HOLMES PRODUCTS CORP, 8-K, 1999-01-26

HOLMES PRODUCTS CORP
8-K, 1999-01-26
ELECTRICAL APPLIANCES, TV & RADIO SETS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) January 25, 1999

HOLMES PRODUCTS CORP.

(Exact Name of Registrant as Specified in Charter)

<TABLE>
<S> <C> <C>
Massachusetts 333-44473 04-2768914

(State of Other Jurisdiction (Commission File (IRS Employer
Incorporation) Number) Identification No.)
</TABLE>

233 Fortune Boulevard, Milford, MA 01757
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (508) 634-8050

Not applicable

(Former Name or Former Address, if changed since Last Report)
<PAGE>

Item 5. Other Events.

The Company intends to enter into a purchase agreement pursuant
to which it shall offer in a private placement approximately $30.0
million in aggregate principal amount of its 9 7/8% Senior
Subordinated Notes due 2007 (the "Notes") (the "Note Offering"). To
ensure that the public is provided with the same disclosure as that
contained in the proposed offering memorandum relating to the Note
Offering, certain information expected to be set forth in such
offering memorandum, including financial information, is set forth in
Exhibit 99.1 hereof.

The securities offered pursuant to the Note Offering have not been
registered under the Securities Act of 1933, as amended, and may not be
offered or sold in the United States absent registration or an
applicable exemption from registration requirements. This Form 8-K shall
not constitute an offer to sell or solicitation of an offer to buy the
Notes.

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

Exhibit 99.1 Excerpts of information to be set forth in the
proposed offering memorandum relating to the Note Offering

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

Holmes Products Corp.
(Registrant)

By: /s/ Ira B. Morgenstern
--------------------------------------
Name: Ira B. Morgenstern
Title: Senior Vice President - Finance

Dated: January 26, 1999

<PAGE>

EXHIBIT INDEX

Exhibit
Number Description

<S> <C>
99.1 Excerpts of information to be set forth in the proposed offering
memorandum relating to the Note Offering.
</TABLE>

SUBJECT TO COMPLETION, DATED JANUARY 25, 1999

PRELIMINARY OFFERING MEMORANDUM CONFIDENTIAL

[HOLMES LOGO]

$30,000,000

Holmes Products Corp.
9 7/8% Senior Subordinated Notes due 2007

--------------------
The 9 7/8% Senior Subordinated Notes due 2007 (the "Notes") are being offered
hereby (the "Offering") by Holmes Products Corp., a Massachusetts corporation
("Holmes"). Holmes intends to utilize the net proceeds of the Offering,
together with an equity investment by affiliates of Berkshire Partners LLC,
certain members of Holmes' senior management and certain other investors, and
borrowings under the Credit Facility (as defined), to finance the Transactions
(as defined), including the acquisition of The Rival Company, a Delaware
corporation ("Rival"). The consummation of the Offering is not contingent upon
the acquisition of Rival. See "The Transactions; Use of Proceeds."

The Notes are substantially identical to Holmes' $105.0 million of
outstanding 9 7/8% Senior Subordinated Notes due 2007 (the "Existing Notes"),
which were issued in November, 1997. Following completion of the Offering,
Holmes will be obligated to file a registration statement with the Securities
and Exchange Commission with respect to an offer to exchange the Notes and the
Existing Notes for a new issue of notes, with terms substantially identical to
those of the Notes and the Existing Notes, that are registered under the
Securities Act of 1933, as amended (the "Securities Act"). See "Description of
Notes."

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

See "Risk Factors" beginning on page 10 for a discussion of certain factors
that should be considered in evaluating an investment in the Notes.

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

THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR ANY STATE
SECURITIES LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS. ACCORDINGLY, THE NOTES ARE BEING OFFERED HEREBY ONLY (1) TO "QUALIFIED
INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
RELIANCE ON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT PROVIDED BY RULE 144A AND (2) OUTSIDE THE UNITED STATES IN RELIANCE ON
REGULATION S UNDER THE SECURITIES ACT. PROSPECTIVE PURCHASERS ARE HEREBY
NOTIFIED THAT SELLERS OF THE NOTES MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A AND
REGULATION S. FOR CERTAIN RESTRICTIONS ON RESALES, SEE "NOTICE TO INVESTORS."

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

PRICE TO INVESTORS: %

--------------------------------
The Notes are being offered by BancBoston Robertson Stephens Inc. and Lehman
Brothers Inc. (the "Initial Purchasers"), subject to prior sale, when, as and
if delivered to and accepted by the Initial Purchasers, and subject to various
prior conditions, including the Initial Purchasers' right to reject orders in
whole or in part. It is anticipated that delivery of the Notes will be made on
or about , 1999 in book-entry form through the facilities of The Depository
Trust Company.

BancBoston Robertson Stephens Inc. Lehman Brothers

The date of this Offering Memorandum is , 1999.

This Preliminary Offering Memorandum and the information contained herein are
subject to change, completion or amendment without notice. These securities may
not be sold nor may offers to buy them be accepted prior to the time the
Offering Memorandum is delivered in final form. These securities are being
offered pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended, and no registration statement relating to
these securities has been filed with the Securities and Exchange Commission.
Under no circumstances shall this Preliminary Offering Memorandum constitute an
offer to sell or a solicitation of an offer to buy, nor shall there be any sale
of, these securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration, qualification or filing under the
securities laws of any such jurisdiction.

<PAGE>

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, INCLUDED IN THIS
OFFERING MEMORANDUM, INCLUDING WITHOUT LIMITATION THE STATEMENTS UNDER
"SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS," ARE, OR MAY BE, FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").
WITHOUT LIMITING THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES," "INTENDS,"
"ESTIMATES," "PLANS," "EXPECTS," AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. VARIOUS ECONOMIC AND COMPETITIVE FACTORS
COULD CAUSE ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED
IN SUCH FORWARD-LOOKING STATEMENTS, INCLUDING WITHOUT LIMITATION, THE COMPANY'S
DEGREE OF LEVERAGE, THE CONSUMMATION AND INTEGRATION OF THE ACQUISITION OF
RIVAL, THE COMPANY'S DEPENDENCE ON MAJOR CUSTOMERS AND KEY PERSONNEL,
COMPETITION, RISKS ASSOCIATED WITH FOREIGN AND DOMESTIC MANUFACTURING, RISKS OF
THE RETAIL INDUSTRY, POTENTIAL PRODUCT LIABILITY CLAIMS OR RECALLS, AND THE
OTHER FACTORS DISCUSSED IN THIS OFFERING MEMORANDUM WITH RESPECT TO THE
COMPANY'S BUSINESS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS."
ACCORDINGLY, SUCH FORWARD-LOOKING STATEMENTS DO NOT PURPORT TO BE PREDICTIONS
OF FUTURE EVENTS OR CIRCUMSTANCES AND MAY NOT BE REALIZED.

i
<PAGE>

SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, included or
incorporated by reference in this Offering Memorandum. Market data (including
market share data) used throughout this Offering Memorandum were obtained from
internal Holmes surveys, surveys commissioned by Holmes, independent market
research companies and industry publications. Independent market research
companies and industry publications generally indicate that the information
provided by them or contained therein has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such information is
not guaranteed. Holmes has not independently verified such market data.
Similarly, surveys performed or commissioned by Holmes, while believed by
Holmes to be reliable, have not been verified by any independent sources.
Unless otherwise specified, all market share data contained in this Offering
Memorandum are estimates measured in units sold. Certain information provided
herein with respect to Rival has been provided by Rival or obtained from
publicly-available sources, generally without independent verification by
Holmes.

Unless the context otherwise requires, references in this Offering
Memorandum to "Holmes" are to Holmes Products Corp. and its subsidiaries prior
to the acquisition of Rival, references to "Rival" are to The Rival Company and
its subsidiaries, and references to the "Company" are to Holmes and its
subsidiaries, including Rival, on a combined basis following the acquisition of
Rival.

Holmes Products Corp.

Holmes is a leading developer, manufacturer and marketer of quality,
branded home comfort products, including fans, heaters, humidifiers and air
purifiers. Holmes believes that it has the leading U.S. market share in each of
these product categories, which, in the aggregate, accounted for approximately
93% of Holmes' net sales for the twelve months ended September 30, 1998. In
addition, Holmes markets and distributes a variety of decorative and home
office lighting products, as well as various replacement filters and
accessories for its products. Holmes believes that its strong market position
and success are attributable to its continuous product innovation, engineering
and manufacturing expertise, close customer partnerships, breadth of product
offerings and reputation for quality.

Holmes' products are sold to consumers through major retail channels,
including mass merchants, do-it-yourself home centers, warehouse clubs,
hardware stores and national drugstore chains. Major customers in these
channels include Wal-Mart, Kmart, Target, Home Depot, Costco, BJ's Wholesale
Club, TruServ (formerly True Value and ServiStar) and Walgreens. Holmes
believes that the strength, scope and visibility of its retail account base
provide a competitive advantage with respect to brand recognition, access to
shelf space and penetration of the consumer market.

Acquisition of The Rival Company

On December 17, 1998, Holmes entered into a definitive agreement to
acquire Rival (the "Acquisition"). Rival is a leading designer, manufacturer
and marketer of a variety of products including small kitchen appliances, such
as Crock-Pot[RegTM] slow cookers and can openers; products for the home
environment, such as heaters, air purifiers, showerheads, utility pumps,
humidifiers and fans; and building supply and industrial products, such as
household ventilation systems, door chimes, ceiling fans and industrial fans.
Rival markets its products under a variety of well known brand names, including
Rival[RegTM], Crock-Pot[RegTM], Bionaire[RegTM], Pollenex[RegTM],
Patton[RegTM], Simer[RegTM] and White Mountain[RegTM]. Holmes believes that
Rival has the leading market share for slow cookers and enjoys a leading market
share in several of its other product categories.

For the twelve months ended September 30, 1998, after giving pro forma
effect to the Acquisition and the associated transactions described herein, the
Company generated net sales and adjusted EBITDA (as defined) of $573.3 million
and $80.8 million, respectively. See "-- Summary Financial Data" and "Unaudited
Pro Forma Combined Condensed Financial Statements."

1
<PAGE>

Holmes believes that the following factors will contribute to the
successful integration of Rival's business into its own and allow the Company
to continue its proven record of growth in net sales and EBITDA:

Leading Name in Kitchen Appliances. Rival, which is the dominant
manufacturer and marketer of slow cookers through its Crock-Pot[RegTM] brand
and enjoys a leading market share in can openers, adds a strong complementary
business to Holmes' home comfort line. This new market segment will allow
Holmes to better service its mass merchant customers and enable the Company to
spread the cost of serving these customers over a larger revenue base. The
Company believes that it will be able to increase sales following the
Acquisition by capitalizing on Rival's franchise in the small kitchen appliance
market and the combined organizations' expertise in product innovation and
marketing products through mass merchants and other distribution channels to
consumers.

Complementary Home Comfort Businesses. Approximately 35% of Rival's net
sales for the twelve months ended September 30, 1998 were in home comfort
products, where Holmes is a market leader. As a result of the Acquisition,
Holmes will be able to broaden its home comfort product offerings through the
addition of well known Rival brand names such as Bionaire, Pollenex and Patton.
Holmes believes that the broadening of its product and brand offerings will
appeal to its mass merchant customers, who increasingly are trying to reduce
the number of vendors from whom they purchase merchandise, while also
differentiating their product offerings through a variety of brands and SKUs.
Additionally, the Company intends to leverage cross selling opportunities with
Holmes' and Rival's key customer relationships.

Opportunities for Significant Cost Savings. Holmes believes that,
following the Acquisition, there will be significant opportunities to reduce
costs by, among other things, (1) capitalizing on Holmes' expertise in sourcing
components and raw materials in the Far East, (2) capitalizing on Holmes' motor
design and manufacturing capabilities, (3) integrating and rationalizing
Holmes' and Rival's manufacturing operations and (4) consolidating certain of
Holmes' and Rival's sales, marketing and administrative functions.

Increased International Presence. Rival's brands, including Rival,
Bionaire and Patton, enjoy considerable international recognition. For the
twelve months ended September 30, 1998, approximately 11.5% of Rival's net
sales were outside the United States. Holmes believes that this additional
distribution channel presents significant opportunities to market a number of
Holmes' products, as well as increase the penetration of Rival's brand names in
international markets.

Complementary Manufacturing Capabilities. Holmes operates two
manufacturing facilities in China, where it manufactures its products and
electric motors for use in its products. Rival manufactures more than 60% of
its products at six domestic manufacturing facilities (one of which is
scheduled to be closed following the Acquisition). Following the Acquisition,
Holmes believes it can achieve substantial manufacturing efficiencies by
utilizing Holmes' Far East sourcing and manufacturing capabilities to produce
certain Rival products. At the same time, Holmes believes that the addition of
Rival's domestic manufacturing capabilities will improve inventory management
and enhance its ability to satisfy its customers' needs for just-in-time
delivery.

Business Strategy

The Company's strategy is to capitalize on Holmes' and Rival's core
strengths to achieve further growth in net sales, profitability and cash flow
by: (1) growing Rival's core kitchen franchise, (2) penetrating new and
existing distribution channels, (3) improving the Company's overall cost
structure and (4) expanding geographically.

Leverage Core Competencies to Strengthen Kitchen Franchise. Holmes has
become a leader in the home comfort appliance market as a result of its
successful product innovations that meet consumer and customer needs, coupled
with its expertise in marketing and distribution. Rival has a long-standing
reputation as a leader in the small kitchen appliance market. Holmes believes
that combining its proven strengths with Rival's core kitchen franchise will
drive growth in Rival's existing lines and the development of new products.

Leverage and Grow Brands. The addition of Rival's home comfort brands
allows Holmes to increasingly differentiate its home comfort offerings among
customers and consumers. Through additional brands, the Company can offer a
step-up brand strategy for increased presence in both mass merchandise and
other distribution channels.

Further Penetrate Existing Distribution Channels. The Company believes
that it can further penetrate its existing distribution channels as a result of
favorable industry dynamics and Holmes' and Rival's strong

2
<PAGE>

relationships and execution with mass merchant retailers. Management believes
that mass merchants will continue to consolidate their vendor base and focus on
a smaller number of sophisticated suppliers that can (1) provide a broad array
of differentiated, quality products, (2) efficiently and consistently fulfill
logistical requirements and volume demands and (3) provide full product support
from design to category management, point-of-sale and after-market service with
the consumer.

Develop New Distribution Channels. The Company continues to develop new
channels of distribution by providing customized product offerings that appeal
to the specific needs of each channel. For example, since 1996, Holmes has
successfully marketed select products through an arrangement with the QVC
electronic retailing network. Holmes has also partnered with Evenflo to market
Holmes' products under the Evenflo brand name and expand into the juvenile
products distribution channel.

Pursue Targeted Marketing Opportunities. As part of its strategy, Holmes
enters into strategic alliances in order to promote awareness of its products.
For example, Holmes has established a marketing affiliation with the Allergy
and Asthma Foundation of America and has developed a strategic marketing
partnership with the Brita Products Company, a subsidiary of Clorox Company, to
market a humidifier that integrates the Brita[RegTM] water filter. Holmes also
markets humidifiers and filters with the Microban[RegTM] anti-bacterial
technology. In addition, Holmes has entered into a variety of
cross-merchandising relationships with other manufacturers including Stanley
Tools, Toro, Vaseline and Benadryl.

Improve the Overall Cost Structure. Holmes, through its manufacturing
facilities in China and related Far East sourcing capabilities, is a low-cost,
high quality, flexible producer of appliance products. By applying these
capabilities to certain of Rival's products, along with Rival's
previously-announced plant closings (one completed in December, 1998 and
another scheduled to close by June, 1999), the Company believes it can
significantly reduce overall manufacturing costs.

Holmes' strong Far East manufacturing capability is demonstrated through
its recent joint venture arrangement with General Electric ("GE"). GE has
selected Holmes as a joint venture partner for third-party motor sales, based
on Holmes' cost position and capabilities. Under this arrangement, GE will
market and sell motors under the GE name from Holmes' motor manufacturing
facility in China. Holmes believes the joint venture will increase Holmes'
third-party motor sales and provide Holmes with access to GE's extensive
technical expertise in motors.

Expand into New Geographic Regions. The Company believes that the
European, Latin American and Asian home comfort markets are underdeveloped and
represent significant growth opportunities. As a result, Holmes has begun to
focus on marketing its products in these regions. Holmes currently sells its
products in Europe and Asia on an original equipment manufacturer basis and its
branded home comfort products in France. Rival has warehouse and distribution
facilities in Ontario, Canada and the Netherlands, as well as a distribution
arrangement in Mexico. The Company believes that combining Rival's larger
international presence with Holmes' product offerings will significantly
accelerate international growth.

