HOME PRODUCTS INTERNATIONAL INC, 424B1, 1997-06-25

HOME PRODUCTS INTERNATIONAL INC
424B1, 1997-06-25
PLASTICS PRODUCTS, NEC

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<PAGE> 1

PROSPECTUS

3,500,000 SHARES

[HOME PRODUCTS INTERNATIONAL, INC. LOGO]

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

Of the 3,500,000 shares of common stock, $0.01 par value (the "Common
Stock") of Home Products International, Inc. (the "Company") being offered,
2,000,000 shares are being sold by the Company and 1,500,000 shares are being
sold by the Meyer J. and Norma L. Ragir Foundation and certain Ragir family
trusts (the "Selling Shareholders"). The Company will not receive any proceeds
from the sale of Common Stock by the Selling Shareholders. See "Principal and
Selling Shareholders." The Common Stock is traded on The Nasdaq National
Market(SM) under the symbol "HPII." On June 24, 1997, the last reported sale
price of the Common Stock as reported on The Nasdaq National Market(SM) was
$10.625 per share. See "Price Range of Common Stock."
------------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------------

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.

<TABLE>
<S> <C> <C> <C> <C>
==================================================================================================================
UNDERWRITING PROCEEDS TO THE
PRICE TO DISCOUNTS AND PROCEEDS TO THE SELLING
THE PUBLIC COMMISSION(1) COMPANY(2) SHAREHOLDERS(3)
- ------------------------------------------------------------------------------------------------------------------
Per Share......................... $9.75 $0.585 $9.165 $9.165
- ------------------------------------------------------------------------------------------------------------------
Total(4).......................... $34,125,000 $2,047,500 $18,330,000 $13,747,500
==================================================================================================================
</TABLE>

(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting the Company's share of expenses, estimated at $454,452.
(3) Before deducting the Selling Shareholders' share of expenses, estimated at
$65,548.
(4) The Company has granted to the Underwriters an option, exercisable within 30
days hereof, to purchase up to an aggregate of 525,000 of additional shares
of Common Stock at the price to the public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$39,243,750, $2,354,625, and $23,141,625, respectively. See "Underwriting."
------------------------------

The shares of Common Stock are offered by the Underwriters named herein,
subject to prior sale, when, as and if issued by the Company and delivered to
and accepted by the Underwriters and subject to certain prior conditions
including the right of the Underwriters to reject any order in whole or in part.
It is expected that delivery of the shares of Common Stock will be made through
the facilities of The Depository Trust Company, New York, New York on or about
June 30, 1997.

EVEREN SECURITIES, INC. MONTGOMERY SECURITIES

June 24, 1997
<PAGE> 2

[ARTWORK -- PICTURE OF HOUSEWARE PRODUCTS]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 103 UNDER REGULATION M. SEE "UNDERWRITING."
<PAGE> 3
Complete line of suction mount shower organizers.

Photo #1
Photo of woman in shower with various suction mount shower organizers.

Photo #2 Photo #3 Photo #4
Photo of soap dispenser Photo of suction Photo of shaving mirror
hooks

The most extensive line of shower caddies.

Photo #5 Photo #6
Photo of 4 shower caddies Photo of 2 shower caddies
<PAGE> 4
Photo #1
Photo of hangers Full line of hangers
and closet organizers.

Photo #2
Photo of shoe rack

General organization products
for kitchen, bath or office

Photo #3
Photo of soap dispenser and
toothbrush holder

Photo #4 Photo #5
Photo of various organization Photo of solutions display
products
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, appearing elsewhere in this
Prospectus. Unless the context otherwise requires, references herein to (i)
"HPI" or the "Company" are to Home Products International, Inc., a Delaware
corporation, and its wholly-owned subsidiaries, Selfix, Inc., a Delaware
corporation ("SELFIX"), Tamor Corporation, a Massachusetts corporation
("TAMOR"), and Shutters, Inc., an Illinois corporation ("SHUTTERS"), (ii)
"Selfix" include both Selfix and, unless the context otherwise requires,
Shutters which was previously a wholly-owned subsidiary of Selfix, (iii) "Tamor"
include both Tamor and Housewares Sales, Inc., a Massachusetts corporation and
Tamor's affiliated product distribution company which was merged into Tamor as
part of the Tamor Acquisition (as defined), and (iv) the "Tamor Acquisition" are
to the acquisition by the Company of the business of Tamor and Housewares Sales,
Inc. which was acquired in February, 1997, effective as of January 1, 1997. Pro
forma information gives effect to the Tamor Acquisition as if the transaction
had occurred on December 31, 1995, or as of December 28, 1996, as the context
requires, and all references to pro forma information refer to the fiscal year
ending the last Saturday of December of each year. As adjusted information gives
effect to the Offering and the application of the estimated net proceeds
therefrom as if such transactions had occurred on December 31, 1995, or on
December 28, 1996, or as of March 29, 1997, as the context requires. All
references to the Company's and Selfix's fiscal year refer to the fiscal year
ending on the last Saturday of December of each year, and all references to
Tamor's fiscal year refer to the fiscal year ending on December 31 of each year.

THE COMPANY

After giving effect to the Tamor Acquisition, on a pro forma basis, the
Company would have had record net sales and record operating profit for fiscal
1996 of $113.9 million and $8.2 million, respectively. For the fiscal quarter
ended March 29, 1997, the Company reported record quarterly net sales and record
quarterly operating profit of $31.7 million and $2.5 million, respectively.

The Company is comprised of three operating subsidiaries, Tamor, which was
acquired in February, 1997, effective as of January 1, 1997, Selfix and
Shutters. Collectively, these three companies have over 100 years of operating
history. Tamor's primary product line is plastic storage containers, ranging
from shoe boxes to jumbo 48 gallon totes, in which it holds a significant market
share in the United States. Through Tamor, the Company is also among the
nation's leading suppliers of plastic hangers. Selfix's primary product line is
bath and shower organization products, in which it holds a significant market
share in the United States. Through Selfix, the Company is also among the
nation's leading suppliers of hooks and home helpers and juvenile organization
products. The Company currently offers more than 750 products, in approximately
2,000 color and feature combinations or "stock keeping units" ("SKUS"), and
intends to continue to aggressively develop and introduce new products with a
target of achieving at least 10% of annual net sales from new products
introduced in the prior year. Through Shutters, the Company has a significant
market share in durable plastic exterior shutters.

approximately 50% of total market sales. According to industry reports, sales of
plastic storage products are expected to remain strong given consumers' growing
needs for easy solutions to storage problems. As in many product areas, large
national retailers are reducing the number of suppliers of storage products and
forming key partnerships with suppliers that can provide them product depth. As
large national retailers seek greater product depth, the suppliers of storage
products have begun to consolidate. Consolidation of suppliers in the plastic
storage market is expected to continue based on the large number of relatively
small suppliers in this market.

The Company believes the completion of the Tamor Acquisition is a
significant first step in the Company becoming a major diversified houseware
products company through its strategy of disciplined growth through acquisition.
After giving effect to the Tamor Acquisition, on a pro forma basis in fiscal
1996, the Company's net sales would have almost tripled and its operating profit
would have increased more than six-fold. The Company believes the increased
credibility and visibility resulting from the Tamor Acquisition will position
the Company to aggressively pursue its strategy of disciplined growth through
acquisition as smaller suppliers are pressured by large national retailers to
consolidate.

The Company believes that its competitive strengths combined with the
following strategies will enable the Company to continue its growth, increase
its profitability and gain market share:

PURSUE ADDITIONAL STRATEGIC ACQUISITIONS, by acquiring companies which
manufacture products within the Company's existing product categories and, in
the future, acquiring companies that will enable it to enter new related product
categories more rapidly and cost-effectively.

LEVERAGE MARKET SHARE POSITION, by using its aggressive new product
development program to increase sales in all of its product categories and to
become a leading supplier of opening price point products in more of its
existing product categories.

CAPITALIZE ON TAMOR ACQUISITION SYNERGIES, by using excess manufacturing
capacity, by expanding the number of product categories offered and the number
of product lines offered within existing product categories, and by increasing
its distribution network and international sales.

CONTINUE TO BE A LOW COST PRODUCER, by remaining focused on continuous cost
reduction and productivity improvement as well as maximizing the use of each
operating facility and leveraging the Company's purchasing power to achieve
certain economies of scale in the purchase of plastic resin and other materials.

INTRODUCE HIGH-VALUE LOW-COST NEW PRODUCTS, that are attractively designed
with consumer driven features and benefits.

EMPHASIZE CUSTOMER SERVICE THROUGH OPERATIONAL AND INFORMATION SYSTEM
INFRASTRUCTURE, by using its state-of-the-art retail information technology,
such as Electronic-Data-Interchange (EDI) and planogram (shelf-space management
techniques) technology, to respond to the demands of its retail customers.

EXPAND MERCHANDISING RELATIONSHIPS WITH KEY CUSTOMERS, by maintaining close
and interactive relationships with its retailers and distributors by focusing on
new product development and creative merchandising ideas.

INCREASE PENETRATION IN INTERNATIONAL MARKETS, by emphasizing further
penetration in Western Europe, Mexico and Latin America and by cross-marketing
newly acquired product lines through existing international channels.

The Company manufactures and distributes the majority of its products
through a network of seven facilities in the United States aggregating over
877,000 square feet. The Company's executive offices are located at 4501 West
47th Street, Chicago, Illinois 60632, and its telephone number is (773)
890-1010.
4
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered
By the Company................................ 2,000,000 shares(1)
By the Selling Shareholders................... 1,500,000 shares
Total.................................... 3,500,000 shares
Common Stock to be outstanding after the
Offering...................................... 6,322,922(1)(2)
Estimated Net Proceeds to the Company........... $17.9 million
Use of Proceeds................................. The Company will use all of the net proceeds of the
Offering (i) to repay $10.9 million of the
principal amount of the Term Loans and (ii) to
repay in full the $7.0 million Subordinated
Note.(3)(4)
The Nasdaq National Market(SM) symbol........... HPII
</TABLE>

- -------------------------
(1) Excludes up to 525,000 shares of Common Stock subject to an over-allotment
option granted to the Underwriters by the Company. See "Underwriting."

(2) Excludes 1,356,998 shares of Common Stock reserved for issuance under the
Home Products International, Inc. 1987, 1991 and 1994 Stock Option Plans
(together, the "Stock Option Plans"). There are currently 965,017 options
outstanding under the Stock Option Plans, each of which entitles the holder
thereof to purchase one share of Common Stock. See "Management -- Stock
Option Plans." The weighted average exercise price for all of the options
currently outstanding under the Stock Option Plans is $6.79 per share. Also
excludes 170,570 shares of Common Stock reserved for issuance under the
Company's 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan") and
79,204 shares reserved for issuance pursuant to the Warrant (as defined
below) issued in connection with the financing of the Tamor Acquisition.

(3) The Company has entered into a Credit Agreement dated as of February 27,
1997 (the "Credit Agreement"), with General Electric Capital Corporation
("GECC"), as agent ("Agent") and individually, and one other lender (such
lender and GECC, collectively, the "Lenders") which provides: (i) a 5 1/2
year revolving credit facility (the "Revolving Credit Facility") under which
up to an aggregate principal amount of $20.0 million (subject to a borrowing
base limitation and including a letter of credit subfacility of up to $10.0
million) are available for borrowing, (ii) a 5 1/2 year $20.0 million term
loan ("Term Loan A") and (iii) a 7 1/2 year $20.0 million term loan ("Term
Loan B"). Proceeds of Term Loan A and Term Loan B (collectively, the "Term
Loans") were used, together with the combined proceeds of a $7.0 million
subordinated equity bridge note issued to GECC (the "Subordinated Note") and
a Warrant (the "Warrant") to purchase 79,204 shares of Common Stock issued
to GECC to finance the Tamor Acquisition, to repay certain indebtedness of
Tamor and to pay transaction costs related thereto. See "Description of the
Credit Agreement and Other Debt."

(4) See "Use of Proceeds."
5
<PAGE> 8

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth (i) the historical financial data of the
Company (formerly Selfix) for fiscal 1995, fiscal 1996 and the thirteen weeks
ended March 29, 1997, (ii) the pro forma (as adjusted) financial data for the
Company for fiscal 1996, (iii) the pro forma (as adjusted) financial data for
the Company (formerly Selfix) for the thirteen weeks ended March 30, 1996, and
(iv) the as adjusted financial data of the Company for the thirteen weeks ended
March 29, 1997. The historical, as adjusted, and pro forma data should be read
in conjunction with the "Unaudited Pro Forma Condensed Combined Financial
Statements," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the historical financial statements of the Company
(formerly Selfix) and Tamor and related notes thereto included elsewhere in this
Prospectus. The balance sheet data as of March 29, 1997, and the statement of
operations data for the thirteen weeks ended March 29, 1997, have been derived
from the Company's unaudited financial statements. Operating results for the
thirteen weeks ended March 29, 1997, may not be indicative of the results that
may be expected for fiscal 1997 or any future period.

<TABLE>
<CAPTION>
PRO THIRTEEN
THIRTEEN FORMA(A) PRO FORMA(A) WEEKS(B)
YEAR ENDED WEEKS YEAR ENDED THIRTEEN WEEKS ENDED
--------------------------- ENDED DECEMBER 28, MARCH 30, MARCH 29,
DECEMBER 30, DECEMBER 28, MARCH 29, 1996 1996 1997
1995 1996 1997(n) (AS ADJUSTED) (AS ADJUSTED) (AS ADJUSTED)
------------ ------------ --------- ------------- -------------- -------------
(DOLLARS IN THOUSANDS (DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS) EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $41,039 $38,200 $31,738 $113,914 $27,389 $31,738
Cost of goods sold................. 25,678 22,992 22,610 80,810 19,154 22,610
--------- --------- --------- --------- --------- ---------
Gross profit..................... 15,361 15,208 9,128 33,104 8,235 9,128
Operating expenses(c).............. 17,385 13,843 6,602 24,864 6,707 6,602
Restructuring charge(d)............ 2,051 -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Operating profit (loss).......... (4,075) 1,365 2,526 8,240 1,528 2,526
Interest expense(e)................ (896) (707) (1,532) (4,569) (1,116) (1,092)
Other income -- net................ 688 148 155 847 64 155
--------- --------- --------- --------- --------- ---------
Earnings (loss) before income
taxes.......................... (4,283) 806 1,149 4,518 476 1,589
Income tax (expense) benefit(f).... 273 -- (117) (1,807) (190) (636)
--------- --------- --------- --------- --------- ---------
Net earnings (loss)................ $(4,010) $ 806 $ 1,032 $ 2,711 $ 286 $ 953
========= ========= ========= ========= ========= =========
Net earnings (loss) per common and
common equivalent share.......... $ (1.11) $ 0.21 $ 0.23 $ 0.43 $ 0.05 $ 0.15
========= ========= ========= ========= ========= =========
Number of weighted average common
and common equivalent shares
outstanding(g)................... 3,616,924 3,853,502 4,513,683 6,373,104 6,336,783 6,513,683
OTHER DATA:
Net sales growth
(decrease)(h)(m)................. 0.1% (6.9)% 15.9% 15.9%
Gross profit margin................ 37.4% 39.8% 28.8% 29.1% 30.1% 28.8%
Operating profit (loss) margin..... (9.9)% 3.6% 8.0% 7.2% 5.6% 8.0%
Net earnings (loss) margin......... (9.8)% 2.1% 3.3% 2.4% 1.0% 3.0%
EBITDA(i).......................... $ (280) $ 3,647 $ 4,371 $ 14,559 $ 2,934 $ 4,371
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 29, 1997
------------------------
AS
ACTUAL ADJUSTED(B)
------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital(j)......................................................................... $11,201 $11,201
Property, plant and equipment, net......................................................... 23,880 23,880
Intangible assets, net..................................................................... 28,060 28,060
Total assets............................................................................... 92,131 92,131
Total debt, including capital lease obligations............................................ 53,951 36,075
Total stockholders' equity................................................................. 15,583 33,459
</TABLE>

(footnotes on following page)
6
<PAGE> 9

The following tables set forth the historical financial data of Selfix and
Tamor. This data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical
financial statements of the Company (formerly Selfix) and Tamor and related
notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, DECEMBER 28,
1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELFIX
STATEMENT OF OPERATIONS DATA:
Net sales......................... $35,209 $39,711 $40,985 $41,039 $38,200
Cost of goods sold................ 22,297 22,504 25,587 25,678 22,992
------- ------- ------- ------- -------
Gross profit................. 12,912 17,207 15,398 15,361 15,208
Operating expenses................ 13,501 14,214 18,185 17,385 13,843
Restructuring charges(k).......... -- -- 1,701 2,051 --
------- ------- ------- ------- -------
Operating profit (loss)...... $ (589) $ 2,993 $(4,488) $(4,075) $ 1,365
======= ======= ======= ======= =======
OTHER DATA:
Net sales growth
(decrease)(h)(m)................ (4.9)% 12.8% 3.2% 0.1% (6.9)%
Gross profit margin............... 36.7% 43.3% 37.6% 37.4% 39.8%
Operating profit (loss) margin.... (1.7)% 7.5% (11.0)% (9.9)% 3.6%
EBITDA(i)......................... $ 2,599 $ 6,097 $ (659) $ (280) $ 3,647
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995 1996
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
TAMOR(l)
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $53,806 $60,301 $75,714
Cost of goods sold.......................................... 43,235 50,194 57,818
------- ------- -------
Gross profit........................................... 10,571 10,107 17,896
Operating expenses.......................................... 8,426 8,839 13,524
------- ------- -------
Operating profit....................................... $ 2,145 $ 1,268 $ 4,372
======= ======= =======
OTHER DATA:
Net sales growth(m)......................................... 12.1% 25.6%
Gross profit margin......................................... 19.6% 16.8% 23.6%
Operating profit margin..................................... 4.0% 2.1% 5.8%
EBITDA(i)................................................... $ 4,576 $ 3,926 $ 7,767
</TABLE>

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

NOTES TO SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

(a) The pro forma (as adjusted) condensed combined financial data gives effect
to the Tamor Acquisition, the Offering and the application of the estimated
net proceeds therefrom and the other transactions referred to herein, as if
each of the transactions had occurred on December 31, 1995. See "Unaudited
Pro Forma Condensed Combined Financial Statements."

(b) The as adjusted condensed combined financial data for the thirteen weeks
ended March 29, 1997 gives effect to the Offering and the application of
the estimated net proceeds therefrom, as if the Offering had occurred on
December 29, 1996. Pursuant to an agreement dated October 29, 1996, the
Company, effective as of January 1, 1997, took operating and financial
control of Tamor, assumed substantially all of the liabilities of Tamor and
retained substantially all of the earnings from Tamor's operations. See
"Unaudited Pro Forma Condensed Combined Financial Statements."
7
<PAGE> 10

(c) The pro forma operating expenses reflect: (i) additional amortization
expense resulting from the recording of goodwill with the Tamor Acquisition
and (ii) net estimated cost savings as a result of the Tamor Acquisition,
and (iii) additional costs associated with the Company's 401(k) and profit
sharing plans and certain other fees.

(d) The 1995 restructuring charge is a result of the Company's decision to
discontinue certain unprofitable product lines, close the Company's
Canadian facility and move the Canadian operations to the Chicago
manufacturing and distribution facilities.

(e) The pro forma (as adjusted) interest expense for the year ended December
28, 1996 and the thirteen weeks ended March 30, 1996 reflects the estimated
net increase in interest expense as if the Tamor Acquisition, the Offering
and the application of the estimated net proceeds therefrom and the other
transactions referred to herein had occurred on December 31, 1995.

The interest expense (as adjusted) for the thirteen weeks ended March 29,
1997 reflects the estimated decrease in interest expense as if the Offering
and the application of the estimated net proceeds therefrom had occurred on
December 29, 1996.

(f) Selfix's fiscal 1995 and fiscal 1996 historical income tax (expense)
benefit differed significantly from the statutory rates as a result of
foreign loss carryforwards and changes to the valuation allowance. See Note
10 of the Notes to Financial Statements of the Company for a further
description.

The pro forma (as adjusted) and the thirteen weeks ended March 29, 1997 (as
adjusted) income tax (expense) benefit assumes all entities are taxed as C
corporations and gives no benefit to the net operating loss carryforwards.
These income tax expense amounts are computed by applying the estimated
combined statutory rate of 40%.

(g) The pro forma (as adjusted) and the thirteen weeks ended March 29, 1997 (as
adjusted) number of weighted average shares assumes the shares issued as a
result of the Tamor Acquisition (480,000 shares), the Warrant and the
Offering (2,000,000 shares) were outstanding as of the first day of the
applicable periods presented.

(h) The reduction in Selfix sales in fiscal 1996 was a result of decisions made
in fiscal 1995 to discontinue the sale of certain under-performing
housewares products, which resulted in a significant decrease in stock
keeping units (SKUs).

(i) EBITDA is defined as the sum of (i) earnings (loss) before income taxes,
(ii) interest expense, (iii) interest income, and (iv) depreciation and
amortization. EBITDA is not presented as an alternative measure of
operating results or cash flow from operations (as determined in
accordance with generally accepted accounting principles), should not be
considered by the reader as an alternative to net income as an indicator
of the Company's operating results and is not indicative of cash flow
available to fund all cash flow needs. EBITDA, as determined by the
Company, may differ from that of other companies.

(j) Working capital is computed as current assets less current liabilities.

(k) The fiscal 1994 restructuring charge relates to cost of severance and
termination benefits paid or accrued for a change in the level and
composition of employees, termination of existing employee arrangements,
inventory adjustments and fixed asset writedowns related to product lines
to be discontinued. See note (d) above regarding the 1995 restructuring
charge.

(l) Financial statements for combined Tamor Corporation and Housewares Sales,
Inc., its affiliated product distribution company, were not prepared for
periods prior to December 31, 1994.

(m) Net sales growth (decrease) represents the percentage increase (decrease) in
net sales from the corresponding period, presented on a comparable basis, in
the prior year.

(n) Pursuant to an agreement dated October 29, 1996, the Company, effective as
of January 1, 1997, took operating and financial control of Tamor, assumed
substantially all of the liabilities of Tamor and retained substantially
all of the earnings from Tamor's operations. Actual results are combined
since the date of effective control although the purchase transaction did
not close until February 28, 1997.
8
<PAGE> 11

RISK FACTORS

Each prospective investor should carefully consider, in addition to the
other information contained in this Prospectus, the following information in
evaluating the Company and its business before purchasing the Common Stock
offered hereby.

RISKS ASSOCIATED WITH ACQUISITION STRATEGY

The Company's growth strategy includes the possible acquisition of other
manufacturers of plastic houseware products and manufacturers of other home
products. The Company's acquisition strategy is primarily based on identifying
and acquiring selected companies either with product lines within the Company's
markets or that will enable the Company to enter new product categories more
rapidly and cost-effectively. The Company's ability to accomplish its strategy
will depend upon a number of factors including, among other things, the
Company's ability to identify acceptable acquisition candidates, to consummate
such acquisitions on terms favorable to the Company, to retain, hire and train
professional management and sale personnel at each such acquired business and to
promptly and profitably integrate the acquired operations into the Company's
operations. See "Business -- Business Strategy." Acquiring additional businesses
may require additional capital and the consent of the Company's lenders and may
have a significant impact on the Company's financial position and results of
operations. Any such acquisitions may involve the issuance of additional debt or
the issuance of one or more classes or series of the Company's equity
securities, which could have a dilutive effect on the then outstanding Common
Stock of the Company. Acquisitions could result in substantial amortization
charges to the Company from the accumulation of goodwill and other intangible
assets which could reduce reported earnings. There can be no assurance that the
Company will be successful in accomplishing its acquisition strategy or that any
acquired operations will be profitable or will be successfully integrated into
the Company or that any such future acquisitions will not materially and
adversely affect the Company's financial condition or results of operations.
Opportunities for growth through acquisitions, future operating results and the
success of acquisitions may be subject to the effects of, and changes in, U.S.
and foreign trade and monetary policies, laws and regulations, political and
economic developments, inflation rates, and the effect of taxes and operating
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Resources and Liquidity."

RISKS ASSOCIATED WITH THE TAMOR ACQUISITION

In furtherance of the Company's growth strategy, the Company recently
completed the Tamor Acquisition. See "Business -- The Tamor Acquisition." The
Company's future operating results will depend upon the continued profitably of
Tamor's operations. However, there is no assurance that Tamor will continue to
operate profitably. The failure of Tamor to operate profitably could have a
material adverse effect on the Company's financial position and results of
operations. The growth of Tamor's operation will be dependent upon the Company's
ability to make significant capital expenditures to improve and expand Tamor's
existing manufacturing equipment and facilities. See "Business -- Facilities."
There is no assurance that in the future the Company will have adequate
financing on favorable terms to make such capital expenditures.

As a result of the Tamor Acquisition, the Company has greater exposure to
the risks of unfavorable changes in the costs of plastic resin, the primary raw
material for the Company's products. Tamor uses significantly more plastic resin
than the Company's other subsidiaries and operates at lower margins than the
Company's other subsidiaries. Fluctuations in resin costs could, therefore, have
a material adverse effect on Tamor's results of operations which would have a
material adverse effect on the Company's results of operations. See "Risk
Factors -- Increases in Cost of Plastic Resin." In addition, the Company is
highly leveraged as a result of the Tamor Acquisition and will be more sensitive
to fluctuations in interest rates. See "Risk Factors -- Leverage; Restrictive
Covenants."

ABILITY TO MANAGE GROWTH AND EXPANSION

As a result of the Tamor Acquisition, the Company has experienced
significant growth and will seek to continue to expand its operations through
acquisitions. The management of the Company's growth, if any, will

9
<PAGE> 12

require continued expansion and refinement of the Company's control systems and
a significant increase in the Company's development, manufacturing, quality
control, marketing, logistics and service capabilities, all of which could place
a significant strain on the Company's resources. There is no assurance that the
Company will adequately anticipate all of the demands that its growth, if any,
will impose on such control systems. If the Company's management is unable to
manage growth effectively, then the quality of the Company's products, its
ability to retain and hire key personnel and its financial condition and results
of operations could be materially and adversely affected. Failure to integrate
new personnel on a timely basis could also have an adverse effect on the
Company.

INCREASES IN COST OF PLASTIC RESIN

The primary raw materials used in plastic injection molding are various
plastic resins -- primarily polypropylene and its derivatives. The plastic
resins used by the Company are produced from petrochemical intermediates which
are, in turn, derived from natural gas liquids. Plastic resin prices may
fluctuate as a result of natural gas and crude oil prices and capacity, supply
and demand for resin and petrochemical intermediates from which they are
produced. The automotive and housing industries are significant users of plastic
resin. As a result, significant changes in the demand for automobiles or housing
starts may cause significant fluctuations in the price of plastic resin. See
"Business -- Manufacturing and Raw Materials."

The Company has no long-term supply contracts for the purchase of resin,
although the Company generally maintains a 60-day supply of resin. For fiscal
1996, the cost of resin on a pro forma basis accounted for approximately 34% of
the Company's total cost of goods sold and 24% of the Company's net sales. In
the past, the Company has had limited ability to increase product pricing in
response to plastic resin price increases. Any future increases in the price of
plastic resins could have a material adverse effect on the Company's financial
position and results of operation. The Company generally attempts to reduce its
resin costs by purchasing off-prime grades of material primarily through brokers
in secondary markets enabling the Company to buy resin at a discount. There is
no assurance that the Company will continue to have available necessary
quantities of resin at reasonable prices. See "Business -- Manufacturing and Raw
Materials."

RECENT LOSSES; SELFIX RESTRUCTURING

The Company has incurred net losses in three of the last five fiscal years.
The Company's net losses for fiscal years 1992, 1994 and 1995 were $0.8 million,
$6.0 million and $4.0 million, respectively. Beginning in 1994, management of
the Company restructured the Company's operations to improve its profitability
by, among other things, eliminating unprofitable product lines, reducing
overhead, upgrading financial controls and increasing international distribution
capabilities. See "Business -- Company Background." After implementing the
restructuring, the Company had operating profits of $1.4 million in fiscal 1996.

Although the Company has restructured its Selfix operations and returned to
profitability in 1996, there is no assurance that the Company will be able to
maintain profitability. The Company's ability to sustain profitability is
dependent upon a number of factors, including the continued successful
implementation of cost control measures, the successful integration of Tamor's
operations into the Company's operations, maintenance of the Company's existing
customer relationships at current levels of sales volume and various other
factors beyond the Company's control, such as plastic resin price increases and
the effect of general economic conditions. The failure of the Company to sustain
profitability could hinder its ability to service its debt, to make capital
expenditures or to take advantage of business opportunities, any one of which
could have a material adverse effect on the Company's financial condition and
results of operations.

LEVERAGE; RESTRICTIVE COVENANTS

The Company incurred substantial indebtedness as a result of the Tamor
Acquisition and will remain highly leveraged after the Offering. See "Business",
"Description of the Credit Agreement and Other Debt" and "Capitalization." At
May 3, 1997, the Company had approximately $54.5 million of total consolidated
indebtedness. Subject to restrictions in its debt instruments, the Company may
incur significant amounts of additional indebtedness in the future, particularly
in connection with acquisitions.

10
<PAGE> 13

The Company's high degree of leverage could have important consequences to
investors, including the following: (i) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired in the future; (ii)
a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal and interest on its indebtedness, thereby
reducing the funds available to the Company for other purposes; (iii) certain of
the Company's borrowings are and will continue to be at variable rates of
interest, including borrowings under the Credit Agreement, which will expose the
Company to interest rate fluctuations and consequently an increase in interest
expense which could have a material adverse impact on the Company's results of
operations; (iv) the Company may be substantially more leveraged than certain of
its competitors, which may place the Company at a competitive disadvantage; and
(v) the Company's substantial degree of leverage may limit its flexibility to
adjust to changing market conditions, reduce its ability to withstand
competitive pressures and make it more vulnerable to a downturn in general
economic conditions or its business. See "Description of the Credit Agreement
and Other Debt."

If the Company is unable to generate sufficient cash flow from operations
in the future to service its indebtedness, it may be required to refinance all
or a portion of its existing indebtedness or to obtain additional financing.
There can be no assurance that any such refinancing would be possible or that
any additional financing could be obtained. The inability to obtain additional
financing could have a material adverse effect on the Company.

The Company's instruments and agreements governing its indebtedness contain
numerous covenants, including financial and operating covenants, certain of
which are quite restrictive. In particular, certain financial covenants under
the Credit Agreement with GECC become more restrictive over time in anticipation
of scheduled debt amortization and improved operating results. For a description
of such covenants, see "Description of the Credit Agreement and Other Debt." The
ability of the Company to comply with such provisions will depend on its future
performance, which will be subject to, among other things, then prevailing
economic, financial and business conditions. The failure of the Company to
comply with such provisions could result in a default or an event of default
under the Credit Agreement which would have a material adverse effect on the
Company's financial position and results of operations.

The failure to comply with the obligations contained in the Credit
Agreement, if not cured, or waived, could permit acceleration of the
indebtedness under the Credit Agreement and acceleration of indebtedness under
other instruments that contain cross-acceleration or cross-default provisions.
If the Company were obligated to repay all or a significant portion of its
indebtedness, there can be no assurance that the Company would have sufficient
cash to do so or that the Company could successfully refinance such
indebtedness. In addition, the obligations of the Company and its subsidiaries
under the Credit Agreement are secured by substantially all of their respective
assets. If an event of default occurs under the Credit Agreement, the lenders
would be entitled to exercise the remedies available to a secured lender under
applicable law, including foreclosure. See "Description of the Credit Agreement
and Other Debt."

DEPENDENCE ON LARGE SALES VOLUME

The Company derives substantially all of its revenues from products which
are sold at relatively low prices. These products must be sold in relatively
large volumes in order to maintain profitability at current or higher levels and
to achieve the manufacturing and logistical efficiencies that are necessary to
enable the Company to price its products competitively and to maintain and
expand its customer base. There can be no assurance that the Company can
continue to sell its products in current or increased volumes and its failure to
do so could have a material adverse effect on the Company's financial position
and results of operations.

CUSTOMER CONCENTRATION/CONSOLIDATING CUSTOMER BASE

During fiscal 1996, on a pro forma basis, Wal-Mart/Sam's Club, Kmart and
Target accounted for approximately 21%, 8%, and 5%, respectively, of the
Company's net sales. During fiscal 1996, no other customer represented 5% or
more of the net sales ($5.7 million on a pro forma basis) of the Company.
Although the Company believes that its relationships with Wal-Mart, Kmart,
Target and its other large

11
<PAGE> 14

customers are good, it does not have long-term purchase agreements or other
contractual assurances as to future sales to these customers. If any significant
customer substantially reduces its level of purchases from the Company, the
Company's financial position and results of operations would be adversely
affected. Moreover, continued consolidation within the retail industry may
result in an increasingly concentrated customer base. To the extent such
consolidation continues to occur, the Company's revenues and profitability may
be increasingly sensitive to a significant deterioration in the financial
condition of, or other adverse developments in its relationships with, one or
more customers. From time to time, the Company has experienced credit losses due
to customers seeking protection under bankruptcy or similar laws. Although such
credit losses have not had a material adverse effect on the Company to date,
there can be no assurance that future credit losses will not have a material
adverse effect on the Company. See "Business -- Marketing and Distribution."

RETAIL INDUSTRY; ECONOMIC CONDITIONS

The Company sells its products through retailers, including mass
merchandisers, supermarkets, hardware stores, specialty stores and other retail
channels. See "Business -- Marketing and Distribution." Retail sales depend, in
part, on general economic conditions. A significant decline in such conditions
could have a negative impact on sales by retailers of products sold by the
Company and consequently could have an adverse effect on the Company's sales,
profitability and cash flows. Retail environments which are poor or perceived to
be poor, whether due to economic or other conditions, may lead houseware
manufacturers and marketers, including the Company, to increase their
discounting and promotional activities. Such activities could have an adverse
effect on the Company's profit margins and, consequently, its results of
operations. The Company may also not be able to fully offset the impact of
inflation through price increases due to the unfavorable retail environment.

RISKS ASSOCIATED WITH DEVELOPING NEW PRODUCTS

In order to remain competitive, the Company is developing and introducing
new products and intends to continue to develop and introduce other new products
in the future. The development, production and marketing of new products require
significant investment of financial resources. Despite such investment, there is
no assurance that the Company will achieve market acceptance of any new
products. The Company's future growth and profitability will in part be
dependent on achieving market acceptance of its new products and the Company's
ability to market such products. Although management intends to introduce and
develop new products which are complementary to the Company's existing products,
the Company may encounter production and marketing obstacles which would have a
material adverse effect on sales of these new products and the Company's results
of operations. See "Business -- Product and Research Development" and "Business
- -- Business Strategy."

COMPETITION

The market for the Company's products is highly competitive. The Company
competes with a significant number of smaller privately held companies and a few
public companies, some of which have greater name/brand recognition, larger
customer bases and/or significantly greater financial resources than the
Company, such as Rubbermaid Inc. There are no substantial regulatory or other
barriers to entry of new competitors into the Company's industries. A supplier
that is able to maintain, or increase, the amount of retail space allocated to
its product may gain a competitive advantage in that product market. There can
be no assurance that the Company will be able to compete successfully against
current and future sources of competition or that the current and future
competitive pressures faced by the Company will not adversely affect its
profitability or financial performance. See "Business -- Competition."

A number of the Company's products are similar in design and/or function to
competitors' products. There can be no assurance that third parties will not
assert infringement or misappropriation claims against the Company in the future
with respect to current or future products. Any such claims or litigation,
whether with or without merit, could be costly and could have a material adverse
effect on the Company's financial position and results of operations. See
"Business -- Patents, Trademarks and Licenses" and "Business -- Legal
Proceedings."

