WINDMERE DURABLE HOLDINGS INC, 424B3, 1998-06-30

WINDMERE DURABLE HOLDINGS INC
424B3, 1998-06-30
ELECTRIC HOUSEWARES & FANS

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<PAGE> 1
Filed pursuant to Rule 424(b)(3)
Registration No. 333-56069

This Prospectus Supplement relates to an effective Registration Statement under
the Securities Act of 1933, and is subject to completion or amendment. This
Prospectus Supplement and the accompanying Prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any sale
of the securities in any jurisdiction in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such jurisdiction.

SUBJECT TO COMPLETION, DATED JUNE 29, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE , 1998)

3,041,000 SHARES

[WINDMERE-DURABLE HOLDINGS LOGO]

COMMON STOCK
------------------------

All of the 3,041,000 shares of common stock (the "Common Stock") offered
hereby are being offered (the "Common Stock Offering") by Windmere-Durable
Holdings, Inc., a Florida corporation (the "Company").

Concurrently with the Common Stock Offering, the Company is publicly
offering $125.0 million in aggregate principal amount of its % Senior
Subordinated Notes due 2008 (the "Notes"). Consummation of each of the Common
Stock Offering and the offering of the Notes (the "Notes Offering" and, together
with the Common Stock Offering, the "Offerings") is contingent upon consummation
of the other.

The Common Stock is listed on The New York Stock Exchange (the "NYSE")
under the symbol "WND." On June 25, 1998, the last reported sale price of the
Common Stock on the NYSE was $32.875 per share. See "Price Range of Common
Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE S-14 OF THIS PROSPECTUS SUPPLEMENT FOR
A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS IN EVALUATING A PURCHASE OF THE COMMON STOCK.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
TO WHICH IT RELATES. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
==================================================================================================================
Price to Underwriting Proceeds to
Public Discounts(1) Company(2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................. $ $ $
Total(3).................................. $ $ $
==================================================================================================================
</TABLE>

(1) The Company and certain of its subsidiaries have agreed to indemnify the
Underwriters (as defined) against, and to provide contribution with respect
to, certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). See "Underwriting."

(2) Before deducting expenses payable by the Company in connection with the
Common Stock Offering, estimated at $500,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
456,150 additional shares of Common Stock solely to cover over-allotments,
if any. If the Underwriters exercise this option in full, the Price to
Public will total $ , the Underwriting Discount will total
$ and the Proceeds to Company will total $ . See
"Underwriting."

The shares of Common Stock are offered by the Underwriters named herein
when, as and if delivered to and accepted by the Underwriters and subject to
their right to reject any order in whole or in part. It is expected that
delivery of certificates representing the shares will be made against payment
therefor at the office of NationsBanc Montgomery Securities LLC on or about
, 1998.
------------------------

NationsBanc Montgomery Securities LLC
Raymond James & Associates, Inc.

The date of this Prospectus Supplement is , 1998.
<PAGE> 2

[PHOTOGRAPHS]

THE UNDERWRITERS PARTICIPATING IN THIS COMMON STOCK OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH
THE COMMON STOCK OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON
STOCK. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 3

PROSPECTUS SUPPLEMENT SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere or incorporated by reference in this
Prospectus Supplement. Unless otherwise indicated or the context otherwise
requires: (i) all information contained in this Prospectus Supplement (a) gives
effect to the acquisition by Windmere-Durable Holdings, Inc. of the Cooking,
Garment Care, Food Preparation, and Beverage businesses of the Household
Products Group of The Black & Decker Corporation and related assets and the
assumption of certain related liabilities, and the related licensing agreements
between Windmere-Durable Holdings, Inc. and The Black & Decker Corporation,
consummated on June 26, 1998 (collectively, the "HPG Acquisition"), and (b)
assumes no exercise of the Underwriters' over-allotment option relating to the
Common Stock Offering; (ii) references to the "Company" mean Windmere-Durable
Holdings, Inc. and its subsidiaries after giving effect to the HPG Acquisition;
(iii) references to "Windmere-Durable" mean Windmere-Durable Holdings, Inc. and
its subsidiaries before giving effect to the HPG Acquisition; and (iv)
references to the "Black & Decker Household Products Group" or "HPG" mean the
Cooking, Garment Care, Food Preparation, and Beverage businesses of the
Household Products Group of The Black & Decker Corporation and certain related
assets purchased, and certain related liabilities assumed, by Windmere-Durable
in the HPG Acquisition.

THE COMPANY

GENERAL

The Company, through its subsidiaries, is a leading diversified
manufacturer and distributor of a broad range of branded and private label small
household appliances, including electric housewares (kitchen and garment care),
personal care, and other products. The Company also manufactures and markets the
LitterMaid(R) self-cleaning cat litter box. The Company manufactures and markets
products under the Windmere(R) and other Company-owned brand names, under
private-label brand names, under licensed brand names, such as Black & Decker(R)
and, pursuant to licenses held by 50%-owned affiliates, the White-
Westinghouse(R) brand name. The Company's customers for such products include
mass merchandisers, specialty retailers and appliance distributors in North
America, Latin America, the Caribbean and Europe. In addition, the Company
manufactures products on an OEM basis for other major consumer products
companies.

With the June 26, 1998 acquisition of the Black & Decker Household Products
Group, the Company became a leading supplier of brand name small electric
housewares in the United States, primarily cooking (toaster ovens), garment care
(hand-held irons), food preparation, and beverage products. The HPG brands had
the number one United States market share in the toaster oven and hand-held iron
categories, with market shares of approximately 56% and 36%, respectively, in
1997. Management also believes that the products marketed by HPG have strong
brand name recognition and a reputation for quality among consumers. The
flagship Black & Decker(R) brand has been licensed to the Company for use in
marketing designated HPG products in specified countries. In addition, the
Company purchased important subbrands, including Toast 'R Oven(TM),
ProFinish(R), Quick 'N Easy(R), Spacemaker(R), and KT Kitchentools(TM).

The Company operates manufacturing facilities in the People's Republic of
China (the "PRC") and the United States, and sources products from manufacturing
facilities in Mexico, which it has contracted to acquire upon the receipt of
certain Mexican governmental approval. In 1997, approximately 85-90% of
Windmere-Durable's products were manufactured by Durable Electrical Metal
Factory, Ltd. ("Durable"), its wholly-owned Hong Kong subsidiary, in Bao An
County, Guangdong Province of the PRC, which is approximately 60 miles northwest
of central Hong Kong. Durable's facilities include six manufacturing plants
located within a six square mile radius, constituting approximately two million
square feet of production capability and employing over 12,000 workers. Durable
is a vertically integrated manufacturing operation, with the capacity and
expertise to handle all phases of product manufacturing, from design to
component manufacturing through final assembly. The Company plans to leverage
its efficient, low-cost manufacturing capabilities to generate increased sales
and profits.

S-3
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The Company also owns a 50% equity interest in both Salton/Maxim
Housewares, Inc. ("Salton"), a publicly-traded company, and Newtech Electronics
Industries, Inc. ("Newtech"). Salton designs and markets small kitchen
appliances for distribution primarily to department stores and upscale mass
merchandisers. Newtech designs, sources, manufactures and markets value-priced
brand name consumer electronic products for distribution to mass merchandisers
and other retailers. Salton and Newtech have each entered into seven-year
contracts (the "Kmart Agreements") with Kmart Corporation ("Kmart"), covering
sales estimated to be an aggregate minimum of $1.7 billion, to supply to Kmart
certain small appliances, consumer electronics and telephone products that bear
the White-Westinghouse(R) brand name licensed to Salton and Newtech by White
Consolidated Industries, Inc. ("WCI"). The Company manufactures and sells
kitchen appliances to Salton for sale under Salton's Kmart Agreement and also
earns fees on all sales to Kmart under Salton's Kmart Agreement. By virtue of
its 50% equity ownership in each of Salton and Newtech, the Company also
recognizes 50% of the net earnings/losses of each of these companies. On June
26, 1998, Salton announced its intention to acquire the Company's 50% equity
interest in Salton. See "-- Recent Developments."

On a pro forma basis after giving effect to the HPG Acquisition, the
Company would have generated net sales of $664.8 million, EBITDA of $68.1
million, and net earnings of $12.2 million, for fiscal 1997. On a pro forma
basis, the Company's product revenue mix for 1997 would have been approximately
71% electric housewares, 19% personal care, 2% LitterMaid(R) and 8% other
products. See "Unaudited Pro Forma Combined Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

THE INDUSTRY

According to The CIT Group, the small household appliance industry was
approximately a $6.3 billion retail business in the United States in 1997, based
upon estimated shipments to the United States market, including imports. The
small household appliance industry can be characterized as mature, fragmented
and highly competitive. However, the small household appliance industry has been
consolidating. The Company believes that the search for large-scale efficiencies
in manufacturing, product development, and marketing has driven this trend. In
addition, the Company expects that retailers will continue to seek to
rationalize their supplier base by dealing primarily with companies that can
offer a wider array of products and higher levels of customer service. The
combination of demanding retailer customer service requirements and intense
competition for shelf space has increased pressure on small, narrowly focused
competitors. The Company believes that industry consolidation will continue in
the next few years and that the Company, with its established low-cost
manufacturing capabilities and extensive array of product offerings with strong
brand name recognition, is well-positioned to be a market leader in this
environment.

COMPETITIVE STRENGTHS

The Company believes that it is a strong competitor in the industry for the
following reasons:

A PORTFOLIO OF STRONG BRAND NAMES. With the acquisition of the Black &
Decker Household Products Group, the Company became a leading supplier of brand
name electric housewares in the United States. The HPG brands have the number
one United States market position in toaster ovens and hand-held irons, with
1997 market shares of approximately 56% and 36%, respectively, and strong
positions in the food preparation and beverage categories. The flagship Black &
Decker(R) brand has been licensed to the Company for use in marketing designated
HPG products in specified countries. In addition, the Company acquired important
subbrands, including Toast 'R Oven(TM), ProFinish(R), Quick 'N Easy(R),
Spacemaker(R), and KT Kitchentools(TM). The Company will also continue to
manufacture and market products under the Windmere(R) and other owned and
licensed brand names and under private-label brand names.

S-4
<PAGE> 5

the capacity and expertise to handle all phases of product manufacturing, from
design to component manufacturing to final assembly. Durable manufactured over
24 million finished goods units and millions of additional components in 1997.
The Company believes that its high volume, vertically integrated manufacturing
capabilities provide the Company flexibility and cost advantages.

REPUTATION FOR INNOVATION. The Black & Decker Household Products Group is
recognized within the small household appliance industry for its product
innovation and sales and marketing expertise. The Black & Decker Household
Products Group team has developed new products and categories within its
targeted industry segments, such as the under-the-counter Spacemaker(R)
products. This team has won numerous awards for design and innovation, including
recent awards from Business Week for its new premium KT Kitchentools(TM) line.
HPG's latest innovations include the PartyMate(TM) cordless blender and
ExpressoMio(TM) microwave espresso maker. Windmere-Durable has also introduced
several new products, including the LitterMaid(R) self-cleaning cat litter box.

BROAD RANGE OF PRODUCT OFFERINGS. With the completion of the HPG
Acquisition, the Company provides customers in the small household appliance
market with a broad product line at introductory, mid-tier, and premium price
points in key product categories. The Company believes that, as the retail
industry continues to consolidate, the ability to serve the retailer with a wide
array of product offerings becomes increasingly important both for maintaining
shelf space and for introducing new products into the retail market in existing
and new distribution channels.

STRONG MANAGEMENT TEAM. The Company has an experienced management team,
with particular expertise in value manufacturing. Its Chairman, President and
Chief Executive Officer has been overseeing the growth of Windmere-Durable for
over 20 years, and Windmere-Durable's other senior executives each have 10 or
more years of service at Windmere-Durable. The managing director of Durable,
Windmere-Durable's manufacturing subsidiary, has been with Durable for over 11
years, and certain heads of production, administration, and quality control have
been with Durable for over 20 years. The managers of the Black & Decker
Household Products Group complement the Company's pre-existing management
strengths. In recent years, HPG management has guided several successful product
introductions, including the KT Kitchentools(TM) premium kitchen appliances and
Quick 'N Easy(R) irons. The Company believes that the HPG management group will
significantly enhance the Company's product innovation and sales and marketing
expertise.

STRATEGIC ALLIANCES. The Company has demonstrated an ability to identify
and execute marketing opportunities with strategic partners. The Company was
integral in helping to establish the White-Westinghouse(R) licensing and
manufacturing agreement, as well as the related agreements for the sale of
products (a portion of which are manufactured by the Company) to Kmart. The
acquisition of the Black & Decker Household Products Group represents the latest
alliance the Company has forged.

BUSINESS STRATEGY

The Company has combined top brand names and a reputation for quality and
innovation with its efficient, low-cost, vertically integrated manufacturing
capabilities. The Company expects to continue to achieve growth and increased
profitability by pursuing the following strategies:

INCREASE MARKET SHARE THROUGH NEW PRODUCT INTRODUCTIONS AND BRAND NAME
LICENSING. The Company intends to increase its market share by offering new
products that build upon the existing offerings of its introductory price point
products under the Windmere(R) name and premium products under the Black &
Decker(R) brand name. In pursuing this strategy, the Company will develop and
introduce new products at price points where neither it nor the Black & Decker
Household Products Group currently competes and will utilize its low-cost
manufacturing capabilities to reenter certain markets from which the Black &
Decker Household Products Group exited. The Company also intends to
opportunistically pursue additional brand name license arrangements from time to
time. The Company believes this strategy will be attractive to its customers by
offering them a broader range of products from a single source.

S-5
<PAGE> 6

LEVERAGE MANUFACTURING CAPABILITIES. The Company intends to manufacture
component parts as well as certain small household appliances that historically
were outsourced by the Black & Decker Household Products Group. In addition, the
Company intends to take advantage of its capabilities as a multinational
manufacturer to reduce operating costs and increase productivity. The Company
estimates that such leveraging of its manufacturing strengths will generate at
least $15.0 million in aggregate annual cost savings in 1999 and $40.0 million
to $50.0 million in such cost savings by the end of the year 2001. Such
anticipated cost savings are in addition to the HPG cost savings discussed in
"Unaudited Pro Forma Combined Financial Information" and the savings anticipated
under the Company's Repositioning Program (as defined). See "Risk
Factors -- Risks Associated with Integration of the Black & Decker Household
Products Group," "-- Risks Associated with the Company's Repositioning Program,"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

EXPAND INTERNATIONAL PRESENCE. The Company intends to utilize the
marketing and distribution channels acquired through the HPG Acquisition to
expand the global market penetration of all of its products, particularly in
Latin America. On a pro forma basis after giving effect to the HPG Acquisition,
the Company's international sales would have been $218.4 million in 1997, as
compared to $82.1 million in international sales for Windmere-Durable alone in
1997.

RECENT DEVELOPMENTS

The Company and Salton entered into an agreement, dated as of May 6, 1998
(the "Stock Agreement"), pursuant to which the Company granted Salton the right
to purchase the Company's 6,535,072 shares of Salton's common stock for $12.00
per share in cash and a six and one-half year, $15.0 million subordinated
promissory note bearing interest at 4.0% per annum, the principal amount of
which is reduced by 5.0% of the total amount paid by Salton for products
purchased from the Company and its affiliates during the term of the note. On
June 26, 1998, Salton announced that it has elected to exercise its option to
acquire the Company's 50% equity interest in Salton. If Salton fails to close
such purchase on or prior to October 30, 1998, the Company has the right to
acquire all of the shares of Salton's common stock that it does not currently
own in a tender offer and/or merger for $14.27 per share in cash or in
registered shares of Company Common Stock. See "Business -- Interest in
Affiliates."

On June 26, 1998, the Company consummated the HPG Acquisition, in which the
Company acquired the Black & Decker Household Products Group for $315.0 million
in cash (approximately $27.0 million of which is held in escrow pending approval
by the Mexican Federal Competition Commission (the "MFCC") of the Company's
acquisition of HPG's facilities in Queretaro, Mexico), and assumed certain
related liabilities. As part of the HPG Acquisition, the Company licensed the
Black & Decker(R) brand for use in marketing HPG products in North America,
Central America, South America (excluding Brazil), and the Caribbean under a
licensing arrangement with a minimum term of six and one-half years. For the
first five years, the license will be on a royalty-free basis. Renewals, if
mutually agreed upon, will be at specified minimum royalty payments. In
addition, the Company purchased subbrands from The Black & Decker Corporation,
including Toast 'R Oven(TM), ProFinish(R), Quick 'N Easy(R), Spacemaker(R), and
KT Kitchentools(TM).

To facilitate the HPG Acquisition, affiliates of one of the Underwriters
provided the Company with (i) $345.0 million in senior secured credit facilities
(the "Senior Credit Facilities"), consisting of a $160.0 million senior secured
revolving credit facility (the "Senior Secured Revolving Credit Facility"), a
$90.0 million Tranche A Term Loan, a $75.0 million Tranche B Term Loan and a
$20.0 million Tranche C Term Loan (collectively, the "Term Loans"), and (ii)
$185.0 million in senior subordinated loans (the "Senior Subordinated Loans").
The Company paid the purchase price of the HPG Acquisition and certain related
costs with borrowings of $185.0 million under the Senior Subordinated Loans,
$185.0 million under the Term Loans and $7.0 million under the Senior Secured
Revolving Credit Facility. The Company intends to repay all outstanding
indebtedness under the Senior Subordinated Loans and the Tranche C Term Loan,
and a portion of the indebtedness under the Senior Secured Revolving Credit
Facility with the proceeds from the Offerings. Approximately $167.2 million in
principal amount under the Senior Credit Facilities will remain outstanding
after completion of the Offerings, and approximately $157.8 million will be
available for future borrowings under the Senior Secured Revolving Credit
Facility under certain circumstances. See "Risk

S-6
<PAGE> 7

Factors," "Use of Proceeds," "Consolidated Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Description of Certain Indebtedness."

The Black & Decker Household Products Group has implemented various
strategic initiatives in order to improve its profitability through reducing
costs and streamlining its product offerings (together, the "HPG Restructuring
Program"). The HPG Restructuring Program resulted in a first quarter 1998
restructuring charge for HPG of $15.5 million for costs associated with the
consolidation of service operations, severance pay for certain selling, general
and administrative employees, the write-off of tooling in conjunction with HPG's
exit from certain product lines, and the general integration of its global
operations. On a pro forma basis giving effect to the HPG Acquisition, the
Company would have realized approximately $6.9 million in cost savings as a
result of the HPG Restructuring Program for the twelve-month period ended March
31, 1998. The Company expects to continue to realize annual cost savings as a
result of the HPG Restructuring Program.

The Company will realize additional cost reductions related to the HPG
Acquisition. For the twelve-month period ended March 31, 1998, on a pro forma
basis, the Company would also have realized $12.7 million from cost reductions
related to the HPG Acquisition, including the elimination of certain corporate
allocations.

On June 23, 1998, the Company announced that, in connection with its
acquisition of the Black & Decker Household Products Group, it will embark upon
a repositioning program (the "Repositioning Program"). The Repositioning Program
is designed to help the Company integrate the operations of HPG and Windmere-
Durable. As part of the Repositioning Program, the Company has decided to exit
certain personal care and other non-core, low-margin product lines in order to
free manufacturing capacity for the production of higher margin product lines,
including those related to product lines acquired in the HPG Acquisition. The
Company expects the discontinuation of these product lines to result in savings
of approximately $3.5 million annually by the year 2000. As a result of the
Repositioning Program, the Company will incur a one-time charge of approximately
$11.4 million in the second quarter of 1998. This charge is primarily non-cash
and consists of: (i) $6.0 million of inventory write-downs; (ii) $2.7 million of
goodwill, tooling and other write-offs; and (iii) $2.7 million of HPG
integration costs.

In addition, the Company has identified further manufacturing synergies
that it believes it will be able to realize as a result of the HPG Acquisition,
by combining its manufacturing expertise with its portfolio of strong brand
names. Manufacturing synergies are expected to be realized as the Company's
Durable manufacturing facilities begin to manufacture products for HPG which are
currently being outsourced from third parties. In addition, Durable will begin
to manufacture component parts for HPG. The Company plans to optimize
manufacturing production among its facilities and other manufacturing resources
in the PRC, Mexico and the U.S. Other projected synergies include ocean freight,
warehousing and additional corporate overhead savings. The Company believes that
these synergies, in addition to the cost savings from the HPG Restructuring
Program and the Repositioning Program, should result in projected cost savings
of approximately $15.0 million in 1999 and increase to approximately $40.0
million to $50.0 million in annual cost savings by the year 2001. These
projections are based on 1997 volumes and do not include any assumptions for
growth related to reentering product lines previously exited by HPG. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview." The Company's ability to recognize any cost savings
from the HPG Acquisition and the related Repositioning Program will depend to a
significant extent on future events, certain of which are beyond the Company's
control, including market demand for its products, stable currency and political
climates in the PRC and Mexico and other factors. See "Risk Factors" for a
discussion of certain factors that could impact the Company's ability to realize
these projected cost savings.

The Company was incorporated under the laws of the State of Florida in
1963. The Company's executive offices are located at 5980 Miami Lakes Drive,
Miami Lakes, Florida 33014, and its telephone number at that address is (305)
362-2611.

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THE COMMON STOCK OFFERING

Common Stock Offered by the
Company..................... 3,041,000 shares.

Common Stock to be Outstanding
after the Common Stock
Offering.................... 21,836,461 shares.(1)

Concurrent Notes Offering..... The Company is concurrently offering to the
public $125.0 million in aggregate principal
amount of its % Senior Subordinated Notes
due 2008. Consummation of each of the Common
Stock Offering and the Notes Offering is
contingent upon consummation of the other. See
"Concurrent Notes Offering" and "Description of
Certain Indebtedness -- % Senior
Subordinated Notes due 2008."

Use of Proceeds............... The Company intends to use the net proceeds of
the Common Stock Offering, together with the
net proceeds of the Notes Offering, to repay
all outstanding indebtedness under the Senior
Subordinated Loans and the Tranche C Term Loan,
and a portion of the indebtedness under the
Senior Secured Revolving Credit Facility. See
"Use of Proceeds."

NYSE Symbol................... "WND"

Dividend Policy............... The Company currently intends to retain all
earnings, if any, for the operation and
development of its business and does not
anticipate paying any cash dividends on the
Common Stock in the foreseeable future. In
addition, the Senior Credit Facilities and the
Indenture (as defined) under which the Notes
will be issued restrict the declaration and
payment of cash dividends by the Company on the
Common Stock. See "Risk Factors -- Dividends"
and "Dividend Policy."

Risk Factors.................. Prospective investors should carefully consider
all the information set forth and incorporated
by reference herein and, in particular, should
evaluate the specific factors set forth under
"Risk Factors" before purchasing any of the
shares of Common Stock offered hereby.
- ---------------
(1) Assumes no exercise of the Underwriters' over-allotment option relating to
the Common Stock Offering and excludes (a) an aggregate of 4,365,858 shares
of Common Stock reserved for issuance pursuant to outstanding options, and
(b) an additional 528,500 shares reserved for future issuance under the
Company's 1996 Stock Option Plan. See "Underwriting."

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SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT RATIOS, SHARE AND PER SHARE DATA)

The Company's Unaudited Pro Forma Combined Statement of Operations Data and
Other Financial Data give effect to the HPG Acquisition, the Offerings and the
borrowings under the Senior Credit Facilities (collectively, the
"Transactions"), in each case as if it or they had occurred at the beginning of
the periods indicated. The Company's Unaudited Pro Forma Combined Balance Sheet
Data give effect to the Transactions as if they had occurred on March 31, 1998.
The Summary Unaudited Pro Forma Combined Financial Information is presented for
illustrative purposes only and does not purport to be indicative of the
Company's actual financial position or results of operations as of the date
hereof, or as of or for any other future date, and is not necessarily indicative
of what the Company's actual financial position or results of operations would
have been had the Transactions been consummated on the above-referenced dates,
nor does it give effect to (i) any transactions other than the Transactions and
those described in the Notes to Unaudited Pro Forma Combined Financial
Information or (ii) Windmere-Durable's or HPG's results of operations since
March 31, 1998. The following Summary Unaudited Pro Forma Combined Financial
Information should be read in conjunction with the information appearing in "Use
of Proceeds," "Consolidated Capitalization," "Unaudited Pro Forma Combined
Financial Information," "Selected Historical Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," Windmere-Durable's Audited Consolidated Financial Statements and
Notes thereto, the Black & Decker Household Products Group's Audited Financial
Statements and Notes thereto, and other financial data included or incorporated
by reference in this Prospectus Supplement and the accompanying Prospectus.

<TABLE>
<CAPTION>
PRO FORMA
-----------------------------------------------------
THREE MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, 1997 MARCH 31, 1998 MARCH 31, 1998
----------------- -------------- --------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $664,813 $117,149 $665,193
Gross profit(1).............................. 179,013 31,100 180,996
Income (loss) from operations(2)(3).......... 32,641 (16,438) 14,996
Interest expense(4)(5)....................... 26,990 6,955 27,411
Net earnings (loss)(6)....................... 12,188 (13,562) 2,172
Earnings (loss) per share -- diluted......... $ 0.53 $ (0.58) $ 0.09
Weighted average number of shares............ 22,817 23,235 22,922

OTHER FINANCIAL DATA:
EBITDA(7)(8)................................. $ 68,135 $ 7,835 $ 65,793
Depreciation and amortization................ 36,073 8,652 35,677
Capital expenditures......................... 28,218 4,154 23,636
Cash interest expense........................ $ 26,826 $ 7,553 $ 28,352
Ratio of total debt to EBITDA................ 4.5x 4.6x
Ratio of EBITDA to interest expense.......... 2.5x 2.4x
Ratio of earnings to fixed charges(9)........ 1.5x 1.0x
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA AS OF
MARCH 31, 1998
---------------
<S> <C>
BALANCE SHEET DATA:
Working capital........................................... $201,239
Total assets.............................................. 690,512
Total debt................................................ 305,159
Stockholders' equity...................................... 286,156
</TABLE>

(footnotes
on following page)
S-9
<PAGE> 10

- ---------------
(1) Reflects the workforce reductions already completed at the plant level of
$1,130 for the year ended December 31, 1997, $67 for the three months ended
March 31, 1998, and $862 for the twelve months ended March 31, 1998.

(2) Reflects adjustments to (i) record the workforce reductions at the corporate
office level of $6,168 for the year ended December 31, 1997, $1,317 for the
three months ended March 31, 1998, and $6,037 for the twelve months ended
March 31, 1998, (ii) reduce corporate expenses by $6,080 for the year ended
December 31, 1997, $1,520 for the three months ended March 31, 1998, and
$6,080 for the twelve months ended March 31, 1998, (iii) record the
incremental amortization expense of the excess of cost over fair market
value of the net assets acquired of $7,773 for the year ended December 31,
1997, $1,943 for the three months ended March 31, 1998, and $7,773 for the
twelve months ended March 31, 1998, (iv) record the amortization of the debt
issuance costs of $2,431 for the year ended December 31, 1997, $608 for the
three months ended March 31, 1998, and $2,431 for the twelve months ended
March 31, 1998, (v) record the utilization of the unfavorable lease accrual
of $1,250 for the year ended December 31, 1997, $313 for the three months
ended March 31, 1998, and $1,250 for the twelve months ended March 31, 1998,
(vi) reduce purchasing costs under the new interim services agreement of
$812 for the year ended December 31, 1997, $203 for the three months ended
March 31, 1998, and $812 for the twelve months ended March 31, 1998, (vii)
eliminate product recall expenses which are indemnified under the terms of
the purchase agreement of $2,250 for the year ended December 31, 1997, $0
for the three months ended March 31, 1998, and $2,250 for the twelve months
ended March 31, 1998, (viii) increase the executive salaries under the new
employment agreements of $223 for the year ended December 31, 1997, $56 for
the three months ended March 31, 1998, and $223 for the 12 months ended
March 31, 1998, (ix) eliminate the Malaysian supply plant losses of $2,580
for the year ended December 31, 1997, $645 for the three months ended March
31, 1998, and $2,580 for the twelve months ended March 31, 1998.

(3) Includes a restructuring charge of $15,500 recorded by the Black & Decker
Household Products Group for the three months ended March 31, 1998 and the
twelve months ended March 31, 1998.

(4) Reflects adjustments to record the additional interest expense of $23,639
for the year ended December 31, 1997, $5,910 for the three months ended
March 31, 1998, and $23,639 for the 12 months ended March 31, 1998.

(5) This amount does not include interest income.

(6) Reflects the adjustments to record income tax benefits related to the
effects of the pro forma adjustments of $1,895 for the year ended December
31, 1997, $5,278 for the three months ended March 31, 1998, and $5,937 for
the twelve months ended March 31, 1998.

(7) EBITDA represents net earnings (loss) before the cumulative effect of change
in accounting plus provisions for income taxes, interest expense,
depreciation and amortization, equity in net earnings (loss) of affiliates,
restructuring costs, and unusual or non-recurring items. While EBITDA should
not be construed as a substitute for other historical operating data in
analyzing the Company's operating performance, financial position and cash
flows, the Company has included EBITDA because it is commonly used by
certain investors to analyze and compare companies on the basis of operating
performance, leverage and liquidity and to determine the Company's ability
to service debt.

(8) It was The Black & Decker Corporation's policy not to enter into foreign
currency hedges in Mexico since the peso-denominated revenues at its other
business units provided it with a natural hedge against peso-denominated
expenses at HPG. The effect of HPG not entering into specific forward
currency contracts had a negative impact on earnings of $7.1 million and
$3.8 million in each of the years ended December 31, 1997 and 1996,
respectively, and a positive impact of $9.7 million in the year ended
December 31, 1995. Windmere-Durable would not have had the benefits of a
natural hedge if it had been operating the HPG business in Mexico and
although it plans to hedge its exposure against changes in the peso-dollar
exchange rates, there can be no assurance that Windmere-Durable's gains on
hedging transactions would have produced a result comparable to the results
of the natural hedge at The Black & Decker Corporation.

(9) The ratio of earnings to fixed charges is computed by dividing income from
continuing operations before income taxes and fixed charges by total fixed
charges. Fixed charges represent interest expense and the amortization of
debt issuance costs.

S-10
<PAGE> 11

SUMMARY HISTORICAL FINANCIAL INFORMATION

The Summary Historical Financial Information for Windmere-Durable as of and
for each of the five years in the period ended December 31, 1997, and for the
Black & Decker Household Products Group as of and for each of the three years in
the period ended December 31, 1997, have been derived from Windmere-Durable's
Audited Consolidated Financial Statements and Notes thereto and the Black &
Decker Household Products Group's Audited Financial Statements and Notes
thereto, respectively. The Summary Historical Consolidated Financial Information
for Windmere-Durable as of and for the three months ended March 31, 1998 and
1997, respectively, is unaudited, but has been prepared on the same basis as
Windmere-Durable's Audited Consolidated Financial Statements and Notes thereto,
which include, in the opinion of management of Windmere-Durable, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the information of Windmere-Durable for the unaudited interim
periods. The Summary Historical Financial Information for the Black & Decker
Household Products Group as of and for the three months ended March 29, 1998 and
March 30, 1997, respectively, is unaudited, but has been prepared on the same
basis as the Black & Decker Household Products Group's Audited Financial
Statements and Notes thereto, which include, in the opinion of HPG management,
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the information of the Black & Decker Household Products
Group for the unaudited interim periods. The operating results of
Windmere-Durable for the three months ended March 31, 1998 may not be indicative
of the operating results of the Company for the full year. The data set forth
are qualified in their entirety by, and should be read in conjunction with,
"Selected Historical Financial Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," Windmere-Durable's
Audited Consolidated Financial Statements and Notes thereto, the Black & Decker
Household Products Group's Audited Financial Statements and Notes thereto and
the other financial data contained elsewhere or incorporated by reference in
this Prospectus Supplement and the accompanying Prospectus.

S-11
<PAGE> 12

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF WINDMERE-DURABLE
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- --------------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................... $170,661 $181,112 $187,777 $197,004 $261,885 $51,412 $55,394
Cost of sales............... 122,772 132,185 146,907 157,279 197,507 40,593 42,511
-------- -------- -------- -------- -------- ------- -------
Gross profit................ 47,889 48,927 40,870 39,725 64,378 10,819 12,883
Selling, general and
administrative expenses... 36,448 35,532 37,625 39,425 50,349 9,697 11,706
Unusual or non-recurring
items..................... -- (7,811)(1) 8,000(2) -- -- -- --
Net interest and other
income.................... (1,368) (1,834) (1,983) (1,073) 624 147 364
Equity in net earnings
(loss) of affiliates...... (504) 91 (393) 2,299 7,353 (490) 444
-------- -------- -------- -------- -------- ------- -------
Earnings (loss) before
taxes, minority interest
and extraordinary item.... 12,305 23,131 (3,165) 3,672 20,758 485 1,257
Extraordinary items......... -- -- -- 3,500(3) -- -- --
Minority interest expense
(income).................. 1,203 (1) -- -- -- -- --
Provision for taxes
(benefits)................ (367)(4) 2,595 (1,281) (279) 923 164 121
-------- -------- -------- -------- -------- ------- -------
Net earnings (loss)......... $ 11,469 $ 20,537 $ (1,884) $ 451 $ 19,835 $ 321 $ 1,136
======== ======== ======== ======== ======== ======= =======
Net earnings (loss) per
share -- basic............ $ 0.74 $ 1.24 $ (0.11) $ 0.03 $ 1.12 $ 0.02 $ 0.06
======== ======== ======== ======== ======== ======= =======
diluted................... $ 0.71 $ 1.17 $ (0.11) $ 0.03 $ 1.00 $ 0.02 $ 0.06
======== ======== ======== ======== ======== ======= =======
Cash dividends paid per
share of Common Stock..... $ -- $ 0.15 $ 0.20 $ 0.20 $ 0.10 $ 0.05 $ --
OTHER FINANCIAL DATA:
EBITDA(5)................... $ 17,147 $ 19,214 $ 10,024 $ 7,291 $ 21,727 $ 3,008 $ 3,251
Depreciation and
amortization.............. $ 5,705 $ 5,819 $ 6,779 $ 6,991 $ 7,698 $ 1,886 $ 2,074
Capital expenditures........ $ 5,891 $ 10,437 $ 8,384 $ 8,618 $ 11,296 $ 2,001 $ 2,671
Ratio of earnings to fixed
charges(6)................ 10.9x 42.9x -- 3.7x 7.0x 1.8x 2.1x
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------- AS OF
1993 1994 1995 1996 1997 MARCH 31, 1998
-------- -------- -------- -------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................ $117,961 $129,281 $127,626 $105,565 $106,078 $105,234
Total assets........................... 180,479 197,124 188,012 237,279 281,847 273,671
Long-term debt, deferred liabilities
and minority interest................ 9,492 4,932 3,519 20,132 17,144 16,897
Stockholders' equity................... 146,587 170,625 164,931 167,695 190,821 191,683
</TABLE>

- ---------------
(1) Non-recurring gain on the sale of Hong Kong office space of $7,811.

(2) Non-recurring loss on the sale of another asset of $8,000.

(3) Extraordinary charge for the settlement of Izumi litigation of $3,500.

(4) Includes cumulative effect of accounting change benefit of $1,731.

(5) EBITDA represents net earnings (loss) before the cumulative effect of change
in accounting plus provisions for income taxes, interest expense,
depreciation and amortization, equity in net earnings (loss) of affiliates,
minority interest, restructuring costs, unusual or non-recurring items and
extraordinary items. While EBITDA should not be construed as a substitute
for other historical operating data in analyzing Windmere-Durable's
operating performance, financial position and cash flows, Windmere-Durable
has included EBITDA because it is commonly used by certain investors to
analyze and compare companies on the basis of operating performance,
leverage and liquidity and to determine Windmere-Durable's ability to
service debt.

(6) The ratio of earnings to fixed charges is computed by dividing income from
continuing operations before income taxes and fixed charges by total fixed
charges. Fixed charges represent interest expense and the amortization of
debt issuance costs. Earnings were inadequate to cover fixed charges for the
year ended December 31, 1995. The coverage deficiency was approximately
$3,165 in that year.

S-12
<PAGE> 13

SUMMARY HISTORICAL FINANCIAL INFORMATION OF THE BLACK & DECKER HOUSEHOLD
PRODUCTS GROUP
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
-------------------------------- --------------------------------
1995 1996 1997 MARCH 30, 1997 MARCH 29, 1998
-------- -------- -------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................ $445,739 $412,446 $402,928 $65,357 $ 61,755
Cost of goods sold....... 315,296 295,187 289,423 47,394 43,605
-------- -------- -------- ------- --------
Gross profit............. 130,443 117,259 113,505 17,963 18,150
Selling, general and
administrative
expenses.............. 110,233 106,143 104,736 19,735 21,723
Restructuring charge..... -- 4,676(1) -- -- 15,500(2)
-------- -------- -------- ------- --------
Operating income
(loss)................ 20,210 6,440 8,769 (1,772) (19,073)
Other expenses
(income).............. 3,464 1,698 579 78 (121)
Income taxes (benefit)... 6,995 3,319 3,936 (801) (3,428)
-------- -------- -------- ------- --------
Net earnings (loss)...... $ 9,751 $ 1,423 $ 4,254 $(1,049) $(15,524)
======== ======== ======== ======= ========
OTHER FINANCIAL DATA:
EBITDA(3)(4)............. $ 34,412 $ 27,499 $ 26,361 $ 2,761 $ 575
Depreciation and
Amortization.......... 17,666 18,081 18,171 4,611 4,027
Capital expenditures..... 18,979 22,306 16,922 1,125 1,873
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------- AS OF
1996 1997 MARCH 29, 1998
-------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................ $ 43,147 $ 79,711 $ 66,519
Total assets......................................... 236,886 258,547 234,593
Total debt........................................... -- -- --
</TABLE>

- ---------------
(1) In 1996, HPG recorded a restructuring provision to accrue severance costs
and a tooling write-off associated with the exit of its countertop beverage
product line and further integration of its Canadian business into its
United States business. Total severance costs associated with these actions
approximated $2,000.

(2) Subsequent to December 31, 1997, HPG provided for severance costs of certain
selling, general and administrative employees and for the severance and
asset write-off costs associated with closing its Malaysian manufacturing
facility which totaled $15,500. The selling, general and administrative
terminations were effected by the end of the quarter ended March 29, 1998,
although payment of severance will continue monthly through the term of the
obligation. The Malaysian plant shutdown is expected to be completed during
1998.

(3) EBITDA represents net earnings (loss) plus provisions for income taxes,
interest expense, depreciation and amortization, and restructuring costs.
While EBITDA should not be construed as a substitute for other historical
operating data in analyzing HPG's operating performance, financial position
and cash flows, HPG has included EBITDA because it is commonly used by
certain investors to analyze and compare companies on the basis of operating
performance, leverage and liquidity and to determine HPG's ability to
service debt.

(4) It was The Black & Decker Corporation's policy not to enter into foreign
currency hedges in Mexico since the peso-denominated revenues at its other
business units provided it with a natural hedge against peso-denominated
expenses at HPG. The effect of HPG not entering into specific forward
currency contracts had a negative impact on earnings of $7.1 million and
$3.8 million in each of the years ended December 31, 1997 and 1996,
respectively, and a positive impact of $9.7 million in the year ended
December 31, 1995. Windmere-Durable would not have had the benefits of a
natural hedge if it had been operating the HPG business in Mexico and
although it plans to hedge its exposure against changes in the peso-dollar
exchange rates, there can be no assurance that Windmere-Durable's gains on
hedging transactions would have produced a result comparable to the results
of the natural hedge at The Black & Decker Corporation.

S-13
<PAGE> 14

RISK FACTORS

Prospective Purchasers of the Common Stock should consider carefully, in
addition to the other information contained or incorporated by reference into
this Prospectus Supplement and the accompanying Prospectus, the following
factors before purchasing the shares of Common Stock offered hereby. This
Prospectus Supplement contains 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"). Such statements are indicated by words
or phrases such as "anticipate," "estimate," "projects," "management believes,"
"the Company believes," "intends," "expects" and similar words or phrases. Such
forward-looking statements are subject to certain risks, uncertainties or
assumptions and may be affected by certain other factors, including the specific
factors set forth below. Should one or more of these risks, uncertainties or
other factors materialize, or should underlying assumptions prove incorrect,
actual results, performance, or achievements of the Company may vary materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements in this
paragraph. The Company disclaims any obligation to publicly announce the results
of any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.

EFFECTS OF LEVERAGE

As a result of the consummation of the Transactions, the Company has
certain indebtedness and debt service obligations. On March 31, 1998, after
giving pro forma effect to the Transactions, the Company would have had total
indebtedness of approximately $305.2 million (of which $125.0 million would have
consisted of the Notes and the balance would have consisted of Term Loans of
$165.0 million, and approximately $15.2 million of other debt) and stockholders'
equity of approximately $286.2 million. After giving pro forma effect to the
Transactions, the ratio of earnings to fixed charges would have been 1.0x for
the twelve months ended March 31, 1998. Subject to certain limitations contained
in the Senior Credit Facilities and the Indenture, the Company and its
subsidiaries will be permitted to incur substantial additional indebtedness in
the future. See "Consolidated Capitalization," "Unaudited Pro Forma Combined
Financial Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Description of Certain
Indebtedness -- % Senior Subordinated Notes due 2008."

The Company's ability to make scheduled payments of principal of, or to pay
the interest on, or to refinance, its indebtedness (including the Notes), or to
fund planned capital expenditures, product research and development expenses and
marketing expenses will depend on its future performance, which, to a certain
extent, is subject to general economic, financial, competitive, legislative,
regulatory, and international and United States domestic political factors and
other factors that are beyond the Company's control. Based upon the current
level of operations and anticipated cost savings and revenue growth, management
believes that cash flow from operations and available cash, together with
available borrowings under the Senior Credit Facilities, will be adequate to
meet the Company's future liquidity needs for at least the next several years.
The Company may, however, need to refinance all or a portion of the principal of
the Notes on or prior to maturity. There can be no assurance that the Company's
business will generate sufficient cash flow from operations, that anticipated
revenue growth and operating improvements will be realized or that future
borrowings will be available under the Senior Credit Facilities in an amount
sufficient to enable the Company to service its indebtedness, including the
Notes, or to fund its other liquidity needs. In addition, there can be no
assurance that the Company will be able to effect any such refinancing on
commercially reasonable terms or at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Pro Forma Liquidity
and Capital Resources."

The degree to which the Company will be leveraged following the
Transactions could have important consequences to holders of the Notes,
including, but not limited to: (i) making it more difficult for the Company to
satisfy its obligations with respect to the Notes; (ii) increasing the Company's
vulnerability to general adverse economic and industry conditions; (iii)
limiting the Company's ability to obtain additional financing to fund future
working capital, capital expenditures, product research and development,
marketing
S-14
<PAGE> 15

and other general corporate requirements; (iv) requiring the dedication of a
substantial portion of the Company's cash flow from operations to the payment of
principal of, and interest on, its indebtedness, thereby reducing the
availability of such cash flow to fund working capital, capital expenditures,
product research and development, marketing or other general corporate purposes;
(v) limiting the Company's flexibility in planning for, or reacting to, changes
in its business and the industry; and (vi) placing the Company at a competitive
disadvantage vis-a-vis less leveraged competitors. In addition, the degree to
which the Company is leveraged could prevent it from repurchasing all of the
Notes tendered to it upon the occurrence of a Change of Control. See
"Description of Certain Indebtedness -- Senior Credit Facilities" and "-- %
Senior Subordinated Notes due 2008."

RISKS OF INTERNATIONAL OPERATIONS AND EXPANSION

A substantial amount of the Company's manufacturing operations are
conducted and located abroad, and the Company's growth strategy involves
expanding its operations in foreign jurisdictions. The Company also sells its
products to customers located in foreign jurisdictions, including Latin America,
Europe and the Far East. Prior to the HPG Acquisition, approximately 85-90% of
Windmere-Durable's products were manufactured by Durable, its wholly-owned Hong
Kong subsidiary, in Bao An County, Guangdong Province of the PRC, which is
approximately 60 miles northwest of central Hong Kong. In connection with the
HPG Acquisition, the Company has contracted to acquire additional manufacturing
facilities in Queretaro, Mexico, a country in which Windmere-Durable had not
previously manufactured products, and has entered into an agreement to purchase
certain products from The Black & Decker Corporation plant in Kuantan, Malaysia
for a limited period of time. The geographical distances between the Far East,
the United States and Mexico create a number of logistical and communications
challenges. Because the Company manufactures its products and conducts business
in several foreign countries, the Company is affected by economic and political
conditions in those countries, including fluctuations in the value of currency,
duties, possible employee turnover, labor unrest, lack of developed
infrastructure, longer payment cycles, greater difficulty in collecting accounts
receivable, the burdens and costs of compliance with a variety of foreign laws
and, in certain parts of the world, political instability. Changes in policies
by the United States or foreign governments resulting in, among other things,
increased duties, higher taxation, currency conversion limitations, restrictions
on the transfer of funds, limitations on imports or exports, or the
expropriation of private enterprises could have a material adverse effect on the
Company, its results of operations, prospects or debt service ability. The
Company could also be adversely affected if the current policies encouraging
foreign investment or foreign trade by its host countries were to be reversed.
In addition, the attractiveness of the Company's services to its United States
customers is affected by United States trade policies, such as
"most-favored-nation" status and trade preferences for certain nations. For
example, trade preferences extended by the United States to Malaysia in recent
years were not renewed in 1997. Moreover, the Company is subject to the Foreign
Corrupt Practices Act (the "FCPA"), which may place the Company at a competitive
disadvantage to foreign companies that are not subject to the FCPA. There can be
no assurance that any of these factors will not have a material adverse effect
on the Company's business, financial condition and results of operations.

RISKS RELATING TO THE PRC. The Company's operations and assets are subject
to significant political, economic, legal and other uncertainties in the PRC,
where the Company maintains a substantial amount of its manufacturing
operations. Under its current leadership, the Chinese government has been
pursuing economic reform policies, including the encouragement of foreign trade
and investment and greater economic decentralization. No assurance can be given,
however, that the Chinese government will continue to pursue such policies, that
such policies will be successful if pursued, or that such policies will not be
significantly altered from time to time. Despite progress in developing its
legal system, the PRC does not have a comprehensive and highly developed system
of laws, particularly with respect to foreign investment activities and foreign
trade. Enforcement of existing and future laws and contracts is uncertain, and
implementation and interpretation thereof may be inconsistent. As the Chinese
legal system develops, the promulgation of new laws, changes to existing laws
and the preemption of local regulations by national laws may adversely affect
foreign investors.

S-15
<PAGE> 16

The Company could also be adversely affected by the imposition of austerity
measures intended to reduce inflation, the inadequate development or maintenance
of infrastructure or the unavailability of adequate power and water supplies,
transportation, raw materials and parts, or a deterioration of the general
political, economic or social environment in the PRC. If the Company determines
that it is necessary to relocate the Company's manufacturing facilities from the
PRC and is unable to so, due to confiscation, expropriation, nationalization,
embargoes, governmental restrictions or otherwise, the Company would incur
substantial operating and capital losses, including losses resulting from
business disruption and delays in production. In addition, as a result of a
relocation of its manufacturing equipment and certain other assets, the Company
would likely incur relatively higher manufacturing costs. A relocation could
also adversely affect the Company's revenues if the demand for the Company's
products currently manufactured in the PRC decreases due to a disruption in the
production and delivery of such products or due to higher prices which might
result from increased manufacturing costs. Furthermore, earnings could be
adversely affected due to reduced sales and/or the Company's inability to
maintain its current margins on the products currently manufactured in the PRC.