The Transactions

Pursuant to an Agreement and Plan of Merger dated as of December 17, 1998
(the "Merger Agreement") among Holmes, Moriarty Acquisition Corp., a wholly
owned subsidiary of Holmes ("Merger Sub"), and Rival, Holmes has agreed to
acquire all of Rival's outstanding shares of common stock (the "Rival Shares")
for $13.75 per share in cash, or an aggregate consideration of approximately
$129.4 million, including payments to the holders of certain Rival stock
options. In connection with the Acquisition, Holmes will also refinance
approximately $150.3 million (as of September 30, 1998) of existing
indebtedness of Rival. Pursuant to the Merger Agreement, Merger Sub has
commenced a tender offer (the "Tender Offer") for all of the Rival Shares,
which offer currently is scheduled to expire at 12:00 midnight on January 25,
1999. Holmes intends to extend the expiration of the Tender Offer to coincide
with the consummation of the transactions described below. The Tender Offer is
conditioned upon, among other things, holders of at least 70% of the
outstanding Rival Shares tendering such shares to Merger Sub. Following
completion of the Tender Offer, Merger Sub will be merged with and into Rival
(the "Merger"), with Rival being the surviving corporation and a wholly owned
subsidiary of Holmes. In the Merger, the remaining holders of outstanding Rival
Shares will receive $13.75 per share in cash.

3
<PAGE>

In connection with the Acquisition and the Offering, Holmes has received a
commitment from investment funds affiliated with Berkshire Partners LLC
("Berkshire Partners"), Holmes' majority stockholder, to purchase $50.0 million
of common stock of Holmes (the "Equity Commitment"), a portion of which is
expected to be purchased by members of Holmes' management and certain other
co-investors. In addition, Holmes has received a commitment from BankBoston,
N.A., as lender, to provide Holmes with $325.0 million in senior credit
facilities (the "Credit Facility"), initial borrowings under which will be
used, together with the net proceeds of the Equity Commitment and the Offering,
to consummate the Acquisition, refinance Rival's existing indebtedness and
refinance outstanding borrowings under Holmes' existing credit facility (the
"Existing Credit Facility"). See "Description of Credit Facility." The
Acquisition, the Tender Offer, the Merger, the funding of the Equity
Commitment, the entering into and borrowings under the Credit Facility, the
Offering, the refinancing of existing indebtedness of Rival and the refinancing
of outstanding borrowings under Holmes' existing credit facility are
collectively referred to herein as the "Transactions."

The following table sets forth the anticipated sources and uses of funds
in connection with the Transactions, based on balances as of September 30, 1998
(in millions). The actual sources and uses of funds will depend on the
outstanding debt levels of Holmes and Rival at the time of the consummation of
the Transactions.

<TABLE>
<CAPTION>
Sources of funds: Uses of funds:
<S> <C> <C> <C>
Credit Facility(a) $ 243.5 Cash purchase price(b) $ 129.4
Issuance of the Notes 30.0 Refinance Rival indebtedness(c) 152.6
Equity Commitment 50.0 Refinance Holmes indebtedness(d) 19.5
Estimated fees and expenses(e) 22.0
--------
Total sources of funds $ 323.5 Total uses of funds $ 323.5
======== ========
</TABLE>

- ------------
(a) The Credit Facility will provide for total availability of $325.0 million.
See "Description of Credit Facility."

(b) Includes payments to holders of Rival Shares and holders of certain Rival
stock options.

(c) Includes $2.3 million of accrued interest. The Company estimates that, due
to seasonality of borrowings, the actual amount will be lower upon the
consummation of the Transactions.

(d) The Company estimates that the actual amount will be lower upon the
consummation of the Transactions.

(e) Includes estimated prepayment premium of $8.0 million. The Company estimates
that the actual amount will be lower upon the consummation of the
Transactions.

Consummation of the Offering is not contingent upon the consummation of
the other Transactions. In the event that the Acquisition is not consummated,
Holmes intends to utilize the net proceeds of the Offering to repay its
existing indebtedness, to pay expenses and for general working capital
purposes.

4
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The Offering

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<S> <C>
Securities Offered .......... $30.0 million aggregate principal amount of 9 7/8% Senior Subordinated
Notes due 2007.

Maturity .................... November 15, 2007.

Interest .................... The Notes will bear interest at the rate of 9 7/8% per annum, payable semi-
annually in arrears on May 15 and November 15 of each year,
commencing on May 15, 1999.

Guarantees .................. The Notes will be unconditionally guaranteed, jointly and severally, by
the Company's existing Domestic Restricted Subsidiaries (as defined),
and all Domestic Restricted Subsidiaries created or acquired by the
Company in the future, including, without limitation, Rival and its
domestic subsidiaries upon consummation of the Acquisition
(collectively, the "Guarantors").

Ranking ..................... The Notes will be general unsecured obligations of the Company and will
be subordinated in right of payment to all existing and future Senior Debt
of the Company. As of September 30, 1998, after giving pro forma effect
to the Transactions, the Company would have had approximately $244.4
million of Senior Debt outstanding, including outstanding borrowings
under the Credit Facility. In addition, the Company would have had $81.5
million of additional borrowings available under the Credit Facility. The
Notes will rank pari passu with the Existing Notes.

Optional Redemption ......... Except as set forth below, the Notes will not be redeemable at the option
of the Company prior to November 15, 2002. Thereafter, the Notes will
be subject to redemption at any time at the option of the Company, in
whole or in part, at the redemption prices set forth herein, plus accrued
and unpaid interest and Liquidated Damages (as defined), if any, thereon
to the redemption date. In addition, at any time prior to November 15,
2000, the Company may redeem up to an aggregate of 33% of the
principal amount of Notes at a redemption price equal to 109.875% of
the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption date, with the net
cash proceeds of one or more sales of Equity Interests (as defined) (other
than Disqualified Stock (as defined)) of the Company, provided that at
least 67% of the principal amount of Notes remains outstanding
immediately following each such redemption.

Change of Control ........... In the event of a Change of Control (as defined), the Company will be
required to make an offer to each holder of Notes to repurchase all or any
part of such holder's Notes at a repurchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the repurchase date.

Covenants ................... The indenture pursuant to which the Notes will be issued (the
"Indenture") will contain certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries (as
defined) to incur additional Indebtedness (as defined), pay dividends,
repurchase Equity Interests or make other Restricted Payments (as
defined), create Liens (as defined), enter into transactions with Affiliates
(as defined), sell assets or enter into certain mergers and consolidations.
See "Description of Notes."
</TABLE>

5
<PAGE>

<TABLE>
<S> <C>
Exchange Offer, Registration Rights Pursuant to a Registration Rights Agreement among the Company, the
Guarantors and the Initial Purchasers (the "Registration Rights
Agreement"), the Company and the Guarantors will agree (1) to file a
registration statement with the Securities and Exchange Commission (the
"Commission"), within 90 days after the consummation of the Offering,
with respect to an offer to exchange (the "Exchange Offer") the Notes
and the Existing Notes for a new issue of notes of the Company (the
"Exchange Notes"), with terms substantially identical to those of the
Notes and the Existing Notes, that are registered under the Securities Act
and (2) to use their best efforts to cause such registration statement to be
declared effective by the Commission within 150 days after the
consummation of the Offering. In addition, under certain circumstances
the Company and the Guarantors may be required to file a shelf
registration statement to cover resales of the Notes by holders thereof (a
"Shelf Registration"). If the Company and the Guarantors do not comply
with their obligations under the Registration Rights Agreement, they will
be required to pay specified Liquidated Damages to the holders of the
Notes under certain circumstances. See "Description of Notes--
Registration Rights; Liquidated Damages."

Transfer Restrictions ............. The Notes have not been registered under the Securities Act and are
subject to certain restrictions on transfer. See "Notice to Investors."

Use of Proceeds ................... The Company intends to utilize the net proceeds of the Offering, together
with the net proceeds of the Equity Commitment and borrowings under
the Credit Facility, to consummate the Acquisition, to refinance certain
outstanding borrowings of Holmes and Rival and to pay certain fees and
expenses of the Transactions. In the event that the Acquisition is not
consummated, Holmes intends to utilize the net proceeds of the Offering
to repay its existing indebtedness, to pay expenses and for general
working capital purposes. See "The Transactions; Use of Proceeds."
</TABLE>

Risk Factors

Prospective purchasers of the Notes should carefully consider the matters
set forth under "Risk Factors," as well as the other information and financial
statements and data included or incorporated by reference in this Offering
Memorandum, prior to making an investment in the Notes.

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<PAGE>

Summary Financial Data

Holmes Products Corp.

The following summary historical financial data for the years ended
December 31, 1995, 1996 and 1997 have been derived from Holmes' audited
Consolidated Financial Statements included or incorporated by reference in this
Offering Memorandum. The summary historical financial data as of September 30,
1998 and for the nine months ended September 30, 1997 and 1998 have been
derived from Holmes' unaudited Consolidated Financial Statements included or
incorporated by reference in this Offering Memorandum. In the opinion of
Holmes' management, these unaudited Consolidated Financial Statements include
all adjustments (consisting of only normal recurring adjustments) necessary for
a fair presentation of Holmes' financial position and results of operations for
these periods. Due to the seasonality of operations and other factors, the
results of operations for interim periods are not necessarily indicative of
results that may be expected for the full year. The summary unaudited pro forma
data as of September 30, 1998 and for the twelve months ended September 30,
1998 have been derived from the Unaudited Pro Forma Combined Condensed
Financial Statements of the Company included or incorporated by reference in
this Offering Memorandum. The unaudited pro forma data do not purport to
represent what the Company's financial position or results of operations
actually would have been if the transactions referred to therein had been
consummated on the date or for the period indicated, or what such results will
be for any future date or for any future period. While the Company believes the
inclusion of adjusted EBITDA as described in Note (4) below is appropriate to
reflect ongoing operations after the Acquisition, adjusted EBITDA may not
comply with regulations published by the Commission. Accordingly, adjusted
EBITDA and information relating to adjusted EBITDA may not be included in the
Company's filings with the Commission. The cost savings included in adjusted
EBITDA have neither been examined nor compiled by any firm of independent
accountants. The following information should be read in conjunction with
"Selected Financial Data," "Unaudited Pro Forma Combined Condensed Financial
Statements," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Holmes' and Rival's Consolidated Financial
Statements, including the notes thereto, included or incorporated by reference
in this Offering Memorandum.

<TABLE>
<CAPTION>
Pro Forma
Nine Months Ended Twelve Months
Year Ended December 31, September 30, Ended
------------------------------------------- ------------------------- September 30,
1995 1996 1997 1997 1998 1998(1)
----------- ----------- --------------- ----------- ----------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales ........................... $178,132 $194,331 $ 192,153 $136,767 $157,602 $573,262
Cost of goods sold .................. 141,226 145,915 136,740 102,442 110,523 416,990
-------- -------- --------- -------- -------- --------
Gross profit ....................... 36,906 48,416 55,413 34,325 47,079 156,272
Selling, general and administrative
expenses ........................... 25,654 32,828 41,993(2) 25,069 31,252 106,497
Restructuring expenses .............. -- -- -- -- -- 4,887
-------- -------- ----------- -------- -------- --------
Operating profit ................... 11,252 15,588 13,420 9,256 15,827 44,888
Interest expense, net ............... 5,219 6,491 7,096 4,724 10,369 36,455
Other (income) expense, net ......... (337) (319) 56 42 (268) 3,963
-------- -------- ----------- -------- -------- --------
Income (loss) before income
taxes and minority interest ...... 6,370 9,416 6,268 4,490 5,726 4,470
Income tax expense (benefit) ........ 2,614 2,787 2,196 292 873 892
Minority interest in net income of
majority-owned subsidiaries(3) ..... 518 408 225 220 -- --
-------- -------- ----------- -------- -------- --------
Net income ......................... $ 3,238 $ 6,221 $ 3,847 $ 3,978 $ 4,853 $ 3,578
======== ======== =========== ======== ======== ========
</TABLE>

7
<PAGE>

<TABLE>
<CAPTION>
Pro Forma
Nine Months Ended Twelve Months
Year Ended December 31, September 30, Ended
------------------------------------ ----------------------- September 30,
1995 1996 1997 1997 1998 1998(1)
---------- ---------- ---------- ---------- ---------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Other Data:
EBITDA(4) ............................. $16,098 $22,774 $20,837 $14,187 $21,279 $ 59,806
Adjusted EBITDA(4) .................... -- -- -- -- -- 80,806
Depreciation and amortization ......... 4,509 6,867 7,473 4,973 5,184 18,881
Capital expenditures .................. 9,706 8,594 5,815 3,601 3,527 12,564
Ratio of adjusted EBITDA to cash
interest expense(5) .................. 2.4x
Ratio of total debt to adjusted
EBITDA ............................... 4.7x
</TABLE>

<TABLE>
<CAPTION>
September 30, 1998
----------------------------
Historical Pro Forma(1)
------------ -------------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents .............................. $ 5,738 $ 6,947
Working capital ........................................ 74,941 234,895
Total assets ........................................... 139,194 484,300
Total long-term debt, including capital leases ......... 124,820 373,049
Total stockholders' equity (deficit) ................... (19,457) 29,860
</TABLE>

- ------------
(1) The unaudited pro forma income statement data gives effect to the
Transactions and the 1997 Transactions (as defined) as if they had
occurred as of January 1, 1997. The unaudited pro forma balance sheet data
gives effect to the Transactions as if they had occurred on September 30,
1998. See "Unaudited Pro Forma Combined Condensed Financial Statements."

(2) Includes approximately $6.9 million of incremental compensation expense
which was paid to certain executives in conjunction with the 1997
Transactions.

(3) In May and June, 1997, Holmes repurchased the shares held by 30% minority
stockholders in one of Holmes' subsidiaries for a total of $900,000. The
summary unaudited pro forma results of operations exclude the minority
interest in net income of majority-owned subsidiaries.

(4) EBITDA represents income before interest expense, income tax expense,
depreciation and amortization and the minority interest in net income of
majority-owned subsidiaries. Adjusted EBITDA represents EBITDA plus (i) a
$3.8 million non-recurring litigation expense recorded by Rival in June
1998, (ii) a $7.7 million restructuring charge recorded by Rival in the
quarter ended September 30, 1998 relating to the closing of three
facilities in North Carolina and Indiana, (iii) approximately $5.1 million
of annual sourcing cost savings that Holmes expects to realize as a result
of the Acquisition and (iv) approximately $4.4 million of annual cost
savings that Holmes expects to realize as a result of the North Carolina
and Indiana facility closings. EBITDA and adjusted EBITDA are presented
because they are widely accepted measures to provide information regarding
a company's ability to service and/or incur debt. EBITDA and adjusted
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operations or other income or cash flow data
prepared in accordance with generally accepted accounting principles, or
as a measure of a company's profitability or liquidity. Additionally, the
Company's calculation of EBITDA and adjusted EBITDA may differ from that
performed by other companies, and thus the amounts disclosed may not be
directly comparable to those disclosed by other companies. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."

(5) Cash interest expense is defined as interest expense less amortization of
debt issuance costs.

8
<PAGE>

The Rival Company

The following summary historical financial data for Rival's fiscal years
ended June 30, 1996, 1997 and 1998 have been derived from Rival's audited
Consolidated Financial Statements included or incorporated by reference in this
Offering Memorandum. The summary historical financial data for the three months
ended September 30, 1997 and 1998 have been derived from Rival's unaudited
Condensed Consolidated Financial Statements included or incorporated by
reference in this Offering Memorandum. In the opinion of Rival's management,
these unaudited Condensed Consolidated Financial Statements include all
adjustments (consisting of only normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operations of Rival
for these periods. Due to the seasonality of operations and other factors, the
results of operations for interim periods are not necessarily indicative of
results that may be expected for the full year. The following information
should be read in conjunction with "Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Rival's Consolidated Financial Statements, including the notes thereto,
included or incorporated by reference in this Offering Memorandum.

<TABLE>
<CAPTION>
Three Months Ended
Year Ended June 30, September 30,
--------------------------------------------- ----------------------------
1996 1997 1998 1997 1998
----------- -------------- -------------- ---------- ---------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales .................................... $313,864 $376,465 $376,919 $96,697 $ 80,052
Cost of sales ................................ 230,207 278,455 281,043 71,119 62,410(3)
-------- -------- -------- ------- ---------
Gross profit ................................ 83,657 98,010 95,876 25,578 17,642
Selling, general and administrative expenses 50,561 63,809 63,251 16,254 15,108
Restructuring expenses ....................... -- 3,000(1) -- -- 4,887(3)
Amortization of goodwill and other
intangible assets ........................... 2,432 3,069 2,894 779 685
-------- -------- -------- ------- ---------
Operating income (loss) ..................... 30,664 28,132 29,731 8,545 (3,038)
Interest expense ............................. 7,117 10,081 10,099 2,587 2,484
Other expenses ............................... 295 21 3,875(2) 3 345
-------- -------- -------- ------- ---------
Earnings (loss) before income taxes ......... 23,252 18,030 15,757 5,955 (5,867)
Income tax expense (benefit) ................. 9,013 7,345 6,550 2,229 (2,033)
-------- -------- -------- ------- ---------
Net earnings (loss) ......................... $ 14,239 $ 10,685 $ 9,207 $ 3,726 $ (3,834)
======== ======== ======== ======= ===========
</TABLE>

<TABLE>
<CAPTION>
September 30,
-----------------------
1997 1998
---------- ----------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Working capital .............. $ 88,537 $ 86,407
Total assets ................. 322,956 299,928
Long-term debt ............... 84,000 78,000
Stockholders' equity ......... 113,525 110,791
</TABLE>

- ------------
(1) In fiscal 1997, Rival recorded a $3.0 million restructuring expense
relating to the closing of its Montreal, Quebec manufacturing,
distribution and administrative functions. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Results
of Operations -- Rival."