12
<PAGE> 15

ENVIRONMENTAL COMPLIANCE

The operations of the Company are subject to environmental laws and
regulations that impose limitations on the discharge of pollutants into the air
and water and establish standards for the treatment, storage and disposal of
solid and hazardous wastes. Although the Company has not historically been
required to make significant capital expenditures for environmental compliance,
there can be no assurance that changes in environmental requirements or the
technological processes used by the Company will not result in the Company
incurring significant costs in the future to comply with environmental
requirements. See "Business -- Environmental Matters."

DEPENDENCE ON KEY PERSONNEL

The Company's success depends, in large part, upon the efforts and
abilities of its executive officers and key employees, particularly James R.
Tennant, the Company's Chief Executive Officer, and Leonard J. Tocci, the Chief
Executive Officer of Tamor. The loss of the services of Mr. Tennant or Mr. Tocci
or one or more of the Company's other key employees could have a material
adverse effect on the Company's business. Mr. Tennant and Mr. Tocci have entered
into employment agreements with the Company, containing certain non-competition
provisions. See "Management -- Employment Agreements." The Company does not
carry key man life insurance on Mr. Tennant or on Mr. Tocci. See "Management."

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS

The Company's Certificate of Incorporation authorizes the issuance of
"blank check" preferred stock with such designations, rights and preferences as
may be determined from time to time by the Company's board of directors (the
"BOARD OF DIRECTORS"). See "Management -- Anti-Takeover Provisions."
Accordingly, the Board of Directors is empowered, without shareholder approval,
to issue such preferred stock with dividend, liquidation, conversion, voting or
other rights which could adversely affect the voting power or other rights of
the holders of the Common Stock. Issuance of "blank check" preferred stock could
be utilized under certain circumstances as a method of discouraging, delaying or
preventing a change in control of the Company. The issuance of such preferred
stock could materially and adversely affect the voting powers and other rights
of the holders of Common Stock and could be used to discourage an unsolicited
acquisition proposal. See "Description of Company's Securities -- Preferred
Stock."

The Board of Directors has approved the implementation of a stockholders
rights plan (the "RIGHTS PLAN"). See "Management -- Shareholders Rights Plan."
The Rights Plan may have the effect of delaying, discouraging, inhibiting,
preventing or rendering more difficult an attempt to obtain control of the
Company by means of a tender offer, business combination, proxy contest or
otherwise. The issuance of rights to purchase preferred stock under the Rights
Plan could make the acquisition of a substantial block of the Company's Common
Stock more difficult or limit the price that investors might be willing to pay
in the future for shares of the Company's Common Stock. See "Management --
Stockholder Rights Plan."

In addition, certain provisions of Delaware law applicable to the Company
could delay or make more difficult a merger, tender offer or proxy contest
involving the Company. See "Management -- Anti-Takeover Provisions."

SHARES ELIGIBLE FOR FUTURE SALE

The sale, or availability for sale, of substantial amounts of Common Stock
in the public market subsequent to this Offering may adversely affect the
prevailing market price of Common Stock and may impair the Company's ability to
raise additional capital by the sale of its equity securities. The Company will
have 6,322,922 shares of Common Stock outstanding immediately following the
Offering (assuming the Underwriters do not exercise the over-allotment option),
of which 961,300 shares will be held by executive officers and directors of the
Company. In addition, as of the date of this Prospectus, a total of 1,356,998
shares of Common Stock are reserved for issuance under the Stock Option Plans
and 170,570 shares are reserved for issuance under the Stock Purchase Plan. In
connection with the Subordinated Note, the Company, on February 27, 1997, issued
the Warrant to GECC to purchase 79,204 shares of Common Stock. See

13
<PAGE> 16

"Description of Credit Agreement and Other Debt." The Company, its directors,
executive officers and the Selling Shareholders have agreed that for a period of
180 days from the date of this Prospectus they will not, without the prior
written consent of EVEREN Securities, Inc., directly or indirectly offer for
sale, sell, contract to sell or otherwise dispose of any shares of Common Stock
or any securities convertible into or exercisable or exchangeable for shares of
Common Stock, subject to certain exceptions. See "Description of Company's
Securities," "Shares Eligible For Future Sale" and "Underwriting."

LIMITED HISTORICAL TRADING VOLUME IN THE COMMON STOCK; POSSIBLE VOLATILITY OF
STOCK PRICE

While the Common Stock has been publicly traded since 1988 and is listed on
The Nasdaq National Market(SM) under the symbol "HPII", the Common Stock has
historically experienced low trading volume due, in part, to substantial
holdings by the estates of the founders of the Company, and certain trusts of
which the adult children of the founders are beneficiaries. Quarterly and annual
operating results of the Company, variations between such results and the
results expected by investors and analysts, changes in general economic
conditions, loss of significant customers, fluctuations in the price of plastic
resin or developments in the retail housewares industry could cause the market
price of the Common Stock to fluctuate substantially. In addition, the stock
market from time to time experiences extreme price and volume fluctuations that
have particularly affected the market price for many companies and that often
have been unrelated to the operating performance of these companies. These broad
market fluctuations may adversely affect the market price of the Company's
Common Stock. See "Price Range of Common Stock."

LABOR RELATIONS

The Company employed approximately 514 people at May 3, 1997 (including
persons employed by Tamor) in the United States. Approximately 90 of such people
are hourly employees at its Leominster, Massachusetts facility, covered by a
collective bargaining agreement which expires March, 1999; 153 are hourly
employees at its Chicago, Illinois facilities, covered by a collective
bargaining agreement which expires January, 1998. There can be no assurance that
the Company will successfully renegotiate the labor contracts when they expire
without work stoppages. However, the Company does not anticipate having problems
renegotiating any contracts that would materially affect its results of
operations. See "Business -- Employees."

Although the Company believes its relationship with its employees is good,
there can be no assurance that the Company will not experience significant work
stoppages in the future or that its relations with employees will continue to be
satisfactory.

14
<PAGE> 17

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Common
Stock are estimated to be approximately $17.9 million ($22.7 million if the
Underwriters' over-allotment option is exercised in full) after deducting the
estimated underwriting discounts and offering expenses. The net proceeds from
the Offering will be used (i) to repay $10.9 million of the outstanding $39.5
million principal amount of the Term Loans, and (ii) to repay in full the $7.0
million Subordinated Note. The Company used the proceeds of the portion of the
Term Loans being repaid and the proceeds of the Subordinated Note and Warrant to
fund a portion of the purchase price of Tamor. The Company will not receive any
of the proceeds from the sale of the shares of Common Stock being sold by the
Selling Shareholders.

After completion of this Offering, the Company may borrow under the
Revolving Credit Facility and incur other debt as necessary from time to time
for general corporate purposes and to fund acquisitions; however, no general
corporate purpose has been specifically identified by the Company at this time
and the Company has no arrangements, agreements or understandings concerning
specific acquisitions.

The Subordinated Note matures in February, 2005 (subject to earlier
maturity in certain circumstances) and Term Loans A and B have a final maturity
in August, 2002 and August, 2004, respectively. As of June 4, 1997, the
Subordinated Note bears interest at the rate of 13.5% per annum and Term Loans A
and B bear interest at the rate of 8.82% and 9.35%, respectively, per annum. See
"Description of the Credit Agreement and Other Debt."

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is traded on The Nasdaq National Market(SM)
under the symbol "HPII." The following table sets forth for the periods
indicated the high and low bid quotations for the Common Stock as reported on
The Nasdaq National Market(SM). The prices reported do not include retail
mark-up, mark-down or commissions and may not reflect actual transactions. See
"Risk Factors -- Limited Historical Trading Volume in Common Stock; Possible
Volatility of Stock Price."

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fifty-two Weeks Ended December 30, 1995:
First Quarter............................................. $ 5.25 $4.00
Second Quarter............................................ $ 5.25 $4.25
Third Quarter............................................. $ 5.75 $4.25
Fourth Quarter............................................ $ 5.875 $4.75
Fifty-two Weeks Ended December 28, 1996:
First Quarter............................................. $ 5.625 $4.125
Second Quarter............................................ $ 5.125 $4.125
Third Quarter............................................. $ 5.00 $4.50
Fourth Quarter............................................ $ 8.625 $4.25
Fifty-two Weeks Ended December 27, 1997:
First Quarter............................................. $12.75 $8.00
Second Quarter (through June 24, 1997).................... $10.875 $8.625
</TABLE>

On June 24, 1997, the last reported sale price of the Common Stock on The
Nasdaq National Market(SM) was $10.625.

As of March 26, 1997, there were 156 holders of record and the Company
believes that the total number of beneficial owners of the Company's Common
Stock is in excess of 590.

15
<PAGE> 18

CAPITALIZATION

The following table sets forth the Company's consolidated capitalization as
of March 29, 1997 (i) on a historical basis and (ii) on an as adjusted basis,
giving effect to the Offering (assuming net proceeds of $17.9 million and
assuming the Underwriters do not exercise the over-allotment option) and the
application of the net proceeds therefrom. This data should be read in
conjunction with the financial statements of the Company included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
MARCH 29, 1997
-----------------------
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total debt, including capital lease obligations(a).......... $53,951 $36,075
Stockholders' equity(b):
Preferred Stock -- authorized, 500,000 shares, $0.01 par
value; none issued..................................... -- --
Common Stock -- authorized, 15,000,000 shares, $0.01 par
value: 4,381,684 shares issued; 6,381,684, shares
issued, as adjusted.................................... 44 64
Additional paid-in capital................................ 13,669 31,525
Retained earnings......................................... 2,328 2,328
Currency translation adjustments.......................... (194) (194)
Common Stock held in treasury -- at cost (58,762
shares)................................................ (264) (264)
------- -------
Total stockholders' equity................................ 15,583 33,459
------- -------
Total capitalization................................. $69,534 $69,534
======= =======
</TABLE>

- -------------------------
(a) Includes current maturities of long-term debt and long-term capital lease
obligations. See Notes 8 and 15 of Notes to Financial Statements of the
Company for a description of the Company's long-term obligations.

(b) Excludes 1,356,998 shares of Common Stock reserved for issuance under the
Stock Option Plans. There are currently 965,017 options outstanding under
the Stock Option Plans, each of which entitles the holder thereof to
purchase one share of Common Stock. See "Management -- Stock Option Plans."
The weighted average exercise price for all of the options currently
outstanding under the Stock Option Plans is $6.79 per share. Also excludes
170,570 shares of Common Stock reserved for issuance under the Stock
Purchase Plan and 79,204 shares reserved for issuance pursuant to the
Warrant issued in connection with the financing of the Tamor Acquisition.

DIVIDEND POLICY

The Company has never declared or paid any dividends on its Common Stock.
The payment of dividends by the Company is currently not permitted under the
Credit Agreement. The Company anticipates that all future earnings, if any, will
be retained for use in the Company's business and it does not anticipate paying
any cash dividends. Payment of future dividends, if any, will be as permitted
under the Credit Agreement and at the discretion of the Board of Directors after
taking into account various factors, including the Company's financial
condition, operating results, current and anticipated cash needs and plans for
expansion. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Resources and Liquidity," "Risk Factors --
Leverage; Restrictive Covenants," and "Description of the Credit Agreement and
Other Debt."

16
<PAGE> 19

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following Unaudited Pro Forma Condensed Combined Statement of
Operations for fiscal 1996 gives effect to the Tamor Acquisition, the Offering
and the application of the estimated net proceeds therefrom, as if each had
occurred on December 31, 1995. The Unaudited Pro Forma Condensed Combined
Statement of Operations for the thirteen weeks ended March 29, 1997 gives effect
to the Offering and the application of the estimated net proceeds therefrom, as
if the Offering had occurred on December 29, 1996.

The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with the "Use of Proceeds," "Capitalization," "Selected
Historical Financial Data of Selfix," "Selected Historical Financial Data of
Tamor" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Prospectus. The pro forma
data do not purport to represent what the Company's actual results of operations
or financial position would have been had such transactions in fact occurred on
such dates. The pro forma statements of operations also does not purport to
project the results of operations of the Company for the current year or for any
other period.
<TABLE>
<CAPTION>

SELFIX TAMOR
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
DECEMBER 28, DECEMBER 31, ACQUISITION OFFERING
1996 1996 ADJUSTMENTS ADJUSTMENTS
------------ ------------ ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................ $ 38,200 $75,714 $ -- $ --
Cost of goods sold....... 22,992 57,818 -- --
--------- ------- ------- ---------
Gross profit......... 15,208 17,896 -- --
Operating expenses....... 13,843 13,524 642(a) --
(3,145)(b)
--------- ------- ------- ---------
Operating profit..... 1,365 4,372 2,503 --
Interest expense......... (707) (1,191) (4,430)(c) 1,759(g)
Other income -- net...... 148 494 205(d) --
--------- ------- ------- ---------
Earnings before
income taxes....... 806 3,675 (1,722) 1,759
Income tax expense....... -- (160) (943)(e) (704)(h)
--------- ------- ------- ---------
Net earnings (loss)...... $ 806 $ 3,515 $(2,665) $ 1,055
========= ======= ======= =========
Net earnings per common
and common equivalent
share.................. $ 0.21 -- -- --
========= ======= ======= =========
Number of weighted
average common and
common equivalent
shares outstanding..... 3,853,502 -- 519,602(f) 2,000,000(i)
========= ======= ======= =========

<CAPTION>
THIRTEEN WEEKS ENDED
MARCH 29, 1997
---------------------------------------
COMPANY PRO FORMA
TOTAL HISTORICAL ADJUSTMENTS TOTAL
----- ---------- ----------- -----
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................ $ 113,914 $ 31,738 $ -- $ 31,738
Cost of goods sold....... 80,810 22,610 -- 22,610
--------- --------- --------- ---------
Gross profit......... 33,104 9,128 -- 9,128
Operating expenses....... 24,864 6,602 -- 6,602

--------- --------- --------- ---------
Operating profit..... 8,240 2,526 -- 2,526
Interest expense......... (4,569) (1,532) 440(g) (1,092)
Other income -- net...... 847 155 -- 155
--------- --------- --------- ---------
Earnings before
income taxes....... 4,518 1,149 440 1,589
Income tax expense....... (1,807) (117) (519)(h) (636)
--------- --------- --------- ---------
Net earnings (loss)...... $ 2,711 $ 1,032 $ (79) $ 953
========= ========= ========= =========
Net earnings per common
and common equivalent
share.................. $ 0.43 $ 0.23 -- $ 0.15
========= ========= ========= =========
Number of weighted
average common and
common equivalent
shares outstanding..... 6,373,104 4,513,683 2,000,000(i) 6,513,683
========= ========= ========= =========
</TABLE>

(footnotes on following pages)

17
<PAGE> 20

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(a) Reflects the additional amortization expense resulting from the recording of
goodwill associated with the Tamor Acquisition. Goodwill is amortized over
40 years.

(b) Reflects estimated cost savings as a result of the Tamor Acquisition as
follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Commission payments to related parties of Housewares under
commission agreement terminated in connection with the
Tamor Acquisition......................................... $(1,194)
Former owners' compensation and other benefits, including
pension, life insurance, travel and auto allowances paid
during 1996, net of compensation expense under new
contracts to be paid subsequent to the Tamor
Acquisition............................................... (1,536)
Change in control agreement payment made to the president of
Tamor in 1996 because of the Tamor Acquisition............ (330)
Change in compensation arrangements:
Special bonus payments discontinued under the Company's
compensation policies subsequent to the Tamor
Acquisition............................................ (265)
Additional costs associated with the Company's 401(k) and
profit sharing plans and certain other fees to be
incurred subsequent to the Tamor Acquisition........... 240
Non-recurring accounting and legal expenses incurred by
Housewares' former owners in 1996 in connection with the
Tamor Acquisition......................................... (60)
-------
$(3,145)
=======
</TABLE>

(c) Reflects the estimated net increase in interest expense as if the Tamor
Acquisition had occurred on December 31, 1995. The pro forma adjustment to
interest expense is comprised of the following:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Interest expense on the estimated weighted average amounts
outstanding under Term Loan A and Term Loan B in the
principal amount of $47.0 million with an effective
interest rate of 9.4%..................................... $ 4,427
Amortization of deferred financing fees..................... 557
Amortization of debt discount created from issuance of
Warrant................................................... 400
Facility and letter of credit fees.......................... 237
Less interest expense related to retired Tamor
obligations............................................... (1,191)
-------
Net adjustments............................................. $ 4,430
=======
</TABLE>

(d) Reflects the estimated increase in interest income as a result of an average
$3.7 million in proceeds on the Term Loans not used in connection with the
Tamor Acquisition and earning interest at an assumed rate of 5.5%.

(e) Tamor was taxed as an S corporation prior to the Tamor Acquisition. Selfix's
fiscal 1996 historical results of operations reflected no income tax expense
as a result of net operating loss carryforwards. The pro forma income tax
expense assumes all entities are taxed as C corporations and gives no
benefit to the net operating loss carryforwards. The pro forma income tax
expense is computed by applying an estimated combined statutory rate of 40%.

18
<PAGE> 21

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS --
(CONTINUED)

(f) Reflects the assumed increase in the weighted average common and common
equivalent shares outstanding as a result of the Tamor Acquisition (480,000
shares) and the Warrant.

(g) Reflects the estimated decrease in interest expense as if the Offering and
the application of the estimated $17.9 million of net proceeds had occurred
as of the beginning of the applicable fiscal year. The proceeds are assumed
to be used to repay a portion of the outstanding principal amount of the
Term Loans, as well as to repay in full the Subordinated Note pursuant to
the terms of the Credit Agreement and Subordinated Note as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Repayment of Subordinated Note.............................. $ 7,000
Partial repayment of Term Loan A............................ 5,438
Partial repayment of Term Loan B............................ 5,438
-------
Net proceeds from the Offering....................... $17,876
=======
</TABLE>

(h) Reflects an increase in income tax expense assuming all entities are taxed
as C corporations and gives no benefit to the net operating loss
carryforwards. The pro forma income tax expense is computed by applying an
estimated combined statutory rate of 40%.

(i) Reflects the assumed increase in the weighted average common and common
equivalent shares as a result of the Offering.

19
<PAGE> 22

SELECTED HISTORICAL FINANCIAL DATA OF SELFIX

The following selected historical financial data should be read in
conjunction with the financial statements and related notes of the Company
(formerly Selfix) and other financial data included elsewhere in this
Prospectus. The balance sheet data and the statement of operations data
presented below are derived from the audited financial statements of the Company
(formerly Selfix).

<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------
DECEMBER 26, DECEMBER 26, DECEMBER 31, DECEMBER 30, DECEMBER 28,
1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $35,209 $39,711 $40,985 $41,039 $38,200
Cost of goods sold.................. 22,297 22,504 25,587 25,678 22,992
--------- --------- --------- --------- ---------
Gross profit...................... 12,912 17,207 15,398 15,361 15,208
Operating expenses.................. 13,501 14,214 18,185 17,385 13,843
Restructuring charges(a)............ -- -- 1,701 2,051 --
--------- --------- --------- --------- ---------
Operating profit (loss)........... (589) 2,993 (4,488) (4,075) 1,365
Interest expense.................... (1,038) (1,066) (999) (896) (707)
Other income (expense)-net.......... 192 126 (295) 688 148
--------- --------- --------- --------- ---------
Earnings (loss) before income
taxes.......................... (1,435) 2,053 (5,782) (4,283) 806
Income tax (expense) benefit(b)..... 654 (574) (221) 273 --
--------- --------- --------- --------- ---------
Earnings (loss) before the
cumulative effect of a change
in accounting for income
taxes.......................... (781) 1,479 (6,003) (4,010) 806
Cumulative effect of a change in
income tax accounting............. -- 36 -- -- --
--------- --------- --------- --------- ---------
Net earnings (loss)................. $ (781) $ 1,515 $(6,003) $(4,010) $ 806
========= ========= ========= ========= =========
Net earnings (loss) per common and
common equivalent share........... $ (0.23) $ 0.43 $ (1.70) $ (1.11) $ 0.21
========= ========= ========= ========= =========
Number of weighted average common
and common equivalent shares
outstanding....................... 3,448,267 3,511,100 3,538,758 3,616,924 3,853,502
OTHER DATA:
Net sales growth (decrease)(c)(f)... (4.9)% 12.8% 3.2 % 0.1 % (6.9)%
Gross profit margin................. 36.7 % 43.3% 37.6 % 37.4 % 39.8 %
Operating profit (loss) margin...... (1.7)% 7.5% (11.0)% (9.9)% 3.6 %
EBITDA(d)........................... $ 2,599 $ 6,097 $ (659) $ (280) $ 3,647
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF AS OF AS OF AS OF
DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, DECEMBER 28,
1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(e)............... $11,599 $12,752 $11,026 $ 6,712 $ 7,152
Property, plant and equipment,
net............................ 10,154 11,524 10,466 8,453 7,934
Intangible assets, net........... 3,828 2,941 1,536 2,693 2,527
Total assets..................... 32,828 35,354 30,761 24,976 24,705
Total debt, including capital
lease obligations.............. 11,884 12,033 10,413 7,914 7,022
Total stockholders' equity....... 17,715 19,326 13,623 10,847 11,709
</TABLE>

(footnotes on following page)

20
<PAGE> 23

NOTES TO SELECTED HISTORICAL FINANCIAL DATA OF SELFIX

(a) The fiscal 1994 restructuring charge relates to costs of severance and
termination benefits paid or accrued for a change in the level and
composition of employees, termination of existing employee arrangements,
inventory adjustments and fixed asset writedowns related to product lines to
be discontinued.

The fiscal 1995 restructuring charge is a result of the Company's decision
to discontinue certain unprofitable product lines, close the Company's
Canadian facility and move the Canadian operations to the Chicago
manufacturing and distribution facilities.

(b) Selfix's historical income tax (expense) benefit differed significantly from
the statutory rates as a result of foreign loss carryforwards and changes to
the valuation allowance. See Note 10 of the Notes to Financial Statements of
the Company for a further description.

(c) The reduction in Selfix net sales in fiscal 1996 was a result of decisions
made in fiscal 1995 to discontinue the sale of certain under-performing
housewares products.

(d) EBITDA is defined as the sum of (i) earnings (loss) before income taxes,
(ii) interest expense, (iii) interest income, and (iv) depreciation and
amortization. EBITDA is not presented as an alternative measure of operating
results or cash flow from operations (as determined in accordance with
generally accepted accounting principles), should not be considered by the
reader as an alternative to net income as an indicator of Selfix's operating
results and is not indicative of cash flow available to fund all cash needs.
EBITDA, as determined by Selfix, may differ from that of other companies.

(e) Working capital is computed as current assets less current liabilities.

(f) Net sales growth (decrease) represents the percentage increase (decrease) in
net sales from the corresponding period, presented on a comparable basis, in
the prior year.

21
<PAGE> 24

SELECTED HISTORICAL FINANCIAL DATA OF TAMOR

The following selected historical financial data should be read in
conjunction with the financial statements and related notes of Tamor and other
financial data included elsewhere in this Prospectus. The balance sheet data and
statement of operations data presented below are derived from the audited
financial statements of Tamor.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(A):
Net sales................................................... $53,806 $60,301 $75,714
Cost of goods sold.......................................... 43,235 50,194 57,818
------- ------- -------
Gross profit........................................... 10,571 10,107 17,896
Operating expenses.......................................... 8,426 8,839 13,524
------- ------- -------
Operating profit....................................... 2,145 1,268 4,372
Interest expense............................................ (531) (1,140) (1,191)
Other income -- net......................................... 225 98 494
------- ------- -------
Earnings before income taxes........................... 1,839 226 3,675
Income tax (expense) benefit(b)............................. (93) 25 (160)
------- ------- -------
Net earnings................................................ $ 1,746 $ 251 $ 3,515
======= ======= =======
OTHER DATA:
Net sales growth(e)......................................... 12.1% 25.6%
Gross profit margin......................................... 19.6% 16.8% 23.6%
Operating profit margin..................................... 4.0% 2.1% 5.8%
EBITDA(c)................................................... $ 4,576 $ 3,926 $ 7,767
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1995 1996
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital(d).......................................... $ 6,079 $ 963
Property, plant and equipment, net.......................... 12,908 16,905
Intangible assets, net...................................... -- --
Total assets................................................ 29,377 34,096
Total debt, including capital lease obligations............. 13,516 11,781
Total stockholders' equity.................................. 7,397 8,181
</TABLE>

NOTES TO SELECTED HISTORICAL FINANCIAL DATA OF TAMOR

(a) Financial statements for combined Tamor Corporation and Housewares Sales,
Inc., its affiliated product distribution company, were not prepared for
periods prior to December 31, 1994.

(b) Tamor's historical income tax (expense) benefit differed significantly from
the statutory rates as Tamor was taxed as an S corporation prior to the
Tamor Acquisition.

(c) EBITDA is defined as the sum of (i) earnings (loss) before income taxes,
(ii) interest expense, (iii) interest income, and (iv) depreciation and
amortization. EBITDA is not presented as an alternative measure of operating
results or cash flow from operations (as determined in accordance with
generally accepted accounting principles), should not be considered by the
reader as an alternative to net income as an indicator of Tamor's operating
results and is not indicative of cash flow available to fund all cash needs.
EBITDA, as determined by Tamor, may differ from that of other companies.

(d) Working capital is computed as current assets less current liabilities.

(e) Net sales growth (decrease) represents the percentage increase (decrease) in
net sales from the corresponding period, presented on a comparable basis, in
the prior year.

22
<PAGE> 25

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

The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the financial statements and notes
thereto included elsewhere in this Prospectus and includes forward-looking
statements the realization of which may be impacted by certain important factors
discussed under "Forward Looking Statements."

GENERAL

The Company designs, manufactures and markets diversified housewares
products through its three wholly-owned operating subsidiaries, Tamor, Selfix
and Shutters. In February, 1997, the Company became the holding company for, and
successor registrant under the Exchange Act of 1934 (the "1934 ACT") to Selfix,
and Selfix and Shutters became wholly-owned subsidiaries of the Company. Selfix,
founded in 1952, manufactures and markets bath and shower organizers, hooks and
home helpers, home/closet organizers and juvenile organization products.
Shutters, acquired by Selfix in 1987, manufactures and markets durable, plastic
exterior shutters. Tamor, acquired by the Company effective as of January 1,
1997, manufactures and markets, among other things, plastic storage containers,
hangers, hooks and juvenile organization products.

In 1994, the Company began to restructure its operations to improve its
profitability. As part of the restructuring, the Company eliminated unprofitable
product lines, reduced its overhead, refocused its sales and marketing efforts,
increased its international distribution capabilities and upgraded its financial
controls. The Company incurred operating losses of approximately $4.5 million in
1994 and $4.1 million in 1995 as a result of the costs of the restructuring.
During 1996, the Company significantly improved its operating results and had
operating profits of $1.4 million. See "Risk Factors -- Recent Losses; Selfix
Restructuring."

The Company acquired Tamor for a total purchase price of $41.9 million,
consisting of approximately $27.8 million in cash, $2.4 million of Common Stock
(480,000 shares) and the repayment of $11.7 million of Tamor's long-term debt,
including long-term capital lease obligations. Pursuant to an agreement dated
October 29, 1996, the Company, effective as of January 1, 1997, took operating
and financial control of Tamor, assumed substantially all of the liabilities of
Tamor and retained substantially all of the earnings from Tamor's operations.
See "Business -- The Tamor Acquisition." In connection with the Tamor
Acquisition, the Company entered into the Credit Agreement with GECC, as agent.
The financing facilities under the Credit Agreement consisted of the Revolving
Credit Facility and the Term Loans which provided a total of $60.0 million of
available financing. The proceeds of the Term Loans, the Subordinated Note and
the Warrant were used to finance the Tamor Acquisition, to repay certain
indebtedness of Tamor and to pay transaction costs related thereto. See
"Description of the Credit Agreement and Other Debt" contained in this
Prospectus for a description of the terms of the Credit Agreement, the
Subordinated Note and the Warrant.

Management believes that the future financial and operating performance of
the Company will be significantly impacted by the financial and operating
performance of Tamor and the Company's ability to successfully integrate Tamor.
See "Risk Factors -- Risks Associated with the Tamor Acquisition." The Company's
business strategy contemplates that the Company will pursue other potential
acquisitions. See "Business -- Business Strategy." The Company currently has no
agreements or understandings with respect to any acquisitions and there can be
no assurance that the Company will be successful in completing other
acquisitions. The financing costs and other costs associated with this strategy
of growth through acquisitions and the process of integrating acquired companies
into the Company's operations could significantly impact the Company's financial
and operating performance. Further, restrictive covenants in the Credit
Agreement may limit the Company's ability to pursue its acquisition strategy.
See "Risk Factors -- Risks Associated with Acquisitions Strategy."

23
<PAGE> 26

In connection with its acquisition of Tamor, the Company capitalized as
goodwill the amount of $25.7 million, representing the excess of the purchase
price over the net assets acquired, and will amortize such goodwill over a
period of 40 years. The Company will have annual expense of $0.6 million
reflecting such goodwill amortization (or approximately $0.06 per share after
giving effect to the Offering and pro forma income tax expense).

The Company reports on a 52-53 week year ending on the last Saturday of
December. References to fiscal 1994, 1995 and 1996 are for the fifty-three weeks
ended December 31, 1994, fifty-two weeks ended December 30, 1995 and the
fifty-two weeks ended December 28, 1996, respectively. The favorable impact on
net sales of the fifty-third week in fiscal 1994 was offset by additional
salaries and operating expenses of the additional week. Management, therefore,
believes the fifty-third week had no meaningful impact on fiscal 1994 results or
on comparisons between years.

The following discussion and analysis of financial condition and results of
operations will compare (i) the Company's thirteen weeks ended March 29, 1997 to
the thirteen weeks ended March 30, 1996, (ii) Selfix's fiscal 1996 to fiscal
1995, (iii) Selfix's fiscal 1995 to fiscal 1994, (iv) Tamor's fiscal 1996 to
fiscal 1995 and (v) Tamor's fiscal 1995 to fiscal 1994.

COMPANY-RESULTS OF OPERATIONS

The following table sets forth certain historical and pro forma information
for the thirteen weeks ended March 30, 1996 and the thirteen weeks ended March
29, 1997. The historical data for the thirteen weeks ended March 30, 1996 has
been derived from the Company's (formerly Selfix) unaudited financial
statements. The data for the pro forma thirteen weeks ended March 30, 1996 has
been prepared on a basis consistent with the Unaudited Pro Forma Condensed
Combined Statement of Operations of the Company appearing elsewhere in this
Prospectus. The data for the pro forma thirteen weeks ended March 30, 1996 gives
effect to the Tamor Acquisition and related financing as if each of the
transactions had occurred on December 31, 1995. The data for the thirteen weeks
ended March 29, 1997 has been derived from the Company's unaudited financial
statements. Operating results for the thirteen weeks ended March 29, 1997 may
not be indicative of the results that may be expected for fiscal 1997 or any
future period.

<TABLE>
<CAPTION>
PRO FORMA(A)
THIRTEEN WEEKS THIRTEEN WEEKS THIRTEEN WEEKS(G)
ENDED ENDED ENDED
MARCH 30, 1996 MARCH 30, 1996 MARCH 29, 1997
-------------- -------------- -----------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................ $ 8,625 $27,389 $ 31,738
Cost of goods sold....................................... 5,767 19,154 22,610
--------- --------- ---------
Gross profit........................................... 2,858 8,235 9,128
Operating expenses(b).................................... 3,826 6,707 6,602
--------- --------- ---------
Operating profit (loss)................................ (968) 1,528 2,526
Interest expense(c)...................................... (180) (1,556) (1,532)
Other income (expense) -- net............................ 32 64 155
--------- --------- ---------
Earnings (loss) before income taxes.................... (1,116) 36 1,149
Income tax (expense) benefit(d).......................... -- (58) (117)
--------- --------- ---------
Net earnings (loss)...................................... $(1,116) $ (22) $ 1,032
========= ========= =========
Net earnings (loss) per common and common equivalent
share.................................................. $ (0.29) $ (0.01) $ 0.23
Number of weighted average common and common equivalent
shares outstanding(e).................................. 3,817,181 4,336,783 4,513,683
OTHER DATA:
Net sales growth (decrease)(h)(i)........................ (19.7)% 15.9%
Gross profit margin...................................... 33.1 % 30.1 % 28.8%
Operating profit (loss) margin........................... (11.2)% 5.6 % 8.0%
Net earnings (loss) margin............................... (12.9)% (0.1)% .3%
EBITDA(f)................................................ $ (337) $ 2,934 $ 4,371
</TABLE>

- -------------------------
(a) The pro forma condensed combined financial data gives effect to the Tamor
Acquisition, and related financing, as if each of the transactions had
occurred on December 31, 1995. See "Unaudited Pro Forma Condensed Combined
Financial Statements."

24
<PAGE> 27

(b) The pro forma operating expenses reflects (i) additional amortization
expense resulting from the recording of goodwill associated with the Tamor
Acquisition and (ii) net estimated cost savings as a result of the Tamor
Acquisition.

(c) The pro forma interest expense reflects the estimated net increase in
interest expense as if the Tamor Acquisition and related financing had
occurred on December 31, 1995.

(d) The Company's historical income tax (expense) benefit differed significantly
from the statutory rates as a result of foreign loss carryforwards and
changes to the valuation allowance.

(e) The pro forma number of weighted average shares assumes the shares issued as
a result of the Tamor Acquisition (480,000 shares) and the Warrant were
outstanding as of December 31, 1995.

(f) EBITDA is defined as the sum of (i) earnings (loss) before income taxes,
(ii) interest expense, (iii) interest income, and (iv) depreciation and
amortization. EBITDA is not presented as an alternative measure of operating
results or cash flow from operations (as determined in accordance with
generally accepted accounting principles), should not be considered by the
reader as an alternative to net income as an indicator of the Company's
operating results and is not indicative of cash flow available to fund all
cash flow needs. EBITDA, as determined by the Company, may differ from that
of other companies.

(g) Pursuant to an agreement dated October 29, 1996, the Company, effective as
of January 1, 1997, took operating and financial control of Tamor, assumed
substantially all of the liabilities of Tamor and retained substantially all
of the earnings from Tamor's operations. Actual results are combined since
the date of effective control although the purchase transaction did not
close until February 28, 1997.

(h) The reduction in Selfix net sales in 1996 was a result of decisions made in
1995 to discontinue the sale of certain under-performing housewares
products, which resulted in a significant decrease in stock keeping units
(SKUs).

(i) Net sales growth (decrease) represents the percentage increase (decrease) in
net sales from the corresponding period, presented on a comparable basis, in
the prior year.

25
<PAGE> 28

THIRTEEN WEEKS ENDED MARCH 29, 1997 COMPARED TO THE THIRTEEN WEEKS ENDED MARCH
30, 1996

General. The Tamor Acquisition and the related financing significantly
impacted the Company's operating results for the first quarter of 1997. The
acquisition of Tamor substantially improved the Company's net earnings from a
net loss of $1.1 million in the first quarter of fiscal 1996 to net earnings of
$1.0 million for the first quarter of fiscal 1997. The improved earnings were
also the result of significant improvements in the financial performance of
Selfix and Shutters. Tamor contributed $1.2 million of pre-tax earnings in the
quarter, net of related financing expenses, transaction costs and goodwill
amortization. Selfix and Shutters had an operating profit of $0.05 million in
the first quarter of fiscal 1997 as compared to a $1.0 million loss in the first
quarter of fiscal 1996. The improved results at Selfix and Shutters were due to
higher gross profit margins and reduced operating expenses consistent with
management initiatives implemented in 1996.