In addition, the PRC currently enjoys most-favored-nation ("MFN") trading
status granted by the United States, pursuant to which the United States imposes
the lowest applicable tariffs on Chinese exports to the United States. The
United States annually reconsiders the renewal of MFN trading status for the
PRC. No assurance can be given that the PRC's MFN trading status will be renewed
in the future years. If MFN status for goods produced in the PRC were removed,
there would be a substantial increase in tariffs imposed on goods of Chinese
origin entering the United States, including those manufactured by the Company,
which would have a material adverse impact on the Company's revenues and
earnings.

Durable is incorporated in Hong Kong and its executive sales offices and
its senior executives are located or reside there. The Company also conducts
significant trading activities through subsidiaries incorporated in Hong Kong,
which may be influenced by the changing political situation in Hong Kong and by
the general state of the Hong Kong economy. On July 1, 1997, sovereignty over
Hong Kong was transferred from the United Kingdom to the PRC, and Hong Kong
became a Special Administrative Region. There can be no assurance that the
transfer of sovereignty over Hong Kong will not have a material adverse effect
on the Company's business, financial condition and results of operations.

RISKS RELATING TO MEXICO. The Mexican government exercises significant
influence over many aspects of the Mexican economy. Accordingly, the actions of
the Mexican government concerning the economy could have a significant effect on
private sector entities in general and the Company in particular. In addition,
during the 1980s and 1990s, Mexico experienced periods of slow or negative
growth, high inflation, significant devaluations of the peso and limited
availability of foreign exchange. As a result of the Company's reliance upon and
pending acquisition of manufacturing facilities in Mexico, economic conditions
in Mexico could adversely affect the Company's business, financial condition and
results of operations.

CURRENCY FLUCTUATIONS

While the Company transacts business predominantly in U.S. dollars and most
of its revenues are collected in U.S. dollars, a portion of the Company's costs,
such as payroll, rent and indirect operations costs, are denominated in other
currencies, such as Chinese renminbi, Hong Kong dollars and Mexican pesos.
Changes in the relation of these and other currencies to the U.S. dollar will
affect the Company's cost of goods sold and operating margins and could result
in exchange losses. The impact of future exchange rate fluctuations on the
Company's results of operations cannot be accurately predicted.

The Company uses forward exchange contracts to reduce fluctuations in
foreign currency cash flows related to third party raw material and other
operating purchases. The purpose of the Company's foreign currency management
activity is to reduce the risk that eventual cash flows from foreign currency
denominated transactions may be adversely affected by changes in exchange rates.
At March 31, 1998, Windmere-Durable had outstanding $23.0 million in forward
contracts to purchase Hong Kong dollars. A deposit of $500,000 is held by the
issuer as collateral on the contracts. There can be no assurance that the
Company's foreign currency management activity will be effective in offsetting
the foregoing currency risks.

S-16
<PAGE> 17

The Company's manufacturing subsidiary, Durable, uses the Hong Kong dollar
as its functional currency. The Hong Kong dollar has historically been "pegged"
to a fixed exchange rate vis-a-vis the U.S. dollar. If the Hong Kong dollar were
to be significantly devalued against the U.S. dollar and the exchange rate
allowed to fluctuate, the Company could experience significant changes in its
currency translation account which would impact the Company's future
comprehensive income.

Upon the approval of the MFCC, the Company will acquire the Queretaro
property and related assets from The Black & Decker Corporation. However,
pending such approval, the Company will purchase from The Black & Decker
Corporation products manufactured at the Queretaro facility under the terms of a
manufacturing agreement between the Company and The Black & Decker Corporation
(the "Manufacturing Agreement") described below. Because the operations of such
facilities are primarily peso-denominated and the revenues derived from products
manufactured at such facilities are primarily dollar-denominated, the Company is
subject to currency fluctuations while operating under the Manufacturing
Agreement as well as when, and if, the Company completes the acquisition of the
Queretaro property. The December 1994 devaluation of the peso had a number of
effects on the Mexican economy that adversely affected the financial condition
of businesses in Mexico. The devaluation caused the peso value of dollar
denominated indebtedness associated with businesses in Mexico to increase
significantly, and also greatly increased the rate of inflation, resulting in a
sharp rise in nominal interest rates on peso-denominated financing. In addition,
recent changes in the peso/dollar exchange rate caused HPG to recognize a
substantial increase in production costs in 1999. There can be no assurance that
the peso to dollar foreign exchange rate will not be volatile in the future and
that financial markets will not have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

DEPENDENCE ON TRADEMARKS

As part of the HPG Acquisition, the Company licensed the Black & Decker(R)
brand for use in marketing HPG products in North America, Central America, South
America (excluding Brazil) and the Caribbean under a licensing arrangement with
a minimum term of six and one-half years. For the first five years, the license
will be on a royalty-free basis. Renewals, if mutually agreed upon, will be at
specified minimum royalty payments. In addition, the Company purchased important
subbrands, including Toast 'R Oven(TM), ProFinish(R), Quick 'N Easy(R),
Spacemaker(R), and KT Kitchentools(TM). The Company believes that its rights in
owned and licensed names is a significant part of the Company's business and
that its ability to create demand for its products is dependent to a large
extent on its ability to exploit these trademarks. There can be no assurance as
to the breadth or degree of protection that these trademarks may afford the
Company, or that the Company will be able to successfully exploit its trademarks
in the future. Any inability to do so, particularly with respect to names in
which the Company has made significant capital investments, including the Black
& Decker(R), Toast 'R Oven(TM), ProFinish(R), Quick 'N Easy(R), Spacemaker(R),
and KT Kitchentools(TM) brand names, could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
because the Company's business strategy is heavily dependent upon the use of
brand names, adverse publicity with respect to products that are not sold by the
Company, but bear the brand names used by the Company could have a material
adverse effect on the Company's business, financial condition and results of
operations, notwithstanding the fact that the products at issue are different
from those sold by the Company. See "Business -- Intellectual Property."

PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY

As a result of the HPG Acquisition, the Company now manufactures products
with features for which the Company has filed or obtained licenses for patents
and design registrations in the United States and in several foreign countries.
With respect to the Company's applications for patents, there can be no
assurance that any patents will be obtained. If obtained, there can be no
assurance that any patents will afford the Company commercially significant
protection of its technologies or that the Company will have adequate resources
to enforce its patents. Patent applications in the United States are maintained
in secrecy until patents are issued, and since publication of discoveries in the
scientific or patent literature tends to lag behind actual discoveries

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by several months, the Company cannot be certain that it will be the first
creator of inventions covered by any patent application it makes or the first to
file patent applications on such inventions.

Competitors in both the United States and foreign countries, many of which
have substantially greater resources and have made substantial investments in
competing technologies, may have applied for or obtained, or may in the future
apply for and obtain, patents that will prevent, limit or otherwise interfere
with the Company's ability to make and sell its products. The Company has not
conducted an independent review of patents issued to third parties. Although the
Company believes that its products do not infringe on the patents or other
proprietary rights of third parties, there can be no assurance that other
parties will not assert infringement claims against the Company or that such
claims will not be successful. There can also be no assurance that competitors
will not infringe on any patents obtained by the Company. Defense and
prosecution of patent suits, even if successful, are both costly and time
consuming. An adverse outcome in the defense of a patent suit could subject the
Company to significant liabilities to third parties, require disputed rights to
be licensed from third parties or require the Company to cease selling its
products.

The Company also relies on unpatented proprietary technology and there can
be no assurance that others may not independently develop the same or similar
technology or otherwise obtain access to the Company's unpatented technology. If
the Company is unable to maintain the proprietary nature of its technologies,
the Company's business, financial condition and results of operations could be
materially adversely affected. See "-- Dependence on Trademarks" and
"Business -- Intellectual Property."

RISKS ASSOCIATED WITH INTEGRATION OF THE BLACK & DECKER HOUSEHOLD PRODUCTS GROUP

There can be no assurance that the Company will successfully integrate the
recently acquired business operations of the Black & Decker Household Products
Group with the Company's pre-existing business operations. The full benefits of
a business combination of the Company and the Black & Decker Household Products
Group will require the integration of administrative, finance, purchasing,
engineering, product research and development, sales and marketing
organizations; the coordination of production efforts; and the implementation of
appropriate operational, financial, and management systems and controls. If the
Company fails to successfully integrate the operations of Windmere-Durable and
the Black & Decker Household Products Group, or if anticipated cost savings are
not as substantial as the Company expects, the Company's business, results of
operations and financial condition would be materially adversely affected. The
Unaudited Pro Forma Combined Financial Information contains certain adjustments
relating to the integration of the Black & Decker Household Products Group.
Although these adjustments are based upon available information and certain
assumptions the Company considers reasonable as of the date of this Prospectus
Supplement, actual amounts could differ from those set forth therein, possibly
to a material extent. Moreover, no assurance can be given that the anticipated
impact of the integration of the Black & Decker Household Products Group upon
the Company's financial condition and results of operations as presented in such
pro forma information will be as presented. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Unaudited Pro
Forma Combined Financial Information."

RISKS ASSOCIATED WITH THE COMPANY'S REPOSITIONING PROGRAM

On June 23, 1998, the Company announced that, in connection with its
acquisition of the Black & Decker Household Products Group, it will embark upon
the Repositioning Program. The Repositioning Program is designed to help the
Company integrate the operations of HPG and Windmere-Durable. As part of the
Repositioning Program, the Company has decided to exit certain personal care and
other non-core, low-margin product lines in order to free manufacturing capacity
for the production of higher margin product lines, including those related to
product lines acquired in the HPG Acquisition. The Company expects the
discontinuation of these product lines to result in savings of approximately
$3.5 million annually by the year 2000. As a result of the Repositioning
Program, the Company will incur a one-time charge of approximately $11.4 million
in the second quarter of 1998. This charge is primarily non-cash, and consists
of: (i) $6.0 million of inventory write-downs; (ii) $2.7 million of goodwill,
tooling and other write-offs; and (iii) $2.7 million of HPG integration costs.
The Company's ability to recognize any cost savings from the HPG Acquisition and
the related Repositioning Program will depend to a significant extent on future
events, certain of which are
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beyond the Company's control, including market demand for its products, stable
currency and political climates in the PRC and Mexico and other factors. There
can be no assurance that the expected cost savings will be realized in the
amounts and in the periods anticipated by the Company, or at all, or that the
costs of the Repositioning Program will not exceed the Company's expectations,
and any such failure could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

COST AND AVAILABILITY OF RAW MATERIALS

Since Durable is a vertically integrated manufacturer, its raw materials
primarily consist of metals and plastics such as aluminum, copper, polypropylene
and polycarbonate. Because the majority of these materials are commodity based,
they are available from at least two and as many as nine or more independent
suppliers. The Company is not dependent on any single foreign source for such
materials. In addition, the Company typically enters into up to one-year forward
supply agreements for certain materials. However, there can be no assurance that
the Company will not, from time to time, experience interruptions of supply in
the future. In addition, there can be no assurance that such sources will
continue to provide raw materials to the Company at attractive prices, or at
all, or that the Company will be able to obtain such raw materials in the future
from these or other providers on the scale and within the time frames required
by the Company. Any failure to obtain such raw materials on a timely basis at an
affordable cost or any significant delays or interruptions of supply, would have
a material adverse effect on the Company's business, financial condition and
results of operations.

CERTAIN RISKS ASSOCIATED WITH THE ACQUISITION OF THE QUERETARO PROPERTY

Pursuant to the terms of the HPG Acquisition, the Company will acquire the
Queretaro property and related assets. However the acquisition of the Queretaro
property cannot be completed without review and approval by the MFCC. Pending
such review and approval, the Company and The Black & Decker Corporation have
entered into the Manufacturing Agreement covering the purchase by the Company of
products manufactured at the Queretaro property. There can be no assurance that
the MFCC will approve the acquisition of the Queretaro property by the Company.
Furthermore, there can be no assurance that during the term of the Manufacturing
Agreement The Black & Decker Corporation will operate the plant and other
facilities at the Queretaro property in such a manner as to assure timely
delivery of products and components of adequate quality and in sufficient
quantity to meet the Company's requirements. See "Business -- Manufacturing, Raw
Materials and Imports."

RELIANCE UPON CERTAIN CUSTOMERS

The Company is dependent on certain of its principal customers. On a pro
forma basis, after giving effect to the Transactions, Wal-Mart Stores, Inc.
("Wal-Mart") and Kmart would have accounted for approximately 14% and 6%,
respectively, of the Company's 1997 net sales, and the top ten customers of the
Company would have accounted for approximately 44% of the Company's 1997 net
sales. Although the Company has long-established relationships with many of its
customers, the Company and its affiliates do not have any long-term supply
contracts with them, other than the Kmart Agreements between each of Salton or
Newtech, on the one hand, and Kmart, on the other hand. A decrease in business
from any of its major customers could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Customers."

DEPENDENCE ON KMART AGREEMENTS

In January 1997, Salton and Newtech entered into their respective Kmart
Agreements for Kmart to purchase, distribute, market and sell certain products
under the White-Westinghouse(R) brand name licensed to Salton and Newtech by
WCI. Kmart is the exclusive discount department store to market these White-
Westinghouse(R) products. Under the terms of the Kmart Agreements, Salton and
Newtech will supply Kmart, either through the Company or through other
manufacturers, with a broad range of small electrical appliances,
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consumer electronics and telephone products under the White-Westinghouse(R)
brand name. Kmart also has the option to procure manufacture of the products
subject to the Kmart Agreements from other manufacturers. No assurance can be
given that Kmart will continue to allocate the manufacturing of such products to
Salton and Newtech or that Salton will continue to use the Company as its
manufacturer under the Kmart Agreements. The Company has entered into an
agreement guaranteeing the performance of Salton and Newtech under the Kmart
Agreements. If either Salton or Newtech were to fail to perform their
obligations under their respective Kmart Agreement, there can be no assurance
that the Company would be able to satisfactorily perform the obligations of
Salton and/or Newtech under the time periods set forth in the Kmart Agreements.

The initial term of the Kmart Agreements is through June 30, 2004; however,
such agreements allow for termination prior to such time for specified reasons,
including (i) in the case of Salton, the termination of Newtech's Kmart
Agreement, (ii) in the case of Newtech, the termination of Salton's Kmart
Agreement, and (iii) without cause after June 30, 2003, by giving advance
written notice. Furthermore, the Kmart Agreements allow Kmart to terminate the
contracts on the basis of any claim which Kmart reasonably believes impairs or
would impair Kmart's ability to receive the benefits of the Kmart Agreements,
whether relating to any or all products. Although the Trademark Litigation (as
defined in the next paragraph) was pending prior to the execution of the Kmart
Agreements, if Kmart were to view the Trademark Litigation as a claim which it
reasonably believes would impair its ability to receive the benefits of the
Kmart Agreements, it could terminate the Kmart Agreements. During 1997, Kmart
purchased approximately $214.0 million of merchandise from Salton and Newtech
pursuant to the Kmart Agreements, which accounted for approximately 22% and 76%,
respectively, of their net sales. The termination of the Kmart Agreements, or
any significant modification thereof, could have a material adverse effect on
the Company's business, financial condition and results of operations.

TRADEMARK LITIGATION

In November 1996, WCI filed suit for injunctive relief and damages against
Westinghouse Electric Corporation (now known as CBS Corporation ("CBS")) in the
United States District Court for the Northern District of Ohio alleging that
CBS's grant of licenses to the Westinghouse(TM) name for use on lighting
products, fans and electrical accessories for use in the home violates WCI's
rights to the Westinghouse(TM) name and constitutes a breach of the agreements
under which CBS's predecessor sold WCI its appliance business and certain
trademark rights in 1975. In response to that suit, CBS filed a related action
in December 1996 in the United States District Court for the Western District of
Pennsylvania, naming WCI, Windmere-Durable, Salton, Newtech and certain other
parties as defendants. The two actions have now been consolidated in the
Pennsylvania court (the "Trademark Litigation"). CBS seeks an injunction
prohibiting Salton, Newtech and WCI from using the White-Westinghouse(R) name on
products not specifically enumerated in the transaction documents, and
unspecified damages and attorneys' fees. An adverse decision in the Trademark
Litigation could result in Salton and Newtech being limited in further use of
the White-Westinghouse(R) name and in termination or significant modification of
the Kmart Agreements, any of which would have a material adverse effect on the
Company's business, financial condition and results of operations.

The legal costs that may be incurred in defending against this action could
be substantial. In addition, the litigation could be protracted and result in
diversion of management and other resources of the Company. There can be no
assurance that WCI will prevail in its lawsuit, or that WCI, the Company and
their co-defendants will prevail in their opposition to CBS's lawsuit. In the
event that a favorable outcome for the Company is not obtained, the Company
intends to vigorously pursue its right to indemnification under an
indemnification agreement among WCI, Kmart and Windmere-Durable, although there
can be no assurance that the parties to the indemnification agreement will agree
on the scope of the indemnity, or that any such indemnity payment which may
become due to the Company will be paid fully or in timely fashion or at all.

Related proceedings have also been commenced before the Trademark Trial and
Appeal Board (the "Trademark Board") of the United States Patent and Trademark
Office in opposition to WCI's and CBS's efforts to register certain uses of the
Westinghouse(TM) and White-Westinghouse(R) names. Such proceedings have been
stayed pending resolution of the Trademark Litigation in the Pennsylvania court.
Even if the Trademark Litigation is resolved in the Company's favor, it is
possible that these proceedings before the
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Trademark Board will continue and could have a material adverse effect upon the
Company's business, financial condition and results of operations. See
"Business -- Legal Proceedings."

COMPETITION

The small household appliance industry is characterized by intense
competition. Competition is based upon price and quality, as well as innovation
in the design of new products and replacement models and in marketing and
distribution approaches. The Company competes with domestic and international
companies, some of which have substantially greater financial and other
resources than those of the Company. The Company believes that its future
success will depend upon its ability to develop and produce reliable products
which incorporate developments in technology and satisfy consumer tastes with
respect to style and design and its ability to market a broad offering of such
products in each applicable category at competitive prices. No assurance can be
given that the Company will be able to successfully compete on the basis of
these factors in the future. See "Business -- Competition."

INTERESTS IN AFFILIATES

The Company shares in the profits of companies in which its ownership
interest is less than 100%, including Salton and Newtech. In addition, the
Company manufactures products for Salton. Prices that the Company is able to
charge Salton are based on negotiations which occur from time to time. No
assurance can be given that the Company and Salton will continue to agree on
prices. In addition, no assurance can be given that the Company will continue to
retain equity interests in such companies, or that the existing value of such
interests will not change. Salton has announced its election to exercise its
option to purchase the Company's 6,535,072 shares of Salton's common stock. If
Salton consummates the purchase of the Company's equity interest in Salton, the
Company would no longer be affiliated with Salton and, as a result, the
Company's ability to continue to negotiate prices with Salton or make sales to
Salton (including pursuant to Salton's Kmart Agreement) or its customers could
be adversely affected. See "Business -- Interests in Affiliates."

DEPENDENCE ON KEY PERSONNEL

The Company's business is managed by a number of key personnel (including
members of the management team of the newly-acquired Black & Decker Household
Products Group), the loss of any of which could have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, as the Company's business develops and expands, the Company believes
that its future success will depend greatly on its continued ability to attract
and retain highly skilled and qualified personnel. There can be no assurance
that key personnel will continue to be employed by the Company or that the
Company will be able to attract and retain qualified personnel in the future.
Failure by the Company to retain or attract such key personnel could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management."

SEASONALITY OF BUSINESS

The Company's business is highly seasonal, with operating results varying
from quarter to quarter. Both Windmere-Durable and the Black & Decker Household
Products Group have historically experienced higher revenues in the third and
fourth quarters of each fiscal year primarily due to increased demand by
customers for such companies' products in the late summer for "back-to-school"
sales and in the fall for holiday sales. This seasonality has also resulted in
additional interest expense to Windmere-Durable during the third and fourth
quarters of each fiscal year due to an increased need to borrow funds to
maintain sufficient working capital to finance such increased demand during such
periods. Lower revenues than expected by the Company in the third and fourth
quarters or the inability to service additional interest expense due to
increased borrowings could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Seasonality."

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RETAIL INDUSTRY

The Company sells its products to retailers, including mass merchandisers,
department stores, catalog showrooms and wholesale clubs. Retail sales depend,
in part, on general economic conditions, and a significant decline in such
conditions could have a negative impact on sales by retailers of the type of
products offered by the Company. A significant deterioration in the financial
condition of the Company's major customers, or in the retail environment in
general, could have a material adverse effect on the Company's sales and
profitability. In addition, as a result of the desire of retailers to more
closely manage inventory levels, there is a growing trend among retailers to
make purchases on a "just-in-time" basis which requires the Company to shorten
its lead time for production in certain cases and more closely anticipate
demand, which could in the future require the carrying of additional inventories
by the Company.

PRODUCT LIABILITY

Any defects in the Company's products that result in personal injury could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company maintains insurance to cover such risks;
however, there can be no assurance that the Company will be able to obtain such
insurance on acceptable terms in the future, if at all, or that the coverage in
certain events will be adequate or will be available to insure against all
product liability claims.

GOVERNMENT REGULATION

In the United States, Latin America, Canada and Europe, most federal,
state, provincial and local authorities require Underwriters Laboratory, Inc. or
other safety regulation certification prior to marketing electrical appliances
in those jurisdictions for the jurisdictions in which such products are
marketed. All of the non-professional salon appliances currently marketed by the
Company have such certifications. There can be no assurance that the Company's
products, or additional electrical appliances which may be developed by the
Company, will meet such specifications. Certain of the products sold by the
Company in the United States are also subject to the cosmetic purity and
labeling provisions of the Fair Packaging and Labeling Act. A determination that
the Company is not in compliance with such rules and regulations could result in
the imposition of fines or an award of damages to private litigants. These and
other initiatives could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Government Regulation."

ENVIRONMENTAL REGULATION

The Company's business operations and facilities are subject to a number of
federal, state, local and foreign environmental laws and regulations. No
assurance can be given that future changes either in such laws, regulations or
interpretations thereof or in the nature of the Company's operations will not
require the Company to make significant additional capital expenditures in order
to effect compliance. See "Business -- Environmental Matters."

EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS; ANTI-TAKEOVER EFFECTS; RIGHTS
PLAN

Certain provisions of Florida law and the Company's Amended and Restated
Articles of Incorporation (the "Amended Articles") may deter or frustrate a
takeover attempt of the Company that a shareholder might consider in his or her
best interest. The Company is subject to the "affiliated transactions" and
"control share acquisition" provisions of the Florida Business Corporation Act.
The Company's Amended Articles require, subject to certain exceptions, that
certain transactions between the Company and an Interested Stockholder (as
defined therein) be approved by the holders of at least 80% of the voting shares
of the Company entitled to vote generally in the election of directors. In
addition, certain provisions of the Company's Amended Articles or By-laws, among
other things, provide that (i) any action required or permitted to be taken by
the shareholders of the Company may be effected only at an annual or special
meeting of shareholders, and not by written consent of the shareholders, (ii)
the annual meeting of shareholders shall be held on such date and at such time
fixed from time to time by the Board of Directors, provided that there shall be
an annual meeting held every calendar year, (iii) any special meeting of the

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shareholders may be called only by the written request of the Chairman of the
Board, the President, a majority of the Board of Directors, or the holders of
not less than 10% of all the shares entitled to vote at such special meeting,
(iv) an advance notice procedure must be followed for nominations of directors
and for other shareholder proposals to be considered at annual shareholders'
meetings and (v) the Company's Board of Directors be divided into three classes,
each of which serves for different three-year periods.

In March 1995, Windmere-Durable implemented a Common Stock Purchase Rights
Plan and distributed one right (a "Right") for each share of its Common Stock
outstanding. The Rights are not exercisable or transferable, apart from the
Company's Common Stock, until after a person or group acquires, or has the right
to acquire, beneficial ownership of 15% or more of the Company's Common Stock
(which threshold may, under certain circumstances, be reduced to 10%) or
announces a tender or exchange offer to acquire such percentage of the Company's
Common Stock. Each Right entitles the holder to purchase one quarter of one
share of Common Stock at an exercise price of $25.00 per full share and contains
provisions that entitle the holder, in the event of specific transactions, to
purchase Common Stock of the Company or any acquiring or surviving entity at
one-half of market price as determined under the terms of the Rights Agreement.
The Rights will expire in March 2005, unless previously exercised or redeemed at
the option of the Company for $.00001 per Right.

RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS

The Senior Credit Facilities and the Indenture contain certain covenants
that restrict, among other things, the Company's ability to incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, consummate certain asset sales, enter into certain transactions with
affiliates, impose restrictions on the ability of a subsidiary to pay dividends
or make certain payments to the Company, enter into sale-leaseback transactions,
merge or consolidate with any other person or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of the assets of the
Company. Certain key elements of the Company's business strategy, including the
incurrence of additional debt, are restricted by the terms of the Senior Credit
Facilities and the Indenture. The Company may need to obtain the consent of the
lenders under the Senior Credit Facilities and the holders of the Notes before
entering into these and other prohibited or restricted transactions, limiting
the Company's flexibility in planning for, and reacting to, changes in business
conditions. The Senior Credit Facilities also require the Company to maintain
specified financial ratios and to satisfy certain financial condition tests. The
Company's ability to meet those financial ratios and financial condition tests
can be affected by events beyond its control, and there can be no assurance that
the Company will meet those tests. A breach of any of these covenants could
result in a default under the Senior Credit Facilities or the Indenture. Upon
the occurrence of an event of default under the Senior Credit Facilities or the
Indenture, the lenders thereunder could elect to declare all amounts outstanding
thereunder, together with accrued interest, to be immediately due and payable.
In the case of the Senior Credit Facilities, if the Company were unable to repay
those amounts, the lenders thereunder could proceed against any collateral
granted to them to secure that indebtedness. If indebtedness under the Senior
Credit Facilities were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay in full that indebtedness and
the other indebtedness of the Company. See "Description of Certain
Indebtedness -- Senior Credit Facilities" and "-- % Senior Subordinated
Notes due 2008."

DIVIDENDS

The Company currently intends to retain all earnings, if any, for the
operation and development of its business and does not anticipate paying any
cash dividends on the Common Stock in the foreseeable future. In addition, the
Senior Credit Facilities and the Indenture under which the Notes will be issued
restrict the declaration and payment of cash dividends by the Company on the
Common Stock, unless the Company complies with certain minimum financial
covenants. Any future determination as to the payment of cash dividends by the
Company on its Common Stock will be at the discretion of the Board of Directors
and will depend on a number of factors, including future earnings, capital
requirements, the financial condition and prospects of the Company, any
restrictions under credit agreements existing from time to time, and such other
factors as the Board of Directors may deem relevant. See "Dividend Policy."

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RISKS RELATING TO YEAR 2000

The Company uses a significant number of computer software programs and
operating systems across its entire organization, including applications used in
financial business systems, manufacturing, and various administrative functions.
To the extent that the Company's software applications contain source code that
is unable to appropriately interpret the upcoming calendar year 2000 and beyond,
modification or replacement of such applications will be necessary. The Company
is in the process of reviewing its computer systems and programs to identify
those that are not Year 2000 compliant. The Company also has begun to address
whether significant customers and suppliers may have Year 2000 compliance issues
which will affect their interaction with the Company. No assurance can be given
that all of the Company's systems, the systems of acquired businesses, and those
of significant customers and suppliers, will be Year 2000 compliant and that the
failure to achieve Year 2000 compliance will not have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000 Issues."

SHARES ELIGIBLE FOR FUTURE SALE

After giving effect to the Common Stock Offering, and based on the number
of shares of Common Stock outstanding as of June 23, 1998, the Company will have
approximately 21,836,461 shares of Common Stock outstanding. Of such shares,
19,164,437 shares of Common Stock will be freely tradable without restriction or
further registration under the Securities Act. The remaining 2,672,024 shares of
Common Stock are "restricted securities" as defined in Rule 144 promulgated
under the Securities Act, and may only be sold in the public market if such
shares are registered under the Securities Act or sold in accordance with Rule
144 or another exemption from registration under the Securities Act. No
prediction can be made as to the effect, if any, that future sales of shares, or
the availability of shares for future sale, will have on the market price of the
Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock (including shares issued upon the exercise of stock options), or
the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock. If such sales reduce the market price of the
Common Stock, the Company's ability to raise additional capital in the equity
markets could be adversely affected. Each of the Company, its directors and
certain of the Company's executive officers has agreed that, without the written
consent of NationsBanc Montgomery Securities LLC, on behalf of the Underwriters,
it will not offer, sell, contract to sell or otherwise dispose of any Common
Stock, or any securities convertible into, or exercisable or exchangeable for,
Common Stock for a period of 120 days after the date of this Prospectus
Supplement.

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CONCURRENT NOTES OFFERING

Concurrently with the Common Stock Offering, the Company is publicly
offering $125.0 million in aggregate principal amount of its % Senior
Subordinated Notes due 2008. Consummation of each of the Common Stock Offering
and the Notes Offering is contingent upon consummation of the other. The Notes
will be issued under the Indenture between the Company, the Subsidiary
Guarantors (as defined in the Indenture) and State Street Bank and Trust
Company, as Trustee. The Notes will be subordinated to the Senior Credit
Facilities and other existing and future Senior Debt (as defined in the
Indenture) of the Company and will rank on parity with all other senior
subordinated indebtedness of the Company. For certain additional terms of the
Notes, and for certain terms of the Indenture, see "Description of Certain
Indebtedness -- % Senior Subordinated Notes due 2008."

USE OF PROCEEDS

The net proceeds to the Company from the Offerings are estimated to be
$215.7 million, after deducting underwriting discounts and estimated expenses of
the Offerings ($230.0 million if the Underwriters' over-allotment option related
to the Common Stock Offering is exercised in full). Consummation of each of the
Common Stock Offering and the Notes Offering is contingent upon consummation of
the other. The Company intends to use the net proceeds of the Offerings to repay
all outstanding indebtedness under the Senior Subordinated Loans and the Tranche
C Term Loan, and a portion of the indebtedness under the Senior Secured
Revolving Credit Facility.

The following table sets forth the estimated sources and uses of funds from
the Offerings (in millions of dollars):

<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- ---------------- -------------
<S> <C> <C> <C>
Notes Offering...................... $125.0 Repayment of Senior Subordinated
Common Stock Offering............... 100.0 Loans(1).......................... $185.0
------ Repayment of Tranche C Term Loan.... 20.0
Repayment of Senior Secured
Total.......................... $225.0 Revolving Credit Facility(1)(2)... 10.7
====== Transaction Costs(3)................ 9.3
------
Total.......................... $225.0
======
</TABLE>

- ---------------
(1) Affiliates of one of the Underwriters are lenders under the Senior
Subordinated Loans and the Senior Credit Facilities and will receive a
majority of the proceeds of the Offerings. See "Underwriting."

(2) The $10.7 million repayment of the Senior Secured Revolving Credit Facility
is calculated based on borrowing levels as of March 31, 1998. Actual
borrowings under the Senior Secured Revolving Credit Facility at closing of
the HPG Acquisition was $7.0 million instead of the expected $12.9 million
(assumed in this Prospectus Supplement) due to a reduction in outstanding
indebtedness under the revolving credit facility prior to the HPG
Acquisition. As a result, if there were no additional borrowings under the
Senior Secured Revolving Credit Facility prior to the consummation of the
Offerings, the Company would realize $3.7 million of excess proceeds. Should
the borrowings under the facility fluctuate prior to the consummation of the
Offerings, excess proceeds to the Company will change accordingly. See
"Consolidated Capitalization."

(3) Includes underwriting discounts and expenses related to the Offerings.
S-25
<PAGE> 26

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the NYSE under the symbol "WND." The
following table sets forth, for each of the quarterly periods indicated, the
high and low sale prices of the Common Stock as reported on the NYSE and the
dividends paid per share.

<TABLE>
<CAPTION>
CASH
YEAR HIGH LOW DIVIDENDS
- ---- -------- ------- ---------
<S> <C> <C> <C>
1996
First Quarter...................................... $11.00 $ 6.88 $0.05
Second Quarter..................................... 14.75 9.63 0.05
Third Quarter...................................... 15.38 11.25 0.05
Fourth Quarter..................................... 16.75 12.63 0.05
-----
$0.20
=====
1997
First Quarter...................................... $14.63 $12.00 $0.05
Second Quarter..................................... 16.56 12.88 0.05
Third Quarter...................................... 24.13 16.25 --
Fourth Quarter..................................... 26.69 19.63 --
-----
$0.10
=====
1998
First Quarter...................................... $29.38 $20.00 --
Second Quarter (through June 22, 1998)............. 34.44 24.50 --
</TABLE>

On June 25, 1998, the last reported sale price of the Common Stock on the
NYSE was $32.875 per share. As of June 23, 1998, Windmere-Durable had
approximately 1,287 holders of record of its Common Stock.

DIVIDEND POLICY

In August 1997, the Company's Board of Directors re-evaluated its dividend
policy in light of the Company's strategic repositioning for growth and the
resultant cash requirements and eliminated the Company's quarterly cash
dividend. The Company currently intends to retain all earnings, if any, for the
operation and development of its business and does not anticipate paying any
cash dividends on the Common Stock in the foreseeable future. Any future
determination as to the payment of cash dividends by the Company on its Common
Stock will be at the discretion of the Board of Directors and will depend on a
number of factors, including future earnings, capital requirements, the
financial condition and prospects of the Company, any restrictions under credit
agreements existing from time to time, and such other factors as the Board of
Directors may deem relevant. In addition, the Senior Credit Facilities and the
Indenture under which the Notes will be issued restrict the declaration and
payment of cash dividends by the Company on the Common Stock, unless the Company
complies with certain minimum financial covenants. See "Risk
Factors -- Dividends."

S-26
<PAGE> 27

CONSOLIDATED CAPITALIZATION

The following table sets forth as of March 31, 1998: (i) the historical
consolidated capitalization of Windmere-Durable; (ii) the pro forma consolidated
capitalization of the Company, giving effect to the HPG Acquisition, the
borrowings under the Senior Subordinated Loans and the Senior Credit Facilities
and the repayment of certain indebtedness of the Company; and (iii) the pro
forma consolidated capitalization of the Company, as adjusted to give effect to
the Transactions and the application of the estimated net proceeds as described
in "Use of Proceeds." The table should be read in conjunction with "Use of
Proceeds," "Unaudited Pro Forma Combined Financial Information," "Selected
Historical Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," Windmere-Durable's Audited
Consolidated Financial Statements and Notes thereto, the Black & Decker
Household Products Group's Audited Financial Statements and Notes thereto and
the other financial data contained elsewhere or incorporated by reference in
this Prospectus Supplement and the accompanying Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
-------- ------------- --------------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C>
DEBT
Short-term debt.................................... $ 48,817 $ 9,002 $ 9,002
Long-term debt:
Loans payable................................... 15,866 4,000 4,000
Senior Credit Facilities........................ -- 197,881 167,157
% Senior Subordinated Notes due 2008....... -- -- 125,000
Senior Subordinated Loans....................... -- 185,000 --
-------- -------- --------
Total long-term debt....................... $ 15,866 $386,881 $296,157
-------- -------- --------
Total debt................................. $ 64,683 $395,883 $305,159
======== ======== ========
STOCKHOLDERS' EQUITY
Common Stock as adjusted, $.10 par value (40,000
shares authorized; 18,722 shares issued and
outstanding; 21,763 shares issued and
outstanding as adjusted)(2)..................... $ 1,872 $ 1,872 $ 2,176
Special Preferred Stock, $.01 par value (40,000
shares authorized; no shares issued and
outstanding).................................... -- -- --
Paid-in capital.................................... 40,668 40,668 134,837
Retained earnings.................................. 150,223 150,223 150,223
Unrealized foreign currency translation
adjustment...................................... (1,080) (1,080) (1,080)
-------- -------- --------
Total stockholders' equity................. $191,683 $191,683 $286,156
-------- -------- --------
Total capitalization....................... $256,366 $587,566 $591,315
======== ======== ========
</TABLE>

- ---------------
(1) Reflects: (i) the HPG Acquisition; (ii) borrowings of $185,000 under the
Senior Subordinated Loans; (iii) borrowings of $197,881 under the Senior
Credit Facilities; and (iv) the payment in full of the $39,000 line of old
credit balance, the $10,847 Salton note payable and $1,834 of industrial
development bonds.

(2) Reflects: (i) the HPG Acquisition; (ii) the issuance and sale of 3,041
shares of Common Stock at an estimated offering price of $32.875 per share
in the Common Stock Offering, net of underwriting discounts and estimated
expenses; (iii) the issuance and sale of $125,000 of % Senior
Subordinated Notes due 2008 in the Notes Offering, net of underwriting
discounts and estimated expenses; and (iv) the repayment of $185,000 of
outstanding indebtedness under the Senior Subordinated Loans, $20,000 of
outstanding indebtedness under the Tranche C Term Loan and $10,724 of
outstanding indebtedness under the Senior Secured Revolving Credit Facility.

S-27
<PAGE> 28

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following Unaudited Pro Forma Combined Financial Information gives
effect to the consummation of the HPG Acquisition (accounted for as a purchase
for financial accounting purposes), the Offerings and the borrowings under the
Senior Credit Facilities, in each case as if it or they had been consummated:
(i) on March 31, 1998, in the case of the Unaudited Pro Forma Combined Balance
Sheet; and (ii) on January 1, 1997, the first day of Windmere-Durable's 1997
fiscal year, in the case of the Unaudited Pro Forma Combined Statements of
Operations for the fiscal year ended December 31, 1997 and the three months and
twelve months ended March 31, 1998.

The following Unaudited Pro Forma Combined Financial Information is
presented for illustrative purposes only and does not purport to be indicative
of the Company's actual financial position or results of operations as of the
date hereof, or as of or for any other future date, and is not necessarily
indicative of what the Company's actual financial position or results of
operations would have been had the Transactions been consummated on the
above-referenced dates, nor does it give effect to (i) any transactions other
than the Transactions and those described in the Notes to the Unaudited Pro
Forma Combined Financial Information or (ii) Windmere-Durable's or HPG's results
of operations since March 31, 1998. The pro forma financial information is based
on the HPG Acquisition including the closing of the acquisition of the Mexican
assets (which is considered probable but still subject to MFCC clearance). Until
such closing takes place, the plant will supply product under the Manufacturing
Agreement which is expected to yield operating results for the Company in
respect of such assets and operations substantively equivalent to the results
reflected in the accompanying pro forma financial statements, which assume
completion of the acquisition of the Mexican assets. Although the following
Unaudited Pro Forma Combined Financial Information for the twelve months ended
March 31, 1998 gives effect to $6.9 million in payroll savings from work force
reductions and $12.7 million from annual cost reductions resulting from the HPG
Acquisition, it does not give effect to an additional $40.0 million to $50.0
million of estimated annual cost savings expected by the Company's management to
be achieved over time following consummation of the HPG Acquisition. The
Company's ability to recognize any cost savings from the HPG Acquisition and the
related Repositioning Program will depend to a significant extent on future
events, certain of which are beyond the Company's control, including market
demand for its products, stable currency and political climates in the PRC and
Mexico and other factors. See "Risk Factors -- Risks Associated with the
Integration of the Black & Decker Household Products Group" and "-- Risks
Associated with the Company's Repositioning Program."

The following Unaudited Pro Forma Combined Financial Information is based
upon the historical financial data of Windmere-Durable and the Black & Decker
Household Products Group and should be read in conjunction with the information
appearing in "Use of Proceeds," "Consolidated Capitalization," "Selected
Historical Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," Windmere-Durable's Audited
Consolidated Financial Statements and Notes thereto, the Black & Decker
Household Products Group's Audited Financial Statements and Notes thereto, and
other financial data included or incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus. In the preparation of the following
Unaudited Pro Forma Combined Financial Information, it has been generally
assumed that the historical value of HPG's assets and liabilities approximates
the fair value thereof (except as described in the accompanying Notes to
Unaudited Pro Forma Combined Financial Information), as an independent valuation
has not been completed. The Company will be required to determine the fair value
of the assets and liabilities of the Black & Decker Household Products Group
(including intangible assets) following the closing of the HPG Acquisition.
Although such determination of fair value is not presently expected to result in
values that are materially greater or less than the values assumed in the
preparation of the following Unaudited Pro Forma Combined Financial Information,
there can be no assurance with respect thereto.

The Unaudited Pro Forma Combined Balance Sheet at March 31, 1998 is based
upon Windmere-Durable's financial position at March 31, 1998 and upon the Black
& Decker Household Products Group's financial position at March 29, 1998. The
Unaudited Pro Forma Combined Statement of Operations for the fiscal year ended
December 31, 1997 is based upon Windmere-Durable's result of operations for its
fiscal year ended December 31, 1997 and upon the Black & Decker Household
Product Group's results of operations for its fiscal year ended December 31,
1997. The Unaudited Pro Forma Combined Statements of Operations for the three
months and twelve months ended March 31, 1998 are based upon Windmere-Durable's
and HPG's results of operations for the three months and twelve months ended
March 31, 1998.

The small household appliance industry is seasonal in nature, with a higher
proportion of sales and earnings usually being generated in the third and fourth
quarters of the fiscal year than in other periods. Because of this seasonality
and other factors, many of which are beyond the Company's control, results of
operations for interim periods are not necessarily indicative of results of
operations for an entire fiscal year. See "Risk Factors -- Seasonality of
Business."

S-28
<PAGE> 29

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

BALANCE SHEET
MARCH 31, 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -------------------------
WINDMERE-DURABLE HPG ADJUSTMENTS COMBINED
---------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 2,491 $ -- $ $ 2,491
Accounts receivable, net............... 38,506 65,492 103,998
Receivables from affiliates............ 17,303 -- 17,303
Inventory.............................. 99,769 61,037 160,806
Prepaid expenses....................... 7,032 5,236 12,268
Future tax benefits.................... 3,950 -- 3,950
Refundable income taxes................ 1,274 -- 1,274
-------- -------- --------
Total current assets......... 170,325 131,765 302,090
Investment in affiliates............... 43,699 -- 43,699
Notes receivable from affiliate........ 7,872 -- 7,872
Property, plant and equipment.......... 38,009 63,738 (15,018)(1) 86,729
Other assets........................... 13,766 16,565 15,800(2) 30,131
(16,000)(1)
Intangible assets...................... -- 22,525 (22,525)(1)
219,991(1) 219,991
-------- -------- --------- --------
Total assets................. $273,671 $234,593 $ 182,248 $690,512
======== ======== ========= ========
Notes and acceptances payable.......... $ 45,451 $ -- $ (39,000)(2) $ 6,451
Current portion of long-term debt...... 3,365 -- (814)(2) 2,551
Accounts payable and accrued
expenses............................. 16,110 65,246 10,000(1) 91,684
328(1)
Deferred income, current portion....... 165 -- 165
-------- -------- --------- --------
Total current liabilities.... 65,091 65,246 (29,486) 100,851
Long-term debt......................... 15,866 -- 280,291(2) 296,157
Deferred income/other liabilities...... 1,031 33,713 (27,396)(1) 7,348
Net assets............................. 135,634 (135,634)(3) --
Common stock........................... 1,872 -- 304(2) 2,176
Paid-in capital........................ 40,668 -- 94,169(2) 134,837
Currency translation adjustment........ (1,080) -- (1,080)
Retained earnings...................... 150,223 -- 150,223
-------- -------- --------- --------
Total stockholders' equity... 191,683 135,634 (41,161) 286,156
-------- -------- --------- --------
Total liabilities and
stockholders' equity....... $273,671 $234,593 $ 182,248 $690,512
======== ======== ========= ========
</TABLE>

See Notes to Unaudited Pro Forma Combined Financial Information.
S-29
<PAGE> 30

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -------------------------
WINDMERE-DURABLE HPG ADJUSTMENTS COMBINED
---------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Sales.................................. $261,885 $402,928 $ $664,813
Cost of goods sold..................... 197,507 289,423 (1,130)(4) 485,800
-------- -------- -------- --------
Gross profit........................... 64,378 113,505 1,130 179,013
Gross profit %......................... 24.6% 28.2% 26.9%
Selling, general, and administrative
expenses............................. 50,349 104,736 (6,168)(4) 146,372
(6,080)(5)
7,773(6)
2,431(7)
(1,250)(8)
(812)(9)
(2,250)(10)
223(11)
(2,580)(12)
-------- -------- -------- --------
Operating profit....................... 14,029 8,769 9,843 32,641
Interest expense....................... 3,351 -- 23,639(7) 26,990
Interest income........................ (2,727) -- (2,727)
Other expense.......................... -- 579 579
-------- -------- -------- --------
Earnings before equity in net earnings
of affiliates and income taxes....... 13,405 8,190 (13,796) 7,799
Equity in net earnings of affiliates... 7,353 -- -- 7,353
Income taxes (benefit)................. 923 3,936 (1,895)(13) 2,964
-------- -------- -------- --------
Net earnings........................... $ 19,835 $ 4,254 $(11,901) $ 12,188
======== ======== ======== ========
Earnings per share -- diluted.......... $ 1.00 $ 0.53
======== ========
Weighted average shares................ 19,776 3,041(14) 22,817
======== ======== ========
OTHER FINANCIAL DATA:
EBITDA............................... $ 21,727 $ 26,361 $ 68,135
Depreciation and amortization........ $ 7,698 $ 18,171 $ 36,073
Capital expenditures................. $ 11,296 $ 16,922 $ 28,218
Ratio of total debt to EBITDA........ 4.5x
Ratio of EBITDA to interest
expense........................... 2.5x
</TABLE>

See Notes to Unaudited Pro Forma Combined Financial Information.
S-30
<PAGE> 31

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -------------------------
WINDMERE-DURABLE HPG ADJUSTMENTS COMBINED
---------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Sales.................................. $55,394 $ 61,755 $ $117,149
Cost of goods sold..................... 42,511 43,605 (67)(4) 86,049
------- -------- ------- --------
Gross profit........................... 12,883 18,150 67 31,100
Gross profit %......................... 23.3% 29.4% 26.5%
Selling, general, and administrative
expenses............................. 11,706 21,723 (1,317)(4) 32,038
(1,520)(5)
1,943(6)
608(7)
(313)(8)
(203)(9)

56(11)
(645)(12)
Restructuring charge................... -- 15,500 15,500
------- -------- ------- --------
Operating profit (loss)................ 1,177 (19,073) 1,458 (16,438)
Interest expense....................... 1,045 -- 5,910(7) 6,955
Interest income........................ (680) -- (680)
Other income (expense)................. -- 121 121
------- -------- ------- --------
Earnings (loss) before equity in net
earnings of affiliates and income
taxes................................ 812 (18,952) (4,452) (22,592)
Equity in net earnings of affiliates... 445 -- 445
Income taxes (benefit)................. 121 (3,428) (5,278)(13) (8,585)
------- -------- ------- --------
Net earnings (loss).................... $ 1,136 $(15,524) $ 826 $(13,562)
======= ======== ======= ========
Earnings (loss) per share -- diluted... $ 0.06 $ (0.58)
======= ========
Weighted average shares................ 20,194 3,041(14) 23,235
======= ======= ========
OTHER FINANCIAL DATA:
EBITDA............................... $ 3,251 $ 575 $ 7,835
Depreciation and amortization........ $ 2,074 $ 4,027 $ 8,652
Capital expenditures................. $ 2,671 $ 1,873 $ 4,154
</TABLE>

See Notes to Unaudited Pro Forma Combined Financial Information.
S-31
<PAGE> 32

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -------------------------
WINDMERE-DURABLE HPG ADJUSTMENTS COMBINED
---------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Sales.................................. $265,867 $399,326 $ $665,193
Cost of goods sold..................... 199,425 285,634 (862)(4) 484,197
-------- -------- -------- --------
Gross profit........................... 66,442 113,692 862 180,996
Gross profit %......................... 25.0% 28.5% 27.2%
Selling, general and administrative
expenses............................. 52,358 106,724 (6,037)(4) 150,500
(6,080)(5)
7,773(6)
2,431(7)
(1,250)(8)
(812)(9)
(2,250)(10)
223(11)
(2,580)(12)
Restructuring charge................... -- 15,500 15,500
-------- -------- -------- --------
Operating profit (loss)................ 14,084 (8,532) 9,444 14,996
Interest expense....................... 3,772 -- 23,639(7) 27,411
Interest income........................ (2,931) -- (2,931)
Other income (expense)................. -- (380) (380)
-------- -------- -------- --------
Earnings before equity in net earnings
of affiliates and income taxes....... 13,243 (8,912) (14,195) (9,864)
Equity in net earnings of affiliates... 8,288 -- 8,288
Income taxes (benefit)................. 880 1,309 (5,937)(13) (3,748)
-------- -------- -------- --------
Net earnings (loss).................... $ 20,651 $(10,221) $ (8,258) $ 2,172
======== ======== ======== ========
Earnings per share -- diluted.......... $ 1.04 $ 0.09
======== ========
Weighted average shares................ 19,881 3,041(14) 22,922
======== ======== ========
OTHER FINANCIAL DATA:
EBITDA............................... $ 21,970 $ 24,175 $ 65,793
Depreciation and amortization........ $ 7,886 $ 17,587 $ 35,677
Capital expenditures................. $ 11,966 $ 17,670 $ 23,636
Ratio of total debt to EBITDA........ 4.6x
Ratio of EBITDA to interest
expense........................... 2.4x
</TABLE>

See Notes to Unaudited Pro Forma Combined Financial Information.
S-32
<PAGE> 33

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

(1) The following adjustments give effect to the HPG Acquisition. The aggregate
purchase price paid by Windmere-Durable in connection with the HPG
Acquisition is summarized below:

<TABLE>
<S> <C>
AGGREGATE PURCHASE PRICE: (in thousands)
Cash paid to The Black & Decker Corporation................. $315,000(a)
Transition/integration costs to be incurred in the HPG
Acquisition............................................... 10,000(b)
Financial and advisory, investment banking, legal,
accounting, and other professional fees................... 4,150
--------
$329,150
========
ALLOCATION OF PURCHASE PRICE:
Aggregate purchase price.................................... $329,150
Less net book value of assets acquired...................... 135,634
--------
Excess of cost over net book value of net assets acquired... 193,516
Adjustments to record assets and liabilities acquired at
fair market value:
Other assets.............................................. 16,000(c)
Accrued liabilities....................................... 328(d)
Other liabilities......................................... (27,396)(e)
Goodwill.................................................. 22,525(f)
Fixed assets.............................................. 15,018(g)
--------
26,475
--------
Excess of cost over fair market value of net assets
acquired.................................................. $219,991
========
</TABLE>

- ---------------
(a) Includes approximately $27.0 million paid into escrow for purchase of the
Queretaro property pending approval by MFCC.