(2) Other expense for fiscal 1998 includes $3.8 million of non-recurring
litigation expenses relating to litigation that was settled during such
year. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations -- Rival."

(3) In the three months ended September 30, 1998, Rival recorded a $7.7 million
restructuring expense ($2.8 million of which is reflected in cost of
sales) relating to the closing of three facilities in North Carolina and
Indiana. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations -- Rival."

9
<PAGE>

RISK FACTORS

The following risk factors should be considered carefully, in addition to
the other information included or incorporated by reference in this Offering
Memorandum, before purchasing the Notes offered hereby. In connection with the
forward-looking statements which appear in this Offering Memorandum,
prospective purchasers of the Notes should carefully review the factors
discussed below and the cautionary statements referred to in "Disclosure
Regarding Forward-Looking Statements."

Substantial Leverage

Following the Offering, the Company will be highly leveraged. As of
September 30, 1998, after giving pro forma effect to the Transactions, the
Company would have had total consolidated indebtedness of approximately $379.4
million and total stockholders' equity of $29.9 million. See "Capitalization"
and "Unaudited Pro Forma Combined Condensed Financial Statements." The Company
may incur additional indebtedness in the future, including through available
borrowings under the Credit Facility, subject to the satisfaction of certain
financial tests. See "Description of Credit Facility" and "Description of
Notes -- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock."

The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including the following: (1) the
Company's ability to obtain additional financing in the future, or to obtain
financing at reasonable rates, for working capital, capital expenditures,
acquisitions or other purposes may be limited or impaired; (2) the Company's
flexibility with respect to certain matters will be limited by covenants
contained in the Indenture and the Credit Facility which will limit the ability
of the Company and its subsidiaries to incur additional indebtedness, grant
liens, pay dividends, redeem capital stock, prepay certain subordinated
indebtedness and enter into mergers and other similar transactions; and (3) the
Company's degree of leverage may make it more vulnerable to economic downturns,
limit its ability to pursue other business opportunities and reduce its
flexibility in responding to changing business and economic conditions.

The Company's ability to generate cash for the repayment of debt,
including the Notes, will be dependent upon the future performance of the
Company's business, which will in turn be subject to financial, competitive,
economic and other factors affecting the operations of the Company, including
certain factors beyond its control.

In the event that the Acquisition and certain of the other Transactions
were not consummated, Holmes would continue, following the Offering, to be
highly leveraged, in which case holders of Notes would be subject to the risks
described above.

Subordination of the Notes

The Notes will be unsecured obligations of the Company and will be
subordinated in right of payment to all current and future Senior Debt of the
Company, including all indebtedness of the Company under the Credit Facility.
In addition, the guarantees of the Notes will be subordinated to all current
and future Senior Debt of the Guarantors, including the Guarantors' obligations
under the Credit Facility. See "Description of Notes -- Subordination." As of
September 30, 1998, after giving pro forma effect to the Transactions, the
Company would have had approximately $244.4 million of Senior Debt outstanding,
including outstanding borrowings under the Credit Facility. In addition, the
Company would have had $81.5 million of additional borrowings available under
the Credit Facility. As a result of the subordination provisions of the
Indenture, in the event of a liquidation or insolvency involving the Company,
holders of the Notes may recover less ratably than creditors of the Company who
are holders of Senior Debt. The Indenture will permit the Company to incur
additional Senior Debt, subject to certain financial tests. See "Description of
Notes -- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock."

Risks Relating to the Acquisition

Uncertainties Regarding Consummation. Consummation of the Offering is not
contingent upon the consummation of the Acquisition. Consummation of the
Acquisition is subject to the satisfaction or waiver of a number of conditions,
including there being validly tendered in the Tender Offer and not withdrawn at
least 70% of the Rival Shares, the receipt of the cash proceeds of the Equity
Commitment, the Credit Facility and the Offering, and other customary
conditions. The initial expiration of the Tender Offer is scheduled for 12:00
midnight, New York

10
<PAGE>

City time, on January 25, 1999, unless extended. However, the Merger Agreement
contemplates that the final consummation of the Merger may, under certain
circumstances, be delayed until June 15, 1999. The Unaudited Pro Forma Combined
Condensed Financial Statements included in this Offering Memorandum assume the
consummation of the Acquisition. However, there can be no assurance as to if,
or when, the Acquisition will be consummated, or that it will be consummated on
the terms described herein. In the event that the Offering is consummated but
the Acquisition is not consummated or is delayed, holders of Notes would not
then have access to the cash flow of Rival as a source of repayment of the
Notes.

Integration of Rival; Increased Size. There can be no assurance that
Holmes will be able to successfully integrate Rival, which is substantially
larger than Holmes in terms of sales and assets, with its existing business
operations. The full benefits of the Acquisition will require the integration
of administration, finance, product development, manufacturing, distribution
and sales and marketing operations. Holmes has no prior experience integrating
an acquired company, and the integration of Rival may be further complicated by
Rival's size relative to Holmes. The integration will require the
implementation of appropriate operational, financial, and management systems
and controls. The Company may encounter difficulties in expanding its financial
controls and reporting systems to meet its future needs. The successful
integration of the Acquisition will also depend upon the Company's ability to
retain and motivate Rival's existing employees and managers. In addition, Rival
has undertaken a number of restructuring actions in recent years to streamline
its operations and improve manufacturing efficiency. There can be no assurance
that additional restructuring expenses will not be incurred in the future, or
that the cost savings anticipated to follow such restructurings and the
Acquisition will actually be realized. If the Company fails to successfully
integrate the operations of Holmes and Rival, or if anticipated revenue
enhancements and cost savings are not realized, the Company's business, results
of operations, financial condition and prospects would be materially adversely
affected. The Unaudited Pro Forma Combined Condensed Financial Statements
included herein contain certain adjustments relating to the acquisition of
Rival; actual amounts will likely differ from those set forth therein, possibly
to a material extent. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview."

Potential Liabilities. Although Holmes has performed a legal and financial
due diligence investigation of Rival, including Phase I environmental studies
of Rival's major facilities, unknown or undiscovered legal, financial or
operational weaknesses or liabilities may exist or may arise. Such liabilities
could include, among others, those arising from litigation, product recalls,
product liability claims, employee benefits obligations or non-compliance with
applicable federal, state or local environmental requirements for which the
Company, as a successor owner, may be responsible. The Merger Agreement does
not provide for any indemnification of the Company against such liabilities.

Product Liability

The Company faces exposure to product recalls and product liability claims
in the event that its products are alleged to have manufacturing or safety
defects or to have resulted in injury or other adverse effects. Although the
Company maintains product liability insurance in amounts that management
believes are reasonable, there can be no assurance that the Company will be
able to maintain its product liability insurance on acceptable terms, if at
all, in the future or that product liability claims will not exceed the amount
of the Company's insurance coverage. In particular, Holmes is a defendant in a
case scheduled for trial in New Jersey state court in February, 1999, in which
a heater manufactured by Holmes is alleged to have caused a fire resulting in
nine deaths, as well as injuries to other persons. With respect to product
recalls, both Holmes and Rival have had ongoing communication with the United
States Consumer Products Safety Commission and, in the case of Rival, the
Canadian Standards Association, regarding allegations that various products may
contain a defect that would warrant a product recall. The Company does not
maintain product recall insurance. As a result, there can be no assurance that
product recalls and product liability claims will not have a material adverse
effect on the Company's financial condition or results of operations. See
"Business of Holmes Products Corp. -- Legal Proceedings" and "Business of The
Rival Company -- Legal Proceedings."

11
<PAGE>

Dependence on Major Customers

Holmes' three largest retail customers, Wal-Mart (including Sam's
Wholesale Club), Kmart and Target, each accounted for over 10%, and in the
aggregate approximately 51%, of Holmes' net sales for the twelve months ended
September 30, 1998. Holmes does not have long-term agreements with its major
customers, and purchases are generally made through the use of individual
purchase orders. A significant reduction in purchases by any of these customers
could have a material adverse effect on the Company's business. See "Business
of Holmes Products Corp. -- Sales and Marketing."

Rival is also highly dependent on sales to its major customers. Rival's
aggregate net sales to its six largest customers during its fiscal year ended
June 30, 1998 were approximately 47% of its total net sales. Rival's net sales
to Wal-Mart (including Sam's Wholesale Club), its largest customer, accounted
for approximately 26% of fiscal 1998 net sales. Rival does not have long-term
supply contracts with its major customers. The adverse effects of a decrease in
business from any of Rival's major customers would likely be exacerbated by the
fact that a number of Holmes' major customers, including Wal-Mart, its largest,
are the same as Rival's.

Retail Industry

The Company's products are sold to consumers through major retail
channels, including mass merchants, do-it-yourself home centers, warehouse
clubs, hardware stores and national drugstore chains. As a result, the
Company's business and financial results fluctuate with the financial condition
of its retail customers and the retail industry generally. Certain of the
Company's retail customers have filed for bankruptcy protection in recent
years. Management monitors and evaluates the credit status of its customers and
attempts to adjust sales terms as appropriate. Additionally, Holmes has entered
into factoring agreements whereby receivables from certain pre-determined
customers, up to specified limits, can be sold in the event the customer
defaults on payment. Despite these efforts, a bankruptcy filing by a
significant customer could have a material adverse affect on the Company. See
Note 12 of Notes to Holmes' Consolidated Financial Statements.

Risks of Non-U.S. Operations

Holmes manufactures a significant portion of its products, and
substantially all of the motors used in its products, in China. Holmes also
sources a significant proportion of the raw materials used in the manufacture
of its products outside the United States. Rival currently has certain of its
products manufactured by contract manufacturers outside of the United States.
In addition, the Company's strategy includes increasing sales to customers
outside of the United States. International operations are subject to risks
including labor unrest, political instability, restrictions on transfers of
funds, import and export duties and quotas, domestic and international customs
and tariffs, unexpected changes in regulatory environments, difficulty in
obtaining distribution and support and potentially adverse tax consequences.
Labor in China has historically been readily available at relatively low cost
to Holmes as compared to labor costs applicable in other nations. China has
experienced rapid social, political and economic change in recent years. There
can be no assurance that labor will continue to be available to the Company in
China at costs consistent with historical levels. A substantial increase in
labor costs in China could have a material adverse effect on the Company.
Although China currently enjoys "most favored nation" trading status with the
United States, the U.S. government has in the past proposed to revoke such
status and to impose higher tariffs on products imported from China in response
to human rights abuse in China and the failure by the Chinese government to
protect U.S. intellectual property rights in China. In addition to risks
specific to China, a number of Asian countries have experienced worsening
economic conditions over the past year. There can be no assurance that any of
the foregoing factors will not have a material adverse effect on the Company's
ability to increase or maintain its international sales or importing
activities, its financial condition or its results of operations.

The Company's international operations also subject the Company to
currency exchange rate risk. Although the Company's international operations
have not historically been significantly impacted by changes in currency
exchange rates, future changes in currency exchange rates could have an adverse
effect on the Company's financial condition or results of operations.

Rival has more substantial European and Canadian operations and sales than
the Company currently does, which may further increase the Company's exposure
to the risks described above following the Acquisition.

12
<PAGE>

Risks Associated with Development of New Products

The Company believes that its future success will depend in part upon its
ability to continue to make innovations in its existing products and to
develop, manufacture and market new products. There can be no assurance that
the Company will be successful in the introduction, marketing and manufacture
of any of its new products or product innovations or that the Company will be
able to develop and introduce in a timely manner new products or innovations to
its existing products which satisfy customer needs or achieve market
acceptance. The failure to develop products and introduce them successfully and
in a timely manner could have a material adverse effect on the Company's
financial condition or results of operations.

Dependence on Manufacturing Facilities

A substantial portion of Holmes' net sales are derived from the sale of
products manufactured or assembled at Holmes' two manufacturing facilities
located in China. One of the facilities manufactures substantially all of the
motors utilized in Holmes' products. The second facility manufactures many of
the remaining components and assembles most of Holmes' products. These
manufacturing facilities are subject to hazards that could result in material
damage to any such facility. Any such damage to either facility, or prolonged
interruption in the operations of either facility for repairs, labor disruption
or other reasons, would have a material adverse effect on the Company's
financial condition and results of operations.

Rival currently operates six manufacturing facilities in the United States
(one of which is scheduled to be closed). Holmes has no prior experience in
operating manufacturing facilities in the United States on the scale of Rival's
operations. In addition, Rival operates one unionized facility, in Jackson,
Mississippi, which produces an essential component (stoneware) for a
significant product line (Crock-Pot[RegTM] slow cookers). Holmes has no prior
experience with unionized employees. See "Business of Holmes Products
Corp. -- Manufacturing" and "Business of The Rival Company -- Manufacturing."

Cost and Availability of Raw Materials

Plastic resin, copper wire and corrugated paper are significant raw
materials used in the manufacture and packaging of the Company's products.
Because the primary resource used in manufactured plastics is petroleum, the
cost and availability of plastic for use in the Company's products varies to a
great extent with the price of petroleum. In addition, copper wire and
corrugated paper prices can fluctuate significantly. Rival's products also
require substantial quantities of steel and aluminum. The Company's inability
to acquire sufficient raw materials at reasonable prices would affect the
Company's ability to maintain its margins and could result in a material
adverse effect on the Company's financial condition or results of operations.

Seasonality

Sales of Holmes' products are highly seasonal, and counter-seasonal
weather can adversely affect the Company's results of operations. Sales of
Holmes' fans to retailers are highest in the first and second quarters of each
year, with an average of 84.1% of domestic gross sales of fans generated during
the first and second quarters in each of the years ended December 31, 1995,
1996 and 1997. Sales of Holmes' heaters, humidifiers and air purifiers to
retailers are highest in the third and fourth quarters of each year, with an
average of 95.4%, 89.9% and 66.2% of domestic gross sales of heaters,
humidifiers and air purifiers, respectively, generated during the third and
fourth quarters in each of the years ended December 31, 1995, 1996 and 1997.
Counter-seasonal summer weather could adversely affect sales of fans and could
result in increased returns of these products to Holmes by retailers in
subsequent quarters and in lower purchases by retailers in the following year
due to high inventory levels. Similarly, counter-seasonal winter weather could
adversely affect sales of heaters and humidifiers and could result in increased
returns in subsequent quarters and in lower purchases by retailers in the
following year. Sales of air purifiers are less subject to seasonal weather
patterns, but follow the seasonal pattern of the retail industry generally,
with highest sales to retailers in the third and fourth quarter in anticipation
of the Christmas selling season. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality -- Holmes."

13
<PAGE>

significant percentage of the products sold by Rival are given as gifts and, as
such, sales volumes are higher in anticipation of the Christmas season. See
"Business of The Rival Company -- Seasonality."

Competition

The markets for the Company's products are highly competitive. The Company
believes that competition is based upon several factors, including price,
access to retail shelf space, product features and enhancements, brand names,
new product introductions, marketing support and distribution systems. The
Company competes with established companies, a number of which have
substantially greater facilities, personnel, financial and other resources than
those of the Company. The Company also competes with importers and foreign
manufacturers of unbranded products. In addition, the consumer home comfort
product industry has recently experienced some consolidation of existing
manufacturers, each generating annual sales which are significantly higher than
those of the Company. Large consumer product companies have from time to time
entered the market for consumer home comfort products and may do so in the
future. There can be no assurance that the Company will be able to compete
successfully against current and future sources of competition or that the
competitive pressures faced by the Company will not adversely affect its
profitability or financial performance. See "Business of Holmes Products
Corp.-- Competition" and "Business of The Rival Company -- Competition."

Dependence on Key Personnel of Holmes

The continued success of the Company will depend significantly on the
efforts and abilities of Holmes' key executive officers, including Jordan A.
Kahn, its President and Chief Executive Officer, Stanley Rosenzweig, its Chief
Operating Officer, Ira B. Morgenstern, its Senior Vice President - Finance,
Gregory F. White, its Executive Vice President, Sales and Marketing, and Tommy
Liu, Managing Director of Holmes' Far East operations. The loss of the services
of one or more of these individuals could have a material adverse effect on the
business of the Company.