The following discussion and analysis compares the results for the first
quarter of fiscal 1997 to the pro forma results for the first quarter of fiscal
1996 as if the Tamor Acquisition had occurred as of December 30, 1995.
Management believes that such a comparison is necessary to meaningfully analyze
the changes occurring in such quarters.

Net sales. Net sales of $31.7 million in the first quarter of fiscal 1997
increased $4.3 million, or 16%, from net sales of $27.4 million in the first
quarter of fiscal 1996. The increase was primarily the result of increased
distribution and the introduction of new Tamor plastic storage products. Sales
increases occurred primarily in home/closet organization and storage containers
product lines. Sales of Tamor home/closet organization products increased 13.1%
as a result of increased distribution of hanger products. Sales of Tamor storage
containers increased 26.5% due to new product introductions (66% of the growth
in the category) and additional distribution of existing products. Sales of
Shutters home improvement products increased 24% due to several new customers.

Gross profit. Gross profit increased 10% from $8.2 million in the first
quarter of fiscal 1996 to $9.1 million in the first quarter of fiscal 1997, as a
result of the increased sales described above. Gross profit margins decreased
from 30.1% in the first quarter of fiscal 1996 to 28.8% in the first quarter of
fiscal 1997, due primarily to increases in the cost of plastic resin. The cost
of plastic resin increased approximately 11.9% between quarters resulting in a
3% drop in gross profit margin. Partially offsetting the increase in plastic
resin costs were improvements in capacity utilization. During the first quarter
of 1997, the Company was able to increase the use of excess capacity at its
Selfix and Shutters manufacturing facilities for molding and packaging products
for Tamor, which allowed Tamor to reduce outside molding costs and Selfix and
Shutters to reduce per unit overhead costs.

Operating expense. Operating expenses in the first quarter of 1997 of $6.6
million were essentially the same as compared to the first quarter of 1996.
Selling expenses decreased from 17% of net sales in the first quarter of fiscal
1996 to 14.5% of net sales in the first quarter of fiscal 1997. Warehousing and
customer service costs in the first quarter of fiscal 1997 were reduced by the
1996 closing of Selfix's Canadian facility in March, 1996. The 1996 decision to
outsource certain product design services resulted in further personnel related
savings.

Administrative expenses also declined as a percentage of net sales from
6.6% in 1996 to 5.7% in the first quarter of fiscal 1997. The decrease in
administrative expenses as a percentage of sales was the result of increases in
sales that were achieved while holding administrative costs flat as compared to
1996.

Amortization of intangibles decreased slightly from 0.8% of net sales in
the first quarter of fiscal 1996 to 0.6% in the first quarter of fiscal 1997.
The decrease was the result of a higher sales base.

Operating profit. As a result of improved sales, operating profit increased
$1.0 million, or 65%, to $2.5 million in the first quarter of 1997 from $1.5
million in the first quarter of 1996. In the first quarter of 1997, operating
profit was 8% of net sales as compared to 5.6% of net sales in the first quarter
of 1996.

Interest expense. Interest expense of $1.5 million in the first quarter of
fiscal 1997 was essentially unchanged from the first quarter of fiscal 1996.
Both periods reflect amortization of debt discount related to the Subordinated
Note. The debt discount of $0.4 million is being amortized over the 7 month
period of time

26
<PAGE> 29

the Subordinated Note is expected to be outstanding. Both periods also reflect
approximately $0.1 million of amortization related to fees and expenses incurred
in connection with the Credit Agreement.

Other income. Other income increased $0.1 million from 1996 to 1997 as a
result of the reversal of excess accruals related to the 1996 closing of the
Company's Canadian distribution facility.

Income tax (expense) benefit. The income tax expense recorded in the first
quarter of fiscal 1997 reflects tax expenses for state income taxes in states
where the Company does not have tax loss carryforwards. No carryforwards are
available in Massachusetts, Tamor's primary state of business. The Company does
not expect to record a material federal tax expense during fiscal 1997 as a
result of tax loss carryforwards. Accordingly, no federal tax expense was
recorded in the first quarter of fiscal 1997.

The Company decreased the valuation allowance for net deferred tax assets
by $0.4 million to $3.1 million. The Company carries the remaining allowance
because although the Company has restructured its Selfix operations and returned
to profitability in 1996, the Company has not yet been able to conclude that it
is more likely than not that it will be able to realize its deferred tax assets.
The Company has based this determination on its historical results of operations
and the uncertainty of several other factors, including the successful
integration of Tamor's operations into the Company's operations, the impact of
the substantial indebtedness incurred in connection with the Tamor Acquisition,
the maintenance of the Company's existing customer relationships at current
levels of sales volume, the continued successful implementation of cost control
measures and various other factors beyond the Company's control, such as plastic
resin price increases and the effect of general economic conditions. See "Risk
Factors". However, if the results of operations for the remainder of fiscal 1997
remain profitable and the Offering is completed, the Company expects to be able
to reduce or eliminate the valuation allowance in the fourth quarter of fiscal
1997.

Net earnings (loss). Net earnings increased to $1.0 million in the first
quarter of 1997 from the first quarter of 1996 net loss of $0.02 million.
Earnings per share increased to $0.23 in the first quarter of fiscal 1997 based
on 4,513,683 weighted average shares outstanding as compared to the first
quarter of 1996 loss per share of $0.01 based on 4,336,783 weighted average
shares outstanding. If the Company had incurred a tax expense using a tax rate
of 40% assuming no federal or state tax loss carryforwards, net earnings in the
first quarter of 1997 would have been $0.7 million, or $0.15 per share based on
4,513,683 weighted average shares outstanding.

OPERATING RESULTS BY INDUSTRY SEGMENT

HOUSEWARES

First quarter 1997 performance in the housewares segment was significantly
improved as compared to the first quarter of 1996 on a pro forma basis. Net
sales increased 15% from $25.1 million, on a pro forma basis, in the first
quarter of 1996 to $30.0 million in the first quarter of 1997 as a result of new
product introductions and expanded distribution. Operating profit increased 27%
from $2.0 million, 7.8% of net sales, on a pro forma basis in the first quarter
of 1996 to $2.6 million, 8.5% of net sales, in the first quarter of 1997.
Increased profitability was a result of the increased sales as well as decreased
operating expenses both in absolute dollars and as a percent of sales. Decreases
in operating expenses were related to personnel reductions initiated in the
second and third quarters of 1996 together with the March 31, 1996 closing of
the Company's Canadian distribution facility.

HOME IMPROVEMENT PRODUCTS

First quarter 1997 sales and operating profit increased substantially from
the first quarter of 1996. Net sales increased 38% from $1.3 million in the
first quarter of 1996 to $1.8 million in the first quarter of 1997. The increase
in sales was a result of new customers. Net sales in the first quarter are
traditionally lower than the second and third quarter as sales are impacted by
weather conditions which are generally better in the late spring, summer and
early fall. The 1997 first quarter operating loss of $0.03 million was
significantly decreased from the 1996 first quarter operating loss of $0.5
million. The reduction in the loss was a result of the increased sales and a
$0.2 million decrease in operating expenses. The decrease in operating expenses
was due to personnel cutbacks and less spending on marketing brochures.

27
<PAGE> 30

SELFIX -- RESULTS OF OPERATIONS

The following table sets forth certain historical information for Selfix
for fiscal years 1994, 1995 and 1996.

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 31, DECEMBER 30, DECEMBER 28,
1994 1995 1996
------------ ------------ ------------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................... $40,985 $41,039 $38,200
Cost of goods sold...................................... 25,587 25,678 22,992
---------- ---------- ----------
Gross profit.......................................... 15,398 15,361 15,208
Operating expenses...................................... 18,185 17,385 13,843
Restructuring charges(a)................................ 1,701 2,051 --
---------- ---------- ----------
Operating profit (loss)............................... (4,488) (4,075) 1,365
Interest expense........................................ (999) (896) (707)
Other income (expense)-net.............................. (295) 688 148
---------- ---------- ----------
Earnings (loss) before income taxes................... (5,782) (4,283) 806
Income tax (expense) benefit(b)......................... (221) 273 --
---------- ---------- ----------
Net earnings (loss)..................................... $(6,003) $(4,010) $ 806
========== ========== ==========
Net earnings (loss) per common and common equivalent
share................................................. $ (1.70) $ (1.11) $ 0.21
Number of weighted average common and common equivalent
shares outstanding.................................... 3,538,758 3,616,924 3,853,502
OTHER DATA:
Net sales growth (decrease)(c)(e)....................... 3.2% 0.1% (6.9)%
Gross profit margin..................................... 37.6% 37.4% 39.8%
Operating profit (loss) margin.......................... (11.0)% (9.9)% 3.6%
EBITDA(d)............................................... $ (659) $ (280) $ 3,647
</TABLE>

- -------------------------
(a) The fiscal 1994 restructuring charge relates to costs of severance and
termination benefits paid or accrued for a change in the level and
composition of employees, termination of existing employee arrangements,
inventory adjustments and fixed asset writedowns related to product lines to
be discontinued.

The fiscal 1995 restructuring charge is a result of the Company's decision
to exit certain unprofitable product lines, close the Company's Canadian
facility and move the Canadian operations to the Chicago manufacturing and
distribution facilities.

(c) The reduction in Selfix net sales in fiscal 1996 was a result of decisions
made in fiscal 1995 to discontinue the sale of certain under-performing
housewares products.

(d) EBITDA is defined as the sum of (i) earnings (loss) before income taxes,
(ii) interest expense, (iii) interest income, and (iv) depreciation and
amortization. EBITDA is not presented as an alternative measure of operating
results or cash flow from operations (as determined in accordance with
generally accepted accounting principles), should not be considered by the
reader as an alternative to net income as an indicator of Selfix's operating
results and is not indicative of cash flow available to fund all cash flow
needs. EBITDA, as determined by Selfix, may differ from that of other
companies.

(e) Net sales growth (decrease) represents the percentage increase (decrease) in
net sales from the corresponding period, presented on a comparable basis, in
the prior year.

28
<PAGE> 31

FISCAL 1996 COMPARED TO FISCAL 1995

General. Fiscal 1996 results began to reflect the positive benefits of the
restructuring actions taken during fiscal years 1994 and 1995. Selfix's net
earnings in fiscal 1996 of $0.8 million reflect reduced operating expenses,
improved manufacturing efficiencies and increased gross profit margins.

Overhead reductions and operating initiatives which were implemented in
1994 and 1995 directly benefited 1996 results as follows: (i) a 24% reduction in
the workforce; (ii) the elimination of unprofitable product lines; (iii) the
closing of three facilities; (iv) a reduction in outside warehousing costs; (v)
a 29% reduction of gross inventory; and (vi) the reduction of operating expenses
below amounts spent in fiscal 1993.

Net sales. Net sales of $38.2 million in 1996 decreased $2.8 million, or
7%, from net sales in 1995 of $41.0 million. The reduction in sales was a direct
result of decisions made in 1995 to discontinue the sale of certain under
performing housewares products. Discontinued products, accounting for $3.3
million of 1995 net sales, were across all of the housewares product lines but
were greatest in the hooks and home helpers and home organization product lines.
Home bathwares sales increased 3% from 1995 as a result of an expanded line of
shower organizers. Juvenile products sales increased 10% as Selfix had a full
year in which to sell the child safety product line acquired in October, 1995.
Home improvement products increased 5% as a result of increased placement with
remodeling distributors.

Gross profit. Gross profit margins in 1996 were 39.8% of net sales, a
slight increase from margins in 1995 of 37.4% of net sales. Increased gross
profit margins were attributable to a slight decrease in the cost of plastic
resin but more significantly to the impact of decisions made in 1995 and the
selling of fewer lower margin products. Plastic resin costs declined about 9%
during 1996 to an average cost of $0.48 per pound from an average cost of $0.53
per pound for plastic resin during 1995. Selfix used approximately seven million
pounds of plastic resin resulting in a cost savings of $0.3 million as compared
to 1995 cost levels. The declines in resin costs were a reflection of plastic
resin market factors and not as a result of any change in Selfix's buying
practices.

Operating expenses. Selling expenses decreased from 25.5% of net sales in
1995 to 23.7% of net sales in 1996. Warehousing and customer service costs were
reduced by the first quarter closing of Selfix's Canadian facility. All Canadian
business is now serviced from Selfix's manufacturing and distribution facilities
in Chicago. The closing resulted in personnel reductions and reduced warehousing
costs. In addition, management decided that the Company was better served by
outsourcing certain product design services. This resulted in further personnel
related savings.

Administrative expenses also decreased as a percent of net sales.
Administrative expenses were 12% of net sales in 1996 as compared to 15.7% in
1995. Management efforts to evaluate and reduce spending successfully reduced
personnel costs, professional fees and nearly all other administrative items.
Costs related to the search and evaluation of acquisition targets were
significantly decreased in 1996. Management devoted the majority of its
attention to cost reduction efforts, manufacturing efficiencies, and managing
the impact of selling a reduced number of product lines. Fourth quarter costs in
1996 of approximately $0.2 million related to the Tamor Acquisition were
capitalized. In addition, 1995 included an increase in the allowance for
doubtful accounts of $0.4 million to address the uncertain financial condition
of several retailers. Further, management decided in 1995 to outsource its
management information department and incurred $0.4 million of charges for
related severance payments and equipment write-offs.

Amortization of intangibles decreased from 1.2% of net sales in 1995 to
0.5% in 1996. The decrease in amortization is the result of 1995 write-offs of
previously capitalized patents and trademarks related to discontinued product
lines.

Restructuring charge. Restructuring charges totaling $2.1 million were
recorded in 1995 related to discontinuing certain unprofitable product lines,
closing Selfix's Canadian facility and moving the Canadian operations to
Chicago. Such charges included severance benefits, the write-off of Canadian
fixed assets, early lease termination charges on the Canadian building lease and
the write-off of inventory and intangibles related to discontinued product
lines. The charges for the closing and relocation of the Canadian operation
totaled $1.0 million including severance benefits of $0.2 million covering all
of the Canadian employees. The

29
<PAGE> 32

relocation of the Canadian operation was completed in the first half of 1996.
The remaining $1.1 million of restructuring charges related to product lines
Selfix decided to discontinue and the write-off of related product molds,
inventory and patents. The after tax and per share impact of the write-off of
depreciable assets in connection with the 1995 restructuring charge was $1.0
million and $0.27, respectively.

Interest expense. In December, 1995, Selfix used excess cash to pay down a
$1.5 million note payable to a bank. In addition, $0.8 million of installment
payments on variable rate demand bonds were made. As a result of these payments,
Selfix's 1996 interest expense was reduced $0.2 million as compared to 1995.
Changes in interest rates had no significant impact on interest expense between
years.

Other income (expense). 1996 other income of $0.1 million was significantly
less than the $0.7 million of other income in 1995. Other income in 1995 was
positively impacted by the favorable settlement of a non-compete and consulting
agreement. The favorable settlement allowed $0.3 million of related accruals to
be reversed into 1995 earnings. In addition, 1995 other income included gains on
sales of fixed assets and a franchise tax refund.

Income taxes. Selfix was able to use tax losses from prior years to reduce
current year tax provisions to zero. In 1995 and 1994, however, Selfix was
unable to record a significant tax benefit on pre-tax losses because of the
unavailability of tax loss carrybacks. An income tax benefit of $0.3 million was
recorded in 1995 through the utilization of alternative minimum tax carrybacks.
Selfix has about $6.5 million of book tax losses to shelter future reported
pre-tax earnings.

Net earnings (loss). Net earnings in 1996 were $0.8 million or $0.21 per
share, based on 3,853,502 weighted average common shares outstanding. This
compares to a net loss of $4.0 million in 1995 or $1.11 loss per share based on
3,616,924 weighted average common shares outstanding. The $4.8 million
turnaround in profitability was due to the operating improvements achieved over
the past few years and the $2.1 million decrease in restructuring charges. The
increase in common shares and common share equivalents was the result of stock
issued in connection with the Company's Stock Purchase Plan and the dilutive
impact of stock options. The increase in the Company's year end stock price from
$5.625 to $8.625 caused several previously issued stock option grants to be
treated as dilutive for purposes of the common share equivalent determination.

FISCAL 1995 COMPARED TO FISCAL 1994

General. During 1994, management began a restructuring of operations and
analysis of market trends which resulted in the decision to discontinue certain
product lines, consolidate facilities and take actions to reduce fixed costs.
Restructuring charges were incurred in both 1995 and 1994 as more fully
described below.

Net sales. Net sales during 1995 of $41.0 million were unchanged from the
net sales during 1994 of $41.0 million. During the year, however, Selfix
identified certain products to discontinue primarily in the home organization
category. As a result, product sales of this category declined 15%. Further,
juvenile products declined 19% as a result of reduced trade channel fill-in of
initial product offerings. These reductions were offset by healthy improvements
(up 4%) in Selfix's stronger categories of home bathwares and hooks, where
Selfix has larger market shares. Increased sales of these products were driven
by a 16% increase in domestic sales to Selfix's largest customer due to improved
distribution and new product offerings. Sales of Selfix's home improvement
products increased 7% as a result of increased penetration of the home center
retail market and also through increased volume with remodeling distributors.
Penetration of the home center retail market was supported by Selfix's make to
order program allowing consumers to customize both the color and size of their
shutters. Net sales in 1994 were reduced by a provision for returns and
allowances of $0.8 million to reflect current market pricing trends and
potential product warranty claims.

Gross profit. Gross profit declined slightly from 37.6% of net sales in
1994 to 37.4% of net sales in 1995. The decrease in gross profit margins was
primarily the result of cost increases related to plastic resin, Selfix's
primary raw material. During 1995, Selfix's cost of plastic resin increased 34%,
causing gross profit margins to decline by 2.6%. Plastic resin costs declined in
the third and fourth quarters from their mid year highs. Gross profit margins
were also impacted by Canadian sales mix shifts away from high margin core
product categories to the lower margin hanging hardware product line. Selfix
concluded it could not effectively and profitably

30
<PAGE> 33

compete in hanging hardware and decided to discontinue this product line. The
related costs to exit this product line are included in the 1995 restructuring
charge. Offsetting the year-to-year gross profit margin decline caused by
plastic resin cost increases and Canadian sales mix shifts, were actions taken
in 1994 to identify excess inventory items and non-performing fixed assets.
Inventory reserves were increased $1.0 million to address slow moving and
obsolete finished goods and packaging. In addition, fixed asset write-offs of
$0.4 million were recorded for assets that were not used and obsolete.

Operating expenses. Selling expenses were 25.5% of net sales as compared to
26.8% in 1994. The decrease was a result of Selfix's consolidation of its
Chicago warehousing facilities from four to two. This action was taken to
improve customer service, increase operating efficiencies and reduce costs.
Selfix's ability to consolidate warehouses was also a direct result of actions
taken in 1994 and 1995 to reduce stock keeping units (SKUs) and inventory.
Selfix's restructuring actions in 1994 to reduce head count also had a favorable
impact on selling expenses.

Administrative expenses increased from 14.1% of net sales in 1994 to 15.7%
in 1995. The increase is attributable to costs incurred related to Selfix's
search for strategic acquisitions, the decision to outsource the management
information department and the increased cost of management incentive plans.
During 1995, Selfix evaluated several acquisition targets and incurred legal,
audit and investment banking fees during the evaluation and negotiation process.
Fees and costs related to acquisition activities are expensed as incurred unless
a transaction is completed. During 1995, management decided to outsource its
management information department to improve overall responsiveness and reduce
costs, and a $0.4 million charge was incurred for the related severance payments
and equipment write-offs. Administrative expenses also increased as a result of
Selfix's management incentive plans. Expenses for such plans increased as a
result of Selfix achieving its operating budget in 1995. The operating budget
was not achieved in 1994 and no management incentive costs were incurred.

Amortization of intangibles decreased from 3.4% of sales in 1994 to 1.2% in
1995. 1994 results included a write-off of $0.6 million related to intangible
assets from previous acquisitions. The write-off recognized projected sales
declines on the related product lines acquired. The write-off of these assets
resulted in reduced amortization in 1995. Further, some of Selfix's intangibles
reached the end of their respective amortization periods during early 1995
further reducing amortization expense as compared to 1994.

Restructuring charge. Restructuring charges were incurred in both 1995 and
1994. Such charges increased from $1.7 million in 1994 to $2.1 million in 1995.
In 1994, Selfix's new senior management team began a restructuring of
operations, analysis of customer and market trends, assessment of product lines,
SKUs and customers served together with a review of operating strategies. In
1994, Selfix recorded a $1.7 million restructuring charge related to the
analysis and assessments completed at that time. The 1994 charge related to the
cost of severance and termination benefits paid or accrued for a change in level
and composition of employees at Selfix's Chicago facilities, as well as
inventory adjustments and fixed asset writedowns related to product lines to be
discontinued. The after tax and per share impact of the write-off of depreciable
assets in connection with the 1994 restructuring charge was $0.2 million and
$0.07, respectively. In the fourth quarter of 1995, Selfix announced its intent
to further consolidate facilities and discontinue additional product lines. The
1995 restructuring charge was a result of Selfix's decision to discontinue
certain unprofitable product lines, close Selfix's Canadian facility and move
the Canadian operations to the Chicago manufacturing and distribution
facilities. The restructuring charges for these initiatives totaled $2.1
million. The charges for the closing and relocation of the Canadian operation
totaled $1.0 million including severance benefits of $0.2 million covering all
of the Canadian employees. The relocation of the Canadian operation was
completed in the first quarter of 1996. The remaining $1.1 million of
restructuring charges pertains to product lines Selfix decided to discontinue
and the write-off of related product molds, inventory and patents.

Interest expense. Interest expense declined $0.1 million as a result of
lower debt levels. Changes in interest rates between years had no significant
impact on interest expense.

Other income (expense). Other expense in 1994 of $0.3 million was
significantly impacted by several items. Other expense was increased $0.5
million related to the write-off of future benefits from non-compete

31
<PAGE> 34

and consulting agreements arising from a previous acquisition, $0.3 million
related to the investigation and remediation of an environmental matter, and
$0.1 million for losses on fixed assets sold. Partially offsetting these
additional expenses was $0.5 million of income for the favorable settlement of a
patent infringement lawsuit. Other income in 1995 of $0.7 million was positively
impacted by the favorable settlement of a non-compete and consulting agreement.
The favorable settlement allowed $0.3 million of related accruals to be reversed
into 1995 earnings. In addition, 1995 other income was favorably impacted by
gains on sales of fixed assets and a franchise tax refund from prior years.

Income tax (expense) benefit. An income tax benefit of $0.3 million was
recorded in 1995 through the utilization of alternative minimum tax carrybacks.
This compares to income tax expense in 1994 of $0.2 million related to foreign
income taxes. During 1995, Selfix ceased operation of its United Kingdom and
Hong Kong subsidiaries and, as a result, did not generate any foreign taxed
earnings or losses of significance. Selfix was unable to record a significant
tax benefit on the 1995 or 1994 pre-tax losses because of the unavailability of
tax loss carrybacks. The losses from both years will be available to reduce
future taxable income.

Net loss. The net loss in 1995 decreased by 33% to $4.0 million or $1.11
per share based on 3,616,924 weighted average common shares and common share
equivalents from the net loss of $6.0 million in 1994, or $1.70 per share based
on 3,538,758 of weighted average common shares and common share equivalents. The
increase in common shares and common share equivalents in 1995 was the result of
stock issued in connection with the acquisition of Mericon Child Safety Products
and the partially offsetting impact of treasury shares acquired during the year.

OPERATING RESULTS BY INDUSTRY SEGMENT

HOUSEWARES

The housewares segment significantly improved its profitability in 1996.
Operating profits of $0.9 million were achieved as compared to an operating loss
of $4.9 million in 1995. The improvement resulted from higher gross profit
margins, reduced operating expenses, and the $2.1 million decrease in
restructuring charges. The majority of the operating initiatives and cost
cutting measures of the past three years benefited the housewares segment. The
Selfix line of products has been significantly streamlined from over 2,000 SKUs
in 1994 to under 700 as of the end of 1996. The reduction in SKUs has allowed
management to concentrate on selling more profitable products, allocate capital
resources accordingly, and cutback personnel. The reduction in expense base and
the improved margins on items sold, has positioned the segment for continued
profitability.

The 1995 operating loss of the housewares segment was $4.9 million as
compared to an operating loss of $3.9 million in 1994. The increased operating
loss was partially the result of higher resin costs. Other factors impacting
results were the decline in gross profit margins due to Canadian sales mix
shifts to a lower margin hardware product line, the costs associated with
Selfix's search for strategic acquisitions, the decision to outsource the
management information department, the additional costs of new management
incentive plans, and increased restructuring charges.

HOME IMPROVEMENT PRODUCTS

Operating profits of the home improvement segment declined in 1996 to $0.5
million from $0.8 million in 1995. The decline in profitability occurred
primarily in the first quarter when sales were significantly constrained by
weather conditions in the midwest and northeast. Late winter storms deferred the
start of the building season. This resulted in missed sales and significant
unabsorbed fixed manufacturing costs. Although sales caught up later in the
year, the unabsorbed manufacturing costs could not be recovered. In addition,
operating expenses increased 8% to support new product introductions and to
pursue new trade channel opportunities. During the fourth quarter, management
initiated a series of changes to permanently reduce manufacturing costs and
operating expenses. This resulted in a fourth quarter profit as compared to
historical fourth quarter losses. Further, these changes positioned the home
improvement segment for improved profitability in 1997.

32
<PAGE> 35

Operating profits in 1995 of $0.8 million increased $1.3 million as
compared to the 1994 operating loss of $0.5 million. The 1994 operating loss was
due to charges related to potential warranty claims, the write-off of obsolete
fixed assets and the bankruptcy of a significant customer. Such charges totaled
$0.8 million and did not recur in 1995. In addition, increased profitability was
the result of improved manufacturing efficiencies through reduced turnover of
personnel and improved work flows. These cost efficiencies offset the increased
cost of plastic resins. Additional savings occurred in operating expenses
related to new product development costs and amortization of intangibles.
Amortization expenses were reduced as a result of the expiration of non-compete
and consulting agreements arising from the 1988 acquisition of Shutters by
Selfix.

TAMOR -- RESULTS OF OPERATIONS

The following table sets forth certain historical information for Tamor for
the years ended December 31, 1994, 1995 and 1996.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $53,806 $60,301 $75,714
Cost of goods sold.......................................... 43,235 50,194 57,818
------- ------- -------
Gross profit.............................................. 10,571 10,107 17,896
Operating expenses.......................................... 8,426 8,839 13,524
------- ------- -------
Operating profit.......................................... 2,145 1,268 4,372
Interest expense............................................ (531) (1,140) (1,191)
Other income-net............................................ 225 98 494
------- ------- -------
Earnings before income taxes.............................. 1,839 226 3,675
Income tax (expense) benefit(a)............................. (93) 25 (160)
------- ------- -------
Net earnings................................................ $ 1,746 $ 251 $ 3,515
======= ======= =======
OTHER DATA:
Net sales growth(c)......................................... 12.1% 25.6%
Gross profit margin......................................... 19.6% 16.8% 23.6%
Operating profit margin..................................... 4.0% 2.1% 5.8%
EBITDA(b)................................................... $ 4,576 $ 3,926 $ 7,767
</TABLE>

- -------------------------
(a) Tamor's historical income tax (expense) benefit differed significantly from
the statutory rates as Tamor was taxed as an S corporation prior to the
Tamor Acquisition.

(b) EBITDA is defined as the sum of (i) earnings (loss) before income taxes,
(ii) interest expense, (iii) interest income, and (iv) depreciation and
amortization. EBITDA is not presented as an alternative measure of operating
results or cash flow from operations (as determined in accordance with
generally accepted accounting principles), should not be considered by the
reader as an alternative to net income as an indicator of Tamor's operating
results and is not indicative of cash flow available to fund all cash flow
needs. EBITDA, as determined by Tamor, may differ from that of other
companies.

(c) Net sales growth represents the percentage increase in net sales from the
corresponding period, presented on a comparable basis, in the prior year.

FISCAL 1996 COMPARED TO FISCAL 1995

Net sales. Net sales in 1996 of $75.7 million increased $15.4 million, or
25.6%, from net sales in 1995 of $60.3 million. The sales increase was driven by
new product introductions, particularly in the storage container product line.
The introduction of the 20-gallon and 33-gallon storage totes, both with
high-dome hinged lids for increased capacity, contributed $8.5 million of new
product sales. This represented 53% of the growth in the storage product
category. Volume growth in this area is being driven by consumer demands for
larger, lower cost means by which to store seasonal items like clothing and
seasonal decorations. The success of the new storage container products also
benefited sales of existing product lines. Hangers, in particular, benefited
from the additional vendor exposure created by the storage container new product
introduction. Hanger sales increased $3.5 million, or 10%, as compared to 1995.

33
<PAGE> 36

Gross profit. Gross profit margins in 1996 were 23.6% of net sales up
significantly from margins of 16.8% of net sales in 1995. The margin improvement
was a direct result of declines in the cost of Tamor's primary raw material,
plastic resin. Tamor's average cost of plastic resin dropped from $0.425 per
pound in 1995 to $0.357 per pound in 1996. Tamor used 48.2 million pounds of
plastic resin in 1995 and as such received savings of approximately $3.3 million
as compared to 1995. This savings represents 4.4% of 1996 net sales. Margins
were also favorably impacted by changes in the mix of products sold. Closet
organization products, primarily plastic hangers, accounted for 48% of net sales
in 1996, down from 55% in 1995. Plastic hangers are among the lower margin
products sold by Tamor due to their commodity nature and selling price
sensitivity. The increase in sales of higher margin storage container products
from 38% of net sales in 1995 to 48% in 1996 helped improve overall gross profit
margins. Tamor was also able to reduce its costs by adding production capacity
at its Missouri and Georgia facilities. The addition of productive capacity
allowed Tamor to bring production in-house which had been previously outsourced
to contract injection molders.

Operating expenses. Selling and warehouse expenses increased to 13.1% of
net sales in 1996 from 10.9% in 1995. The increase relates to salaries and
commissions paid to the previous owners of Tamor. The increases in 1996 are not
indicative of future spending levels and will be significantly reduced in 1997.

General and administrative expenses were 4.7% of sales in 1996, up from
3.8% in 1995. The increase relates to wages and bonuses paid to the previous
owners as well as the reversal in 1995 of accruals totaling $0.3 million related
to the realizability of life insurance cash surrender values. The increase in
wages and bonus is not indicative of future spending levels and the Company
anticipates such costs will be significantly reduced in 1997.

Interest expense. Interest expense of $1.2 million in 1996 is essentially
unchanged from 1995. Tamor was able to finance operations and capital spending
from operating cash flows until the fourth quarter. Additional lease financing
was obtained at that time and certain trade payables were extended.

Net earnings. Net earnings increased by $3.2 million in 1996 to $3.5
million from $0.3 million in 1995. Increased profitability was driven by reduced
plastic resin costs and additional sales volume. Offsetting the $7.8 million
gain in gross profit was a $4.7 million increase in operating expenses primarily
related to salaries and bonuses paid to the prior owners.

FISCAL 1995 COMPARED TO FISCAL 1994

Net sales. Net sales of $60.3 million increased $6.5 million, or 12.1%,
from net sales of $53.8 million in 1994. The increase of 12.1% was driven by new
product introductions in the storage container product line and by increased
distribution of plastic hanger products.

Gross profit. Gross profit of $10.1 million decreased slightly in 1995 from
$10.6 million in 1994. Despite higher sales, gross profits declined as a result
of increased product costs and the resulting unfavorable impact on gross profit
margins. Gross margins were 16.8% in 1995 as compared to 19.6% in 1994. Tamor's
average cost of plastic resin increased from $0.34 per pound in 1994 to $0.425
per pound in 1995 as a result of price increases from vendors. Tamor used 33.8
million pounds of plastic resin in 1994 but its plastic resin costs increased by
$2.9 million from 1993 when Tamor used a comparable amount of plastic resin. In
addition, margins on incremental sales were lower due to the higher costs.
Partially offsetting the increased cost of plastic resin was an overall
improvement in product mix resulting from the sales growth of higher margin
storage container products.

Operating expenses. Selling and warehouse expenses decreased to 10.9% of
net sales from 11.6% in 1994. The decrease was a result of lower sales
commission in reaction to the decrease in gross profit margins. General and
administrative expenses were 3.8% of net sales in 1995, down slightly from 4.1%
in 1994. The decrease as a percent of sales is a function of the relatively
fixed nature of these costs. 1995 was also favorably impacted by the reversal of
accruals totaling $0.3 million related to the realizability of life insurance
cash surrender values.

Net earnings. Tamor's net earnings in 1995 decreased $1.4 million to $0.3
million from $1.7 million in 1994.

34
<PAGE> 37

QUARTERLY RESULTS

The information set forth below is derived from unaudited quarterly results
of operations of the Company for each quarter of fiscal 1996 and the first
quarter of fiscal 1997. The pro forma data has been prepared assuming that the
Tamor Acquisition and the Offering occurred as of the first day of the
applicable years presented. The data has been prepared by the Company on a basis
consistent with the Consolidated Financial Statements included elsewhere in this
Prospectus. These operating results are not necessarily indicative of the
Company's future performance.

<TABLE>
<CAPTION>
QUARTERS ENDING
----------------------------------------------------
3/30/96 6/29/96 9/28/96 12/28/96 3/29/97
------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
1996 AND 1997
Net sales....................................... $ 8,625 $10,155 $10,728 $ 8,692 $31,738
Gross profit.................................... 2,858 4,311 4,388 3,651 9,128
Net earnings (loss)............................. (1,116) 709 764 449 1,032
Earnings (loss) per share....................... (0.29) 0.19 0.20 0.11 0.23
1996 AND 1997
Pro Forma (as adjusted)(a)(b)
Net sales..................................... $27,389 $28,227 $32,123 $26,175 $31,738
Net earnings(c)............................... 286 790 1,334 301 953
Earnings per share(d)......................... 0.05 0.12 0.21 0.05 0.15
</TABLE>

- -------------------------
(a) The pro forma (as adjusted) condensed combined financial data for 1996 and
1997 gives effect to the Tamor Acquisition and related financing, the
Offering and the application of the estimated net proceeds therefrom and the
other transactions referred to herein, as if each of the transactions had
occurred on December 31, 1995.

The as adjusted condensed combined financial data as and for the thirteen
weeks ended March 29, 1997 gives effect to the Offering and the application
of the estimated net proceeds therefrom, as if the Offering had occurred on
December 29, 1996.

(b) The pro forma (as adjusted) and the thirteen weeks ended March 29, 1997 (as
adjusted) income tax (expense) benefit assumes all entities are taxed as C
corporations and gives no benefit to net operating loss carryforwards. The
pro forma (as adjusted) and the thirteen weeks ended March 29, 1997 (as
adjusted) income tax (expense) benefit is computed by applying the estimated
combined statutory rate of 40%.

(c) The pro forma (as adjusted) net earnings for 1996 reflects (i) additional
amortization expense resulting from the recording of goodwill associated
with the Tamor Acquisition, (ii) net estimated cost savings as a result of
the Tamor Acquisition, (iii) estimated net increase in interest expense as
if the Tamor Acquisition, the Offering and the application of the estimated
net proceeds therefrom and the other transactions referred to herein had
occurred on December 31, 1995, and (iv) income tax (expense) benefit
computed as discussed in Note (b) above.

The as adjusted net earnings for the thirteen weeks ended March 29, 1997
reflects (i) the estimated decrease in interest expense as if the Offering
and the application of the estimated net proceeds therefrom had occurred on
December 29, 1996 and (ii) income tax (expense) benefit computed as
discussed in Note (b) above.