(b) Reflects certain estimated transition and integration costs to be incurred
in connection with the HPG Acquisition in accordance with EITF 95-3
"Recognition of Liabilities in Connection with a Purchase Business
Combination."

(c) Reflects the eliminations of income tax assets of $16,000 which are not
being conveyed in the HPG Acquisition under the terms of the asset purchase
agreement between Windmere-Durable and The Black & Decker Corporation (the
"Purchase Agreement").

(d) Reflects the accrual of $2,500 for unfavorable office and computer leases
(idle property) under APB 16, and the elimination of $2,172 of product
recall liability accruals related to the recall of HPG's T1000 toaster
ovens by the Consumer Products Safety Commission as Windmere-Durable is
indemnified for such recall expense under the Purchase Agreement. There can
be no assurance, however, that Windmere-Durable will not incur product
recall expense in the future.

(e) Reflects the elimination of other postemployment benefit liabilities of
$27,396 not assumed by Windmere-Durable.

(f) Reflects the eliminations of HPG's existing goodwill of $22,525.

(g) Reflects the elimination of HPG's Kuantan, Malaysia fixed assets of $15,018
which are not being conveyed to the buyer under the purchase agreement.

S-33
<PAGE> 34
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)

(2) Reflects the adjustment to record the following:

<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM COMMON PAID-IN OTHER
CASH DEBT DEBT STOCK CAPITAL ASSETS
--------- ---------- --------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Borrowings under Senior
Subordinated Loans........... $ 185,000 $ $ 185,000 $ $ $
Borrowings under Term Loans.... 185,000 185,000
Borrowings under new Senior
Secured Revolving Credit
Facility..................... 12,882 12,882
Repayment of existing credit
facility..................... (39,000) (39,000)
Repayment of Salton loan....... (10,847) (10,847)
Repayment of industrial
development bonds............ (1,834) (814) (1,020)
Issuance of Common Stock, net
of costs..................... 94,473 304 94,169
Debt issuance costs............ (15,800) 15,800
HPG Acquisition cash purchase
price and expenses........... (319,150)
% Senior Subordinated
Notes due 2008............... 125,000 125,000
Repayment of Senior
Subordinated Loans........... (185,000) (185,000)
Repayment of Tranche C Term
Loan......................... (20,000) (20,000)
Repayment of Senior Secured
Revolving Credit Facility.... (10,724) (10,724)
--------- -------- --------- ---- ------- -------
$ -- $(39,814) $ 280,291 $304 $94,169 $15,800
========= ======== ========= ==== ======= =======
</TABLE>

(3) Reflects the elimination of HPG's equity which will be cancelled upon
acquisition.

(4) Reflects the HPG workforce reductions in 1997 and early 1998 at the plant
and corporate office levels resulting in the elimination of 127 positions
and savings of $7,298 for the year ended December 31, 1997, $1,384 for the
three months ended March 31, 1998, and $6,899 for the twelve months ended
March 31, 1998.

(5) Reflects the reduction of corporate expenses as calculated by comparing the
amount paid by HPG to The Black & Decker Corporation prior to the HPG
Acquisition to the amount estimated to be incurred on a stand-alone basis
which is a savings of $6,080 for the year ended December 31, 1997, $1,520
for the three months ended March 31, 1998, and $6,080 for the twelve months
ended March 31, 1998.

(6) Reflects incremental amortization expense as a result of the excess of cost
over fair market value of the net assets acquired (see Note 1) as follows:

<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ESTIMATED YEAR ENDED ENDED ENDED
USEFUL LIFE DECEMBER 31, 1997 MARCH 31, 1998 MARCH 31, 1998
--------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Amortization of identifiable
intangible assets............. 6.5 to 12 years $7,323 $1,831 $7,323
Amortization of excess of cost
over fair value of net assets
acquired...................... 40 years $ 450 $ 112 $ 450
</TABLE>

(7) Reflects an adjustment to record additional interest expense and
amortization of debt issuance costs of $26,070 for the year ended December
31, 1997, $6,518 for the three months ended March 31, 1998, and

S-34
<PAGE> 35
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)

$26,070 for the twelve months ended March 31, 1998. An assumed rate of
10.0% per annum is used in connection with the interest expense on the
Notes. If the actual interest rate varies by 25 basis points from the
assumed rates, pro forma interest expense in connection with the Notes
would change by $313 for the year ended December 31, 1997, $78 for the
three months ended March 31, 1998 and $313 for the twelve months ended
March 31, 1998.

(8) Reflects the elimination of lease costs in excess of market rates in the
amount of $1,250 for the year ended December 31, 1997, $313 for the three
months ended March 31, 1998, and $1,250 for the twelve months ended March
31, 1998.

(9) Reflects the expected future reduction in purchasing costs for the Hong
Kong purchasing office under the interim services agreement entered into
between Windmere-Durable and The Black & Decker Corporation as part of the
HPG Acquisition from the amounts paid by HPG to The Black & Decker
Corporation prior to the HPG Acquisition of $812 for the year ended
December 31, 1997, $203 for the three months ended March 31, 1998, and $812
for the twelve months ended March 31, 1998.

(10) Reflects the elimination of product recall expense for which The Black &
Decker Corporation has indemnified Windmere-Durable under the terms of the
Purchase Agreement of $2,250 for the year ended December 31, 1997, $0 for
the three months ended March 31, 1998, and $2,250 for the twelve months
ended March 31, 1998. There can be no assurance, however, that the Company
will not incur product recall expense going forward.

(11) Reflects the agreed upon increase in executive salaries under the new
employment agreements which have been or are expected to be entered into of
$223 for the year ended December 31, 1997, $56 for the three months ended
March 31, 1998, and $223 for the twelve months ended March 31, 1998. See
"Management."

(12) Reflects the elimination of the Malaysian plant losses of $2,580
experienced by HPG for the year ended December 31, 1997, $645 for the three
months ended March 31, 1998, and $2,580 for the twelve months ended March
31, 1998. The Malaysia facility was not purchased by Windmere-Durable in
the HPG Acquisition.

(13) Reflects the income tax benefit related to the effects of the pro forma
adjustments based upon an assumed composite income tax rate of 38% or
$1,895 for the year ended December 31, 1997, $5,278 for the three months
ended March 31, 1998, and $5,937 for the twelve months ended March 31,
1998.

(14) Reflects the shares issued as a result of the Common Stock Offering at an
assumed offering price of $32.875 per share.

EBITDA is earnings (loss) before equity of net earnings of affiliates
income taxes plus depreciation expense, amortization expense, net interest
expense, and the restructuring charge. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service and/or
incur indebtedness, however, EBITDA should not be considered as an alternative
to net earnings as a measure of operating results or to cash flows as a measure
of liquidity in accordance with generally accepted accounting principles.

S-35
<PAGE> 36

SELECTED HISTORICAL FINANCIAL INFORMATION

The Selected Historical Financial Information for Windmere-Durable as of
and for each of the five years in the period ended December 31, 1997, and for
the Black & Decker Household Products Group as of and for each of the three
years in the period ended December 31, 1997, have been derived from
Windmere-Durable's Audited Consolidated Financial Statements and Notes thereto
and the Black & Decker Household Products Group's Audited Financial Statements
and Notes thereto, respectively. The Selected Historical Consolidated Financial
Information for Windmere-Durable as of and for the three months ended March 31,
1998 and 1997, respectively, is unaudited, but has been prepared on the same
basis as Windmere-Durable's Audited Consolidated Financial Statements and Notes
thereto, which include, in the opinion of management of Windmere-Durable, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the information of Windmere-Durable for the unaudited
interim periods. The Selected Historical Financial Data for the Black & Decker
Household Products Group as of and for the three months ended March 29, 1998 and
March 30, 1997, respectively, is unaudited, but has been prepared on the same
basis as the Black & Decker Household Products Group's Audited Financial
Statements and Notes thereto, which include, in the opinion of HPG management,
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the information of the Black & Decker Household Products
Group for the unaudited interim periods. The operating results of
Windmere-Durable for the three months ended March 31, 1998 may not be indicative
of the operating results of the Company for the full year. The data set forth
are qualified in their entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," Windmere-Durable's Audited Consolidated Financial Statements and
Notes thereto, the Black & Decker Household Products Group's Audited Financial
Statements and Notes thereto and the other financial data contained elsewhere or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus.

S-36
<PAGE> 37

SELECTED HISTORICAL CONSOLIDATED FINANCIAL
INFORMATION OF WINDMERE-DURABLE
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- -------------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- ---------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................... $170,661 $181,112 $ 187,777 $197,004 $261,885 $51,412 $55,394
Cost of sales............... 122,772 132,185 146,907 157,279 197,507 40,593 42,511
-------- -------- ---------- -------- -------- ------- -------
Gross profit................ 47,889 48,927 40,870 39,725 64,378 10,819 12,883
Selling, general and
administrative expenses... 36,448 35,532 37,625 39,425 50,349 9,697 11,706
Unusual or non-recurring
items..................... -- (7,811)(1) 8,000(2) -- -- -- --
Net interest and other
income.................... (1,368) (1,834) (1,983) (1,075) 624 147 364
Equity in net earnings
(loss) of affiliates...... (504) 91 (393) 2,299 7,353 (490) 444
-------- -------- ---------- -------- -------- ------- -------
Earnings (loss) before
taxes, minority interest
and extraordinary item.... 12,305 23,131 (3,165) 3,672 20,758 485 1,257
Extraordinary items......... -- -- -- 3,500(3) -- -- --
Minority interest expense
(income).................. 1,203 (1) -- -- -- -- --
Provision for taxes
(benefits)................ (367)(4) 2,595 (1,281) (279) 923 164 121
-------- -------- ---------- -------- -------- ------- -------
Net earnings (loss)......... $ 11,469 $ 20,537 $ (1,884) $ 451 $ 19,835 $ 321 $ 1,136
======== ======== ========== ======== ======== ======= =======
Net earnings (loss) per
share -- basic............ $ 0.74 $ 1.24 $ (0.11) $ 0.03 $ 1.12 $ 0.02 $ 0.06
======== ======== ========== ======== ======== ======= =======
diluted................... $ 0.71 $ 1.17 $ (0.11) $ 0.03 $ 1.00 $ 0.02 $ 0.06
======== ======== ========== ======== ======== ======= =======
Cash dividends paid per
share of Common Stock..... $ -- $ 0.15 $ 0.20 $ 0.20 $ 0.10 $ 0.05 $ --
OTHER FINANCIAL DATA:
EBITDA(5)................... $ 17,147 $ 19,214 $ 10,024 $ 7,291 $ 21,727 $ 3,008 $ 3,251
Depreciation and
amortization.............. $ 5,705 $ 5,819 $ 6,779 $ 6,991 $ 7,698 $ 1,886 $ 2,074
Capital expenditures........ $ 5,891 $ 10,437 $ 8,384 $ 8,618 $ 11,296 $ 2,001 $ 2,671
Ratio of earnings to fixed
charges(6)................ 10.9x 42.9x -- 3.7x 7.0x 1.8x 2.1x
</TABLE>

- ---------------
(1) Non-recurring gain on the sale of Hong Kong office space of $7,811.
(2) Non-recurring loss on the sale of another asset of $8,000.
(3) Extraordinary charge for the settlement of Izumi litigation of $3,500.
(4) Includes cumulative effect of accounting change benefit of $1,731.
(5) EBITDA represents net earnings (loss) before the cumulative effect of change
in accounting plus provisions for income taxes, interest expense,
depreciation and amortization, equity in net earnings (loss) of affiliates,
minority interest, restructuring costs, unusual or non-recurring items and
extraordinary items. While EBITDA should not be construed as a substitute
for other historical operating data in analyzing Windmere-Durable's
operating performance, financial position and cash flows, Windmere-Durable
has included EBITDA because it is commonly used by certain investors to
analyze and compare companies on the basis of operating performance,
leverage and liquidity and to determine Windmere-Durable's ability to
service debt.

S-37
<PAGE> 38

SELECTED HISTORICAL FINANCIAL INFORMATION OF
THE BLACK & DECKER HOUSEHOLD PRODUCTS GROUP
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
-------------------------------- -------------------------------
1995 1996 1997 MARCH 30, 1997 MARCH 29, 1998
-------- -------- -------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $445,739 $412,446 $402,928 $65,357 $ 61,755
Cost of goods sold.................. 315,296 295,187 289,423 47,394 43,605
-------- -------- -------- ------- --------
Gross profit........................ 130,443 117,259 113,505 17,963 18,150
Selling, general and administrative
expenses......................... 110,233 106,143 104,736 19,735 21,723
Restructuring charge................ -- 4,676(1) -- -- 15,500(2)
-------- -------- -------- ------- --------
Operating income (loss)............. 20,210 6,440 8,769 (1,772) (19,073)
Other expenses (income)............. 3,464 1,698 579 78 (121)
Income taxes (benefit).............. 6,995 3,319 3,936 (801) (3,428)
-------- -------- -------- ------- --------
Net earnings (loss)................. $ 9,751 $ 1,423 $ 4,254 $(1,049) $(15,524)
======== ======== ======== ======= ========
OTHER FINANCIAL DATA:
EBITDA(3)(4)........................ $ 34,412 $ 27,499 $ 26,361 $ 2,761 $ 575
Depreciation and amortization....... 17,666 18,081 18,171 4,611 4,027
Capital expenditures................ 18,979 22,306 16,922 1,125 1,873
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------- AS OF
1996 1997 MARCH 29, 1998
-------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................... $ 43,147 $ 79,711 $ 66,519
Total assets............................................. 236,886 258,547 234,593
Total debt............................................... -- -- --
</TABLE>

(4) It was The Black & Decker Corporation's policy not to enter into foreign
currency hedges in Mexico since the peso-denominated revenues at its other
business units provided it with a natural hedge against peso-denominated
expenses at HPG. The effect of HPG not entering into specific forward
currency contracts had a negative impact on earnings of $7.1 million and
$3.8 million in each of the years ended December 31, 1997, and 1996,
respectively, and a positive impact of $9.7 million in the year ended
December 31, 1995. Windmere-Durable would not have had the benefits of a
natural hedge if it had been operating the HPG business in Mexico and
although it plans to hedge its exposure against changes in the peso-dollar
exchange rates, there can be no assurance that Windmere-Durable's gains on
hedging transactions would have produced a result comparable to the results
of the natural hedge at The Black & Decker Corporation.

S-38
<PAGE> 39

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

This Prospectus Supplement contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such statements are indicated by words or phrases such as "anticipate,"
"estimate," "projects," "management believes," "the Company believes,"
"intends," "expects" and similar words or phrases. Such forward-looking
statements are subject to certain risks, uncertainties or assumptions and may be
affected by certain other factors, including the specific factors set forth in
"Risk Factors." Should one or more of these risks, uncertainties or other
factors materialize, or should underlying assumptions prove incorrect, actual
results, performance, or achievements of the Company may vary materially from
any future results, performance or achievements expressed or implied by such
forward-looking statements. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements in this
paragraph. The Company disclaims any obligation to publicly announce the results
of any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.

OVERVIEW

The Company, through its subsidiaries, is a leading diversified
manufacturer and distributor of a broad range of branded and private label small
household appliances, including electric housewares (kitchen and garment care),
personal care and other products. Through Durable, its wholly-owned subsidiary,
the Company believes it has a competitive advantage with efficient, low-cost
manufacturing capabilities. In addition, with the June 26, 1998 acquisition of
the Black & Decker Household Products Group, the Company became a leading
supplier of brand name small electric housewares in the United States across the
product price spectrum. Several initiatives which have been implemented and
announced are intended to enable the Company to further improve its cost
position and manufacturing base going forward.

The Black & Decker Household Products Group has implemented the HPG
Restructuring Program in order to improve its profitability through reducing
costs and streamlining its product offerings. The HPG Restructuring Program
resulted in a first quarter 1998 restructuring charge for HPG of $15.5 million
for costs associated with the consolidation of service operations, severance pay
for certain selling, general and administrative employees, the write-off of
tooling in conjunction with HPG's exit from certain product lines, and the
general integration of its global operations. On a pro forma basis giving effect
to the HPG Acquisition, the Company would have realized approximately $6.9
million in cost savings as a result of the HPG Restructuring Program for the
twelve-month period ended March 31, 1998. The Company expects to continue to
realize annual cost savings as a result of the HPG Restructuring Program.

On June 23, 1998, the Company announced that, in connection with its
acquisition of the Black & Decker Household Products Group, it will embark upon
the Repositioning Program. The Repositioning Program is designed to help the
Company integrate the operations of HPG and Windmere-Durable. As part of the
Repositioning Program, the Company has decided to exit certain personal care and
other non-core, low-margin product lines in order to free manufacturing capacity
for the production of higher margin product lines, including those related to
product lines acquired in the HPG Acquisition. The Company expects the
discontinuation of these product lines to result in savings of approximately
$3.5 million annually by the year 2000. As a result of the Repositioning
Program, the Company will incur a one-time charge of approximately $11.4 million
in the second quarter of 1998. This charge is primarily non-cash and consists
of: (i) $6.0 million of inventory write-downs; (ii) $2.7 million of goodwill,
tooling and other write-offs; and (iii) $2.7 million of HPG integration costs.

strong brand names. Manufacturing synergies are expected to be realized as the
Company's Durable manufacturing facilities begin to manufacture products for HPG
which are currently being outsourced from third parties. In addition, Durable
will begin to manufacture component parts for HPG. The Company plans to optimize
manufacturing production among its facilities in the PRC, Mexico and the U.S.
Other projected synergies include ocean freight, warehousing and additional
corporate overhead savings. The Company believes that these synergies, in
addition to the cost savings from the HPG Restructuring Program and the
Repositioning Program, should result in projected cost savings of approximately
$15.0 million in 1999 and increase to approximately $40.0 million to $50.0
million in annual cost savings by the year 2001. These projections are based on
1997 volumes and do not include any assumptions for growth related to reentering
product lines previously exited by HPG. The Company's ability to recognize any
cost savings from the HPG Acquisition and the related Repositioning Program will
depend to a significant extent on future events, certain of which are beyond the
Company's control, including market demand for its products, stable currency and
political climates in the PRC and Mexico and other factors. See "Risk Factors"
for a discussion of certain factors that could impact the Company's ability to
realize these projected cost savings.

The information presented in the following year-to-year comparisons
represents the historical financial information for Windmere-Durable and the
Black & Decker Household Products Group on a stand-alone basis. These
comparisons do not include pro forma adjustments, charges, savings,
restructurings or repositionings in connection with the HPG Acquisition as
detailed above, and therefore may not present a meaningful basis of comparison.

RESULTS OF OPERATIONS

WINDMERE-DURABLE

The operating results of Windmere-Durable expressed as a percentage of
sales and other revenues are set forth below:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- --------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...................................... 78.2 79.8 75.4 79.0 76.7
----- ----- ----- ----- -----
Gross profit....................................... 21.8 20.2 24.6 21.0 23.3
Selling, general and administrative expenses....... 20.0 20.0 19.2 18.9 21.1
Unusual items or non-recurring items............... 4.3 0.0 0.0 0.0 0.0
Net interest and other income...................... (1.1) (0.5) 0.2 0.3 0.7
Equity in net earnings (loss) of affiliates........ (0.2) 1.2 2.8 (1.0) 0.8
----- ----- ----- ----- -----
Earnings (loss) before taxes, minority interest and
extraordinary item............................... (1.7) 1.9 7.9 0.9 2.3
Extraordinary items................................ 0.0 1.8 0.0 0.0 0.0
Minority interest (expense), net................... 0.0 0.0 0.0 0.0 0.0
Provision for taxes (benefits)..................... (0.7) (0.1) 0.4 0.3 0.2
----- ----- ----- ----- -----
Net earnings (loss)................................ (1.0)% 0.2% 7.6% 0.6% 2.1%
===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED MARCH 31, 1998 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1997

Sales and other revenues. Sales and other revenues for the first quarter
of 1998 increased by $4.0 million or 7.7% over sales and other revenues for the
same period in 1997. The increase is primarily the result of increases in
distribution sales of the Company's LitterMaid(R) product as well as private
label kitchen and seasonal products. Sales to a national retail beauty supply
chain accounted for 10.2% of sales and other revenues for the 1998 period.

S-40
<PAGE> 41

Fees earned by Windmere-Durable under marketing arrangements with its
affiliates in the 1998 period totaled $0.7 million and are included in sales and
other revenues. Fees earned in the 1997 period were not significant.

Set forth below is a table indicating the sales and other revenues that
Windmere-Durable derived from its distribution and manufacturing operations for
the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------
1998 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
Distribution............................. $45,249,000 82% $39,615,000 77%
Manufacturing............................ 10,145,000 18 11,797,000 23
----------- ----- ----------- -----
Total sales and other
revenues..................... $55,394,000 100.0% $51,412,000 100.0%
=========== ===== =========== =====
</TABLE>

Gross profit. Windmere-Durable's gross profit margin increased to 23.3% of
sales and other revenues for the three months ended March 31, 1998 as compared
to 21.0% of sales and other revenues in the three months ended March 31, 1997.
Decreases in certain raw material prices contributed significantly to this
increase as did the higher margins related to sales of LitterMaid(R).

Selling, general and administrative. Selling, general and administrative
costs increased by $2.0 million in the first quarter of 1998 to $11.7 million
from $9.7 million in the first quarter of 1997. The increase is primarily the
result of Windmere-Durable's increased investment in development of the
LitterMaid(R) business including $1.2 million in advertising expenditures.

Equity in net earnings (loss) of affiliates. Windmere-Durable's equity in
net earnings of affiliates was $0.5 million for the first quarter of 1998 as
compared to a loss of $0.5 million for the same period in 1997.

Interest expense. Interest expense increased by $0.4 million to $1.0
million for the three months ended March 31, 1998 from the same period in 1997.
The increase is the result of the increased level of borrowing under
Windmere-Durable's credit facilities.

Income taxes. Windmere-Durable's tax expense is based on the earnings of
each of its foreign and domestic operations, and it includes such additional
U.S. taxes as are applicable to the repatriation of foreign earnings. Foreign
earnings, other than in Canada, are generally taxed at rates lower than in the
United States.

Earnings per share. In 1997, Windmere-Durable adopted Financial Accounting
Standards No. 128 (FAS 128), "Earnings Per Share." Basic shares for the three
month periods ended March 31, 1998 and 1997 were 18,413,731 and 17,465,494,
respectively. Included in diluted shares are common stock equivalents relating
to options, warrants and convertible debt of 1,779,910 and 1,855,345 for the
three month periods ended March 31, 1998 and 1997, respectively. The increase in
number of shares was primarily due to the additional dilutive effect of stock
option exercises and Windmere-Durable's higher average stock price in 1998.

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996

Sales and other revenues. Sales and other revenues increased by $64.9
million to $261.9 million for the year ended December 31, 1997, an increase of
32.9% over sales and other revenues for the year ended December 31, 1996. The
increase is primarily the result of a $47.7 million increase in distribution
sales, and a $17.1 million increase in manufacturing sales. The increase in
distribution sales includes $16.5 million in seasonal product sales resulting
from Windmere-Durable's December 1996 acquisition of the remainder of its
seasonal products affiliate and $9.4 million in kitchen product sales. Also
contributing to the 1997 growth in sales and other revenues is the increase in
LitterMaid(R) distribution sales of $11.9 million.

Fees earned by Windmere-Durable under various marketing arrangements with
its affiliates totaled $3.3 million for 1997 and are included in sales and other
revenues. Salton accounted for 12% of Windmere-Durable's sales and other
revenues in 1997. No such fees were earned in 1996.

S-41
<PAGE> 42

Set forth below is a table indicating the sales and other revenues that
Windmere-Durable derived from its distribution and manufacturing operations for
the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1996
------------------- -------------------
<S> <C> <C> <C> <C>
Distribution.............................. $194,147,300 74% $146,431,800 74%
Manufacturing............................. 67,737,800 26 50,571,800 26
------------ --- ------------ ---
Total sales and other
revenues...................... $261,885,100 100% $197,003,600 100%
============ === ============ ===
</TABLE>

Gross profit. Windmere-Durable's gross margin percentage increased in 1997
to 24.6% of sales from 20.2% in 1996. The better absorption of fixed
manufacturing overhead costs and decreases in certain raw material costs
contributed significantly to the increase as did the higher margins related to
sales of LitterMaid(R).

Selling, general and administrative. Selling, general and administrative
costs increased by $10.9 million to $50.3 million for the year ended December
31, 1997 compared to $39.4 million for the year ended December 31, 1996, yet
decreased as a percentage of sales to 19.2% from 20.0% for the same periods as
fixed expenses were spread over Windmere-Durable's increased sales. The increase
in costs is primarily the result of expenses related to LitterMaid, Inc., Bay
Books & Tapes, Inc. and Windmere-Durable's now wholly-owned seasonal products
company, whose operations, due to their respective acquisition dates, were not
fully reflected in the 1996 financial statements.

Equity in net earnings (loss) of affiliates. Windmere-Durable's equity in
net earnings of affiliates was $7.4 million for the year ended December 31, 1997
as compared to $2.3 million for the same period in 1996. Included in the 1997
amounts are the results of operations of Windmere-Durable's equity interests in
Salton, Newtech and various other affiliates, which were not acquired until the
second or third quarters of 1996. In December 1996, Windmere-Durable acquired
the remainder of its seasonal products affiliate. Windmere-Durable's equity in
earnings of Salton and Newtech totaled $6.8 million for 1997.

Interest expense. Interest expense increased by $2.0 million to $3.4
million in 1997. The increase is due to amounts paid on notes payable issued by
Windmere-Durable in conjunction with the acquisition of equity interests in
Salton and Newtech as well as the increased level of borrowing under
Windmere-Durable's line of credit facility.

Income taxes (benefit). Windmere-Durable's tax expense is based on the
earnings of each of its foreign and domestic operations and it includes such
additional U.S. taxes as are applicable to the repatriation of foreign earnings.
Foreign earnings, other than in Canada, are generally taxed at rates lower than
in the United States. The Internal Revenue Service has completed its examination
of Windmere-Durable's 1992 tax return. No material assessments were made. The
Internal Revenue Service is presently examining Windmere-Durable's 1994 and 1995
income tax returns and Windmere-Durable's 401(k) Plan filings. It is also
examining Windmere-Durable's compliance with the requirements supporting the
deductibility of interest paid on the industrial development bonds. Management
believes that adequate provision for taxes has been made for the years under
examination and those not yet examined.

Earnings per share. Windmere-Durable adopted Financial Accounting
Standards No. 128 (FAS 128), "Earnings Per Share" in 1997. FAS 128 requires dual
presentation of basic and diluted earnings per share on the face of the income
statement as well as the restatement of prior periods presented.

S-42
<PAGE> 43

Basic net earnings per share equals net earnings divided by the weighted
average shares outstanding during the year. The computation of diluted net
earnings per share includes dilutive common stock equivalents in the weighted
average shares outstanding. The reconciliation between the computations is as
follows:

<TABLE>
<CAPTION>
NET INCOME
(BEFORE
EXTRAORDINARY BASIC BASIC DILUTED DILUTED
ITEM) SHARES EPS SHARES EPS
------------- ---------- ----- ---------- -------
<S> <C> <C> <C> <C> <C>
1997........................ $19,835,300 17,654,772 $1.12 19,776,183 $1.00
1996........................ $ 3,951,400 16,846,418 $0.23 17,558,275 $0.23
</TABLE>

The increase in the number of shares used in the computations of both basic
and diluted net earnings per share was due primarily to the additional dilutive
effect of stock option and warrant exercises, Windmere-Durable's higher average
stock price in 1997 and inclusion of additional shares issued by
Windmere-Durable upon the acquisition of equity interests in Salton for a full
year.

YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995

Sales and other revenues. Sales and other revenues were $197.0 million and
$187.8 million for the years ended December 31, 1996 and 1995, respectively.
Manufacturing sales increased by $10.4 million due primarily to increased
shipments of kitchen appliances. A kitchen appliance distributor and a national
retail beauty supply chain accounted for 10.9% and 10.3%, respectively, of
Windmere-Durable's 1996 sales.

Set forth below is a table indicating the sales and other revenues that
Windmere-Durable derived from its distribution and manufacturing operations for
the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1995
------------------- -------------------
<S> <C> <C> <C> <C>
Distribution.............................. $146,431,800 74% $147,576,000 79%
Manufacturing............................. 50,571,800 26 40,200,900 21
------------ --- ------------ ---
Total sales and other
revenues...................... $197,003,600 100% $187,776,900 100%
============ === ============ ===
</TABLE>

Gross profit. Windmere-Durable's gross margin percentage decreased in 1996
to 20.2% of sales and other revenues from 21.8% in 1995. The decrease is
primarily attributed to the continued effect of remaining higher cost raw
material inventories and a greater concentration of manufacturing sales. Lower
margin kitchen electric products which comprised 82% of manufacturing sales in
both 1996 and 1995, accounted for 31% and 25% of Windmere-Durable's sales and
other revenues in those years, respectively.

Selling, general and administrative. Selling, general and administrative
expenses as a percentage of sales and other revenues were 20.0% in both 1996 and
1995. Commencement of operations at Windmere-Durable's newly acquired
LitterMaid, Inc. and Bay Books & Tapes, Inc. businesses resulted in a $1.6
million increase in expenses. Travel, legal and selling expenses increased by
$1.2 million and advertising costs decreased by $1.0 million.

Unusual or non-recurring items. In 1995, Windmere-Durable incurred a
non-recurring pre-tax loss of $8.0 million on the sale of an asset. This
transaction reduced 1995 net earnings by $5.3 million, or $0.31 per share, on an
after-tax basis.

Equity in net earnings (loss) of affiliates. Windmere-Durable's equity in
net earnings (loss) of affiliates was $2.3 million and $(0.4) million in 1996
and 1995, respectively. The increase in 1996 primarily reflects the results of
operations of Windmere-Durable's newly acquired interests in Salton and Newtech.
Windmere-Durable's equity in the net earnings of Salton and Newtech totaled $3.2
million for 1996 which was partially offset by losses of $0.9 million at certain
of Windmere-Durable's other affiliates.

Interest expense. Interest expense increased by $0.8 million to $1.4
million in 1996. The increase is due to amounts paid on notes payable issued by
Windmere-Durable in conjunction with the acquisition of equity

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interests in Salton and Newtech as well as the increased level of borrowing
under Windmere-Durable's line of credit facility.

Income taxes (benefits). Windmere-Durable's tax expense is based on the
earnings of each of its foreign and domestic operations and it includes such
additional U.S. taxes as are applicable to the repatriation of foreign earnings.
Foreign earnings, other than in Canada, are generally taxed at rates lower than
in the United States. Windmere-Durable made a provision in its 1995 second
quarter of $0.4 million, or $0.02 per share, as a result of its settlement of a
Hong Kong tax audit.

Extraordinary item. On March 27, 1997, Windmere-Durable paid $4.5 million
to settle the lawsuit filed in April 1994 by Izumi. An accrual of $5.3 million,
including $800,000 in estimated legal expenses has been recorded as of December
31, 1996. The transaction resulted in an after tax charge of $3.5 million or
$0.20 per share and has been recorded as an extraordinary item.

Earnings per share. The average number of common shares and common
equivalent shares used in computing per share results was 17,620,000, in 1996 as
compared to 17,227,000 in 1995. The decrease was primarily due to the
non-inclusion of the dilutive effect of stock options and warrants in those 1996
quarters in which Windmere-Durable sustained losses, offset by the additional
shares issued by Windmere-Durable upon the acquisition of equity interests in
Salton and upon the exercise of stock options and warrants.

BLACK & DECKER HOUSEHOLD PRODUCTS GROUP

The operating results of HPG expressed as a percentage of net sales are set
forth below:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
YEAR ENDED DECEMBER 31, MARCH 30, MARCH 29,
----------------------- --------- ---------
1995 1996 1997 1997 1998
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............................ 70.7 71.6 71.8 72.5 70.6
----- ----- ----- ----- -----
Gross profit.................................. 29.3 28.4 28.2 27.5 29.4
Selling, general and administrative
expenses.................................... 24.7 25.7 26.0 30.2 35.2
Restructuring charge.......................... 0.0 1.1 0.0 0.0 25.1
Operating income (loss)....................... 4.5 1.6 2.2 (2.7) (30.9)
Other expense (income)........................ 0.8 0.4 0.1 0.1 (0.2)
Income taxes (benefit)........................ 1.6 0.8 1.0 (1.2) (5.6)
----- ----- ----- ----- -----
Net earnings (loss)........................... 2.2% 0.3% 1.1% (1.6)% (25.1)%
===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED MARCH 29, 1998 COMPARED TO THREE MONTHS ENDED MARCH 30,
1997

Net sales. Net sales decreased by $3.6 million or 5.5%, to $61.8 million
for the three months ended March 29, 1998 from $65.4 for the three months ended
March 30, 1997. Strategic price decreases with respect to certain sourced food
preparation and cooking products as well as price concessions given to a
significant customer in Mexico accounted for the decrease. In addition, HPG's KT
Kitchentools(TM) line was late in launching new products due to production
delays at a third party source. HPG expects these items to similarly impact net
sales for the second quarter of 1998.

Gross profit. Gross profit increased by $0.2 million or 1.0% for the three
months ended March 29, 1998 from the three months ended March 30, 1997 as a
result of a change in product mix. Net sales volume decreases resulting from
product exit strategies contributed to the decrease. HPG expects such items to
similarly impact gross profit for the second quarter of 1998.

Selling, general and administrative. Selling, general and administrative
expenses increased by $2.0 million for the three months ended March 29, 1998
from the three months ended March 30, 1997. Expenses represented 35.2% and
30.2%, of 1998 and 1997 first quarter net sales, respectively. The increase in
costs is

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<PAGE> 45

primarily the result of the KT Kitchentools(TM) product line, which experienced
a higher than average level of sales promotion costs.

Restructuring charge. HPG had a restructuring charge of $15.5 million for
the three months ended March 29, 1998 due to costs associated with the HPG
Restructuring Program. See "-- Overview."

Other expenses. Other expenses decreased by $0.2 million in the three
months ended March 29, 1998 from the three months ended March 30, 1997.

Income taxes (benefit). Income tax benefit increased by $2.6 million, to
$3.4 million in the three months ended March 29, 1998 from $0.8 million for the
three months ended March 30, 1997. The increase was primarily attributable to a
higher pre-tax loss offset by the effects of management's decision that portions
of the tax benefit of the restructuring charge recognized during the quarter in
connection with the HPG Restructuring Program were unlikely to be realized.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Net sales. Net sales decreased by $9.5 million or 2.3%, to $402.9 million
for the year ended December 31, 1997 from $412.4 million for the year ended
December 31, 1996. HPG's decision to exit several product categories in the U.S.
and Canada as part of an overall strategy to improve profitability was the
primary contributor to a decrease in sales of $18.4 million. This decrease was
partially offset by the introduction of HPG's KT Kitchentools(TM) premium line
of food preparation products and an $11.6 million increase in sales to Latin
America, which includes all four HPG branded product categories. The increase in
Latin American sales is primarily attributable to sales in Mexico as well as the
continuing strength in the other Latin American markets where HPG does business.

Gross profit. Gross profit decreased by $3.8 million or 3.2% for the year
ended December 31, 1997 from the year ended December 31, 1996 while remaining
relatively constant as a percentage of sales in 1997 as compared to 1996. Higher
prices in Latin American sales were partially offset by the lowering of prices
on certain exited products in the food preparation categories in North America.

Selling, general and administrative. Selling, general and administrative
expenses decreased by $1.4 million, from $106.1 million for the year ended
December 31, 1996 to $104.7 million for the year ended December 31, 1997. The
decrease in selling, general and administrative expenses reflects overall
improvements in operations including (i) a reduction in national advertising
costs in North America as emphasis was shifted away from certain products, (ii)
a more effective management of transportation costs and (iii) a restructuring of
sales compensation.

Other expenses. Other expenses decreased by $1.1 million in the year ended
December 31, 1997 from the year ended December 31, 1996 due to fewer sales by
The Black & Decker Corporation of HPG's receivables.

Income taxes (benefit). Income tax expenses increased by $0.6 million, to
$3.9 million for the year ended December 31, 1997 from $3.3 million for the year
ended December 31, 1996. The increase was primarily due to a higher pre-tax
income.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Net sales. Net sales decreased by $33.3 million or 7.5% from $445.7
million for the year ended December 31, 1995 to $412.4 million for the year
ended December 31, 1996. Net sales in the food preparation category declined
$18.5 million, as increased low cost competition from both brand name and
private label manufacturers entered the market. HPG also began the initial
stages of its exit strategy in counter-top coffee makers, bread makers and
personal care products, resulting in a $6.5 million decrease in sales.

Gross profit. Gross profit decreased by $13.2 million or 10.1% from $130.4
million for the year ended December 31, 1995 to $117.3 million for the year
ended December 31, 1996. Gross profit as a percentage of sales decreased from
29.3% to 28.4%. The majority of the decrease resulted from a lowering of prices
as part of

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<PAGE> 46

a strategy to remain cost competitive and to exit specific product categories in
North America. Margins in Latin America remained relatively constant.

Selling, general and administrative. Selling, general and administrative
expenses decreased by $4.1 million from 1995 to 1996. Expenses increased as a
percentage of net sales from 24.7% in 1995 to 25.7% in 1996. Lower spending
costs in national advertising and trade promotion and reductions in general
product development and marketing costs in North America were partially offset
by increased spending to support a higher sales base in Latin America.

Other expenses. Other expenses decreased by $1.8 million, from $3.5
million for the year ended December 31, 1995 to $1.7 million for the year ended
December 31, 1996. The decrease in other expenses was due to fewer sales by The
Black & Decker Corporation of HPG's receivables.

Income taxes (benefit). Income tax expense decreased by $3.7 million, from
$7.0 million in the year ended December 31, 1995 to $3.3 million in the year
ended December 31, 1996 due to a reduction in pre-tax income.

PRO FORMA LIQUIDITY AND CAPITAL RESOURCES

Upon consummation of the Transactions, the Company's primary sources of
liquidity will be cash flow from operations and borrowings under the Senior
Credit Facilities. Approximately $167.2 million in principal amount under the
Senior Credit Facilities will remain outstanding after completion of the
Offerings, and approximately $157.8 million will be available for future
borrowings under the Senior Secured Revolving Credit Facility. Advances under
the Senior Secured Revolving Credit Facility will be based upon percentages of
outstanding eligible accounts receivable and inventories. The Company will be
entering its peak manufacturing season immediately subsequent to the
consummation of the HPG Acquisition and expects to borrow additional amounts
under the Senior Secured Revolving Credit Facility in order to meet its working
capital requirements. See "Use of Proceeds" and "Description of Certain
Indebtedness -- Senior Credit Facilities."

Under the Senior Secured Revolving Credit Facility, the Company may elect
to borrow at either LIBOR (adjusted for any reserves) or the Base Rate (as
defined). Interest will accrue on the Senior Secured Revolving Credit Facility
and the Tranche A Term Loan at either LIBOR (adjusted for any reserves) plus a
specified margin which will be determined by the leverage ratio of the Company
and its subsidiaries that initially will be set at 2.50%, or the Base Rate, plus
a specified margin of 1.50%. Interest will accrue on the Tranche B Term Loan and
the Tranche C Term Loan at either LIBOR (adjusted for any reserves) plus a
specified margin which will be determined by the leverage ratio of the Company
and its subsidiaries that initially will be set at 3.00%, or the Base Rate plus
a specified margin of 2.00%. See "Description of Certain Indebtedness -- Senior
Credit Facilities."

The Senior Credit Facilities contain a number of significant covenants
that, among other things, restrict the ability of the Company to dispose of
assets, incur additional indebtedness, prepay other indebtedness, pay dividends,
repurchase or redeem capital stock, enter into certain investments or create new
subsidiaries, enter into sale and lease-back transactions, make certain
acquisitions, engage in mergers or consolidations, create liens, or engage in
certain transactions with affiliates, and that will otherwise restrict corporate
and business activities. In addition, under the Senior Credit Facilities, the
Company is required to comply with specified financial ratios and tests,
including a minimum net worth test, a fixed charge coverage ratio, an interest
coverage ratio, a leverage ratio and a minimum EBITDA requirement. See
"Description of Certain Indebtedness -- Senior Credit Facilities."

Concurrently with the Common Stock Offering, the Company is publicly
offering $125.0 million in aggregate principal amount of its % Senior
Subordinated Notes due 2008. The Notes will be general unsecured obligations of
the Company, will rank subordinate in right of payment to all Senior Debt of the
Company and will rank senior or pari passu in right of payment to all future
subordinated indebtedness of the Company. For certain additional terms of the
Notes, and for certain terms of the Indenture, see "Description of Certain
Indebtedness -- % Senior Subordinated Notes due 2008."

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Windmere-Durable's aggregate capital expenditures for 1996, 1997 and the
three months ended March 31, 1998 were $8.6 million, $11.3 million and $2.7
million, respectively. The capital expenditures for the Black & Decker Household
Products Group for 1996, 1997 and the three months ended March 29, 1998 were
$22.3 million, $16.9 million and $1.9 million, respectively. The Company
anticipates that the total capital expenditures for 1998 and for 1999 will be
approximately $28.0 million and $29.0 million, respectively which include
approximately $2.0 million in each of those years for the expansion of Durable's
manufacturing facilities. The Company plans to fund those capital expenditures
from cash flow from operations and, if necessary, borrowings under the Senior
Secured Revolving Credit Facility.

On a pro forma basis, for the twelve months ended March 31, 1998, the
Company's cash used in operations would have been $1.0 million; cash used for
investing activities would have been $37.8 million; cash generated by financing
activities would have been $32.1 million; and the ratio of earnings to fixed
charges would have been 1.0x.

As a result of the HPG Acquisition and related financings, Salton has the
right to demand payment of $10,847,620 principal amount and accrued interest
from the Company under a promissory note by the Company. The Company believes
that it has adequate capital resources from the proceeds of borrowings under the
Senior Secured Revolving Credit Facility to satisfy such indebtedness in full.

The Company's ability to make scheduled payments of principal of, or to pay
the interest on, or to refinance, its indebtedness (including the Notes), or to
fund planned capital expenditures, product research and development expenses and
marketing expenses will depend on its future performance, which, to a certain
extent, is subject to general economic, financial, competitive, legislative,
regulatory, and international and United States domestic political factors and
other factors that are beyond the Company's control. Based upon the current
level of operations and anticipated cost savings and revenue growth, management
believes that cash flow from operations and available cash, together with
available borrowings under the Senior Credit Facilities, will be adequate to
meet the Company's future liquidity needs for at least the next several years.
The Company may, however, need to refinance all or a portion of the principal of
the Notes on or prior to maturity. There can be no assurance that the Company's
business will generate sufficient cash flow from operations, that anticipated
revenue growth and operating improvements will be realized or that future
borrowings will be available under the Senior Credit Facilities in an amount
sufficient to enable the Company to service its indebtedness, including the
Notes, or to fund its other liquidity needs. In addition, there can be no
assurance that the Company will be able to effect any such refinancing on
commercially reasonable terms or at all. The Indenture contains restrictions on
the Subsidiary Guarantors' ability to pay dividends to the Company. See "Risk
Factors -- Effects of Leverage."

CURRENCY MATTERS

The Company uses forward exchange contracts to reduce fluctuations in
foreign currency, cash flows related to third party raw material and other
operating purchases. The terms of the currency instruments used are generally
consistent with the timing of the committed or anticipated transactions being
hedged. The purpose of the Company's foreign currency management activity is to
protect the Company from the risk that eventual cash flows from foreign currency
denominated transactions may be adversely affected by changes in exchange rates.
At March 31, 1998, Windmere-Durable had outstanding $23.0 million in contracts
to purchase Hong Kong dollars forward. A deposit of $500,000 is held by the
issuer as collateral on the contracts. There is no significant unrealized gain
or loss on these contracts. All contracts have terms of six months or less.

Upon approval of the MFCC, the Company will acquire the Queretaro property
and related assets from The Black & Decker Corporation. However, pending such
approval, the Company will purchase from The Black and Decker Corporation
products manufactured at the Queretaro facility under the terms of the
Manufacturing Agreement. Because the operations of such facilities are primarily
peso-denominated and the revenues derived from products manufactured at such
facilities are primarily dollar-denominated, the Company is subject to currency
fluctuations while operating under the Manufacturing Agreement as well as

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when, and if, the Company completes the acquisition of the Queretaro property.
The December 1994 devaluation of the peso had a number of effects on the Mexican
economy that adversely affected the financial condition of businesses in Mexico.
The devaluation caused the peso value of dollar-denominated indebtedness
associated with businesses in Mexico to increase significantly, and also greatly
increased the rate of inflation, resulting in a sharp rise in nominal interest
rates on peso-denominated financing. There can be no assurance that the peso to
dollar foreign exchange rate will not be volatile in the future and that
financial markets will not have a material adverse effect on the Company's
business, financial condition and results of operations. See "Risk
Factors -- Currency Fluctuations."

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued Statement of Financial Accounting Standard
No. 130 (SFAS 130), "Reporting Comprehensive Income," and No. 131 (SFAS 131),
"Disclosures About Segments of an Enterprise and Related Information." These
statements are effective for fiscal years commencing after December 15, 1997.
The Company will be required to comply with the provisions of these statements
in 1998. The Company has not assessed the effect that these new standards will
have on its consolidated financial statements and/or disclosures.