Year 2000 Compliance

Portions of the accounting and operational systems and software used by
Holmes, Rival and their customers and suppliers identify years with two digits
instead of four. If not corrected, these systems may recognize the Year 2000 as
the Year 1900, which might cause system failures or inaccurate reporting of
data that disrupts operations. If Year 2000 issues in Holmes', Rival's or third
parties' information technology and non-information technology systems are not
remedied in a timely manner, there can be no assurance that significant
business interruptions or increased costs having a material adverse effect on
the business, financial condition or results of operations of the Company will
not occur in connection with the change in century. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000."

Control by Principal Stockholders

Upon completion of the Transactions, Berkshire Partners and certain
members of the Company's senior management, including Jordan A. Kahn, will
beneficially own approximately 87.2% of the Company's outstanding common stock.
These stockholders will have the ability to elect or remove any or all of the
Company's directors and to control substantially all corporate actions. The
interests of the Company's stockholders may conflict with the interests of the
holders of the Notes in certain circumstances. See "Share Ownership."

Restrictions on Company under the Credit Facility and the Indenture

The Credit Facility and the Indenture will impose restrictions that
affect, among other things, the ability of the Company to incur debt, pay
dividends, sell assets, create liens, make capital expenditures and
investments, and otherwise enter into certain transactions outside the ordinary
course of business. The Credit Facility will also require the Company to
maintain specified financial ratios and meet certain financial tests. The
ability of the Company to continue to comply with the covenants and
restrictions may be affected by events beyond its control. The breach of any of
these covenants or restrictions would result in a default under the Credit
Facility and the Indenture, in which case the lenders under the Credit Facility
could elect to declare all amounts borrowed thereunder, together

14
<PAGE>

with accrued interest, to be due and payable, foreclose on the assets securing
the Credit Facility or cease to provide additional revolving loans or letters
of credit, which could have a material adverse effect on the Company. See
"Description of Credit Facility" and "Description of Notes."

Change of Control

In the event of a Change of Control, the Company will be required to make
an offer to repurchase all or any part of each holder's Notes at a repurchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the repurchase date. The
source of funds for any such repurchase would be the Company's available cash
or cash generated from operations or other sources, including borrowings, sales
of equity or funds provided by a new controlling person. However, there can be
no assurance that sufficient funds will be available at the time of any Change
of Control to make any required repurchases of the Notes tendered. In addition,
the Credit Facility is expected to prohibit the Company from making any such
required repurchases. The failure of the Company to offer to repurchase Notes,
or to repurchase Notes tendered, following a Change of Control will result in a
default under the Indenture, which could lead to a cross-default under the
Credit Facility and under the terms of other indebtedness of the Company. In
such a case, the subordination provisions of the Indenture may limit the
ability of the holders of the Notes to receive payment in respect of their
Notes. See "Description of Credit Facility," "Description of Notes --
Subordination" and "-- Repurchase of Notes at the Option of Holders -- Change
of Control."

Subsidiary Guarantees

The Notes will be guaranteed by all of the Company's Domestic Restricted
Subsidiaries. The existing domestic subsidiaries of Holmes do not have
substantial assets or operations. While Rival and its domestic subsidiaries
have substantial assets, consummation of the Offering is not contingent upon
the Acquisition. In any event, the Company will continue to conduct a
substantial portion of its operations, including Holmes' Chinese manufacturing
operations, through foreign subsidiaries. These subsidiaries will not be
guarantors of the Notes.

Lack of Public Market for the Notes; Restrictions on Resale

The Notes are new securities for which there currently is no market.
Although the Initial Purchasers have informed the Company that they intend to
make a market in the Notes and, if issued, the Exchange Notes, they are not
obligated to do so and any such market making may be discontinued at any time
without notice. In addition, such market making activity may be limited during
the pendency of the Exchange Offer or the effectiveness of a shelf registration
statement in lieu thereof. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Notes and, if issued, the
Exchange Notes. The Company does not intend to apply for listing of Notes or,
if issued, the Exchange Notes, on any securities exchange.

The Notes are being offered in reliance upon an exemption from
registration under the Securities Act and applicable state securities laws.
Therefore, the Notes may be transferred or resold only in a transaction
registered under or exempt from the Securities Act and applicable state
securities laws. Pursuant to the Registration Rights Agreement, the Company has
agreed to file the Exchange Offer Registration Statement with the Commission
and to use its best efforts to cause such Exchange Offer Registration Statement
to become effective with respect to the Exchange Notes. If issued, the Exchange
Notes generally will be permitted to be resold or otherwise transferred
(subject to the restrictions described under "Description of Notes --
Registration Rights; Liquidated Damages" and "Notice to Investors") by each
holder without the requirement of further registration. The Exchange Notes,
however, also will constitute a new issue of securities with no established
trading market. The Exchange Offer will not be conditioned upon any minimum or
maximum aggregate principal amount of notes being tendered for exchange. No
assurance can be given as to the liquidity of the trading market for the
Exchange Notes, or, in the case of non-tendering holders of the Notes, the
trading market for the Notes following the Exchange Offer.

The liquidity of, and trading market for, the Notes or, if issued, the
Exchange Notes also may be adversely affected by general declines in the market
for similar securities. Such a decline may adversely affect such liquidity and
trading markets or the financial performance of, and prospects for, the
Company.

The Company intends to conduct the Exchange Offer in part in order to
allow the Notes and the Existing Notes to trade as a single issue, which the
Company believes will offer greater liquidity to holders. However, the Company

15
<PAGE>

cannot compel tenders by holders, and there can be no assurance that all
holders of the Notes and the Existing Notes will exchange such notes for
Exchange Notes. To the extent that less than all of the Notes and the Existing
Notes are tendered and accepted in the Exchange Offer, two series of 97/8%
Senior Subordinated Notes due 2007, issued under separate indentures and
trading under different CUSIP numbers, will remain outstanding and the trading
market for both Exchange Notes and untendered or unaccepted Notes and Existing
Notes may be adversely affected.

Fraudulent Conveyance Matters

The obligations of the Company under the Notes, and the application of the
net proceeds therefrom in connection with the Transactions, may be subject to
review under various laws for the protection of creditors, including federal
and state fraudulent conveyance and fraudulent transfer laws, if a bankruptcy
case or other lawsuit (including in circumstances where bankruptcy is not
involved) is commenced by or on behalf of any creditor of the Company or a
representative of any of the Company's creditors. If a court in such case or
lawsuit were to find that, at the time the Company issued the Notes or at the
time of the Transactions, the Company (i) intended to hinder, delay or defraud
any existing or future creditor or (ii) did not receive fair consideration or
reasonably equivalent value for issuing the Notes or in connection with the
Transactions, and the Company either (a) was insolvent or rendered insolvent by
reason thereof, (b) was engaged or was about to engage in a business or
transaction for which its remaining unencumbered assets constituted
unreasonably small capital or (c) intended to or believed that it would incur
debts beyond its ability to pay such debts as they matured or became due, such
court could void the Company's obligations under the Notes, subordinate the
Notes to other indebtedness of the Company, direct that holders of the Notes
return any amounts paid thereunder to the Company or to a fund for the benefit
of its creditors or take other action detrimental to the holders of the Notes.

The measure of insolvency for purposes of the foregoing will vary
depending upon the law of the jurisdiction being applied. Generally, however, a
company will be considered insolvent at a particular time if the sum of its
debts, including contingent liabilities, at that time is greater than the
then-fair value of its assets or if the fair saleable value of its assets at
that time is less than the amount that would be required to pay its probable
liability on its existing debts as they become absolute and mature. There can
be no assurance, however, as to what standard a court would apply to evaluate
the parties' intent or to determine whether the Company was insolvent at the
time of, or rendered insolvent upon consummation of, the Transactions or that,
regardless of the standard, a court would determine that the Company was
insolvent at the time of, or rendered insolvent upon consummation of, the
Transactions.

The Company's obligations under the Notes will be guaranteed by the
Guarantors, and the guarantees of the Notes also may be subject to review under
various laws for the protection of creditors, including federal and state
fraudulent conveyance and fraudulent transfer laws, if a bankruptcy case or a
lawsuit (including in circumstances where bankruptcy is not involved) is
commenced by or on behalf of any creditor of a Guarantor or a representative of
any such creditors. In such a case, the analysis set forth above would
generally apply, except that the Guarantees could also be subject to the claim
that, since the guarantees were incurred for the benefit of the Company (and
only indirectly for the benefit of the Guarantors), the obligations of the
Guarantors thereunder were incurred for less than reasonably equivalent value
or fair consideration. A court could void a Guarantor's obligation under its
guarantee of the Notes, subordinate the guarantee to other indebtedness of a
Guarantor, direct that holders of the Notes return any amounts paid under a
guarantee to the relevant Guarantor or to a fund for the benefit of its
creditors, or take other action detrimental to the holders of the Notes.

16
<PAGE>

THE TRANSACTIONS; USE OF PROCEEDS

Pursuant to the Merger Agreement among Holmes, Merger Sub and Rival,
Holmes has agreed to acquire all of the Rival Shares for $13.75 per share in
cash, or an aggregate consideration of approximately $129.4 million, including
payments to the holders of certain Rival stock options. In connection with the
Acquisition, Holmes will also refinance approximately $150.3 million (as of
September 30, 1998) of existing indebtedness of Rival. Pursuant to the Merger
Agreement, Merger Sub has commenced the Tender Offer for all of the Rival
Shares, which offer currently is scheduled to expire at 12:00 midnight on
January 25, 1999. Holmes intends to extend the expiration of the Tender Offer
to coincide with the consummation of the Transactions. The Tender Offer is
conditioned upon, among other things, holders of at least 70% of the
outstanding Rival Shares tendering such shares to Merger Sub. Following
completion of the Tender Offer, Merger Sub will be merged with and into Rival,
with Rival being the surviving corporation and a wholly owned subsidiary of
Holmes. In the Merger, the remaining holders of outstanding Rival Shares will
receive $13.75 per share in cash.

In connection with the Acquisition and the Offering, Holmes has received
the Equity Commitment from investment funds affiliated with Berkshire Partners,
Holmes' majority stockholder, to purchase $50.0 million of common stock of
Holmes, a portion of which is expected to be purchased by members of Holmes'
management and certain other co-investors. In addition, Holmes has received a
commitment from BankBoston, N.A., as lender, to provide Holmes with $325.0
million in senior credit facilities, initial borrowings under which will be
used, together with the net proceeds of the Equity Commitment and the Offering,
to consummate the Acquisition, refinance Rival's existing indebtedness and
refinance outstanding borrowings under the Existing Credit Facility. See
"Description of Credit Facility."

<TABLE>
<S> <C> <C> <C>
Sources of funds: Uses of funds:
Credit Facility(a) $ 243.5 Cash purchase price(b) $ 129.4
Issuance of the Notes 30.0 Refinance Rival indebtedness(c) 152.6
Equity Commitment 50.0 Refinance Holmes indebtedness(d) 19.5
Estimated fees and expenses(e) 22.0
--------
Total sources of funds $ 323.5 Total uses of funds $ 323.5
======== ========
</TABLE>

- ------------
(a) The Credit Facility will provide for total availability of $325.0 million.
See "Description of Credit Facility."

(b) Includes payments to holders of Rival Shares and holders of certain Rival
stock options.

(c) Includes $2.3 million of accrued interest. The Company estimates that, due
to seasonality of borrowings, the actual amount will be lower upon the
consummation of the Transactions.

(d) The Company estimates that the actual amount will be lower upon the
consummation of the Transactions.

(e) Includes estimated prepayment premium of $8.0 million. The Company estimates
that the actual amount will be lower upon the consummation of the
Transactions.

17
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of Holmes as of
September 30, 1998, on an actual basis and on a pro forma basis as adjusted to
give effect solely to the Offering and to give effect to the Transactions as a
whole. See "The Transactions; Use of Proceeds." The following table should be
read in conjunction with "Selected Financial Data," "Unaudited Pro Forma
Combined Condensed Financial Statements" and the Consolidated Financial
Statements of Holmes, including the notes thereto, included or incorporated by
reference in this Offering Memorandum.

<TABLE>
<CAPTION>
September 30, 1998
-------------------------------------------------
Pro Forma Pro Forma
Actual for Offering for Transactions
------------ -------------- -----------------
(in thousands)
<S> <C> <C> <C>
Total debt, including current maturities:
Capital lease obligations ................... $ 904 $ 904 $ 904
Existing Credit Facility .................... 19,500 -- --
Credit Facility(1) .......................... -- -- 243,529
Existing Notes .............................. 105,000 105,000 105,000
Notes ....................................... -- 30,000 30,000
--------- --------- --------
Total debt ................................. 125,404 135,904 379,433
Total stockholders' equity (deficit) ......... (19,457) (19,457) 29,860
--------- --------- --------
Total capitalization ....................... $ 105,947 $ 116,447 $409,293
========= ========= ========
</TABLE>

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

(1) The Credit Facility will provide for total availability of $325.0 million.
See "Description of Credit Facility."

18
<PAGE>

SELECTED FINANCIAL DATA

Holmes Products Corp.

The following selected financial data of Holmes as of and for the years
ended December 31, 1994, 1995, 1996 and 1997 have been derived from the audited
Consolidated Financial Statements of Holmes; such Consolidated Financial
Statements as of December 31, 1996 and 1997 and for each of the three years in
the period ended December 31, 1997 are included or incorporated by reference in
this Offering Memorandum. The selected financial data as of and for the year
ended December 31, 1993 have been derived from the unaudited consolidated
financial statements of Holmes. The selected financial data as of and for the
nine months ended September 30, 1997 and 1998 have been derived from the
unaudited Consolidated Financial Statements of Holmes; such Consolidated
Financial Statements as of September 30, 1998 and for the nine months ended
September 30, 1997 and 1998 are included or incorporated by reference in this
Offering Memorandum. In the opinion of management, these unaudited Consolidated
Financial Statements include all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the financial
position and results of operations of Holmes for these periods. Due to the
seasonality of operations and other factors, the results of operations for
interim periods are not necessarily indicative of results that may be expected
for the full year. The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Holmes' Consolidated Financial Statements, including the notes
thereto, included or incorporated by reference in this Offering Memorandum.

<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
----------------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1997 1998
------------- ----------- ----------- ----------- --------------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales ............................. $61,838 $114,509 $178,132 $194,331 $ 192,153 $136,767 $157,602
Cost of goods sold .................... 43,720 84,672 141,226 145,915 136,740 102,442 110,523
------ -------- -------- -------- --------- -------- --------
Gross profit ......................... 18,118 29,837 36,906 48,416 55,413 34,325 47,079
Selling, general and administrative
expenses ............................. 12,717 17,522 22,500 27,308 36,530(1) 21,432 26,514
Product development expenses .......... 1,643 2,742 3,154 5,520 5,463 3,637 4,738
------ -------- -------- -------- --------- -------- --------
Operating profit ..................... 3,758 9,573 11,252 15,588 13,420 9,256 15,827
Interest expense, net ................. 1,215 2,087 5,219 6,491 7,096 4,724 10,369
Other (income) expense, net ........... (413) (244) (337) (319) 56 42 (268)
------ -------- -------- -------- --------- -------- --------
Income before income taxes and
minority interest .................. 2,956 7,730 6,370 9,416 6,268 4,490 5,726
Income tax expense (benefit) .......... 787 3,214 2,614 2,787 2,196 292 873
------ -------- -------- -------- --------- -------- --------
Income before minority interest 2,169 4,516 3,756 6,629 4,072 4,198 4,853
Minority interest in net income of
majority-owned subsidiaries(2) ....... 1 282 518 408 225 220 --
------ -------- -------- -------- --------- -------- --------
Income before cumulative effect
of change in accounting
principle .......................... 2,168 4,234 3,238 6,221 3,847 3,978 4,853
Cumulative effect of change in
accounting principle ................. 138(3) -- -- -- -- -- --
------ -------- -------- -------- --------- -------- --------
Net income ........................... $2,306 $ 4,234 $ 3,238 $ 6,221 $ 3,847 $ 3,978 $ 4,853
====== ======== ======== ======== ========= ======== ========
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1993 1994 1995 1996 1997
----------- ------------ ------------ ------------ ------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Other Data:
EBITDA(4) ............................... $ 5,930 $ 12,798 $ 16,098 $ 22,774 $ 20,837
Ratio of earnings to fixed
charges(5) ............................. 3.0x 3.9x 2.1x 2.2x 1.8x
Depreciation and amortization ........... $ 1,759 $ 2,981 $ 4,509 $ 6,867 $ 7,473
Capital expenditures .................... 5,083 8,821 9,706 8,594 5,815
Balance Sheet Data (at end of period):
Cash and cash equivalents ............... $ 667 $ 1,578 $ 3,368 $ 4,462 $ 5,141
Working capital (deficit) ............... (3,439) (5,021) (6,770) (2,883) 78,318
Total assets ............................ 41,175 72,490 118,524 128,286 135,165
Total long-term debt, including
capital leases ......................... -- -- 217 737 134,294
Total stockholders' equity (deficit)..... 4,015 8,249 11,487 17,708 (24,991)(6)

<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1997 1998
------------ ------------------
(Dollars in thousands)
<S> <C> <C>
Other Data:
EBITDA(4) ............................... $ 14,187 $ 21,279
Ratio of earnings to fixed
charges(5) ............................. 1.8x 1.5x
Depreciation and amortization ........... $ 4,973 $ 5,184
Capital expenditures .................... 3,601 3,527
Balance Sheet Data (at end of period):
Cash and cash equivalents ............... $ 8,149 $ 5,738
Working capital (deficit) ............... 850 74,941
Total assets ............................ 135,310 139,194
Total long-term debt, including
capital leases ......................... 890 124,820
Total stockholders' equity (deficit)..... 21,686 (19,457)(6)
</TABLE>

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

(1) Includes approximately $6.9 million of incremental compensation expense
which was paid to certain executives in conjunction with the 1997
Transactions.