(d) The pro forma (as adjusted) and the thirteen weeks ended March 29, 1997 (as
adjusted) number of weighted average shares utilized in the computation of
pro forma (as adjusted) and the thirteen weeks ended March 29, 1997 (as
adjusted) earnings per share assumes the shares issued as a result of the
Tamor Acquisition (480,000 shares), the Warrant (79,204 shares) and the
Offering (2,000,000 shares) were outstanding as of the first day of the
applicable years presented.

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<PAGE> 38

SEASONALITY

Revenues of the Company are slightly lower in the first and fourth quarters
of each fiscal year because of the seasonality of the Company's businesses.
Operating expenses are higher in the first quarter of each fiscal year due, in
part, to the Company's attendance at annual trade shows.

CAPITAL RESOURCES AND LIQUIDITY

Cash and cash equivalents at December 28, 1996 were $2.9 million, as
compared to $3.0 million at December 30, 1995. The Company's cash flow from
operating activities of $1.8 million was sufficient to fund operations, pay down
debt of $0.9 million and acquire new fixed assets totaling $1.6 million. In
fiscal 1996, pro forma combined EBITDA was $14.6 million. In the first quarter
of fiscal 1997, cash flow from operating activities was $0.3 million and EBITDA
was $4.4 million. See Note (i) of "Summary Historical and Pro Forma Financial
Data."

The required borrowings for the Tamor Acquisition have significantly
changed the Company's financial structure. To fund the acquisition, financing
facilities were provided by commercial lenders to replace and augment the
financing facilities in place at December 28, 1996. The financing facilities
consist of $40.0 million of term notes and a $20.0 million revolving line of
credit under the Credit Agreement and the $7.0 million Subordinated Note. See
"Description of the Credit Agreement and Other Debt." At May 3, 1997, the
Company had total short and long term debt outstanding of $54.5 million and
unused availability under the revolving line of credit of $11.9 million. During
the remainder of 1997, $2.0 million of debt will come due. At May 3, 1997, $1.0
million was outstanding under the revolving line of credit.

The Company's ability to make scheduled principal or interest payments or
to refinance its indebtedness will depend upon its future operating performance
and cash flow, which are subject to prevailing economic conditions, prevailing
interest rate levels, and financial, competitive, business and other factors,
many of which are beyond its control, as well as the availability of borrowings
under the Credit Agreement or successor facility. See "Risk Factors -- Retail
Industry; Economic Condition."

The Company's capital spending needs in 1997 are expected to be $8.5
million. Most of the spending relates to new injection molding presses and molds
to support Tamor's sales growth and new product development. Also included in
the capital spending forecast is approximately $2.4 million to expand Tamor's
Missouri manufacturing and warehouse facility. The Company believes that its
existing financing facilities together with its cash flow from operations will
provide sufficient capital to fund operations, make the required debt repayments
and meet anticipated capital spending needs.

There can be no assurance, however, that the Company will continue to
generate sufficient cash flow at or above current levels. If the Company is
unable to generate sufficient cash flow from operations in the future to service
its indebtedness, it may be required to refinance all or a portion of its
existing indebtedness or to obtain additional financing. There is no assurance
that any such refinancing would be possible or that any additional financing
could be obtained at all or on favorable terms. See "Risk Factors -- Leverage;
Restrictive Covenants."

INFLATION

Inflation has historically not had a material effect on the Company's
operations.

FORWARD-LOOKING STATEMENTS

This Prospectus, including "Business," "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," contains forward-looking statements within the meaning of the
"safe-harbor" provisions of the Private Securities Litigation Reform Act of
1995. Such statements are based on management's current expectations and are
subject to a number of factors and uncertainties which could cause actual
results to differ materially from those described in the forward-looking
statements. Such factors and uncertainties include, but are not limited to: (i)
the anticipated effect of the Tamor Acquisition on the Company's sales and
earnings; (ii) the impact of the level of the Company's

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<PAGE> 39

indebtedness; (iii) restrictive covenants contained in the Company's various
debt documents; (iv) general economic conditions and conditions in the retail
environment; (v) the Company's dependence on a few large customers; (vi) price
fluctuations in the raw materials used by the Company, particularly plastic
resin; (vii) competitive conditions in the Company's markets; (viii) the
Company's ability to execute its acquisition strategy; (ix) fluctuations in the
stock market; (x) the extent to which the Company is able to retain and attract
key personnel; (xi) relationships with retailers; and (xii) the impact of
federal, state and local environmental requirements (including the impact of
future environmental claims against the Company). As a result, the Company's
operating results may fluctuate, especially when measured on a quarterly basis.

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<PAGE> 40

BUSINESS

The following discussion contains certain forward-looking statements.
Actual results could differ materially. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Forward Looking
Statements."

GENERAL

Home Products International, Inc. designs, manufactures and markets a broad
range of quality consumer houseware products. The Company is a leading supplier
to large national retailers of value-priced storage and organization products
including storage containers, bath and shower organization products, hooks,
hangers, home/closet organization products and juvenile organization products.
The Company holds a significant market share in the United States in its key
product categories of plastic storage containers, plastic hangers and bath and
shower organization products. The Company's products are sold in the United
States through most of the large national retailers, including Wal-Mart, Target,
Kmart, Home Depot, Toys 'R Us, Walgreens and Bed Bath & Beyond. The Company also
sells its products internationally in over 40 countries. The Company is
comprised of three operating subsidiaries, Tamor, which was acquired in
February, 1997, effective as of January 1, 1997, Selfix and Shutters. After
giving effect to the Tamor Acquisition, on a pro forma basis, the Company would
have had record net sales and record operating profit for fiscal 1996 of $113.9
million and $8.2 million, respectively. For the fiscal quarter ended March 29,
1997, the Company reported record quarterly net sales and record quarterly
operating profit of $31.7 million and $2.5 million, respectively.

COMPANY BACKGROUND

The Company was founded as Selfix in 1952 as a privately held manufacturer
and distributor of plastic hooks. After being acquired in 1962 by Meyer and
Norma Ragir, the Company expanded the number of product categories it offered,
as well as the product lines within each category, resulting in increased net
sales and net earnings. In fiscal 1987, Selfix acquired Shutters, a manufacturer
and marketer of home improvement products, primarily durable plastic exterior
shutters. Selfix became a public company following an initial public offering of
its Common Stock in fiscal 1988. Although net sales had increased to
approximately $40.0 million in fiscal 1993, Selfix's operating profits were
marginal primarily due to under performing products, some of which were acquired
in two unsuccessful acquisitions in the early 1990's, and the death of the
Company's chief executive officer in 1992 which caused a void in management. In
addition, a lack of management controls resulted in sales of many under
performing products and a significant increase in operating expenses
attributable primarily to increased overhead expenses.

In April, 1994, Selfix hired James Tennant, then a member of its Board of
Directors with substantial marketing and management experience, to be Chairman
of the Board of Directors and Chief Executive Officer. Mr. Tennant set out to
restructure the Company's operations and improve its profitability. As part of
this restructuring, the Company replaced its entire senior management group,
focused its sales and marketing efforts, increased its distribution
capabilities, upgraded its financial and systems controls, eliminated under
performing product lines which resulted in a significant decrease of SKUs and
reduced overhead expenses. The Company incurred operating losses of
approximately $4.5 million in fiscal 1994 and $4.0 million in fiscal 1995,
resulting primarily from the costs of this restructuring. The restructuring,
completed in fiscal 1995, contributed to operating profits of $1.4 million in
fiscal 1996 and net earnings of $0.8 million.

Once the restructuring was completed, Selfix began to aggressively pursue a
strategy of disciplined growth through acquisition. This strategy has initially
focused on acquiring companies manufacturing products within the Company's
existing product categories and, in the future, will expand to acquiring
companies that will enable it to enter new related product categories more
rapidly and cost-effectively. Effective January 1, 1997, the Company completed
the acquisition of Tamor and its affiliated product distribution company,
Housewares Sales, Inc. The Company believes that the Tamor Acquisition will
result in significant increases in fiscal 1997 net sales and operating profits.
After giving effect to the Tamor Acquisition, on a pro forma basis in fiscal
1996, the Company's net sales would have almost tripled and its operating profit
would have increased more than six-fold. Selfix, in anticipation of the Tamor
Acquisition and to position itself for future growth,

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<PAGE> 41

established a holding company organizational structure in February, 1997. Home
Products International, Inc. is the new holding company for its direct
wholly-owned operating subsidiaries, Tamor, Selfix and Shutters.

THE TAMOR ACQUISITION

On February 28, 1997, pursuant to a Stock Purchase Agreement among the
Company and the stockholders of Tamor (the "Tamor Shareholders"), and an
Agreement and Plan of Merger among the Company, Housewares Sales, Inc., and the
stockholders of Housewares Sales, Inc., effective as of January 1, 1997,
Housewares was merged into a wholly-owned acquisition subsidiary of the Company
and the Company, through the same acquisition subsidiary, acquired 100% of the
outstanding capital stock of Tamor. The acquisition subsidiary then merged into
Tamor and Tamor became a wholly-owned direct subsidiary of the Company. Tamor, a
privately held company founded in 1947, designs, manufactures and markets
quality plastic housewares products, including storage totes, hangers, and
juvenile organization products.

The Company acquired Tamor for a total purchase price of $41.9 million,
consisting of approximately $27.8 million in cash, $2.4 million of Common Stock
(480,000 shares) and the repayment of $11.7 million of Tamor's long-term debt,
including long-term capital lease obligations. Pursuant to an agreement dated
October 29, 1996, the Company, effective as of January 1, 1997, took operating
and financial control of Tamor, assumed substantially all of the liabilities of
Tamor and retained substantially all of the earnings from Tamor's operations.
Tamor's 1996 EBITDA was $7.8 million. See Note (i) to "Summary Historical and
Pro Forma Financial Data." On a pro forma basis, Tamor's 1996 EBITDA would have
been $10.9 million (calculated based on the $3.1 million pro forma net
adjustment reflecting the estimated cost savings from the Tamor Acquisition).
See Note (b) to "Unaudited Pro Forma Condensed Combined Financial Statements."

The Stock Purchase Agreement contains certain customary representations,
warranties and covenants. The Stock Purchase Agreement requires the Tamor
Shareholders to indemnify the Company and its affiliates for inaccuracies in the
representations and warranties in the Stock Purchase Agreement, and for the
failure of any such party to comply with covenants made in the Stock Purchase
Agreement. Subject to certain exceptions, the indemnification obligations of the
Shareholders with respect to inaccuracies in representations and warranties and
breaches of covenants are subject to a deductible of $75,000 and an aggregate
maximum liability of $10.0 million. The Tamor Shareholders have placed $1.1
million in escrow to (i) secure certain environmental clean up or other remedial
work at Tamor's Leominster, Massachusetts facility and (ii) to secure the
indemnity obligations of the Tamor Shareholders. See "Environmental Matters."
The Company is obligated to place a letter of credit in the amount of $1.5
million in escrow to secure certain tax indemnity obligations to the Tamor
Shareholders.

The Company believes the completion of the Tamor Acquisition is a
significant first step in the Company becoming a major diversified houseware
products company through its strategy of disciplined growth through acquisition.
The Company believes the increased credibility and visibility resulting from the
Tamor Acquisition will position the Company to aggressively pursue its strategy
of disciplined growth through acquisition as smaller suppliers are pressured by
large national retailers to consolidate. See "Risk Factors -- Risks Associated
with the Tamor Acquisition."

INDUSTRY

The Company plans to take advantage of consolidation opportunities in the
housewares industry, a large market comprised of a highly fragmented supplier
base. The majority of the Company's products are classified in the "plastic
storage" segment of the market for housewares products. The home organization
category, which includes the plastic storage segment, has been a strong
performer for retailers who are committing an increasing amount of shelf space
to the storage category. According to an industry source, the plastic storage
market accounted for 50% of total 1996 retail sales of the $1.85 billion home
organization market. The plastic storage market grew 7.0% from 1995 to 1996
(versus 6.0% for the wire storage category) and, according to an industry
source, is expected to remain strong for the foreseeable future as consumers
look for easy, durable, inexpensive ways to solve storage problems. In addition
to the popularity of large-capacity totes, the market is driven by a movement
away from generic products toward items designed to perform specific functions.
In

39
<PAGE> 42

particular, juvenile storage systems, bathroom wire and plastic organizers using
suction cups for mounting and storage and organization products catering to the
home office boom continue to create opportunities for growth in this market.

To improve margins and operating efficiencies, the Company believes large
national retailers are continuing to reduce the number of suppliers of storage
and other housewares products. These retailers are forming key partnerships with
suppliers that can provide complete product lines within product categories,
profitable fast-turning products, timely delivery and merchandising support.
With its numerous product lines and strong relationships with these retailers,
the Company believes it is well positioned to continue to meet their needs.

To provide complete product lines to national retailers, suppliers of
housewares products have begun to consolidate. The Company believes that there
are a number of excellent acquisition candidates because the suppliers of
consumer houseware products are highly fragmented with no single supplier
accounting for more than 5% of the total sales. For example, the National
Housewares Manufacturers Association consists of 2,000 members of which
approximately 25% participate in the Company's product categories. The Company
believes it is well-positioned to pursue its strategy of growth through
acquisition given its access to the capital markets and its increased visibility
from the recent acquisition of Tamor.

BUSINESS STRATEGY

The Company believes that its competitive strengths, combined with the
following strategies, will enable the Company to continue its growth, increase
its profitability and gain market share.

Pursue Additional Strategic Acquisitions. The Company intends to
aggressively pursue a strategy of disciplined growth through acquisition. This
strategy will initially focus on acquiring companies which manufacture products
within the Company's existing product categories and, in the future, will expand
to acquiring companies that will enable the Company to enter new related product
categories more rapidly and cost effectively. By consolidating product lines and
channels of distribution through acquisitions, the Company believes it can
successfully gain market share and increase sales in its key product categories
of plastic storage containers, plastic hangers and bath and shower organization
products.

Leverage Market Share Position. The Company holds a significant market
share in the United States in its key product categories of plastic storage
containers, plastic hangers and bath and shower organization products. Using its
aggressive new product development program, the Company intends to leverage its
market presence, particularly in core product categories such as storage
containers and bath and shower organizers, to increase sales in all of its
product categories.

The Company's strategy is to be a leading supplier to major retailers of
opening price point products in its key product categories. The Company believes
that being the leading supplier of opening price point products in more of its
existing product categories will increase the likelihood that the Company will
be selected by retailers as a preferred single source vendor.

Capitalize on Tamor Acquisition Synergies. The Company believes that it
will be able to capitalize on certain marketing and operational synergies that
exist between Selfix and Tamor. The Tamor Acquisition has enabled the Company to
expand the number of product categories and product lines offered within
existing product categories as well as increase its distribution network and
international sales. Selfix's largest selling product categories, bath and
shower organizers and hooks and home helpers, complement Tamor's largest selling
product categories, storage containers and hangers. Currently, Tamor sells its
products primarily through major discount retailers and has very limited
international sales. Although Selfix also has the major discount retailers as
customers, it also sells more of its products through hardware/home centers and
has increasing international sales. The Tamor Acquisition has also enabled the
Company to use excess manufacturing capacity at the Selfix and Shutters
facilities for production of Tamor products which would otherwise be outsourced
resulting in a more efficient use of fixed costs and increased gross profit
margins.

Continue To Be A Low Cost Producer. The Company remains focused on
continuous cost reduction and productivity improvement in its effort to become
the lowest cost houseware products producer. The Company,

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<PAGE> 43

as a result of the Tamor Acquisition, has five manufacturing facilities using
similar manufacturing processes and injection molding technology as well as
similar raw materials. The Company's objective is to maximize the use of each
operating facility and leverage its purchasing power to achieve certain
economies of scale in the purchase of plastic resin and other materials. Before
the Tamor Acquisition, Tamor was operating over capacity at its manufacturing
facilities which constrained its growth and forced it to outsource a substantial
portion of its production while Selfix's and Shutter's manufacturing facilities
were operating at less than full capacity. Following the Tamor Acquisition, the
Company shifted some of Tamor's outsourced production to the Selfix and Shutters
facilities which enabled the Company to achieve full manufacturing capacity at
all of its facilities.

Introduce High-Value Low-Cost New Products. The Company intends to continue
to leverage its design capabilities and know-how in plastics to create new
products and launch new product lines that respond to consumer preferences and
market trends. The Company intends to continue developing new and innovative
products that are attractively designed with consumer driven features and
benefits. The Company has established a target of achieving at least 10% of
annual net sales from new products introduced in the prior year. By developing
and introducing new products, the Company believes it is well positioned to
maintain, and expand on, its existing allocation of shelf space, to secure
additional shelf space and to be selected as a single-resource vendor by major
discount retailers. The Company also believes that the development and
introduction of new products leads to increased sales. In 1993, Tamor identified
a market opportunity to introduce quality storage containers at opening
price-points. In 1996, storage containers accounted for 48.1% of Tamor's net
sales and were primarily responsible for Tamor's 21% compounded annual growth
rate in net sales from 1993 through 1996. The Company has established minimum
margin levels for all of its new products and actively eliminates
under-performing product lines.

Emphasize Customer Service through Operational and Information System
Infrastructure. The Company has developed and implemented a multi-faceted
customer service program to address the requirements of its major discount
retail, mass market and hardware/home center customers. Through its
state-of-the-art retail information technology, such as
Electronic-Data-Interchange (EDI) order transmission and planogram (shelf space
management techniques) technology, the Company is in a position to immediately
respond to the demands of its retail customers. Because houseware retailers
place considerable value on the customer service provided by their vendors, the
Company anticipates continually updating its customer service program in the
future in order to respond to the needs of its customers.

Expand Merchandising Relationships with Key Customers. The Company
maintains close and interactive relationships with its retailers and
distributors by engaging in a continuing dialogue concerning new product and
merchandising ideas. The Company continually works to strengthen such
relationships and develop relationships with other major retailers and
distributors in order to provide them with timely and innovative solutions to
their merchandising requirements. Key customers of the Company include Wal-Mart,
Kmart, Target, Toys 'R Us, Home Depot, Walgreens and Bed Bath & Beyond. By
offering retail customers a broad line of product offerings, the Company can
create cross-company promotional programs to gain shelf space over smaller
competitors. Additionally, the Company can merchandise specially selected items
from one or more operating companies to win seasonal promotions. For example, a
Tamor storage container can be filled with a selection of Selfix hooks and
bathwares as a special promotion.

Increase Penetration in International Markets. The Company intends to
continue to expand its international market penetration, by emphasizing further
penetration in Western Europe, Mexico and Latin America and by cross-marketing
newly acquired product lines through existing international channels. The
Company, through its international distribution network, currently sells its
products in over 40 countries.

PRODUCTS

Storage Containers. The Company offers a variety of plastic home storage
containers under the "Tamor" brand name. These range in size from shoe boxes to
jumbo (48 gallon) totes, and include specialty seasonal containers. These
products range in retail price from $2.00 to $20.00 and contain a variety of
product attributes, including removable wheels and domed-top lids which increase
storage capacity. Management

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<PAGE> 44

believes these features are key to obtaining and maintaining shelf space and
competing in the market. This is the fastest growing segment for Tamor, and
management believes it holds a significant market share in the plastic storage
container market.

Key products in this category include:

- Jumbo storage containers
- Under-bed storage containers
- Hampers and laundry baskets
- Waste baskets
- Refuse containers

Home/Closet Organization Products. The Company offers a variety of products
for general home organization, under both the "Selfix" and "Tamor" brand names.
This category is comprised primarily of plastic clothes hangers, which
represented 60% of this category's pro forma gross dollar sales in 1996. Due to
the commodity nature of the hanger segment, margins in this category are
inherently lower, while unit volumes are substantially higher. Management
believes that Tamor is among the nation's leading suppliers of plastic clothes
hangers and that its broad product offering gives it a competitive advantage
over other hanger manufacturers.

Key products in this category include:

- Tubular plastic hangers
- Wood hangers
- Acrylic hangers
- Shirt and slack hangers
- Shoe racks

Also included in this category are other plastic organizers, closet and
clothing care products, recycling containers, plastic kitchen organizers and
housewares products, and vinyl coated wire kitchen organizers.

Bath and Shower Products. The Company markets a broad line of value-priced
plastic bath accessories and organizers, primarily under the brand name
"Selfix." In January, 1997, Selfix launched Suction-Lock(R) Organizers, a major
line extension in the Bath and Shower Products category. The Company believes it
is a leading producer of opening price-point plastic bath and shower
accessories.

Key products in this category include:

- Shower caddies
- Toothbrush, tissue and soap holders
- Fogless shave mirrors
- Vanity-top accessories
- Bath and shower shelving
- Towel bars
- Hand-held shower spray

Hooks. The Company markets a complete line of over 150 hooks, primarily
made of plastic, under the brand name "Selfix." The original product marketed by
Selfix was a plastic hook, unique in that it employed a proprietary adhesive
mounting system. Selfix has expanded its offering of these patented,
self-adhesive hooks, and the Company offers a complete line of hooks in the
opening price point segment. Augmenting the plastic hooks are a line of metal
picture hooks, sold to the same customer base.

Key products in this category include:

- Patented self-adhesive hooks
- Closet hooks
- Utility area hooks

Also included in this category are home helpers such as faucet sprays, line
traps, suction clips, magnetic clips and towel grips.

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<PAGE> 45

Juvenile Products. The Company, through Selfix and Tamor, markets a line of
quality children's organization products, under the brand names Tidy Kids(R),
Kidtivity(R) and Lil' Helpers(TM). These include closet extenders, hook racks,
storage cubes, clothes hangers, and under-the-bed storage trolleys. These
products are sold in the juvenile or housewares departments of its largest
retail customers, and also through specialty juvenile retailers like Toys 'R Us
and Baby Superstores. The Company believes it created a market niche of
children's organization products in the development and successful sales of its
Tidy Kids(R) and Lil Helpers(TM) products and that it offers the premier
children's organization program in the industry. The Company also markets child
safety products under the licensed Fisher-Price(R) brand, which are sold in the
same channels as the Company's other juvenile products.

Key products in this category include:

- Under-bed storage containers
- Toy chests
- Shoe racks
- General storage containers
- Wall racks
- Closet organizers
- Homework organizers

Home Improvement Products. Through Shutters, the Company markets a unique
line of plastic exterior shutters to the construction trades and consumer home
improvement catalogs. Because of a patented design, the shutters are assembled
from components, rather than formed in a single piece. This allows the shutters
to be configured in the largest variety of sizes and colors in the industry.
Shutters markets the shutters in component form to remodeling distributors, and
in finished form to home center retailers. In both cases, the key competitive
advantage is customization of size and color, and quick turnaround service. In
early 1997, Shutters entered a new market segment with "fixed-size" shutters,
utilizing existing trade channels.

Key products in this category include:

- Plastic shutters
- Wood shutters
- Exterior housing trim
- Exterior millwork

Pro Forma Sales by Product Category

The following table sets forth the amounts and percentages of the Company's
pro forma sales for its product categories for the periods indicated.

<TABLE>
<CAPTION>
THIRTEEN
YEAR ENDED WEEKS ENDED
DECEMBER 28, 1996 MARCH 29, 1997
----------------- --------------
<S> <C> <C>
Storage Containers.......................................... 32% 35%
Home/Closet Organization Products........................... 33 35
Bath and Shower Products.................................... 13 11
Hooks and Home Helpers...................................... 5 5
Juvenile Products........................................... 9 9
--- ---
Housewares Products....................................... 92 95
Home Improvement Products................................. 8 5
--- ---
Total Gross Sales...................................... 100% 100%
=== ===
</TABLE>

MARKETING AND DISTRIBUTION

The Company's housewares products are sold through national and regional
discount, variety, supermarket, drug, hardware/home center, and specialty
stores. Selfix and Tamor both sell directly to major retail

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<PAGE> 46

customers through internal sales management personnel. Selfix and Tamor also
sell to approximately 3,000 other customers, through a network of approximately
50 independent manufacturers' representatives. During fiscal 1996, including
Tamor on a pro forma basis, Wal-Mart/Sam's Club, Kmart and Target represented
approximately 21%, 8% and 5% respectively, of the Company's net sales. During
fiscal 1996, no other customer represented 5% or more of the net sales. See
"Risk Factors -- Customer Concentration/Consolidating Customer Base."

Key channels include the following:

<TABLE>
<CAPTION>
MASS MERCHANT HOME/HARDWARE FOOD/DRUG STORES JUVENILE SPECIALTY RETAIL
------------- ------------- ---------------- -------- ----------------
<C> <C> <C> <C> <C>
Wal-Mart/ Home Depot Walgreens Toys 'R Us Bed Bath & Beyond
Sam's Club Lowes Kroger Baby Superstores Linens 'n Things
Kmart Builders Square Rite-Aid
Target Ace Hardware Thrifty/Payless
True Value
</TABLE>

The Company's primary marketing strategy is to design innovative products
with consumer features and benefits, and focus on marketing the product to its
retail selling partners. Management believes that one of its competitive
advantages is prompt and reliable product delivery of value-priced high-volume
products, allowing customers to maintain minimal inventories. The Company
believes that the customer specific merchandising programs it offers enable
retailers to achieve a higher return on the Company's products than the products
of many of its competitors. To that end, both Selfix and Tamor offer customers a
variety of retail support services, including customized merchandise
planogramming, small shipping packs, point-of-purchase displays, EDI, and
just-in-time (JIT) product delivery designed to continue their growth with
volume retailers.

Shutters markets its products in component form to remodeling distributors,
and in finished form to home center retailers.

Including Tamor on a pro forma basis, the Company's 1996 sales outside the
United States accounted for 5% of its total net sales primarily in Canada,
Australia, Argentina, Brazil, United Kingdom and Mexico.

PRODUCT RESEARCH AND DEVELOPMENT

At May 3, 1997, the Company employed ten people in Product Research and
Development. The Company uses computer-aided design (CAD) systems to enhance its
product development efforts. New products have been the critical stimulus to the
Company's sales growth. The Company has established a target of achieving at
least 10% of annual net sales from new products introduced in the prior year.
Although the historical accounting records do not separately present research
and development expenses, the Company estimates that for 1994, 1995 and 1996
expenses associated with research and development were $436,000, $501,000 and
$330,000, respectively.

MANAGEMENT INFORMATION SYSTEMS

The Company's retail information technology allows it to be online with any
customer who requires EDI (electronic data interchange). With the Company's
largest customers, Kmart, Wal-Mart, Target and Toys 'R Us, all orders are
transmitted via EDI. Additionally, these customers are on VMR (vendor management
replenishment) and E-Mail. Finally, with Kmart and Wal-Mart, the Company's POS
(point-of-sale) technology allows it to access daily sales activity directly
from retail cash register point of sale information.

Internally, the manufacturing process is guided by a state-of-the art MRP
(manufacturing resource planning) system. This computerized planning
infrastructure allows the Company to plan its manufacturing, purchasing and
labor resources and make revisions on a daily basis in reaction to ever-changing
sales activity.

COMPETITION

The market for the Company's products is highly competitive. The Company
believes it is recognized as a strong competitor in the marketplace based on its
innovative yet value-priced products and reliable, timely

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<PAGE> 47

volume delivery. However, the Company competes with a significant number of
smaller privately held companies and a few public companies, some of which have
greater name/brand recognition, larger customer bases and/or significantly
greater financial resources than the Company, such as Rubbermaid Inc. There are
no substantial regulatory or other barriers to entry of new competitors into the
Company's industries. A supplier that is able to maintain, or increase, the
amount of retail space allocated to its product may gain a competitive advantage
in that product market. There can be no assurance that the Company will be able
to compete successfully against current and future sources of competition or
that the current and future competitive pressures faced by the Company will not
adversely affect its profitability or financial performance.

MANUFACTURING AND RAW MATERIALS

The Company manufactures the majority of its products at its five
manufacturing facilities using injection molding and extrusion processes. The
Company's production processes utilize fully automated raw material handling
systems and high speed packaging equipment. Many of the injection molding and
extrusion operations are also automated and are supported by incentive based,
manually performed secondary operations.

The Company works closely with subcontractors which use the Company's molds
to manufacture, assemble and package some of its products. By outsourcing a
portion of manufacturing to such subcontractors, the Company has been able to
devote its resources to product development and marketing while maintaining
control over production quality. As a result of the Tamor Acquisition, the
Company has shifted some of Tamor's outsourced manufacturing to Company
facilities.

The primary raw material used in the Company's plastic injection molding
operations is plastic resin, primarily polypropylene. Plastic resin is a
commodity with pricing parameters tied to supply and demand characteristics
beyond the Company's control. As a result of the Tamor Acquisition, the Company
is now a significant user of plastic resin. In total, the Company used 75.4
million pounds of plastic resin on a pro forma basis in 1996. Because of the
large amount of plastic resin used and the relative inability to pass cost
increases along to its retail customers, the Company is highly susceptible to
changes in plastic resin pricing. For fiscal 1996, the cost of resin on a pro
forma basis accounted for approximately 34% of the Company's total cost of goods
sold and 24% of the Company's net sales. See "Risk Factors -- Increases in Cost
of Plastic Resin."

Plastic resin prices can vary widely from year to year and are very
difficult to predict beyond a few months. Tamor's plastic resin cost history is
illustrative of the swings that can occur in resin pricing. Tamor, which uses
about 90% of the Company's resin requirements, experienced average price
increases from 1993 to 1994 of 26%, from 1994 to 1995 of another 25% but then
experienced a price decrease from 1995 to 1996 of 16%. See "Risk Factors --
Increases in Cost of Plastic Resin."

Due to the nature of its products, the Company is able to use off-prime
grades of resin. As a result, it does not purchase its plastic resin directly
from manufacturers but rather is able to buy through brokers in a secondary
market. This enables the Company to buy at a discount. Buying off-prime material
at a discount gives the Company a cost advantage over some of its larger
competitors but does not alleviate the pricing risks inherent with buying a
commodity raw material. Plastic resin is in demand by a number of different
industries, many of which are quite different from the Company's primary
housewares business. For example, the automobile and housing industries are very
large users of plastic resin. Demand changes in the automobile industry or the
number of new housing starts can have an impact on plastic resin pricing. See
"Risk Factors -- Increases in Cost of Plastic Resin."

There is no futures market for plastic resin, and as a result, the Company
cannot lock in its costs without purchasing significant quantities beyond its
immediate manufacturing needs. The Company has no long-term supply contracts for
the purchase of resin. However, the Company generally maintains a 60-day supply
of resin.

45
<PAGE> 48

EMPLOYEES

As of May 3, 1997, the Company employed 514 persons in the United States.
The Company believes its relationship with its employees is good. Approximately
90 are hourly employees at its Leominster, Massachusetts facility, covered by a
collective bargaining agreement which expires in March, 1999; 153 are hourly
employees at its Chicago, Illinois facilities, covered by a collective
bargaining agreement which expires in January, 1998. See "Risk Factors -- Labor
Relations."

FACILITIES

At May 3, 1997, the Company maintained facilities with an aggregate of
approximately 877,000 square feet of space for its operations. The Company
considers all of its facilities to be in good operating condition. Currently,
all of the Company's manufacturing facilities are operating at or near
approximately full capacity. The following table summarizes the principal
physical properties, both owned and leased, used by the Company in its
operations:

<TABLE>
<CAPTION>
APPROXIMATE
SQUARE LEASE
LOCATION USE FOOTAGE OWNED/LEASED EXPIRATION DATE
-------- --- ----------- ------------ ---------------
<S> <C> <C> <C> <C>
TAMOR
Leominster, MA Manufacturing 100,000 Owned
Louisiana, MO Manufacturing/Distribution 180,000 Leased February 9, 1999(1)
Thomasville, GA Manufacturing/Distribution 45,000 Owned
Fitchburg, MA Distribution 220,000 Leased March 31, 1998
SELFIX
Chicago, IL Manufacturing/Distribution 186,000 Leased July, 2010
Chicago, IL Storage/Distribution 83,505 Leased September, 1997
SHUTTERS
Hebron, IL Manufacturing/Distribution 62,500 Owned
</TABLE>

- -------------------------
(1) The Company has a commitment to construct an addition to this facility at an
estimated cost of $2,400,000. The Company has the option through September,
1998 to purchase the building for $1,500,000.

During 1997, the Company plans to make capital expenditures in the amount
of up to $8.5 million to expand Tamor's manufacturing facility in Missouri and
acquire new machinery and molds for all of its facilities. The Company's
manufacturing facilities are currently being used at or near full capacity, and,
as a result, during the first quarter of fiscal 1997, the Company sent
approximately 25-30% of its production to various other manufacturers. See
"Business -- Manufacturing and Raw Materials."

Tamor's and Selfix's backlog at May 3, 1997 was approximately one month's
sales and one week's sales, respectively. Consequently, the Company does not
believe that backlog is indicative of the Company's results of operations or
prospects.

PATENTS, TRADEMARKS AND LICENSES

Selfix, Tamor and Shutters own a number of trademarks and approximately 100
United States mechanical and design patents relating to various products and
manufacturing processes. The Company believes that in the aggregate its patents
enhance its business, in part by discouraging competitors from adopting patented
features of its products; however, no single patent, trademark or license is
material to the business of the Company.

Through the acquisition of Mericon Child Safety Products in 1995, Selfix
has a licensing agreement with Fisher-Price, Inc. of East Aurora, N.Y. The
agreement requires the Company to pay a percentage-based royalty to
Fisher-Price, a minimum of $100,000 for calendar year 1997, for sales by Selfix
of Fisher-Price

46
<PAGE> 49

brand products, which are designed, manufactured and marketed by Selfix. The
agreement, which calls for certain conditions to be met by both parties, is in
effect through December 31, 1997.

ENVIRONMENTAL MATTERS

An environmental report obtained in connection with the Tamor Acquisition
indicated that certain remedial work relating to ground contamination of Tamor's
Leominster, Massachusetts facility was required. The former shareholders of
Tamor escrowed $1.1 million to pay for, among other things, any required
remediation at the Leominster, Massachusetts facility. The Company believes that
the remediation can be completed for less than the amount of the escrow.

Except as described above, the Company believes that its properties and
facilities are in compliance, in all material respects, with applicable Federal,
state and local laws, ordinances and regulations concerning the presence of
hazardous substances and that continued compliance with such laws, ordinances
and regulations will not have a material effect on the Company's capital
expenditures, earnings or competitive position.

No assurances can be given that (i) future laws, ordinances or regulations
will not require or impose any material expenditures or liabilities in
connection with any environmental conditions on the Company's facilities, (ii)
the current environmental condition of the Company's properties will not be
affected by the condition of properties in the vicinity of the Company's
facilities or by third parties unrelated to the Company and (iii) prior owners
of any of the Company's properties and facilities did not create environmental
problems of which the Company is not aware. See "Risk Factors -- Environmental
Compliance."

LEGAL PROCEEDINGS

The Company is not subject to or involved in, nor is the Company aware of,
any pending or threatened litigation which could be material to the financial
position or results of operations of the Company.