SEASONALITY

YEAR 2000 ISSUES

The Company uses a significant number of computer software programs and
operating systems across its entire organization, including applications used in
financial business systems, manufacturing, and various administrative functions.
To the extent that the Company's software applications contain source code that
is unable to appropriately interpret the upcoming calendar year 2000 and beyond,
modification or replacement of such applications will be necessary. The Company
has initiated a review of its computer systems and programs to identify those
that are not Year 2000 compliant. Key systems and programs, including those that
interact with customers and suppliers, are being assessed and plans are being
developed to address and implement required system and program modifications by
December 31, 1999. The Company also has begun to address whether significant
customers and suppliers may have Year 2000 compliance issues which will affect
their interaction with the Company. In addition, as part of its integration
activities related to the HPG Acquisition, the Company will extend its
assessment of key systems and programs to those used in the Black & Decker
Household Products Group. The cost of implementing required system changes is
not expected to be material to the Company's consolidated financial statements.
No assurance can be given, however, that all of the Company's systems, the
systems of acquired businesses, and those of significant customers and
suppliers, will be Year 2000 compliant and that the failure to achieve Year 2000
compliance will not have a material adverse effect on the Company's operations.
See "Risk Factors -- Risks Relating to Year 2000."

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INDUSTRY OVERVIEW

According to Appliance magazine, the U.S. appliance industry includes nine
major product segments: consumer electronics, electric housewares (including
kitchen appliances), business appliances, personal care appliances, major
appliances, comfort conditioning (including seasonal) appliances, outdoor
appliances, floor care appliances and commercial appliances. The Company focuses
primarily on the small household appliance segments of this industry, which
largely overlap with the electric houseware, personal care appliance, and
comfort conditioning appliance markets. The total market size for the U.S.
domestic small appliance market (electric housewares and fans and household
vacuum cleaners) was estimated to be approximately $6.3 billion in 1997
according to the sixth annual Small Appliance Outlook by the Commercial Services
division of The CIT Group.

The small household appliance industry can be characterized as mature,
fragmented and highly competitive. Competition within this industry is primarily
based on price and quality. Given this competitive environment, manufacturers
seek to establish low-cost manufacturing infrastructure and operations. Other
important characteristics of the industry include cyclicality and seasonality.
The highest industry volume is typically during the second half of the year.

The small household appliance industry has been consolidating. The Company
believes that the search for large-scale efficiencies in manufacturing, product
development, and marketing has driven this trend. In addition, the Company
expects that retailers will continue to seek to rationalize their supplier bases
by dealing primarily with companies that can offer a wide array of products and
higher levels of customer service. The combination of demanding retailer
customer service requirements and intense competition for shelf space has
increased pressure on small, narrowly focused competitors. The Company believes
that the industry consolidation will continue in the next few years with the
Company being well-positioned to be a market leader in this operating
environment.

Mass merchandisers are the most important distribution channel for
household appliances. The mass merchandiser channel is concentrated, with three
retailers (Wal-Mart, Kmart and Target) accounting for a substantial portion of
total industry volume. Retail consolidation has increased the importance of
meeting the demanding service requirements of these mass merchandisers.
Department stores are an important distribution channel for manufacturers of
premium household appliances. Department stores have eliminated most of the
shelf space previously devoted to low and middle-range competitors. Several
high-end competitors of the Company have experienced very limited volume growth
and reduced access to shelf space in the department store channel and
consequently have shifted into the mass merchandiser channel. This crossing of
channel boundaries by competitors has offered the Black & Decker Household
Products Group an opportunity to renew its relationships with department stores
by offering a new line of kitchen appliances and assuming additional shelf space
vacated by these competitors. Low-cost overseas manufacturers, like Durable,
have become a viable alternative for sourcing product as cost competitiveness
has become increasingly important.

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BUSINESS

GENERAL

The Company operates manufacturing facilities in the PRC and the United
States, and sources products from manufacturing facilities in Mexico, which it
has contracted to acquire upon receipt of certain Mexican governmental approval.
In 1997, approximately 85-90% of Windmere-Durable's products were manufactured
by Durable, its wholly-owned Hong Kong subsidiary, in Bao An County, Guangdong
Province of the PRC, which is approximately 60 miles northwest of central Hong
Kong. Durable's facilities include six manufacturing plants located within a six
square mile radius, constituting approximately two million square feet of
production capability and employing over 12,000 workers. Durable is a vertically
integrated manufacturing operation, with the capacity and expertise to handle
all phases of product manufacturing, from design to component manufacturing
through final assembly. The Company plans to leverage its efficient, low-cost
manufacturing capabilities to generate increased sales and profits.

The Company also owns a 50% equity interest in both Salton, a
publicly-traded company, and Newtech. Salton designs and markets small kitchen
appliances for distribution primarily to department stores and upscale mass
merchandisers. Newtech designs, sources, manufactures and markets value-priced
brand name consumer electronic products for distribution to mass merchandisers
and other retailers. Salton and Newtech have each entered into seven-year
contracts with Kmart, covering sales estimated to be an aggregate minimum of
$1.7 billion, to supply to Kmart certain small appliances, consumer electronics
and telephone products that bear the White-Westinghouse(R) brand name licensed
to Salton and Newtech by WCI. The Company manufactures and sells kitchen
appliances to Salton for sale under Salton's Kmart Agreement and also earns fees
on all sales to Kmart under Salton's Kmart Agreement. By virtue of its 50%
equity ownership in each of Salton and Newtech, the Company also recognizes 50%
of the net earnings/losses of each of these companies. On June 26, 1998, Salton
announced its intention to acquire the Company's 50% equity interest in Salton.

On a pro forma basis after giving effect to the HPG Acquisition, the
Company would have generated net sales of $664.8 million, EBITDA of $68.1
million, and net earnings of $12.2 million, for fiscal 1997. On a pro forma
basis, the Company's product revenue mix for 1997 would have been approximately
71% electric housewares, 19% personal care, 2% LitterMaid(R), and 8% other
products. See "Unaudited Pro Forma Combined Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

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COMPETITIVE STRENGTHS

The Company believes that it is a strong competitor in the industry for the
following reasons:

HIGH VOLUME, LOW-COST MANUFACTURING CAPABILITIES. The Company's products
are manufactured primarily at the Company's facilities in the PRC and the United
States, and The Black & Decker Corporation's manufacturing facilities in Mexico,
which it has contracted to acquire upon the receipt of certain Mexican
governmental approval. Prior to the HPG Acquisition, 85-90% of
Windmere-Durable's products were manufactured at Durable's plant in the PRC.
Durable is a vertically integrated manufacturing operation, with the capacity
and expertise to handle all phases of product manufacturing, from design to
component manufacturing to final assembly. Durable manufactured over 24 million
finished goods units and millions of additional components in 1997. The Company
believes that its high volume, vertically integrated manufacturing capabilities
provide the Company flexibility and cost advantages.

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portion of which are manufactured by the Company) to Kmart. The acquisition of
the Black & Decker Household Products Group represents the latest alliance the
Company has forged.

BUSINESS STRATEGY

The Company has combined top brand names and a reputation for quality and
innovation with its efficient, low-cost vertically integrated manufacturing
capabilities. The Company expects to continue to achieve growth and increased
profitability by pursuing the following strategies:

LEVERAGE MANUFACTURING CAPABILITIES. The Company intends to manufacture
component parts as well as certain small household appliances that historically
were outsourced by the Black & Decker Household Products Group. In addition, the
Company intends to take advantage of its capabilities as a multinational
manufacturer to reduce operating costs and increase productivity. The Company
estimates that such leveraging of its manufacturing strengths will generate at
least $15.0 million in aggregate annual cost savings in 1999 and $40.0 million
to $50.0 million in such cost savings by the end of the year 2001. Such
anticipated cost savings are in addition to the HPG cost savings discussed in
"Unaudited Pro Forma Combined Financial Information" and the savings anticipated
under the Company's Repositioning Program (as defined). See "Risk
Factors -- Risks Associated with Integration of the Black & Decker Household
Products Group," "-- Risks Associated with the Company's Repositioning Program"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

PRODUCTS

With the acquisition of the Black & Decker Household Products Group, the
Company became a leading supplier of brand name small electric housewares in the
United States, primarily cooking (toaster ovens), garment care (hand-held
irons), food preparation, and beverage products. The Company provides customers
in the small household appliances market with a broad product line at
introductory, mid-tier, and premium price points in key product categories.

ELECTRIC HOUSEWARES

The Company's products in this category include toaster ovens, toasters,
hand-held irons, blenders, can openers, coffee grinders/makers, electric knives,
food choppers, mixers, popcorn poppers, rice cookers/steamers, sandwich makers
and other similar products. This division constitutes the largest product
category for the Company, constituting approximately 71% of the Company's net
sales for 1997 on a pro forma basis. Growth in this category has historically
been driven primarily by growth of licensed product lines, the
White-Westinghouse(R) product line and a private-label expansion program. With
the acquisition of the Black & Decker Household Products Group, the Company
significantly enhanced its market position in this segment.

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The Company holds the number one United States market position in toaster
ovens with an approximately 56% share in 1997, more than four times that of its
closest competitor. As part of the HPG Acquisition, the Company purchased the
Toast 'R Oven(TM) subbrand and will continue to market toaster ovens under that
name. The KT Kitchentools(TM) product line, which includes a full line of
high-end mixers, food processors and blenders, is positioned at the high end of
the premium brand spectrum for its product category. The Company believes that
it also occupies a top market position in coffee makers and espresso machines,
with approximately 8% of the United States market share in 1996. The Company's
key product in this segment is the Spacemaker(R) product, which competes in the
under-the-counter coffee maker segment. The Company also offers a broad product
line consisting of personal coffee makers, thermal carafes, coffee makers,
kettles and various accessories. The Company's future strategy includes
leveraging the Spacemaker(R) brand to extend in-category offerings, growing its
personal coffee maker business, and expanding into other kitchen products. In
addition, the Company will focus on products that offer unique customer value
such as espresso/cappuccino makers, innovative microwave coffee makers, and
personal coffee makers.

With the acquisition of the Black & Decker Household Products Group, the
Company acquired a product line with the number one United States market share
in irons, with approximately a 36% share of the U.S. market in 1997. Brand names
include Quick N' Easy(R), Surge(R) and TravelPro(TM). For the past four decades,
the Black & Decker Household Products Group has been a leading innovator in the
category, offering such new features as automatic on/off switches, high quality
soleplates and advanced steam controls. Such innovations have revitalized demand
for irons over the years.

The Company's strategy with respect to the garment care business includes
lowering production and sourcing costs and improving the profitability of its
sales mix by increasing its presence in high-end segments. The introduction of
two new products, Quick 'N Easy(R) and ProFinish(R), is anticipated to improve
the Company's offering at price points in both the middle and high-end segments
of the markets.

PERSONAL CARE PRODUCTS

The Company's personal care products include hair dryers, curling irons,
hairsetters, combs and brushes, shears, and mirrors. Higher margin "professional
line" products are sold primarily to beauty salons and beauty supply stores. The
"value line" is targeted at drug stores, mass merchandisers, and other retail
channels. In addition, a subsidiary of the Company supplies electric and
non-electric amenities to the lodging industry. These products include
wall-mounted hair dryers, lighted makeup and shaving mirrors and pulsating
shower heads.

The Company intends to continue to leverage its more than 30 years'
experience of supplying personal care products to both leading retailers and the
professional salon industry. In 1997, personal care products accounted for
approximately 19% of the Company's net sales on a pro forma basis.

LITTERMAID(R)

In order to expand its product line, in March 1996, Windmere-Durable
acquired the rights to LitterMaid(R) for $2.2 million in cash. This transaction
represented Windmere-Durable's entree into the pet care market. The
LitterMaid(R) product is the first computerized, infrared-activated, automated,
self-cleaning cat litter box. The Company anticipates significant growth for
this product, which constituted approximately 2% of the Company's net sales in
1997 on a pro forma basis.

OTHER PRODUCTS

Certain of the Company's other products include fans and heaters. Sales of
other products by the Company accounted for approximately 8% of the Company's
net sales in 1997 on a pro forma basis.

SALES, MARKETING AND DISTRIBUTION

Historically, Windmere-Durable's products have been sold under various
trademarks and registrations, some of which include: Windmere(R), First Class
Gourmet(TM), Solid Gold(TM), VIP Pro(TM), Clothes Shaver(TM),

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Mirror Go Lightly(TM), Jerdon(TM), First Class(TM), LitterMaid(R), Belson(TM),
Comare(TM), and Gold'n Hot(TM). In connection with the HPG Acquisition, the
Company licensed the Black & Decker(R) brand for use in marketing HPG products
in North America, Central America, South America (excluding Brazil), and the
Caribbean. In addition, the Company purchased important subbrands, including
Toast 'R Oven(TM), ProFinish(R), Quick 'N Easy(R), Spacemaker(R), and KT
Kitchentools(TM). The Company also manufactures and markets products under other
owned and licensed brand names and under private-label brand names. The Company
will also continue to manufacture components on an OEM basis for other major
consumer products companies.

The Company's products are sold principally by independent sales
representatives. The Company utilizes media advertising, cooperative advertising
and collateral materials to promote its products. In the U.S., the Company
wholesales its line of consumer products nationwide to retailers, including mass
merchandisers, department stores, drug chains, catalog stores and discount and
variety stores. The Company also markets its consumer and professional salon
appliances and a wide variety of brushes and other hair care accessories to
beauticians, barbers and stylists through distributors. In addition, certain
items, including the Company's hair dryers, curling irons and other personal
care appliances, are sold through professional beauty and barber retail store
outlets. Finally, through the Company's subsidiary, Jerdon Products, Inc., the
Company sells electric and non-electric amenities to the lodging industry and
large specialty retailers. A separate sales and marketing organization has been
established to sell the Company's LitterMaid(R) product. A staggered
distribution strategy is being implemented that begins with an "infomercial"
format and moves through other premium channels, and eventually leads to
distribution through mass merchandisers.

The Company intends to utilize the marketing and distribution channels
acquired through the HPG Acquisition to expand the global market penetration of
all of its products, particularly in Latin America. As a result of the HPG
Acquisition, the Company has acquired the leading market share in irons, and a
smaller market presence in the blender category, in Argentina, Colombia,
Ecuador, Puerto Rico, Venezuela, Chile, Mexico and the Caribbean. In addition to
targeting mass merchandisers, wholesalers, warehouse clubs and government
institutions in Latin America, the Company intends to pursue alternative
channels of distribution in Latin America which it believes will continue to be
important sources of sales. On a pro forma basis after giving effect to the HPG
Acquisition, the Company's international sales would have been $218.9 million in
1997, as compared to $82.1 million in international sales for Windmere-Durable
alone in 1997.

The Company intends to increase its market share by offering new products,
building upon existing offerings of its introductory price point products under
various owned and licensed brands and premium products under the Black &
Decker(R) brand name and certain other brand names purchased from The Black &
Decker Corporation. In pursuing this strategy, the Company will develop and
introduce new products at price points where neither it nor the Black & Decker
Household Products Group currently competes and will utilize its low-cost
manufacturing capabilities to reenter certain markets from which the Black &
Decker Household Products Group exited. The Company believes this strategy will
be attractive to its customers by offering them a broader spectrum of products
from a single source.

CUSTOMERS

The Company's customers for its products include mass merchandisers,
specialty retailers and appliance distributors in North America, Latin America,
Europe and the Caribbean. In addition, the Company manufactures products on an
OEM basis for other major consumer products companies. On a pro forma basis,
after giving effect to the Transactions, Wal-Mart and Kmart would have accounted
for approximately 14% and 6%, respectively, of the Company's 1997 net sales, and
the top ten customers of the Company would have accounted for approximately 44%
of the Company's 1997 net sales.

INTERESTS IN AFFILIATES

The Company's principal investments are its equity interests in Salton and
Newtech.

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SALTON

In July 1996, Windmere-Durable acquired a 50% equity interest in Salton for
approximately $20.0 million. Salton uses the Company and various other
independent manufacturers (located primarily overseas) to market a broad range
of kitchen and home appliances, personal and beauty care appliances and
decorative quartz wall and alarm clocks under a variety of brand names. The
kitchen and home appliances currently marketed by Salton include
espresso/cappuccino makers, waffle makers, rice cookers, coffee makers, sandwich
makers, toasters and bread baking machines. Salton's personal and beauty care
appliances include hair dryers, shower radios, shavers, curling irons, makeup
mirrors, massagers, manicure systems and facial saunas. The Salton and Maxim
brand names are well-established with consumers (introduced in the 1940s and
1970s, respectively) and are targeted at the mid to premium markets,
respectively. Salton was Windmere-Durable's largest customer in 1997 and
represented $31.0 million of Windmere-Durable's 1997 net sales.

The Company and Salton entered into the Stock Agreement, dated as of May 6,
1998, pursuant to which the Company granted Salton the right to purchase the
Company's 6,535,072 shares of Salton's common stock for $12.0 per share in cash
and a six and one-half year, $15.0 million subordinated promissory note bearing
interest at 4.0% per annum, the principal amount of which is reduced by 5.0% of
the total amount paid by Salton for products purchased from the Company and its
affiliates during the term of the note. On June 26, 1998, Salton announced that
it has elected to exercise its option to acquire the Company's 50% equity
interest in Salton. If Salton fails to close such purchase on or prior to
October 30, 1998, the Company has the right to acquire all of the shares of
Salton's common stock that it does not currently own in a tender offer and/or
merger for $14.27 per share in cash or in registered shares of Company Common
Stock.

NEWTECH

The Company has an approximately 50% equity interest in Newtech. Newtech,
established in 1990, designs, sources, manufactures, and markets high-quality,
value-priced brand-name consumer electronic products. Newtech offers a broad
line of audio, video and telecommunications products and selected home
appliances, including televisions, video cassette players and recorders
("VCRs"), home audio systems, compact disc ("CD") players, cassette players,
telephones and portable microwave ovens. By having a portfolio of brand names,
Newtech is able to offer retailers proprietary and flexible merchandising
programs. Newtech currently sells its products to 15 retailers which operate
over 14,000 retail outlets in the United States and Canada, including mass
merchandisers such as Kmart and Wal-Mart and other retailers, including Rite-Aid
Corporation, Zellers Inc. and Ames Department Stores, Inc. In addition, Newtech
sells its products to customers in Mexico, the Caribbean and Central and South
America.

KMART AGREEMENTS

In January 1997, Salton and Newtech entered into the Kmart Agreements for
Kmart to purchase, distribute, market and sell certain products under the
White-Westinghouse(R) brand name licensed to Salton and Newtech by WCI. Under
the terms of the Kmart Agreements, Salton and Newtech will supply Kmart, either
through the Company or through other manufacturers, with a broad range of small
electrical appliances, consumer electronics and telephone products under the
White-Westinghouse(R) brand name. Kmart will be the exclusive U.S. discount
department store to market these White-Westinghouse(R) products. The Kmart
Agreements provide Kmart sole distribution rights to the White-Westinghouse(R)
brand name for the mass merchandiser market, but does allow distribution through
other retail channels under certain conditions. During 1997, Kmart purchased
approximately $214.0 million of merchandise from Salton and Newtech pursuant to
the Kmart Agreements, which accounted for approximately 22% and 76%,
respectively, of their net sales. The Company has entered into an agreement
guaranteeing the performance of Salton and Newtech under the Kmart Agreements.

The Kmart Agreements provide for minimum purchases by Kmart, which increase
through their terms, and for the payment of penalties for shortfalls. In the
event that aggregate U.S. retail sales in the consumer electronics industry for
any specified category decrease by more than 10% in any year from that sold in
the prior year, Kmart has the right to reduce the minimum purchase requirements
for such category to an amount

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not less than 80% of the minimum for such period. Kmart further has the right to
procure the manufacture of products from other manufacturers under the
White-Westinghouse(R) brand name through Salton and Newtech, which procurements
count towards its minimum purchase requirements. In such cases, Kmart has the
option of paying the purchase price to the third-party manufacturers directly or
making such payment to Salton or Newtech, in which case Salton or Newtech pays
the third-party manufacturer. In the event that Kmart fails to pay the
third-party manufacturer, Salton or Newtech must make payment.

The initial term of the Kmart Agreements is through June 30, 2004; however,
such agreements allow for termination prior to such time for specified reasons,
including (i) in the case of Salton, the termination of Newtech's Kmart
Agreement, (ii) in the case of Newtech, the termination of Salton's Kmart
Agreement, and (iii) without cause after June 30, 2003, by giving advance
written notice. Kmart also has the right to terminate the Kmart Agreements on
the basis of any claim which Kmart reasonably believes impairs or would impair
Kmart's ability to receive the benefits of the Kmart Agreements, whether
relating to any or all products. In the Trademark Litigation, CBS seeks, among
other things, a preliminary injunction enjoining Salton, Newtech, the Company
and WCI from using the White-Westinghouse name in connection with the sale of
certain products. Although the Trademark Litigation was pending prior to the
execution of the Kmart Agreements, it is possible that the Trademark Litigation
may be viewed by Kmart as a claim which Kmart reasonably believes impairs or
would impair its ability to receive the benefits of the Kmart Agreements. See
"-- Legal Proceedings" and "Risk Factors -- Dependence on Kmart Agreements."

MANUFACTURING, RAW MATERIALS AND IMPORTS

The Company's products are manufactured primarily at the Company's
facilities in the PRC and the United States, and The Black & Decker
Corporation's manufacturing facilities in Mexico, which it has contracted to
acquire upon the receipt of certain Mexican governmental approval. Prior to the
HPG Acquisition, approximately 85-90% of Windmere-Durable's products were
manufactured by Durable, its wholly-owned Hong Kong subsidiary, in Bao An
County, Guangdong Province of the PRC, which is approximately 60 miles northwest
of central Hong Kong. Durable's facilities include six manufacturing plants
located within a six square mile radius, constituting approximately two million
square feet of production capability and employing over 12,000 workers. Durable
is a vertically integrated manufacturing operation, with the capacity and
expertise to handle all phases of product manufacturing, from design to
component manufacturing through final assembly. Durable uses computer-aided
design and manufacturing software and up-to-date mold-making machinery to
shorten the time between product conception and final production. In addition,
Durable can produce most components for the Company's electrical appliances.
Durable manufactured over 24 million finished goods units and millions of
additional components in 1997. With this production flexibility, Durable has
become a single source supplier for its OEM and private-label customers. The
Company believes that its high volume, vertically integrated manufacturing
capabilities provide the Company flexibility and cost advantages.

By manufacturing the majority of its own parts and testing at several
points in the manufacturing process, Durable is better able to ensure consistent
quality. Durable's commitment to quality control earned ISO 9002 certification
for its facilities.

The following summarizes the advantages of the Durable facilities:

VERTICAL INTEGRATION. Due to the lack of continuously dependable suppliers
in the PRC in the early 1980s, Durable became and remains today a vertically
integrated operation, manufacturing virtually all components from winding its
own motors, to chrome-plating, to producing metal components. Durable now
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manufactures 55,000 components which comprise 3,000 finished goods. A "make
versus buy" evaluation is applied to every purchase, and management evaluates
the cost effectiveness of labor versus capital. In some instances, when it is
cost effective, Durable builds its own manufacturing equipment and instead of
using fully-automated machines, Durable workers hand-manufacture some
components.

LOW LABOR COST. The Shenzhen area attracts a steady pool of low-cost
labor, creating an ample pool of able-bodied workers. Durable's manufacturing
wages include subsidized housing, free medical care and one meal per day.

EXPERIENCED MANAGEMENT TEAM. Durable's management team is characterized by
both depth and experience. Durable's founder remains involved in the Company,
and its managing director Raymond So, who is responsible for day-to-day
operations, has been with the Company for 11 years. Certain of Durable's heads
of production, administration, and quality control have been with the Company
for over 20 years. See "Management."

OPERATING EXPERIENCE IN THE PRC. The Company's operating experience in the
PRC for nearly 20 years creates a distinct competitive advantage. Durable has
been able to develop important relationships throughout the localities in which
it operates. As more companies begin to source manufacturing in Asia in an
attempt to maximize the benefit of lower labor and manufacturing costs, the
Company has a unique opportunity to capitalize on its experience in the PRC and
leverage the incremental business obtained through the Kmart Agreements and
other opportunities into sales and earnings growth. See "Risk Factors -- Risk of
International Operations."

TECHNOLOGY. Until very recently, most of Durable's management functions
were performed in Hong Kong, but in 1994, Durable was allocated a fiber optic
cable which links its Unix-based information system in the PRC to its
engineering and administrative staff in Hong Kong. Since that time, Durable has
moved the bulk of its management and administrative functions (purchasing,
engineering, accounting, etc.) on-site to Shenzhen. This move has resulted in
significant cost savings by reducing the number of Hong Kong-based
administrative personnel to 190 (down from 700 in 1986). Moreover, the addition
of an HPK-260 mainframe and the installation of MINX manufacturing software have
further streamlined management functions and have made possible the
implementation of a "Just-in-Time" supply delivery system. Durable is also
beginning to reap the benefits of a recently installed CAD/CAM system,
experiencing a drop in the parts inventory from 80,000 to 55,000 parts.

QUALITY ASSURANCE. Each factory complex is set up to operate in a
relatively autonomous manner, supported by its own machine shop, quality
assurance department, and other support functions. Low labor costs allow Durable
to conduct extensive quality assurance. Some production lines have up to five
interim quality assurance checks.

During the term of the Manufacturing Agreement, (i) HPG will continue to
manufacture at the Queretaro property in a manner consistent with the conduct of
business at the Queretaro property immediately prior to the HPG Acquisition,
(ii) the Company will purchase a minimum of 75% of the daily production of
Designated Products (as defined in the Manufacturing Agreement) and related
parts (the "Minimum Purchase Obligations") manufactured at the Queretaro
property and will reimburse HPG for costs and expenses incurred in continuing to
own and operate the Queretaro property in accordance with the Manufacturing
Agreement, (iii) the Company has a right of first refusal to purchase all
production at the Queretaro property in excess of the Minimum Purchase
Obligation, and (iv) HPG and the Company have an option for the Company to
acquire the Queretaro property on the terms and conditions set forth in the

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Manufacturing Agreement. Queretaro currently manufactures products for the
garment care and a portion of the food preparation segments of the Black &
Decker Household Products Group business.

The Company has entered into an operating lease with The Black & Decker
Corporation for the Black & Decker Household Product Group's Manufacturing and
Distribution Facility in Asheboro, North Carolina (the "Asheboro Facility").
Currently, the Asheboro Facility is responsible for manufacturing primarily all
of the Company's Toast 'R Oven(TM) output in addition to producing several Power
Tools products and Cleaning and Lighting products for The Black & Decker
Corporation.

The Company intends to manufacture component parts as well as certain small
household appliances that historically were outsourced by the Black & Decker
Household Products Group. In addition, the Company intends to take advantage of
its capabilities as a multinational manufacturer to reduce operating costs and
increase productivity. The Company estimates that such leveraging of its
manufacturing strengths will generate at least $15.0 million in aggregate annual
cost savings in 1999 and $40.0 million to $50.0 million in cost savings by the
end of the year 2001. See "Risk Factors -- Risks Associated with the Company's
Repositioning Program."

SEASONALITY

The Company's business is highly seasonal, with operating results varying
from quarter to quarter. Both Windmere-Durable and the Black & Decker Household
Products Group have historically experienced higher revenues in the third and
fourth quarters of each fiscal year primarily due to increased demand by
customers for such companies' products in the late summer for "back-to-school"
sales and in the fall for holiday sales. The Company's major sales occur during
August through November. Sales are generally made on 60 to 90 day terms.
Heaviest collections on its open accounts receivable are received from November
through March, at which time the Company is in its most liquid state. See "Risk
Factors -- Seasonality" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

RESEARCH AND DEVELOPMENT

HPG supports research and development through its marketing and research
functions. The marketing function researches both demographics and lifestyle
trends to identify product concepts related to unmet consumer needs. Product
concepts are then expressed in engineering prototypes in the first stage of new
product development. The ability to simplify a task that provides an inherent
benefit to the consumer is a critical focus of this development process.
Research continues as product concepts evolve through interaction with consumer
focus groups. The Company seeks to balance the cost-value relationship of the
new product with methods previously employed to complete the tests performed by
the product. The Company develops and introduces new products and categories
targeted towards capitalizing on emerging consumer trends, such as the
Spacemaker(R) and LitterMaid(R)products. The Company's research and development
efforts have resulted in numerous awards for design and innovation, including
the PartyMate(TM) cordless blender and ExpressoMio(TM) microwave espresso maker.
The Company generally has products in various stages of development.

COMPETITION

The sale of small household appliances is characterized by intense
competition. Competition is based upon price and quality, as well as innovation
in the design of new products and replacement models and in marketing and
distribution approaches. The Company competes with domestic and international
companies, some of which have substantially greater financial and other
resources than those of the Company. The Company believes that its future
success will depend upon its ability to develop and produce reliable products
which incorporate developments in technology and satisfy consumer tastes with
respect to style and design and its ability to market a broad offering of such
products in each applicable category at competitive prices. High-end competitors
in electric housewares that distribute primarily through department stores
include Braun, Rowenta, Kitchen Aid, De Longhi and Cuisinart. Principal
competitors in mass merchandise channels include Sunbeam, Rival, Royal,
Proctor-Silex, Signature Brands, and Ekco. Within the personal care appliances
category, competitors include Conair, Helen of Troy and Remington. See "Risk
Factors -- Competition."

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INTELLECTUAL PROPERTY

Although Windmere-Durable's business historically was not materially
dependent upon patents and patent protection, as a result of the HPG
Acquisition, the Company now manufactures products with features for which the
Company has filed or obtained licenses for patents and design registrations in
the United States and in several foreign countries. The Company also relies on
unpatented proprietary technology. In connection with the HPG Acquisition, the
Company licensed the Black & Decker(R) brand for use in marketing HPG products
in North America, Central America, South America (excluding Brazil), and the
Caribbean under a licensing arrangement. In addition, the Company purchased
important subbrands, including Toast 'R Oven(TM), ProFinish(R), Quick 'N
Easy(R), Spacemaker(R), and KT Kitchentools(TM). The Company believes that its
rights to these names is a significant part of the Company's business and that
its ability to create demand for its products is dependent to a large extent on
its ability to exploit these trademarks. See "Risk Factors -- Dependence on
Trademarks," "-- Patents and Protection of Proprietary Technology" and
"-- Trademark Litigation."

GOVERNMENT REGULATION

In the United States, Latin America, Canada and Europe, most federal,
state, provincial and local authorities require Underwriters Laboratory, Inc. or
other safety regulation certification prior to marketing electrical appliances
in those jurisdictions for the jurisdictions in which such products are
marketed. All of the non-professional salon appliances currently marketed by the
Company have such certifications. The Company endeavors to have most of its
products designed to meet those requirements and to be so certified. Certain of
the products sold by the Company in the United States are also subject to the
cosmetic purity and labeling provisions of the Fair Packaging and Labeling Act.
The Company believes that in addition to complying with the Fair Packaging and
Labeling Act, it complies with the applicable rules and regulations of the
Federal Trade Commission and other federal and state agencies with respect to,
among other things, the content of advertising and other trade practices.
However, a determination that the Company is not in compliance with such rules
and regulations could result in the imposition of fines or an award of damages
to private litigants. See "Risk Factors -- Government Regulation."

ENVIRONMENTAL REGULATION

EMPLOYEES

As of March 31, 1998, on a pro forma basis after giving effect to the HPG
Acquisition, the Company had approximately 16,000 full-time employees. From time
to time, the Company also utilizes the services of seasonal employees. In
connection with the HPG Acquisition, the Company assumed the obligations of
Black & Decker, S.A. de C.V. under a collective bargaining agreement with the
Sindicato Unico de Trabajadores Black & Decker del Estado de Queretaro, C.T.M.
(Single Workers Union of Black & Decker of the State of Queretaro, C.T.M.) (the
"Union") covering approximately 1,650 employees employed at the Company's
manufacturing plant in Queretaro, Mexico (the "Queretaro Collective Bargaining
Agreement"). The Queretaro Collective Bargaining Agreement is subject to
renegotiation with respect to salaries in February 1999, and with respect to
wages and benefits in February 2000. To date, the Union has not engaged in
strikes or work stoppages against the Company. The Company believes that its
relationships with both Union and non-union employees are good.

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PROPERTIES

The following table sets forth the principal operating facilities of the
Company.

<TABLE>
<CAPTION>
APPROX. OWNED/
LOCATION PRINCIPAL USE SQUARE FEET LEASED
- -------- ------------- ----------- ------
<S> <C> <C> <C>
Miami Lakes, Florida Headquarters, general administration and 40,000 Owned
sales office
Downington, Pennsylvania General administration and sales office 2,500 Leased
Richardson, Texas General administration and sales office 3,500 Leased
San Francisco, California General administration and sales office 4,500 Leased
Toronto, Canada General administration and sales office 3,000 Leased
Shelton, Connecticut HPG headquarters, general administration, 170,000 Leased
laboratories and sales office
Asheboro, North Carolina Manufacturing and distribution 325,000 Leased
Shenzhen, China Manufacturing, distribution, warehouse, and 2,000,000 Leased
office
Overland Park, Kansas General administration and sales office 3,000 Leased
Opa Locka, Florida Warehouse 25,000 Leased
Little Rock, Arkansas Warehouse and distribution 560,000 Leased
Miami, Florida Warehouse 35,000 Leased
Miami Lakes, Florida Warehouse and distribution 100,000 Owned
Hong Kong, China Durable headquarters and general 40,000 Leased
administration
</TABLE>

Pursuant to the terms of the HPG Acquisition, the Company will acquire the
Queretaro property, a 270,000 square foot facility, and related assets. HPG
utilizes the Queretaro facility principally for manufacturing, distributing,
warehousing and office space. However the acquisition of the Queretaro Property
cannot be completed without review and approval by the MFCC. Pending such review
and approval, the Company and The Black & Decker Corporation have entered into
the Manufacturing Agreement covering the purchase by the Company of products
manufactured at the Queretaro property. See "-- Manufacturing, Raw Materials and
Imports" and "Risk Factors -- Certain Risks Associated with the Acquisition of
the Queretaro Property."

Pursuant to an interim service agreement with The Black & Decker
Corporation, the Company presently warehouses a significant portion of its
inventory at a facility in Fort Mill, South Carolina. The Company also utilizes
the services of public warehouses located in Reno, Nevada and Memphis, Tennessee
pursuant to short-term contracts. The Company intends to substantially
consolidate the warehousing of its products into its Little Rock, Arkansas
facility in the near future.

The Company believes its current facilities are adequate to meet its needs
in the foreseeable future. If necessary, the Company may, from time to time,
acquire or lease additional facilities in the future for warehousing and/or
other activities.

LEGAL PROCEEDINGS

In November 1996, WCI filed suit for injunctive relief and damages against
CBS in the United States District Court for the Northern District of Ohio
alleging that CBS's grant of licenses to the Westinghouse(TM) name for use on
lighting products, fans and electrical accessories for use in the home violates
WCI's rights to the Westinghouse(TM) name and constitutes a breach of the
agreements under which CBS's predecessor sold WCI its appliance business and
certain trademark rights in 1975. In response to that suit, CBS filed a related
action in December 1996 in the United States District Court for the Western
District of Pennsylvania, naming WCI, Windmere-Durable, Salton, Newtech and
certain other parties as defendants. The two actions have now been consolidated
in the Pennsylvania court. CBS seeks an injunction prohibiting Salton, Newtech
and WCI from using the White-Westinghouse(R) name on products not specifically
enumerated in the transaction documents, and unspecified damages and attorneys'
fees. An adverse decision in the Trademark Litigation could result in Salton and
Newtech being limited in further use of the White-Westinghouse(R) name and in

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termination or significant modification of the Kmart Agreements, any of which
would have a material adverse effect on the Company's business, financial
condition and results of operations.

The legal costs that may be incurred in defending against this action could
be substantial; however, pursuant to an indemnification agreement dated January
23, 1997 by and among WCI, Kmart and Windmere-Durable, WCI is defending and
indemnifying Kmart and the Company for all costs and expenses for claims,
damages and losses, including the costs of litigation. In addition, the
litigation could be protracted and result in diversion of management and other
resources of the Company. There can be no assurance that WCI will prevail in its
lawsuit, or that WCI, the Company and their co-defendants will prevail in their
opposition to CBS's lawsuit. In the event that a favorable outcome for the
Company is not obtained, the Company intends to vigorously pursue its right to
indemnification under the indemnification agreement described above, although
there can be no assurance that the parties to the indemnification agreement will
agree on the scope of the indemnity.

Related proceedings have also been commenced before the Trademark Board of
the United States Patent and Trademark Office in opposition to WCI's and CBS's
efforts to register certain uses of the Westinghouse(TM) and
White-Westinghouse(R) names. Such proceedings have been stayed pending
resolution of the Trademark Litigation in the Pennsylvania court. Even if the
Trademark Litigation is resolved in the Company's favor, it is possible that
these proceedings before the Trademark Board will continue and could have a
material adverse effect upon the Company's business, financial condition and
results of operations. See "Risk Factors -- Trademark Litigation."

The Company is also subject to other legal proceedings, product liability
and other claims which arise in the ordinary course of its business. In the
opinion of management, the amount of ultimate liability, if any, in excess of
applicable insurance coverage, is not likely to have a material adverse effect
on the business, financial condition or results of operations of the Company.
However, the outcome of litigation or other legal claims is difficult to
predict; significant changes in the estimated exposures could occur.

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MANAGEMENT

The names and ages of certain of the executive officers and directors of
the Company, and their positions with the Company and/or its operating
subsidiaries, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David M. Friedson................. 42 Chairman of the Board, President and Chief
Executive Officer of the Company
Michael P. Hoopis................. 46 President and Chief Executive Officer of
Household Products, Inc.
Harry D. Schulman................. 46 President and Chief Operating Officer of Windmere
Corp. and Chief Financial Officer of the
Company
Raymond So........................ 48 Managing Director of Durable and Director of the
Company
William S. Endres................. 49 Senior Vice President -- Sales & Marketing of
Windmere Corp.
Michael J. Michienzi.............. 42 Vice President -- Sales & Marketing of Household
Products, Inc.
Terry L. Polistina................ 35 Senior Vice President -- Finance and
Administration of Windmere Corp. and Director of
Durable
Thomas A. Dollard................. 54 Vice President -- Finance and Chief Financial
Officer of Household Products, Inc.
Robert L. Merrick................. 44 Senior Vice President and Chief Information
Officer of Windmere Corp.
Richard J. Gagliano............... 39 Vice President -- Engineering & Manufacturing of
Household Products, Inc.
Desmond Lai....................... 33 Director of the Company and Director of Durable
Lai Kin........................... 67 Director of the Company and Chairman of Durable
Barbara Friedson Garrett.......... 45 Director of the Company
Arnold Thaler..................... 59 Director of the Company and Director of Durable
Burton A. Honig................... 60 Vice President -- Finance of Windmere Corp.
Cindy R. Solovei.................. 35 Treasurer of the Company
</TABLE>

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

David M. Friedson has served as Chairman of the Board of the Company since
April 1996, Chief Executive Officer of the Company since January 1987 and as
President of the Company since January 1985. Mr. Friedson has served as a
director of the Company since 1982. From June 1976 to January 1985, Mr. Friedson
held various other management positions with the Company.

Michael P. Hoopis has served as President and Chief Executive Officer of
Household Products, Inc., a subsidiary of the Company ("HPI"), since the
acquisition of the Black & Decker Household Products Group on June 26, 1998.
Prior to joining HPI, Mr. Hoopis held various executive positions with The Black
& Decker Corporation from 1989 to June 1998.

Harry D. Schulman has served as President and Chief Operating Officer of
Windmere Corp. since June 1998, and as Chief Financial Officer of the Company
since March 1990. Mr. Schulman served as Senior Vice President of the Company
from February 1996 to June 1998, and as Executive Vice President -- Finance and
Administration of Windmere Corp. from February 1993 to June 1998. From March
1990 to January 1993, Mr. Schulman served as Senior Vice President -- Finance
and Administration of the Company, and from January 1989 to March 1990, he
served as Vice President -- Financial Analysis and Administration of the
Company.

Raymond So has served as Managing Director of Durable since February 1996
and as a Director of the Company since May 1995. Mr. So served as Senior Vice
President of the Company from February 1996 to June 1998. Prior thereto and
beginning in 1986, Mr. So held various senior executive management positions
with Durable.

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William S. Endres joined Windmere Corp. in January 1998 and has served as
Senior Vice President -- Sales & Marketing of Windmere Corp. since June 1998.
From March 1976 to November 1997, Mr. Endres held various positions with The
Rival Company, most recently, as its Senior Vice President -- Sales and
Marketing and a member of its Board of Directors.

Michael J. Michienzi has served as Vice President -- Sales & Marketing of
HPI since June 1998. From 1996 to June 1998, Mr. Michienzi served as HPG's Vice
President of North American Sales, Marketing, and Customer Service. Mr.
Michienzi joined The Black & Decker Corporation in 1987 as director of sales for
national accounts and new products for the Black & Decker Household Products
Group. He then went on to become the vice president of sales for the US Power
Tools division. Mr. Michienzi began his career at Phillip Morris in 1978 where
he held various sales positions until 1986.

Terry L. Polistina has served as Senior Vice President -- Finance and
Administration of Windmere Corp. and as a Director of Durable since June 1998.
Mr. Polistina served as Controller of the Company from December 1995 to June
1998, as Assistant Controller from April 1992 to December 1995, and as Manager
of Financial Planning from 1989 to April 1992.

Thomas A. Dollard has served as Vice President -- Finance and Chief
Financial Officer of HPI since June 1998. From 1990 to June 1998, Mr. Dollard
served as HPG's Vice President of Finance. Mr. Dollard began his career with
General Electric, working in various Financial, General Management and Senior
Financial Management positions at GE Appliance, GE Corporate (Auditor), GE
Medical and finally Vice President -- Finance for Supply, the position he held
prior to joining The Black & Decker Corporation.

Robert L. Merrick has served as Senior Vice President and Chief Information
Officer of Windmere Corp. since June 1998. Mr. Merrick served as Vice President
of Management Information Systems from January 1994 to June 1998. From September
1988 to January 1994, Mr. Merrick served as Director of Management Information
Systems. From January 1981 to September 1998, he served as Manager of Data
Processing.

Richard J. Gagliano has served as Vice President -- Engineering &
Manufacturing of HPI since June 1998. From 1997 to June 1998, Mr. Gagliano
served as Vice President, Operations and Engineering of HPG. From 1995 to 1997,
he served as Vice President of Operations of the Price Pfister Group of The
Black & Decker Corporation, and from 1994 to 1995, as Director of Manufacturing.
Prior to that time, Mr. Gagliano served in various positions with Eaton
Corporation for 14 years.

Desmond Lai has been a Director of the Company since February 1996 and a
Director of Durable since March 1993. Mr. Lai has held various senior management
positions with Durable for more than the last five years.

Lai Kin has been a Director of the Company since 1989 and Chairman of
Durable since May 1995. From 1973 to 1995, Mr. Lai was Managing Director of
Durable. In addition, Mr. Lai has been Managing Director of Ourimbah Investment,
Limited, a holding and investment company, since 1989.

Barbara Friedson Garrett has served as a Director of the Company since
1984. Ms. Garrett served as Senior Vice President of the Company from February
1996 to June 1998, and as Executive Vice President -- Sales and Marketing of
Windmere Corp. from December 1988 to June 1998. Prior to that time, Ms. Garrett
held various other management positions with the Company.

Arnold Thaler has served as a Director of the Company and a Director of
Durable since February 1996. Mr. Thaler served as Senior Vice President of the
Company from February 1996 to June 1998. Mr. Thaler also served as Executive
Vice President -- Product Development, Engineering and Manufacturing of the
Company from December 1988 to February 1996. Prior thereto, Mr. Thaler held
various other management positions with the Company.

Burton A. Honig has served as Vice President -- Finance of Windmere Corp.
since December 1982. Mr. Honig also served as Treasurer of Windmere Corp. from
March 1987 to March 1992 and from August 1981 to December 1982. Mr. Honig is a
Certified Public Accountant.

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Cindy R. Solovei has served as Treasurer of the Company since June 1998.
Ms. Solovei served as Assistant Vice President -- Finance of the Company from
April 1996 to June 1998. Prior to that, Ms. Solovei served as the Assistant
Corporate Controller for Telemundo, Inc. and as a Senior Manager with Deloitte &
Touche in the audit group.

The Board of Directors of the Company is divided into three classes, with
staggered three-year terms, and one class of directors is elected annually at
the annual meeting of shareholders. The Company's executive officers are
appointed by, and serve at the pleasure of, the Board of Directors, subject to
the terms of any employment agreements.

No family relationship exists among the executive officers or directors of
the Company, except that David M. Friedson and Barbara Friedson Garrett are the
son and daughter, respectively, of Belvin Friedson, the Chairman Emeritus of the
Board, and Desmond Lai is the son of Lai Kin.

DESCRIPTION OF CERTAIN INDEBTEDNESS

SENIOR CREDIT FACILITIES

To facilitate the HPG Acquisition, an affiliate of one of the Underwriters
provided the Company with $345.0 million in Senior Credit Facilities, consisting
of a $160.0 million Senior Secured Revolving Credit Facility, a $90.0 million
Tranche A Term Loan, a $75.0 million Tranche B Term Loan and a $20.0 million
Tranche C Term Loan. The Company paid the purchase price of the HPG Acquisition,
in part, with borrowings of $185.0 million under the Term Loans and $7.0 million
under the Senior Secured Revolving Credit Facility. The Company intends to repay
all of the outstanding indebtedness under the Tranche C Term Loan and a portion
of the indebtedness under the Senior Secured Revolving Credit Facility with the
proceeds from the Offerings. Approximately $167.1 million in principal amount
under the Senior Credit Facilities will remain outstanding after completion of
the Offerings, and approximately $157.9 million will be available for borrowing
under the Senior Secured Revolving Credit Facility under certain circumstances.
See "Use of Proceeds."

The Senior Secured Revolving Credit Facility includes (a) a $20 million
sublimit for the issuance of letters of credit and (b) a $10 million sublimit
for swing line loans (the "Swing Line Loans"). All amounts outstanding under the
Senior Secured Revolving Credit Facility shall be payable on June 26, 2003. The
Tranche A Term Loan will be payable in quarterly installments, ranging from $2.5
million for the quarter ended March 31, 1999 to $6.25 million for the quarter
ended March 31, 2003, and all remaining amounts owing due the following quarter.
The Tranche B Term Loan will be payable in annual installments of $750,000, with
all remaining amounts owing thereunder due June 26, 2004. The Tranche C Term
Loan will be payable in annual installments of $200,000, with all remaining
amounts owing thereunder due June 26, 2004.

Interest will accrue on the loans made under the Senior Secured Revolving
Credit Facility (other than Swing Line Loans) at either LIBOR (adjusted for any
reserves) or the base rate, which is the higher of NationsBank, N.A.'s prime
rate and the federal funds rate plus 0.50% (the "Base Rate"), at the Company's
option. Interest will accrue on the Senior Secured Revolving Credit Facility and
the Tranche A Term Loan at either LIBOR (adjusted for any reserves) plus a
specified margin which will be determined by the leverage ratio of the Company
and its subsidiaries that initially will be set at 2.50%, or the Base Rate, plus
a specified margin of 1.50%, at the Company's option. Interest will accrue on
the Tranche B Term Loan and the Tranche C Term Loan at either LIBOR (adjusted
for any reserves) plus a specified margin which will be determined by the
leverage ratio of the Company and its subsidiaries that initially will be set at
3.00%, or the Base Rate plus a specified margin of 2.00%, at the Company's
option. Swing Line Loans will bear interest at the Base Rate. The post-default
rate on outstanding loans is 2.00% above the otherwise applicable rate of
interest.