(2) In May and June, 1997, Holmes repurchased the shares held by 30% minority
stockholders in one of Holmes' subsidiaries for a total of $900,000.

(3) In 1993, a required change in accounting principle for accounting for
income taxes resulted in the recognition of $138,000 of income.

(4) EBITDA represents income before interest expense, income tax expense,
depreciation and amortization and the minority interest in net income of
majority-owned subsidiaries. EBITDA is presented because it is a widely
accepted measure to provide information regarding a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation or
as a substitute for net income, cash flows from operations or other income
or cash flow data prepared in accordance with generally accepted
accounting principles, or as a measure of a company's profitability or
liquidity. Additionally, Holmes' calculation of EBITDA may differ from
that performed by other companies, and thus the amounts disclosed may not
be directly comparable to those disclosed by other companies.

(5) For purposes of determining the ratio of earnings to fixed charges,
earnings represent income before income taxes and minority interest, plus
fixed charges. Fixed charges consist of interest expense on all
indebtedness plus a portion of rental payments on operating leases that is
considered representative of the interest factor. After giving pro forma
effect to the Transactions and the 1997 Transactions, the Company's ratio
of earnings to fixed charges would have been 1.2x, 0.6x and 1.1x for the
year ended December 31, 1997, the nine months ended September 30, 1998 and
the twelve months ended September 30, 1998, respectively.

(6) Total stockholders' equity as of December 31, 1997 and September 30, 1998
reflects a reduction attributable to Holmes' 1997 recapitalization. See
Note 8 of Notes to Holmes' Consolidated Financial Statements.

20
<PAGE>

The Rival Company

The following selected historical financial data of Rival for the fiscal
years ended June 30, 1994, 1995, 1996, 1997 and 1998 have been derived from
Rival's audited Consolidated Financial Statements; such Consolidated Financial
Statements for the fiscal years ended June 30, 1997 and 1998 are included or
incorporated by reference in this Offering Memorandum. The selected historical
financial data for the three months ended September 30, 1997 and 1998 have been
derived from Rival's unaudited Condensed Consolidated Financial Statements
included or incorporated by reference in this Offering Memorandum. In the
opinion of Rival's management, these unaudited Condensed Consolidated Financial
Statements include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the financial position and
results of operations of Rival for these periods. Due to the seasonality of
operations and other factors, the results of operations for interim periods are
not necessarily indicative of results that may be expected for the full year.
The following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Rival's Consolidated Financial Statements, including the notes thereto,
included or incorporated by reference in this Offering Memorandum.

<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
-----------------------------------------------------------------
1994 1995 1996 1997 1998
----------- ----------- ----------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales. ............................ $229,233 $231,711 $313,864 $376,465 $376,919
Cost of sales. ........................ 162,703 168,406 230,207 278,455 281,043
-------- -------- -------- -------- --------
Gross profit ......................... 66,530 63,305 83,657 98,010 95,876
Selling, general and administrative
expenses ............................. 37,483 34,461 50,561 63,809 63,251
Restructuring expenses ................ -- -- -- 3,000(1) --
Amortization of goodwill and
other intangible assets. ............. 1,635 1,774 2,432 3,069 2,894
-------- -------- -------- -------- --------
Operating income (loss). .............. 27,412 27,070 30,664 28,132 29,731
Interest expense ...................... 4,113 4,216 7,117 10,081 10,099
Other expenses ........................ 205 120 295 21 3,875(2)
-------- -------- -------- -------- --------
Earnings (loss) before income
taxes. ............................... 23,094 22,734 23,252 18,030 15,757
Income tax expense (benefit) .......... 8,777 8,749 9,013 7,345 6,550
-------- -------- -------- -------- --------
Net earnings (loss). ................. $ 14,317 $ 13,985 $ 14,239 $ 10,685 $ 9,207
======== ======== ======== ======== ========

<CAPTION>
Three Months Ended
September 30,
--------------------------
1997 1998
---------- ---------------
(in thousands)
<S> <C> <C>
Income Statement Data:
Net sales. ............................ $96,697 $ 80,052
Cost of sales. ........................ 71,119 62,410(3)
------- ----------
Gross profit ......................... 25,578 17,642
Selling, general and administrative
expenses ............................. 16,254 15,108
Restructuring expenses ................ -- 4,887(3)
Amortization of goodwill and
other intangible assets. ............. 779 685
------- ----------
Operating income (loss). .............. 8,545 (3,038)
Interest expense ...................... 2,587 2,484
Other expenses ........................ 3 345
------- ----------
Earnings (loss) before income
taxes. ............................... 5,955 (5,867)
Income tax expense (benefit) .......... 2,229 (2,033)
------- ----------
Net earnings (loss). ................. $ 3,726 $ (3,834)
======= ==========
</TABLE>

<TABLE>
<CAPTION>
June 30, September 30,
------------------------------------------------------ ---------------------
1994 1995 1996 1997 1998 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital. ............. $ 60,063 $ 60,293 $ 91,396 $ 84,819 $ 89,607 $ 88,537 $ 86,407
Total assets ................. 151,467 204,368 288,251 298,605 292,114 322,956 299,928
Long-term debt ............... 46,000 42,000 88,000 84,000 78,000 84,000 78,000
Stockholders' equity ......... 76,104 93,805 106,148 110,390 116,615 113,525 110,791
</TABLE>

21
<PAGE>

22
<PAGE>

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

The following unaudited pro forma combined condensed financial statements
as of September 30, 1998, for the year ended December 31, 1997, for the nine
months ended September 30, 1998 and the twelve months ended September 30, 1998
("the Pro Forma Financial Statements") have been derived by the application of
pro forma adjustments to the combination of the historical financial statements
of each of Holmes and Rival included or incorporated by reference in this
Offering Memorandum.

The pro forma combined condensed balance sheet assumes that the
Transactions took place September 30, 1998 and combines Holmes' unaudited
September 30, 1998 balance sheet and Rival's unaudited September 30, 1998
balance sheet. The pro forma combined condensed statements of operations assume
that the Transactions and the 1997 Transactions (as defined below) took place
as of January 1, 1997 and combine Holmes' statement of operations for the year
ended December 31, 1997, unaudited nine months ended September 30, 1998 and the
unaudited twelve months ended September 30, 1998 and Rival's unaudited
statement of operations for the year ended December 31, 1997, unaudited nine
months ended September 30, 1998 and unaudited twelve months ended September 30,
1998, respectively. The pro forma combined condensed statements of operations
also reflect employment and management agreements entered into in conjunction
with the 1997 Transactions.

The Pro Forma Financial Statements do not purport to represent what the
Company's financial position or results of operations would have actually been
had the Transactions and the 1997 Transactions in fact occurred on such dates,
or to project results of operations for any future period. The Pro Forma
Financial Statements should be read in conjunction with "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements of each of Holmes and
Rival, including the notes thereto, included or incorporated by reference in
this Offering Memorandum.

The "1997 Transactions" consist of (1) the November 1997 leveraged
recapitalization of Holmes in which affiliates of Berkshire Partners, certain
members of Holmes senior management and certain other investors made an equity
investment in Holmes, the proceeds of which, together with the proceeds of a
$105 million offering of Existing Notes, borrowings under the Existing Credit
Facility and available cash, were used to redeem a portion of the common stock
held by Holmes' prior majority owner, to repay certain outstanding indebtedness
and to pay fees and expenses of the recapitalization; and (2) the May and June
1997 repurchase by Holmes of the 30% minority interest held by certain
stockholders in one of Holmes' subsidiaries for a total of $900,000.

The Transactions, as previously defined, include the issuance of the
Notes, the receipt of the Equity Commitment, initial borrowings under the
Credit Facility, the Acquisition of Rival, the refinancing of Rival's existing
indebtedness, the refinancing of outstanding borrowings under the Existing
Credit Facility and the payment of fees and expenses of the Transactions.

23
<PAGE>

HOLMES PRODUCTS CORP.

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1998
(in thousands except par value)

<TABLE>
<CAPTION>
Adjustments
--------------------------------------
Holmes Rival
September 30, September 30, Financing Acquisition Pro
1998(1) 1998(1) Adjustments Adjustments Forma
--------------- --------------- ----------------- -------------------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents ................ $ 5,738 $ 1,209 $ 291,975(2) $ (291,975)(2) $ 6,947
Accounts receivable ...................... 39,632 73,837 -- -- 113,469
Inventories .............................. 57,114 113,008 -- 9,720(4) 179,842
Prepaid expenses and other
current assets .......................... 1,637 2,044 -- 3,291(4) 6,972
Deferred income taxes .................... 4,651 2,361 -- (2,361)(4) 4,651
--------- -------- ---------- ----------- ---------
108,772 192,459 291,975 (281,325) 311,881
Property, plant & equipment .............. 17,950 37,606 -- -- 55,556
Deferred income taxes .................... 638 -- -- -- 638
Goodwill ................................. -- 59,859 -- 23,895(4) 83,754
Deposits and other assets ................ 2,397 10,004 -- (229)(4) 12,172
Debt issuance costs, net ................. 9,437 -- 12,000 (2) -- 20,299
(1,138)(3)
--------- -------- ---------- ----------- ---------
$ 139,194 $299,928 $ 302,837 $ (257,659) $ 484,300
========= ======== ========== =========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to bank .................... $ -- $ 66,335 $ -- $ (66,335)(2) $ --
Current portion of long-term debt ........ -- 6,000 5,800(2) (6,000)(2) 5,800
Current portion of capital leases ........ 584 -- -- -- 584
Accounts payable ......................... 16,593 19,823 -- -- 36,416
Accrued expenses ......................... 14,580 13,894 (54)(2) 2,620(4) 31,040
Deferred tax liabilities ................. -- -- -- 1,527(4) 1,527
Accrued income taxes ..................... 2,074 -- (455)(3) -- 1,619
--------- -------- ---------- ----------- ---------
33,831 106,052 5,291 (68,188) 76,986
Capital lease obligations ................ 320 -- -- -- 320
Line of credit ........................... 19,500 -- (19,500)(2) -- --
Long-term debt (less current
portion) ................................ 105,000 78,000 267,729(2) (78,000)(2) 372,729
Other liabilities and deferred
income tax .............................. -- 5,085 -- (680)(4) 4,405
--------- -------- ---------- ----------- ---------
158,651 189,137 253,520 (146,868) 454,440
Commitments & contingencies .............. -- -- -- -- --
Stockholders' equity:
Common stock, $.001 par .................. 10 -- 50(2) -- 60
Common stock, $.01 par ................... -- 98 -- (98)(5) --
Paid in capital .......................... 16,985 45,972 49,950(2) (45,972)(5) 66,935
Treasury stock, at cost .................. (62,058) (6,952) -- 6,952(5) (62,058)
Retained earnings ........................ 25,606 71,673 (683)(3) (71,673)(5) 24,923
--------- -------- ---------- ----------- ---------
Total stockholders' equity (deficit) ..... (19,457) 110,791 49,317 (110,791) 29,860
--------- -------- ---------- ----------- ---------
$ 139,194 $299,928 $ 302,837 $ (257,659) $ 484,300
========= ======== ========== =========== =========
</TABLE>

24
<PAGE>

NOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED BALANCE SHEET
(in thousands)

Basis of Presentation

(1) The pro forma combined condensed balance sheet assumes that the
Transactions took place September 30, 1998 and combines Holmes' unaudited
September 30, 1998 balance sheet and Rival's unaudited September 30, 1998
balance sheet.

Pro Forma Adjustments

(2) Reflects the issuance of the Notes, initial borrowings under the Credit
Facility, the funding of the Equity Commitment, the repayment of the
Existing Credit Facility and all of Rival's indebtedness and the related
adjustments to cash assuming consummation of the Transactions as of
September 30, 1998, computed as follows:

<TABLE>
<CAPTION>
Financing Acquisition Total
----------- ------------- -------------
<S> <C> <C> <C>
Sources of Funds:
Initial borrowings under Credit Facility -- long-term .......... $ 237,729 $ -- $ 237,729
Initial borrowings under Credit Facility -- short-term ......... 5,800 -- 5,800
Issuance of the Notes, at par value ............................ 30,000 -- 30,000
Issuance of common stock ....................................... 50,000 -- 50,000
--------- ---------- ----------
323,529 -- 323,529
--------- ---------- ----------
Uses of Funds:
Repayment of existing Rival credit facility .................... -- (66,335) (66,335)
Repayment of existing Rival notes -- long-term ................. -- (78,000) (78,000)
Repayment of existing Rival notes -- short-term ................ -- (6,000) (6,000)
Repayment of the Existing Credit Facility ...................... (19,500) -- (19,500)
Redemption of Rival common stock ............................... -- (127,785) (127,785)
Redemption of certain Rival options ............................ -- (1,575) (1,575)
Prepayment premium on Rival debt ............................... -- (8,000) (8,000)
Accrued interest at September 30, 1998 ......................... (54) (2,280) (2,334)
Estimated fees and expenses .................................... (12,000) (2,000) (14,000)
--------- ---------- ----------
(31,554) (291,975) (323,529)
--------- ---------- ----------
Net adjustment to cash ......................................... $ 291,975 $ (291,975) $ --
========= ========== ==========
</TABLE>

Short-term debt incurred under the Credit Facility is comprised of $5,250 on
Term Loan A and $550 on Term Loan B, which are the total of quarterly
payments due under the Credit Facility within one year of September 30,
1998, commencing one quarter after closing.

(3) Reflects the write-off of $683 of debt issuance costs, net of $455 tax
benefit, related to the Holmes debt extinguished in connection with the
Transactions. This amount has not been included in the pro forma combined
condensed statements of operations due to its extraordinary nature.

(4) Reflects management's preliminary allocation of purchase price for the
Acquisition in accordance with the purchase method of accounting, as
follows:

Purchase price:

<TABLE>
<S> <C>
Cash used to purchase shares and options ......... $129,360
Retirement of Rival indebtedness ................. 150,335
Prepayment premium on debt ....................... 8,000
Accrued interest on debt ......................... 2,280
Estimated fees and expenses ...................... 2,000
--------
$291,975
========
</TABLE>

25
<PAGE>

<TABLE>
<CAPTION>
Rival
September 30, Pro
1998 Adjustments Forma
--------------- ------------------ -----------
<S> <C> <C> <C>
Cash and cash equivalents ........................ $ 1,209 $ -- $ 1,209
Accounts receivable ............................... 73,837 -- 73,837
Inventories ....................................... 113,008 9,720 (a) 122,728
Deferred income taxes ............................. 2,361 (2,361)(b) --
Prepaid expenses and other current assets ......... 2,044 3,291 (c) 5,335
-------- ---------- --------
Total current assets ............................ 192,459 10,650 203,109
Property, plant & equipment ....................... 37,606 -- 37,606
Deferred income taxes ............................. 3,606 -- 3,606
Deposits and other assets ......................... 6,398 (229)(d) 6,169
Goodwill .......................................... 59,859 23,895 (e) 83,754
-------- ---------- --------
Total assets .................................... 299,928 34,316 334,244
Current portion of long-term debt ................. 72,335 (72,335)(f) --
Accounts payable .................................. 19,823 -- 19,823
Accrued expenses .................................. 13,894 (2,280)(g) 16,514
-- 4,900 (h) --
Deferred tax liabilities .......................... -- 1,527 (i) 1,527
-------- ---------- --------
Total current liabilities ....................... 106,052 (68,188) 37,864
Long-term debt (less current portion) ............. 78,000 (78,000)(f) --
Other liabilities and deferred income tax ......... 5,085 (680)(j) 4,405
-------- ---------- --------
Total liabilities ............................... 189,137 (146,868) 42,269
-------- ---------- --------
Net assets acquired ............................. $110,791 $ 181,184 $291,975
======== ========== ========
</TABLE>

(a) Reflects the increase in inventories to estimated fair value based on
preliminary purchase price allocation and elimination of the LIFO
reserve. This write-up will result in a non-recurring charge to the
Company in the year subsequent to the Acquisition.