47
<PAGE> 50

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors, executive officers and certain other key employees of the
Company, and their respective ages and principal positions as of March 29, 1997,
are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James R. Tennant..................... 44 Chairman of the Board, Chief Executive Officer of Home
Products and Chief Executive Officer of Selfix
James E. Winslow..................... 42 Executive Vice President, Chief Financial Officer and
Secretary of Home Products and Executive Vice President
of Selfix
Leonard J. Tocci..................... 55 Chief Executive Officer of Tamor
Dennis M. Gerrard.................... 44 President of Tamor
Jeffrey R. Dolan..................... 40 Senior Vice President -- Sales and Marketing of Selfix
David E. Limanni..................... 48 Vice President -- Manufacturing of Tamor
Peter L. Graves...................... 40 Vice President -- Product Marketing of Selfix
Robert Holz.......................... 48 Vice President -- International Sales of Selfix
Richard M. Tocci..................... 48 Vice President -- Operations of Tamor
Michael J. Ricard.................... 57 Vice President -- General Manager of Shutters
Charles R. Campbell(1)(2)............ 57 Director
Marshall Ragir(2).................... 52 Director
Jeffrey C. Rubenstein(1)............. 55 Director
Daniel B. Shure(2)................... 38 Director
Joel D. Spungin...................... 59 Director
</TABLE>

- -------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee

James R. Tennant joined the Company as Chairman of the Board and Chief
Executive Officer in April, 1994. Mr. Tennant was elected a Director of the
Company in December, 1992, and was a member of the Company's Compensation
Committee until April, 1994. From 1982 to 1994, Mr. Tennant was President of
Foote, Cone & Belding/Direct, an international marketing services company. From
1979 to 1982, he was employed by Young and Rubicam, an advertising agency, his
final position being Senior Vice President.

James E. Winslow was named Executive Vice President and Chief Financial
Officer of the Company in October, 1996. Mr. Winslow joined the Company as
Senior Vice President and Chief Financial Officer in November, 1994. In 1994,
Mr. Winslow was Executive Vice President and Chief Financial Officer of Stella
Foods, Inc. From 1983 to 1994, Mr. Winslow was employed by Wilson Sporting Goods
Co. in various capacities, his final position being Vice President and Chief
Financial Officer.

Leonard J. Tocci joined the Company as Chief Executive Officer of Tamor in
February, 1997. From 1988 until 1997, Mr. Tocci was President of Tamor. From
1977 to 1986, Mr. Tocci owned and operated American Hanger, Inc. Leonard J.
Tocci is the brother of Richard M. Tocci.

Dennis M. Gerrard joined the Company as President of Tamor in February,
1997. From 1995 to 1996, Mr. Gerrard was Vice President of Marketing -- Plastics
of EKCO Housewares. From 1993 to 1995, he was Vice President of Sales and
Marketing for Tamor. From 1985 to 1993, Mr. Gerrard was employed by Whitney
Productions, Inc., a supplier of corrugated storage products, with his final
position being President.

Jeffrey R. Dolan joined the Company as Senior Vice President -- Sales of
Selfix in August, 1995. In 1996, Mr. Dolan was named Senior Vice President --
Sales and Marketing of Selfix. From 1982 to 1995,

48
<PAGE> 51

Mr. Dolan was employed by Rubbermaid, Inc., in various sales management
capacities, his final position being Vice President National Accounts.

David E. Limanni joined the Company as Vice President -- Manufacturing of
Tamor in February, 1997. From 1994 to 1997, Mr. Limanni was Director of
Operations Midwest region for Tamor. From 1993 to 1994, Mr. Limanni was
Operations Manager -- West Coast for Syroco, Inc. From 1991 to 1993, Mr. Limanni
was General Manager of Alpha Plastics. From 1989 to 1991, Mr. Limanni was
General Manager of Syroco, Inc. From 1983 to 1989, Mr. Limanni was Vice
President of Operations for Beacon Plastics.

Peter L. Graves has been Vice President -- Product Marketing of Selfix
since October, 1994. Mr. Graves joined the Company in 1981 as a copywriter and
has served in various sales and marketing positions in the Company, with his
previous position in the Company being Manager of Sales and Marketing
Administration of Selfix.

Robert Holz has been Vice President -- International Sales of Selfix since
1996. Mr. Holz joined the Company as Director of International Sales in 1995.
From 1993 to 1995, he was Director of Sales for Sunbeam/Oster International.
From 1987 to 1993, Mr. Holz was Sales Manager for Frigidaire. From 1984 to 1987,
Mr. Holz was Sales Manager for H.R. Johnson.

Richard M. Tocci joined the Company as Vice President -- Operations of
Tamor in February, 1997. From 1988 to 1997, Mr. R. M. Tocci was Treasurer and
Vice President -- Operations of Tamor. From 1977 to 1987, he was employed by
American Hanger, Inc., with his final position being Vice President of
Operations. Richard M. Tocci is the brother of Leonard J. Tocci.

Michael J. Ricard has been Vice President and General Manager of Shutters
since September, 1996. From October, 1995, to September, 1996, he was Vice
President -- Sales of Shutters. Mr. Ricard joined the Company in 1988 as Product
Development Manager of Selfix. He became National Sales Manager of Shutters in
1989. From 1986 to 1988, he was employed by Cedco as General Manager. From 1983
to 1986, he was Vice President -- Sales of Superior Plastics.

Charles R. Campbell has been a Director of the Company since September,
1994. Mr. Campbell has been President of C. R. Campbell & Associates, a
management consulting firm, since January, 1995. From 1985 to 1995, Mr. Campbell
was Senior Vice President, Chief Financial and Administrative Officer of Federal
Signal Corporation, a diversified manufacturer of capital goods. From 1982 to
1985, he was Vice President and Chief Financial Officer of the Masonite
Corporation, a manufacturer of building products. Mr. Campbell is a member of
the Compensation Committee and Audit Committee.

Marshall Ragir has been a Director of the Company since July, 1995. Since
1991, Mr. Ragir has been President and Chief Executive Officer of Know Business
Inc., a venture capital and investment company. Mr. Ragir is a member of the
Compensation Committee. Mr. Ragir is a director of several charitable
foundations and non-profit agencies.

Jeffrey C. Rubenstein has been a director of the Company since September,
1986. Since 1991, Mr. Rubenstein has been a partner in the law firm of Much
Shelist Freed Denenberg Ament Bell & Rubenstein, P.C., an Illinois professional
corporation, which is counsel to the Company. From January, 1989 until June,
1991, Mr. Rubenstein was of counsel to the law firm of Sachnoff & Weaver, Ltd.,
an Illinois professional corporation, and of which he had been a principal prior
to July, 1988. From March, 1988 until January, 1989, Mr. Rubenstein was
President of Medical Management of America, Inc. ("MMA"), a management services
company for health care providers. Mr. Rubenstein is a member of the Company's
Audit Committee. Mr. Rubenstein is a director of Miller Building Systems, Inc.,
Vita Food Products, Inc. and a number of privately held firms. Mr. Rubenstein is
the executor of the estate of Norma L. Ragir (the "Ragir Estate") and in such
capacity exercises voting and investment power with respect to the shares of
Common Stock beneficially owned by the Ragir Estate. Mr. Rubenstein is
co-trustee of the MJR/NLR Gift Trust -- Judith Ragir Separate Trust, the MJR/NLR
Gift Trust -- Robert Ragir Separate Trust and the MJR/NLR Gift Trust -- Marshall
Ragir Separate Trust (collectively, the "Ragir Gift Trusts") and, in such
capacities, exercises shared voting and investment power with respect to the
shares of Common Stock beneficially owned by the Ragir Gift Trusts. Mr.
Rubenstein is also co-trustee of the Meyer J. Ragir Family Irrevocable Trust --

49
<PAGE> 52

Judith Ragir Separate Trust and the Meyer J. Ragir Family Irrevocable Trust --
Marshall Ragir Separate Trust (collectively, the "Ragir Family Trusts") and, in
such capacities, exercises shared voting and investment power with respect to
the shares of Common Stock beneficially owned by the Ragir Family Trusts. The
Ragir Gift Trusts and the Ragir Family Trusts Estates are collectively referred
to as the "Ragir Trusts." Mr. Rubenstein, as executor of the Ragir Estate and
co-trustee of the Ragir Trusts, exercises either sole or shared voting and
investment power with respect to 2,083,358 shares of Common Stock or 48% of the
outstanding shares of Common Stock as of March 26, 1997.

Daniel B. Shure has been a director of the Company since December, 1994.
Since 1988, Mr. Shure has been President and Chief Executive Officer of
Strombecker Corporation, an international toy manufacturer and distributor. From
1987 to 1988, he was Vice President of Giftco, Inc., a wholesaler and
distributor of non-durable products. From 1986 to 1987, Mr. Shure was Executive
Vice President of North American Bear Company, a toy manufacturer. Mr. Shure is
a member of the Compensation Committee. He is also a director of a number of
privately held firms.

Joel D. Spungin has been director of the Company since September, 1996. Mr.
Spungin is managing Partner of DMS Enterprises, L.P., a consulting and
management advisory partnership. Mr. Spungin was formerly Chairman and Chief
Executive Officer of United Stationers and since 1994, he has been Chairman
Emeritus of United Stationers, Inc. Mr. Spungin is also a director of AAR
Corporation and a number of privately-held firms.

Officers serve at the discretion of the Board of Directors, except as
provided in the employment agreements of Mr. Tennant, Mr. Leonard Tocci and Mr.
Richard Tocci. See "Management -- Employment Agreements."

The Company's Bylaws provide that the Board of Directors of the Company
shall consist of six directors. The number of authorized directors may be
increased or decreased from time to time by either the Board of Directors or the
affirmative vote of a majority of the Company's shareholders. Directors are
elected annually to serve until the next annual meeting of shareholders and
until their successors are elected and qualified. Executive officers are
appointed annually by the Board of Directors and serve at the Board's
discretion, subject to any written employment agreements with the Company. See
"Management -- Employment Agreements."

BOARD COMMITTEES

The Audit Committee is comprised of directors Charles R. Campbell and
Jeffrey C. Rubenstein. The Audit Committee oversees the activities of the
Company's independent auditors. The Compensation Committee is comprised of
directors Charles R. Campbell, Marshall Ragir and Daniel B. Shure. This
Committee reviews and makes recommendations to the Board of Directors with
regard to the salaries, incentive compensation and related benefits of corporate
officers and other employees.

COMPENSATION OF DIRECTORS

Directors who are employees of the Company are not separately compensated
for serving on the Board of Directors. Non-employee directors are paid an annual
retainer of $2,500. In addition, they receive a fee of $1,750 for each board
meeting attended. Non-employee directors who are members of board committees
also receive $500 for each committee meeting attended. During 1996, one
non-employee director was granted options to purchase 5,000 shares of Common
Stock at an exercise price of $4.625 per share, the fair market value as defined
in the 1994 Stock Option Plan, on the date of grant.

EXECUTIVE COMPENSATION

The following table shows certain information concerning the compensation
of the Chief Executive Officer and each other executive officer of the Company
where aggregate compensation for services in all capacities rendered during the
year ended December 28, 1996, exceeded $100,000 (collectively the "NAMED
EXECUTIVE OFFICERS").

50
<PAGE> 53

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
ANNUAL COMPENSATION AWARDS
-------------------- ------------------
SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) UNDERLYING OPTIONS COMPENSATION(1)
--------------------------- ---- ------ -------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
James R. Tennant......................... 1996 $250,000 $125,000 200,000 $13,161
Chairman of the Board and 1995 250,000 100,000 350,000(2) 4,243
Chief Executive Officer of 1994 175,769 0 350,000 0
Home Products and Chief
Executive Officer of Selfix, Inc.
James E. Winslow......................... 1996 173,262 60,000 25,000 10,576
Executive Vice President, Chief 1995 170,000 118,000(3) 60,000(2) 4,141
Financial Officer and Secretary of Home
Products and Executive Vice President
of Selfix, Inc.
Jeffrey R. Dolan......................... 1996 131,292 20,000 0 3,443
Senior Vice President -- Sales and
Marketing of Selfix, Inc.
Peter L. Graves.......................... 1996 102,865 15,000 6,000 8,298
Vice President -- Product Marketing 1995 102,865 34,254 10,000(4) 7,141
of Selfix, Inc.
Michael J. Ricard........................ 1996 104,120 12,000 0 6,375
Vice President -- General Manager 1995 100,732 32,786 20,000 6,570
of Shutters, Inc.
</TABLE>

- -------------------------
(1) Reflects amounts contributed by the Company to the Company's Profit Sharing
/401(k) Plan and Trust (including elective 401(k) deferrals).

(2) Reflects replacement options granted in fiscal 1995 to these executive
officers. During 1995, the Company's Board of Directors cancelled options to
purchase 460,000 shares of Common Stock held by various members of senior
management at exercise prices ranging from $7.50 to $12.00 per share and
issued replacement options to purchase the same number of shares of Common
Stock at prices ranging from $6.00 to $8.00 per share which exceeded the
fair market value, as defined in the 1994 Stock Option Plan, on the date of
grant. The options were cancelled and repriced to provide a more realistic
and attainable incentive based on the market price of the Common Stock
($4.25) on the date of grant. No other options were granted to these
executive officers in fiscal 1995.

(3) Includes a $50,000 contingent payout pursuant to Mr. Winslow's continued
employment by the Company.

(4) Reflects replacement options granted in fiscal 1995 to replace cancelled
options that were also granted in fiscal 1995.

51
<PAGE> 54

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table provides information on option exercises in fiscal 1996
by the Named Executive Officers and the value of such officers' unexercised
options at fiscal 1996 year-end.

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN
OPTIONS AT THE MONEY OPTIONS AT
SHARES FISCAL YEAR-END(1) FISCAL YEAR-END(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Tennant............. -0- $-0- 5,000 550,000 $10,625 $1,318,750
James E. Winslow............. -0- -0- -0- 85,100 -0- 192,313
Jeffrey R. Dolan............. -0- -0- -0- 30,100 -0- 49,138
Peter L. Graves.............. -0- -0- 1,629 16,100 6,840 40,689
Michael J. Ricard............ -0- -0- 1,117 20,100 2,779 32,938
</TABLE>

- -------------------------
(1) Future exercisability is subject to vesting and the optionee remaining
employed by the Company.

(2) Value is calculated by subtracting the exercise price from the assumed fair
market value of the securities underlying the option at fiscal year-end and
multiplying the result by the number of in-the-money options held. There is
no guarantee that if and when these options are exercised they will have
this value. Fair market value was calculated based on the last reported sale
price per share of the Common Stock as reported on The NASDAQ National
Market(SM) on December 28, 1996 ($8.625).

OPTION GRANTS IN LAST FISCAL YEAR

The following table provides information on option grants in fiscal 1996 to
the Named Executive Officers.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED(1) IN YEAR(3) ($/SHARE) DATE 5% 10%
---- ---------- ---------- --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
James R. Tennant............... 200,000(4) 80.3% $5.00 12/31/99 $70,803 $231,175
James E. Winslow............... 10,000 4.0% 4.625 02/08/06 29,086 73,711
15,000 6.0% 5.00 11/07/06 86,871 182,753
Jeffrey R. Dolan............... -- -- -- -- -- --
Peter L. Graves................ 6,000 2.4% 4.625 02/08/06 17,452 44,226
Michael J. Ricard.............. -- -- -- -- -- --
</TABLE>

- -------------------------
(1) All options (with the exception of options granted to Mr. Tennant) have a
ten year term and become exercisable in equal annual increments over a three
year vesting period beginning three years from the date of grant.

(2) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the option term. These numbers are
based on the requirements of the Securities and Exchange Commission and do
not reflect the Company's estimate of future stock price performance.

(3) The Company granted options representing 231,000 shares in 1996 to the
persons named in the table above. The Company granted options representing
17,900 shares in 1996 to persons other than those named in the table above.

(4) The options became exercisable in equal annual increments over a three year
vesting period beginning January 1, 1997.

52
<PAGE> 55

EMPLOYMENT AGREEMENTS

James R. Tennant is employed as Chairman of the Board and Chief Executive
Officer of the Company pursuant to an employment agreement dated as of January
1, 1997. Such employment agreement expires on December 31, 1999, with automatic
one year extensions thereafter unless cancelled by either party. The employment
agreement provides for an annual base salary of $275,000. Mr. Tennant is also
entitled to receive a discretionary bonus, based on the Company's financial
performance. If the Company does not renew Mr. Tennant's employment agreement
for any renewal year after December 31, 1999, Mr. Tennant will be entitled to
receive a severance payment of $250,000, payable in twelve monthly installments,
and may exercise options which have vested prior to such date. If Mr. Tennant's
employment is terminated after a change in control of the Company, Mr. Tennant
is entitled to receive a $500,000 severance payment and all of his stock options
will immediately vest. In the event that the Company is sold for a price of
$5.50 per share or more in a stock sale or asset sale and Mr. Tennant is
employed by the Company on the closing of any such event, Mr. Tennant will be
entitled, at his option, to (i) receive a $1,000,000 payment from the Company or
(ii) exercise all stock options he holds as if they were then available and
vested. Mr. Tennant's employment agreement also restated the terms of the
350,000 replacement stock options previously granted by the Board of Directors.
These replacement options were granted at prices ranging from $6.00 to $8.00 and
expire December 31, 1999. The expiration date of these options can be extended
for a period of five years if the trading price of the Common Stock exceeds
$10.00 per share for the entire month of December, 1999. During 1995, the
Company's Board of Directors cancelled options to purchase 350,000 shares of
Common Stock held by Mr. Tennant at exercise prices ranging from $7.50 to $12.00
per share and issued replacement options to purchase the same number of shares
of Common Stock at prices ranging from $6.00 to $8.00 per share which exceeded
the fair market value, as defined in the 1994 Stock Option Plan, on the date of
grant. The options were cancelled and repriced to provide a more realistic and
attainable incentive based on the market price of the Common Stock ($4.25) on
the date of grant. He was also granted additional stock options for 200,000
shares at a price of $5.00 per share, which vest in equal increments over a
three year period. These options may be extended until April 30, 2005, under the
same conditions as the other options. The principal terms of Mr. Tennant's
employment agreement, including the grant of additional stock options at an
exercise price of $5.00 per share, were included in an agreement between the
Company and Mr. Tennant dated September 19, 1996. The last reported sale price
of the Company's Common Stock on The Nasdaq National Market(SM) on September 19,
1996 was $5.00 per share.

Leonard J. Tocci is employed as Chief Executive Officer of Tamor pursuant
to an employment agreement, which commenced February 26, 1997, and expires on
February 26, 2000, with automatic one year extensions thereafter unless canceled
by either party. The employment agreement provides for an annual base salary of
$300,000. Mr. Tocci is also entitled to receive a discretionary bonus, based on
Tamor's financial performance. In addition, Mr. Tocci is entitled to receive
from Tamor an amount equal to 100% of his base salary then in effect and
exercise all stock options he holds as if they were then available and vested,
if a change in control of Company ownership, as defined in the employment
agreement, occurs and Mr. Tocci's full-time employment with Tamor terminates
within 180 days after such change in control. Pursuant to his employment
agreement, Mr. Tocci was also granted options to purchase 50,000 shares of
Common Stock at an exercise price of $4.375 per share which vest over a three
year period commencing February 26, 1998 and expire on December 31, 2003. The
principal terms of Mr. Tocci's employment agreement, including the grant of
stock options at an exercise price of $4.375 per share, were included in the
agreement between the Company and Tamor dated October 29, 1996. The last
reported sale price of the Company's Common Stock on The Nasdaq National
Market(SM) on October 29, 1996 was $4.375 per share. See "Risk Factors --
Dependence on Key Personnel."

STOCK OPTION PLANS

The Company's 1994 Stock Option Plan (the "1994 PLAN") was adopted by the
Board of Directors in April, 1994, and approved by the shareholders in July,
1994. The Company also has a 1987 Stock Option Plan and a 1991 Stock Option
Plan, the terms of which are substantially similar to the 1994 Stock Option Plan
(the 1987, 1991 and 1994 Stock Option Plans are collectively referred to as the
"STOCK OPTION PLANS"). The

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<PAGE> 56

purpose of the Stock Option Plans are to attract and retain qualified personnel,
to provide additional incentives to employees of the Company and to promote the
success of the Company's business. A total of 1,475,000 shares of Common Stock
have been reserved for issuance under the Stock Option Plans, of which, as of
June 4, 1997, 118,002 have been issued and 1,356,998 remain in reserve. The
Stock Option Plans provide for the granting to key employees and key
non-employees of incentive stock options and/or nonstatutory stock options. As
of June 4, 1997, key employees and certain key nonemployees have been granted
options to purchase up to 965,017 shares of Common Stock under the Stock Option
Plans, as amended.

The Stock Option Plans are administered by either the Board of Directors or
a committee of the Board of Directors ("ISO COMMITTEE"), whose members are not
entitled to receive options. The ISO Committee has complete discretion to select
the optionees, the exercise price and payment terms and to establish the terms
and conditions of each option, subject to the provisions of the Stock Option
Plans and applicable laws and regulations. The ISO Committee also has the
authority to interpret the Stock Option Plans. Options granted may or may not be
"incentive stock options" as defined by the Internal Revenue Code of 1986
("QUALIFIED INCENTIVE OPTIONS") depending upon the terms established by the ISO
Committee at the time of grant. The exercise price of incentive stock options
granted under the Stock Option Plans is determined by the Board of Directors at
the time of grant, but in the case of Qualified Incentive Options, the exercise
price may not be less than 100% of the fair market value of the Common Stock
subject to the option on the date of grant (110% if the optionee owns more than
10% of the Company's Common Stock). The exercise price may be paid in any form
of consideration if authorized by the Board of Directors in connection with the
grant of an option. Qualified Incentive Options may not be granted for a term
greater than 10 years (five years if the optionee owns more than 10% of the
Company's Common Stock).

The Stock Option Plans may be amended at any time by the Board of
Directors, although certain amendments would require stockholder approval. The
Board of Directors may terminate any of the Stock Option Plans at any time.

1995 EMPLOYEE STOCK PURCHASE PLAN

The Company's 1995 Employee Stock Purchase Plan (the "STOCK PURCHASE PLAN")
was adopted by the Board of Directors in December, 1994, and was approved by the
shareholders in July, 1995. A total of 200,000 shares of Common Stock has been
authorized for issuance to eligible employees under the Stock Purchase Plan. As
of June 4, 1997, 29,430 shares have been purchased under the Stock Purchase
Plan. The Stock Purchase Plan, which is intended to qualify under Section 423 of
the Internal Revenue Code of 1986, as amended (the "CODE"), is administered by
the 1995 Employee Stock Purchase Plan Committee. Members of the Committee are
selected by the Board of Directors and cannot satisfy the eligibility
requirements to participate in the Stock Purchase Plan. Under the Stock Purchase
Plan, an employee shall be entitled to elect to have between 2% and 12% of his
salary withheld from each paycheck. Any employee who has been continuously in
the employment of the Company for six months and is not a member of the union
collective bargaining agreement will be eligible to participate in the Stock
Purchase Plan; provided, however, an employee who owns more than 5% of the
outstanding Common Stock is not eligible to participate in the Stock Purchase
Plan. The first purchase period under the Stock Purchase Plan commenced on July
1, 1995, and continued for the six months immediately following such date. New
six-month purchasing periods commence thereafter on December 31 and July 1
(individually, a "Purchase Date" and collectively, the "Purchase Dates"). In the
event of a change in control of the Company, including a merger or sale of
substantially all of the Company's assets, where the Company survives, the
employee may receive the number of shares for which he would have been entitled
to receive had he purchased the shares before the event. If the Company is not
the survivor, the employee shall be entitled to receive the number of shares
which he would have been entitled to pursuant to the terms of the merger, if he
had held such shares prior to the merger. The price at which Common Stock will
be purchased under the Stock Purchase Plan is the lesser of 85% of the fair
market value of the Common Stock on the first day of the applicable purchase
period or the fair market value of the Common Stock on the last day of such
purchase period adjusted to the nearest 1/8 point. Employees may end their
participation in the Offering effective on the next succeeding Purchase Date and
participation ends automatically on termination of employment with the Company.
No person may purchase shares under the

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<PAGE> 57

Stock Purchase Plan to the extent such person would own stock with a fair market
value (determined at the beginning of each six-month purchasing period) in
excess of $25,000 in any calendar year. The Board of Directors may terminate the
Stock Purchase Plan at any time. The Stock Purchase Plan will terminate on
December 31, 1999, unless terminated earlier by the Board of Directors.

PROFIT SHARING PLAN

The Company's Profit Sharing and 401(k) Plan and Trust, as amended and
restated as of May 1, 1995 (the "PROFIT SHARING PLAN"), is a qualified profit
sharing plan with a 401(k) feature which covers all full-time employees of the
Company (other than employees whose employment is covered by collective
bargaining agreements) who have completed six months of service in the Company's
employ and attained age 21. In addition, the Company may contribute an amount to
the Profit Sharing Plan each year based on its net profits for such year, and
all covered employees who have met the eligibility requirements may share in the
Company's contribution for a given year according to a prescribed allocation
formula. The amount of the Company's contribution is determined at the
discretion of the Board of Directors. Subject to adjustments based upon
regulatory provisions, each participant's share of Company profit sharing
contributions vests at the rate of 20% per year, beginning after two full years
of employment, and the employee becomes fully vested after six years. During
fiscal 1996, the Company contributed $201,000 under the Profit Sharing Plan.
Because additional profit sharing contributions in the future will be contingent
on future profits and are at the discretion of the Board of Directors, the
amount of benefits that will be payable to the executive officers named is
impossible to predict.

LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY AND INDEMNIFICATION

The Company's Certificate of Incorporation, as amended, limits the personal
liability of directors to the fullest extent permitted by Delaware law. Under
the Company's Certificate of Incorporation and as permitted under Delaware law,
directors are not personally liable for monetary damages for breach of their
fiduciary duties of care as directors. Such provision does not, however, affect
liability for any breach of a director's duty of loyalty to the Company or its
shareholders, for acts or omissions not in good faith or which involve
intentional misconduct, fraud or a knowing violation of law or unlawful payments
of dividends or for any transaction in which the director received an improper
personal benefit. Such limitation of liability does not apply to liabilities
arising under the federal securities laws and does not affect the availability
of equitable remedies such as injunctive relief or rescission. In addition, the
Company's Certificate of Incorporation and By-laws provide that the Company
shall, to the fullest extent permitted by Delaware law, indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative by reason of the fact that he or she is or was a director,
officer, employee or agent of the Company or serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any and all
expenses, liabilities or other matters referred to or covered by Delaware law,
which were reasonably incurred by such person. This indemnification is in
addition to any other rights of indemnification to which such persons may be
entitled under the Company's By-laws, any agreement or vote of shareholders or
disinterested directors. The Company's Certificate of Incorporation and By-laws
also permit it to secure insurance on behalf of any director, officer, employee
or other agent for any liability arising out of his or her actions in such
capacity, regardless of whether Delaware law, the Certificate of Incorporation
or By-laws would permit indemnification.

At present there is no pending litigation or proceeding involving a
director or officer of the Company in which indemnification is required or
permitted, and the Company is not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification. The Company
believes that the indemnification provisions in its Certificate of Incorporation
and By-laws are necessary to attract and retain qualified persons as directors
and officers. The Company does not have any separate indemnification agreements
with its directors or officers.

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<PAGE> 58

ANTI-TAKEOVER PROVISIONS

The Company is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in a business combination (as defined therein) with an "interested
stockholder" (defined generally as any person who beneficially owns 15% or more
of the outstanding voting stock of the Company or any person affiliated with
such person) for a period of three years following the date that such
stockholder became an interested stockholder, unless (i) prior to such date the
board of directors of the corporation approved either the business combination
or the transaction which resulted in the stockholder becoming an interested
stockholder, or (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which the employee participants do
not have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer, or (iii) on or
subsequent to such date the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least two-thirds of the
outstanding voting stock which is not owned by the interested stockholder.

STOCKHOLDER RIGHTS PLAN

The Board of Directors has approved the implementation of a stockholders
rights plan (the "RIGHTS PLAN"). The Company currently anticipates that the
Rights Plan will become effective within 30 to 60 days of the date of this
Prospectus. To implement the Rights Plan, the Board of Directors declared a
dividend of one preferred stock purchase right (individually, a "RIGHT" and
collectively, the "RIGHTS") for each outstanding share of Common Stock at the
close of business on a to be determined record date (the "RECORD DATE") and with
respect to each share of Common Stock which shall become outstanding after the
Record Date and prior to the earlier of the Redemption Date and the Final
Expiration Date (as such terms are defined in the Rights Agreement referred to
below). The Rights, exercisable only in certain circumstances, will trade
together with the Common Stock until the Distribution Date (as defined below).
Under the terms of the rights agreement between the Company and the rights agent
(the "RIGHTS AGREEMENT"), each Right, when it becomes exercisable, will entitle
the holder to purchase one one-hundredth of a share (a "UNIT") of Series B
Junior Participating Preferred Stock, $0.01 par value ("PREFERRED STOCK"), of
the Company at a purchase price of $40.00 per Unit (the "PURCHASE PRICE"),
subject to the conditions set forth in the Rights Agreement.

Until the earlier of (a) 10 business days following a public announcement
that a person or a group of affiliated persons (an "ACQUIRING PERSON") has
acquired beneficial ownership of 15% or more of the shares of Common Stock then
outstanding or (b) 10 business days after the commencement of, or the first
public announcement of the intention of a tender or exchange offer the
consummation of which would result in beneficial ownership by a person or group
of 15% or more of the shares of Common Stock then outstanding (the earliest of
the dates specified in clauses (a) and (b) being hereinafter called the
"DISTRIBUTION DATE"), the Rights are not exercisable. Prior to the Distribution
Date, the Rights will be evidenced, with respect to any certificate for Common
Stock outstanding as of the Record Date by such certificate, together with a
Summary of Rights.

On the Record Date, the Company shall mail a copy of the Summary of Rights
to the holders of record of the Common Stock on the Record Date. The Rights
Agreement provides that, until the Distribution Date (or earlier redemption or
expiration of the Rights), (i) the Rights will be transferred with and only with
the Common Stock, (ii) new Common Stock certificates issued after the Rights
Record Date will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any certificates for Common
Stock outstanding as of the Record Date, even without such notation or a copy of
the Summary of Rights being attached thereto, will constitute a transfer of the
Rights associated with the Common Stock represented by such certificate. As soon
as practicable after the Distribution Date, the Company shall deliver separate
certificates evidencing the Rights ("RIGHTS CERTIFICATES") and the Rights
Certificates will evidence the Rights.

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<PAGE> 59

The Rights will expire in 2007, unless extended or unless the Rights are
redeemed or exchanged by the Company, in each case described below.

The purchase price payable and the number of shares of Preferred Stock or
other securities or property issuable upon the exercise of the Rights are
subject to adjustment from time to time to prevent dilution (a) in the event of
a stock dividend on, or a subdivision, combination, or reclassification of the
shares of Preferred Stock, (b) upon the grant to the holders of shares of
Preferred Stock of certain rights or warrants to subscribe for or purchase
shares of Preferred Stock at a price less than the then-current market price of
the Preferred Stock, or securities convertible into shares of Preferred Stock or
(c) upon the distribution to holders of shares of Preferred Stock of evidences
of indebtedness or assets (excluding regularly periodic cash dividends) or of
subscription rights or warrants (other than those referred to above).

If any person becomes an Acquiring Person, each holder of a Right, other
than the Acquiring Person, will thereafter have the right to receive, upon the
exercise thereof and payment of an amount equal to the then-current Purchase
Price of a Right, that number of shares of Common Stock that, at the time of
such transaction, will have a market value of two times the Purchase Price of a
Right. If the Company is acquired in a merger or other business combination or
50% or more of its consolidated assets or earning power is sold, each holder of
a Right will thereafter have the right to receive, upon the exercise thereof and
payment of an amount equal to the then-current Purchase Price of a Right, that
number of shares of Common Stock of the Acquiring Person that, at the time of
the transaction, will have a market value of two times the Purchase Price of a
Right.

Under certain circumstances, after a person becomes an Acquiring Person,
the Board of Directors of the Company may exchange the Rights (other than Rights
owned by the Acquiring Person, which are void), in whole or in part, at an
exchange ratio of one share of Common Stock per Right (subject to adjustment).

At any time before a person has become an Acquiring Person, the Company may
redeem the rights in whole, but not in part, at a price of $0.01 per Right,
subject to adjustment ("REDEMPTION PRICE"). Immediately upon the action of the
Board of Directors to redeem the Rights, the Company will announce the
redemption, the right to exercise the Rights will terminate, and the only right
of the holders of Rights will be to receive the Redemption Price. The Company
may, at its option, pay the Redemption Price in cash, shares of Common Stock
based on fair market value, or any other form of consideration deemed
appropriate by the Board of Directors.

Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.

The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on the Rights being redeemed or a substantial
number of Rights being acquired and under certain circumstances the Rights
beneficially owned by such a person or group may become void. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors of the Company since the Board of Directors may, at its
option, redeem all but not less than all, of the then outstanding Rights at the
Redemption Price.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company leases its principal office and the Selfix manufacturing and
distribution facility in Chicago, Illinois from the Ragir Gift Trusts. Marshall
Ragir is a director of the Company and is the brother of Judith Ragir and Robert
Ragir. The Company made aggregate payments to the Ragir Gift Trusts under the
lease of $467,139 during fiscal 1996 and $491,417 during fiscal 1995. Rent
payments are subject to adjustment every three years to reflect increases in the
Consumer Price Index. The lease expires in July, 2010. The Company believes that
the rent paid to the Ragir Gift Trusts under the lease represents fair market
value and that the other terms and conditions are commercially reasonable.

The Company entered into three exclusive patent licensing agreements with
Meyer J. Ragir, two in 1971 and one in 1981, relating to patented manufacturing
processes used to produce wood insert molded products

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<PAGE> 60

and the patented design of certain suction lock and shower organizer products,
which in each case was developed by Mr. Ragir. The licensing agreements also
cover any improvements which Mr. Ragir developed with respect to such patents.
The licensing agreements provide for payment of royalties based upon unit sales
of licensed products subject to annual minimum royalties in the aggregate amount
of $8,500. Pursuant to the licensing agreements, the Company accrued
approximately $47,194 for fiscal 1996 payable to Mr. Ragir's estate (the "MEYER
J. RAGIR ESTATE") and paid $71,868 to the Meyer J. Ragir Estate for fiscal 1995.
The Meyer J. Ragir Estate beneficially owns more than 5% of the outstanding
shares of the Company's Common Stock.

Certain legal matters in connection with the validity of the shares of
Common Stock offered hereby will be passed upon for the Company and the Selling
Shareholders by Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C.,
Chicago, Illinois which serves as the Company general counsel. Jeffrey C.
Rubenstein, a principal of Much Shelist Freed Denenberg Ament Bell & Rubenstein,
P.C., as executor of the Ragir Estate, and co-trustee of the Ragir Trusts,
exercises either sole or shared voting and investment power with respect to
2,083,358 shares of Common Stock or 48% of the outstanding shares of Common
Stock as of March 26, 1997. Mr. Rubenstein is also a director of the Company.
The Company's principal office and the Selfix manufacturing and distribution
facility in Chicago, Illinois is owned by the Ragir Gift Trusts of which Mr.
Rubenstein serves as co-trustee.

In fiscal 1996, Tamor purchased raw materials and packaging from vendors
whose ownership was, or related, to officers of the Company. Such transactions
were as follows: (i) raw materials totaling $1.9 million were purchased from a
vendor which is owned by the brother of Leonard and Richard Tocci, and (ii)
packaging totaling $1.9 million was purchased from a vendor which is 50% owned
by Richard Tocci's father-in-law. Management believes the transactions were
conducted on an arm's length basis at competitive prices.