The aggregate amount outstanding under the Senior Credit Facilities will be
prepaid by amounts equal to the net proceeds, or a specified portion thereof,
from certain indebtedness and equity issuances and specified

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asset sales by the Company and its subsidiaries, and by a specified percentage
of cash flow in excess of certain expenditures, costs and payments. The Company
may at its option reduce the amount available under the Senior Credit Facilities
to the extent such amounts are unused or prepaid in certain minimum amounts.

The Company pays certain annual administration fees to NationsBank, N.A.
for its own account as well as a commitment fee and certain fees relating to
letters of credit to NationsBank, N.A. for its own account and the account of
the other lenders under the Senior Credit Facilities.

The Senior Credit Facilities are secured by a security interest in
substantially all of the real and personal property, tangible and intangible, of
the Company and its domestic subsidiaries, as well as a pledge of all of the
stock of such domestic subsidiaries, a pledge of not less than 65% of the voting
stock of each direct foreign subsidiary of the Company and each direct foreign
subsidiary of each domestic subsidiary of the Company, and a pledge of all of
the capital stock of any subsidiary of a subsidiary of the Company that is a
borrower under the Senior Credit Facilities. The Senior Credit Facilities will
be guaranteed by all of the current and future domestic subsidiaries of the
Company.

The Senior Credit Facilities contain a number of significant covenants
that, among other things, will restrict the ability of the Company to dispose of
assets, incur additional indebtedness, prepay other indebtedness, pay dividends,
repurchase or redeem capital stock, enter into certain investments or create new
subsidiaries, enter into sale and lease-back transactions, make certain
acquisitions, engage in mergers or consolidations, create liens, or engage in
certain transactions with affiliates, and that will otherwise restrict corporate
and business activities. In addition, under the Senior Credit Facilities, the
Company is required to comply with specified financial ratios and tests,
including a minimum net worth test, a fixed charge coverage ratio, an interest
coverage ratio, a leverage ratio and a minimum EBITDA requirement.

SENIOR SUBORDINATED LOANS

The Company paid a portion of the purchase price of the HPG Acquisition
with borrowings of $185.0 million under the Senior Subordinated Loans provided
to the Company by an affiliate of one of the Underwriters. The Senior
Subordinated Loans mature in 2008 and bear interest at an increasing rate equal
to (i) the one-month London interbank offered rate, adjusted for reserves
("LIBOR Option") plus (ii) the "Applicable Margin," which shall initially be 550
basis points per annum, increasing by an additional 100 basis points per annum
after the first 180-day period following the funding date, then increasing by 50
basis points per annum on each 90-day period thereafter for as long as the
Senior Subordinated Loans are outstanding. The Company intends to use a portion
of the proceeds from the Offerings to repay all outstanding indebtedness under
the Senior Subordinated Loans. See "Use of Proceeds" and "Underwriting."

% SENIOR SUBORDINATED NOTES DUE 2008

Concurrently with the Common Stock Offering, the Company is offering $125.0
million in aggregate principal amount of % Senior Subordinated Notes due
2008. The Notes will be subject to the terms and conditions of the Indenture to
be dated as of the date of the consummation of the Common Stock Offering, among
the Company, the Subsidiary Guarantors and State Street Bank and Trust Company,
as Trustee. The Notes will be subject to all of the terms and conditions of the
Indenture. The following summary of the material provisions of the Indenture
does not purport to be complete, and is subject to, and qualified in its
entirety by reference to, all of the provisions of the Indenture and those terms
made a part of the Indenture by the Trust Indenture Act of 1939, as amended. All
capitalized terms defined in the Indenture and not otherwise defined herein are
used below with the meanings set forth in the Indenture.

General. The Notes will mature on , 2008 and bear interest at
% per annum, payable semi-annually on and of
each year. The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior Debt of the
Company. The Notes will be unconditionally guaranteed, on an unsecured senior
subordinated basis, jointly and severally, by all of the Company's Domestic
Subsidiaries.

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Optional Redemption. The Notes will be subject to redemption at any time,
at the option of the Company, in whole or in part, on or after ,
2003 at redemption prices (plus accrued and unpaid interest) starting at %
of principal (plus accrued and unpaid interest) during the 12-month period
beginning , 2003 and declining annually to 100% of principal (plus
accrued and unpaid interest) on , 2006 and thereafter.

In addition, prior to , 2001, the Company may redeem up to
% of the aggregate principal amount of Notes with the net cash proceeds of
an offering of common stock of the Company, at a price equal to % of the
principal (plus accrued and unpaid interest) provided that at least % of
the original aggregate principal amount of the Notes remains outstanding
thereafter.

Change of Control. Upon the occurrence of a Change of Control, each holder
of the Notes may require the Company to repurchase all or a portion of such
holder's Notes at a purchase price equal to 101% of the principal amount thereof
(plus accrued and unpaid interest). Generally, a Change of Control, means the
occurrence of any of the following: (i) the disposition of all or substantially
all of the Company's assets to any person, (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company, (iii) the consummation of any
transaction in which a person becomes the beneficial owner of more than 35% of
the voting stock of the Company, or (iv) the first day on which a majority of
the members of the Board of Directors of the Company are not Continuing
Directors.

Subordination. The Notes will be general unsecured obligations of the
Company and will be subordinate to all existing and future Senior Debt of the
Company. The Notes will rank senior in right of payment to all subordinated
Indebtedness of the Company. Any Subsidiary Guarantees would be general
unsecured obligations of the Guarantors and are subordinated to the Senior Debt
and to the guarantees of Senior Debt of such Guarantors. The Subsidiary
Guarantees rank senior in right of payment to all subordinated Indebtedness of
the Guarantors.

Certain Covenants. The Indenture will contain a number of covenants
restricting the operations of the Company, which, among other things, limit the
ability of the Company to incur additional Indebtedness, pay dividends or make
distributions, sell assets, issue subsidiary stock, restrict distributions from
Subsidiaries, create certain liens, enter into certain consolidations or mergers
and enter into certain transactions with affiliates.

Events of Default. Events of Default under the Indenture will include the
following: (i) a default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of the principal of or premium, if any,
on the Notes; (iii) failure by the Company to comply with certain provisions of
the Indenture (subject, in some but not all cases, to notice and cure periods);
(iv) default under any Indebtedness for money borrowed by the Company or any of
its Subsidiaries; (v) failure by the Company or any Subsidiary that would be a
Significant Subsidiary to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vi) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Subsidiary Guarantee; or (vii) certain events of bankruptcy or insolvency
with respect to the Company or any of its Subsidiaries.

Upon the occurrence of an Event of Default, with certain exceptions, the
Trustee or the holders of at least 25% in principal amount of the then
outstanding Notes may accelerate the maturity of all the Notes as provided in
the Indenture.

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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS

The following is a general discussion of certain U.S. federal income and
estate tax consequences of the acquisition, ownership and disposition of Common
Stock by a Non-U.S. Holder. For purposes of this discussion, a Non-U.S. Holder
is a beneficial owner of Common Stock that, for U.S. federal income tax
purposes, is (i) a nonresident alien individual, (ii) a corporation, partnership
or other entity created or organized in or under the laws of a country (or a
political subdivision thereof) other than the United States or (iii) a foreign
estate or trust within the meaning of section 7701(a)(31) of the Internal
Revenue Code of 1986, as amended (the "Code"). For purposes of the discussion
below of the withholding of tax (other than backup withholding), a Non-U.S.
Holder includes a nonresident fiduciary of an estate or trust. For purposes of
the following discussion, dividends and gain on a sale, exchange or other
disposition of Common Stock generally will be considered "U.S. trade or business
income" of a Non-U.S. Holder if the dividends or gain is (i) effectively
connected with trade or business conducted by the Non-U.S. Holder within the
United States or (ii) in the case of most treaty residents, attributable to a
permanent establishment (or, in the case of an individual, a fixed base) of the
Non-U.S. Holder in the United States.

This discussion is based upon the Code, Treasury Regulations thereunder,
administrative rulings and judicial decisions now in effect, all of which are
subject to change, possibly with retroactive effect. This discussion does not
address all U.S. federal income tax consequences that may be relevant to a
Non-U.S. Holder in light of that Non-U.S. Holder's particular circumstances (or
any U.S. federal income or estate tax consequences to an expatriate or former
long-term resident of the United States) and does not address any state, local
or foreign tax consequences. This discussion is limited to a Non-U.S. Holder
that will hold the Common Stock as a "capital asset" within the meaning of
section 1221 of the Code.

EACH PROSPECTIVE PURCHASER OF COMMON STOCK THAT IS OR MAY BE A NON-U.S.
HOLDER IS URGED TO CONSULT ITS OWN TAX ADVISER REGARDING THE FEDERAL, STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
COMMON STOCK.

DIVIDENDS

The gross amount of a dividend that is not U.S. trade or business income of
a Non-U.S. Holder will be subject to U.S. federal income tax at a 30% rate,
unless an income tax treaty reduces the rate of that tax, that will be withheld
on the actual payment of the dividend. Dividends paid to a Non-U.S. Holder that
constitute U.S. trade or business income will be subject to U.S. federal income
tax on a net income basis at graduated rates in the same manner as a U.S.
taxpayer is taxed and will be exempt from the withholding of U.S. tax. In the
case of a Non-U.S. Holder that is a corporation, U.S. trade or business income
under certain circumstances also may be subject to an additional branch profits
tax at a 30% rate, unless an income tax treaty reduces the rate of that tax.

To determine the applicability of a tax treaty providing for a lower rate
of withholding, under the currently effective Treasury Regulations (the "Current
Regulations"), dividends paid to an address in a foreign country are presumed to
be paid to a resident of that country unless the payer has knowledge to the
contrary. To claim the benefit of a tax treaty or to claim an exemption from the
withholding of tax because income is U.S. trade or business income, a Non-U.S.
Holder must provide a properly executed Form 1001 or 4224, as applicable, prior
to the payment of the income. These forms must be updated periodically. Under
recently adopted Treasury regulations that generally will be effective for
payments made on or after January 1, 2000 (the "New Regulations"), a Non-U.S.
Holder (including, in certain cases of Non-U.S. Holders that are entities, the
owner or owners of those entities) will be required to provide IRS Form W-8,
subject to certain transition rules, and may be required to provide a TIN.
Special procedures are provided in the New Regulations for payments through
qualified intermediaries. A prospective investor should consult its own tax
adviser regarding the effect, if any, of the New Regulations on it.

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DISPOSITION OF COMMON STOCK

Subject to the discussion below of backup withholding of tax, gain
recognized by a Non-U.S. Holder on a disposition of Common Stock generally will
not be subject to U.S. federal income tax unless (i) the gain is U.S. trade or
business income of the Non-U.S. Holder, (ii) the Non-U.S. Holder is an
individual who holds the Common Stock as a capital asset and is present in the
United States for 183 days or more in the taxable year of the disposition and
certain other conditions are met or (iii) the Company is or, during the shorter
of (a) the period during which the Non-U.S. Holder has held the Common Stock and
(b) the five-year period ending on the date of disposition of the Common Stock,
has been a United States real property holding corporation (a "USRPHC") for U.S.
federal income tax purposes and, so long as the Common Stock continues to be
regularly traded on an established securities market, the Non-U.S. Holder has
held, actually and constructively, more than 5% of the Common Stock at some time
during the foregoing time period. The Company does not believe that it is or has
been a USRPHC.

FEDERAL ESTATE TAX

Common Stock that is owned, or treated as owned, by an individual at the
time of death will be included in that individual's gross estate for U.S.
federal estate tax purposes, whether or not that individual's domicile is in the
United States, unless an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

The Company must report annually to the U.S. Internal Revenue Service and
to each Non-U.S. Holder the amount of dividends paid to that holder and the tax
withheld from those dividends regardless of whether withholding was required.
Copies of these information returns also may be made available, under the
provisions of a specific treaty or agreement, to the tax authorities of the
country in which the Non-U.S. Holder resides. Under the Current Regulations,
backup withholding generally will not apply to dividends paid to a Non-U.S.
Holder at an address outside the United States, unless the payer has actual
knowledge that the payee is a U.S. Holder. Backup withholding and information
reporting generally will apply, however, to dividends paid on shares of Common
Stock to a Non-U.S. Holder at an address in the United States, if that holder
fails to establish an exemption or to provide certain other information to the
payer. Under the New Regulations, a Non-U.S. Holder will be subject to backup
withholding of tax unless applicable certification requirements are met.

The payment of proceeds from the disposition of Common Stock to or through
a U.S. office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding of tax unless the beneficial owner
certifies under penalties of perjury that it is not a United States person
(within the meaning of section 7701(a)(30) of the Code (a "U.S. person")) or
otherwise establishes an exemption, provided the broker does not have actual
knowledge that the holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied. The payment of proceeds from the
disposition of Common Stock to or through a non-U.S. office of a non-U.S. broker
that is not a "U.S. related person" (as specially defined) will not be subject
to information reporting or backup withholding. The payment of proceeds from the
disposition of Common Stock to or through a non-U.S. office of a broker that is
either a U.S. person or a "U.S. related person" will be subject to information
reporting unless the broker has documentary evidence in its files that the
beneficial owner of the Common Stock is not a U.S. person and the broker has no
knowledge to the contrary. Backup withholding will not apply to a payment made
through a foreign office of a broker that is not a U.S. person or a "U.S.
related person" (absent actual knowledge that the payee is a U.S. person). For
purposes of this paragraph, a "U.S. related person" is (i) a controlled foreign
corporation, as defined for U.S. federal income tax purposes, (ii) a foreign
person 50% or more of whose gross income from all sources for the three year
period ending with the close of its taxable year preceding the payment (or for
that part of the period that the broker has been in existence) is derived from
activities that are effectively connected with the conduct of a U.S. trade or
business or (iii) with respect to payments made on or after January 1, 2000, a
foreign partnership that, at any time during its taxable year, is owned 50% or
more (by income or capital interest) by U.S. persons or is engaged in the
conduct of a U.S. trade or business. The New Regulations provide certain

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presumptions under which a Non-U.S. Holder will be subject to backup withholding
and information reporting unless the Non-U.S. Holder certifies that it is not a
U.S. person.

Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or credit against that Non-U.S.
Holder's U.S. federal income tax liability, provided the requisite procedures
are followed.

THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISER AS TO THE
PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF COMMON
STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX
LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.

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UNDERWRITING

The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions in the underwriting agreement (the
"Underwriting Agreement") by and among the Company, certain of its subsidiaries
and the Underwriters, to purchase from the Company the number of shares of
Common Stock indicated below opposite their respective names at the public
offering price less the underwriting discount set forth on the cover page of
this Prospectus Supplement. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent and
that the Underwriters are committed to purchase all of the shares of Common
Stock, if they purchase any.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------ ---------
<S> <C>
NationsBanc Montgomery Securities LLC.......................
Raymond James & Associates, Inc. ...........................
Total.............................................
</TABLE>

The Underwriters have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public on the terms set
forth on the cover page of this Prospectus Supplement. The Underwriters may
allow selected dealers a concession of not more than $ per share; and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $ per share to certain other dealers. After the Common Stock
Offering, the public offering price and other selling terms may be changed by
the Underwriters. The Common Stock is offered subject to receipt and acceptance
by the Underwriters and to certain other conditions, including the right to
reject orders in whole or in part.

The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus Supplement, to purchase up
to an aggregate maximum of 456,150 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the initial shares to be
purchased by the Underwriters. To the extent the Underwriters exercise this
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may exercise this
over-allotment option only to cover over-allotments made in connection with the
Common Stock Offering.

The Underwriting Agreement provides that the Company and certain
subsidiaries will indemnify the Underwriters and their affiliates and
controlling persons against certain liabilities, including liabilities under the
Securities Act, or will contribute to payments that the Underwriters may be
required to make in respect thereof.

The directors and executive officers of the Company have agreed that for a
period of 120 days after the date of this Prospectus Supplement they will not,
without the prior written consent of NationsBanc Montgomery Securities LLC
("NMS")directly or indirectly, sell, offer, contract or grant any option to sell
(including, without limitation, any short sale), pledge, transfer, establish an
open put equivalent position or otherwise dispose of any share of Common Stock,
options or warrants to acquire shares of Common Stock or securities exchangeable
or exercisable or convertible into shares of Common Stock except gifts and
pledges of shares where the donee or pledgee, as the case may be, agrees in
writing to be bound by the terms of such agreement. In addition, the Company has
agreed that, for a period of 120 days after the date of this Prospectus
Supplement, it will not, without the prior written consent of NMS, directly or
indirectly issue, offer, sell, grant options to purchase or otherwise dispose of
any of the Company's equity securities or any other securities convertible into
or exchangeable for its equity securities, subject to certain exceptions.

Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market. Such transactions may include stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting any purchase for the purpose of pegging, fixing
or maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. The Underwriters may also

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<PAGE> 71

elect to reduce any short position by exercising all or part of the
over-allotment options described above. A penalty bid means an arrangement that
permits the Underwriters to reclaim a selling concession from a syndicate member
in connection with the offering when shares of Common Stock sold by the
syndicate member are purchased in syndicate covering transactions. Such
transactions may be effected on the Nasdaq National Market, in the
over-the-counter market, or otherwise.

In general, the purchase of a security for the purpose of stabilizing or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchase. Neither the Company nor any of the
Underwriters makes any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the
price of the Common Stock. In addition, neither the Company nor any of the
Underwriters makes any representation that the Underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.

In addition, certain of the Underwriters that currently act as market
makers for the Common Stock may engage in passive market making in the Common
Stock on Nasdaq in accordance with Regulation M under the Exchange Act.
Regulation M permits, upon the satisfaction of certain conditions, underwriters
participating in a distribution that are also Nasdaq market makers in the
security being distributed to engage in limited market making transactions
during the period that such activities would otherwise be prohibited by
Regulation M. However, Regulation M does not permit passive market making at any
time when a stabilizing bid is in effect. Also, Regulation M prohibits
underwriters engaged in passive market making generally from entering a bid or
effecting a purchase at a price that exceeds the highest bid for those
securities displayed on Nasdaq by a market maker that is not participating in
the distribution. Under Regulation M, each underwriter engaged in passive market
making is subject to a daily net purchase limitation generally equal to such
entity's average daily trading volume during the two full consecutive calendar
months immediately preceding, or any 60 consecutive calendar days ending within
the 10 calendar days preceding, the date of the filing of the registration
statement under the Securities Act pertaining to the securities to be
distributed.

The Underwriters have informed the Company that the Underwriters do not
intend to confirm sales of Common Stock offered by this Prospectus Supplement to
accounts over which they exercise discretionary authority in excess of 5% of the
number of shares of Common Stock offered hereby.

NMS and its affiliates have provided investment banking, financial advisory
and other services to the Company from time to time, including in connection
with the HPG Acquisition, for which services NMS has received customary fees. In
addition, NMS is acting as underwriter for the concurrent Notes Offering.
Affiliates of NationsBank Corporation are lenders under the Senior Subordinated
Loans and the Senior Credit Facilities and will receive customary fees (and
reimbursement of expenses) in connection therewith. Substantially all of the
proceeds from the Common Stock Offering, together with the proceeds of the Notes
Offering, will be used to repay all outstanding indebtedness under the Senior
Subordinated Loans and a portion of the indebtedness under the Senior Credit
Facilities. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Pro Forma Liquidity and Capital
Resources," "Description of Certain Indebtedness -- Senior Credit Facilities"
and "-- Senior Subordinated Loans."

Under the Conduct Rules of the National Association of Securities Dealers,
Inc. (the "NASD"), if more than 10% of the net proceeds of a public offering of
equity securities, not including underwriting compensation, are intended to be
paid to members of the NASD of affiliated or associated persons that are
participating in the distribution of the offering, under Rule 2720 ("Rule 2720")
the public offering price at which the equity securities are distributed to the
public can be no lower than that recommended by a "qualified independent
underwriter" meeting certain standards of the NASD (a "QIU"). An affiliate of
NationsBank Corporation (the parent of NMS) is expected to receive in the
aggregate more than 10% of the net proceeds of the Notes Offering as a result of
the repayment by the Company of outstanding indebtedness under the Senior
Subordinated Loans. See "Use of Proceeds." Accordingly,
(" ") has assumed the responsibilities of acting as QIU and will recommend
a public offering price for the Common Stock in compliance with the requirements
of Rule 2720. In connection with the Common Stock Offering, is

S-71
<PAGE> 72

performing due diligence investigations and is participating in the preparation
of this Prospectus Supplement. will receive customary compensation for
its services as QIU.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock will be passed upon
by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, P.A., Miami, Florida, as
counsel for the Company, and for the Underwriters by Latham & Watkins, New York,
New York.

EXPERTS

The consolidated financial statements and related schedule of the Company
at December 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1997, appearing herein and in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, which is incorporated by
reference herein, have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their report thereon appearing herein and
incorporated herein by reference. Such consolidated financial statements are
included herein and incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

The combined financial statements of the Household Products Group Excluding
Cleaning and Lighting Products Lines (a Component of The Black & Decker
Corporation) at December 31, 1997 and 1996, and for each of the three years in
the period ended December 31, 1997, appearing in this Prospectus and
Registration Statement and included in the Form 8-K of Windmere-Durable
Holdings, Inc. dated June 26, 1998 which is incorporated by reference herein,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere and incorporated by reference, herein,
and are included or incorporated by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

S-72
<PAGE> 73

PROSPECTUS

$250,000,000

[WINDMERE-DURABLE HOLDINGS LOGO]

DEBT SECURITIES

COMMON STOCK

Windmere-Durable Holdings, Inc. (the "Company"), directly or through
agents, dealers, or underwriters designated from time to time, may offer, issue
and sell, in one or more series or issuances, up to $250,000,000 in aggregate
principal amount of (a) secured or unsecured debt securities (the "Debt
Securities") of the Company, in one or more series, which may be either senior
debt securities (the "Senior Debt Securities"), senior subordinated debt
securities (the "Senior Subordinated Debt Securities") or subordinated debt
securities (the "Subordinated Debt Securities"), and (b) shares of common stock
of the Company, par value $.10 per share (the "Common Stock"), or any
combination of the foregoing, either individually or as units consisting of one
or more of the foregoing, each on terms to be determined at the time of sale.
The Debt Securities may be issued as exchangeable and/or convertible Debt
Securities exchangeable for or convertible into shares of Common Stock and may
be guaranteed by all or certain of the Company's subsidiaries. The Debt
Securities and the Common Stock are collectively referred to herein as the
"Securities." The Debt Securities and the Common Stock may be offered separately
or together, in one or more separate classes or series and in amounts, at prices
and on terms to be determined at the time of offering, and to be set forth in
one or more supplements to this Prospectus (each, a "Prospectus Supplement").

The Company's Common Stock is traded on The New York Stock Exchange (the
"NYSE") under the symbol "WND." Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on the NYSE. On June 25, 1998, the last reported sale
price of the Common Stock on the NYSE was $32.875 per share. The Company has not
yet determined whether any of the Debt Securities offered hereby will be listed
on any exchange or over-the-counter market. If the Company decides to seek
listing of any such Securities, the Prospectus Supplement relating thereto will
disclose such exchange or market.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The Securities will be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. The Company reserves the sole right to accept, and together with its
agents, from time to time, to reject in whole or in part any proposed purchase
of Securities to be made directly or through agents. If agents of the Company or
any dealers or underwriters are involved in the sale of the Securities in
respect of which this Prospectus is being delivered, the names of such agents,
dealers or underwriters and any applicable commissions or discounts will be set
forth in or may be calculated from the Prospectus Supplement with respect to
such Securities. See "Plan of Distribution" for possible indemnification
arrangements with agents, dealers and underwriters.

This Prospectus may not be used to consummate sales of Securities unless
accompanied by the applicable Prospectus Supplement.

The date of this Prospectus is , 1998.
<PAGE> 74

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, part of which has been omitted in accordance with the
rules and regulations of the Commission. For further information about the
Company and the Securities offered hereby, reference is made to the Registration
Statement, including the exhibits filed as a part thereof and otherwise
incorporated therein. Statements made in this Prospectus as to the contents of
any agreement or other document referred to herein are qualified by reference to
the copy of such agreement or other document filed as an exhibit to the
Registration Statement or such other document, each such statement being
qualified in its entirety by such reference.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports, proxy statements and other information with
the Commission. The Registration Statement, as well as such reports and other
information filed by the Company with the Commission, can be inspected, without
charge, and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C., 20549; 7 World
Trade Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The Commission also maintains a site on the World Wide
Web at http://www.sec.gov, that contains reports, proxy and other information
regarding registrants that file electronically with the Commission, and certain
of the Company's filings are available at such Web site. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports and
other information concerning the Company can also be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.

INFORMATION INCORPORATED BY REFERENCE

The following documents filed with the Commission pursuant to the Exchange
Act are incorporated by reference in, and shall be deemed to be a part of, this
Prospectus:

(1) the Company's Annual Report on Form 10-K for the year ended December
31, 1997;

(2) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998;

(3) the Company's Current Reports on Form 8-K filed with the Commission on
May 8, May 13, May 20 and June 29, 1998;

(4) the Company's Amended Current Report on Form 8-K/A filed with the
Commission on May 14, 1998;

(5) the Company's Proxy Statement filed with the Commission on April 20,
1998 relating to the Company's 1998 Annual Meeting of Shareholders; and

(6) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on
February 1, 1989.

All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of all Securities to which this
Prospectus relates shall be deemed to be incorporated by reference into this
Prospectus or any Prospectus Supplement and to be a part hereof from the
respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus or any Prospectus Supplement shall be deemed to be modified or
superseded for purposes of this Prospectus or any Prospectus Supplement to the
extent that a statement contained herein, therein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference in
this Prospectus or in such Prospectus Supplement modifies or supersedes such
statement. Any such statement so

2
<PAGE> 75

modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus or any Prospectus Supplement.

The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any documents incorporated into this
Prospectus by reference (other than exhibits incorporated by reference into such
document). Requests for documents should be submitted to the Corporate
Secretary, Windmere-Durable Holdings, Inc., 5980 Miami Lakes Drive, Miami Lakes,
Florida 33014, telephone number (305) 362-2611. The information relating to the
Company contained in this Prospectus does not purport to be comprehensive and
should be read together with the information contained in the documents
incorporated or deemed to be incorporated by reference herein.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus, including any documents that are incorporated by reference
as set forth in "Information Incorporated by Reference," contains
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such statements are indicated by words
or phrases such as "anticipate," "estimate," "projects," "management believes,"
"the Company believes," "intends," "expects" and similar words or phrases. Such
forward-looking statements are subject to certain risks, uncertainties or
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results, performance or
achievements of the Company may vary materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements in this paragraph. The
Company disclaims any obligation to publicly announce the results of any
revisions to any of the forward-looking statements contained herein (including
any documents incorporated herein by reference) to reflect future events or
developments.

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<PAGE> 76

THE COMPANY

The Company, through its subsidiaries and investments, is a diversified
manufacturer and distributor of a broad range of personal care products, small
kitchen appliances, and seasonal products for major retailers and appliance
distributors in North America, Europe, and the Far East. Products are
manufactured under the Windmere(TM) and other Company-owned brands, under
private-label and licensed brand arrangements, and on an OEM basis for other
major consumer products companies. Additionally, the Company is one of the
largest suppliers of hair care appliances to the professional salon industry in
the United States. To expand its product line, the Company also entered into the
pet care market in 1996 with its LitterMaid(R) computerized, infrared, automatic
self-cleaning cat litter box. Approximately 85% to 90% of the Company's products
are manufactured by Durable Electrical Metal Factory, Ltd., its wholly-owned
Hong Kong subsidiary, in Bao An County, Guangdong Province of the People's
Republic of China, which is approximately 60 miles northwest of central Hong
Kong.

The Company also owns a 50-percent equity interest in both Salton/Maxim
Housewares, Inc. ("Salton"), a designer and marketer of small kitchen appliances
which distributes primarily to department stores and upscale mass merchandisers,
and Newtech Electronics Industries, Inc. ("Newtech"), which designs, sources,
manufactures and markets value-priced brand-name consumer electronic products.
Salton and Newtech have entered into contracts to supply to Kmart Corporation
certain small appliances, consumer electronics and telephone products for
distribution, marketing and sale under the White-Westinghouse(R) brand name
licensed by White Consolidated Industries, Inc. to Salton and Newtech.

The Company and Salton have entered into a stock agreement, dated as of May
6, 1998 (the "Stock Agreement"), pursuant to which the Company granted Salton
the right to purchase the Company's approximate 50% equity interest in Salton
for $12 per share in cash and a six and one-half year, $15 million subordinated
promissory note bearing interest at 4% per annum. The principal amount of the
note will be reduced by 5% of the total amount paid by Salton for products
purchased from the Company and its affiliates during the term of the note. Under
the terms of the Stock Agreement, if Salton fails to exercise its right to
purchase the Company's equity interest in Salton on or prior to June 30, 1998,
or to close such purchase on or prior to October 30, 1998, the Company will have
the right to acquire all of the shares of Salton that it does not currently own
in a tender offer and/or merger for $14.27 per share in cash or in registered
shares of Company Common Stock. The Stock Agreement has been approved by the
Board of Directors of the Company and a Special Committee of the Board of
Directors of Salton.

On May 11, 1998, the Company announced a definitive purchase agreement to
acquire most of the assets, including the Cooking, Garment Care, Food
Preparation, and Beverage operations, of the Household Products Group of The
Black & Decker Corporation for $315 million in cash (the "HPG Acquisition") and
to assume certain liabilities of the Household Products Group. In connection
with the HPG Acquisition, the Company and The Black & Decker Corporation entered
into a long-term licensing arrangement to allow the Company to continue to
market products under the Black & Decker(R) brand name in the cooking, garment
care, food preparation and beverage product categories in North America and
Latin America (excluding Brazil) for six and one-half years on a royalty-free
basis, with potential renewal periods, upon mutual agreement, at specified
royalties. As part of the HPG Acquisition, the Company also acquired certain
other sub-brand names related to such products, including the Toast'R Oven(R)
and Spacemaker(R) names.

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<PAGE> 77

USE OF PROCEEDS

Unless otherwise indicated in the applicable Prospectus Supplement, the
Company anticipates that any net proceeds from the sale of the Securities will
be used for general corporate purposes, which may include, but are not limited
to, working capital, capital expenditures, future acquisitions, and the
repayment or refinancing of the Company's indebtedness, including indebtedness
to be incurred in connection with the HPG Acquisition. The factors which the
Company will consider in any refinancing will include the amount and
characteristics of any Securities issued and may include, among others, the
impact of such refinancing on the Company's liquidity, debt-to-capital ratio and
earnings per share. When a particular series of Securities is offered, the
Prospectus Supplement relating thereto will set forth the Company's intended use
for the net proceeds received from the sale of such Securities. Pending the
application of the net proceeds, the Company expects to invest such proceeds in
short-term, interest-bearing instruments or other investment-grade securities or
to reduce indebtedness under its bank credit agreement.

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth the ratio of earnings to fixed charges of
the Company and its consolidated subsidiaries for the periods indicated.

<TABLE>
<CAPTION>
THREE-MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------ ------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(1)....................... 2.14 1.78 7.03 3.71 (4.36)(2) 42.91 10.94
</TABLE>

- ---------------
(1) The ratio of earnings to fixed charges is computed by dividing income from
continuing operations before income taxes and fixed charges by total fixed
charges. Fixed charges represent interest expense and the amortization of
debt issuance costs.

(2) Earnings were inadequate to cover fixed charges for the year ended December
31, 1995. The coverage deficiency was approximately $3.2 million in that
year.

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<PAGE> 78

DESCRIPTION OF DEBT SECURITIES

The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement,
and the extent, if any, to which such general provisions do not apply to the
Debt Securities so offered, will be described in the Prospectus Supplement
relating to such Debt Securities.

Debt Securities may be issued from time to time in series under an
indenture, and one or more indentures supplemental thereto (collectively, the
"Indenture"), between the Company and a trustee to be identified in the
applicable Prospectus Supplement (the "Trustee"). The terms of the Debt
Securities will include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"TIA"), as in effect on the date of the Indenture. The Debt Securities will be
subject to all such terms, and potential purchasers of the Debt Securities are
referred to the Indenture and the TIA for a statement thereof. The following
summary of certain provisions of the Indenture does not purport to be complete
and is qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. A copy of the proposed form of
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. As used under this caption, unless the context
otherwise requires, "Offered Debt Securities" shall mean the Debt Securities
offered by this Prospectus and an accompanying Prospectus Supplement.

GENERAL

The Indenture will provide for the issuance of Debt Securities in series
and will not limit the principal amount of Debt Securities that may be issued
thereunder. The Debt Securities offered under the Indenture may be issued in one
or more series with the same or various maturities, at par, at a premium or at a
discount. The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Offered Debt Securities in respect
of which this Prospectus is being delivered: (1) the title of the Offered Debt
Securities; (2) whether the Offered Debt Securities are senior debt securities
("Senior Debt Securities"), senior subordinated debt securities, ("Senior
Subordinated Debt Securities") or subordinated debt securities ("Subordinated
Debt Securities") or any combination thereof; (3) the price or prices (expressed
as a percentage of the aggregate principal amount thereof) at which the Offered
Debt Securities will be issued; (4) any limit upon the aggregate principal
amount of the Offered Debt Securities; (5) the date or dates on which the
principal of the Offered Debt Securities is payable; (6) the rate or rates
(which may be fixed or variable) at which the Offered Debt Securities will bear
interest and the manner in which such rate or rates are determined; (7) the date
or dates from which any such interest will accrue, the interest payment dates on
which any such interest on the Offered Debt Securities will be payable and the
record dates for the determination of Holders to whom such interest is payable;
(8) the place or places where the principal of, and any interest on, the Offered
Debt Securities will be payable; (9) the obligation of the Company, if any, to
redeem, repurchase or repay the Offered Debt Securities in whole or in part
pursuant to any sinking fund or analogous provisions or at the option of the
Holders and the price or prices at which, the period or periods within which and
the terms and conditions upon which the Offered Debt Securities shall be
redeemed, repurchased or repaid pursuant to such obligation; (10) the
denominations in which any Offered Debt Securities will be issuable, if other
than denominations of U.S. $1,000 and any integral multiple thereof; (11) if
other than the principal amount thereof, the portion of the principal amount of
the Offered Debt Securities of the series that will be payable upon declaration
of the acceleration of the maturity thereof; (12) whether the Offered Debt
Securities will be guaranteed by any of the Company's subsidiaries; (13) any
addition to or change in the covenants that apply to the Offered Debt
Securities; (14) any Events of Default with respect to the Offered Debt
Securities, if not otherwise set forth under "Events of Default;" (15) whether
the Offered Debt Securities will be issued in whole or in part in global form,
the terms and conditions, if any, upon which such global Offered Debt Securities
may be exchanged in whole or in part for other individual securities, and the
depositary for the Offered Debt Securities; (16) the terms and conditions, if
any, upon which the Offered Debt Securities shall be exchanged for or converted
into Common Stock or Preferred Stock; (17) the nature and terms of the security
for any secured Offered Debt Securities; and (18) any other

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<PAGE> 79

terms of the Offered Debt Securities, which other terms shall not be
inconsistent with the provisions of the Indenture.

Debt Securities may be issued at a discount from their principal amount
("Original Issue Discount Securities"). Federal income tax considerations and
other special considerations applicable to any such Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.

Debt Securities may be issued in bearer form, with or without coupons.
Federal income tax considerations and other special considerations applicable to
bearer securities will be described in the applicable Prospectus Supplement.

STATUS OF DEBT SECURITIES; TERMS OF SUBORDINATION

The Senior Debt Securities will rank pari passu with all other unsecured
and unsubordinated indebtedness of the Company.

The payment of principal of, premium, if any, and interest on the Senior
Subordinated Debt Securities and Subordinated Debt Securities will be
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full of all Senior Debt, whether outstanding on the date of the
Indenture or thereafter incurred.

Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the Holders of Senior Debt will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt, whether or not an allowable claim), and until all
such Obligations are paid in full, any distribution to which the Holders of
Senior Subordinated Debt Securities or Subordinated Debt Securities would be
entitled shall be made to the Holders of Senior Debt (except that Holders of
Senior Subordinated Debt Securities or Subordinated Securities may receive and
retain Permitted Junior Securities and payments made from the trust described
under "-- Defeasance of Debt Securities and Certain Covenants in Certain
Circumstances").

The Company also may not make any payment upon or in respect of the Senior
Subordinated Securities or Subordinated Debt Securities (except in Permitted
Junior Securities or from the trust described under "-- Defeasance of Debt
Securities and Certain Covenants in Certain Circumstances") if (i) a default in
the payment of the principal of, premium, if any, or interest on Designated
Senior Debt occurs and is continuing beyond any applicable period of grace or
(ii) any other default occurs and is continuing with respect to Designated
Senior Debt that permits holders of the Designated Senior Debt as to which such
default relates to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or the holders of
any Designated Senior Debt. Payments on the Senior Subordinated Debt Securities
or Subordinated Debt Securities, as applicable, may and shall be resumed (a) in
the case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment blockage
may be commenced unless and until (i) 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the Senior
Subordinated Debt Securities or Subordinated Debt Securities, as applicable,
that have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been waived for a period of not less than
90 days.

The Indenture will further require that the Company promptly notify the
holders of Senior Debt if payment of the Senior Subordinated Debt Securities or
Subordinated Debt Securities, as applicable, is accelerated because of an Event
of Default.

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<PAGE> 80

As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Senior Subordinated Debt Securities
or Subordinated Debt Securities, as applicable, may recover less ratably than
creditors of the Company who are holders of Senior Debt.

The terms "Designated Senior Debt," "Permitted Junior Securities" and
"Senior Debt" will be defined in the Prospectus Supplement relating to each
series of Offered Debt Securities that are Senior Subordinated Debt Securities
or Subordinated Debt Securities.

If the Company offers Debt Securities, the applicable Prospectus Supplement
will set forth the aggregate amount of outstanding indebtedness, if any, as of
the most recent practicable date that by the terms of such Debt Securities would
be senior to such Debt Securities. The applicable Prospectus Supplement will
also set forth any limitation on the issuance by the Company of any additional
indebtedness.

CONVERSION RIGHTS

The terms, if any, on which Convertible Debt Securities of a series may be
exchanged for or converted into shares of Common Stock or Preferred Stock will
be set forth in the Prospectus Supplement relating thereto.

EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT

Unless otherwise specified in the applicable Prospectus Supplement, payment
of principal, premium, if any, and any interest on the Debt Securities will be
payable, and the exchange of and the transfer of Debt Securities will be
registrable, at the office of the Trustee or at any other office or agency
maintained by the Company for such purpose subject to the limitations of the
Indenture. Unless otherwise indicated in the applicable Prospectus Supplement,
the Debt Securities will be issued in denominations of U.S. $1,000 or integral
multiples thereof. No service charge will be made for any registration of
transfer or exchange of the Debt Securities, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.

GLOBAL DEBT SECURITIES

The Debt Securities of a series may be issued in the form of one or more
Global Securities (each a "Global Security" and collectively, the "Global
Securities") that will be deposited with a Depositary or its nominee identified
in the applicable Prospectus Supplement. In such a case, one or more Global
Securities will be issued in a denomination or aggregate denominations equal to
the portion of the aggregate principal amount of outstanding Debt Securities of
the series to be represented by such Global Security or Securities. Each Global
Security will be deposited with such Depositary or nominee or a custodian
therefor and will bear a legend regarding the restrictions on exchanges and
registration of transfer thereof referred to below and any such other matters as
may be provided for pursuant to the applicable Indenture.

Notwithstanding any provision of the Indenture or any Debt Security
described herein, no Global Security may be transferred to, or registered or
exchanged for Debt Securities registered in the name of, any person or entity
other than the Depositary for such Global Security or any nominee of such
Depositary, and no such transfer may be registered, unless (i) the Depositary
has notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or has ceased to be qualified to act as such
as required by the applicable Indenture, (ii) the Company executes and delivers
to the Trustee an order that such Global Security shall be so transferable,
registrable and exchangeable, and such transfers shall be registrable or (iii)
there shall exist such circumstances, if any, as may be described in the
applicable Prospectus Supplement. All Debt Securities issued in exchange for a
Global Security or any portion thereof will be registered in such names as the
Depositary may direct.

The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.

8
<PAGE> 81

Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities that are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interests in such Global Security will be limited to participants or persons
that may hold interests through participants. Ownership of beneficial interests
by participants in such Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by persons that hold through participants will
be shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificate form. The foregoing
limitations and such laws may impair the ability to transfer beneficial
interests in such Global Securities.

So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Unless otherwise specified in the applicable Prospectus Supplement,
owners of beneficial interests in such Global Security will not be entitled to
have Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in certified form and will not be
considered the Holders thereof for any purposes under the Indenture.
Accordingly, each person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a Holder under the Indenture. If the
Company requests any action of Holders or if an owner of a beneficial interest
in such Global Security desires to give any notice or take any action a holder
is entitled to give or take under the Indenture, the Depositary will authorize
the participants to give such notice or take such action, and participants would
authorize beneficial owners owning through such participants to give such notice
or take such action or would otherwise act upon the instructions of beneficial
owners owning through them.

Principal of, and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.

CONSOLIDATION, MERGER AND SALE OF ASSETS

The Indenture will provide that the Company may not, directly or
indirectly, consolidate or merge with or into (whether or not the Company is the
surviving corporation), or sell, assign, transfer, convey or otherwise dispose
of all or substantially all of its properties or assets, in one or more related
transactions, to another Person unless (i) the Company is the surviving
corporation or the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia; (ii) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, conveyance or other disposition shall have been made
assumes all the obligations of the Company under the Debt Securities and the
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a wholly owned subsidiary of the Company, the Company or the Person formed
by or surviving any such consolidation or merger (if other than the Company), or
to which such sale, assignment, transfer, conveyance or other disposition shall
have been made will satisfy certain financial requirements set forth in the
Indenture. The Indenture will also provide that the Company may not,

9
<PAGE> 82

directly or indirectly, lease all or substantially all of its properties or
assets, in one or more related transactions, to any other Person. The provisions
of this covenant will not be applicable to a sale, assignment, transfer,
conveyance or other disposition of assets between or among the Company and its
wholly owned subsidiaries.

CERTAIN OTHER COVENANTS

The supplemental indenture creating a particular series of Debt Securities
will contain additional covenants, and such covenants will be described in the
Prospectus Supplement pursuant to which such Debt Securities are offered. Other
than the covenants of the Company included in the Indenture as described above
or as described in the applicable Prospectus Supplement, there are no covenants
or other provisions in the Indenture providing for a put or increased interest
or otherwise that would afford Holders of Debt Securities additional protection
in the event of a recapitalization transaction, a change of control of the
Company or a highly leveraged transaction.

EVENTS OF DEFAULT

Unless otherwise specified in the applicable Prospectus Supplement, the
following will constitute Events of Default under the Indenture with respect to
Debt Securities of any series: (i) default for 30 days in the payment when due
of interest on the Debt Securities of a particular Series (whether or not
prohibited by any subordination provisions of the Indenture); (ii) default in
payment when due of the principal of or premium, if any, on the Debt Securities
of a particular Series (whether or not prohibited by any subordination
provisions of the Indenture); (iii) failure by the Company or any of its
subsidiaries party to the Indenture for 30 days after notice by the Trustee or
the Holders of at least 25% of the outstanding Debt Securities of a particular
Series (which notice must specify the Default, demand that it be remedied and
state that the notice is a "Notice of Default") to comply with any of its other
agreements in the Debt Securities of that series or in the Indenture with
respect to that series; (iv) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any indebtedness for money borrowed by the Company or any of its subsidiaries
(or the payment of which is guaranteed by the Company or any of its
subsidiaries) whether such indebtedness or guarantee now exists, or is created
after the date of the Indenture, which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such indebtedness on the date of such
default (a "Payment Default") or (b) results in the acceleration of such
indebtedness prior to its express maturity and, in each case, the principal
amount of any such indebtedness, together with the principal amount of any other
such indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10.0 million or more; and (v)
certain events of bankruptcy or insolvency with respect to the Company or any of
its subsidiaries.

If an Event of Default with respect to outstanding Debt Securities of any
series (other than an Event of Default relating to certain events of bankruptcy
or insolvency) shall occur and be continuing, either the Trustee or the Holders
of at least 25% in principal amount of the outstanding Debt Securities of that
series by notice, as provided in the Indenture, may declare the unpaid principal
amount (or, if the Debt Securities of that series are Original Issue Discount
Securities, such lesser amount as may be specified in the terms of that series)
of, and any accrued and unpaid interest on, all Debt Securities of that series
to be due and payable immediately. However, at any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, but
before a judgment or decree based on such acceleration has been obtained, the
Holders of a majority in principal amount of the outstanding Debt Securities of
that series may, under certain circumstances, rescind and annul such
acceleration. For information as to waiver of defaults, see "Modification and
Waiver" below.

The Company will be required to furnish to the Trustee under the Indenture
annually a statement as to the performance by the Company of its obligations
under that Indenture and as to any default in such performance.

10
<PAGE> 83

MODIFICATION AND WAIVER

Subject to certain exceptions, the Company and the Trustee may amend the
Indenture, the Debt Securities with the written consent of the Holders of a
majority in principal amount of the then outstanding Debt Securities of each
series affected by the amendment with each series voting as a separate class.
The Holders of a majority in principal amount of the then outstanding Debt
Securities of any series may also waive compliance in a particular instance by
the Company with any provision of the Indenture with respect to the Debt
Securities of that series; provided, however, that without the consent of each
holder of Debt Securities affected, an amendment, supplement or waiver may not
(i) reduce the percentage of the principal amount of Debt Securities whose
Holders must consent to an amendment or waiver; (ii) reduce the rate or change
the time for payment of interest on any Debt Security (including default
interest); (iii) reduce the principal of, premium, if any, or change the fixed
maturity of any Debt Security, or reduce the amount of, or postpone the date
fixed for, redemption or the payment of any sinking fund or analogous obligation
with respect thereto; (iv) make any Debt Security payable in currency other than
that stated in the Debt Security; (v) make any change in the provisions
concerning waivers of Default or Events of Default by Holders or the rights of
Holders to recover the principal of, premium, if any, or interest on, any Debt
Security; (vi) waive a default in the payment of the principal of, or interest
on, any Debt Security, except as otherwise provided in the Indenture or (vii)
reduce the amount due and owing upon the acceleration of any Original Issue
Discount Securities. Notwithstanding the foregoing, the Company and the Trustee
may amend the Indenture or the Debt Securities without notice to or the consent
of any Holder of a Debt Security: (i) to cure any ambiguity, defect or
inconsistency; (ii) to comply with the Indenture's provisions with respect to
successor corporations; (iii) to comply with any requirements of the Commission
in connection with the qualification of the Indenture under the TIA; (iv) to
provide for uncertificated Debt Securities in addition to or in place of
certificated Debt Securities; (v) to add to, change or eliminate any of the
provisions of the Indenture in respect of one of more series of Debt Securities,
provided, however, that any such addition, change or elimination (A) shall
neither (1) apply to any Debt Security of any series created prior to the
execution of such amendment and entitled to the benefit of such provision, nor
(2) modify the rights of a holder of any such Debt Security with respect to such
provision, or (B) shall become effective only when there is no outstanding Debt
Security of any series created prior to such amendment and entitled to the
benefit of such provision; (vi) to make any change that does not adversely
affect in any material respect the interest of any holder; or (vii) to establish
additional series of Debt Securities as permitted by the Indenture.

The Holders of a majority in principal amount of the then outstanding Debt
Securities of any series, by notice to the Trustee, may waive an existing
Default or Event of Default and its consequences except a Default or Event of
Default in the payment of the principal of, or any interest on, any Debt
Security with respect to the Debt Securities of that series; provided, however,
that the Holders of a majority in principal amount of the outstanding Debt
Securities of any series may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration.

DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES

The following provisions of the Indenture will be applicable to each series
of Debt Securities unless otherwise specified in the Prospectus Supplement
pursuant to which such Debt Securities are offered.

Legal Defeasance. The Indenture will provide that the Company may be
discharged from any and all obligations in respect of the Debt Securities of any
series (except for certain obligations to register the transfer or exchange of
Debt Securities of such series, to replace stolen, lost or mutilated Debt
Securities of such series, and to maintain paying agencies) upon the deposit
with the Trustee, in trust, of money and/or U.S. government obligations, that,
through the payment of interest and principal in respect thereof in accordance
with their terms, will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants to pay and
discharge each installment of principal and premium and interest, if any, on and
any mandatory sinking fund payments in respect of the Debt Securities of such
series on the stated maturity of such payments or on the applicable redemption
date, as the case may be, in accordance with the terms of the Indenture and such
Debt Securities. Such discharge may occur only if, among other things, the
Company has received from, or there has been published by, the United States
Internal Revenue Service a
11
<PAGE> 84

ruling, or, since the date of execution of the Indenture, there has been a
change in the applicable United States federal income tax law, in either case to
the effect that Holders of the outstanding Debt Securities of such series will
not recognize income, gain or loss for United States federal income tax purposes
as a result of such deposit, defeasance and discharge and will be subject to
United States federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit, defeasance and
discharge had not occurred.

Defeasance of Certain Covenants. The Indenture will provide that, upon
compliance with certain conditions, the Company may elect to have the
obligations of the Company released with respect to certain covenants contained
in the Indenture, as well as any additional covenants or Events of Default
contained in a supplement to the Indenture, a Board Resolution or an Officers'
Certificate delivered pursuant thereto and thereafter any omission to comply
with such obligations shall not constitute a Default or Event of Default with
respect to any series of Debt Securities. The conditions include: (i) the
deposit with the Trustee of money and/or U.S. government obligations, that,
through the payment of interest and principal in respect thereof in accordance
with their terms, will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants to pay principal
and premium and interest, if any, on and any mandatory sinking fund payments in
respect of the Debt Securities of such series on the stated maturity or on the
applicable redemption date, as the case may be, of such payments in accordance
with the terms of the Indenture and such Debt Securities; (ii) the delivery to
the Trustee of an opinion of counsel in the United States reasonably acceptable
to the Trustee to the effect that the Holders of the Debt Securities of such
series will not recognize income, gain or loss for United States federal income
tax purposes as a result of such deposit and related covenant defeasance and
will be subject to United States federal income tax in the same amount and in
the same manner and at the same times as would have been the case if such
deposit and related covenant defeasance had not occurred; (iii) the delivery to
the Trustee of an opinion of counsel to the effect that after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; and (iv) the delivery to the Trustee of an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of defeating, hindering, delaying, or defrauding creditors of the
Company or others.

Defeasance and Events of Default. In the event that the Company exercises
its option to omit compliance with certain covenants of the Indenture with
respect to any series of Debt Securities and the Debt Securities of such series
are declared due and payable because of the occurrence of any Event of Default,
the amount of money and/or U.S. government obligations on deposit with the
Trustee will be sufficient to pay amounts due on the Debt Securities of such
series at the time of their stated maturity but may not be sufficient to pay
amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. However, the Company will
remain liable for such payments.

REGARDING THE TRUSTEE

The Trustee for the Debt Securities will be identified in the Prospectus
Supplement relating to such Debt Securities. The Indenture and provisions of the
TIA incorporated by reference therein contain certain limitations on the rights
of the Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim, as security or otherwise. The Trustee and its affiliates may
engage in, and will be permitted to continue to engage in, other transactions
with the Company and its affiliates; provided, however, that if it acquires any
conflicting interest (as defined in the TIA), it must eliminate such conflict or
resign.

The Holders of a majority in principal amount of the then outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee. The TIA and the Indenture provide that in case an Event of Default
shall occur (and be continuing), the Trustee will be required, in the exercise
of its rights and powers, to use the degree of care and skill of a prudent
person in the conduct of such person's affairs. Subject to such provision, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request of any of the Holders of the Debt Securities
issued thereunder, unless they have offered to the Trustee indemnity
satisfactory to it against any loss, liability, or expense.
12
<PAGE> 85

PLAN OF DISTRIBUTION

The Company may sell the Securities to one or more underwriters for public
offering and sale by them and may also sell the Securities to investors directly
or through agents. Any such underwriter or agent involved in the offer and sale
of Securities will be named in the applicable Prospectus Supplement. The Company
has reserved the right to sell or exchange Securities directly to investors on
its own behalf in those jurisdictions where and in such manner as it is
authorized to do so.

The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, or at negotiated prices. Sales of Common Stock offered
hereby may be effected from time to time in one or more transactions on the NYSE
or in negotiated transactions or a combination of such methods. The Company may
also, from time to time, authorize dealers, acting as the Company's agents, to
offer and sell Securities upon such terms and conditions as are set forth in the
applicable Prospectus Supplement. In connection with the sale of Securities,
underwriters may receive compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agent. Any such
underwriter, dealer or agent will be identified, and any such compensation
received from the Company will be described, in the Prospectus Supplement.
Unless otherwise indicated in a Prospectus Supplement, an agent will be acting
on a best efforts basis and a dealer will purchase Securities as a principal,
and may than resell such Securities at varying prices to be determined by the
dealer.

Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Dealers and agents participating in the
distribution of Securities may be deemed to be underwriters, and any discounts
and commissions received by them and any profit realized by them on resale of
the Securities may be deemed to be underwriting discounts and commissions.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act, and to
reimbursement by the Company for certain expenses.

To facilitate an offering of Securities, certain persons participating in
the offering may engage in transactions that stabilize, maintain, or otherwise
affect the price of the Securities. This may include over-allotments or short
sales of the Securities, which involves the sale by persons participating in the
offering of more Securities than have been sold to them by the Company. In such
circumstances, such persons would cover such over-allotments or short positions
by purchasing in the open market or by exercising the over-allotment option
granted to such persons. In addition, such persons may stabilize or maintain the
price of the Securities by bidding for or purchasing Securities in the open
market or by imposing penalty bids, whereby selling concessions allowed to
dealers participating in any such offering may be reclaimed if Securities sold
by them are repurchased in connection with stabilization transactions. The
effect of these transactions may be to stabilize or maintain the market price of
the Securities at a level above that which might otherwise prevail in the open
market. Such transactions, if commenced, may be discontinued at any time.

Certain of the underwriters, dealers or agents and their associates may
engage in transactions with and perform services for the Company in the ordinary
course of business, including providing interim financing for the HPG
Acquisition. See "Use of Proceeds."

13
<PAGE> 86

LEGAL MATTERS

Certain legal matters with respect to the Securities offered hereby will be
passed upon for the Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel,
P.A., Miami, Florida. If the Securities are distributed in an underwritten
offering or through agents, certain legal matters may be passed upon for any
agents or underwriters by counsel for such agents or underwriters identified in
the applicable Prospectus Supplement.

EXPERTS

14
<PAGE> 87

TABLE OF CONTENTS
WINDMERE-DURABLE HOLDINGS, INC.

<TABLE>
<S> <C>
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Auditor's Report of Independent Certified Public
Accountants............................................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-8
Schedule II -- Valuation and Qualifying Accounts............ F-29
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Consolidated Statements of Earnings......................... F-30
Consolidated Balance Sheets................................. F-31
Consolidated Statements of Cash Flows....................... F-32
Notes to Consolidated Financial Statements.................. F-33
</TABLE>

HOUSEHOLD PRODUCTS GROUP
EXCLUDING CLEANING AND LIGHTING PRODUCT LINES
(A COMPONENT OF THE BLACK & DECKER CORPORATION)

<TABLE>
<S> <C>
Combined Statement of Financial Position as of December 31,
1997 and 1996............................................. F-41
Combined Statement of Operations for the Years Ended
December 31, 1997, 1996 and 1995.......................... F-42
Combined Statement of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995.......................... F-43
Combined Statement of Changes in Owner's Net Investment for
the Years Ended December 31, 1997, 1996 and 1995.......... F-44
Notes to Combined Financial Statements...................... F-45
Report of Independent Auditors.............................. F-56
Interim Combined Statement of Financial Position............ F-57
Interim Combined Statement of Operations.................... F-58
Interim Combined Statement of Cash Flows.................... F-59
Interim Combined Statement of Changes in Owner's Net
Investment................................................ F-60
Notes to Interim Combined Financial Statements.............. F-61
</TABLE>

F-1
<PAGE> 88

REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Windmere-Durable Holdings, Inc.

We have audited the accompanying consolidated balance sheets of
Windmere-Durable Holdings, Inc. and Subsidiaries (the "Company") as of December
31, 1997 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
Windmere-Durable Holdings, Inc. and Subsidiaries at December 31, 1997 and 1996,
and the consolidated results of their operations and their consolidated cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.

We have also audited Schedule II of Windmere-Durable Holdings, Inc. and
Subsidiaries for each of the three years in the period ended December 31, 1997.
In our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.

GRANT THORNTON LLP

Miami, Florida
February 10, 1998

F-2
<PAGE> 89

WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note A)........................ $ 8,223,900 $ 8,779,500
Accounts and other receivables, less allowances of
$1,111,300 in 1997 and $1,128,700 in 1996 (Note E)..... 43,338,000 37,601,200
Receivables from affiliates (Notes A, C and P)............ 15,291,200 12,138,800
Inventories (Notes A and E)............................... 102,172,400 89,514,000
Prepaid expenses.......................................... 4,617,600 3,751,100
Refundable income taxes (Notes A and I)................... 5,043,100 --
Future income tax benefits (Notes A, I and S)............. 1,274,100 3,231,800
------------ ------------
Total current assets.............................. 179,960,300 155,016,400
INVESTMENTS IN JOINT VENTURES (Notes A, C and J)............ 43,090,800 35,290,800
PROPERTY, PLANT AND EQUIPMENT -- AT COST, less accumulated
depreciation (Notes A and D).............................. 37,199,400 32,759,800
NOTES RECEIVABLE FROM AFFILIATE (Note P).................... 7,798,800 --
OTHER ASSETS (Notes A, I and J)............................. 13,797,800 14,211,900
------------ ------------
$281,847,100 $237,278,900
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and acceptances payable (Note E).................... $ 42,981,600 $ 21,882,500
Current maturities of long-term debt (Note G)............. 3,814,800 814,800
Accounts payable.......................................... 14,600,500 12,106,500
Accrued expenses (Notes F and R).......................... 12,237,800 14,228,700
Deferred income, current portion (Note A)................. 247,500 419,400
------------ ------------
Total current liabilities......................... 73,882,200 49,451,900
LONG-TERM DEBT, less current maturities (Note G)............ 16,069,800 19,884,700
DEFERRED INCOME, less current portion (Note A).............. 1,073,800 247,500
COMMITMENTS AND CONTINGENCIES (Note K)...................... -- --
STOCKHOLDERS' EQUITY (Notes A, L and M)
Special preferred stock -- authorized 40,000,000 shares of
$.01 par value; none issued............................ --
Common stock -- authorized 40,000,000 shares of $.10 par
value; issued 18,119,147 in 1997 and 17,445,146 in
1996................................................... 1,811,900 1,744,500
Paid-in capital........................................... 41,024,100 35,765,900
Retained earnings......................................... 149,087,500 130,965,100
Unrealized foreign currency translation adjustment........ (1,102,200) (780,700)
------------ ------------
Total stockholders' equity........................ 190,821,300 167,694,800
------------ ------------
$281,847,100 $237,278,900
============ ============
</TABLE>

The accompanying notes are an integral part of these statements
F-3
<PAGE> 90

WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Sales and other revenues (Note R)................ $261,885,100 $197,003,600 $187,776,900
Cost of goods sold............................... 197,507,200 157,278,400 146,907,300
------------ ------------ ------------
Gross profit................................... 64,377,900 39,725,200 40,869,600
Selling, general and administrative expenses..... 50,349,200 39,425,100 37,625,100
Unusual or non-recurring items (Note B).......... -- -- 8,000,000
------------ ------------ ------------
Operating profit (loss)........................ 14,028,700 300,100 (4,755,500)
Other (income) expense
Interest expense............................... 3,351,100 1,345,900 578,300
Interest and other income...................... (2,727,500) (2,418,800) (2,561,800)
------------ ------------ ------------
623,600 (1,072,900) (1,983,500)
------------ ------------ ------------
Earnings (loss) before equity in net
earnings (loss) of joint ventures, income
taxes and extraordinary item.............. 13,405,100 1,373,000 (2,772,000)
Equity in net earnings (loss) of joint ventures
(Notes A, C and J)............................. 7,353,200 2,298,700 (392,600)
------------ ------------ ------------
Earnings (loss) before income taxes and
extraordinary item........................ 20,758,300 3,671,700 (3,164,600)
Income taxes (benefit) (Notes A and I)
Current........................................ (3,272,000) (716,300) (1,242,700)
Deferred....................................... 4,195,000 436,600 (38,100)
------------ ------------ ------------
923,000 (279,700) (1,280,800)
------------ ------------ ------------
Earnings (loss) before extraordinary item... 19,835,300 3,951,400 (1,883,800)
Extraordinary item (Note S)...................... -- (3,500,000) --
------------ ------------ ------------
Net earnings (loss)......................... $ 19,835,300 $ 451,400 $ (1,883,800)
============ ============ ============
Per share data (Notes A, L and S)
Earnings (loss) per common share -- basic
before effect of extraordinary item......... $ 1.12 $ .23 $ (.11)
Extraordinary item.......................... -- (.20) --
------------ ------------ ------------
Net earnings................................ $ 1.12 $ .03 $ (.11)
============ ============ ============
Earnings (loss) per common share -- diluted.... $ 1.00 $ .23 $ (.11)
Extraordinary item.......................... -- (.20) --
------------ ------------ ------------
Net earnings................................ $ 1.00 $ .03 $ (.11)
============ ============ ============
Dividends per common share..................... $ .10 $ .20 $ .20
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these statements.
F-4
<PAGE> 91

WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
THREE YEARS ENDED DECEMBER 31, 1997
-----------------------------------------------------
UNREALIZED
FOREIGN
CURRENCY
COMMON PAID-IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENT
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1995............... $1,673,400 $30,648,700 $139,088,800 $ (785,900)
Net loss................................. -- -- (1,883,800) --
Cash dividends -- $.20 per share......... -- -- (3,353,600) --
Purchase and retirement of 139,600 shares
of common stock........................ (14,000) (997,400) -- --
Exercise of stock options and warrants... 11,900 414,400 -- --
Tax benefit resulting from exercise of
stock options.......................... -- 242,800 -- --
Cost of intercompany recapitalization.... -- (135,500) -- --
Unrealized foreign currency translation
adjustment............................. -- -- -- 20,700
---------- ----------- ------------ -----------
Balance at December 31, 1995............. 1,671,300 30,173,000 133,851,400 (765,200)
Net earnings............................. -- -- 451,400 --
Cash dividends -- $.20 per share......... -- -- (3,337,700) --
Purchase and retirement of 463,000 shares
of common stock........................ (46,300) (3,721,800) -- --
Exercise of stock options and warrants... 44,700 2,531,500 -- --
Tax benefit resulting from exercise of
stock options.......................... -- 183,600 -- --
Fair value of options to non-employees... -- 617,000 -- --
Issuance of 748,112 shares -- acquisition
of 50% of Salton/Maxim Housewares,
Inc.................................... 74,800 5,982,600 -- --
Unrealized foreign currency translation
adjustment............................. -- -- -- (15,500)
---------- ----------- ------------ -----------
Balance at December 31, 1996............. 1,744,500 35,765,900 130,965,100 (780,700)
Net earnings............................. -- -- 19,835,300 --
Cash dividends -- $.10 per share......... -- -- (1,712,900) --
Exercise of stock options and warrants... 67,400 1,675,200 -- --
Tax benefit resulting from exercise of
stock options.......................... -- 3,493,000 -- --
Fair value of options to non-employees... -- 90,000 -- --
Unrealized foreign currency translation
adjustment............................. -- -- -- (321,500)
---------- ----------- ------------ -----------
Balance at December 31, 1997............. $1,811,900 $41,024,100 $149,087,500 $(1,102,200)
========== =========== ============ ===========
</TABLE>

The accompanying notes are an integral part of this statement.
F-5
<PAGE> 92

WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings (loss)................................. $ 19,835,300 $ 451,400 $(1,883,800)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities
Depreciation of property, plant and equipment.... 6,856,600 6,377,900 6,218,300
Amortization of intangible assets................ 840,700 613,400 561,100
Loss on sale of other asset (Note B)............. -- -- 8,000,000
Net change in allowance for losses on accounts
receivable..................................... (17,400) (29,300) (180,100)
Consulting expense on non-employee stock
options........................................ 90,000 68,000 --
Amortization of deferred income.................. (334,400) (598,100) (598,100)
Undistributed equity in (earnings) loss of joint
ventures....................................... (7,537,300) (2,762,700) 392,600
Gain on sale of assets........................... 988,800 -- --
Changes in assets and liabilities
Decrease (increase) in accounts and other
receivables................................. (5,719,400) 149,600 2,316,100
Decrease (increase) in inventories............. (12,658,400) 534,700 (4,735,200)
Decrease (increase) in prepaid expenses........ (866,500) (709,600) 5,836,900
Increase in accounts payable and accrued
expenses.................................... 503,100 7,714,400 1,005,800
(Decrease) in current and deferred income
taxes....................................... (2,250,000) (1,405,300) (1,829,300)
(Increase) decrease in other assets............ 2,231,000 (783,600) (1,073,300)
Decrease (increase) in other accounts.......... (321,500) (14,000) 20,700
------------ ------------ -----------
Net cash provided by operating activities... 1,640,600 9,606,800 14,051,700
Cash flows from investing activities
Proceeds from fixed asset sales..................... -- -- 129,600
Additions to property, plant and equipment.......... (11,296,200) (8,618,200) (8,383,500)
(Decrease) increase in short-term investments....... -- -- 2,500,000
Purchase of assets -- LitterMaid(TM), Inc. ......... -- (2,246,000) --
Purchase of assets -- Bay Books and Tapes, Inc. .... -- (1,180,000) --
Investments in joint ventures....................... (262,700) (7,745,400) --
Decrease (increase) in receivable accounts and notes
from affiliates.................................. (10,951,200) (15,301,600) 2,068,900
------------ ------------ -----------
Net cash used in investing activities....... (22,510,100) (35,091,200) (3,685,000)
Cash flows from financing activities
Net borrowings under lines of credit................ 21,099,100 21,840,200 (697,800)
Payments of long-term debt.......................... (814,900) (814,800) (814,900)
Exercises of stock options and warrants............. 1,742,600 2,576,200 426,300
Cash dividends paid................................. (1,712,900) (3,337,700) (3,353,600)
Purchases of common stock........................... -- (3,768,100) (1,011,400)
Cost of intercompany recapitalization............... -- -- (135,500)
------------ ------------ -----------
Net cash provided by (used in) financing
activities................................ 20,313,900 16,495,800 (5,586,900)
------------ ------------ -----------
Increase (decrease) in cash and cash equivalents...... (555,600) (8,988,600) 4,779,800
Cash and cash equivalents at beginning of year........ 8,779,500 17,768,100 12,988,300
------------ ------------ -----------
Cash and cash equivalents at end of year.............. $ 8,223,900 $ 8,779,500 $17,768,100
============ ============ ===========
</TABLE>

F-6
<PAGE> 93

WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest............................................ $ 3,187,200 $ 1,488,200 $ 488,500
Income taxes........................................ $ 33,700 $ 548,400 $ 2,181,800
Non-cash investing and financing activities:
Tax benefit resulting from exercise of stock
options.......................................... $ 3,493,000 $ 183,600 $ 242,800
Valuation of non-employee stock options under SFAS
123 (LitterMaid(TM) acquisition)................. $ -- $ 549,000 $ --
In 1996, the Company purchased a 50-percent interest
in New M-Tech Corporation in exchange for
$3,000,000 in cash and $7,000,000 in long-term
promissory notes.
In 1996, the Company purchased a 50-percent interest
in Salton/Maxim Housewares, Inc. in exchange for
$3,254,300 in cash, 748,112 shares of Windmere
common stock (valued at $6,057,000) and a
$10,847,700 promissory note.
In 1996, the Company acquired the remaining
50-percent of its seasonal products joint venture
for a nominal amount. In conjunction with the
acquisition, the Company obtained the following
assets and liabilities:
Cash............................................. $ 1,102,300
Accounts receivable.............................. 1,124,200
Inventory........................................ 10,305,100
Prepaid and other assets......................... 74,600
Less liabilities assumed......................... (13,883,600)
------------
Goodwill......................................... $ 1,277,400
============
</TABLE>

The accompanying notes are an integral part of these statements.
F-7
<PAGE> 94

WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995

NOTE A -- SUMMARY OF ACCOUNTING POLICIES

Windmere-Durable Holdings, Inc. and Subsidiaries (the "Company") is
principally engaged in the manufacture and sale of personal care, kitchen
electric and seasonal products. In preparing financial statements in conformity
with generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates. A summary of the
Company's significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Intercompany balances and transactions are
eliminated in consolidation. The Company reflects its investments in its
50%-owned joint ventures at cost plus its equity in undistributed net earnings.

Foreign Currency Translation

Balance sheet accounts of the Company's foreign operations are translated
at the exchange rate in effect at each year end and income statement accounts
are translated at the average exchange rates prevailing during the year.
Adjustments resulting from this translation process are accumulated in a
separate component of stockholders' equity and are not included in the
determination of net earnings. The Company's foreign manufacturing subsidiary
utilizes the local currency as its functional currency, and the other foreign
subsidiaries primarily utilize the U.S. dollar as their functional currency.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of
three months or less at the time of purchase to be cash equivalents. Cash
balances at December 31, 1997 include $4,741,000 held in foreign banks by the
Company's Hong Kong and Canadian subsidiaries.

Inventories

Inventories are stated at the lower of cost or market; cost is determined
by the first-in, first-out method. Inventories are comprised of the following:

<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Raw materials............................................ $ 13,327,400 $13,824,300
Work in process.......................................... 21,062,400 20,551,900
Finished goods........................................... 67,782,600 55,137,800
------------ -----------
$102,172,400 $89,514,000
============ ===========
</TABLE>

Receivables from Affiliates

Receivables from affiliates include accounts receivable which arise in the
ordinary course of business and are settled as trade obligations, as well as
notes receivable due from certain of the Company's joint venture partners
("affiliates"). Notes receivable from these affiliates are due upon demand and
bear interest at prevailing market interest rates (Note C).

F-8
<PAGE> 95
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Property, Plant and Equipment

Depreciation and amortization are provided for in amounts sufficient to
relate the cost of depreciable assets to their estimated operating service lives
using accelerated and straight-line methods.

Intangible Assets

Intangible assets, consisting primarily of goodwill, are being amortized on
a straight-line basis over periods ranging from 7-20 years. Intangible assets
were $13,955,300 and $13,704,600 at December 31, 1997 and 1996, respectively,
and the related accumulated amortization was $3,502,000 and $2,700,700,
respectively.

On an ongoing basis, management reviews the valuation and amortization of
goodwill. As part of this review, the Company estimates the value and future
benefits of the net income generated by the related subsidiaries to determine
that no impairment has occurred.

Fair Value of Financial Instruments

Financial instruments consist primarily of cash and cash equivalents,
accounts receivable, notes receivable, accounts payable, notes payable and bank
debt. At December 31, 1997, the fair value of these instruments approximates the
carrying amount of these items.

Derivative Financial Instruments

The Company uses forward exchange contracts to reduce fluctuations in
foreign currency cash flows related to third party raw material and other
operating purchases. The terms of the currency instruments used are generally
consistent with the timing of the committed or anticipated transactions being
hedged. The purpose of the Company's foreign currency management activity is to
protect the Company from the risk that eventual cash flows from foreign currency
denominated transactions may be adversely affected by changes in exchange rates.
Gains and losses on forward exchange contracts are deferred and recognized in
income when the related transactions being hedged are recognized. Such gains and
losses are reported on the same financial statement line as the hedged
transaction. The Company does not use derivative financial instruments for
trading or speculative purposes. Outstanding at December 31, 1997, are
$7,000,000 in contracts to purchase Hong Kong dollars forward. There is no
significant unrealized gain or loss on these contracts. All contracts have terms
of six months or less. A deposit of $500,000 is held by the issuer as collateral
on the contracts. No such contracts existed at December 31, 1996.

Income Taxes

No provision has been made for U.S. taxes on undistributed earnings of
foreign subsidiaries and joint ventures of approximately $125,000,000 at
December 31, 1997, as it is anticipated that such earnings will be reinvested in
their respective operations or in other foreign operations.

Deferred taxes have been provided on temporary differences in reporting
certain transactions for financial accounting and tax purposes.

Advertising Costs

Advertising costs are expensed as incurred and are included in selling,
general and administrative expenses.

F-9
<PAGE> 96
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Earnings Per Share

The Company adopted Financial Accounting Standards No. 128 (FAS 128),
"Earnings Per Share" in 1997. FAS 128 requires dual presentation of basic and
diluted earnings per share on the face of the income statement as well as the
restatement of prior periods presented.

<TABLE>
<CAPTION>
NET EARNINGS
(BEFORE
EXTRAORDINARY BASIC BASIC DILUTED DILUTED
ITEM) SHARES EPS SHARES EPS
------------- ---------- ----- ---------- -------
<S> <C> <C> <C> <C> <C>
1997................................ $19,835,300 17,654,772 $1.12 19,776,183 $1.00
1996................................ $ 3,951,400 16,846,418 $ .23 17,558,275 $ .23
1995................................ $(1,883,800) 16,758,955 $(.11) 17,236,873 $(.11)
</TABLE>

Included in diluted shares are common stock equivalents relating to
options, warrants and convertible debt of 2,121,411, 711,857, and 477,918 for
1997, 1996 and 1995, respectively. Options to purchase 34,000 shares of common
stock at prices ranging from $18.38 to $24.19, which were outstanding during
1997, were not included in the computation of diluted EPS because the options'
exercise prices were greater than the annual average market price of the common
shares. These options were granted in 1997 and become exercisable over the next
six years.

Basic and diluted earnings per share for 1996 are $.03 after the effect of
the extraordinary charge of $3,500,000 or $.20 per share for settlement of the
Izumi case (Note S).

Recent Accounting Pronouncements

Reclassifications

Certain prior year amounts within the accompanying financial statements
have been reclassified for comparability.

NOTE B -- UNUSUAL OR NON-RECURRING ITEMS

In 1995, the Company incurred a non-recurring pre-tax loss of $8,000,000 on
the sale of an other asset. This transaction reduced 1995 net earnings by
$5,280,000, or $.31 per share, on an after-tax basis.

NOTE C -- INVESTMENTS IN JOINT VENTURES

Investments in joint ventures consist of the Company's interests in joint
ventures, accounted for under the equity method. Included are the Company's
50-percent interests in Salton/Maxim Housewares, Inc. ("Salton"), New M-Tech
Corporation ("New M-Tech"), PX Distributors, Inc. ("PX"), Breakroom of
Tennessee, Inc. and Anasazi Partners, L.P. ("Anasazi").

F-10
<PAGE> 97
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In December 1996, the Company acquired the remaining 50 percent of its
seasonal products joint venture for a nominal amount. The results of operations
of the joint venture have been excluded from the summarized financial
information below for 1997.

Summarized financial information of the unconsolidated companies is as
follows:

<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Current assets.......................................... $189,169,000 $ 85,536,000
Non-current assets...................................... 41,623,000 32,524,000
------------ ------------
Total assets............................................ $230,792,000 $118,060,000
============ ============
Current liabilities..................................... $158,045,000 $ 65,991,000
Non-current liabilities................................. 2,544,000 889,000
------------ ------------
Total liabilities....................................... $160,589,000 $ 66,880,000
============ ============
Sales................................................... $467,549,000 $162,368,000
============ ============
Gross profit............................................ $105,941,000 $ 34,312,000
============ ============
Net earnings (loss)..................................... $ 15,885,000 $ 5,552,000
============ ============
</TABLE>

All sales made by joint ventures, other than sales of $1,250,000 and
$935,000 by Salton to the Company in 1997 and 1996, respectively, were to
entities other than members of the consolidated group. Included in the Company's
sales are sales made to joint ventures of approximately $37,226,200, $17,855,400
and $7,485,300 in 1997, 1996 and 1995, respectively.

Commencing in 1997, the Company provided New M-Tech with certain
administrative services for a monthly management fee. In 1997, the total amount
received from New M-Tech for such fees was approximately $93,200.

The Company's loans to certain of its joint ventures totaled $9,854,100 and
$8,045,800 at December 31, 1997 and 1996, respectively. The 1997 amount excludes
notes receivable totaling $8,183,000 from the sale of assets by the Company's
manufacturing subsidiary (Note P). The Company also has provided a $9.0 million
corporate guarantee as support for a credit facility obtained by one of its
joint ventures.

NOTE D -- PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property, plant and equipment:

<TABLE>
<CAPTION>
USEFUL LIVES 1997 1996
------------------ ----------- -----------
<S> <C> <C> <C>
Building.......................... 15 -- 50 years $ 7,784,400 $ 6,315,400
Building improvements............. 8 -- 31 years 1,925,600 2,220,200
Computer equipment................ 3 -- 5 years 6,045,500 5,173,300
Furniture and equipment........... 3 -- 8 years 59,128,200 54,853,600
Leasehold improvements............ 8 years 9,984,600 8,443,700
Land and land improvements........ 15 -- 31 years 2,660,100 2,660,100
----------- -----------
(Improvements only) 87,528,400 79,666,300
Less accumulated depreciation and
amortization.................... 50,329,000 46,906,500
=========== ===========
$37,199,400 $32,759,800
=========== ===========
</TABLE>

F-11
<PAGE> 98
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE E -- NOTES AND ACCEPTANCES PAYABLE

The Company's foreign subsidiaries (the "subsidiaries") have $14,600,000 in
trade finance lines of credit, payable on demand, which are collateralized by
the subsidiaries' tangible and intangible property located in Hong Kong and in
the People's Republic of China, as well as a Company guarantee. At December 31,
1997, the subsidiaries were utilizing, including letters of credit,
approximately $3,400,000 of these credit lines. These subsidiaries also have
available an additional $5,000,000 line of credit which is supported by a
domestic standby letter of credit. As of December 31, 1997, $1,500,000 was being
utilized under this facility.

The Company has a $45,000,000 line of credit from a domestic bank, which is
collateralized by domestic accounts receivable and inventory. At December 31,
1997, there was $41,500,000 outstanding under this credit line. Borrowings under
the line bear interest at LIBOR plus 1.5 percent, (7.2% at December 31, 1997).

NOTE F -- ACCRUED EXPENSES

Accrued expenses are summarized as follows:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Advertising allowances.................................. $ 1,307,200 $ 1,075,600
Salaries and bonuses.................................... 2,823,600 1,879,300
Volume rebates.......................................... 1,586,000 1,325,600
Extraordinary litigation settlement..................... -- 5,300,000
Other................................................... 6,521,000 4,648,200
----------- -----------
$12,237,800 $14,228,700
=========== ===========
</TABLE>

NOTE G -- LONG-TERM DEBT

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Note payable to Salton (Note J)......................... $10,847,700 $10,847,700
Notes payable to New M-Tech Corporation (Note J)........ 7,000,000 7,000,000
Industrial development revenue bonds.................... 2,036,900 2,851,800
----------- -----------
19,884,600 20,699,500
Less current maturities................................. 3,814,800 814,800
----------- -----------
Total long-term debt.................................... $16,069,800 $19,884,700
=========== ===========
</TABLE>

In 1985, the Company received proceeds of $7,500,000 from the issuance of
tax-exempt industrial development revenue bonds. The bonds are being paid off in
equal quarterly principal payments of $203,700 through May 2000. At December 31,
1997, the interest rate on the bonds was 6.70%. The bonds include certain
covenants which provide, among other things, restrictions relating to the
maintenance of minimum levels of working capital, net worth and other financial
ratios. These bonds are unsecured (Note I).

NOTE H -- EMPLOYEE BENEFIT PLANS

The Company has a 401(k) plan for its employees to which the Company makes
discretionary contributions at rates dependent on the level of each employee's
contributions. Contributions made by the Company are limited to the maximum
allowable for federal income tax purposes. The amounts charged to earnings for
this plan during the three years ended December 31, 1997 were not significant.

The Company does not provide any health or other benefits to retirees.

F-12
<PAGE> 99
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE I -- INCOME TAXES

Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
1997 1996 1995
----------- --------- -----------
<S> <C> <C> <C>
Current
Federal.................................. $(3,274,000) $(748,200) $(1,392,300)
Foreign.................................. (2,100) 183,800
State.................................... 2,000 34,000 (34,200)
----------- --------- -----------
(3,272,000) (716,300) (1,242,700)
Deferred................................... 4,195,000 436,600 (38,100)
----------- --------- -----------
$ 923,000 $(279,700) $(1,280,800)
=========== ========= ===========
</TABLE>

The analysis of the deferred income tax provision (benefit) representing
the tax effects of temporary differences between tax and financial reporting is
as follows:

<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Intercompany profit in inventory.............. $ (13,900) $ (2,700) $ (72,500)
Differences in timing between financial and
tax reporting............................... 1,879,000 145,700 49,300
Utilization of net operating loss
carryforward................................ 1,678,200 356,200 220,100
Deferred income............................... 157,300 224,300 224,300
Depreciation and amortization................. 567,200 (246,900) (303,800)
Other......................................... (72,800) (40,000) (155,500)
---------- --------- ---------
$4,195,000 $ 436,600 $ (38,100)
========== ========= =========
</TABLE>

The United States and foreign components of earnings (loss) before income
taxes are as follows:

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
United States............................... $ 7,521,200 $(2,253,800) $(8,056,300)
Foreign..................................... 13,237,100 5,925,500 4,891,700
----------- ----------- -----------
$20,758,300 $ 3,671,700 $(3,164,600)
=========== =========== ===========
</TABLE>

The differences between the statutory rates and the tax rates computed on
pre-tax profits are as follows:

<TABLE>
<CAPTION>
1997 1996 1995
% % %
----- ----- -----
<S> <C> <C> <C>
Tax expense (benefit) at statutory rates.................... 34.0% 34.0% (34.0)%
State taxes, net of federal tax benefit..................... -- .6 (.7)
Foreign (income) loss not subject to tax.................... -- (6.4) 2.6
Provision for prior years' Hong Kong income taxes........... -- (.6) 12.3
Net tax rate differential on undistributed foreign
earnings.................................................. (23.5) (17.3) (25.6)
Equity in joint venture earnings not subject to U.S. tax or
already taxed............................................. (11.1) (25.7) (4.2)
Effect of gross up of foreign taxes, net of foreign tax
credit.................................................... (.2) (4.0) (4.1)
Federal withholding taxes................................... 1.2 6.7 7.8
Other....................................................... 4.1 5.1 5.4
----- ----- -----
4.5% (7.6)% (40.5)%
===== ===== =====
</TABLE>

F-13
<PAGE> 100
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In 1995, the Company reached an agreement with the Hong Kong Inland Revenue
Department concerning the taxes assessed against the Company's consolidated Hong
Kong subsidiaries through 1991. The assessment, including interest charges and
net of U.S. foreign tax credits, approximated $1,400,000. The Company made a
provision in 1995 of $400,000 or $.02 per share, to increase its contingency
reserve to the settlement amount. Security deposits of approximately $3,000,000
were refunded to the Company during 1995. Hong Kong tax returns for the fiscal
years 1992 through 1996 have been audited and accepted as filed.

The Internal Revenue Service has completed its examination of the Company's
1992 tax return. No material assessments were made. The Internal Revenue Service
is presently examining the Company's 1994 and 1995 income tax returns and the
Company's 401(k) Plan filings. It is also examining the Company's compliance
with the requirements supporting the deductibility of interest paid on the
Industrial Development Revenue Bonds. Management believes that adequate
provision for taxes has been made for the years under examination and those not
yet examined.

The Company's future income tax benefits at December 31, 1997, arise
primarily from the Company's and its subsidiaries' net operating loss
carryforwards. Valuation allowances have not been recorded limiting such
benefits based on management's current estimate that future profits will be
sufficient to realize these benefits.

The primary components of future income tax benefits at December 31, 1997
are as follows:

<TABLE>
<S> <C>
Net operating loss and other carryforwards.................. $ 4,489,800
Depreciation and amortization............................... (1,743,500)
Deferred income............................................. 131,800
Differences in timing between financial and tax reporting... 1,079,400
Extraordinary litigation settlement......................... --
Other....................................................... (25,800)
-----------
3,931,700
Less amount included in other assets........................ 1,274,100
-----------
$ 2,657,600
===========
</TABLE>

The tax benefits resulting from the exercise of stock options have been
recorded as additions to paid-in capital in the amounts of $3,493,000 and
$183,600 in 1997 and 1996, respectively.

The amounts and expiration years of the Company's tax carryforwards are as
follows:

<TABLE>
<CAPTION>
EXPIRATION
AMOUNT YEARS
----------- ----------
<S> <C> <C>
Federal net operating losses:
U.S. .................................................... $ 8,752,300 2012
Canada................................................... $ 721,400 2003
Hong Kong................................................ $ 100,900 Unlimited
States/Provincial net operating losses:
Florida.................................................. $19,960,600 2012
Ontario.................................................. $ 87,300 2003
</TABLE>

The Company also has U.S. tax credit carryforwards of $466,900, many of
which do not expire.

F-14
<PAGE> 101
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE J -- ACQUISITIONS

Salton/Maxim Housewares, Inc.

On July 11, 1996, Windmere completed its acquisition of 50-percent of
Salton. The Company received 6,508,572 shares of Salton common stock (market
value at date of acquisition of approximately $36.2 million) in exchange for a
cash payment of $3,254,300, a $10,847,700 promissory note and 748,112 shares of
Windmere stock (market value at date of agreement of approximately $6,057,000).
The total cost in excess of net assets acquired is not deemed to be material.

In addition, the Company received an option to purchase 453,000 shares of
Salton common stock at an exercise price of $4.83 per share. The option becomes
exercisable only if and to the extent that options to purchase shares of Salton
common stock outstanding at the date of the stock purchase agreement are
exercised. During 1997, the Company exercised 26,500 options under the terms of
the agreement.

The $10,847,700 promissory note bears interest at a rate of 8-percent per
annum, payable quarterly, and matures in July 2001. The note is subordinated to
the Company's current and future indebtedness to its senior lender and is
collateralized by certain of the Company's domestic assets.

Littermaid(TM)

In 1996, the Company purchased certain assets and marketing rights,
including patents, for the LitterMaid(TM), computerized, infrared, automatic
self-cleaning cat litter box. The purchase price of the assets included
$2,200,000 in cash and options to purchase 150,000 shares of the Company's
common stock. The total fair value of the options as determined under SFAS 123,
is $549,000 and has been included in the cost of the assets acquired (Note L).

New M-TECH Corporation

In April 1996, the Company acquired a 50-percent interest in New M-Tech
Corporation, a consumer electronics company for $10,000,000. Payment consisted
of $3,000,000 in cash and $7,000,000 in unsecured promissory notes. The
promissory notes bear interest at 8% per annum and consist of a $3,000,000
promissory note maturing in 1998, and two $2,000,000 promissory notes maturing
in 2001, one of which is convertible into shares of the Company's common stock
at a price of $15 per share. Conversion may occur at any time during the term of
the convertible promissory note, and may be required under certain
circumstances. The notes are subordinated to the Company's current and future
indebtedness to its senior lender. The total cost in excess of net assets
acquired of $5,300,000 has resulted in goodwill and is being amortized over 20
years on a straight-line basis.

Breakroom of Tennessee, Inc.

In May 1996, the Company agreed to contribute inventory valued at $250,000
in exchange for a 50-percent interest in Breakroom of Tennessee, Inc., a joint
venture formed to market and distribute office products.

Bay Books & Tapes, Inc.

In June 1996, the Company acquired the assets of the books and video
publishing division of KQED, Inc., consisting mostly of inventory, for
$1,180,000 in cash. Bay Books & Tapes, Inc. publishes public television
companion books and videos.

F-15
<PAGE> 102
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Anasazi Partners, L.P.

In June 1996, the Company acquired a 50-percent interest in an investment
partnership for $1,250,000. Payments as of December 31, 1997, include a
$1,500,000 capital contribution to the partnership and loans totaling $1,500,000
to the partnership's other equity partner. Such loans bear interest at a rate of
8-percent per annum, are unsecured and are payable upon demand.

The partnership's investments include certain privately traded securities
whose values have been estimated by the General Partner in the absence of
readily ascertainable market values. Fair value of these securities may differ
significantly from the values that would have been used had a ready market for
the securities existed.

Pro Forma

The results of operations on a pro forma basis as though Salton and New
M-Tech had been acquired as of the beginning of the year ended December 31, 1996
is as follows: (In Thousands except per share amounts)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1996 1995
------ -------
<S> <C> <C>
Equity in net earnings (loss) of joint ventures............. $2,152 $ (905)
Net loss.................................................... $ (306) $(2,482)
Loss per common and common equivalent share................. $ (.02) $ (.14)
</TABLE>

NOTE K -- COMMITMENTS AND CONTINGENCIES

Litigation

The Company, its 50-percent owned joint venture partners Salton/Maxim
Housewares, Inc. and New M-Tech Corporation, White Consolidated Industries, Inc.
("White Consolidated"), and certain other parties have been named as defendants
in litigation filed by Westinghouse Electric Corporation ("Westinghouse") in the
United States District Court for the Western District in Pennsylvania on
December 18, 1996. The action arises from a dispute between Westinghouse and
White Consolidated over rights to use the "Westinghouse" trademark for consumer
products, based on transactions between Westinghouse and White Consolidated in
the 1970's and the parties' subsequent conduct. Prior to the filing of
Westinghouse's complaint against the Company, White Consolidated, on November
14, 1996, filed a complaint in the United States District Court for the Northern
District of Ohio against Westinghouse and another corporation for trademark
infringement, dilution, false designation or origin and false advertisement,
seeking both injunctive relief and damages. Procedural motions concerning the
jurisdiction in which the dispute should be heard have been filed by the
parties. The action by Westinghouse seeks, among other things, a preliminary
injunction enjoining the defendants from using the trademark, unspecified
damages and attorneys' fees. Pursuant to the Indemnification Agreement dated
January 23, 1997 by and among White Consolidated, Kmart Corporation, and the
Company, White Consolidated is defending and indemnifying the Company for all
costs and expenses for claims, damages, and losses, including the costs of
litigation. Pursuant to the license agreements with White Consolidated, White
Consolidated is defending and indemnifying Salton/Maxim and New M-Tech for all
costs and expenses for claims, damages, and losses, including the costs of
litigation. On April 9, 1997, on joint motion of the parties, the court issued
an order staying future proceedings until the earlier of July 1, 1997 or five
days after hearing before the court in order to give the parties an opportunity
to pursue settlement discussions. Subsequently, after a status hearing before
the court on July 15, 1997, and in accordance with the court's memorandum order
of July 17, 1997, counsel for the parties in the litigation pending in the
United States District Court for the Western District of Pennsylvania reported
to the court in a letter that the parties had agreed to pursue an expedited
mini-trial/mediation proceeding in an effort to resolve their disputes. A

F-16
<PAGE> 103
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

mediation proceeding occurred and the parties were unable to reach a mediated
settlement. Discovery is proceeding and the matter is likely to be tried in late
1998.

The Company is also subject to other legal proceedings, product liability
and other claims which arise in the ordinary course of its business. In the
opinion of management, the amount of ultimate liability, if any, in excess of
applicable insurance coverage, is not likely to have a material effect on the
financial position of the Company. However, as the outcome of litigation or
other legal claims is difficult to predict, significant changes in the estimated
exposures could occur.

Employment Agreements

The Company has entered into employment agreements with several of its
executive officers for periods ranging from two to five years. The agreements
provide the employees with an option to terminate their agreements and receive
lump sum payments of up to five years compensation if there is a change in
control of the Company.

Leases

In January 1998, the Company entered into a long-term operating lease for a
warehouse facility. Future minimum payments under the lease, which commences
April 1998, are as follows:

<TABLE>
<S> <C>
1998.......................................... $ 472,500
1999.......................................... 1,161,600
2000.......................................... 1,338,800
2001.......................................... 1,338,800
2002.......................................... 1,338,800
Thereafter.................................... 7,028,400
-----------
$12,678,900
===========
</TABLE>

Other

In April 1994, the Company purchased from Ourimbah Investment, Limited
("Ourimbah") the remaining 20% of the issued and outstanding capital stock of
Durable (the "Purchased Shares") which had not, prior to such purchase, been
owned, directly or indirectly, by the Company. In connection with such purchase,
the Company agreed to make an additional payment to Ourimbah for the Purchased
Shares upon the occurrence of a change of control of the Company on or before
July 1, 1999. Any such additional payment will be in an amount with respect to
each Purchased Share equal to the greater of (i) the same multiple of earnings
per share of Durable as the highest multiple of earnings per share paid for the
shares of common stock of the Company received in connection with such change of
control or (ii) the same multiple of net asset value per share of Durable as the
highest multiple of price per net asset value per share paid for the shares of
common stock of the Company received in connection with such change of control.
For purposes of determining whether any such additional payment is required, a
change of control will be deemed to have occurred upon (i) the acquisition by
any person of 50% or more of the then outstanding shares of common stock of the
Company, (ii) a change in the majority of the members of the Company's board of
directors who are serving as of the date of the purchase agreement or (iii) the
approval by the Company's shareholders of (A) a reorganization, merger or
consolidation in which the shareholders of the Company prior to such transaction
do not, immediately thereafter, own more than 50% of the combined voting power
of the Company following such transaction, (B) a liquidation of dissolution of
the Company or (C) a sale of all or substantially all of the Company's assets.
No change of control will be deemed to have occurred in connection with any
transaction approved by a majority of the members of the board of directors.

F-17
<PAGE> 104
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In December 1997, the employment agreements of the senior members of
Salton's management expired. Disagreements arose between the management and the
members of the Salton board of directors who have been designated by the Company
under the Stockholders' Agreement between the two companies, dated July 11, 1996
(the "Windmere Directors"), as to the provisions to be contained in new
agreements or the terms under which management would continue to be employed by
Salton if no agreements were executed. During the course of these discussions,
Salton alleged that certain actions of the Company would breach the terms of the
July 11, 1996 Marketing Cooperation Agreement between the Company and Salton and
violate fiduciary duties to Salton. The Company and the Windmere Directors,
after being advised by legal counsel, vehemently disagree with the allegations
and although discussions are currently under way in an attempt to resolve these
issues, there can be no assurance that these negotiations will be successful. A
failure to resolve these disputes could have a material adverse effect on the
Company's business relationship with Salton.

NOTE L -- STOCKHOLDERS' EQUITY

Stock Options

The Company's 1982 and 1992 Employees' Incentive Stock Option Plans provide
for granting of options of not more than 1,200,000 shares and 500,000 shares,
respectively, of common stock. Options granted under the plans are exercisable
in equal annual installments during a five or six year period beginning one year
after the date the option is granted. The Company has also granted stock options
which are classified as non-qualified, and which are not included in the 1982 or
1992 Employees' Incentive Stock Option Plans.

In May 1997, the Company's shareholders approved and ratified the 1996
Stock Option Plan. The 1996 plan provides for the granting of incentive stock
options for employees and non-qualified stock options for employees, consultants
and directors. A total of 850,000 shares of common stock have been reserved
under the 1996 plan.

The exercise price of all options granted by the Company equals the market
price at the date of grant. No compensation expense has been recognized.