<TABLE>
<S> <C>
Elimination of LIFO reserve ................................ $6,090
Increase in inventories to their estimated fair market value 3,630
------
$9,720
======
</TABLE>

(b) Reflects the netting of the existing current deferred tax assets
against the deferred tax liabilities generated in the Acquisition.

(c) Reflects the current tax benefits related to the prepayment premium on
the extinguished debt of Rival, as well as the current tax benefits
related to the deferred financing fees written-off.

(d) Reflects the write-off of deferred financing fees relating to the debt
that has been extinguished in the Transactions.

(e) Reflects the excess purchase price over the fair value of net assets
acquired based on a preliminary purchase price allocation.

(f) Reflects the reduction in current and long-term debt repaid in
connection with the Transactions.

(g) Reflects the payment of $2,280 in accrued interest paid in connection
with the Transactions.

(h) Reflects a $4,900 estimate of accrued restructuring charges to be
incurred in connection with the Acquisition. Management is in the
process of assessing and formulating its integration plans.

(i) Reflects adjustments to deferred income taxes in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, as a result of adjustments made to historical assets and
liabilities in connection with the purchase price --netted by the
current deferred tax assets in note (b) above.

(j) Reflects the elimination of an unrealized gain on a swap transaction
previously entered into by Rival.

(5) Reflects the elimination of Rival's historical common stock, additional
paid in capital and retained earnings accounts in connection with the
Acquisition.

26
<PAGE>

HOLMES PRODUCTS CORP.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands)

<TABLE>
<CAPTION>
Rival
Holmes Twelve Months
Year Ended Ended
December 31, 1997(1) December 31, 1997(1)
---------------------- ----------------------
<S> <C> <C>
Net sales ................ $192,153 $379,798
Cost of goods sold ....... 136,740 285,667
-------- --------
Gross profit ............ 55,413 94,131
Restructuring ............ -- 3,000
Selling, general and
administrative
expenses ................ 41,993 67,578
Operating profit ........ 13,420 23,553
Other (income) expense:
Interest expense, net 7,096 10,310
Other (income)
expense, net .......... 56 (65)
-------- --------
Income (loss) before
taxes and
minority interest ..... 6,268 13,308
Income tax expense
(benefit) ............... 2,196 5,330
-------- --------
Income (loss) before
minority interest ..... 4,072 7,978
Minority interest ........ 225 --
-------- --------
Net income (loss) ....... $ 3,847 $ 7,978
======== ========

<CAPTION>
Adjustments
----------------------------------------------------
1997 Financing Acquisition Pro
Transactions Adjustments Adjustments Forma
----------------- ----------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net sales ................ $ -- $ -- $ -- $571,951
Cost of goods sold ....... (1,834)(2) -- -- 420,573
---------- ---------- -------- --------
Gross profit ............ 1,834 -- -- 151,378
Restructuring ............ -- -- -- 3,000
Selling, general and
administrative
expenses ................ (6,901)(3) -- 154(10) 103,224
400 (4)
---------- -------- --------
Operating profit ........ 8,335 -- (154) 45,154
Other (income) expense:
Interest expense, net 7,248(5) 11,382(8) -- 36,036
Other (income)
expense, net .......... -- -- -- (9)
---------- ---------- -------- --------
Income (loss) before
taxes and
minority interest ..... 1,087 (11,382) (154) 9,127
Income tax expense
(benefit) ............... (1,012)(6) (4,553)(9) -- 1,961
---------- ---------- -------- --------
Income (loss) before
minority interest ..... 2,099 (6,829) (154) 7,166
Minority interest ........ (225)(7) -- -- --
---------- ---------- -------- --------
Net income (loss) ....... $ 2,324 $ (6,829) $ (154) $7,166
========== ========== ======== ========
</TABLE>

27
<PAGE>

HOLMES PRODUCTS CORP.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(in thousands)

<TABLE>
<CAPTION>
Holmes Rival
Nine Months Nine Months
Ended Ended
September 30, 1998(1) September 30, 1998(1)
----------------------- -----------------------
<S> <C> <C>
Net sales ........................ $157,602 $232,422
Cost of sales, plant
restructuring ................... -- 2,833
Cost of goods sold ............... 110,523 175,821
-------- --------
Gross profit .................... 47,079 53,768
Restructuring .................... -- 4,887
Selling, general and
administrative .................. 31,252 45,519
-------- --------
Operating profit ................ 15,827 3,362
Other (income) expense:
Interest expense, net ........... 10,369 7,124
Other (income) expense, net ..... (268) 4,312
-------- --------
Income (loss) before taxes ...... 5,726 (8,074)
Income tax expense (benefit) ..... 873 (2,284)
-------- --------
Net income (loss) ............... $ 4,853 $ (5,790)
======== ========

<CAPTION>
Adjustments
------------------------------------
Financing Acquisition Pro
Adjustments Adjustments Forma
------------------- ---------------- -----------
<S> <C> <C> <C>
Net sales ........................ $ -- $ -- $ 390,024
Cost of sales, plant
restructuring ................... -- -- 2,833
Cost of goods sold ............... -- -- 286,344
----------- -------- ---------
Gross profit .................... -- -- 100,847
Restructuring .................... -- -- 4,887
Selling, general and
administrative .................. -- 115 (10) 76,886
----------- -------- ---------
Operating profit ................ -- (115) 19,074
Other (income) expense:
Interest expense, net ........... 9,391 (8) -- 26,884
Other (income) expense, net ..... -- -- 4,044
----------- -------- ---------
Income (loss) before taxes ...... (9,391) (115) (11,854)
Income tax expense (benefit) ..... (3,757) (9) -- (5,168)
----------- -------- ---------
Net income (loss) ............... $ (5,634) $ (115) $ (6,686)
=========== ======== =========
</TABLE>

28
<PAGE>

HOLMES PRODUCTS CORP.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1998
(in thousands)

<TABLE>
<CAPTION>
Holmes Rival
Twelve Months Twelve Months
Ended Ended
September 30, 1998(1) September 30, 1998(1)
----------------------- -----------------------
<S> <C> <C>
Net sales .............. $212,988 $360,274
Cost of sales, plant
restructuring ......... -- 2,833
Cost of goods sold ..... 144,821 269,501
-------- --------
Gross profit .......... 68,167 87,940
Plant restructuring
expenses .............. -- 4,887
Selling, general and
administrative ........ 48,176 64,905
Operating profit ...... 19,991 18,148
Other (income) expense:
Interest expense,
net ................. 12,741 9,996
Other (income)
expense, net ........ (254) 4,217
-------- --------
Income (loss)
before taxes ........ 7,504 3,935
Income tax expense
(benefit) ............. 2,777 2,288
-------- --------
Income (loss)
before minority
interest ............ 4,727 1,647
Minority interest ...... 5 --
-------- --------
Net income (loss) $ 4,722 $ 1,647
======== ========

<CAPTION>
Adjustments
----------------------------------------------------------
1997 Financing Acquisition Pro
Transactions Adjustments Adjustments Forma
--------------------- ------------------- ---------------- -----------
<S> <C> <C> <C> <C>
Net sales .............. $ -- $ -- $ -- $573,262
Cost of sales, plant
restructuring ......... -- -- -- 2,833
Cost of goods sold ..... (165)(2) -- -- 414,157
---------- ----------- -------- --------
Gross profit .......... 165 -- -- 156,272
Plant restructuring
expenses .............. -- -- -- 4,887
Selling, general and
administrative ........ (6,838)(3) -- 154(10) 106,497
100 (4)
----------
Operating profit ...... 6,903 -- (154) 44,888
Other (income) expense:
Interest expense,
net ................. 1,085 (5) 12,633(8) -- 36,455
Other (income)
expense, net ........ -- -- -- 3,963
---------- ----------- -------- --------
Income (loss)
before taxes ........ 5,818 (12,633) (154) 4,470
Income tax expense
(benefit) ............. 880 (6) (5,053)(9) -- 892
---------- ----------- -------- --------
Income (loss)
before minority
interest ............ 4,938 (7,580) (154) 3,578
Minority interest ...... (5)(7) -- -- --
---------- ----------- -------- --------
Net income (loss) $ 4,943 $ (7,580) $ (154) $ 3,578
========== =========== ======== ========
</TABLE>

29
<PAGE>

NOTES TO THE UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
(in thousands)

Basis of Presentation

(1) The pro forma statements of operations assume the Transactions and the 1997
Transactions took place as of January 1, 1997 and combine Holmes'
statements of operations for the year ended December 31, 1997, the
unaudited nine months ended September 30, 1998 and the unaudited twelve
months ended September 30, 1998 and Rival's unaudited statements of
operations for the year ended December 31, 1997, the unaudited nine months
ended September 30, 1998 and the unaudited twelve months ended September
30, 1998, respectively.

Rival operates on a June 30 fiscal year end. Accordingly, Rival's twelve
month period ended December 31, 1997 has been derived by combining the
unaudited results for the quarters ended March 31, June 30, September 30,
and December 31, 1997. Rival's nine month period ended September 30,1998 has
been derived by combining the unaudited results for the quarters ended March
31, June 30, and September 30, 1998. Rival's twelve month period ended
September 30, 1998 has been derived by combining the unaudited results for
the quarters ended December 31, 1997, March 31, June 30, and September 30,
1998.

The pro forma provision for income taxes may not represent the amounts that
would have resulted had Holmes and Rival filed consolidated income tax
returns during the period presented.

Pro Forma Adjustments

(2) Reflects the elimination of historical commissions paid to a related entity
for financing.

(3) Certain executives of Holmes signed employment agreements at the closing of
the 1997 Transactions which specify such executives' compensation through
the term of the agreements, which run initially for three years. This
adjustment reflects the difference between the historical compensation
expense recorded for these executives and the contractual amounts
reflected in the employment agreements, computed as the specified base
compensation plus the maximum amount of annual performance bonus specified
in the agreements. Included in historical compensation expense is
approximately $6,901 for the year ended December 31, 1997 and $6,838 for
the period October 1, 1997 to November 26, 1997 of incremental
compensation paid under the terms of previous agreements as a result of
the 1997 Transactions.

(4) Reflects fees which were paid by Holmes to Berkshire Partners under a
management agreement signed in connection with the 1997 Transactions.

(5) Reflects adjustments to interest expense on debt incurred in connection
with the 1997 Transactions in excess of historical interest expense
assuming consummation of the 1997 Transactions on January 1, 1997,
computed as follows (all amounts relate to the period from January 1, 1997
through the actual consummation of the 1997 Transactions on November 26,
1997):

<TABLE>
<CAPTION>
October 1,
Year Ended 1997 to
December 31, November 26,
1997 1997
-------------- -------------
<S> <C> <C>
Interest expense on the Existing Notes .............................. $ 9,361 $ 1,584
Interest expense on the Existing Credit Facility at a LIBOR-based
rate, assumed to be 7.71% and 7.85% for each of the pro forma
periods respectively, based on estimated average outstanding
balances of $33,819 and $31,333 for each of the pro forma
periods, respectively ............................................. 2,390 383
Commitment fee of 0.5% on unused availability under the Existing
Credit Facility ................................................... 303 51
Amortization of debt issuance costs ................................. 1,079 196
Elimination of historical interest expense associated with the
previous credit facility and affiliate borrowings which were repaid (5,885) (1,129)
-------- --------
$ 7,248 $ 1,085
======== ========
</TABLE>

30
<PAGE>

(6) Reflects an adjustment for the income tax effects of the items described in
Notes (2)-(5) computed at an assumed tax rate of 40%. Additionally this
adjustment includes the elimination of $1,447 of income tax expense
associated with the limitation on deductibility of interest expense paid
on the previous credit facility and affiliated borrowings, which
limitation primarily resulted from the incremental bonuses described
above.

(7) In May and June 1997, Holmes repurchased the shares held by the 30%
minority stockholders in one of Holmes' subsidiaries for a total of $900.
The adjustment reflects the elimination of minority interest in net income
of majority-owned subsidiaries.

(8) Reflects adjustments to interest expense on debt incurred in connection
with the Transactions in excess of historical interest expense assuming
consummation of the Transactions on January 1, 1997, computed as follows:

<TABLE>
<CAPTION>
Nine Months Twelve
Year Ended Ended Months
December 31, September 30, Ended
1997 1998 September 30, 1998
-------------- --------------- -------------------
<S> <C> <C> <C>
Interest expense on the Notes, at par value .......... $2,963 $ 2,222 $ 2,963
Interest expense on $50,000 Term Loan A at a
LIBOR based rate + 3.0% ......................... 4,049 3,037 4,049
Interest expense on $75,000 Term Loan B at a
LIBOR based rate + 3.5% ......................... 6,449 4,836 6,449
Interest expense on remaining Credit Facility
borrowings at a LIBOR based rate + 3.0% ......... 9,518 6,896 9,896
Commitment fee of 0.5% on unused availability
under the Credit Facility ....................... 412 324 389
Amortization of deferred financing costs .......... 1,500 1,125 1,500
----- ----- -----
Net increase in interest expense .................. 24,891 18,440 25,246
Elimination of historical interest expense
(Holmes) ........................................ (2,515) (1,624) (2,198)
Elimination of historical interest expense (Rival) (10,634) (7,155) (10,055)
Amortization of historical deferred financing
costs (Holmes) .................................. (276) (207) (276)
Amortization of historical deferred financing
costs (Rival) ................................... (84) (63) (84)
--------- -------- --------

Net increase in interest expense .................. $ 11,382 $ 9,391 $ 12,633
========= ======== ========
</TABLE>

A 0.125% increase in the interest rate under the Credit Facility would
increase interest expense by $303, $223, and $309, for the year ended
December 31, 1997, the nine months ended September 30, 1998 and the twelve
months ended September 30, 1998, respectively.

(9) Reflects the income tax benefits generated on the pro forma interest
expense and the write-off of the existing Rival deferred financing costs as
a result of the Transactions. Weighted average statutory (federal, state,
and foreign) tax rates of approximately 40% were assumed in the pro forma
adjustments for the year ended December 31, 1997, the twelve months ended
September 30, 1998, and the nine months ended September 30, 1998.

(10) Reflects incremental expense required to properly reflect amortization of
goodwill generated in the Acquisition based on an estimated useful life of
35 years.

31
<PAGE>

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

The following discussions of the financial condition and results of
operations of Holmes and Rival should be read in conjunction with their
respective consolidated financial statements, including the notes thereto,
included or incorporated by reference in this Offering Memorandum.

Overview

On December 17, 1998, Holmes entered into a definitive agreement to
acquire Rival. Rival is a leading designer, manufacturer and marketer of a
variety of products including small kitchen appliances, such as
Crock-Pot[RegTM] slow cookers and can openers; products for the home
environment, such as heaters, air purifiers, showerheads, utility pumps,
humidifiers and fans; and building supply and industrial products, such as
household ventilation systems, door chimes, ceiling fans and industrial fans.
Rival markets its products under a variety of well known brand names, including
Rival, Crock-Pot[RegTM], Bionaire, Pollenex, Patton, Simer and White Mountain.
Holmes believes that Rival has the leading market share in slow cookers and
enjoys a leading market share in several of its other product categories.

Holmes believes that, following a transition period for the integration of
certain of Holmes' and Rivals' operations, the Company will be able to achieve
substantial annual cost savings as compared with the companies' existing
operations. Holmes estimates that cost savings of at least $5.1 million per
year can be achieved by sourcing components and manufacturing certain of
Rival's products through Holmes' Far East operations. These potential cost
savings would require relatively little integration of the two companies'
operations. Holmes also estimates that Rival's previously announced
restructuring involving the closing of three facilities in Indiana and North
Carolina will result in cost savings of approximately $4.4 million per year.
Finally, Holmes believes that additional cost savings may be realized through
consolidation of certain of the companies' selling, general and administrative
functions.

In addition to the $7.7 million restructuring charge incurred by Rival
during the quarter ended September 30, 1998, and a further charge of
approximately $0.7 million during the quarter ended December 31, 1998, Holmes
anticipates that additional related restructuring charges of approximately $0.6
million will be incurred during 1999. Cash expenditures in connection with the
restructuring are expected to be approximately $4.0 million.

Holmes anticipates that the Company will incur additional non-recurring
integration costs of approximately $6.5 million in the aggregate during 1999
and 2000 in connection with the Acquisition, primarily for integration of the
companies' operations, integration consulting assistance and other related
costs. In addition, management believes that there may be incremental annual
integration expenses, as well as capital expenditures such as computer systems
upgrades, which the Company will incur during 1999 and in future periods in
order to more fully realize the benefits of the Acquisition.

The foregoing discussion of potential cost savings, restructuring charges
and expenditures following the Acquisition is forward-looking in nature and is
based on a number of assumptions, judgments and estimates. Actual results will
likely differ from those described herein, possibly to a material extent. See
"Risk Factors -- Risks Relating to the Acquisition."