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<PAGE> 61

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of June 4, 1997, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, for
(i) each person or entity who is known by the Company to own beneficially more
than 5% of the Company's Common Stock, (ii) each of the Selling Shareholders,
(iii) each Named Executive Officer (iv) each director of the Company, and (v)
all directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
-------------------- NUMBER OF --------------------
NAME AND ADDRESS OF NUMBER OF SHARES BEING NUMBER OF
BENEFICIAL OWNER SHARES PERCENT OFFERED SHARES PERCENT
------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Estate of Norma L. Ragir(1)(8).................... 1,489,001 34.4% 1,050,000 439,001 6.9%
200 North LaSalle Street
Suite 2100
Chicago, Illinois 60601
Leonard Tocci..................................... 379,200 8.8 -- 379,200 6.0
4501 West 47th Street
Chicago, Illinois 60632
MJR/NLR Gift Trust -- Judith Ragir Separate
Trust(1)(3)..................................... 157,623 3.6 142,434 15,189 *
MJR/NLR Gift Trust -- Robert Ragir Separate
Trust(1)(3)..................................... 145,123 3.4 131,138 13,985 *
MJR/NLR Gift Trust -- Marshall Ragir Separate
Trust(1)(3)..................................... 157,624 3.6 142,434 15,190 *
Meyer J. Ragir Family Irrevocable Trust -- Judith
Ragir Separate Trust(1)......................... 66,994 1.5 33,994 33,000 *
Meyer J. Ragir Family Irrevocable Trust --
Marshall Ragir Separate Trust(1)................ 66,993 1.5 -- 66,993 1.1
Jeffrey C. Rubenstein(1)(2)....................... 25,550 * -- 25,550 *
Lowell L. Ruffer(3)............................... 0 * -- 0 *
James R. Tennant(4)............................... 202,486 4.5 -- 202,486 3.1
Charles R. Campbell............................... 6,000 * -- 6,000 *
Daniel B. Shure................................... 6,400 * -- 6,400 *
Marshall Ragir(5)................................. 67,093 1.6 -- 67,093 1.1
James E. Winslow.................................. 8,477 * -- 8,477 *
Peter L. Graves................................... 3,566 * -- 3,566 *
Michael J. Ricard(6).............................. 2,265 * -- 2,265 *
Joel D. Spungin................................... 7,500 * -- 7,500 *
Jeffrey R. Dolan.................................. 3,003 * -- 3,003 *
All directors and executive officers as a group
(15 persons)(7)................................. 2,794,898 59.4% -- 1,294,898 19.3%
</TABLE>

- -------------------------
* Less than 1%.

(1) Jeffrey C. Rubenstein is the executor of the Norma L. Ragir Estate and in
such capacity exercises voting and investment power with respect to the
shares of Common Stock beneficially owned by the Norma L. Ragir Estate.
These shares of Common Stock are deemed to be beneficially owned by Mr.
Rubenstein pursuant to the 1934 Act and the rules and regulations
thereunder. Mr. Rubenstein is co-trustee of the Ragir Trusts and, in such
capacities exercises shared voting and investment power with respect to the
shares of Common Stock beneficially owned by the Ragir Trusts. These shares
of Common Stock are deemed to be beneficially owned by Mr. Rubenstein
pursuant to the 1934 Act and the rules and regulations thereunder. Mr.
Rubenstein, as executor of the Norma L. Ragir Estate and co-trustee of the
Ragir Trusts, exercises either sole or shared voting and investment power
with respect to 2,083,358 shares of Common Stock or 48% of the outstanding
shares of Common Stock as of June 4, 1997. Mr. Rubenstein disclaims
beneficial ownership of all but 20,500 of these shares of Common Stock.

(2) Includes 5,050 shares beneficially owned by Mr. Rubenstein's adult children,
as to which 5,050 shares Mr. Rubenstein disclaims beneficial ownership. Does
not include the 1,489,001 shares beneficially owned by the

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<PAGE> 62

Norma L. Ragir Estate which Mr. Rubenstein is deemed to beneficially own
pursuant to the 1934 Act and the rules and regulations thereunder.

(3) Mr. Ruffer is a co-trustee of the Ragir Gift Trusts and, in such capacities,
exercises shared voting and investment power with respect to the shares of
Common Stock owned by the Ragir Gift Trusts. These shares of Common Stock
are deemed to be beneficially owned by Mr. Ruffer pursuant to the 1934 Act
and the rules and regulations thereunder. Mr. Ruffer in his various
capacities, exercises shared voting and investment power with respect to
460,370 shares of Common Stock or 11% of the outstanding shares of stock as
of June 4, 1997. Mr. Ruffer disclaims beneficial ownership of these shares
of Common Stock.

(4) Includes 188,150 shares of Common Stock subject to stock options exercisable
within 60 days of June 4, 1997.

(5) Includes 66,963 shares of Common Stock beneficially owned by the Meyer J.
Ragir Family Irrevocable Trust -- Marshall Ragir Separate Trust with respect
to which Mr. Ragir, in his capacity as a co-trustee, exercises shared voting
and investment power. Does not include 157,624 shares of Common Stock
beneficially owned by the MJR/NLR Gift Trust -- Marshall Ragir Separate
Trust with respect to which Mr. Ragir does not exercise sole or shared
voting or investment power.

(6) Includes 1,117 shares of Common Stock subject to stock options exercisable
within 60 days of June 4, 1997.

(7) Includes 189,267 shares of Common Stock subject to stock options exercisable
within 60 days of June 4, 1997.

(8) Immediately prior to the Offering, the Norma L. Ragir Estate will transfer
1,050,000 of its shares of Common Stock of the Company to the Meyer J. and
Norma L. Ragir Foundation ("FOUNDATION"). As a result, the Selling
Shareholder with respect to such shares will be the Foundation. The
Foundation is an Illinois not-for-profit corporation. The Foundation is a
tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code
("CODE") and is a private foundation within the meaning of Code Section
509(a). Under the terms of the will of Norma L. Ragir, her estate is
required to transfer 58.82% of the residuary trust (prior to the payment of
taxes) to the Foundation. Her shares of the Common Stock of the Company are
included in the residuary trust. As a general rule, a private foundation may
not own 20% of the voting stock of an incorporated business (with such
percentage reduced by the percentage of voting stock owned by disqualified
persons). Disqualified persons include family members of substantial
contributors to the foundation. If the above percentage limit is violated,
an excise tax is imposed on holdings that are not corrected within a
required period of time. To avoid the imposition of an excise tax, the
applicable shares owned by the Norma L. Ragir Estate will not be transferred
to the Foundation until immediately prior to the time of the Offering.

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<PAGE> 63

DESCRIPTION OF COMPANY'S SECURITIES

The authorized capital stock of the Company consists of 15,000,000 shares
of Common Stock, $0.01 par value, and 500,000 shares of Preferred Stock, $0.01
par value. No shares of Preferred Stock are currently issued and outstanding. As
of June 4, 1997, there were 4,322,922 shares of Common Stock issued and
outstanding. The following summary description of the capital stock of the
Company is qualified in its entirety by reference to the form of the Certificate
of Incorporation of the Company, as amended, and the By-laws of the Company,
which are incorporated by reference as an Exhibit to the Registration Statement
(as defined herein) of which this Prospectus is a part.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by shareholders and are entitled to receive such
dividends, if any, as may be declared from time-to-time by the Board of
Directors from funds legally available therefor, subject to the dividend
preferences of the Preferred Stock, if any. Each member of the Board of
Directors stands for election at each annual meeting of the Company's
shareholders. Upon liquidation or dissolution of the Company, the holders of
Common Stock are entitled to share ratably in all assets available for
distribution after payment of liabilities and liquidation preferences of the
Preferred Stock, if any. Holders of Common Stock have no preemptive rights, no
cumulative voting rights and no rights to convert their Common Stock into any
other securities. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of any series
of Preferred Stock which the Company may issue in the future.

PREFERRED STOCK

The Board of Directors is authorized, without any further vote or action by
the Company's shareholders, authorize the issuance of up to 500,000 shares of
Preferred Stock. The Board of Directors is authorized to provide for the
issuance of additional classes and series of preferred stock out of these
undesignated shares, and the Board Directors may establish the voting powers,
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of any such additional
class or series of preferred stock, including the dividend rights, dividend
rate, terms of redemption, redemption price or prices, conversion rights and
liquidation preferences of the shares constituting any series, without any
further vote or action by the stockholders of the Company. The issuance of
Preferred Stock could adversely affect, among other things, the rights of
existing shareholders or could delay or prevent a change in control of the
Company without further action by the shareholders. The issuance of Preferred
Stock could decrease the amount of earnings and assets available for
distribution to holders of Common Stock and satisfaction of any dividend
preferences of outstanding shares of Preferred Stock would reduce the amount of
funds available for the payment of dividends on Common Stock. Holders of
Preferred Stock would be entitled to receive a preference payment in the event
of any liquidation, dissolution or winding up of the Company before any payment
is made to the holders of Common Stock.

The Company has preliminarily designated shares of preferred stock as
Series B Junior Participating Preferred Stock, $0.01 par value, which may be
issued upon the exercise of any of the preferred stock purchase rights that are
associated with the Common Stock. The rights of the holders of Common Stock will
generally be subject to the prior rights of the holders of any outstanding
shares of Preferred Stock with respect to dividends, liquidation preferences and
other matters. The holders of shares of the Preferred Stock are entitled to
receive, when, as and if declared by the Board, quarterly dividends. In addition
to any other voting rights required by applicable law, each share of the
Preferred Stock entitles the holder to 100 votes on all matters submitted to a
vote of the stockholders of the Corporation. In the event that the Corporation
shall be a party to any transaction in which the outstanding shares of Common
Stock are converted or changed into or exchanged for other capital stock,
securities, cash or other property, or any combination thereof, then each share
of the Preferred Stock shall at the same time be similarly converted or changed
into or exchanged for an aggregate amount, subject to adjustment, equal to 100
times the aggregate amount of capital stock, securities, cash and/or other
property, as the case may be, into which or for which each share of Common Stock
is being

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<PAGE> 64

converted or changed or exchanged. The shares of the Preferred Stock are not
redeemable at any time. See "Management -- Stockholder Rights Plan."

The issuance of preferred stock by the Board of Directors could have the
effect of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company, thereby delaying, deferring or
preventing a change in control of the Company.

TRANSFER AGENT

The transfer agent for the Common Stock is ChaseMellon Shareholder
Services, L.L.C.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, there will be 6,322,922 shares of Common
Stock outstanding (6,847,922 if the Underwriters' over-allotment option is
exercised in full). All of the shares sold in this Offering, will be freely
tradeable without registration or other restrictions under the Securities Act of
1933, as amended (the "Act"), except for any shares held by an "affiliate" of
the Company (as defined in the Act).

Of the currently outstanding shares, 1,384,131 shares are deemed restricted
securities within the meaning of Rule 144 ("Restricted Shares"). Restricted
Shares may not be sold unless they are registered under the Act or are sold
pursuant to an applicable exemption from registration, including an exemption
under Rule 144 and Rule 144A.

The Company has, or intends to, register 1,475,000 shares of Common Stock
that were reserved for issuance under its Stock Option Plans and 200,000 shares
that were reserved for issuance under the Stock Purchase Plan. As of June 4,
1997, options to purchase 965,017 shares were outstanding, each of which
entitles the holder thereof to purchase one share of Common Stock. Once
registered, shares issued upon exercise of options will be generally eligible
for immediate resale in the public market, subject to vesting under the
applicable option agreements.

In connection with the Subordinated Note, the Company issued the Warrant on
February 27, 1997, to GECC to purchase 79,204 shares of Common Stock.

The Company, its directors, executive officers and the Selling Shareholders
have agreed that for a period of 180 days from the date of this Prospectus that
they will not, without the prior written consent of EVEREN Securities, Inc.,
directly or indirectly offer for sale, sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock, subject to certain
exceptions.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has beneficially owned, for at
least one year (including the holding period of any immediate prior owner,
except an affiliate), shares of Common Stock that have not been registered under
the Securities Act or that were acquired from an "affiliate" of the Company (in
a transaction or chain of transactions not involving a public offering) is
entitled to sell in "broker's transactions" or to market makers, within any
three month period commencing 90 days after the date of this Prospectus, a
number of shares of Common Stock which does not exceed the greater of (i) 1% of
the number of shares of Common Stock then outstanding (approximately 63,362
shares immediately after this Offering assuming the Underwriters do not exercise
the over-allotment option) or (ii) the average weekly trading volume of the
Common Stock during the four calendar weeks preceding the sale. Sales under Rule
144 are generally subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about the
Company. Under Rule 144(k), a person who is not deemed to have been an affiliate
of the Company at any time during a 90-day period preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any immediate prior owner, except an
affiliate), is entitled to sell such shares without having to comply with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.

62
<PAGE> 65

The Company is unable to estimate the number of shares that will be sold
under Rule 144, since this will depend on the market price for the Common Stock
of the Company, the personal circumstances of the sellers and other factors.
There can be no assurance that a significant public market for the Common Stock
will be sustained after the Offering. Any future sale of substantial amounts of
Common Stock in the open market may adversely affect the market price of the
Common Stock offered hereby.

The Company cannot predict the effect, if any, that sales of the Common
Stock or the availability of such Common Stock for sale will have on the market
price prevailing from time to time. Nevertheless, sales by existing stockholders
of substantial amounts of Common Stock could adversely affect prevailing market
prices for the Common Stock. See "Risk Factors -- Shares Eligible for Future
Sale."

DESCRIPTION OF THE CREDIT AGREEMENT AND OTHER DEBT

The Company has entered into a Credit Agreement dated as of February 27,
1997 (the "CREDIT AGREEMENT"), with General Electric Capital Corporation
("GECC"), as agent ("AGENT") and individually, and one other lender (such lender
and GECC, collectively, the "LENDERS") which provides: (i) a 5 1/2 year
revolving credit facility (the "REVOLVING CREDIT FACILITY") under which up to an
aggregate principal amount of $20.0 million (subject to a borrowing base
limitation and including a letter of credit subfacility of up to $10.0 million)
are available for borrowing, (ii) a 5 1/2 year $20.0 million term loan ("TERM
LOAN A") and (iii) a 7 1/2 year $20.0 million term loan ("TERM LOAN B").
Proceeds of Term Loan A and Term Loan B were used, together with the combined
proceeds of a $7.0 million subordinated equity bridge note (the "SUBORDINATED
NOTE") issued to GECC and a Warrant to purchase 79,204 shares of the Company's
Common Stock (as more fully described below), to finance the Tamor Acquisition,
to refinance certain indebtedness of Tamor and to pay transaction costs related
thereto. The availability under the Revolving Credit Facility was reduced by the
issuance of two letters of credit in the aggregate face amount of $5.6 million
which secure certain industrial development bonds of Selfix. The balance of the
Revolving Credit Facility is available for general corporate purposes. Upon
consummation of the Offering and the application of the net proceeds as provided
in "Use of Proceeds," the Subordinated Note will be repaid in full and a portion
of the outstanding principal amounts of Term Loan A and Term Loan B will be
repaid.

The above description and the following summaries of the material
provisions of the Credit Agreement and Subordinated Note do not purport to be
complete, and such description and summaries, including definitions of certain
terms, are qualified in their entirety by reference to the Credit Agreement and
Subordinated Note.

GENERAL

The Revolving Credit Facility terminates in August, 2002, at which time
borrowings thereunder will be due. Term Loan A matures in August, 2002 and is
payable in quarterly installments commencing in April, 1997. Term Loan B matures
in August, 2004 and is payable in quarterly installments commencing in April,
1997. Aggregate annual principal repayments for Term Loan A and Term Loan B are
set forth below. The Company is required to make mandatory prepayments of
principal of the Subordinated Note, Term Loan A and Term Loan B from a fixed
percentage of excess cash flow and upon the occurrence of certain events,
including but not limited to, certain asset sales and certain issuances and
sales of securities. The Company may make voluntary prepayments at any time.
However, the Company will be required to pay a prepayment premium if the
Revolving Credit Facility is terminated prior to its maturity date or the
Company prepays all or any portion of Term Loan A or Term Loan B other than as a
result of a mandatory prepayment.

63
<PAGE> 66

Aggregate principal repayments for Term Loan A are as follows:

<TABLE>
<CAPTION>
YEARS ENDING (IN THOUSANDS)
------------ --------------
<S> <C>
1997................................................. $ 1,500
1998................................................. 2,750
1999................................................. 3,375
2000................................................. 3,500
2001................................................. 4,625
Thereafter............................................. 4,250
</TABLE>

Aggregate principal repayments for Term Loan B are as follows:

<TABLE>
<CAPTION>
YEARS ENDING (IN THOUSANDS)
------------ --------------
<S> <C>
1997................................................. $ 150
1998................................................. 200
1999................................................. 200
2000................................................. 200
2001................................................. 200
Thereafter............................................. 19,050
</TABLE>

In connection with the Subordinated Note, the Company on February 27, 1997,
issued a warrant (the "WARRANT") to GECC to purchase 79,204 shares of Common
Stock exercisable at 50% of the Market Price (as defined in the Warrant) at any
time during the period commencing on August 1, 1997 through February 27, 2007.
If the Subordinated Note has been paid in full on or prior to July 31, 1997, the
Company has the option to repurchase the Warrant at a price equal to $792,000.
The repurchase price of the Warrant was determined through negotiation with
GECC. At the time of the negotiation, the market price of the Company's Common
Stock was approximately $10 per share. If the Subordinated Note is not paid in
full by (i) July 31, 1997, the number of shares issuable under the Warrant will
increase by the difference between five percent of the total number of fully
diluted shares of Common Stock then outstanding and 79,204 shares of Common
Stock, (ii) February 27, 1998, the number of shares issuable under the Warrant
will increase by the number of shares equal to two percent of the then
outstanding fully diluted shares of Common Stock and (iii) February 27, 1999 and
on each subsequent February 27, until and including February 27, 2005, the
number of shares issuable under the Warrant will be increased by the number of
shares equal to one percent of the total number of then outstanding fully
diluted shares of Common Stock as of each of such dates. Each tranche of Warrant
shares is exercisable at 50% of the Market Price (determined based upon the
average of the bid and asked closing prices for the immediately preceding
fifteen day period) as of the date of any such Warrant issuance. The Company may
call the shares issued or issuable upon the exercise of the Warrant and
terminate the Warrant at any time after July 31, 2002 at a call price equal to
the Market Price for such shares, but in no event will the call price be less
than $10 per share.

INTEREST RATE

Interest on the Revolving Credit Facility is charged, at the Company's
option, at either: (i) the 1, 2, or 3 month reserve adjusted LIBOR plus a margin
of 2.75% or (ii) a floating rate equal to the prime rate plus a margin of 1.25%.
Interest is paid monthly for borrowings which bear interest based on the prime
rate, and is paid at the end of the applicable LIBOR period for borrowings which
bear interest based on a LIBOR rate. An unused facility fee of 0.5% per annum is
charged on the average unused daily balance.

Interest on Term Loan A is charged, at the Company's option, at either the
1, 2 or 3 month reserve adjusted LIBOR rate plus a margin of 3.00% or a floating
rate equal to the prime rate plus a margin of 1.50%. At June 4, 1997, the rate
was 8.82%. Interest is paid monthly for prime rate based loans and at the end of
the applicable LIBOR period for LIBOR based loans.

Interest on Term Loan B is charged, at the Company's option, at either 1, 2
or 3 month reserve adjusted LIBOR rate plus a margin of 3.50% or a floating rate
equal to the prime rate plus a margin of 2.00%. At

64
<PAGE> 67

June 4, 1997, the rate was 9.35%. Interest is paid monthly for prime rate based
loans and at the end of the applicable LIBOR period for LIBOR based loans.

After the fiscal quarter of the Company ending in December, 1997, the
interest rates applicable to the obligations outstanding under the Credit
Agreement are subject to adjustment (up or down) based on the Company's
quarterly consolidated financial performance.

At June 4, 1997, the interest rate on the Subordinated Note was 13.5%.

GUARANTEES AND SECURITY

Borrowings and other obligations under the Credit Agreement and
Subordinated Note are guaranteed by the Company. Loans and other obligations
under the Credit Agreement and the guarantee are secured by substantially all of
the assets of the Company's subsidiaries, and a pledge by the Company of the
stock of the Company's subsidiaries. The Subordinated Note is secured by a
second lien on substantially all of the assets of the Company's subsidiaries.
The Subordinated Note is subordinated in right of payment to the Revolving
Credit Facility and Term Loan A and Term Loan B.

COVENANTS; EVENTS OF DEFAULT

The Credit Agreement contains a number of customary covenants, including,
among other things, (i) prohibitions and/or limitations on the incurrence of
debt, liens, payment of dividends or distributions, redemptions of capital
stock, investments, transactions with affiliates, mergers, acquisitions and
asset dispositions and (ii) financial covenants covering interest coverage,
fixed charge coverage, net worth, minimum EBITA and capital expenditures. The
minimum EBITA covenant requires the Company to have EBITA of not less than a
specified amount which ranges from $4.4 million for the two fiscal quarters
ending in June, 1997 to $22.0 million for the four fiscal quarters ending in
September, 2002 and thereafter. The Credit Agreement also contains customary
events of default, including an event of default if a "change of control"
occurs.

65
<PAGE> 68

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting
Agreement, the syndicate of underwriters named below (the "UNDERWRITERS"), for
whom EVEREN Securities, Inc. and Montgomery Securities are acting as
Representatives (the "REPRESENTATIVES"), have severally agreed, to purchase from
the Company and the Selling Shareholders, and the Company and the Selling
Shareholders have agreed to sell, the respective number of shares of Common
Stock set forth opposite the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF COMMON STOCK
---- ----------------
<S> <C>
EVEREN Securities, Inc. .................................... 1,252,500
Montgomery Securities....................................... 1,252,500
ABN AMRO Chicago Corporation................................ 75,000
Bear, Stearns & Co. Inc. ................................... 75,000
Alex. Brown & Sons Incorporated............................. 75,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 75,000
Goldman, Sachs & Co. ....................................... 75,000
Lehman Brothers Inc. ....................................... 75,000
Morgan Stanley & Co. Incorporated........................... 75,000
Robertson, Stephens & Company LLC........................... 75,000
Smith Barney Inc. .......................................... 75,000
Robert W. Baird & Co. Incorporated.......................... 40,000
William Blair & Company, L.L.C. ............................ 40,000
Friedman, Billings, Ramsey & Co., Inc. ..................... 40,000
J.J.B. Hilliard, W.L. Lyons, Inc. .......................... 40,000
Needham & Company, Inc. .................................... 40,000
Stifel, Nicolaus & Company, Incorporated.................... 40,000
Sutro & Co. Incorporated.................................... 40,000
Wedbush Morgan Securities Inc. ............................. 40,000
---------
Total.................................................. 3,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by their counsel
and to certain other conditions. The Underwriters are obligated to purchase all
of the shares of Common Stock offered hereby (other than the shares of Common
Stock covered by the over-allotment option described below) if any are
purchased.

The Company and the Selling Shareholders have been advised by the
Underwriters that they propose to offer the Common Stock to the public initially
at the price set forth on the cover page of this Prospectus and to certain
dealers (who may include the Underwriters) at such price, less a concession not
in excess of $0.34 per share of Common Stock. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $0.10 per share of
Common Stock to certain other dealers. After the initial public offering, the
price to the public, the concession and the discount to dealers may be changed.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to accounts over which they exercise discretionary
authority.

The Offering of the Common Stock is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the Common Stock.

The Company has granted to the Underwriters an option, exercisable for the
30 days from the date of this Prospectus, to purchase up to an aggregate of
525,000 additional shares of Common Stock at the initial price to public, less
the underwriting discounts and commissions, solely to cover over-allotments. To
the extent that the Underwriters exercise such option, each Underwriter may be
committed, subject to certain conditions, to

66
<PAGE> 69

purchase a number of additional shares of Common Stock proportionate to such
Underwriter's initial commitment pursuant to the Underwriting Agreement.

In the Underwriting Agreement, the Company, the Selling Shareholders and
the Underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.

Subject to certain exceptions, the Company, the executive officers and
directors of the Company, and the Selling Shareholders of the Company each have
agreed that they will not, without the prior written consent of EVEREN
Securities, Inc., offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for such Common Stock or in any other manner
transfer all or a portion of the economic consequences associated with the
ownership of any such Common Stock for a period of 180 days from the date of
this Prospectus.

In connection with the offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may overallot the offering,
creating a syndicate short position. Underwriters may bid for and purchase
shares of Common Stock in the open market to cover syndicate short positions. In
addition, the Underwriters may bid for and purchase shares of Common Stock in
the open market to stabilize the price of the Common Stock. These activities may
stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities,
and may end these activities at any time.

The Underwriters and dealers may engage in passive market making
transactions in the Common Stock in accordance with Rule 103 of Regulation M
promulgated by the Commission. The Underwriters and dealers will not engage in
passive market making when a stabilizing bid for the Common Stock is in effect.
In general, a passive market maker may not bid for or purchase the Common Stock
at a price that exceeds the highest independent bid. In addition, the net daily
purchases made by any passive market maker generally may not exceed 30% of its
average daily trading volume in the Common Stock during a specified two month
prior period, or 200 shares, whichever is greater. A passive market maker must
identify passive market making bids on the Nasdaq electronic inter-dealer
reporting system. Passive market making may stabilize or maintain the market
price of the Common Stock above independent market levels. Underwriters and
dealers are not required to engage in passive market making and may end passive
market making activities at any time.

In October, 1996, the Company engaged EVEREN Securities, Inc. to assist the
Company in obtaining financing from institutional investors to refinance its
then existing senior debt and to finance the Tamor Acquisition, and, in
connection therewith, the Company obtained financing from GECC in February,
1997. EVEREN Securities, Inc. was paid $725,000 for its services in connection
with such engagement. See "Description of Credit Agreement and Other Debt" and
"Use of Proceeds."

LEGAL MATTERS

Certain legal matters in connection with the validity of the shares of
Common Stock offered hereby will be passed upon for the Company and the Selling
Shareholders by Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C.,
Chicago, Illinois which serves as the Company general counsel. Jeffrey C.
Rubenstein, a principal of Much Shelist Freed Denenberg Ament Bell & Rubenstein,
P.C., as executor of the Ragir Estate and co-trustee of the Ragir Trusts,
exercises either sole or shared voting and investment power with respect to
2,083,358 shares of Common Stock or 48% of the outstanding shares of Common
Stock as of March 26, 1997. Mr. Rubenstein is also a director of the Company.
The Company's principal office and the Selfix manufacturing and distribution
facility in Chicago, Illinois is owned by the Ragir Gift Trusts of which Mr.
Rubenstein serves as co-trustee. See "Management," "Principal and Selling
Shareholders" and "Certain Relationships and Related Transactions." Certain
legal matters will be passed upon for the Underwriters by Ungaretti & Harris,
Chicago, Illinois.

67
<PAGE> 70

EXPERTS

The consolidated financial statements of the Company as of December 28,
1996, and for the fifty-two week period ended December 28, 1996, included in
this Prospectus and the Registration Statement of which it is a part, have been
so included in reliance on the report of Arthur Andersen LLP, independent public
accountants, given on the authority of said firm as experts in auditing and
accounting. The consolidated financial statements of Selfix as of December 30,
1995, and as of December 31, 1994, and for the fifty-two week period ended
December 30, 1995 and the fifty-three week period ended December 31, 1994,
included in this Prospectus and the Registration Statement of which it is part,
have been so included in reliance on the report of Grant Thornton LLP,
independent public accountants, given on the authority of said firm as experts
in accounting and auditing. The financial statements of Tamor Plastics
Corporation and Houseware Sales, Inc. as of December 31, 1996, and December 31,
1995, and for each of the three years in the period ended December 31, 1996,
included in this Prospectus and Registration Statement have been audited by BDO
Seidman, LLP, independent certified public accountants, to the extent and for
the periods as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority of said firm as
experts in auditing and accounting.

The Company dismissed Grant Thornton LLP, its independent certified public
accountants, effective April 12, 1996. In connection with the 1995 and 1994
Audits and during the interim period prior to the dismissal, there were no
disagreements with the former accountants on any matter or accounting principle
or practice, financial statement disclosure, or auditing scope or procedure. The
former accountant's reports included in the 1995 and 1994 Audits were
unqualified. The Company engaged Arthur Andersen LLP as its new independent
public accountants effective with the dismissal of its former accountants.
During the Company's fiscal years 1994 and 1995 and during the interim period
prior to engagement, there were no consultations with Arthur Andersen LLP with
regard to either the application of accounting principles as to any specific
transaction, either completed or proposed; the type of audit opinion that would
be rendered on the Company's financial statements; or any matter of
disagreements with the former accountants. The Board of Directors approved the
Audit Committee's recommendation to change accountants.

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "COMMISSION"). Such
reports, proxy statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C., as well as the regional
offices of the Commission located at 500 West Madison Street, Chicago, Illinois,
and 7 World Trade Center, New York, New York. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also
maintains a site on the World Wide Web that contains reports, proxy and
information statements and other information regarding the Company. The address
for such site is http://www.sec.gov.

The Company has filed with the Commission a registration statement on Form
S-2 (together with all amendments and exhibits thereto, the "REGISTRATION
STATEMENT") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, as certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock, reference
is made to the Registration Statement and the exhibits thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete and, in each instance, reference is made
to the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of the Registration Statement, including all exhibits thereto,
may be obtained from the Commission's principal office in Washington, D.C. upon
payment of the fees prescribed by the Commission, or may be examined without
charge at the offices of the Commission described above.

68
<PAGE> 71

DOCUMENTS INCORPORATED BY REFERENCE

The following documents previously filed with the Commission are hereby
incorporated by reference into this Prospectus: (i) the Company's Annual Report
on Form 10-K for the fifty-two weeks ended December 28, 1996 (File No. 0-17237),
(ii) the Company's Current Report on Form 8-K dated February 18, 1997, (iii) the
Company's Registration Statement on Form 8-B filed on February 21, 1997, (iv)
the Company's Current Report on Form 8-K dated February 28, 1997, (v) the
Company's Quarterly Report on Form 10-Q for the thirteen weeks ended March 29,
1997 and (vi) the Company's Current Report on Form 8-K/A-1 filed on May 12,
1997.

Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated herein modifies or replaces such statement. Any statement so
modified or superseded shall not be deemed, in its unmodified form, to
constitute a part of this Prospectus or such Registration Statement. The Company
will provide without charge to each person to whom a copy of the Prospectus has
been delivered, and who makes a written or oral request, a copy of any and all
of the information that has been incorporated by reference in the Registration
Statement (other than exhibits unless such exhibits are specifically
incorporated by reference therein). Requests should be submitted in writing or
by telephone to James E. Winslow, Executive Vice President, Home Products
International, Inc., 4501 West 47th Street, Chicago, Illinois 60632, telephone:
(773) 890-1010.

69
<PAGE> 72

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HOME PRODUCTS INTERNATIONAL, INC.
Report of Arthur Andersen LLP............................... F-2
Report of Grant Thornton LLP................................ F-3
Consolidated Balance Sheets at December 30, 1995 and
December 28, 1996......................................... F-4
Consolidated Statements of Operations for the fiscal years
1994, 1995 and 1996....................................... F-5
Consolidated Statements of Stockholders' Equity for the
fiscal years 1994, 1995 and 1996.......................... F-6
Consolidated Statements of Cash Flows for the fiscal years
1994, 1995 and 1996....................................... F-7
Notes to Consolidated Financial Statements.................. F-8
Report of Arthur Andersen LLP on Schedule II................ F-24
Report of Grant Thornton LLP on Schedule II................. F-25
Schedule of Valuation and Qualifying Accounts............... F-26
Consolidated Balance Sheets at December 28, 1996 and March
29, 1997 (unaudited)...................................... F-27
Consolidated Statements of Operations for the thirteen week
periods ended March 30, 1996 and March 29, 1997
(unaudited)............................................... F-28
Consolidated Statements of Cash Flows for the thirteen week
periods ended March 30, 1996 and March 29, 1997
(unaudited)............................................... F-29
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................... F-30

TAMOR PLASTICS CORPORATION AND HOUSEWARE SALES, INC.
Report of BDO Seidman, LLP.................................. F-31
Combined Balance Sheets as of December 31, 1995 and 1996.... F-32
Combined Statements of Income for each of the three years in
the period ended December 31, 1996........................ F-33
Combined Statements of Stockholders' Equity for each of the
three years in the period ended December 31, 1996......... F-34
Combined Statements of Cash Flows for each of the three
years in the period ended December 31, 1996............... F-35
Notes to Combined Financial Statements...................... F-38
</TABLE>

F-1
<PAGE> 73

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors
Home Products International, Inc.

We have audited the accompanying consolidated balance sheet of Home
Products International, Inc. (formerly Selfix, Inc.) (a Delaware corporation)
and subsidiaries as of December 28, 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows for the fifty-two
week period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Home Product International,
Inc. and subsidiaries as of December 28, 1996, and the results of its operations
and its cash flows for the fifty-two week period then ended in conformity with
generally accepted accounting principles.

Arthur Andersen LLP
Chicago, Illinois

February 7, 1997, except with
respect to the transactions discussed
in Note 15, as to which the date
is February 28, 1997

F-2
<PAGE> 74

REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Home Products International, Inc. (formerly Selfix, Inc.)

We have audited the accompanying consolidated balance sheet of Home
Products International, Inc. (formerly Selfix, Inc.) and Subsidiaries as of
December 30, 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for the 52-week period ended December 30,
1995 and the 53-week period ended December 31, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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 Home Products
International, Inc. and Subsidiaries as of December 30, 1995, and the
consolidated results of their operations and their consolidated cash flows for
the 52-week period ended December 30, 1995 and the 53-week period ended December
31, 1994, in conformity with generally accepted accounting principles.