Prior to December 31, 1995, the Company accounted for non-qualified options
under APB Opinion 25 and related Interpretations. Commencing January 1, 1996,
the Company accounts for non-qualified options issued to non-employees, under
SFAS 123, Accounting for Stock Based Compensation.

During 1997, the Company issued options to purchase 25,000 shares to
non-employee sales representatives.

During 1996, the Company issued options to purchase 97,500 shares of common
stock to non-employee sales representatives. These sales representatives
included Top Sales and TJK (Note P), each of which received options to purchase
25,000 shares. The options were issued with an exercise price that was equal to
the market price on the date of the grant. The total fair value of the options,
as determined under SFAS 123, was $357,000, which is to be amortized over the
vesting period of the options. The 1997 and 1996 expense associated with
non-employee stock options totaled $90,000 and $68,000, respectively.

In connection with the 1996 purchase of certain assets of LitterMaid(TM),
the Company issued options for the purchase of 150,000 shares of common stock.
The total fair value of the options, as determined under SFAS 123, was $549,000
and has been included in the cost of purchasing the assets.

Had compensation cost for the Employees' Incentive Stock Option Plans and
non-qualified options issued to employees been determined based on the fair
value of the options at the grant dates consistent with the method of SFAS 123,
the Company's net earnings (loss) and earnings (loss) per share would have been
changed to the pro forma amounts indicated below.

F-18
<PAGE> 105
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net earnings (loss)
As reported............................... $19,835,300 $ 451,400 $(1,883,800)
Pro forma................................. $18,911,900 $(2,846,400) $(1,935,700)
Basic earnings (loss) per share
As reported............................... $ 1.12 $ .03 $ (.11)
Pro forma................................. $ 1.07 $ (.17) $ (.11)
Diluted earnings (loss) per share
As reported............................... $ 1.00 $ .03 $ (.11)
Pro forma................................. $ .96 $ (.17) $ (.11)
</TABLE>

The above pro forma disclosures may not be representative of the effects on
reported net earnings for future years as options vest over several years and
the Company may continue to grant options to employees.

The fair value of each option grant is estimated on the date of grant using
the binomial option-pricing model with the following weighted-average
assumptions used for grants in 1997 and 1996, respectively: dividend yield of
0.0 percent for all years; expected volatility of 37.85 percent and 43.97
percent; risk-free interest rates of 5.33 percent and 5.56 percent; and expected
holding periods of 4 and 6.34 years.

A summary of the status of the Company's fixed stock options as of December
31, 1997 and 1996, and changes during the years ending on those dates is as
follows:

<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
WEIGHTED- WEIGHTED-
SHARES AVERAGE SHARES AVERAGE
(000) EXERCISE PRICE (000) EXERCISE PRICE
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............... 3,369 $ 7.03 1,866 $5.95
Granted........................................ 235 14.94 1,758 7.89
Exercised...................................... (764) 6.45 (221) 4.20
Forfeited...................................... (27) 8.68 (34) 6.16
----- ------ ----- -----
Outstanding at end of year..................... 2,813 7.77 3,369 7.03
===== =====
Options exercisable at end of year............. 1,750 1,563
Weighted-average fair value of options granted
during the year.............................. $5.54 $4.04
</TABLE>

The following information applies to options outstanding at December 31,
1997.

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ -----------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF SHARES REMAINING AVERAGE SHARES AVERAGE
EXERCISE PRICES (000) CONTRACTUAL LIFE EXERCISE PRICE (000) EXERCISE PRICE
- ----------------- ------ ---------------- -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
$ 2.875 - $ 3.693 228 2.72 $ 3.28 228 $ 3.15
$ 4.500 - $ 6.375 102 12.85 5.88 101 4.72
$ 7.000 - $10.375 2,159 17.17 7.19 1,359 7.37
$10.875 - $14.875 290 6.15 13.88 62 12.46
$18.375 - $24.188 34 6.00 19.23 -- --
----- -----
$ 2.875 - $24.188 2,813 14.52 7.77 1,750 6.76
===== =====
</TABLE>

F-19
<PAGE> 106
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Warrants

As part of a lawsuit settlement, warrants to purchase 750,423 shares of the
Company's common stock have been issued. The warrants which had an exercise
price of $7.50 per share expired on January 19, 1998. Upon expiration, 565,796
warrants had been exercised.

Common Stock Purchase Rights Plan

In March 1995, the Company implemented a Common Stock Purchase Rights Plan
and distributed one Right for each share of the Company's common stock
outstanding. The Rights are not exercisable or transferable, apart from the
Company's common stock, until after a person or group acquires, or has the right
to acquire, beneficial ownership of 15 percent or more of the Company's common
stock (which threshold may, under certain circumstances, be reduced to 10
percent) or announces a tender or exchange offer to acquire such percentage of
the Company's common stock. Each Right entitles the holder to purchase one
quarter of one share of common stock at an exercise price of $25.00 per full
share and contains provisions that entitle the holder in the event of specific
transactions, to purchase common stock of the Company or any acquiring or
surviving entity at one-half of market price as determined under the terms of
the Rights Agreement. The Rights will expire in March 2005, unless previously
exercised or redeemed at the option of the Company for $.00001 per Right.

Stock Purchase Program

The $3.8 million purchase in 1996 of 463,000 shares of the Company's common
stock completed the Company's purchase of 1,000,000 shares of its common stock
under the 1994 stock purchase program. In 1996, the Company's Board of Directors
authorized a new stock purchase program, whereby, the Company can purchase up to
10-percent of its outstanding shares (approximately 1.6 million shares). No
shares have been purchased under the new program.

Dividends

In August 1997, the Board of Directors re-evaluated the dividend policy in
light of the Company's strategic repositioning for growth and the resultant cash
requirements and eliminated the Company's quarterly cash dividend.

NOTE M -- SPECIAL PREFERRED STOCK

During 1986, the Company was authorized to issue 40,000,000 shares of $.01
par value special preferred stock purchase rights for each share of common
stock, par value $.10 per share. These rights entitled the holder to purchase
one share of special preferred stock at a price of $.01 under certain conditions
in connection with preserving for the Company and its stockholders the benefits
of any recovery in the Company's lawsuit with North American Philips
Corporation, et al. In 1992, these conditions ceased to apply, therefore, the
special preferred stock rights remain outstanding but have no continuing
application.

F-20
<PAGE> 107
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE N -- GEOGRAPHIC AREA INFORMATION

<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES
United States operations............... $179,756,100 $127,093,600 $126,959,000
International operations
Sales to unaffiliated customers..... 82,129,000 69,910,000 60,817,900
Transfers between geographical
areas............................. 96,842,700 82,809,500 83,517,400
Eliminations........................... (96,842,700) (82,809,500) (83,517,400)
------------ ------------ ------------
$261,885,100 $197,003,600 $187,776,900
============ ============ ============
OPERATING PROFIT
United States operations............... $ (474,300) $ (3,831,000) $ (7,774,000)
International operations............... 15,033,000 5,020,100 1,854,500
Eliminations........................... (530,000) (889,000) 1,164,000
------------ ------------ ------------
Operating profit (loss)............. 14,028,700 300,100 (4,755,500)
Equity in net earnings (loss) of joint
ventures............................ 7,353,200 2,298,700 (392,600)
Interest expense....................... (3,351,100) (1,345,900) (578,300)
Interest and other income.............. 2,727,500 2,418,800 2,561,800
------------ ------------ ------------
Consolidated earnings (loss) before
income taxes and extraordinary
item.............................. $ 20,758,300 $ 3,671,700 $ (3,164,600)
============ ============ ============
IDENTIFIABLE ASSETS
United States operations............... $248,795,800 $180,503,900 $101,555,700
International operations............... 174,944,900 159,785,100 145,714,800
Eliminations........................... (141,893,600) (103,010,100) (59,258,600)
------------ ------------ ------------
Consolidated assets................. $281,847,100 $237,278,900 $188,011,900
============ ============ ============
</TABLE>

Transfers between geographic areas are billed at negotiated prices. In
1995, the United States operations' operating profit includes an $8,000,000 loss
on the sale of an other asset. All United States revenues are derived from sales
to unaffiliated customers. Included in domestic revenues and operating profit
are certain sales derived from direct product shipments from Hong Kong to
customers located in the United States.

International operations are conducted in Canada, Hong Kong, Europe and the
People's Republic of China.

NOTE O -- CONCENTRATION OF CREDIT AND OTHER RISKS

The Company sells on credit terms to a majority of its customers, most of
which are U.S. and Canadian retailers and distributors located throughout those
countries.

Salton accounted for 12.0% of 1997 sales. A kitchen electric appliance
distributor and a national retail beauty supply chain accounted for 10.9% and
10.3%, respectively, of 1996 sales. In 1995, Wal-Mart Stores, Inc. and a kitchen
electric appliance distributor accounted for 13.1% and 11.4%, respectively, of
the Company's sales.

The Company's allowance for doubtful accounts is based on management's
estimates of the creditworthiness of its customers, and, in the opinion of
management is believed to be set in an amount sufficient to respond to normal
business conditions. Should such conditions deteriorate or any major credit
customer

F-21
<PAGE> 108
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

default on its obligations to the Company, this allowance may need to be
increased which may have an adverse impact upon the Company's earnings.

The Company produces the vast majority of its products in its facilities in
the People's Republic of China ("PRC"). The supply and cost of the products
manufactured by Durable can be adversely affected, among other reasons, by
changes in foreign currency exchange rates, increased import duties, imposition
of tariffs, imposition of import quotas, interruptions in sea or air
transportation and political or economic changes. The Company has a significant
amount of its assets in the People's Republic, primarily consisting of
inventory, equipment and molds. From time to time, the Company explores
opportunities to diversify its sourcing and/or production of certain products to
other low-cost locations or with other third parties or joint venture partners
in order to reduce its dependence on production in the People's Republic and/or
reduce Durable's dependence on the Company's existing distribution base.
However, at the present time, the Company intends to continue its production in
the Peoples's Republic.

Recent months have seen an unusually rapid devaluation of certain
Asian-Pacific currencies. While there has not been a material impact on the
currencies in Hong Kong or the People's Republic, where the Company has
operations, there can be no assurance that there will not be a material impact
in the future.

Hong Kong underwent a transfer of control to the People's Republic in July
1997. Durable is incorporated in Hong Kong and its executive, sales offices and
its senior executives are located or reside there. The Company also conducts
significant trading activities through subsidiaries incorporated in Hong Kong.
The Company's business has not been materially affected by the governmental
changes that have already occurred. Although the Company believes that its
operations will not be materially affected by any further governmental changes
occurring in Hong Kong, no assurance can be given that such changes will be
benign.

In 1997, President Clinton extended the People's Republic's most-favored
nation (MFN) trading status for an additional year. The President announced in
1994 that the United States would, in the future, permanently de-link MFN
renewal from human rights issues, other than freedom of emigration provisions.
Under U.S. law, MFN status means that products are subject to the relatively low
duty rates set forth in Column 1 of the Harmonized Tariff Schedules of the
United States (HTSUS), that have resulted from several rounds of reciprocal
tariff negotiations conduct under the auspices of the General Agreement on
Tariffs and Trade (GATT) since 1945. Products from countries not eligible for
MFN treatment are subject to much higher rates of duty, averaging 30 percent ad
valorem, as set forth in Column 2 of the HTSUS. If MFN status for goods produced
in the People's Republic were removed there would be a substantial increase in
tariffs imposed on goods of Chinese origin entering the United States, including
those manufactured by the Company, which could have a material adverse impact on
the Company's revenues and earnings.

NOTE P -- RELATED PARTY TRANSACTIONS

The Company has used the services of Top Sales Company, Inc. ("Top Sales"),
an independent sales representative, since 1978. A member of the Company's Board
of Directors is the sole shareholder and Chief Executive Officer of Top Sales.
The Company made commission payments to Top Sales of $531,100, $693,300 and
$556,400 in 1997, 1996 and 1995, respectively. In 1996, the President of TJK
Sales Inc. ("TJK"), an independent sales representative, became a member of the
Company's Board of Directors. Commission payments to TJK totaled $427,000 and
$469,000 in 1997 and 1996, respectively.

In 1986, the Company made a non-interest bearing loan of $78,000 to a
director of the Company. The entire amount of such loan was outstanding at
December 31, 1997.

The Company loaned $300,000 to Lion Redcliff Import and Export, Ltd., which
is 50-percent owned by an entity whose President is also a Director of the
Company. Pursuant to the note, periodic principal payments are made by the
debtor. The remaining obligation of $150,000 at December 31, 1997, was paid in
March 1998.

F-22
<PAGE> 109
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Included in receivables from affiliates is $584,500 due the Company's
President and Chief Executive Officer. Such amount is due upon demand and bears
interest at the prevailing market rate.

On October 1, 1997, one of the Company's wholly-owned subsidiaries sold
certain assets to New M-Tech for $1,977,600 of which a gain of $988,800 has been
recorded as Other Income. The Company has recorded a note receivable from New
M-Tech as payment for the assets. The note is payable in 24 quarterly
installments, which commenced December 31, 1997 and bears interest at a rate of
prime plus one percent (9.5% at December 31, 1997). On November 1, 1997, New
M-Tech purchased all the common stock of the subsidiary for $1,300 and assumed
indebtedness totaling $6,220,000 due the Company's wholly-owned manufacturing
subsidiary. The note evidencing the indebtedness matures on October 31, 2003,
bears interest at a rate of prime plus one percent and is collateralized by
inventory and fixed assets.

NOTE Q -- SUPPLIER CONTRACT

In January 1997, the Company through its 50-percent interests in Salton and
New M-Tech entered into supply contracts with the Kmart Corporation for Kmart to
purchase, distribute, market and sell certain products under the
White-Westinghouse brand name licensed to Salton and New M-Tech. Under the terms
of the contract, Salton and New M-Tech will supply Kmart, either through the
Company or other manufacturers, with a broad range of small electrical
appliances, consumer electronics and telephone products under the
White-Westinghouse brand name. Kmart will be the exclusive discount department
store to market these White-Westinghouse products. The Company has entered into
an agreement guaranteeing the performance of Salton and New M-Tech under the
Kmart contract.

NOTE R -- MARKETING COOPERATION AGREEMENT

The Company has entered into various agreements pursuant to the Marketing
Cooperation Agreement executed as part of the 1996 acquisition of Salton.

In the fourth quarter of 1996, the Company entered into a license
agreement, pursuant to which, it holds the exclusive world-wide rights to use
the Farberware name on a broad range of small electric products. Under the
Company's marketing cooperation agreement with Salton, Salton is to be the
exclusive distributor of the Farberware products. The license agreement expires
December 31, 2095 and calls for quarterly royalty payments of 10-percent of net
sales as defined in the agreement.

On April 30, 1997, the parties entered into an agreement under which fees
are paid to the Company in consideration of its efforts in connection with the
supply contract with Kmart.

Fees earned by the Company under various marketing arrangements with its
joint ventures totaled $3.3 million for 1997, and are classified as Sales and
Other Revenues. No such fees were earned in 1996.

NOTE S -- EXTRAORDINARY ITEM

On March 27, 1997, the Company paid $4,500,000 to settle the lawsuit filed
in April 1994 by Izumi relating to the Phillips settlement in 1992. An accrual
of $5,300,000, including $800,000 in estimated legal expenses, was recorded as
of December 31, 1996. The transaction resulted in an after tax charge of
$3,500,000 and has been recorded as an extraordinary item, to correspond with
the extraordinary gain recorded from the settlement in 1992.

F-23
<PAGE> 110
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE T -- CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Company's domestic subsidiaries will be guarantors of the Company's
planned Offering of Senior Subordinated Notes. The following condensed
consolidating financial information presents the results of operations,
financial position and cash flows of the Company (on a stand alone basis), the
guarantor subsidiaries (on a combined basis), the non-guarantor subsidiaries (on
a combined basis) and the eliminations necessary to arrive at the consolidated
results of the Company. The results of operations and cash flows presented below
assume as if the guarantor subsidiaries were in place for all periods presented.
The Company and subsidiary guarantors have accounted for investments in their
respective subsidiaries on an unconsolidated basis using the equity method of
accounting. The Subsidiary Guarantors are wholly-owned subsidiaries of the
Company and have fully and unconditionally guaranteed the Notes on a joint and
several basis. The Notes contain certain covenants which, among other things,
will restrict the ability of the Subsidiary Guarantors to make distributions to
Windmere-Durable Holdings Inc. The Company has not presented separate financial
statements and other disclosures concerning the guarantors and non-guarantor
subsidiaries because it has determined they would not be material to investors.

F-24
<PAGE> 111

WINDMERE DURABLE HOLDINGS, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
WIND DUR
HOLDINGS GUARANTORS NON-GUAR. ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
Net Sales........................................ -- 189,468,000 169,259,900 (96,842,800) 261,885,100
Cost of goods sold............................... -- 148,402,000 145,778,700 (96,673,500) 197,507,200
---------- ----------- ----------- ------------ -----------
Gross profit................................... -- 41,066,000 23,481,200 (169,300) 64,377,900
Operating expenses............................... (674,600) 45,700,100 4,963,400 360,300 50,349,200
Non recurr items................................. -- -- -- -- --
---------- ----------- ----------- ------------ -----------
Operating income............................... 674,600 (4,634,100) 18,517,800 (529,600) 14,028,700
Other (income) expense, net...................... (3,066,100) 1,166,700 (3,424,600) 5,947,600 623,600
---------- ----------- ----------- ------------ -----------
Earnings before income taxes and
minority int in subsidiaries................. 3,740,700 5,800,800 21,942,400 (6,477,200) 13,405,100
Provision for income taxes....................... -- (1,967,100) 2,507,000 383,100 923,000
Equity in earnings (loss) of affiliated
companies, net of tax.......................... 578,200 6,775,000 -- -- 7,353,200
Minority interest................................ -- -- -- -- --
---------- ----------- ----------- ------------ -----------
Net earnings..................................... 4,318,900 2,941,300 19,435,400 (6,860,300) 19,835,300
========== =========== =========== ============ ===========
BALANCE SHEET
Cash............................................. -- -- 8,223,900 -- 8,223,900
Accounts receivables............................. -- 45,235,500 4,788,000 (6,685,500) 43,338,000
Intercompany receivables......................... 3,063,500 (24,939,400) 27,573,200 9,593,900 15,291,000
Inventories...................................... -- 63,054,300 39,980,700 (862,600) 102,172,400
Other current assets............................. -- 10,179,100 1,582,100 (826,400) 10,934,800
---------- ----------- ----------- ------------ -----------
Total current assets......................... 3,063,500 93,529,500 82,147,900 1,219,400 179,960,300
Investments in affiliated companies.............. 80,692,100 50,422,400 46,199,200 (134,222,900) 43,090,800
Property and equipment net....................... -- 7,310,100 29,889,300 -- 37,199,400
Other Assets..................................... -- 10,236,800 20,250,300 (8,890,500) 21,596,600
---------- ----------- ----------- ------------ -----------
Total assets................................. 83,755,600 161,498,800 178,486,700 (141,894,000) 281,847,100
========== =========== =========== ============ ===========
Notes payable.................................... -- 49,350,200 4,981,600 (11,350,200) 42,981,600
Accounts Payable................................. -- 7,120,000 8,054,200 (573,700) 14,600,500
Accrued expenses................................. 2,178,900 6,141,000 3,885,100 32,800 12,237,800
Curr maturities of L.T........................... -- 814,900 -- 2,999,900 3,814,800
Income taxes payable and other current
liabilities.................................... -- 997,500 (178,200) (571,800) 247,500
---------- ----------- ----------- ------------ -----------
Total current liabilities.................... 2,178,900 64,423,600 10,742,700 (9,463,000) 73,882,200
Long term debt................................... 10,847,700 8,222,200 -- 3,000,100 16,069,800
Covenant and licenses L.T........................ -- 126,200 -- 947,600 1,073,800
Deferred Income Taxes............................ -- (185,700) 2,153,700 (1,968,000) --
---------- ----------- ----------- ------------ -----------
Total Liabilities............................ 13,026,600 72,586,300 18,896,400 (13,483,500) 91,025,800
Shareholders' equity............................. 70,729,000 88,912,500 159,590,300 128,410,500 190,821,300
---------- ----------- ----------- ------------ -----------
Total liabilities and shareholder equity......... 83,755,600 161,498,800 178,486,700 (141,894,000) 281,847,100
========== =========== =========== ============ ===========
CASH FLOW INFORMATION
Net cash provided (used) in operating
activities..................................... 4,251,600 16,546,100 20,694,200 (6,759,100) 1,640,600
Net cash provided (used) in investing
activities..................................... (4,371,200) (40,768,400) (18,410,700) 41,040,200 (22,510,100)
Net cash provided (used) in financing
activities..................................... 119,600 55,197,700 (400,900) (34,281,100) 20,835,300
Effect of exchange rate.......................... -- -- (321,400) -- (321,400)
Cash at beginning................................ -- 2,116,800 6,662,700 -- 8,779,500
Cash at end...................................... -- -- 8,223,900 -- 8,223,900
</TABLE>

F-25
<PAGE> 112

WINDMERE DURABLE HOLDINGS, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
WIND DUR
HOLDINGS GUARANTORS NON-GUAR. ELIMINATIONS CONSOLIDATED
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
Net Sales.................................. -- 137,593,800 142,219,200 (82,809,400) 197,003,600
Cost of goods sold......................... -- 107,992,000 131,566,600 (82,280,200) 157,278,400
---------- ----------- ----------- ------------ -----------
Gross profit........................... -- 29,601,800 10,652,600 (529,200) 39,725,200
Operating expenses......................... 258,000 32,538,100 6,268,700 360,300 39,425,100
Non recurring items........................ -- -- -- -- --
---------- ----------- ----------- ------------ -----------
Operating income....................... (258,000) (2,936,300) 4,383,900 (889,500) 300,100
Other (income) expense..................... (1,494,300) (607,500) (671,100) 1,700,000 (1,072,900)
---------- ----------- ----------- ------------ -----------
Earnings before income taxes and minority
int. in subsidiaries................... 1,236,300 (2,328,800) 5,055,000 (2,589,500) 1,373,000
Provision for income taxes................. (157,700) (701,400) 225,900 353,500 (279,700)
Equity in earnings (loss) of affiliated
companies, net of tax.................... 3,130,100 (831,400) -- -- 2,298,700
Extraordinary item......................... -- (3,500,000) -- -- (3,500,000)
---------- ----------- ----------- ------------ -----------
Net earnings............................... 4,524,100 (5,958,800) 4,829,100 (2,943,000) 451,400
========== =========== =========== ============ ===========
BALANCE SHEET
Cash....................................... -- 2,116,800 6,662,700 -- 8,779,500
Accounts receivables....................... -- 31,620,500 10,209,900 (4,229,200) 37,601,200
Intercompany receivables................... 817,200 (988,300) 8,091,100 4,218,800 12,138,800
Inventories................................ -- 42,343,100 47,962,700 (791,800) 89,514,000
Other current assets....................... -- 5,272,800 1,845,000 (135,000) 6,982,800
---------- ----------- ----------- ------------ -----------
Total current assets................... 817,200 80,364,900 74,771,400 (937,200) 155,016,300
Investments in affiliated companies........ 76,320,900 10,418,800 46,199,100 (97,648,000) 35,290,800
Property and equipment..................... -- 7,207,000 25,552,800 -- 32,759,800
Other Assets............................... -- 6,366,400 12,270,600 (4,425,000) 14,212,000
---------- ----------- ----------- ------------ -----------
Total assets........................... 77,138,100 104,357,100 158,793,900 (103,010,200) 237,278,900
========== =========== =========== ============ ===========
Notes payable.............................. -- 29,350,200 3,882,500 (11,350,200) 21,882,500
Accounts payable........................... -- 2,830,100 9,276,400 -- 12,106,500
Accrued expenses........................... -- 10,290,600 3,938,100 -- 14,228,700
Curr maturities of L.T. ................... -- 814,800 -- -- 814,800
Income taxes payable and other current
liabilities.............................. -- 2,194,100 (347,600) (1,427,100) 419,400
---------- ----------- ----------- ------------ -----------
Total current liabilities.............. -- 45,479,800 16,749,400 (12,777,300) 49,451,900
Long term debt............................. 10,847,600 9,037,100 -- -- 19,884,700
Covenant & licenses L.T. .................. -- 247,500 -- -- 247,500
Deferred Income Taxes...................... -- (185,600) 68,400 117,200 --
---------- ----------- ----------- ------------ -----------
Total Liabilities...................... 10,847,600 54,578,800 16,817,800 (12,660,100) 69,584,100
Shareholders' Equity....................... 66,290,500 49,778,300 141,976,100 (90,350,100) 167,694,800
---------- ----------- ----------- ------------ -----------
Total liabilities and shareholder equity... 77,138,100 104,357,100 158,793,900 (103,010,200) 237,278,900
========== =========== =========== ============ ===========
CASH FLOW INFORMATION
Net cash provided (used) in operating
activities............................... -- 4,978,600 4,628,200 -- 9,606,800
Net cash provided (used) in investing
activities............................... -- (26,929,000) (8,162,200) -- (35,091,200)
Net cash provided (used) in financing
activities............................... -- 12,655,600 3,843,400 -- 16,499,000
Effect of exchange rate.................... -- -- (3,200) -- (3,200)
Cash at beginning.......................... -- 11,411,600 6,356,500 -- 17,768,100
Cash at end................................ -- 2,116,800 6,662,700 -- 8,779,500
</TABLE>

F-26
<PAGE> 113

WINDMERE DURABLE HOLDINGS, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
WIND DUR NON
HOLDINGS INC. GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
Net Sales................................. -- 137,087,900 134,226,400 (83,517,400) 187,776,900
Cost of goods sold........................ -- 105,186,900 126,761,800 (85,041,400) 146,907,300
-- ----------- ----------- ----------- -----------
Gross profit............................ -- 31,881,000 7,464,600 1,524,000 40,869,000
Operating expenses........................ -- 31,133,400 6,131,400 1,360,300 37,625,100
Non recurring items....................... -- 8,000,000 -- -- (8,000,000)
-- ----------- ----------- ----------- -----------
Operating income........................ -- (7,252,400) 1,333,200 1,163,700 (4,755,500)
Other (income) expense, net............... -- (4,455,000) 2,471,500 -- (1,983,500)
-- ----------- ----------- ----------- -----------
Earnings before income taxes and
minority int in subsidiaries.......... -- (2,797,400) (1,138,300) 1,163,700 (2,772,000)
Provision for income taxes................ -- (1,715,500) 273,100 161,600 (1,280,800)
Equity in earnings (loss) of affiliated
companies, net of tax................... -- (393,200) 600 -- (392,600)
Minority interest......................... -- -- -- -- --
-- ----------- ----------- ----------- -----------
Net earnings.......................... -- (1,475,100) (1,410,800) 1,002,100 (1,883,800)
BALANCE SHEET
Cash...................................... -- 11,411,600 6,356,500 -- 17,768,100
Accounts receivables...................... -- 28,286,900 6,530,800 1,779,600 36,597,300
Intercompany receivables.................. -- 3,672,700 7,049,000 (738,900) 9,982,800
Inventories............................... -- 36,712,700 42,584,200 (262,600) 79,013,600
Other current assets...................... -- 2,592,000 990,500 244,000 3,826,500
-- ----------- ----------- ----------- -----------
Total current assets.................. -- 82,675,900 63,511,000 1,022,100 147,188,300
Investments in affiliated companies....... -- 9,689,700 46,199,100 55,888,800 --
Property and equipment net................ -- 7,450,400 23,034,300 -- 30,484,700
-- ----------- ----------- ----------- -----------
Other Assets.............................. -- 2,224,900 12,505,900 (4,391,900) 10,338,900
-- ----------- ----------- ----------- -----------
Total assets.......................... -- 102,040,900 145,250,300 (59,258,600) 188,011,900
== =========== =========== =========== ===========
Notes payable............................. -- 11,350,200 42,300 (11,350,200) 42,300
Accounts Payable.......................... -- 1,522,800 8,456,900 -- 9,979,700
Accrued expenses.......................... -- 4,527,100 3,600,700 -- 8,127,800
Curr maturities of L.T.................... -- 814,800 -- -- 814,800
Income taxes payable and other current
liabilities............................. -- 1,422,500 (550,000) (274,400) 598,100
-- ----------- ----------- ----------- -----------
Total current liabilities............. -- 19,637,400 11,549,900 (11,624,600) 19,562,700
Long term debt............................ -- 2,851,800 -- -- 2,851,800
Covenant and licenses L.T................. -- 666,900 -- -- 666,900
Deferred Income Taxes..................... -- (185,700) 105,500 80,200 --
-- ----------- ----------- ----------- -----------
Total Liabilities..................... -- 22,970,400 11,655,400 (11,544,400) 23,081,400
Shareholders' equity...................... -- 79,069,800 133,574,900 (47,714,200) 164,930,500
-- ----------- ----------- ----------- -----------
Total liabilities and shareholder
equity.................................. -- 102,040,200 145,230,300 (59,258,600) 188,011,900
== =========== =========== =========== ===========
CASH FLOW INFORMATION
Net cash provided (used) in operating
activities.............................. -- 5,345,500 10,936,200 (2,280,000) 14,051,700
Net cash provided (used) in investing
activities.............................. -- 3,089,200 (31,396,100) 24,621,900 (3,685,000)
Net cash provided (used) in financing
activities.............................. -- (3,813,500) 19,705,600 (22,265,000) (6,372,900)
Effect of exchange rate................... -- -- 862,900 (76,900) 786,000
Cash at beginning......................... -- 6,790,400 6,197,900 -- 12,988,300
Cash at end............................... -- 11,411,600 6,356,500 -- 17,768,100
</TABLE>

F-27
<PAGE> 114

WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

QUARTERLY FINANCIAL DATA (UNAUDITED)

The quarterly results for the years 1997 and 1996 are set forth in the
following tabulation.

<TABLE>
<CAPTION>
NET EARNINGS
GROSS EARNINGS (LOSS)
SALES PROFIT (LOSS) PER SHARE
-------- ------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997
First quarter......................... $ 51,412 $10,819 $ 321 $ .02
Second quarter........................ 60,063 13,006 1,941 .10
Third quarter......................... 79,976 17,959 8,517 .43
Fourth quarter........................ 70,434 22,54 9,056 .45
-------- ------- ------- -----
Total......................... $261,885 $64,378 $19,835 $1.00
======== ======= ======= =====
1996
First quarter......................... $ 40,440 $ 8,603 $ 296 $ .02
Second quarter........................ 39,503 8,349 (442) (.03)
Third quarter......................... 56,181 10,415 1,701 .10
Fourth quarter........................ 60,880 12,358 (1,104)* (.06)
-------- ------- ------- -----
Total......................... $197,004 $39,725 $ 451 $ .03*
======== ======= ======= =====
</TABLE>

- ---------------
* Differs by $.01 from earnings per share for the year-ended 1996, due to the
effect of the change in common shares and common equivalent shares outstanding
from quarter to quarter. Includes an after tax extraordinary charge for the
settlement of the Izumi case of $3,500,000 or $.20 per share.

QUARTERLY STOCK QUOTATIONS AND DIVIDENDS PER SHARE

The Company's common stock is traded on the New York Stock Exchange under
the symbol WND. High and low market prices and dividends paid per share in 1997
and 1996, by quarters, are as follows:

<TABLE>
<CAPTION>
MARKET PRICE
------------- CASH
HIGH LOW DIVIDENDS
----- ---- ---------
<S> <C> <C> <C>
1997
Fourth quarter.......................................... 26 11/16 19 5/8 $ --
Third quarter........................................... 24 1/8 16 1/4 --
Second quarter.......................................... 16 9/16 12 7/8 .05
First quarter........................................... 14 5/8 12 .05
----
$.10
====
1996
Fourth quarter.......................................... 16 3/4 12 5/8 $.05
Third quarter........................................... 15 3/8 11 1/4 .05
Second quarter.......................................... 14 3/4 9 5/ .05
First quarter........................................... 11 6 7/ .05
----
$.20
====
</TABLE>

F-28
<PAGE> 115

WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 1997, 1996 AND 1995

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------ ---------- --------------------- ---------- ----------
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Reserves deducted from assets to
which they apply:
Allowance for possible losses
on accounts receivable....... $1,129,000 $ 433,000 $62,700(a) $ (513,400)(b) $1,111,300
========== ========= ======= ========== ==========
YEAR ENDED DECEMBER 31, 1996
Reserves duducted from assets to
which they apply:
Allowance for possible losses
on accounts receivable....... $1,158,000 $ 930,000 $ 4,000(a) $ (963,000)(b) $1,129,000
========== ========= ======= ========== ==========
YEAR ENDED DECEMBER 31, 1995
Reserves duducted from assets to
which they apply:
Allowance for possible losses
on accounts receivable....... $1,338,100 $ 894,700 $31,600(a) $1,106,400(b) $1,158,000
========== ========= ======= ========== ==========
</TABLE>

- ---------------
(a) Recoveries of amounts previously written off against the reserve.

(b) Write-off of accounts receivable against the reserve.

F-29
<PAGE> 116

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WINDMERE-DURABLE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------
1998 1997
---------------- ----------------
<S> <C> <C> <C> <C>
Sales and Other Revenues................................ $55,394 100.0% $51,412 100.0%
Cost of Goods Sold...................................... 42,511 76.7 40,593 79.0
------- ----- ------- -----
Gross Profit.......................................... 12,883 23.3 10,819 21.0
Selling, General and Administrative Expenses............ 11,706 21.1 9,697 18.9
------- ----- ------- -----
Operating Profit...................................... 1,177 2.2 1,122 2.1
Other (Income) Expense
Interest Expense...................................... 1,045 1.9 624 1.2
Interest and Other Income............................. (681) (1.2) (477) (.9)
------- ----- ------- -----
364 .7 147 .3
------- ----- ------- -----
Earnings Before Equity in Net Earnings of Joint Ventures
and Income Taxes...................................... 813 1.5 975 1.8
Equity in Net Earnings of Joint Ventures................ 444 .8 (490) (.9)
------- ----- ------- -----
Earnings Before Income Taxes............................ 1,257 2.3 485 .9
Provision for Income Taxes.............................. 121 .2 164 .3
------- ----- ------- -----
Net Earnings............................................ $ 1,136 2.1% $ 321 .6%
======= ===== ======= =====
Earnings Per Share -- basic............................. $ .06 $ .02
======= =======
Earnings Per Share -- diluted........................... $ .06 $ .02
======= =======
Dividends Per Common Share.............................. $ .00 $ .05
======= =======
</TABLE>

The accompanying notes are an integral part of these statements.
F-30
<PAGE> 117

WINDMERE-DURABLE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
3/31/98 12/31/97 3/31/97
-------- -------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash & Cash Equivalents.................................... $ 2,491 $ 8,224 $ 9,188
Accounts and Other Receivables, less allowances of $1,068,
$1,111 and $1,193, respectively.......................... 38,506 43,338 32,492
Receivables from Affiliates (Note 2)....................... 17,303 15,291 17,108
Inventories
Raw Materials............................................ 16,330 13,327 13,856
Work-in-process.......................................... 21,711 21,062 21,077
Finished Goods........................................... 61,728 67,783 50,112
-------- -------- --------
Total Inventories................................ 99,769 102,172 85,045
Prepaid Expenses........................................... 7,032 4,618 4,903
Refundable Income Taxes.................................... 3,950 5,043 --
Future Income Tax Benefits................................. 1,274 1,274 3,274
-------- -------- --------
Total Current Assets............................. 170,325 179,960 152,010
INVESTMENTS IN JOINT VENTURES (NOTE 2)..................... 43,699 43,091 34,880
PROPERTY, PLANT & EQUIPMENT -- AT COST, less accumulated
depreciation of $52,014, $50,329 and $46,959,
respectively............................................. 38,009 37,199 33,139
Notes Receivable from Affiliate............................ 7,872 7,799 --
OTHER ASSETS............................................... 13,766 13,798 13,867
-------- -------- --------
TOTAL ASSETS..................................... $273,671 $281,847 $233,896
======== ======== ========
LIABILITIES
CURRENT LIABILITIES
Notes and Acceptances Payable.............................. $ 45,452 $ 42,982 $ 26,846
Current Maturities of Long-term Debt....................... 3,365 3,815 815
Accounts Payable and Accrued Expenses...................... 16,109 26,838 18,757
Deferred Income, current portion........................... 165 247 352
-------- -------- --------
Total Current Liabilities........................ 65,091 73,882 46,770
LONG-TERM DEBT............................................. 15,866 16,070 19,681
DEFERRED INCOME, less current portion...................... 1,031 1,074 165
STOCKHOLDERS' EQUITY (Note 3)
Special Preferred Stock -- authorized 40,000,000 shares of
$.01 par value; none issued
Common Stock -- authorized 40,000,000 shares of $.10 par
value; shares outstanding: 18,722, 18,119 and 17,478,
respectively............................................. 1,872 1,812 1,748
Paid-in Capital............................................ 40,668 41,024 35,986
Retained Earnings.......................................... 150,223 149,088 130,431
Unrealized Foreign Currency Translation Adjustment......... (1,080) (1,102) (885)
-------- -------- --------
Total Shareholders' Equity....................... 191,683 190,821 167,280
-------- -------- --------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY......... $273,671 $281,847 $233,896
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.
F-31
<PAGE> 118

WINDMERE-DURABLE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1997
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 1,136 $ 321
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation of property, plant and equipment.......... 1,861 1,622
Amortization of intangible assets...................... 213 264
Amortization of deferred income........................ (125) (149)
Net change in allowance for losses on accounts
receivable............................................ (44) (57)
Equity in net earnings (loss) of joint ventures........ (608) 310
Changes in assets and liabilities
Decrease in accounts and other receivables........... 4,875 5,166
Decrease in inventories.............................. 2,403 4,469
Increase in prepaid expenses......................... (2,414) (1,152)
(Increase) decrease in other assets.................. (180) 148
Decrease in accounts payable and accrued expenses.... (10,729) (7,578)
Decrease in current and deferred income taxes........ 1,093 --
(Increase) decrease in other accounts................ 22 (146)
-------- -------
Net cash provided by (used in) operating
activities....................................... (2,497) 3,218
Cash flows from investing activities:
Additions to property, plant and equipment -- net......... (2,671) (2,001)
Increase in receivable accounts and notes from
affiliates............................................. (2,085) (4,935)
-------- -------
Net cash used in investing activities............. $ (4,756) $(6,936)
</TABLE>

<TABLE>
Cash flows from financing activities:
<S> <C> <C>
Net borrowings under lines of credit...................... $ 2,470 $ 4,963
Payments of long-term debt................................ (654) (204)
Exercise of stock options and warrants.................... 2,050 223
Cash dividends paid....................................... -- (855)
Payment of withholding tax on stock option exercises...... (2,346) --
-------- -------
Net cash provided by financing activities......... 1,520 4,127
-------- -------
(Decrease) increase in cash and cash
equivalents...................................... (5,733) 409
Cash and cash equivalents at beginning of year.............. 8,224 8,779
-------- -------
Cash and cash equivalents at end of quarter................. $ 2,491 $ 9,188
======== =======
</TABLE>

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<S> <C> <C>
Cash paid for:
Interest.................................................. $ 1,643 $ 117
Income taxes.............................................. $ 29 $ 68
</TABLE>

The accompanying notes are an integral part of these statements.
F-32
<PAGE> 119

WINDMERE-DURABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF ACCOUNTING POLICIES

Interim Reporting

In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all normal recurring adjustments necessary to
present fairly the Company's financial position as of March 31, 1998 and 1997,
and the results of its operations and changes in financial position for the
interim periods. Results for interim periods should not be considered indicative
of results for a full year. Reference should be made to the financial statements
contained in the registrant's Annual Report on Form 10-K for the year ended
December 31, 1997.

Reclassifications

Certain prior period amounts have been reclassified for comparability.

Receivables From Affiliates

Receivables from affiliates include accounts receivable which arise in the
ordinary course of business and are settled as trade obligations, as well as the
current portion of notes receivable due from certain of the Company's joint
venture partners ("affiliates"). Notes receivable from these affiliates are due
upon demand and bear interest at prevailing market interest rates.

2. INVESTMENTS IN JOINT VENTURES

Investments in joint ventures consist of the Company's interests in joint
ventures, accounted for under the equity method. Included are the Company's
50-percent interests in Salton/Maxim Housewares, Inc.("Salton"), Newtech
Electronics Industries, Inc. ("Newtech"), PX Distributors, Inc. ("PX"),
Breakroom of Tennessee, Inc. and Anasazi Partners, L.P. ("Anasazi").

Summarized financial information of the unconsolidated companies is as
follows:

<TABLE>
<CAPTION>
THREE THREE
MONTHS ENDED YEAR ENDED MONTHS ENDED
3/31/98 12/31/97 3/31/97
------------ ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
EARNINGS
Sales........................................ $107,064 $467,549 $50,177
Gross Profit................................. $ 29,746 $108,100 $14,055
Net Earnings (Loss).......................... $ 1,541 $ 15,885 $ (619)
BALANCE SHEET
Current Assets............................... $172,539 $169,300 $78,215
Noncurrent Assets............................ $ 41,679 $ 38,781 $34,011
Current Liabilities.......................... $140,171 $132,550 $60,241
Shareholders' Equity......................... $ 74,047 $ 61,581 $51,098
</TABLE>

Notes receivable from affiliates totaled $16.7 million at March 31, 1998
which includes $8.1 million, of which $.3 million is short term, from the 1997
sale of one of the Company's manufacturing subsidiaries. The Company has also
provided a $9.0 million corporate guarantee as support for a credit facility
obtained by one of its joint ventures.

All sales made by joint ventures in the three month periods ended March 31,
1998 and 1997 were to entities other than members of the consolidated group.
Sales totaling $6.3 million and $7.7 million were made by the Company to the
joint ventures in the three month periods ended March 31, 1998 and 1997,

F-33
<PAGE> 120
WINDMERE-DURABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

respectively. Included in Receivables from Affiliates at March 31, 1998 is $6.7
million due the Company from the joint ventures for trade receivables.

Note: Profits earned by the Company's manufacturing subsidiary on sales to
joint ventures are included in the consolidated earnings results and are not
part of the above table.

3. SHAREHOLDERS' EQUITY

Earnings Per Share

In 1997, the Company adopted Financial Accounting Standards No. 128 (SFAS
128) "Earnings Per Share." Basic shares for the three month periods ended March
31, 1998 and 1997 were 18,413,731 and 17,465,494, respectively. Included in
diluted shares are common stock equivalents relating to options, warrants and
convertible debt of 1,779,910 and 1,855,345 for the three-month periods ended
March 31, 1998 and 1997, respectively.

4. RECENT ACCOUNTING PRONOUNCEMENTS

The Company adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting Comprehensive Income," effective January 1, 1998. SFAS
130 establishes standards for reporting and display of comprehensive income and
its components in financial statements. Differences between net earnings and
comprehensive earnings for the three-month periods ended March 31, 1998 and 1997
were insignificant and, therefore, have not been separately disclosed.

In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 (SFAS 131), "Disclosures About Segments of an Enterprise and Related
Information." The Company has not assessed the effect this new standard will
have on its consolidated financial statements and/or disclosures.

5. MARKETING COOPERATION AGREEMENT

On April 30, 1997, the Company entered into a Letter Agreement with Salton
pursuant to the Marketing Cooperation Agreement included as part of the original
Stock Purchase Agreement. Fees earned by the Company under marketing
arrangements with its joint ventures totaled $.7 million for the three-month
period ended March 31, 1998 and are classified as Sales and Other Revenues. Fees
earned in the 1997 period were insignificant.

6. COMMITMENTS AND CONTINGENCIES

The Company, its 50 percent owned joint venture partners Salton and
Newtech, White Consolidated Industries, Inc. ("White Consolidated"), and certain
other parties have been named as defendants in litigation filed by Westinghouse
Electric Corporation ("Westinghouse") in the United States District Court for
the Western District in Pennsylvania on December 18, 1996. The action arises
from a dispute between Westinghouse and White Consolidated over rights to use
the "Westinghouse" trademark for consumer products, based on transactions
between Westinghouse and White Consolidated in the 1970's and the parties'
subsequent conduct. Prior to the filing of Westinghouse's complaint against the
Company, White Consolidated, on November 14, 1996, filed a complaint in the
United States District Court for the Northern District of Ohio against
Westinghouse and another corporation for trademark infringement, dilution, false
designation or origin and false advertisement, seeking both injunctive relief
and damages. Procedural motions concerning the jurisdiction in which the dispute
should be heard have been filed by the parties. The action by Westinghouse
seeks, among other things, a preliminary injunction enjoining the defendants
from using the trademark, unspecified damages and attorneys' fees. Pursuant to
the Indemnification Agreement dated January 23, 1997 by and among White
Consolidated, Kmart Corporation, and the Company, White Consolidated is
defending and indemnifying the Company for all costs and expenses for claims,
damages, and

F-34
<PAGE> 121
WINDMERE-DURABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

losses, including the costs of litigation. Pursuant to the license agreements
with White Consolidated, White Consolidated is defending and indemnifying Salton
and Newtech for all costs and expenses for claims, damages, and losses,
including the costs of litigation. On April 9, 1997, on joint motion of the
parties, the court issued an order staying future proceedings until the earlier
of July 1, 1997 or five days after hearing before the court in order to give the
parties an opportunity to pursue settlement discussions. Subsequently, after a
status hearing before the Court on July 15, 1997, and in accordance with the
Court's memorandum order of July 17, 1997, counsel for the parties in the
litigation pending in the United States District Court for the Western District
of Pennsylvania reported to the Court in a letter that the parties had agreed to
pursue an expedited mini- trial/mediation proceeding in an effort to resolve
their disputes. A mediation proceeding occurred and the parties were unable to
reach a mediated settlement. Discovery is proceeding and the matter is likely to
be tried in late 1998.

In December 1997, the employment agreements of the senior members of
Salton's management expired. Disagreements arose between the management and the
members of the Salton board of directors who have been designated by the Company
under the Stockholders' Agreement between the two companies, dated July 11, 1996
(the "Windmere Directors"), as to provisions to be contained in new agreements
or the terms under which management would continue to be employed by Salton if
no agreements were executed. During the course of these discussions, Salton
alleged that certain actions of the Company would breach the terms of the July
11, 1996 Marketing Cooperation Agreement between the Company and Salton and
violate fiduciary duties to Salton. The Company and the Windmere Directors,
after being advised by legal counsel, vehemently disagree with the allegations.

On May 7, 1998, the Company announced that it had entered into an agreement
which grants Salton the right to purchase the Company's 6,535,072 shares of
Salton for $12 per share in cash and a six and one-half year, $15 million
subordinated promissory note bearing interest at 4% per annum.

The note is offset by 5% of the total purchase price paid by Salton for
product purchases from the Company and its affiliates during the term of the
note. The aggregate value of the transaction would be equivalent to $14.27 per
share of Salton common stock. If Salton fails to exercise their right on or
prior to June 30, 1998 or to close the purchase on or prior to October 30, 1998,
then the Company will have the right to acquire all of the shares of Salton
which it does not own in a tender offer and/or merger for $14.27 per share in
cash or in registered shares of its common stock.

The agreement further provides that in the event Salton acquires the
Company's 50% interest in Salton: (i) the Company will simultaneously pay in
full its $10.8 million promissory note to Salton; (ii) Salton will repurchase
for approximately $3.3 million an option owned by the Company to purchase up to
458,500 shares of Salton stock; and (iii) various contractual and other
arrangements, including those relating to Kmart, will continue subject to
certain modifications.

The Company and the other 50 percent owner in Newtech have entered into an
agreement whereby each party will transfer 5.0% of their interest in Newtech to
a third party if and when a liquidity event for the Company occurs. Pursuant to
the agreement, a liquidity event would occur if Newtech sells equity interests
in a public offering, Newtech is sold to a third party, or if there is an other
disposition of the Company's interest or other similar event. On May 14, 1998,
Newtech filed a Form S-1 Registration Statement to publicly offer shares of its
common stock with the Securities and Exchange Commission.