32
<PAGE>

Recent Developments

Holmes

Based upon preliminary unaudited financial information, Holmes' net sales
for the quarter ended December 31, 1998 were $54.4 million, compared to $55.4
million for the quarter ended December 31, 1997, a decrease of $1.0 million, or
1.8%. The decrease in net sales during the fourth quarter of 1998 was primarily
the result of higher-than-expected sales in the third quarter of 1998, as noted
in the nine-month comparison incorporated by reference herein, that might
otherwise have been recognized during the fourth quarter. Based upon
preliminary unaudited financial information, Holmes' EBITDA for the quarter
ended December 31, 1998 was $10.7 million, compared to $13.6 million for the
quarter ended December 31, 1997 (on a comparable basis adjusted to exclude $0.2
million of financing commissions paid to Holmes' former majority stockholder
and $6.8 million of incremental compensation expense, and to include $0.1
million of management fees paid to Berkshire Partners), a decrease of $2.9
million, or 21.3%. The decrease in EBITDA during the fourth quarter of 1998 was
primarily the result of the higher-than-expected third quarter 1998 sales, as
well as planned increases in selling, general and administrative expenses to
build infrastructure during the fourth quarter of 1998 as compared to the
fourth quarter of 1997.

Based upon preliminary unaudited financial information, Holmes' net sales
for the year ended December 31, 1998 were $212.0 million, compared to $192.2
million for the year ended December 31, 1997, an increase of $19.8 million, or
10.3%. The increase in net sales for 1998 was primarily attributable to
increases in all four of Holmes' main product categories: fans, heaters,
humidifiers and air purifiers. Based upon preliminary unaudited financial
information, Holmes' EBITDA for the year ended December 31, 1998 was $32.0
million, compared to $29.2 million for the year ended December 31, 1997 (on a
comparable basis adjusted to exclude $1.8 million of financing commissions paid
to Holmes' former majority stockholder and $6.9 million of incremental
compensation expense, and to include $0.4 million of management fees paid to
Berkshire Partners), an increase of $2.8 million, or 9.6%. The increase in
EBITDA during 1998 was attributable to the increase in net sales, as well as
improvements in gross margins, offset in part by business-building investment
in selling, general and administrative expenses.

Rival

Based upon unaudited financial information publicly released by Rival,
Rival's net sales for the three month period ended December 31, 1998 were
$114.8 million, compared to $127.9 million for the three months ended December
31, 1997, a decrease of $13.1 million, or 10.2%. For the six months ended
December 31, 1998, Rival's net sales were $194.9 million, a decrease of $29.6
million, or 13.2%, from net sales for the six months ended December 31, 1997 of
$224.5 million. The primary reasons for the lower sales in the three and six
month periods ended December 31, 1998 were reduced international sales and
reduced sales of massagers, heaters and humidifiers and, to a lesser extent,
lower sales of kitchen electrics during the three months ended September 30,
1998. Based upon unaudited financial information provided to Holmes, Rival's
EBITDA for the three months ended December 31, 1998 was $15.1 million
(excluding the $0.7 million restructuring charge), a decrease of 14.7% from
EBITDA of $17.7 million for the same period of 1997. Based upon such
information, Rival's EBITDA for the six months ended December 31, 1998 was
$22.7 million (excluding the $8.4 million of restructuring charges), a decrease
of 21.7% from EBITDA of $29.0 million for the same period of 1997. The
decreases in EBITDA resulted from the lower sales volume and corresponding
increases in selling, general and administrative expenses as a percentage of
sales.

Results of Operations

Holmes

Nine Months Ended September 30, 1998 Compared to Nine Months Ended
September 30, 1997

Net Sales. Net sales for the first nine months of fiscal 1998, which ended
September 30, 1998, were $157.6 million compared to $136.8 million for the
first nine months of fiscal 1997, which ended September 30, 1997, an increase
of $20.8 million or 15.2%. This increase is primarily attributable to an
increase in all four of the Company's main product categories; fans, heaters,
humidifiers and air purifiers over the prior year which resulted from stronger
retail seasons, improved consumer response and a significant increase in
external sales from the Far East operations to non-U.S. markets.

Gross Profit. Gross profit for the first nine months of 1998 was $47.1
million compared to $34.3 million for the first nine months of 1997, an
increase of $12.8 million or 37.3%. As a percentage of net sales, gross profit
increased to 29.9% for the first nine months of 1998 from 25.1% for the first
nine months of 1997. The increase

33
<PAGE>

was primarily due to the above mentioned increases in net sales as well as
reductions in raw material prices at the Company's manufacturing operations.
Additionally, sales of air purifiers, humidifiers and related filters,
including sales through the customer service department, continued above prior
year levels. These two categories generate higher gross profit margins than the
other categories, and the increase in sales of these products in the first nine
months of 1998 improved the overall gross profit percentage.

Selling Expenses. Selling expenses for the first nine months of 1998 were
$14.7 million compared to $11.2 million for the first nine months of 1997, an
increase of $3.5 million or 31.3%. As a percentage of net sales, selling
expenses increased to 9.3% for the first nine months of 1998 from 8.2% for the
first nine months of 1997. The increase in selling expenses was primarily due
to a continued increase in co-operative advertising and new sales promotions of
higher margin products with several major retailers. Also contributing to the
increase was an increase in packaging costs from redesigning the outside
packaging for existing product lines. To a lesser extent, shipping costs and
selling commissions increased as a result of the higher sales level.

General and Administrative Expenses. General and administrative expenses
for the first nine months of 1998 were $11.8 million compared to $10.2 million
for the first nine months of 1997, an increase of $1.6 million or 15.7%. As a
percentage of net sales, general and administrative expenses remained at 7.5%
for the first nine months of 1998 and 1997, respectively. The Company increased
its expenditures on management and information systems support, and increases
in personnel costs to improve operating efficiencies at all of the Company's
locations. In addition, general and administrative expenses increased due to
the administrative costs on-going as part of the recapitalization of the
Company in November 1997.

Product Development Expenses. Product development expenses for the first
nine months of 1998 were $4.7 million compared to $3.6 million for the first
nine months of 1997, an increase of $1.1 million or 30.6%. As a percentage of
net sales, product development expenses increased to 3% for the first nine
months of 1998 from 2.6% for the first nine months of 1997. The increase was
primarily due to increased expenditures for royalties and outside consulting
firms as part of the Company's effort in developing new technologies for both
existing and new product lines.

Interest and Other Expense, Net. Interest and other expense, net for the
first nine months of 1998 was $10.1 million compared to $4.8 million for the
first nine months of 1997, an increase of $5.3 million or 110.4%. The increase
in interest expense was primarily due to the additional borrowings resulting
from the 1997 Transactions.

Income Tax Expense. Income tax expense increased to $.9 million in the
first nine months of 1998 from $.3 million in the first nine months of 1997, as
a result of the Company reporting a larger pre-tax income in the first nine
months of 1998 as compared to the first nine months of 1997. The Company
provides for taxes using a projected worldwide effective tax rate for the
entire year. The effective tax rate increased to 15% in the first nine months
of 1998 from 6.5% in the comparable prior period based on the forecasted
profitability by geographic area.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Net Sales. Net sales decreased $2.2 million, or 1.1%, to $192.2 million
for the year ended December 31, 1997 from $194.3 million for the year ended
December 31, 1996. The decrease in net sales was primarily due to a reduction
in sales of air conditioners resulting from a strategic management decision to
eliminate the air conditioner category because of the relatively low profit
margins of these products lines. In addition, an increase in sales of heaters
was offset by decreases in sales of fans, air purifiers and lighting products.

Gross Profit. Gross profit increased $7.0 million, or 14.5%, to $55.4
million for the year ended December 31, 1997 from $48.4 million for the year
ended December 31, 1996. As a percentage of net sales, gross profit increased
to 28.8% in 1997 from 24.9% in 1996. The increase in gross profit was
attributable, in part, to product mix. Decreased sales of dehumidifiers and air
conditioners, low margin contributors, were offset by increased sales in the
higher margin heater category. In addition, air purifier filter and humidifier
filter sales, which generate relatively high gross profit margins, increased
significantly for the year ended December 31, 1997 as compared to the year
ended December 31, 1996. There were also efficiency improvements in Holmes' Far
East manufacturing operations.

Selling Expenses. Selling expenses increased $2.4 million, or 18.3%, to
$15.6 million for the year ended December 31, 1997 from $13.2 million for the
year ended December 31, 1996. As a percentage of net sales, selling expenses
increased to 8.1% for the year ended December 31, 1997 from 6.8% for the year
ended December 31,

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1996. The increase in selling expenses was primarily due to an increase in
co-operative advertising of higher margin products with a number of major
retailers.

General and Administrative Expenses. General and administrative expenses
increased $6.8 million, or 48.3%, to $20.9 million for the year ended December
31, 1997 from $14.1 million for the year ended December 31, 1996. As a
percentage of net sales, general and administrative expenses increased to 10.9%
for the year ended December 31, 1997 from 7.2% for the year ended December 31,
1996. The increase in general and administrative expenses was primarily due to
approximately $6.0 million of incremental incentive compensation expenses paid
in connection with the closing of the 1997 Transactions. These incentive
compensation amounts were deducted from the purchase price of the capital stock
in the 1997 Transactions. In addition, general and administrative expenses
increased due to additional management and information systems support to
improve operating efficiencies at the Company's manufacturing facilities in
China.

Product Development Expenses. Product development expenses decreased $0.1
million, or 0.1%, to $5.4 million for the year ended December 31, 1997 from
$5.5 million for the year ended December 31, 1996. As a percentage of net
sales, product development expenses remained relatively constant at 2.9% and
2.8% for the years ended December 31, 1997 and 1996, respectively.

Interest and Other Expenses, Net. Interest and other expenses, net
increased $1.0 million, or 15.9%, to $7.2 million for the year ended December
31, 1997 from $6.2 million for the year ended December 31, 1996. The increase
in interest expense is primarily due to the additional borrowings resulting
from the 1997 Transactions, which were outstanding for one month in 1997.

Provision for Income Taxes. The Company's effective tax rate increased to
35.0% of pre-tax income for the year ended December 31, 1997 from 29.6% of
pre-tax income for the year ended December 31, 1996. The increase in the
effective tax rate was principally a result of limitations placed on the
Company's ability to deduct for tax purposes approximately $3.6 million of
interest paid to or guaranteed by Pentland (as defined) and its affiliates.
This was offset by an increase in the profitability of the Company's
manufacturing operations in China, which are taxed at significantly lower rates
than the Company's U.S. operations. While the interest limitation may be
carried forward indefinitely, because of the Company's current highly leveraged
structure it is uncertain whether the Company will be able to deduct this
amount in the future. Therefore, management has recorded a valuation allowance
on the entire amount of deferred tax asset arising from this carryforward,
which has the impact of increasing the effective tax rate. This limitation
primarily arose as a result of the incentive compensation expenses described
above. The Company had no such limitations in previous years, and because
interest is no longer paid to foreign affiliates, this limitation is not
expected to be applicable in the future. If the Company is able to utilize this
deduction, it will reduce income tax expense in future years.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Net Sales. Net sales increased $16.2 million, or 9.1%, to $194.3 million
in 1996 from $178.1 million in 1995. The increase in net sales was primarily
due to an increase in sales of heaters, humidifiers, air purifiers and related
accessories which resulted from the Company's continued expansion of product
lines to improve features, performance and pricing, as well as the growing
installed base of products requiring accessories. Net sales also increased as a
result of the introduction of the air conditioner category. The increase in net
sales was offset in part by lower sales of fans and dehumidifiers as a result
of unusually cool summer weather in the United States which led to higher
product returns.

Gross Profit. Gross profit increased $11.5 million, or 31.2%, to $48.4
million in 1996 from $36.9 million in 1995. As a percentage of net sales, gross
profit increased to 24.9% in 1996 from 20.7% in 1995. The increase in gross
profit was primarily due to lower raw material costs. Gross Profit was also
favorably impacted by increased efficiencies in Holmes' manufacturing
operations as a result of the opening of a new custom made facility and better
management control of production processes.

Selling Expenses. Selling expenses increased $0.5 million, or 3.9%, to
$13.2 million in 1996 from $12.7 million in 1995. The increase in selling
expenses was primarily related to new direct advertising programs as well as an
increase in co-operative advertising programs with customers. As a percentage
of net sales, selling expenses decreased to 6.8% in 1996 from 7.1% in 1995.

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General and Administrative Expenses. General and administrative expenses
increased $4.3 million, or 43.9%, to $14.1 million in 1996 from $9.8 million in
1995. As a percentage of net sales, general and administrative expenses
increased to 7.2% in 1996 from 5.5% in 1995. The increase in general and
administrative expenses was primarily due to additional management, controls
and information systems required by the Company's manufacturing operations in
order to meet the demands brought on by the rapid growth of these operations.
General and administrative expenses also increased as a result of higher
incentive compensation based on the Company's profitability.

Product Development Expenses. Product development expenses increased $2.3
million, or 71.9%, to $5.5 million in 1996 from $3.2 million in 1995. As a
percentage of net sales, product development expenses increased to 2.9% in 1996
from 1.8% in 1995. The increase in product development expenses was primarily
due to added personnel as part of the Company's strategy to invest in the
resources necessary to develop new product innovations, and the implementation
of more stringent quality control programs. Product development expenses also
increased due to an increase in patent and trademark expenses relating to
product development.

Interest and Other Expenses, Net. Interest and other expenses, net
increased $1.3 million, or 26.5%, to $6.2 million in 1996 from $4.9 million in
1995. The increase in interest and other expenses, net was primarily due to an
increase in average inventory levels, principally as a result of lower fan
sales and higher returns resulting from cool summer weather. The increase in
inventory levels and, to a lesser extent, accounts receivable resulted from a
retail industry trend to purchase more goods from the Company's warehouse
facilities rather than directly from the Company's manufacturing facilities in
China.

Provision for Income Taxes. The Company's effective tax rate decreased to
29.6% of pre-tax income in 1996 from 41.0% of pre-tax income in 1995. The
decrease in the effective tax rate was principally a result of an increase in
the profitability of the Company's manufacturing operations in China, which are
taxed at significantly lower rates than the Company's U.S. operations.

Rival

Three Months Ended September 30, 1998 Compared to Three Months Ended
September 30, 1997

Net Sales. Net sales were $80.1 million in the quarter ended September 30,
1998 compared to $96.7 million in the prior year. The sales decline affected
most of Rival's major lines of business. Kitchen electrics posted a 16% decline
from $49.6 million to $41.8 million. Sales to retailers are not consistent with
retail point of sale information received from Rival's major retail customers
indicating that at least a substantial portion of the sales decline relates to
shrinking retail inventories. Home environment sales declined $6.4 million
(24%). Much of this decline was in the Bionaire air cleaners and humidifiers.
Major customers are shifting their assortments to newly introduced products
that will be available for shipment during October and November. The
international business unit had significant sales gains during fiscal 1998,
however, sales declined during the September 1998 quarter by $2.2 million (22%)
largely as a result of currency devaluations in key Latin American markets.

Gross Profit. Gross profit before restructuring costs was $20.5 million
(25.6% of sales) compared to $25.6 million (26.5% of sales) in the prior year.
This 0.9% decline in gross profit as a percent of sales was the result of
various factors including competition in space heaters, lower profitability in
Canada due to the weak currency and increased shipping costs from Asia. These
factors offset improvements that have been achieved in other categories
including can openers and air cleaners. After the restructuring costs, gross
profit was $17.6 million (22.0% of sales).

Selling, General and Administrative Expenses. Selling expenses were $12.2
million (15.2% of sales) for the current quarter compared to $13.0 million
(13.4% of sales) in the prior year. The higher selling expenses as a percentage
of sales was primarily due to spreading fixed costs over the smaller sales
base. Commission expense increased as a percentage of sales due to a higher
percentage of total sales made through independent sale representatives.
General and administrative expenses decreased nearly 10% to $2.9 million due to
a decline in legal expenses.

Interest Expense. Interest expense declined from $2.6 million to $2.5
million due to a $4.0 million payment on long-term debt and lower borrowings on
the revolving credit agreement.

Other Non-operating Expense. Other non-operating expense of $0.3 million
primarily represents losses from foreign currency exchange relative to the
Canadian dollar and the Mexican peso.

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Net Loss. Net loss for the quarter was $3.8 million compared to net
earnings of $3.7 million in the prior year. Excluding the $4.7 million after
tax cost of the restructuring, earnings for the September 1998 quarter were
$0.9 million.