GRANT THORNTON LLP

Chicago, Illinois
February 9, 1996

F-3
<PAGE> 75

HOME PRODUCTS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF FISCAL YEAR END
---------------------
1995 1996
---- ----
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,982 $ 2,878
Investments in marketable securities...................... 516 1
Accounts receivable, net of allowance for doubtful
accounts of $1,395 at December 30, 1995 and $901 at
December 28, 1996...................................... 4,690 6,476
Notes and other receivables............................... 83 118
Refundable income taxes................................... 222 --
Inventories, net.......................................... 5,151 4,391
Prepaid expenses and other current assets................. 175 100
------- --------
Total current assets................................... 13,819 13,964
------- --------
Property, plant and equipment -- at cost.................... 21,362 22,515
Less accumulated depreciation and amortization.............. (12,909) (14,581)
------- --------
Property, plant and equipment, net.......................... 8,453 7,934
------- --------
Intangible and other assets................................. 2,704 2,807
------- --------
TOTAL ASSETS................................................ $24,976 $ 24,705
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations............... $ 892 $ 838
Accounts payable.......................................... 1,334 1,956
Accrued liabilities....................................... 4,881 4,018
------- --------
Total current liabilities.............................. 7,107 6,812
------- --------
Long-term obligations -- net of current maturities.......... 7,022 6,184
Stockholders' equity:
Preferred stock -- authorized, 500,000 shares, $.01 par
value; none issued..................................... -- --
Common stock -- authorized 7,500,000 shares, $.01 par
value;
3,861,784 shares issued at December 30, 1995 and
3,881,423 shares issued at December 28, 1996........... 39 39
Additional paid-in capital................................ 10,765 10,839
Retained earnings......................................... 490 1,296
Common stock held in treasury -- at cost (58,762
shares)................................................ (264) (264)
Currency translation adjustments.......................... (192) (201)
Other, net................................................ 9 --
------- --------
Total stockholders' equity............................. 10,847 11,709
------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $24,976 $ 24,705
======= ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-4
<PAGE> 76

HOME PRODUCTS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------------
1994 1995 1996
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales................................................... $40,985 $41,039 $38,200
Cost of goods sold.......................................... 25,587 25,678 22,992
------- ------- -------
Gross profit.............................................. 15,398 15,361 15,208
Operating expenses
Selling................................................... 10,991 10,474 9,042
Administrative............................................ 5,789 6,433 4,600
Amortization of intangible assets......................... 1,405 478 201
Restructuring charge...................................... 1,701 2,051 --
------- ------- -------
19,886 19,436 13,843
------- ------- -------
Operating profit (loss)................................... (4,488) (4,075) 1,365
------- ------- -------
Other income (expense)
Interest income........................................... 206 230 80
Interest (expense)........................................ (999) (896) (707)
Other income (expense).................................... (501) 458 68
------- ------- -------
(1,294) (208) (559)
------- ------- -------
Earnings (loss) before income taxes......................... (5,782) (4,283) 806
Income tax (expense) benefit................................ (221) 273 --
------- ------- -------
Net earnings (loss)......................................... $(6,003) $(4,010) $ 806
======= ======= =======
Net earnings (loss) per common and common equivalent
share..................................................... $ (1.70) $ (1.11) $ 0.21
======= ======= =======
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-5
<PAGE> 77

HOME PRODUCTS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON
ADDITIONAL CURRENCY STOCK HELD
PREFERRED COMMON PAID-IN RETAINED TRANSLATION OTHER, IN TREASURY
STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS NET AT COST TOTAL
--------- ------ ---------- -------- ----------- ------ ----------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 25, 1993..... $-- $35 $ 8,945 $10,503 $(157) $ -- $ -- $19,326
Net loss......................... -- -- -- (6,003) -- -- -- (6,003)
Issuance of 99,385 shares of
common stock in connection with
exercise of stock options...... -- 1 415 -- -- -- -- 416
Other............................ -- -- -- -- -- (51) -- (51)
Translation adjustments.......... -- -- -- -- (65) -- -- (65)
--- --- ------- ------- ----- ---- ----- -------
BALANCE AT DECEMBER 31, 1994..... -- 36 9,360 4,500 (222) (51) -- 13,623
Net loss......................... -- -- -- (4,010) -- -- -- (4,010)
Issuance of 250,000 shares of
common stock in connection with
the acquisition of Mericon
Child Safety Products.......... -- 3 1,372 -- -- -- -- 1,375
Issuance of 8,147 shares of
common stock in connection with
exercise of stock options...... -- -- 33 -- -- -- -- 33
Purchase of 58,762 common shares
held in treasury at cost....... -- -- -- -- -- -- (264) (264)
Other............................ -- -- -- -- -- 60 -- 60
Translation adjustments.......... -- -- -- -- 30 -- -- 30
--- --- ------- ------- ----- ---- ----- -------
BALANCE AT DECEMBER 30, 1995..... -- 39 10,765 490 (192) 9 (264) 10,847
Net earnings..................... -- -- -- 806 -- -- -- 806
Issuance of 19,639 shares of
common stock in connection with
employee stock purchase plan... -- -- 74 -- -- -- -- 74
Other............................ -- -- -- -- -- (9) -- (9)
Translation adjustments.......... -- -- -- -- (9) -- -- (9)
--- --- ------- ------- ----- ---- ----- -------
BALANCE AT DECEMBER 28, 1996..... $-- $39 $10,839 $ 1,296 $(201) $ -- $(264) $11,709
=== === ======= ======= ===== ==== ===== =======
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6
<PAGE> 78

HOME PRODUCTS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------
1994 1995 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)....................................... $(6,003) $(4,010) $ 806
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 4,330 3,337 2,214
Deferred income tax expense............................ 378 -- --
Provision for restructuring charge..................... 1,701 2,051 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable........... (765) 494 (1,786)
Decrease in inventories.............................. 1,312 105 760
(Increase) decrease in refundable income taxes....... (151) 159 222
(Increase) decrease in other assets.................. 469 23 (269)
(Increase) decrease in notes and other receivables... (1,709) 1,691 (35)
Increase (decrease) in accounts payable.............. 551 (681) 622
Increase (decrease) in accrued liabilities........... 1,768 (603) (793)
Other operating activities, net........................ 151 9 82
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 2,032 2,575 1,823
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale or maturity of marketable securities... 2,231 408 515
Capital expenditures, net................................. (2,326) (1,215) (1,624)
Investment in marketable securities....................... (1,485) -- --
Restricted cash -- Industrial Revenue Bond................ 1,221 5 --
Payment and direct costs for Mericon Child Safety
Products............................................... -- (921) --
------- ------- -------
NET CASH USED FOR INVESTING ACTIVITIES...................... (359) (1,723) (1,109)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings.................................... (3,098) (2,471) (860)
Proceeds from borrowings.................................. 1,500 -- --
Payment of capital lease obligation....................... (23) (27) (32)
Purchase of treasury stock................................ -- (264) --
Issuance of common stock under stock purchase plan........ -- -- 74
Exercise of common stock options.......................... 416 33 --
------- ------- -------
NET CASH USED FOR FINANCING ACTIVITIES...................... (1,205) (2,729) (818)
------- ------- -------
Net increase (decrease) in cash and cash equivalents...... 468 (1,877) (104)
Cash and cash equivalents at beginning of year............ 4,391 4,859 2,982
------- ------- -------
Cash and cash equivalents at end of year.................. $ 4,859 $ 2,982 $ 2,878
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest and swap fees.................................... $ 905 $ 822 $ 599
Income taxes, net......................................... 10 (457) (314)
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-7
<PAGE> 79

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Home Products International, Inc. (the "Company") and its subsidiaries
design, manufacture and market products in two industry segments: housewares
products and home improvement products. Housewares products are marketed
principally through mass market trade channels throughout the United States and
internationally. Home improvement products are sold principally through
wholesalers that service the residential construction, repair and remodeling
industry throughout the United States.

Principles of Consolidation.

The accompanying statements include the accounts of the Company and its
wholly-owned subsidiaries, Selfix, Inc. and Shutters, Inc. All significant
intercompany transactions and balances have been eliminated. The accompanying
statements do not include the accounts of Tamor Corporation, a Massachusetts
corporation ("Tamor"), and Housewares, Inc. ("Housewares") since the Company did
not complete the acquisition until after the end of fiscal year 1996. See Note
15 for more information regarding the acquisition of Tamor and Housewares.

Use of Estimates.

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

Fair Value of Financial Instruments and Credit Risk.

The carrying value of cash, cash equivalents, investments and long-term
obligations approximate their fair values based upon quoted market rates. As of
December 30, 1995 and December 28, 1996, the Company had no significant
concentrations of credit risk related to cash equivalents.

Translation of Foreign Currencies.

All balance sheet accounts of foreign operations are translated into U.S.
dollars at the year-end exchange rates. Statement of operations items are
translated at the weighted average exchange rates for the year. The resulting
currency translation adjustments are made directly to a separate component of
stockholders' equity.

Inventories.

Inventories are stated at the lower of cost or net realizable value with
cost determined on a first in, first out (FIFO) basis.

Property, Plant and Equipment.

Property, plant and equipment are stated at cost. Depreciation is charged
against results of operations over the estimated service lives of the related
assets.

Improvements to leased property are amortized over the life of the lease or
the life of the improvement, whichever is shorter. For financial reporting
purposes, the Company uses both straight-line and declining-balance methods of
depreciation. For tax purposes, the Company generally uses accelerated methods
where permitted.

F-8
<PAGE> 80

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The estimated service lives of the fixed assets are as follows:

<TABLE>
<S> <C>
Buildings................................................... 30 years
Land and building under capital lease....................... lease term
Machinery, equipment and vehicles........................... 3-8 years
Tools and dies.............................................. 5 years
Furniture, fixtures and office equipment.................... 2-8 years
Leasehold improvements...................................... lease term
</TABLE>

Revenue Recognition.

The Company recognizes revenue as products are shipped to customers.

Intangible Assets.

Goodwill, which represents the excess of the purchase price over the fair
value of net assets acquired, is amortized over periods ranging from 20 to 40
years. Covenants not to compete are amortized on a straight-line basis over the
terms of the respective agreements. Patents, royalty rights, trademarks acquired
and licensing agreements are amortized over their estimated useful lives ranging
from 5 to 10 years.

Long-Lived Assets.

In fiscal 1996, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of". The statement requires entities to
review long-lived assets and certain intangible assets in certain circumstances,
and if the value of the asset is impaired, an impairment loss shall be
recognized. The adoption of this policy had no material effect on the Company's
financial position or results of operations.

Income Taxes.

Deferred tax assets and liabilities are determined at the end of each
period, based on differences between the financial statement bases of assets and
liabilities and the tax bases of those same assets and liabilities, using the
currently enacted statutory tax rates. Deferred income tax expense is measured
by the change in the net deferred income tax asset or liability during the year.

Earnings (Loss) Per Share.

Earnings (loss) per share is computed by dividing net earnings (loss) by
the weighted average number of common share and common share equivalents
outstanding during the year. Weighted average common share and common share
equivalents were 3,538,758, 3,616,924 and 3,853,502, for 1994, 1995 and 1996,
respectively.

Benefit Plans.

The Company provides a profit sharing and savings plan (including a 401(k)
plan) to which both the Company and eligible employees may contribute. Company
contributions to the profit sharing and savings plan are voluntary and at the
discretion of the Board of Directors. The Company matches the employee 401(k)
plan contributions with limitations. The total Company contributions to both
plans are limited to the maximum deductible amount under the Federal income tax
law.

F-9
<PAGE> 81

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The Company also provides a retirement plan for its employees covered under
a collective bargaining agreement. The Company is required to contribute to this
plan based on the number of employees in the collective bargaining unit who have
satisfied eligibility requirements. Employees do not contribute to the plan. The
amount of the Company contribution is determined by the collective bargaining
agreement.

The contributions to all the profit sharing, savings, and retirement plans
for 1994, 1995 and 1996, were $257, $259, and $248, respectively.

Cash and Cash Equivalents.

The Company considers all highly liquid, short-term investments with an
original maturity of three months or less, to be cash equivalents.

Investments in Marketable Securities.

At the beginning of fiscal 1994, the Company adopted a new accounting
method for investment securities in accordance with SFAS No. 115 which required
the Company to designate its securities as held to maturity, available for sale
or trading. Securities held to maturity are accounted for at amortized cost and
management must express a positive intent to hold these securities to maturity.
Available-for-sale securities are those that management designates as available
to be sold in response to changes in market interest rates or liquidity needs.
All marketable securities held by the Company are accounted for as
available-for-sale securities. The Company does not invest in trading
securities. The effect of the accounting change was not applied retroactively;
therefore, there was no restatement of prior year investments or cumulative
effect of a change in accounting principle on prior year income. The cumulative
effect at the beginning of fiscal year 1994 was not material.

Fiscal Year.

The Company's fiscal year ends on the last Saturday in December and, as a
result, a fifty-third week is added every 5 or 6 years. The fiscal year ending
December 31, 1994 consisted of fifty-three weeks. References to the fiscal years
1994, 1995 and 1996 are for the fifty-three weeks ended December 31, 1994, the
fifty-two weeks ended December 30, 1995 and the fifty-two weeks ended December
28, 1996, respectively.

Related Party.

A director of the Company is the executor and co-trustee of certain estates
and trusts which beneficially own 48% of the Company's outstanding common stock
as of February 28, 1997. In such capacities, the director exercises either sole
or shared voting and investment power for these shares. The director disclaims
beneficial ownership of this stock. The director is also co-trustee to certain
related trusts which lease facilities to the Company as discussed in Notes 8 and
9. In addition, the director is a partner in a law firm which is the Company's
general counsel and which was paid $138 for its legal fees and disbursements
during 1996.

NOTE 2. STATEMENT OF OPERATIONS AND RESTRUCTURING CHARGES

The 1994 restructuring charge of $1,701 relates to costs of severance and
termination benefits paid or accrued for a change in the level and composition
of employees, termination of existing employee arrangements, inventory
adjustments and fixed asset writedowns related to product lines to be
discontinued. The actions and charges were based on assessments completed by
year-end 1994. The Company provided for severance benefits approximating $1,010
for employee terminations during the third and fourth quarters. Such benefits
covered approximately 25 employees across most departments, which represented
17% of the administrative staff, or 5% of total employees. All such terminations
were completed by the end of the first

F-10
<PAGE> 82

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

quarter of 1995. Inventory and fixed asset write-offs related to products to be
discontinued were $460 and $231, respectively. At the end of 1995, no balances
remained in these accounts.

In the fourth quarter of 1995, the Company announced its intent to
consolidate facilities and exit additional product lines. The 1995 charge is a
result of the Company's decision to exit certain unprofitable product lines,
close the Company's Canadian facility and move the Canadian operations to the
Chicago manufacturing and distribution facilities. The restructuring charges for
these initiatives totaled $2,051. The charges for the closing and relocation of
the Canadian operation totaled $951 including severance benefits of $184
covering all of the Canadian employees. The relocation of the Canadian operation
was completed in the first half of 1996. The remaining $1,100 of restructuring
charges pertains to product lines the Company has decided to exit and the
related write-off of product molds, inventory and patents. Approximately $66 of
inventory reserves, $74 of accrued legal and accrued severance and $140 of
accrued facility closing costs remained on the Company's books at December 28,
1996.

In 1995, the Company received approximately $1,400, net of a contingent
liability, as its share of the net proceeds from a patent suit settlement. The
Company recorded approximately $500 as its share of the proceeds in other income
in 1994.

NOTE 3. INVENTORIES

The components of the Company's inventory were as follows:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Finished goods.............................................. $3,165 $2,604
Work-in-process............................................. 893 1,003
Raw materials............................................... 1,093 784
------ ------
$5,151 $4,391
====== ======
</TABLE>

NOTE 4. PROPERTY, PLANT AND EQUIPMENT

The components of property, plant and equipment were as follows:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Buildings and land....................................... $ 2,167 $ 2,176
Land and building under capital lease.................... 2,535 2,535
Machinery, equipment and vehicles........................ 7,259 7,092
Tools and dies........................................... 5,570 6,704
Furniture, fixtures and office equipment................. 2,446 2,679
Leasehold improvements................................... 1,385 1,329
-------- --------
21,362 22,515
Less accumulated depreciation and amortization........... (12,909) (14,581)
-------- --------
$ 8,453 $ 7,934
======== ========
</TABLE>

F-11
<PAGE> 83

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 5. INTANGIBLE ASSETS

Intangible assets consist of the following:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Goodwill, net of accumulated amortization of $174 on
December 30, 1995 and $223 on December 28, 1996........... $2,027 $1,978
Covenants not to compete, net of accumulated amortization of
$1 on December 30, 1995 and $7 on December 28, 1996....... 29 23
Industrial Revenue Bond fees, net of accumulated
amortization of $169 on December 30, 1995 and $202 on
December 28, 1996......................................... 234 201
Patents, net of accumulated amortization of $1,269 on
December 30, 1995 and $1,327 on December 28, 1996......... 211 153
Licensing agreement, net of accumulated amortization of $3
on December 30, 1995 and $23 on December 28, 1996......... 192 172
------ ------
$2,693 $2,527
====== ======
</TABLE>

NOTE 6. LINE OF CREDIT

On April 12, 1996 the Company completed the consolidation of its banking
relationships and entered into a credit agreement with LaSalle National Bank
(the "LaSalle Credit Agreement"). The LaSalle Credit Agreement provided an
$8,000 line of credit subject to asset based availability formulas and a line of
credit to support letters of credit required for the Company's Industrial
Development Finance Authority Bonds (the "IDBs"). All of the Company's assets
were pledged as collateral in support of the LaSalle Credit Agreement. At
December 28, 1996 there were no borrowings outstanding under the asset based
line of credit. The LaSalle Credit Agreement was terminated and all collateral
was released in connection with the debt incurred relating to the acquisition of
Tamor. (See Note 15).

NOTE 7. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Salaries and wages.......................................... $1,585 $1,104
Property, payroll and other taxes........................... 317 296
Profit sharing trust........................................ 204 217
Sales incentives and commissions............................ 731 814
Accrued professional fees................................... 337 192
Warranty reserve............................................ 495 453
Accrued facility closing costs.............................. 484 140
Other....................................................... 728 802
------ ------
$4,881 $4,018
====== ======
</TABLE>

F-12
<PAGE> 84

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 8. LONG-TERM OBLIGATIONS

Long-term obligations consist of the following:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Mortgage note payable bearing interest at 85.6% of prime,
payable in equal monthly installments of $5,208 through
January 1997; collateralized by land and buildings of
Shutters, Inc............................................. $ 60 $ --
Illinois Development Finance Authority (IDFA) variable rate
demand bonds (Shutters, Inc. Project) Series 1989, issued
December 1989, with interest at a weekly variable rate and
principal payable in annual installments on December 1.
The variable rate at December 28, 1996 was 4.6%........... 2,800 2,400
Illinois Development Finance Authority (IDFA) variable rate
demand Industrial Development Revenue Bonds (Selfix, Inc.
Project) Series 1990, issued September 1990, with interest
at a weekly variable rate and principal payable in annual
installments due December 1. The variable rate at December
28, 1996 was 4.6%......................................... 3,200 2,800
Capital lease obligations................................... 1,854 1,822
------ ------
7,914 7,022
Less current maturities..................................... (892) (838)
------ ------
$7,022 $6,184
====== ======
</TABLE>

Under the terms of the IDFA agreements, the Company may not distribute any
cash dividends. Terms of both IDFA demand bonds provide that the holder may
periodically put the bonds back to the Company which are then remarketed under a
remarketing agreement with a bank. Terms of each remarketing agreement include
irrevocable letters of credit, which provides for borrowings by the Company to
repurchase the bonds until remarketed. The letters of credit have an interest
rate of 1/2%. The terms of these debt agreements include several financial
covenants which have been met by the Company.

The Company entered into an interest rate swap on May 1, 1994 with a
termination date of May 1, 1997. The notional amount of the contract is $1,500
with a fixed rate of 6.45% and a floating rate option based on the U.S. dollar
LIBOR rate. Settlement dates are calendar quarters which commenced on August 1,
1994. The swap fees are included in interest expense.

Aggregate principal payments on long-term debt, excluding capital lease
obligations as of December 28, 1996 are as follows:

<TABLE>
<CAPTION>
Years ending:
<S> <C>
1997................................................... $ 800
1998................................................... 800
1999................................................... 800
2000................................................... 800
2001................................................... 800
Thereafter............................................. 1,200
</TABLE>

Capital lease obligations include a lease agreement between the Company and
two related trusts for the Company's principal factory and corporate office.
Lease payments to the trusts were $478, $491 and $467, in

F-13
<PAGE> 85

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1994, 1995 and 1996, respectively. The lease payments were adjusted in July of
1995 to reflect increases in the Consumer Price Index.

The following schedule shows future minimum lease payments (excluding
rental increases resulting from increases in the Consumer Price Index) together
with the present value of the payments for capital lease obligations.

<TABLE>
<CAPTION>
Years ending:
<S> <C>
1997................................................... $ 342
1998................................................... 342
1999................................................... 342
2000................................................... 342
2001................................................... 342
Thereafter............................................. 2,939
------
4,649
Less amount representing interest...................... (2,827)
------
Present value of minimum lease payments................ $1,822
======
Long-term portion...................................... $1,784
Current portion........................................ 38
------
$1,822
======
</TABLE>

The following is an analysis of the leased land and building under
capitalized lease:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Land and building.......................................... $ 2,535 $ 2,535
Less accumulated amortization.............................. (1,638) (1,769)
------- -------
$ 897 $ 766
======= =======
</TABLE>

NOTE 9. COMMITMENTS AND CONTINGENCIES

The Company also leases certain manufacturing, distribution and office
facilities, including the Canadian facility which is leased from a related trust
(annual rental expense of approximately $115), under operating leases expiring
at various dates through 1999. Most of these leases contain renewal options.

Future minimum rental payments under noncancellable operating leases are as
follows:

<TABLE>
<S> <C>
Years ending:
1997................................................... $297
1998................................................... 115
1999................................................... 96
----
$508
====
</TABLE>

Rent expense under operating leases for 1994, 1995 and 1996 was $399, $381,
and $354, respectively.

The Company has investigated and remediated an environmental matter at its
principal facility in Chicago. In 1994, the Company recorded a $300 accrual for
the cost of such investigation and remediation. Actions to date have been funded
from this accrual. Approximately $61 remained in this account at the end of
1996.

F-14
<PAGE> 86

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 10. INCOME TAXES

The components of earnings (loss) before income taxes are as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Domestic............................................ $(5,631) $(3,262) $1,122
Foreign............................................. (151) (1,021) (316)
------- ------- ------
$(5,782) $(4,283) $ 806
======= ======= ======
</TABLE>

Significant components of the Company's deferred tax items as of December
30, 1995 and December 28, 1996 are as follows:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
DEFERRED TAX ASSETS
Inventory reserves........................................ $ 463 $ 388
Employee benefit expenses and other accruals.............. 513 450
Accounts receivable reserve............................... 365 241
Overhead capitalized in inventory for tax purposes only... 171 26
Capitalized lease treated as operating lease for tax
purposes............................................... 393 430
Reserve for returns....................................... 291 109
Minimum tax, R&D and other credits........................ 332 349
Other accrued liabilities................................. 398 344
Unrealized capital losses and contribution
carryforwards.......................................... 151 133
Net operating loss carryforward........................... 393 612
Other..................................................... 417 407
------- -------
Gross deferred tax assets................................... 3,887 3,489
------- -------
DEFERRED TAX LIABILITIES
Depreciation.............................................. 447 301
Other..................................................... 41 45
------- -------
Gross deferred tax liabilities.............................. 488 346
------- -------
Deferred tax assets net of deferred liabilities............. 3,399 3,143
Valuation allowance......................................... (3,399) (3,143)
------- -------
Net deferred tax asset...................................... $ -- $ --
======= =======
</TABLE>

F-15
<PAGE> 87

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Income tax (expense) benefit is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current
U.S. federal........................................ $ 45 $ 247 $ 0
Foreign............................................. 67 (22) 10
State............................................... 45 48 0
------- ----- -----
157 273 10
------- ----- -----
Deferred
U.S. federal........................................ 2,215 463 (266)
(Increase) decrease in valuation allowance.......... (2,593) (463) 256
------- ----- -----
(378) -- (10)
------- ----- -----
Total income tax (expense) benefit.................... $ (221) $ 273 $ --
======= ===== =====
</TABLE>

Income tax (expense) benefit differs from amounts computed based on the
U.S. federal statutory tax rate applied to earnings (loss) before tax as
follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Computed at statutory U.S. federal income tax rate.......... $ 1,966 $1,456 $(282)
State income taxes, net of U.S. federal tax benefit......... 267 32 39
Foreign tax rate difference and foreign loss
carryforwards............................................. 13 (460) --
Tax exempt interest......................................... 26 25 12
Other....................................................... 100 (317) (25)
Change in valuation allowance............................... (2,593) (463) 256
------- ------ -----
$ (221) $ 273 $ --
======= ====== =====
</TABLE>

The Company decreased the valuation allowance from $3,399 as of December
30, 1995 to $3,143 as of December 28, 1996. The decrease is based on the
Company's evaluation of the future realization of tax benefits recorded as
deferred tax assets.

The Company also has research and development credit carryforwards of
approximately $61 expiring through the year 2010, net operating loss
carryforwards of $1,576 expiring through 2011, state investment tax credit
carryforwards of approximately $88 expiring through 2000, foreign net operating
loss carryforwards of $1,082 expiring in 2002 and alternative minimum tax credit
carryforwards of approximately $198 which do not have an expiration date.

NOTE 11. STOCK OPTIONS

Under the 1987, 1991 and 1994 stock option plans, as amended, key employees
and certain key nonemployees were granted options to purchase shares of the
Company's common stock.

Options granted may or may not be "incentive stock options" as defined by
the Internal Revenue Code of 1986. The exercise price is determined by the
Company's Board of Directors at the time of grant but may not be less than 100%
of the market price at the time of grant for incentive stock options. Options
may not be granted for a term greater than ten years.

F-16
<PAGE> 88

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

During 1995, the Company's Board of Directors cancelled 460,000 options to
various members of senior management at prices ranging from $7.50 to $12.00 and
reissued these options at prices ranging from $6.00 to $8.00 which exceeded the
market price on the date of reissuance.

A summary of the transactions in the option plans is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---------------- ----------------- ----------------
SHARES PRICE* SHARES PRICE* SHARES PRICE*
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of year.... 228,460 $4.65 557,842 $8.65 598,527 $6.74
Granted..................................... 458,800 9.51 626,700 7.22 248,900 4.95
Exercised................................... (99,385) 4.23 (8,147) 4.15 --
Cancelled................................... (30,033) 6.13 (577,868) 9.14 (65,440) 6.20
------- -------- -------
Unexercised options outstanding at end of
year...................................... 557,842 8.65 598,527 6.74 781,987 6.21
======= ======== =======
Options exercisable at end of year.......... 58,487 4.41 15,784 4.69 16,754 4.89
======= ======== =======
Available for grant......................... 234,226 195,394 1,934
======= ======== =======
</TABLE>

- -------------------------
*Weighted average

<TABLE>
<S> <C> <C> <C>
Price range of options
Granted....................................... $4.25 - $12.00 $4.13 - $12.00 $4.25 - $6.00
Exercised..................................... $4.23 - $ 5.00 $4.00 - $ 4.23 --
Cancelled..................................... $4.75 - $ 6.14 $3.13 - $12.00 $4.13 - $8.00
Outstanding................................... $3.13 - $12.00 $4.13 - $ 8.00 $4.13 - $8.00
</TABLE>

The above stock options have the following characteristics as of December
28, 1996:

<TABLE>
<CAPTION>
SHARES REMAINING LIFE SHARES
GRANT YEAR OUTSTANDING PRICE* (IN YEARS)* EXERCISABLE
- ---------- ----------- ------ -------------- -----------
<C> <C> <C> <C> <C>
1987 5,971 $4.23 .3 5,971
1988 1,117 6.14 1.5 1,117
1991 8,000 4.88 4.3 8,000
1993 5,000 6.50 6.8 1,666
1994 10,399 4.25 8.0 --
1995 513,000 6.87 8.4 --
1996 238,500 4.96 9.7 --
------- ------
781,987 16,754
======= ======
</TABLE>

- -------------------------
*Weighted average

During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting For Stock-Based Compensation." The statement required the Company to
calculate the value of stock options at the date of the grant using an option
pricing model. The Company has elected the "pro forma, disclosure only" option
permitted under SFAS No. 123, instead of recording a charge to operations.

F-17
<PAGE> 89

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

A summary of the average grant date exercise price and fair value per
option share is as follows:

<TABLE>
<CAPTION>
1995 1996
----------------- -----------------
EXERCISE FAIR EXERCISE FAIR
PRICE* VALUE* PRICE* VALUE*
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Exercise price exceeds market price............ $7.19 $1.33 $5.00 $2.01
Exercise price equals market price............. 5.19 2.34 4.74 2.11
</TABLE>

- -------------------------
* Weighted average

During 1995 and 1996, 600,000 and 200,000 options, respectively, were
granted with an exercise price exceeding the market price. All other options
were granted with an exercise price equal to the market price.

Had compensation cost for the Company's 1995 and 1996 grants been
determined using the above fair values and considering the applicable vesting
periods, the Company's reported results would have been impacted as follows:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Net earnings (loss)
As reported............................................... $(4,010) $806
Pro forma................................................. (4,092) 564
======= ====
Net earnings (loss) per common and common equivalent share
As reported............................................... $ (1.11) $.21
Pro forma................................................. (1.13) .15
======= ====
</TABLE>

The fair value of each option granted during 1995 and 1996 is estimated
using the following assumptions: (1) dividend yield of 0%, (2) expected
volatility of 41%, (3) risk free rate at grant date averaging 6.2% for 1995 and
6.5% for 1996 and (4) expected life of 5 years.

NOTE 12. SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates in two industry segments, the housewares segment and
the home improvement products segment. The housewares segment provided
approximately 77% of the Company's gross sales in 1996 through sales of its home
bathware, hook and home helpers, juvenile products and home organization
products to national and regional discount, variety, supermarket, drug,
hardware/home center and specialty store customers. The home improvement
products segment provided approximately 23% of the Company's gross sales in
1996. The segment's plastic exterior shutters are sold to distributors as well
as national and regional home center retailers. 1996 sales to customers outside
the United States accounted for approximately 17% of

F-18
<PAGE> 90

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

total net sales with Canada accounting for approximately 7% of total net sales.
Information about the Company's operations in these segments is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Gross sales:
Housewares....................................... $35,805 $34,543 $31,375
Home improvement products........................ 8,417 8,993 9,457
------- ------- -------
Consolidated.................................. $44,222 $43,536 $40,832
======= ======= =======
Operating profit (loss):
Housewares....................................... $(3,949) $(4,892) $ 904
Home improvement products........................ (539) 817 461
------- ------- -------
Consolidated.................................. $(4,488) $(4,075) $ 1,365
======= ======= =======
Identifiable assets:
Housewares....................................... $24,785 $19,687 $19,615
Home improvement products........................ 5,998 5,300 5,090
Eliminations..................................... (22) (11) --
------- ------- -------
Consolidated.................................. $30,761 $24,976 $24,705
======= ======= =======
Depreciation and amortization:
Housewares....................................... $ 3,083 $ 2,684 $ 1,532
Home improvement products........................ 1,247 653 682
------- ------- -------
Consolidated.................................. $ 4,330 $ 3,337 $ 2,214
======= ======= =======
Capital expenditures, net:
Housewares....................................... $ 2,158 $ 880 $ 982
Home improvement products........................ 168 335 642
------- ------- -------
Consolidated.................................. $ 2,326 $ 1,215 $ 1,624
======= ======= =======
</TABLE>

Information about the Company's operations by geographic area is as
follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Gross sales:
United States.................................... $40,422 $40,283 $38,855
Foreign.......................................... 3,800 3,253 1,977
------- ------- -------
Consolidated................................ $44,222 $43,536 $40,832
======= ======= =======
Operating profit (loss):
United States.................................... $(4,185) $(2,975) $ 1,386
Foreign.......................................... (303) (1,100) (21)
------- ------- -------
Consolidated................................ $(4,488) $(4,075) $ 1,365
======= ======= =======
Identifiable assets:
United States.................................... $27,468 $23,699 $24,170
Foreign.......................................... 3,315 1,288 535
Eliminations..................................... (22) (11) --
------- ------- -------
Consolidated................................ $30,761 $24,976 $24,705
======= ======= =======
</TABLE>

F-19
<PAGE> 91

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

One customer represented 11%, 12% and 12% of gross sales for 1994, 1995,
and 1996. The percentage of their receivable to the total receivable is slightly
above their relationship to sales.

NOTE 13. EMPLOYEE STOCK PURCHASE PLAN

The 1995 Employee Stock Purchase Plan allows eligible employees to purchase
up to 200,000 shares of the Company's stock. The purchase price shall be the
lesser of 85% of the fair market value of a common share on the first day of
each purchase period or the fair market value of a common share on the last day
of such purchase period adjusted to the nearest 1/8 point. As of December 28,
1996, 19,639 shares had been purchased under the plan.

NOTE 14. ACQUISITION OF MERICON CHILD SAFETY PRODUCTS

On October 24, 1995, the Company acquired the common stock of Mericon Child
Safety Products for a purchase price of $2,421. The acquisition agreement also
provided for a non-compete period of five years.

Consideration for the acquisition included issuance of 250,000 shares of
the Company's common stock. The Purchase price was allocated as follows:

<TABLE>
<S> <C>
Current assets.............................................. $ 400
Goodwill.................................................... 1,796
Licensing agreement and covenant not to compete............. 225
------
$2,421
Less:
Liabilities............................................... $ 125
Common stock issued....................................... 1,375
------
Cash consideration and direct costs....................... $ 921
======
</TABLE>

Results of operations are included from the date of acquisition. Results of
operations prior to date of acquisition were not material.

NOTE 15. SUBSEQUENT EVENTS

Effective January 1, 1997, the Company acquired Tamor and its affiliated
product distribution company, Housewares. Tamor, headquartered in Leominster,
Massachusetts, is a leading manufacturer of home storage and organization
products and has three manufacturing facilities in the United States. Following
are audited combined financial results for Tamor and Housewares for 1996:

<TABLE>
<CAPTION>
1996
----
<S> <C>
Net sales................................................... $75,714
Gross profit................................................ 17,896
Operating expenses.......................................... 13,524
Operating profit............................................ 4,372
Net earnings................................................ 3,515
</TABLE>

The acquisition will be accounted for as a purchase in 1997. The purchase
price will be allocated to the assets acquired and liabilities assumed based
upon their estimated fair values. Results of operations for Tamor and Housewares
will be included with those of the Company for periods subsequent to January 1,
1997.

F-20
<PAGE> 92

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The excess of the purchase price over the net assets acquired, which is
expected to be approximately $25,000, will be amortized over a period not
exceeding 40 years. The purchase price allocation will be determined during 1997
when appraisals, other studies and additional information become available.
Accordingly, the final allocation may have a material effect on the supplemental
unaudited pro forma information presented below.

The following unaudited pro forma information presents the combined results
of operations as if the acquisition had been completed at the beginning of 1996
and may not be indicative of what would have occurred had the acquisition
actually been made as of such date or results which may occur in the future.

<TABLE>
<CAPTION>
1996
----
(UNAUDITED)
<S> <C>
Net sales................................................... $113,914
Operating profit............................................ 8,240
Net earnings................................................ 1,656
</TABLE>

Adjustments made in arriving at the pro forma unaudited combined results
include increased interest expense and amortization of debt issuance costs on
acquisition debt, amortization of goodwill, certain operating expense reductions
and increased income tax expense computed at an estimated combined statutory
rate of 40% (gives no benefit to the net operating loss carryforwards). No
effect has been given in operating expenses to the fair value of assets
acquired, depreciable values or lives, transition and restructuring costs or
synergistic benefits which may be realized from the acquisition.

Total consideration for the acquisition was approximately $41,900
consisting of approximately $27,800 in cash, $2,400 in common stock (480,000
shares) and the assumption of $11,700 in short and long term debt. The source of
funds for the acquisition included cash of the Company as well as a portion of
the proceeds of a new $60,000 Credit Agreement (the "CREDIT AGREEMENT"), dated
as of February 27, 1997, among the Company, Selfix, Tamor, Shutters, the lenders
which are parties thereto and General Electric Capital Corporation ("GECC"), as
agent, and a new $7,000 Note Purchase Agreement (the "NOTE AGREEMENT"), dated as
of February 27, 1997, among Selfix, Tamor, Shutters (the foregoing,
collectively, the "JOINT ISSUERS"), the Company and GECC. The Credit Agreement
consists of a revolving credit facility and term loans. GECC purchased a $7,000
subordinated equity bridge note (the "SUBORDINATED NOTE") dated February 27,
1997 issued by the Joint Issuers pursuant to the Note Agreement. All loans under
the Credit Agreement are secured by substantially all of the assets of the
subsidiaries of the Company and a pledge by the Company of all of the
outstanding shares of capital stock of such subsidiaries.

The provisions of the Credit Agreement include restrictions on additional
indebtedness, asset sales, acquisitions or mergers, capital expenditures and
dividend payments, among other things. As defined in the Credit Agreement, the
Company is also required to meet certain financial tests which include, but are
not limited to, those relating to a minimum net worth test and a minimum
interest coverage ratio.

The revolving credit facility provides up to $20,000 (including a letter of
credit subfacility of up to $10,000) subject to the availability of sufficient
qualifying collateral consisting of certain accounts receivable and inventory.
Interest is charged, at the Company's option, at either: (i) the 1, 2, or 3
month reserve adjusted LIBOR plus a margin of 2.75%; or (ii) a floating rate
equal to the prime rate plus a margin of 1.25%. Interest is paid monthly for
borrowings which bear interest based on the prime rate, and is paid at the end
of the applicable LIBOR period for borrowings which bear interest based on a
LIBOR rate. An unused facility fee of .5% per annum is charged on the average
unused daily balance. On February 28, 1997, there was no balance outstanding
under the revolving line of credit and unused availability was $11,100. The
availability under the

F-21
<PAGE> 93

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

revolving credit facility was reduced by the issuance of two letters of credit
in the aggregate face amount of $5,600 which secure the IDBs. The revolving
credit facility terminates on August 28, 2002.