7. SUBSEQUENT EVENTS

On May 11, 1998 the Company announced that it had signed a definitive
agreement to acquire The Black & Decker Corporation's Household Products Group,
which includes the Cooking, Garment Care, Food Preparation and Beverage
categories.

F-35
<PAGE> 122
WINDMERE-DURABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pursuant to the terms of the acquisition agreement, the Company will
purchase the assets and assume certain liabilities of The Black & Decker
Household Products Group for $315 million in cash. In connection with the
transaction, the Company and Black & Decker have established a long-term
licensing arrangement which will allow Windmere to continue to market products
under the Black & Decker brand name in the Cooking, Garment Care, Food
Preparation and Beverage categories in North and Latin America, excluding
Brazil, Uruguay and Paraguay, for a minimum of six and one-half years on a
royalty-free basis with potential renewal periods upon mutual agreement. The
Company has received a commitment from its senior lender in the amount of the
transaction plus transaction fees as well as an additional working capital
facility. The transaction is expected to close within 60 days, subject to the
receipt of regulatory and other necessary approvals.

On June 26, 1998, the Company completed its acquisition of The Black &
Decker Household Products Group. The Company borrowed an aggregate of
approximately $377,000,000 under the Senior Credit Facilities and the Senior
Subordinated Loans. The proceeds were used to close on the acquisition and to
repay certain indebtedness. The Company has filed a registration statement with
the Securities and Exchange Commission to offer $125 million of Senior
Subordinated Notes and $100 million of common stock, and the proceeds of this
offering, if successful, will be used primarily to repay the Senior Subordinated
Loans incurred in the HPG acquisition.

On June 26, 1998, Salton/Maxim Housewares Inc. ("Salton") announced that it
has elected to exercise its option to acquire the Company's 50% equity interest
in Salton for $12/ share plus a $15 million promissory note (the note is subject
to reduction in certain circumstances). Salton has until October 30 to close
such purchase otherwise the Company has the right to acquire the Salton common
stock that it does not currently own.

F-36
<PAGE> 123
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------------------------------------
WIND DUR NON
HOLDINGS INC. GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Net Sales.......................... -- 44,507 25,563 (14,676) 55,394
Cost of goods sold................. -- 35,037 22,450 (14,976) 42,511
-------- ---------- ---------- ----------- ----------
Gross profit..................... -- 9,470 3,113 300 12,883
Operating expenses................. (154) 10,375 1,395 90 11,706
Non-recurring items................ -- -- -- -- --
-------- ---------- ---------- ----------- ----------
Operating income................. 154 (905) 1,718 210 1,177
Other (income) expense, net........ 107 358 (460) 359 364
-------- ---------- ---------- ----------- ----------
Earnings before income taxes and
minority int. in
subsidiaries.................. 47 (1,263) 2,178 (149) 813
Provision for income taxes......... -- 43 94 (16) 121
Equity in earnings of affiliated
companies, net of tax............ 121 323 -- -- 444
Minority interest.................. -- -- -- -- --
-------- ---------- ---------- ----------- ----------
Net earnings....................... 168 (983) 2,084 (133) 1,136
======== ========== ========== =========== ==========
BALANCE SHEET
Cash............................... -- (1,593) 4,084 -- 2,491
Accounts receivables............... -- 27,955 9,709 842 38,506
Intercompany receivables........... 793 (7,305) 24,112 (297) 17,303
Inventories........................ -- 54,458 45,672 (361) 99,769
Other current assets............... -- 15,589 1,324 (4,657) 12,256
-------- ---------- ---------- ----------- ----------
Total current assets.......... 793 89,104 84,901 (4,473) 170,325
Investments in affiliated
companies........................ 80,701 51,021 46,200 (134,223) 43,699
Property and equipment............. -- 7,429 30,580 -- 38,009
Other Assets....................... -- 4,632 20,137 (3,131) 21,638
-------- ---------- ---------- ----------- ----------
Total assets.................. 81,494 152,186 181,818 (141,827) 273,671
======== ========== ========== =========== ==========
Notes payable...................... -- 50,350 6,452 (11,350) 45,452
Accounts Payable................... -- 2,657 8,567 (622) 10,602
Accrued expenses................... 45 1,978 3,484 -- 5,507
Curr maturities of L.T. ........... -- 3,365 -- -- 3,365
Income taxes payable and other
current liabilities.............. -- 948 (134) (649) 165
-------- ---------- ---------- ----------- ----------
Total current liabilities..... 45 59,298 18,369 (12,621) 65,091
Long term debt..................... 10,848 5,018 -- -- 15,866
Covenant and licenses L.T. ........ -- 125 -- 906 1,031
Deferred Income Taxes.............. -- (186) 2,154 (1,968) --
-------- ---------- ---------- ----------- ----------
Total Liabilities............. 10,893 64,255 20,523 (13,683) 81,988
Shareholders' equity............... 70,601 87,931 161,295 (128,144) 191,683
-------- ---------- ---------- ----------- ----------
Total liabilities and
shareholders equity......... 81,494 152,186 181,818 (141,827) 273,671
======== ========== ========== =========== ==========
</TABLE>

F-37
<PAGE> 124
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
----------------------------------------------------------------------
WIND DUR NON
HOLDINGS INC. GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOW INFORMATION
Net cash provided (used) in
operating activities............. -- (522) (1,975) -- (2,497)
Net cash provided (used) in
investing activities............. -- (2,399) (2,357) -- (4,756)
Net cash provided (used) in
financing activities............. -- 1,329 213 -- 1,542
Effect of exchange rate............ -- -- (22) -- (22)
Cash at beginning.................. -- -- 8,224 -- 8,224
Cash at end........................ -- (1,592) 4,083 -- 2,491
</TABLE>

F-38
<PAGE> 125
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
--------------------------------------------------------------------------
WIND DUR NON
HOLDINGS, INC. GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Net Sales....................... -- 38,918 28,701 (16,207) 51,412
Cost of goods sold.............. -- 30,600 26,770 (16,777) 40,593
---- ------ ------ ------- ------
Gross profit............... -- 8,318 1,931 570 10,819
Operating expenses.............. -- 8,724 882 91 9,697
Non-recurring items............. -- -- -- -- --
---- ------ ------ ------- ------
Operating income........... -- (406) 1,049 479 1,122
Other (income) expense, net..... 107 402 (362) -- 147
---- ------ ------ ------- ------
Earnings before income taxes
and minority int in
subsidiaries............... (107) (808) 1,411 479 975
Provision for income taxes...... -- 3 61 100 164
Equity in (earnings) of
affiliated companies, net of
tax........................... (572) 82 -- -- (490)
Minority interest............... -- -- -- -- --
---- ------ ------ ------- ------
Net earnings.................... (679) (729) 1,350 379 321
==== ====== ====== ======= ======
</TABLE>

F-39
<PAGE> 126
WINDMERE-DURABLE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
----------------------------------------------------------------------
WIND DUR NON
HOLDINGS, INC. GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Cash................................ -- 1,793 7,395 -- 9,188
Accounts receivables................ -- 26,385 6,981 (874) 32,492
Intercompany receivables............ (36) 191 17,774 (821) 17,108
Inventories......................... -- 41,000 43,444 601 85,045
Other current assets................ -- 5,737 2,304 136 8,177
------ ------- ------- -------- -------
Total current assets........... (36) 75,106 77,898 (958) 152,010
Investments in affiliated
companies......................... 75,864 10,840 46,200 (98,024) 34,880
Property and equipment net.......... -- 7,327 25,812 -- 33,139
Other Assets........................ -- 4,784 12,249 (3,166) 13,867
====== ======= ======= ======== =======
Total assets................... 75,828 98,057 162,159 (102,148) 233,896
====== ======= ======= ======== =======
Notes payable....................... -- 32,850 5,347 (11,351) 26,846
Accounts Payable.................... -- 1,752 10,503 -- 12,255
Accrued expenses.................... -- 2,656 3,362 484 6,502
Curr maturities of L.T. ............ -- 815 -- -- 815
Income taxes payable and other
current liabilities............... -- 2,123 (344) (1,427) 352
------ ------- ------- -------- -------
Total current liabilities...... -- 40,196 18,868 (12,294) 46,770
Long term debt...................... 10,848 8,833 -- -- 19,681
Covenant & licenses L.T. ........... -- 165 -- -- 165
Deferred Income Taxes............... -- (186) 69 117 --
------ ------- ------- -------- -------
Total Liabilities.............. 10,848 49,008 18,937 (12,177) 66,616
Shareholders' equity................ 64,980 49,049 143,222 (89,971) 167,280
------ ------- ------- -------- -------
Total liabilities and shareholder
equity............................ 75,828 98,057 162,159 (102,148) 233,896
====== ======= ======= ======== =======
CASH FLOW INFORMATION
Net cash provided (used) in
operating activities.............. -- (8,260) 11,478 -- 3,218
Net cash provided (used) in
investing activities.............. -- 4,027 (10,963) -- (6,936)
Net cash provided (used) in
financing activities.............. -- 3,910 113 -- 4,023
Effect of exchange rate............. -- -- 104 -- 104
Cash at beginning................... -- 2,116 6,663 -- 8,779
Cash at end......................... -- 1,793 7,395 -- 9,188
</TABLE>

F-40
<PAGE> 127

HOUSEHOLD PRODUCTS GROUP EXCLUDING CLEANING AND
LIGHTING PRODUCT LINES
(A COMPONENT OF THE BLACK & DECKER CORPORATION)

COMBINED STATEMENT OF FINANCIAL POSITION
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets
Accounts receivable, net of allowances of $3,800 in
1997 and $3,100 in 1996............................... $ 96,460 $ 55,084
Inventories............................................ 40,971 53,146
Prepaid expenses and other............................. 5,808 8,986
-------- --------
Total current assets.............................. 143,239 117,216
Property, equipment and capitalized software, net......... 74,457 74,781
Goodwill.................................................. 23,451 27,134
Other assets.............................................. 17,400 17,755
-------- --------
Total assets...................................... 258,547 236,886

LIABILITIES
Current liabilities
Accounts payable....................................... 12,419 22,729
Accrued liabilities.................................... 51,109 51,340
-------- --------
Total current liabilities......................... 63,528 74,069
Other liabilities......................................... 35,547 38,130
-------- --------
Total liabilities................................. 99,075 112,199
-------- --------
OWNER'S NET INVESTMENT...................................... $159,472 $124,687
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-41
<PAGE> 128

HOUSEHOLD PRODUCTS GROUP EXCLUDING CLEANING AND
LIGHTING PRODUCT LINES
(A COMPONENT OF THE BLACK & DECKER CORPORATION)

COMBINED STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales.................................................. $402,928 $412,446 $445,739
Cost of goods sold......................................... 289,423 295,187 315,296
-------- -------- --------
Gross margin............................................... 113,505 117,259 130,443
Selling, general and administrative expenses............... 104,736 106,143 110,233
Restructuring.............................................. -- 4,676 --
-------- -------- --------
Operating income........................................... 8,769 6,440 20,210
Other expense.............................................. 579 1,698 3,464
-------- -------- --------
Earnings before income taxes............................... 8,190 4,742 16,746
Income tax provision....................................... 3,936 3,319 6,995
-------- -------- --------
Net earnings............................................... $ 4,254 $ 1,423 $ 9,751
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-42
<PAGE> 129

HOUSEHOLD PRODUCTS GROUP EXCLUDING CLEANING AND
LIGHTING PRODUCT LINES
(A COMPONENT OF THE BLACK & DECKER CORPORATION)

COMBINED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings................................................ $ 4,254 $ 1,423 $ 9,751
Adjustments to reconcile net earnings to cash flows from
operating activities:
Depreciation and amortization............................. 18,171 18,081 17,666
Restructuring charges..................................... -- 4,676 --
Changes in selected working capital items:
(Increase) decrease in accounts receivable............. (7,480) (1,181) 49,568
Decrease in inventories................................ 11,908 16,589 1,718
(Decrease) increase in accounts payable................ (10,288) 4,221 (2,284)
Other assets and liabilities.............................. 3,561 408 4,716
Net decrease in accounts receivable sold.................. (34,507) (8,450) (24,116)
-------- -------- --------
Net cash (used in) provided from operating activities....... (14,381) 35,767 57,019
INVESTING ACTIVITIES:
Capital expenditures........................................ (16,922) (22,306) (18,979)
Proceeds from disposal of assets............................ 185 63 1,932
-------- -------- --------
Net cash used in investing activities....................... (16,737) (22,243) (17,047)
FINANCING ACTIVITIES:
Net cash invested by (remitted to) owner.................... 31,118 (13,524) (39,972)
-------- -------- --------
CASH AT BEGINNING AND END OF YEAR........................... $ -- $ -- $ --
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-43
<PAGE> 130

HOUSEHOLD PRODUCTS GROUP
EXCLUDING CLEANING AND LIGHTING PRODUCT LINES

COMBINED STATEMENT OF CHANGES IN OWNER'S NET INVESTMENT
(AMOUNTS IN THOUSANDS)

<TABLE>
<S> <C>
BALANCE AT DECEMBER 31, 1994................................ $166,529
Net income................................................ 9,751
Foreign currency translation adjustments.................. 671
Net financing provided to B&D............................. (39,972)
--------
BALANCE AT DECEMBER 31, 1995................................ 136,979
Net income................................................ 1,423
Foreign currency translation adjustments.................. (191)
Net financing provided to B&D............................. (13,524)
--------
BALANCE AT DECEMBER 31, 1996................................ 124,687
Net income................................................ 4,254
Foreign currency translation adjustments.................. (587)
Net financing provided by B&D............................. 31,118
--------
BALANCE AT DECEMBER 31, 1997................................ $159,472
========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-44
<PAGE> 131

HOUSEHOLD PRODUCTS GROUP EXCLUDING CLEANING LIGHTING PRODUCT LINES
(A COMPONENT OF THE BLACK & DECKER CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNT IN THOUSANDS)

1. BASIS OF PRESENTATION

Household Products Group Excluding Cleaning and Lighting Product Lines
("HPG") presented in these financial statements is a component of The Black &
Decker Corporation ("B&D") that markets and manufactures small household
appliances excluding cleaning and lighting product lines in the Western
Hemisphere exclusive of Brazil (collectively, the "Market Area"). HPG's
operations consist of three manufacturing facilities located in the United
States, Mexico and Malaysia and a dedicated United States marketing and sales
organization. Sales in the remainder of the Market Area are managed through
sales and marketing organizations shared with other product lines of B&D.
Additionally, within the United States, HPG products are sold through service
centers and retail outlets and utilize distribution facilities managed by other
divisions of B&D. Certain sourcing and purchasing operations are conducted
through other B&D managed entities.

The accompanying combined financial statements have been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in a Form 8-K to be filed by Windmere-Durable
Holdings, Inc. in connection with its acquisition of HPG.

Throughout the period covered by the combined financial statements, the HPG
business was not conducted discretely from other businesses of B&D and,
accordingly, separate financial statements for HPG were not prepared. These
combined financial statements have been prepared from the historical accounting
records of B&D. The combined financial statements include all revenues of HPG,
all items of expense directly incurred by it and expenses charged or allocated
to it by B&D in the normal course of business. In addition, certain expenses
were allocated by B&D to HPG for the sole purpose of preparing these combined
financial statements. As a result of the business structure discussed above, the
vast majority of selling, general and administrative expenses are allocated. For
additional information concerning expenses charged or allocated to HPG by B&D,
see Note 3. These combined financial statements were prepared without regard to
legal organization.

B&D principally utilizes a centralized cash management system. Under this
system, HPG's cash requirements were provided directly by B&D; similarly, cash
generated by HPG was remitted directly to B&D. All charges and allocations of
costs for functions and services provided by B&D are deemed paid by HPG, in
cash, in the period in which the cost is recorded in the combined financial
statements. Intercompany balances with B&D, net of cash, are included in owner's
net investment. No B&D indebtedness is directly attributable to the assets of
HPG. Accordingly, no debt of B&D or related interest expense has been allocated
to HPG.

HPG's results have been included in B&D's consolidated income tax returns
in the various taxing jurisdictions in the Market Area. The amount of taxes
payable or receivable due to/from B&D for 1997, 1996 and 1995 is included as a
component of owner's net investment. The provision for income taxes, the related
assets and liabilities, and the related footnote disclosures are presented as if
HPG had filed separate tax returns and are in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."

The historical basis in inventories, property and equipment, capitalized
software and goodwill are clearly identifiable to the HPG business. Other
elements of working capital are not as clearly identifiable and accordingly
working capital other than inventory has been allocated to HPG in order to
estimate the total fixed and working capital investment related to reported
revenues.

All of the accounting judgments, estimations and allocations in the
combined financial statements are based on assumptions that B&D management
believes are reasonable under the circumstances. However,
F-45
<PAGE> 132
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

these allocations and estimates are not necessarily indicative of the costs that
would have resulted if HPG had been operated as a separate entity.

2. SIGNIFICANT ACCOUNTING POLICIES

Use of estimates: The combined financial statements and related
disclosures have been prepared on the basis of presentation disclosed in Note 1.
They reflect management's estimates and assumptions. Actual results could differ
from these estimates, impacting reported results of operations and financial
position.

Foreign currency translation: The financial statements of HPG businesses
located outside the United States, except those businesses operating in highly
inflationary economies and manufacturing operations producing primarily for the
United States market, generally are measured using the local currency as the
functional currency. Assets and liabilities of these businesses are translated
at the rates of exchange at the balance sheet date. The resultant translation
adjustments are included in owner's net investment. Income and expense items are
translated at average monthly rates of exchange. Gains and losses from foreign
currency transactions of these businesses are included in net earnings. For
businesses operating in highly inflationary economies and manufacturing
operations producing primarily for the United States market, gains and losses
from balance sheet translation adjustments are included in net earnings.

Revenue recognition: Revenues are recognized when products are shipped and
ownership risk and title pass to the customer.

Inventories: Inventories are stated at the lower of cost or market. The
cost of United States inventories is based primarily on the last-in, first-out
(LIFO) method; all other inventories are based on the first-in, first-out (FIFO)
method.

Property and equipment: Property and equipment is stated at historical
cost, net of accumulated depreciation. Property and equipment is depreciated
over their estimated useful lives, primarily on the straight-line basis. In
general, the estimated useful lives are as follows:

<TABLE>
<S> <C>
Buildings................................ 50 years
Computers and related equipment.......... 2-4 years
Furniture and office equipment........... 15 years
Leasehold improvements................... Shorter of lease term or useful life
Machinery and other equipment............ 8-13 years
Tools and dies........................... Shorter of estimated life of tool/die,
product life cycle or 3 years
</TABLE>

Capitalized software costs: HPG capitalizes the cost of purchased
software. Software costs are amortized over five years from the date placed in
service.

Goodwill: Goodwill is amortized on the straight-line method over 20 years.

Advertising and promotional costs: Advertising and promotional costs are
expensed in the year they are first used. Advertising and promotional expense
for the years ended December 31, 1997, 1996 and 1995 approximated $22,600,
$24,700 and $27,700, respectively.

Research and development costs: Costs associated with the development of
new products and changes to existing products are expensed as incurred and
approximated $7,600, $7,600 and $5,800 for the years ended December 31, 1997,
1996 and 1995, respectively.

Stock-based compensation: B&D has elected to follow the accounting
provisions of Accounting Principles Board Opinion (APBO) No. 25 for stock-based
compensation.

F-46
<PAGE> 133
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Derivative financial instruments: B&D utilizes derivative financial
instruments to manage certain foreign currency exposures including those of HPG.
Gains and losses on foreign currency transaction hedges are recognized in income
and offset the foreign exchange gains and losses on the underlying transactions.
Deferred gains on options that hedge forecasted cash flows, including
intercompany cash flows generally related to inventory purchases, are recognized
in cost of sales when the related inventory is sold or when a hedged purchase is
no longer expected to occur. Forward contracts that hedge forecasted
intercompany transactions are marked to market. Foreign currency contracts held
by B&D on behalf of HPG outstanding at December 31, 1997 were not material to
these combined financial statements.

3. RELATED PARTY TRANSACTIONS

As previously discussed, in many regards the operations of HPG are
commingled with those of other B&D operations. Related party expenses included
in these combined financial statements include B&D corporate overhead allocated
to HPG ("Corporate expense allocations"), costs incurred on behalf of HPG by B&D
largely to leverage B&D's combined purchasing power ("Corporate pass-through
charges"), costs shared by HPG and other B&D operations which are charged
primarily based on relative usage ("Shared direct services with B&D
affiliates"), and business unit overhead allocated to HPG ("Business unit
overheads"). The amounts charged for these services may not necessarily be
representative of the costs that would be incurred by HPG on a stand-alone
basis. In addition, business unit overheads in the HPG United States marketing
organization have been allocated to the cleaning and lighting product lines
which have been excluded from these combined financial statements. Products
manufactured in HPG production facilities for other B&D operations have been
transferred at cost and the related sales and expenses are excluded from these
combined financial statements.

Corporate expense allocations: B&D provides certain indirect management
services to HPG, including corporate and group management, treasury, tax, risk
management, certain legal services, internal audit and other indirect
administrative functions. The corporate expense allocations related to HPG
included in these combined financial statements was $4,600, $3,000 and $5,600
for the years ended December 31, 1997, 1996 and 1995, respectively.

Corporate pass-through charges: B&D provides certain common services for
HPG and other B&D affiliates, including group self-insurance programs and
blanket insurance coverage. Many of these services represent services provided
by third parties whereby B&D incurs the cost of the service on behalf of HPG.
B&D charges HPG for the estimated cost of these services. The charges for many
of these services from B&D represent estimates based upon certain allocations.
The amounts charged by B&D for these services may not necessarily be
representative of the costs that would be incurred by HPG on a stand-alone
basis.

F-47
<PAGE> 134
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Corporate pass-through charges allocated to HPG in the United States and
reflected in the accompanying Combined Statement of Operations for each year are
as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Product liability..................................... $ 4,720 $ 2,917 $ 3,397
Workers' compensation................................. 234 209 203
General liability and loss insurance.................. 361 268 342
Employee benefits:
Medical............................................. 3,672 3,843 4,217
Pension............................................. 788 716 538
Post-retirement medical............................. 149 388 1,275
401(k).............................................. 432 497 417
Patent expenses....................................... 208 323 353
Employment taxes...................................... 2,223 2,345 2,224
------- ------- -------
$12,787 $11,506 $12,966
======= ======= =======
</TABLE>

Shared direct services with B&D affiliates: HPG utilizes various direct
services provided by other B&D affiliates, including product distribution,
purchasing and information technology services. HPG is charged for these
services from the applicable affiliates as follows:

Product distribution: HPG's products are distributed in the United
States through two distribution centers which are operated by other B&D
affiliates. These distribution centers provide distribution services to HPG
and other B&D affiliates including shipping, receiving, warehousing and
invoicing. The charges from these distribution centers for these services
represent charges based upon certain allocation methodologies. The amounts
charged by B&D for these services may not necessarily be representative of
the costs that would be incurred by HPG on a stand-alone basis. Costs
charged to HPG for the use of these distribution services are reflected
within selling, general and administrative expenses in the accompanying
Combined Statement of Operations and totaled $12,700, $13,100 and $14,000
for the years ended December 31, 1997, 1996 and 1995, respectively.

Purchasing. A B&D affiliate provides certain sourcing, purchasing and
inspection services with respect to finished goods and component parts
provided by vendors located in the Far East for many B&D business units,
including HPG. In exchange for these services, B&D charges HPG an
administrative fee of $1,100 per annum. The amount of the administrative
fee was determined by B&D based upon an allocation of the affiliate's
overhead costs to all business units which utilize the affiliate's
services. The amounts allocated by B&D may not necessarily be
representative of the costs that would be incurred by HPG on a stand-alone
basis.

Purchases made by B&D on behalf of HPG for the years ended December
31, 1997, 1996 and 1995, approximated $85,900, $89,200 and $82,300,
respectively.

Information technology and communication services. Certain
information technology and communication services are provided to HPG by
B&D affiliates. These services include mainframe computer processing,
payroll and benefits processing, information and communication systems
support, equipment lease administration, and the use of telephone and data
communication lines. The charges allocated to HPG for these services
represent both allocations of common costs and specifically identified
expenses that are incurred on behalf of HPG by other B&D affiliates. The
amounts charged to HPG for these services may not necessarily be
representative of the costs that would be incurred by HPG on a stand-alone
basis. Costs charged to HPG for the use of these information technology and
communication services are reflected within selling, general and
administrative expenses in the accompanying Combined Statement of
Operations and totaled $1,700, $1,500 and $1,600 for the years ended
December 31, 1997, 1996 and 1995, respectively.

F-48
<PAGE> 135
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Business unit overheads. As previously mentioned, HPG sells its products
in the Market Area outside of the United States through B&D affiliates. Selling,
general and administrative expenses include those costs, principally promotion,
marketing and research and development expenses, which are specifically
attributable to the HPG business. Those selling, general and administrative
expenses not directly attributable to HPG or other B&D product lines are
allocated to product lines, including HPG, on the basis of product line sales to
total sales. Allocated selling, general and administrative expenses included in
the HPG Combined Statement of Operations were $20,500, $19,700 and $19,200 for
the years ended December 31, 1997, 1996 and 1995, respectively.

Within the United States and Canada, B&D affiliates operate over 100
service centers and 20 retail outlet stores. These service centers and outlet
stores primarily sell new and reconditioned B&D products, including HPG
products. New HPG products sold through these channels are primarily supplied by
HPG, and reconditioned products sold through these channels are supplied by a
reconditioning center operated by a B&D affiliate. Amounts reflected in the
accompanying Combined Statement of Operations represent HPG's share of the
operating results of the aforementioned service centers and retail outlets
including allocated overheads. Indirect costs included in these combined
financial statements which were allocated to revenues generated through these
service centers and outlets totaled $6,400, $6,700 and $6,600 for the years
ended December 31, 1997, 1996 and 1995, respectively.

Within the United States, selling, general and administrative expenses were
allocated between the HPG business and the cleaning and lighting product lines
first on the basis of specific identification. Those expenses that were not
specifically attributable to the HPG business or cleaning and lighting product
lines were allocated based on the revenue contribution of the respective
businesses or product lines. Costs allocated to cleaning and lighting, and
therefore excluded from these combined financial statements, were $37,300,
$55,700 and $59,800 for the years ended December 31, 1997, 1996 and 1995,
respectively. These costs include portions of the Corporate pass-through charges
and shared direct services with B&D affiliates noted above.

4. ACCOUNTS RECEIVABLE

HPG participated in B&D's sales of receivables program under which HPG's
and other B&D affiliate's receivables were sold without significant recourse on
a revolving basis. In December 1997, B&D terminated its sale of receivables
program. At December 31, 1996, B&D estimates that it had sold approximately
$34,500 of HPG's receivables under this program. The estimate is based on an
allocation percentage derived by dividing HPG's receivables eligible for sale at
that time by B&D's total receivable available for sale at that time, multiplied
by the actual receivables sold under the program. The discount on the sale of
receivables of $600, $1,700 and $2,200 for the years ended December 31, 1997,
1996 and 1995, respectively, is recorded in other expense.

HPG continuously evaluates the credit worthiness of its customers, and
generally does not require collateral.

5. INVENTORIES

The classification of inventories at the end of each year consisted of the
following:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Raw materials and work in progress.......................... $ 8,670 $13,777
Finished goods.............................................. 36,651 45,141
Provision for excess and obsolete inventories............... (4,350) (5,772)
------- -------
$40,971 $53,146
======= =======
</TABLE>

The cost of inventories determined under the last-in, first-out method
(LIFO) approximates the cost determined under the first-in, first-out (FIFO)
method. The cost of United States inventories stated under the

F-49
<PAGE> 136
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

LIFO method was approximately 60% and 50% of total inventories at December 31,
1997 and 1996, respectively. For the year ended December 31, 1996, gross margin
increased by $700 due to a LIFO liquidation.

6. PROPERTY, EQUIPMENT AND CAPITALIZED SOFTWARE

Major classes of property, equipment and capitalized software at the end of
each year are summarized as follows:

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land and land improvements.................................. $ 2,733 $ 2,568
Buildings and leasehold improvements........................ 21,519 22,729
Computers and related equipment............................. 4,276 6,947
Furniture and office equipment.............................. 2,606 3,088
Machinery and other equipment............................... 92,929 107,060
Tools and dies.............................................. 26,265 27,850
Construction in progress.................................... 2,724 3,797
Capitalized software........................................ 4,553 --
-------- --------
157,605 174,039
Less accumulated depreciation and amortization.............. 83,148 99,258
-------- --------
$ 74,457 $ 74,781
======== ========
</TABLE>

Depreciation expense for the year ended December 31, 1997, 1996 and 1995
was approximately $14,500, $14,400 and $14,000, respectively.

7. GOODWILL

Goodwill at the end of each year was as follows:

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Goodwill.................................................... $ 85,825 $ 85,804
Accumulated amortization.................................... (62,374) (58,670)
-------- --------
$ 23,451 $ 27,134
======== ========
</TABLE>

8. ACCRUED LIABILITIES

Accrued liabilities at the end of each year consisted of the following:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accrued advertising and promotion........................... $ 8,717 $14,816
Accrued warranty............................................ 7,311 7,419
Accrued payroll and benefits................................ 7,510 5,186
Other....................................................... 27,571 23,919
------- -------
$51,109 $51,340
======= =======
</TABLE>

9. EMPLOYEE BENEFIT PLANS

Throughout the period covered by the combined financial statements, HPG's
United States employees were covered by certain non-contributory defined benefit
plans of B&D. The benefits for these plans are based primarily on employees'
years of service and remuneration near retirement. The cost of these plans for
HPG

F-50
<PAGE> 137
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

was determined on an actuarial basis. Assets, which are not specifically
attributable to individual employees, were assumed to be equal to the projected
pension obligation for purposes of determining pension expense. The pension cost
is not necessarily indicative of the pension cost that would have been incurred
if HPG had been operated as a separate entity.

The components of pension cost for each year were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost.......................................... $ 1,114 $ 989 $ 846
Interest cost on projected benefit obligation......... 2,014 1,660 1,775
Actual return on assets............................... (2,363) (2,184) (2,093)
Net amortization and deferral......................... 23 251 10
------- ------- -------
Net pension cost...................................... $ 788 $ 716 $ 538
======= ======= =======
</TABLE>

The funded status of the domestic defined benefit plans at the end of each
year was as follows:

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit............................................ $ 25,331 $ 19,714
-------- --------
Accumulated benefit....................................... $ 26,167 $ 20,318
-------- --------
Projected benefit......................................... $ 31,045 $ 23,554
Allocated plan assets at fair value......................... (30,916) (23,490)
-------- --------
Projected benefit obligation in excess of plan assets....... 129 64
Unrecognized net gain....................................... 1,953 1,121
-------- --------
Net pension liability recognized in the Combined Statement
of Financial Position..................................... $ 2,082 $ 1,185
======== ========
Discount rates.............................................. 7.5% 8.0%
Salary scales............................................... 5.0% 5.0%
Expected return on plan assets.............................. 9.75% 10.5%
</TABLE>

Plan assets consist principally of investments in equity securities, debt
securities and cash equivalents.

HPG also participates in a B&D sponsored defined contribution plan. Under
the terms of the plan, HPG matches one half of employee contributions based on a
percentage of the employee contribution or compensation. Expense for defined
contribution plans amounted to approximately $400, $500, and $400 for the years
ended December 31, 1997, 1996, and 1995, respectively.

Throughout the period covered by the combined financial statements, HPG's
United States and Canadian pensioners and survivors were provided health care
and life insurance benefits by an unfunded plan sponsored by B&D. The cost of
these plans for HPG was determined on an actuarial basis.

Net periodic postretirement benefit expense for each year included the
following components:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service expense....................................... $ 127 $ 112 $ 83
Interest expense...................................... 1,326 1,426 2,207
Net amortization...................................... (1,304) (1,150) (1,015)
------- ------- -------
Net periodic postretirement benefit expense........... $ 149 $ 388 $ 1,275
======= ======= =======
</TABLE>

The reconciliation of the accumulated postretirement benefit obligation to
the liability recognized in other liabilities in the Combined Statement of
Financial Position at the end of each year was as follows:

F-51
<PAGE> 138
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $15,018 $14,842
Fully eligible active participants........................ 1,909 1,602
Other active participants................................. 1,570 1,277
------- -------
Total............................................. 18,497 17,721
------- -------
Unrecognized prior service cost............................. 5,790 7,039
Unrecognized net gain....................................... 3,031 4,860
------- -------
Net postretirement benefit liability recognized in the
Combined Statement of Financial Position.................. $27,318 $29,620
======= =======
</TABLE>

The health care cost trend rate used to determine the postretirement
benefit obligation was 9.7% for 1997 and 7.2% for 1998, decreases gradually to
an ultimate rate of 5.25% in 2001, and remains at that level thereafter. The
trend rate is a significant factor in determining the amounts reported. The
effect of a 1% annual increase in these assumed health care cost trend rates
would increase the accumulated postretirement benefit obligation at December 31,
1997, by approximately $1.2 million. The effect of a 1% increase on the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost is immaterial. An assumed discount rate of 7.5% was
used to measure the accumulated postretirement benefit obligation in 1997
compared to 8.0% used in 1996.

The benefit costs are not necessarily indicative of the costs that would
have been incurred if HPG had been operated as a separate entity.

10. RESTRUCTURING

Subsequent to December 31, 1997, HPG provided for severance costs of
certain selling, general and administrative employees and for the severance and
asset write-off costs associated with closing its Malaysian manufacturing
facility which totaled $15,500. The selling, general and administrative
terminations were effected during the quarter ended March 29, 1998, although
payment of severance will continue monthly through the term of the obligation.
The Malaysian plant shut-down is expected to be completed during 1998.

In 1996, HPG recorded a restructuring provision to accrue severance costs
and a tooling write-off associated with the exit of its countertop beverage
product line and further integration of its Canadian business into its United
States business. Total severance costs associated with these actions
approximated $2,000.

11. INCOME TAXES

Earnings (loss) before income taxes for each year were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- ------ -------
<S> <C> <C> <C>
United States......................................... $(12,642) $2,688 $ 6,294
Other countries....................................... 20,832 2,054 10,452
-------- ------ -------
$ 8,190 $4,742 $16,746
======== ====== =======
</TABLE>

F-52
<PAGE> 139
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Significant components of income taxes (benefits) for each year were as
follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------ -------
<S> <C> <C> <C>
Current:
United States........................................ $(3,600) $ 373 $(1,163)
Other countries...................................... 7,333 666 2,919
------- ------ -------
3,733 1,039 1,756
------- ------ -------
Deferred (primarily United States)..................... 203 2,280 5,239
------- ------ -------
$ 3,936 $3,319 $ 6,995
======= ====== =======
</TABLE>

Deferred tax assets (liabilities) at the end of each year were composed of
the following:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Postretirement benefits..................................... $12,194 $12,322
Product liability........................................... 3,368 2,897
Warranty.................................................... 2,486 2,459
Other....................................................... 4,443 4,973
Inventories................................................. (3,417) (3,339)
Fixed assets................................................ (1,806) (1,841)
------- -------
Net deferred tax assets..................................... $17,268 $17,471
======= =======
</TABLE>

A reconciliation of income taxes at the federal statutory rate to HPG's
income taxes for each year is as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Income taxes at federal statutory rate................... $2,867 $1,660 $5,861
Higher (lower) effective taxes on earnings in other
countries.............................................. 41 (53) (739)
State taxes (net of federal benefit)..................... (362) 332 510
Amortization of goodwill................................. 1,296 1,296 1,292
Other -- net............................................. 94 84 71
------ ------ ------
Income taxes............................................. $3,936 $3,319 $6,995
====== ====== ======
</TABLE>

Income taxes have not been provided on the undistributed earnings of
foreign businesses, as such earnings are designated to be reinvested locally to
finance expansion or to support local operating requirements. It is not
practicable to estimate the amount of additional tax that might be payable upon
repatriation of foreign earnings.

12. DISAGGREGATED FINANCIAL INFORMATION

HPG operates in a single segment.

Geographic information

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales:
United States.................................... $266,685 $287,288 $312,704
Canada........................................... 53,982 55,193 66,052
Other............................................ 82,261 69,965 66,983
-------- -------- --------
Combined total..................................... $402,928 $412,446 $445,739
======== ======== ========
</TABLE>

F-53
<PAGE> 140
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Net sales are attributed to countries based on the location of the customer.

<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Long-lived assets:
United States............................................. $47,731 $ 48,762
Mexico.................................................... 31,981 34,764
Malaysia.................................................. 15,018 17,105
Other..................................................... 3,178 1,284
------- --------
Combined total.............................................. $97,908 $101,915
======= ========
</TABLE>

Significant customers: Sales to Wal-Mart represented 21% of net sales in
1997 (20% in 1996 and 19% in 1995). Sales to Kmart were 10% of net sales in 1997
(10% in 1996 and 11% in 1995). At December 31, 1997, receivables from Wal-Mart
represented 19% of total receivables.

13. COMMITMENTS AND CONTINGENCIES

Lease obligations: HPG is obligated under various non-cancelable leases
for office facilities and equipment. These leases generally provide for renewal
options and, in the case of facilities leases, for periodic rate increases based
upon various economic factors.

Future minimum payments under non-cancelable operating leases with initial
terms of one year or more as of December 31, 1997 are as follows:

<TABLE>
<S> <C>
1998................................................ $3,859
1999................................................ 3,224
2000................................................ 2,433
2001................................................ 42
------
Total..................................... $9,558
======
</TABLE>

Rental expense was $4,900, $4,000 and $4,100 for the years ended December
31, 1997, 1996 and 1995, respectively.

Legal proceedings: In October 1997, the Consumer Product Safety Commission
filed an administrative complaint against B&D seeking an order requiring B&D to
give public notice of a fire hazard associated with the T1000 Type 1 Horizontal
Toaster manufactured and sold by HPG and an order requiring to provide an
adequate remedy for the T1000 Type 1 Horizontal Toaster. Prior to the filing of
the administrative complaint, HPG had initiated a recall of the toaster. A
provision was made in HPG's results from operations in 1997 for the estimated
cost of the original recall.

Subsequent to December 31, 1997, B&D agreed to modify the original recall
plan and entered into a settlement agreement with the Consumer Product Safety
Commission. The additional provision necessary to cover the incremental
estimated cost of the modified plan was also recorded in the Combined Statement
of Operations in 1997. B&D believes these amounts provided are adequate to
reflect the cost of the recall.

Various other suits, claims and actions are pending against HPG. Management
of B&D does not anticipate that the disposition of these suits, claims and
actions, either individually or in the aggregate, will have a material adverse
effect on HPG's financial position or its expected ongoing results of its
operations.

14. SUBSEQUENT EVENTS

On May 11, 1998, B&D announced that it had entered into an agreement to
sell its HPG business to Windmere-Durable Holdings, Inc. (the "buyer"). In
connection with the anticipated sale, B&D and the buyer have agreed to enter
into certain distribution services agreements, services agreements and lease or
tenancy agreements.

F-54
<PAGE> 141
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The distribution services agreements are to provide for the distribution by
B&D of HPG products in the United States through February 29, 2000. Separate
agreements will exist for other jurisdictions in the Market Area. These
agreements generally are cancelable by the buyer at certain early termination
dates upon specified advance written notice. Terms to be provided to HPG are to
be consistent with budgeted intercompany rates currently in effect.

The services agreements are to provide for the performance of certain
administrative services by B&D on behalf of HPG through periods ranging up to
September 30, 2000. Separate agreements will exist for the United States and
other jurisdictions in the Market Area and are cancelable by the buyer, in whole
or in part, upon specified advance written notice. Terms to be provided to HPG
are to be consistent with budgeted intercompany rates currently in effect.

The lease or tenancy agreements provide for the buyer to use the Malaysian
production facility for up to six months subsequent to closing and the United
States production facility through September 30, 1999, at nominal rates.

F-55
<PAGE> 142

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
The Black & Decker Corporation

We have audited the accompanying combined statement of financial position
of the Household Products Group Excluding Cleaning and Lighting Product Lines (a
Component of The Black & Decker Corporation) as defined in Note 1 ("HPG") as of
December 31, 1997 and 1996, and the related combined statements of operations,
changes in owner's net investment and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of HPG's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of HPG, as defined in
Note 1, at December 31, 1997 and 1996, and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP

Stamford, Connecticut
June 5, 1998

F-56
<PAGE> 143

HOUSEHOLD PRODUCTS GROUP EXCLUDING CLEANING AND
LIGHTING PRODUCT LINES
(A COMPONENT OF THE BLACK & DECKER CORPORATION)

INTERIM COMBINED STATEMENT OF FINANCIAL POSITION
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 29, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Accounts receivable....................................... $ 65,492 $ 96,460
Inventories............................................... 61,037 40,971
Prepaid expenses and other................................ 5,236 5,808
-------- --------
Total current assets.............................. 131,765 143,239
Property, equipment and capitalized software, net........... 63,738 74,457
Goodwill.................................................... 22,525 23,451
Other assets................................................ 16,565 17,400
-------- --------
Total assets...................................... 234,593 258,547
LIABILITIES
Current liabilities
Accounts payable.......................................... 19,896 12,419
Accrued liabilities....................................... 45,350 51,109
-------- --------
Total current liabilities......................... 65,246 63,528
Other liabilities........................................... 33,713 35,547
-------- --------
Total liabilities................................. 98,959 99,075
-------- --------
OWNER'S NET INVESTMENT...................................... $135,634 $159,472
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-57
<PAGE> 144

HOUSEHOLD PRODUCTS GROUP
EXCLUDING CLEANING AND LIGHTING PRODUCT LINES
(A COMPONENT OF THE BLACK & DECKER CORPORATION)

INTERIM COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 29, MARCH 30,
1998 1997
--------- ---------
<S> <C> <C>
Net sales................................................... $ 61,755 $65,357
Cost of goods sold.......................................... 43,605 47,394
-------- -------
Gross margin................................................ 18,150 17,963
Selling, general and administrative expenses................ 21,723 19,735
Restructuring............................................... 15,500 --
-------- -------
Operating loss.............................................. (19,073) (1,772)
Other income (expense)...................................... 121 (78)
-------- -------
Loss before income taxes.................................... (18,952) (1,850)
Income tax benefit.......................................... (3,428) (801)
-------- -------
Net loss.................................................... $(15,524) $(1,049)
======== =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-58
<PAGE> 145

HOUSEHOLD PRODUCTS GROUP
EXCLUDING CLEANING AND LIGHTING PRODUCT LINES

INTERIM COMBINED STATEMENT OF CASH FLOWS (UNAUDITED)
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 29, MARCH 30,
1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $(15,524) $ (1,049)
Adjustments to reconcile net earnings to cash flows from
operating activities:
Depreciation and amortization............................. 4,027 4,611
Restructuring charges..................................... 15,500 --
Changes in selected working capital items:
Decrease in accounts receivable........................ 30,890 28,143
Increase in inventories................................ (20,106) (8,079)
Increase (decrease) in accounts payable................ 7,479 (982)
Other assets and liabilities.............................. (12,174) (12,696)
Net decrease in accounts receivable sold.................. -- (17,298)
-------- --------
Net cash provided from (used in) operating activities....... 10,092 (7,350)

INVESTING ACTIVITIES:
Capital expenditures........................................ (1,873) (1,125)
Proceeds from disposal of assets............................ 19 --
-------- --------
Net cash used in investing activities....................... (1,854) (1,125)

FINANCING ACTIVITIES:
Net cash (remitted to) invested by owner.................... (8,238) (8,475)
-------- --------
CASH AT BEGINNING AND END OF YEAR........................... $ -- $ --
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-59
<PAGE> 146

HOUSEHOLD PRODUCTS GROUP EXCLUDING CLEANING AND
LIGHTING PRODUCT LINES
(A COMPONENT OF THE BLACK & DECKER CORPORATION)

INTERIM COMBINED STATEMENT OF CHANGES IN OWNER'S NET INVESTMENT
(UNAUDITED)
(AMOUNTS IN THOUSANDS)

<TABLE>
<S> <C>
BALANCE AT DECEMBER 31, 1996................................ $124,687
Net loss.................................................. (1,049)
Foreign currency translation adjustments.................. (232)
Net financing provided by B&D............................. 8,475
--------
BALANCE AT MARCH 30, 1997................................... $131,881
========
BALANCE AT DECEMBER 31, 1997................................ $159,472
Net loss.................................................. (15,524)
Foreign currency translation adjustments.................. (76)
Net financing provided to B&D............................. (8,238)
--------
BALANCE AT MARCH 29, 1998................................... $135,634
========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-60
<PAGE> 147

HOUSEHOLD PRODUCTS GROUP EXCLUDING CLEANING AND
LIGHTING PRODUCT LINES
(A COMPONENT OF THE BLACK & DECKER CORPORATION)

NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)

1. BASIS OF PRESENTATION

The accompanying unaudited combined financial statements include all
adjustments, consisting of recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for these
periods but do not include all the information and notes required by generally
accepted accounting principles for complete financial statements. Operating
results for the period ended March 29, 1998, are not necessarily indicative of
the results that may be expected for the entire year.

2. RESTRUCTURING

In the quarter ended March 29, 1998, HPG provided for severance costs of
certain selling, general and administrative employees and for the severance and
asset write-off costs associated with closing its Malaysian manufacturing
facility. The selling, general and administrative terminations were effected by
the end of the quarter ended March 29, 1998, although payment of severance will
continue monthly through the term of the obligation. The Malaysian plant
shut-down is expected to be completed during 1998.

F-61
<PAGE> 148

============================================================
No dealer, salesperson or other person is authorized to give any
information or to make any representations other than those contained in or
incorporated by reference in this Prospectus Supplement or the Prospectus in
connection with the offer made by this Prospectus Supplement and the Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or any of the Underwriters. This
Prospectus Supplement and the Prospectus do not constitute an offer to sell, or
a solicitation of an offer to buy, any securities other than the shares of
Common Stock to which they relate or an offer to, or a solicitation of, any
person in any jurisdiction where such offer or solicitation would be unlawful.
Neither the delivery of this Prospectus Supplement and the Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
the information contained herein is correct as of any time subsequent to the
date hereof or that there has been no change in the affairs of the Company since
such date.
----------------------------------------
TABLE OF CONTENTS
----------------------------------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary......... S-3
Risk Factors.......................... S-14
Concurrent Notes Offering............. S-25
Use of Proceeds....................... S-25
Price Range of Common Stock........... S-26
Dividend Policy....................... S-26
Consolidated Capitalization........... S-27
Unaudited Pro Forma Combined Financial
Information......................... S-28
Selected Historical Financial
Information......................... S-36
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-39
Industry Overview..................... S-49
Business.............................. S-50
Management............................ S-62
Description of Certain Indebtedness... S-64
Certain United States Federal Tax
Considerations for Non-United States
Holders............................. S-67
Underwriting.......................... S-70
Legal Matters......................... S-72
Experts............................... S-72
PROSPECTUS
Available Information................. 2
Information Incorporated by
Reference........................... 2
Disclosure Regarding Forward-Looking
Statements.......................... 3
The Company........................... 4
Use of Proceeds....................... 5
Ratio of Earnings to Fixed Charges.... 5
Description of Debt Securities........ 6
Plan of Distribution.................. 13
Legal Matters......................... 14
Experts............................... 14
Index to Financial Statements......... F-1
</TABLE>

============================================================

3,041,000 SHARES

[WINDMERE-DURABLE HOLDINGS LOGO]

COMMON STOCK
----------------------------------------------------
PROSPECTUS SUPPLEMENT
(To Prospectus Dated June , 1998)
----------------------------------------------------
NationsBanc Montgomery
Securities LLC

Raymond James & Associates,
Inc.
, 1998

============================================================