Fiscal Year Ended June 30, 1998 Compared to Fiscal Year Ended June 30,
1997

Net Sales. Net sales increased slightly from $376.5 million for the year
ended June 30, 1997 ("fiscal 1997") to $376.9 million for the year ended June
30,1998 ("fiscal 1998"). Sales of kitchen electrics increased 2% as strong
sales of Rival's new oval-shaped Crock-Pot[RegTM] slow cooker more than offset
lower sales of promotionally priced toasters and novelty massagers. The
international business unit experienced 22% sales growth to $43.7 million due
to improved placement of kitchen electric products with Canadian retailers and
increased fan sales into Latin America. Sales in the home environment business
unit declined 10% to $104.9 million due to decreases in sales of Bionaire air
purifiers and humidifiers and Patton space heaters that more than offset a near
doubling of Pollenex showerhead sales. The sales declines were generally the
result of products that were nearing the end of their life cycles. Rival has
introduced new products in each of these categories for fiscal 1999. A similar
investment in new showerhead development resulted in the fiscal 1998 sales
growth in this category. Industrial sales declined slightly during fiscal 1998
as Rival solidified its customer base through improved service during the year.

Gross Profit. Gross profit was $95.9 million (25.5% of net sales) in
fiscal 1998 compared to $98.0 million (26.0% of net sales) in fiscal 1997. The
decline in gross margin was the result of a decrease in sales of high margin
novelty massagers together with increased manufacturing costs, in particular
higher labor rates, which were not accompanied by price increases. Rival is
transferring the production of some of its products to overseas sources and is
restructuring its manufacturing operations in an effort to reduce costs and
improve gross margins.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses totaled $63.3 million (16.8% of net sales) in fiscal
1998 compared to $63.8 million (16.9% of net sales) in fiscal 1997. The decline
was achieved despite an increase of $0.9 million in product development
spending. Legal and professional expenses also increased in fiscal 1998 due to
higher spending to protect Rival's intellectual property. These increases were
more than offset by savings generated from consolidation of administrative
functions in Canada, lower advertising expenditures and a decline in fixed
selling expenses from reducing the size of the direct sales force.

Restructuring Charge. A restructuring charge of $3.0 million was
recognized in fiscal 1997 as a result of the decision to close the Montreal,
Canada production and shipping facility together with the consolidation of
certain Canadian administrative functions.

Interest Expense. Interest expense was $10.1 million in both fiscal 1998
and fiscal 1997. Total average borrowings were $150 million in fiscal 1998,
down slightly from $154 million in the prior year. The decline in borrowings
was offset by a small increase in average interest rates.

Other Non-operating Expense. During fiscal 1998, Rival recognized a
litigation charge of $3.8 million related to the settlement of a lawsuit in
Montreal. The litigation resulted from an action taken by minority shareholders
of Biotech Electronics, Inc., which was a predecessor to Bionaire. The lawsuit
originated in 1985 (over 10 years prior to the acquisition of Bionaire by
Rival). In January 1998, the Canadian Court of Appeal affirmed a lower court
decision and substantially increased the damages awarded to the plaintiffs. In
the settlement reached by Rival in June 1998, the plaintiffs dropped all
actions against Rival and released Rival and its affiliates from any further
liability.

Income Taxes. Effective income tax rates were 41.6% in fiscal 1998
compared to 40.7% in fiscal 1997. The statutory rate was 35% in each year. The
difference between the statutory rate and the effective rate is primarily due
to non-deductible amortization of goodwill recorded as a result of the 1986
acquisition of Rival and the 1996 acquisition of Bionaire. Additional
differences arise due to state income taxes and differences between the rate of
taxation between Rival's U.S. and international operations. Additionally, in
fiscal 1998, a portion of the Canadian litigation loss was non-deductible,
which resulted in the higher effective tax rate.

Net Earnings. Net earnings were $9.2 million in fiscal 1998 compared to
$10.7 million in fiscal 1997 due to the lower gross margins and the litigation
charge discussed above. Excluding the fiscal 1998 Canadian litigation charge
and the fiscal 1997 Canadian restructuring charge, net earnings were $12.2
million in fiscal 1998 compared to $12.8 million in fiscal 1997.

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Fiscal Year Ended June 30, 1997 Compared to Fiscal Year Ended June 30,
1996

Net Sales. Net sales increased $62.6 million to $376.5 million for fiscal
1997 compared to $313.9 million for the year ended June 30, 1996 ("fiscal
1996"). The acquisitions of Fasco, Bionaire and Dazey between January 1996 and
January 1997 contributed $64.1 million in incremental sales. Excluding these
acquired businesses, sales in the kitchen electrics business unit increased
approximately $3.5 million or two percent due to new product introductions in
the iron and massager categories. Industrial sales were adversely affected by a
$4.0 million decrease in sales of fans and drum blowers due to unusually mild
weather. The growth in the home environment and international business units
was generally consistent with incremental sales from the Fasco and Bionaire
acquisitions.

Gross Profit. Gross profit was $98.0 million (26.0% of net sales) in
fiscal 1997 compared to $83.7 million (26.7% of net sales) in fiscal 1996. The
decline in gross margins was the result of unfavorable manufacturing variances
caused by excess plant capacity together with high service returns from retail
customers. The under-utilization in manufacturing was the result of recent
acquisitions and resulted in the closing of two plants in Montreal, Canada, and
in Peru, Indiana. Additionally, production in the Sweet Springs, Missouri,
plant was significantly curtailed as the facility is now being used as a
centralized return center to more effectively process and inspect customer
returns.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses totaled $63.8 million (16.9% of net sales) in fiscal
1997 compared to $50.6 million (16.1% of net sales) in fiscal 1996. Selling
expenses increased as a percentage of net sales from 12.7% to 13.4%. The higher
expenses as a percentage of net sales are due, in part, to the full year impact
of the international and industrial sales contributed by the Bionaire and Fasco
acquisitions. Selling expenses of these two business units are higher as a
percentage of sales than the kitchen electrics and home environment business
units. Distribution expenses also increased as a percentage of net sales due to
inefficiencies caused by congestion in the Clinton, Missouri, distribution
center. A new distribution center was opened in July 1997 in Sedalia, Missouri,
in order to increase shipping capacity and improve efficiency. General and
administrative expenses were $13.5 million (3.6% of net sales) in fiscal 1997
compared to $10.7 million (3.4% of net sales) in fiscal 1996. Costs incurred by
the product engineering group were $3.8 million in fiscal 1997 compared to $2.7
million in fiscal 1996 as Rival increased its spending on product development.
Other general and administrative costs increased at rates consistent with the
sales growth.

Restructuring Charge. A restructuring charge of $3.0 million was
recognized in fiscal 1997 as a result of the decision to close the Montreal,
Canada, production and shipping facility together with the consolidation of
certain Canadian administrative functions. The Montreal facility was acquired
as part of the Bionaire acquisition in April 1996. The closing reflects efforts
by Rival to reduce its excess plant capacity. The restructuring cost reflects
the estimated cost of future lease obligations in excess of projected sublease
income as well as severance costs.

Interest Expense. Interest expense was $10.1 million in fiscal 1997
compared to $7.1 million in fiscal 1996. Total average borrowings increased
from $106 million to $154 million due to the three acquisitions made between
January 1996 and January 1997 together with higher working capital
requirements. Average interest rates declined from 6.7% in fiscal 1996 to 6.4%
in fiscal 1997 due to lower rates on the revolving credit facility.

Income Taxes. Effective income tax rates were 40.7% in fiscal 1997
compared to 38.8% in fiscal 1996. The statutory rate was 35% in each year. The
difference between the statutory rate and the effective rate is primarily due
to nondeductible amortization of goodwill recorded as a result of the 1986
acquisition of Rival and the 1996 acquisition of Bionaire. Additional
differences arise due to state income taxes and differences between the rate of
taxation between Rival's U.S. and international operations. In fiscal 1997,
Rival's Canadian operations operated at a loss as a result of the
aforementioned restructuring charge. The tax benefit recognized by Rival on the
Canadian loss was below the U.S. statutory rate.

Net Earnings. Net earnings were $10.7 million in fiscal 1997 compared to
$14.2 million in fiscal 1996 due to the higher interest costs and the 1997
restructuring charge discussed above.

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Liquidity and Capital Resources

Holmes currently funds its operations through cash flows from operations
and borrowings under the Existing Credit Facility. Holmes generated $13.7
million of cash from operations for the nine months ended September 30, 1998,
compared to $0.7 million of cash used for operations for the nine months ended
September 30, 1997. Cash provided by operations in the first nine months of
1998 primarily reflected Holmes' net income of $4.9 million and increases in
accrued liabilities and accounts payable, partially offset by increases in
accounts receivable and inventory. The increase in accrued liabilities related
mainly to the accrued interest on Holmes' long-term debt. The $2.9 million
increase in accounts payable was primarily due to purchases of materials for
increased manufacturing activity in Holmes' Far East operations to support
Holmes' higher sales level. The increase in inventory was mainly due to
increased warehouse levels of winter season products (heaters and humidifiers)
in anticipation of in-season orders, as early season shipments are generally
made directly to customers from Holmes' Far East manufacturing facilities. The
increase in accounts receivable was sales volume related. Cash provided by
(used for) operations for the years ended December 31, 1995, 1996 and 1997 was
$5.5 million, $2.8 million and $(46.4) million, respectively. Cash used for
operations in 1997 primarily reflected the repayment of trade acceptances and
amounts due to affiliates in connection with the 1997 Transactions.

Cash provided by (used for) financing activities for the nine months ended
September 30, 1998 and 1997 was $(9.6) million and $8.4 million, respectively.
Cash used for financing in the first nine months of 1998 reflected the payback
of borrowings under the Existing Credit Facility. The cash provided by
financing activities in the first nine months of 1997 reflected working capital
borrowings under a previous line of credit. Cash provided by financing
activities for the years ended December 31, 1995, 1996 and 1997 was $6.0
million, $6.9 million and $53.3 million, respectively. The increase in 1997
reflected the borrowings to refinance Holmes' indebtedness in connection with
the 1997 Transactions.

Holmes' capital expenditures, including assets acquired under capital
leases, for the nine months ended September 30, 1998 were approximately $3.5
million, primarily for tooling for the production of new products. Holmes
expects that capital expenditures for the fourth quarter of 1998 and for 1999
will be approximately $2.5 million and $6.9 million, respectively, primarily
for tooling for new products and new computer equipment.

On May 22, 1997 and June 4, 1997, Holmes reached agreements to acquire the
capital stock held by the 30% minority stockholders of one of its subsidiaries
for an aggregate of $0.9 million, half of which was paid at the closing of the
acquisitions, and half of which was payable, with interest, one year later. See
Note 2 of Notes to Holmes' Consolidated Financial Statements.

Rival has financed its prior acquisitions, capital expenditures and
working capital requirements with a combination of cash flows from operations,
long-term notes and revolving credit loans. As of September 30, 1998, long-term
debt outstanding aggregated $84.0 million, including the current portion of
$6.0 million. Revolving credit loans outstanding at September 30, 1998
aggregated $66.3 million. Revolving credit commitments as of such date included
a $75.0 million U.S. bank line, a Canadian facility for the Canadian dollar
equivalent of U.S. $10.0 million, and a $15.0 million seasonal bank line which
expired December 31, 1998. In connection with the Transactions, Rival's
long-term and revolving credit indebtedness will be repaid and the facilities
terminated.

Following consummation of the Transactions, the Company's primary
liquidity requirements will be for working capital and to service the Company's
indebtedness. The Company intends to finance its liquidity requirements with
cash flows from operations and borrowings under the Credit Facility. The
Company believes that cash flows from operations and borrowings under the
Credit Facility will be sufficient to meet the Company's liquidity needs for
the foreseeable future.

The Company will enter into the Credit Facility in connection with the
Transactions. The Credit Facility consists of a tranche A term loan of $50.0
million, a tranche B term loan of $75.0 million and a $200.0 million revolving
credit commitment. The Credit Facility, and the guarantees thereof by the
Company's direct and indirect domestic subsidiaries, are expected to be secured
by substantially all of the Company's domestic and certain foreign assets. The
Credit Facility and the Indenture will include certain financial and operating
covenants which will, among other things, restrict the ability of the Company
to incur additional indebtedness, make investments and take other actions. See
"Description of Credit Facility" and "Description of Notes." The ability of the
Company to meet its debt service obligations will be dependent upon the future
performance of the Company, which will be impacted by general economic
conditions and other factors. See "Risk Factors."

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As a result of the consummation of the Offering and the Company's expected
borrowings under the Credit Facility, the Company's interest expense in future
periods will increase substantially. See "Risk Factors--Substantial Leverage."

In the event that the Acquisition is not consummated, Holmes would utilize
the net proceeds of the Offering to repay its existing indebtedness, to pay
expenses and for general working capital purposes. In such event, Holmes would
continue to service its liquidity needs through the Existing Credit Facility.

Seasonality

Holmes

Sales of most of Holmes' products follow seasonal patterns which affect
Holmes' results of operations. In general, Holmes' sales of fans and
dehumidifiers occur predominantly from January through June, and Holmes' sales
of heaters and humidifiers occur predominantly from July through December.
Although air purifiers, lighting products and accessories generally are used
year-round, the nature of these products tend to draw increased sales during
the winter months when people are indoors and, as a result, sales of these
products tend to be greatest in advance of the winter months from July through
December. In addition to the seasonal fluctuations in sales, Holmes experiences
seasonality in gross profit, as margins realized on fan products tend to be
lower than those realized on heater, humidifier and air purifier products. See
"Risk Factors--Seasonality."

Rival

Certain of Rival's product lines are also seasonal, with sales of heaters
and humidifiers highest during the fall and winter, and ice cream freezers,
pumps and fans sold primarily during the spring or summer. In addition, a
significant percentage of the products sold by Rival are given as gifts and, as
such, sales volumes are higher in anticipation of the Christmas season. See
"Business of The Rival Company -- Seasonality."

Year 2000

The Year 2000 problem relates to computer systems that have time and
date-sensitive programs that were designed to read years beginning with "19",
but may not properly read the Year 2000. If a system used by the Company or by
a third party fails because of the inability to properly read the Year 2000
date, the results could have a material adverse effect on the Company. Holmes
and Rival have developed plans to address the possible exposures related to
their computer systems from the Year 2000.

Holmes

Holmes has identified its Year 2000 risk to be in two general categories:
Information Technology Systems, including Electronic Data Interchange Systems
("EDI"), and general business systems.

Information Technology Systems Including EDI. Holmes is currently in the
process of implementing a new company wide computer software system. The new
system will be fully Year 2000 compliant, according to the vendor, and Holmes
anticipates that it will be operational by the end of the second quarter of
1999. In addition, all computer hardware has or is in the process of being
tested for Year 2000 compliance. Those systems that fail will be upgraded or
replaced during the second quarter of 1999. Holmes is also in the process of
implementing a new EDI system that will be fully Year 2000 compliant to prevent
any interruption of data interchange from the many customers using this
platform. Holmes anticipates that this system will be completed during the
second quarter of 1999. Holmes intends to use both internal and external
resources to test, reprogram or replace the software and hardware for Year 2000
modifications. The total specific project costs are difficult to determine as
many of the upgrades and new implementations would have been made regardless of
the Year 2000 issue. The majority of project costs, related to the purchase of
hardware and software to meet both Year 2000 and company specific requirements,
will be capitalized. All other remaining project costs will be expensed during
1999 and 2000.

General Business Systems. Business systems encompass the following:
telecommunications systems, departmental specific application systems,
machinery and equipment, building and utility systems and, finally, third party
vendors and service providers. Holmes has created a Year 2000 committee
consisting of one member from each department. The committee is reviewing all
aspects of Holmes' business systems to determine if they are Year 2000
compliant, and testing systems as necessary. This process will continue through
the second quarter of 1999.

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Holmes has sent a comprehensive questionnaire to substantially all significant
customers and suppliers regarding their Year 2000 compliance. While Holmes
intends to carefully monitor its customer and supplier risks, Holmes cannot
fully control each customer and supplier, and there can be no guarantee that a
Year 2000 problem that may originate with a third party will not materially
adversely affect Holmes. Holmes has not designed a specific contingency plan in
the event of a Year 2000 failure caused by a supplier or third party, but is
working to identify issues as soon as possible. Finally, Holmes has determined
that products that it manufactures and sells have no exposure related to the
Year 2000 issue.

Rival

During the past several years, Rival has replaced all of its significant
computer software applications as part of normal system upgrades. All of the
new systems are, according to the software vendors, Year 2000 compliant. Rival
has created a task force to test all of its significant software and to
determine whether embedded technology, such as microcontrollers, contained in
its machinery and equipment is Year 2000 compliant. In addition, the task force
will review the Year 2000 compliance of its key suppliers and service providers
in an effort to reduce the potential adverse effect on its operations from
non-compliance by such third parties. The task force is currently expected to
complete its review by June 30, 1999. As systems are tested, Rival intends to
develop contingency plans for systems that exhibit possible Year 2000 problems.
The cost of the task force's activities is not expected to be significant.

[End of Exhibit 99.1.
Remainder of Offering Memorandum intentionally omitted.]