The Credit Agreement also includes two term loans consisting of a $20,000
22 quarter term loan A and a $20,000 30 quarter term loan B. Both term loans are
immediately due and payable in full if the revolving credit facility is
terminated.

Term loan A is required to be repaid in quarterly principal installments
commencing in April of 1997. Aggregate principal repayments for term loan A are
as follows:

<TABLE>
<CAPTION>
YEARS ENDING
------------
<S> <C>
1997...................................................... $1,500
1998...................................................... 2,750
1999...................................................... 3,375
2000...................................................... 3,500
2001...................................................... 4,625
Thereafter................................................ 4,250
</TABLE>

Interest is charged, at the Company's option, at either the 1, 2 or 3 month
reserve adjusted LIBOR rate plus a margin of 3.00% or a floating rate equal to
the prime rate plus a margin of 1.50%. At February 28, 1997, the rate was 9.75%.
Interest is paid monthly for prime rate based loans and at the end of the
applicable LIBOR period for LIBOR based loans.

Term loan B is required to be repaid in quarterly principal installments
commencing in April of 1997. Aggregate principal repayments for term loan B are
as follows:

<TABLE>
<CAPTION>
YEARS ENDING
------------
<S> <C>
1997...................................................... $ 150
1998...................................................... 200
1999...................................................... 200
2000...................................................... 200
2001...................................................... 200
Thereafter................................................ 19,050
</TABLE>

Interest is charged, at the Company's option, at either the 1, 2 or 3 month
reserve adjusted LIBOR rate plus a margin of 3.50% or a floating rate equal to
the prime rate plus a margin of 2.00%. At February 28, 1997, the rate was
10.25%. Interest is paid monthly for prime rate based loans and at the end of
the applicable LIBOR period for LIBOR based loans.

After the fiscal quarter of the Company ended in December, 1997 the
interest rates applicable to the obligations outstanding under the Credit
Agreement are subject to adjustment (up or down) based on the Company's
quarterly consolidated financial performance.

The Subordinated Note matures on February 27, 2005, and is secured by a
second lien on substantially all of the assets of the Company's subsidiaries. As
such, the Subordinated Note is subordinated in right of payment from the
proceeds of such collateral to the revolving credit facility and to term loans A
and B. If all outstanding obligations under the Credit Agreement have been paid
and the commitment under the revolving credit facility has been terminated, the
Joint Issuers must prepay the Subordinated Note in full. Interest is payable
quarterly and is charged, at the Company's option, at a rate of 11.5% per annum,
provided that such cash payments shall not exceed 25% of the Company's Excess
Cash Flow (as defined in the Note Agreement)

F-22
<PAGE> 94

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

or through the issuance of payment-in-kind notes bearing interest at a rate of
13.5% per annum. At February 28, 1997, the rate on the Subordinated Note was
13.5%.

In connection with the Subordinated Note, the Company issued a warrant to
GECC to purchase 79,204 shares of common stock (the "Warrant") exercisable at
50% of the Market Price (as defined in the Warrant) on February 27, 1997 (the
"Closing Date"), at any time during the period commencing on August 1, 1997
through February 27, 2007. If the Subordinated Note has been paid in full on or
prior to July 31, 1997, the Company has the option to repurchase the Warrant at
a price equal to $792. The Warrant will be recorded by the Company at its
estimated fair value of $400. Such value has been determined by using an option
pricing model.

If the Subordinated Note is not repaid in full on or prior to July 31,
1997, the number of shares issuable upon exercise of the Warrant will be
increased by that number of shares which is equal to the difference between (i)
5% of the total number of shares of the Company's common stock then outstanding
on a fully diluted basis, and (ii) 79,204 shares. If the Subordinated Note is
not repaid in full on or prior to February 27, 1998, the number of shares
issuable upon exercise of the Warrant will be further increased by that number
of shares which is equal to 2% of the total number of shares of the Company's
common stock then outstanding on a fully diluted basis. The number of shares
issuable upon exercise of the Warrant will be further increased annually by 1%
of the total number of shares of the Company's common stock then outstanding on
a fully diluted basis if the Subordinated Note is not repaid in full on or prior
to February 27, 1999 and on each anniversary date of the Closing Date
thereafter. The exercise price for the shares issuable upon exercise of the
Warrant issued after the Closing Date will be 50% of the Market Price. The
Company may call the shares issued or issuable upon the exercise of the Warrant
and terminate the Warrant at any time after July 31, 2002 at a call price equal
to the Market Price for such shares, but in no event will the call price be less
than $10 per share.

The Credit Agreement provides for mandatory prepayments of obligations
under the Credit Agreement and the Subordinated Note from the following funds:
all net proceeds of any sale or other disposition of any assets (other than the
sale of inventory and other items in the ordinary course of business), all net
insurance proceeds, 100% of the net cash proceeds from the issuance of equity
securities and 75% of annual consolidated excess cash flow as defined in the
Credit Agreement. Mandatory prepayments from the proceeds of any issuance of
equity securities shall be applied as follows: first, 50% of such proceeds
applied to accrued interest and principal of the Subordinated Note and the
remaining 50% applied to accrued interest and principal of term loan A and term
loan B, ratably; and second, 100% of such proceeds applied ratably to accrued
interest and principal of term loan A and term loan B after the Subordinated
Note has been repaid in full. All mandatory prepayments from sources other than
the issuance of equity securities shall be applied as follows: (a) fees and
expenses owed under the Credit Agreement; (b) pro rata to term loans A and B
until both such loans are repaid in full; (c) to repay amounts outstanding under
the revolving credit facility without reduction in availability; and (d) other
obligations outstanding under the Credit Agreement. The Company will also be
required to pay a prepayment premium, as defined in the Credit Agreement, if the
revolving credit facility is terminated or the Company prepays all or any
portion of term loan A or term loan B other than as a result of the mandatory
prepayment discussed above.

F-23
<PAGE> 95

REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS ON SCHEDULE II

Board of Directors
Home Products International Inc.

We have audited in accordance with generally accepted auditing standards
the consolidated financial statements of Home Products International, Inc.
(formerly Selfix, Inc.) as of and for the fifty-two week period ended December
28, 1996 included in this registration statement on Form S-2, and have issued
our report thereon dated February 7, 1997, except with respect to the
transactions discussed in Note 15, as to which the date is February 28, 1997.
Our audit was made for the purpose of forming an opinion on those statements
taken as a whole. The financial statement Schedule II is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The schedule, for the fifty-two week period ended December
28, 1996, has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

Arthur Andersen LLP
Chicago, Illinois

February 7, 1997, except with
respect to the transactions
discussed in Note 15, as to which
the date is February 28, 1997

F-24
<PAGE> 96

REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE II

Board of Directors
Home Products International, Inc. (Formerly Selfix, Inc.)

In connection with our audit of the consolidated financial statements of
Home Products International, Inc. (formerly Selfix, Inc.) and Subsidiaries
referred to in our report dated February 9, 1996, we have also audited Schedule
II for the 52-week and 53-week periods ended December 30, 1995 and December 31,
1994, respectively. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.

GRANT THORNTON LLP

Chicago, Illinois
February 9, 1996

F-25
<PAGE> 97

SCHEDULE II

HOME PRODUCTS INTERNATIONAL, INC.

VALUATION AND QUALIFYING ACCOUNTS
FOR THE FIFTY-THREE WEEKS ENDED DECEMBER 31, 1994,
FOR THE FIFTY-TWO WEEKS ENDED DECEMBER 30, 1995,
FOR THE FIFTY-TWO WEEKS ENDED DECEMBER 28, 1996

<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
BALANCE AT CHARGED TO (NET BALANCE
BEGINNING COSTS AND WRITE-OFFS/ AT END
OF PERIOD EXPENSES RECOVERIES) OF PERIOD
---------- ---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
December 31, 1994.................................... $1,255 $ 565 $ (389) $1,431
December 30, 1995.................................... $1,431 $ 524 $ (560) $1,395
December 28, 1996.................................... $1,395 $ 211 $ (705) $ 901
WARRANTY RESERVES
December 31, 1994.................................... $ 12 $ 500 $ (1) $ 511
December 30, 1995.................................... $ 511 $ -- $ (16) $ 495
December 28, 1996.................................... $ 495 $ -- $ (42) $ 453
INVENTORY RESERVES
December 31, 1994.................................... $ 621 $2,018 $(1,079) $1,560
December 30, 1995.................................... $1,560 $1,648 $ (797) $2,411
December 28, 1996.................................... $2,411 $ 678 $(2,096) $ 993
</TABLE>

F-26
<PAGE> 98

HOME PRODUCTS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 29,
DECEMBER 28, 1997
1996 (UNAUDITED)
------------ -----------
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,879 $ 6,709
Accounts receivable, net.................................. 6,594 17,414
Inventories, net.......................................... 4,391 11,602
Prepaid expenses and other current assets................. 100 883
-------- --------
Total current assets................................... 13,964 36,608
Property, plant and equipment -- at cost.................... 22,515 56,338
Less accumulated depreciation and amortization.............. (14,581) (32,458)
-------- --------
Property, plant and equipment, net.......................... 7,934 23,880
Intangible and other assets................................. 2,807 31,643
-------- --------
TOTAL ASSETS................................................ $ 24,705 $ 92,131
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations............... $ 838 $ 2,810
Accounts payable.......................................... 1,956 14,048
Accrued liabilities....................................... 4,018 8,549
-------- --------
Total current liabilities.............................. 6,812 25,407
-------- --------
Long-term obligations -- net of current maturities.......... 6,184 51,141
Stockholders' equity:
Preferred Stock -- authorized, 500,000 shares, $.01 par
value; none issued..................................... -- --
Common Stock -- authorized 15,000,000 shares, $.01 par
value; 3,881,423 shares issued at December 28, 1996 and
4,381,684 shares issued at March 29, 1997.............. 39 44
Additional paid-in capital................................ 10,839 13,669
Retained earnings......................................... 1,296 2,328
Common stock held in treasury -- at cost (58,762
shares)................................................ (264) (264)
Currency translation adjustments.......................... (201) (194)
-------- --------
Total stockholders' equity............................. 11,709 15,583
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $ 24,705 $ 92,131
======== ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-27
<PAGE> 99

HOME PRODUCTS INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
MARCH 30, MARCH 29,
1996 1997
--------- ---------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $8,625 $31,738
Cost of goods sold.......................................... 5,767 22,610
------ -------
Gross profit.............................................. 2,858 9,128
Operating expenses
Selling................................................... 2,482 4,588
Administrative............................................ 1,301 1,809
Amortization of intangible assets......................... 43 205
------ -------
3,826 6,602
------ -------
Operating profit (loss)................................... (968) 2,526
------ -------
Other income (expense)
Interest income........................................... 11 31
Interest (expense)........................................ (180) (1,532)
Other income, net......................................... 21 124
------ -------
(148) (1,377)
------ -------
Earnings (loss) before income taxes......................... (1,116) 1,149
Income tax (expense) benefit................................ -- (117)
------ -------
Net earnings (loss)......................................... (1,116) 1,032
Retained earnings at beginning of period.................... 490 1,296
------ -------
Retaining earnings at end of period......................... $ (626) $ 2,328
====== =======
Net earnings (loss) per common and common equivalent
share..................................................... $ (.29) $ .23
====== =======
The accompanying notes are an integral part of the financial
statements.
</TABLE>

F-28
<PAGE> 100

HOME PRODUCTS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
MARCH 30, MARCH 29,
1996 1997
--------- ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)....................................... $(1,116) $ 1,032
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 605 1,721
Changes in assets and liabilities:
(Increase) in accounts receivable.................... (702) (1,960)
(Increase) decrease in inventories................... 209 (1,086)
Increase (decrease) in accounts payable.............. 681 (310)
Increase (decrease) in accrued liabilities........... (733) 697
Other operating activities, net........................ (23) 160
------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... (1,079) 254
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Tamor Acquisition, net of cash acquired................... -- (27,792)
Proceeds from sale or maturity of marketable securities... 280 --
Capital expenditures, net................................. (330) (597)
------- --------
NET CASH USED FOR INVESTING ACTIVITIES...................... (50) (28,389)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on borrowings.................................... (16) (11,744)
Net proceeds from borrowings and warrants................. -- 43,671
Payment of capital lease obligation....................... (7) (9)
Exercise of common stock options and issuance of common
stock under stock purchase plan........................ 59 47
------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES................... 36 31,965
------- --------
Net increase (decrease) in cash and cash equivalents...... (1,093) 3,830
Cash and cash equivalents at beginning of period.......... 2,982 2,879
------- --------
Cash and cash equivalents at end of period................ $ 1,889 $ 6,709
======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest and swap fees.................................... $ 140 $ 300
Income taxes, net......................................... 1 --
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-29
<PAGE> 101

HOME PRODUCTS INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. The unaudited condensed financial statements included herein as of and
for the thirteen weeks ended March 30, 1996 and March 29, 1997 reflect, in the
opinion of the Company, all adjustments (which include only normal recurring
accruals) necessary for the fair presentation of the financial position, the
results of operations and cash flows. These unaudited financial statements
should be read in conjunction with the audited financial statements and related
notes thereto. The results for the interim periods presented are not necessarily
indicative of results to be expected for the full year.

NOTE 2. Inventories are summarized as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 28, MARCH 29,
1996 1997
------------ ---------
<S> <C> <C>
Finished goods.......................................... $2,604 $ 6,531
Work-in-process......................................... 1,003 2,045
Raw materials........................................... 784 3,026
------ -------
$4,391 $11,602
====== =======
</TABLE>

NOTE 3. No provision was made for federal income taxes in 1996 or 1997 due to
net operating loss carryforwards available to the Company. The provision for
income taxes for 1997 reflects state income taxes in states in which the Company
has no tax loss carryforwards.

NOTE 4. Earnings per share have been computed by dividing net earnings (loss)
for the thirteen weeks ended March 30, 1996 and March 29, 1997 by the weighted
average common and common equivalent shares of 3,817,181 and 4,513,683,
respectively. Common equivalent shares included in the computation of common and
common equivalent shares represent shares issuable upon assumed exercise of the
stock options using the treasury stock method. Common share equivalents are not
included under the treasury stock method when their effect is antidulitive.

NOTE 5. Pursuant to an agreement dated October 29, 1996, the Company, effective
as of January 1, 1997, took operating and financial control of Tamor
Corporation, assumed substantially all of the liabilities of Tamor and retained
substantially all of the earnings from Tamor's operations. Actual results are
combined since the date of effective control although the purchase transaction
did not close until February 28, 1997.

The aggregate purchase price was approximately $41.9 million, consisting of
approximately $27.8 million in cash, $2.4 million of Common Stock (480,000
shares) and the repayment of approximately $11.7 million of Tamor's long-term
debt, including long-term capital lease obligations. Certain direct transaction
costs and expenses totaled $1.2 million. Deferred imputed interest expense of
$0.4 million was recorded as a result of the effective date of the Tamor
Acquisition prior to the closing date. This amount is amortized to interest
expense during January and February of fiscal 1997. Goodwill recorded in
connection with the acquisition is being amortized over forty years. The
purchase price was allocated as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
Assets acquired............................................. $ 32,755
Goodwill.................................................... 25,700
Deferred imputed interest expense........................... 445
--------
58,900
Less:
Other liabilities assumed................................... (15,800)
--------
Purchase price and direct costs............................. $ 43,100
========
</TABLE>

The pro forma impact of the Tamor Acquisition on the Company's historical
results together with a detailed description of the related financing is more
fully described in Note 15 to the Consolidated Financial Statements of the
Company included elsewhere in this Prospectus.

F-30
<PAGE> 102

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
Tamor Plastics Corporation and
Houseware Sales, Inc.
Leominster, Massachusetts

We have audited the accompanying combined balance sheets of Tamor Plastics
Corporation and Houseware Sales, Inc. as of December 31, 1995 and 1996 and the
related combined statements of income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1996. These combined
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined 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 combined financial position of Tamor Plastics
Corporation and Houseware Sales, Inc. at December 31, 1995 and 1996, and the
combined results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.

BDO Seidman, LLP

January 24, 1997
Gardner, MA 01440

F-31
<PAGE> 103

TAMOR PLASTICS CORPORATION
AND HOUSEWARE SALES, INC.

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
---- ----
<S> <C> <C>
ASSETS (NOTE 6)
Current assets:
Cash and cash equivalents................................. $ 266,783 $ 1,187,858
Accounts receivable, less allowance of $237,000 in 1995
and $659,000 in 1996................................... 9,255,377 8,859,561
Inventories (Note 2)...................................... 6,188,565 6,427,148
Prepaid expenses and other................................ 331,375 354,019
----------- -----------
Total current assets................................. 16,042,100 16,828,586
----------- -----------
Property and equipment, at cost less accumulated
depreciation and amortization (Notes 3 and 4)............. 12,907,887 16,904,864
Cash surrender value of life insurance ($8,912,000 face
amount)................................................... 347,300 362,088
Deferred financing costs.................................... 34,709 --
Deferred state tax assets (Note 8).......................... 45,000 --
----------- -----------
TOTAL ASSETS................................................ $29,376,996 $34,095,538
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Checks issued against future deposits..................... $ 2,222,518 $ 4,376,807
Notes payable............................................. 115,000 --
Accounts payable -- trade (Note 7)........................ 4,654,920 4,202,355
Accounts payable -- other (Note 3)........................ -- 3,824,227
Accrued liabilities (Note 5).............................. 1,471,879 1,730,076
Current maturities of long-term debt (Note 6)............. 909,476 1,099,000
Current maturities of capital lease obligations (Note 4).. 589,470 634,000
----------- -----------
Total current liabilities............................ 9,963,263 15,866,465
----------- -----------
Long-term debt, less current maturities (Note 6)............ 7,434,253 6,031,963
Long-term obligations under capital leases (Note 4)......... 4,582,591 4,015,795
----------- -----------
Total liabilities.................................... 21,980,107 25,914,223
----------- -----------
Commitments and contingencies (Notes 1, 3, 4, 6, 7, 9 and
10)
Stockholders' equity:
Tamor Plastics Corporation common stock, $100 par value;
100 shares authorized; 50 shares issued................ 5,000 5,000
Additional paid-in capital................................ 294,425 294,425
Houseware Sales, Inc. common stock, no par value; 1,000
shares authorized; 100 shares issued................... 500 500
Retained earnings......................................... 7,096,964 9,363,618
----------- -----------
7,396,889 9,663,543
Less treasury stock, 11.23 shares at cost (Note 13)....... -- 1,482,228
----------- -----------
Total stockholders' equity........................... 7,396,889 8,181,315
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $29,376,996 $34,095,538
=========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to combined financial
statements.

F-32
<PAGE> 104

TAMOR PLASTICS CORPORATION
AND HOUSEWARE SALES, INC.

COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net sales (Note 10)................................... $53,806,571 $60,300,801 $75,713,837
Cost of sales (Note 7)................................ 43,235,407 50,193,776 57,817,814
----------- ----------- -----------
Gross profit........................................ 10,571,164 10,107,025 17,896,023
----------- ----------- -----------
Operating expenses:
Selling and warehousing (Note 7).................... 6,220,829 6,565,029 9,885,973
General and administrative.......................... 2,205,219 2,274,035 3,637,606
----------- ----------- -----------
Total operating expenses......................... 8,426,048 8,839,064 13,523,579
----------- ----------- -----------
Income from operations................................ 2,145,116 1,267,961 4,372,444
----------- ----------- -----------
Other income (expense):
Interest expense.................................... (530,901) (1,140,353) (1,190,764)
Other income, net................................... 224,806 97,582 493,886
----------- ----------- -----------
Total other expense, net......................... (306,095) (1,042,771) (696,878)
----------- ----------- -----------
Income before state taxes on income (benefit)......... 1,839,021 225,190 3,675,566
State taxes on income (benefit) (Note 8).............. 93,000 (25,000) 160,000
----------- ----------- -----------
Net income............................................ $ 1,746,021 $ 250,190 $ 3,515,566
=========== =========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to combined financial
statements.

F-33
<PAGE> 105

TAMOR PLASTICS CORPORATION AND HOUSEWARE SALES, INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
HOUSEWARE
TAMOR PLASTICS CORPORATION VICTORY BUTTON COMPANY, INC. SALES, INC.
---------------------------- ------------------------------- ---------------
COMMON STOCK ADDITIONAL COMMON STOCK ADDITIONAL COMMON STOCK
--------------- PAID-IN ------------------ PAID-IN --------------- RETAINED
SHARES AMOUNT CAPITAL SHARES AMOUNT CAPITAL SHARES AMOUNT EARNINGS
------ ------ ---------- ------ ------ ---------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993........ 3 $ 300 $ 51,125 400 $ 198,000 $ 100,000 100 $500 $ 6,145,495
Net income........................ -- -- -- -- -- -- -- -- 1,746,021
Distributions to stockholders..... -- -- -- -- -- -- -- -- (350,877)
-- ------ -------- ---- --------- --------- --- ---- -----------
BALANCE, DECEMBER 31, 1994........ 3 300 51,125 400 198,000 100,000 100 500 7,540,639
Merger of Victory Button Company,
Inc. (Note 12).................. 47 4,700 243,300 (400) (198,000) (100,000) -- -- --
Net income........................ -- -- -- -- -- -- -- -- 250,190
Distributions to stockholders..... -- -- -- -- -- -- -- -- (693,865)
-- ------ -------- ---- --------- --------- --- ---- -----------
BALANCE, DECEMBER 31, 1995........ 50 5,000 294,425 -- -- -- 100 500 7,096,964
Net income........................ -- -- -- -- -- -- -- -- 3,515,566
Purchase of Tamor Plastics
Corporation treasury stock (Note
13)............................. -- -- -- -- -- -- -- -- --
Distributions to stockholders..... -- -- -- -- -- -- -- -- (1,248,912)
-- ------ -------- ---- --------- --------- --- ---- -----------
BALANCE, DECEMBER 31, 1996........ 50 $5,000 $294,425 -- $ -- $ -- 100 $500 $ 9,363,618
== ====== ======== ==== ========= ========= === ==== ===========

TREASURY STOCK
-------------------
SHARES AMOUNT
------ ------
<S> <C> <C>
BALANCE, DECEMBER 31, 1993........ 100 $ 50,000
Net income........................ -- --
Distributions to stockholders..... -- --
----- ----------
BALANCE, DECEMBER 31, 1994........ 100 50,000
Merger of Victory Button Company,
Inc. (Note 12).................. (100) (50,000)
Net income........................ -- --
Distributions to stockholders..... -- --
----- ----------
BALANCE, DECEMBER 31, 1995........ -- --
Net income........................ -- --
Purchase of Tamor Plastics
Corporation treasury stock (Note
13)............................. 11.23 1,482,228
Distributions to stockholders..... -- --
----- ----------
BALANCE, DECEMBER 31, 1996........ 11.23 $1,482,228
===== ==========
</TABLE>

See accompanying summary of accounting policies and notes to combined financial
statements.

F-34
<PAGE> 106

TAMOR PLASTICS CORPORATION
AND HOUSEWARE SALES, INC.

COMBINED STATEMENTS OF CASH FLOWS

(NOTE 11)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income.......................................... $ 1,746,021 $ 250,190 $ 3,515,566
Adjustments to reconcile net income to net cash
provided (used) by operations:
Depreciation and amortization.................... 2,206,048 2,559,819 2,900,809
(Gain) loss on sales of fixed assets............. (62,358) 4,901 31,025
Deferred state taxes............................. -- (45,000) 45,000
Changes in operating assets and liabilities:
Accounts receivable............................ (2,233,842) (2,659,462) 395,816
Inventories.................................... (1,037,450) (841,399) (238,583)
Prepaid expenses and other assets.............. 84,988 (280,132) (37,432)
Checks issued against future deposits.......... 1,173,094 (1,208,451) 2,154,289
Accounts payable and accrued liabilities....... (423,147) 2,215,253 3,629,859
----------- ----------- -----------
Net cash provided (used) by operating
activities.................................. 1,453,354 (4,281) 12,396,349
----------- ----------- -----------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Additions to property and equipment................. (3,047,867) (1,654,653) (6,889,402)
Proceeds from sales of fixed assets................. 106,000 6,500 32,000
----------- ----------- -----------
Net cash used for investing activities......... (2,941,867) (1,648,153) (6,857,402)
----------- ----------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving lines
of credit........................................ 2,780,005 1,816,189 (1,818,149)
Proceeds from vehicle loans......................... 90,182 52,365 140,830
Proceeds from term loans............................ -- 1,300,000 306,000
Payments of capital lease obligations............... -- (318,343) (558,966)
Principal repayment of term loans................... (514,213) (887,616) (1,009,256)
Distributions paid to stockholders.................. (350,877) (693,865) (1,248,912)
Purchase of treasury stock.......................... -- -- (429,419)
----------- ----------- -----------
Net cash provided (used) by financing
activities.................................. 2,005,097 1,268,730 (4,617,872)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................................... 516,584 (383,704) 921,075
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........ 133,903 650,487 266,783
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR.............. $ 650,487 $ 266,783 $ 1,187,858
=========== =========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to combined financial
statements.

F-35
<PAGE> 107

TAMOR PLASTICS CORPORATION AND HOUSEWARE SALES, INC.

SUMMARY OF ACCOUNTING POLICIES

Principles of Combination and Reporting

The Combined financial statements include the accounts of Tamor Plastics
Corporation ("Tamor") and Houseware Sales, Inc. ("Housewares") (collectively,
the "Companies"), which are related through common ownership and management.

All significant interaffiliate transactions and balances have been
eliminated.

Business

Tamor is engaged in the manufacturing and sale of plastic hangers, closet
accessories and houseware products, including an environmental product line of
recycling and separation containers. The company has manufacturing facilities in
Leominster, Massachusetts, Louisiana, Missouri and Thomasville, Georgia, and
sells to retail stores throughout the United States.

Housewares has an exclusive sales agreement with Tamor expiring in
February, 2009. Under the terms of the agreement, the company acts as the sole
sales representative for substantially all of Tamor's product lines and has
agreed not to sell, distribute or promote the sale of any other goods of a
competitive nature.

Cash Equivalents

For purposes of balance sheet classification and the statements of cash
flows, all highly liquid debt instruments purchased with a maturity of three
months or less are considered to be cash equivalents.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or
market. Inventory costs include materials, direct labor, depreciation and other
factory overhead costs.

Property, Equipment and Depreciation

Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the related assets using both straight-line and
accelerated methods. The estimated useful lives are as follows:

<TABLE>
<CAPTION>
CATEGORY LIFE
-------- ----
<S> <C>
Machinery and equipment..................................... 5 - 11 years
Real estate and improvements................................ 31 - 33 years
Leasehold improvements...................................... 5 - 7 years
Office furniture and equipment.............................. 5 - 7 years
Vehicles.................................................... 3 - 5 years
</TABLE>

Income Taxes

The Companies, with the consent of their stockholders, have elected S
Corporation status, whereby the stockholders of each corporation are taxed on
their proportionate share of each Corporation's taxable income. Accordingly, the
accompanying combined financial statements do not include a provision or
liability for federal income taxes.

Deferred income taxes are recognized for the tax consequences of temporary
differences between the financial reporting basis and the tax basis of the
Companies assets and liabilities. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.

F-36
<PAGE> 108

Estimates and Assumptions

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

Fair Value of Financial Instruments

Cash and cash equivalents, accounts receivable, accounts payable and
accrued liabilities are reflected in the financial statements at fair value
because of the short-term maturity of those instruments.

Based upon borrowing rates currently available to the Companies for
issuance of similar debt with similar terms and remaining maturities, the
estimated fair value of the long-term debt and capital lease obligations at
December 31, 1996 approximates carrying value.

Concentration of Credit Risk

Cash and temporary cash investments are with financial institutions which
management considers to be of high quality; however, at times such deposits may
be in excess of the Federal Deposit Insurance Corporation insurance limits.

Revenue Recognition

The Companies recognize revenue when product is shipped to the customer.

F-37
<PAGE> 109

TAMOR PLASTICS CORPORATION
AND HOUSEWARE SALES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

1. SUBSEQUENT EVENT

Tamor's stockholders have entered into a stock purchase agreement with
another company which will result in the sale of 100% of the Company's
outstanding common stock subject to certain provisions, effective January 1,
1997.

Housewares has entered into a merger agreement which would result in the
Company being merged into the company that agreed to purchase Tamor's stock. All
shares of Housewares stock will be canceled, effective January 1, 1997. Prior to
the merger, assets and liabilities included in the December 31, 1996 combined
balance sheet are to be distributed/discharged as follows:

<TABLE>
<S> <C>
Cash and cash equivalents................................... $ 920,204
Other....................................................... 84,502
----------
Assets to be distributed............................... 1,004,706
Liabilities to be discharged................................ (97,075)
----------
Net distributions...................................... $ 907,631
==========
</TABLE>

2. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Finished goods........................................ $3,464,297 $3,325,827
Work-in-process....................................... 870,517 1,175,432
Raw materials......................................... 1,853,751 1,925,889
---------- ----------
Total............................................ $6,188,565 $6,427,148
========== ==========
</TABLE>

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Machinery and equipment............................. $17,813,633 $21,544,567
Real estate and improvements........................ 839,533 1,205,847
Leasehold improvements.............................. 563,393 627,147
Office furniture and equipment...................... 751,246 951,248
Vehicles............................................ 671,691 639,393
Machinery and equipment deposits.................... 330,579 2,693,848
----------- -----------
Total.......................................... 20,970,075 27,662,050
Less accumulated depreciation....................... 13,068,850 15,045,366
----------- -----------
Net property and equipment owned.................... 7,901,225 12,616,684
Leased property under capital leases, net of
accumulated amortization (Note 4)................. 5,006,662 4,288,180
----------- -----------
Net property and equipment.......................... $12,907,887 $16,904,864
=========== ===========
</TABLE>

Tamor has a commitment to construct an addition to the manufacturing
facility in Louisiana, Missouri which it currently leases (Note 4). The Company
has the option through September, 1998 to purchase the building for $1,500,000.
The addition is estimated to cost approximately $2,400,000.

F-38
<PAGE> 110

TAMOR PLASTICS CORPORATION
AND HOUSEWARE SALES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Accounts payable other consists of $3,824,227 of equipment purchases which
are expected to be refinanced on a long-term basis. Long-term financing has not
been arranged due to the impending change in ownership as described in Note 1.

4. LEASES

The Companies lease warehouse and manufacturing facilities, vehicles and
factory and office equipment under capital and operating leases. Assets held
under capital leases include:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Molding machines....................................... $4,008,600 $4,008,600
Molds.................................................. 767,614 767,614
Equipment.............................................. 791,254 791,254
Vehicles............................................... -- 36,700
---------- ----------
Total................................................ 5,567,468 5,604,168
Less accumulated amortization.......................... 560,806 1,315,988
---------- ----------
Leased property, net................................... $5,006,662 $4,288,180
========== ==========
</TABLE>

Lease amortization is included in depreciation expense.

Future minimum payments under capital leases and noncancellable operating
leases with an initial term of one year or more are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Fiscal 1997............................................ $1,139,220 $ 338,000
1998............................................. 1,046,120 292,000
1999............................................. 1,037,869 292,000
2000............................................. 1,029,200 292,000
2001............................................. 1,029,200 73,000
Thereafter....................................... 1,164,451 --
---------- ----------
Total minimum lease payments........................... 6,446,060 $1,287,000
==========
Amount representing interest........................... 1,796,265
----------
Present value of net minimum lease payments............ 4,649,795
Less current obligations............................... 634,000
----------
Long-term obligations.................................. $4,015,795
==========
</TABLE>

Capital lease obligations include $4,527,717 due to a related entity.
Payments on such obligations aggregated $591,300 in 1995 and $1,227,104 in 1996.
Tamor has also guaranteed the related entity's obligations related to these same
leases in the amount of $4,527,717 (Note 7).

Operating lease expense, including ancillary costs of warehouse and
manufacturing facilities, amounted to $345,000 in 1994, $608,000 in 1995 and
$729,000 in 1996. The operating leases contain renewal options and require the
Companies to pay certain operating costs including maintenance, insurance, and
taxes in addition to the minimum lease payments.

F-39
<PAGE> 111

TAMOR PLASTICS CORPORATION
AND HOUSEWARE SALES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Customer rebates...................................... $ 583,645 $ 643,596
Materials............................................. 483,386 442,209
Bonus................................................. -- 330,000
State taxes........................................... 3,662 90,836
Utilities............................................. 120,614 60,000
Payroll and retirement................................ 176,062 103,600
Other................................................. 104,510 59,835
---------- ----------
Total.......................................... $1,471,879 $1,730,076
========== ==========
</TABLE>

6. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
TAMOR
Revolving line of credit with interest at variable
rates (7.6% at December 31, 1996), maturing May,
1988................................................ $6,374,278 $4,671,129
Term note payable in monthly installments of $35,983
plus interest at variable rates (7.6% at December
31, 1996) through May, 1998......................... 1,004,501 572,700
Term note payable in monthly installments of $36,111
plus interest at variable rates (7.6% at December
31, 1996) through January, 1998..................... 902,778 469,444
Note payable to former stockholder's estate in monthly
installments of $20,031 including interest at 5.0%
through August, 2001................................ -- 989,875
Term note payable in monthly installments of $2,600
including interest at 6.0% through June, 2001 with a
final payment of approximately $230,000 due August,
2001, collateralized by a building in Thomasville,
Georgia............................................. -- 300,489
TAMOR AND HOUSEWARES
Various vehicle loans payable in monthly installments
through September, 2001 with interest at rates from
7.4% to 8.4%........................................ 62,172 127,326
---------- ----------
Total.......................................... 8,343,729 7,130,963
Less scheduled current maturities..................... 909,476 1,099,000
---------- ----------
Long-term portion..................................... $7,434,253 $6,031,963
========== ==========
</TABLE>

The bank revolving line of credit and term notes (that mature in 1998), are
collateralized by all of Tamor's assets. The revolving credit line is advanced
based on 80% of qualified accounts receivable, plus 50% of raw material and
finished goods inventories, less certain outstanding letters of credit, all as
defined in the security agreement.

F-40
<PAGE> 112

TAMOR PLASTICS CORPORATION
AND HOUSEWARE SALES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The loan agreements contain, among other matters, certain restrictive
covenants relating to ownership control, payment of dividends, further liens and
security interests, mergers or consolidation with others, investments and
advances, guaranties, borrowings, disposition of collateral, and capital
expenditures in excess of $1,500,000 for 1996 and $1,000,000 thereafter. Tamor
is also required to maintain certain financial ratios related to minimum net
worth, debt to equity and cash flow coverage. Tamor was not in compliance with
the capital expenditures limitation, cash flow coverage ratio, and additional
borrowings. Noncompliance has been waived by the bank for fiscal 1996.

Scheduled maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
Year ended December 31,
<S> <C>
1997................................................... $1,099,000
1998................................................... 5,095,000
1999................................................... 260,000
2000................................................... 274,000
2001................................................... 402,963
----------
Total.................................................. $7,130,963
==========
</TABLE>

7. RELATED PARTY TRANSACTIONS

Tamor purchases packaging materials from an entity which is partially owned
by two stockholders of Tamor. Payments to this entity for packaging materials
were $1,096,713 in 1994, $1,151,000 in 1995 and $1,313,000 in 1996. Accounts
payable trade includes $97,109 at December 31, 1995 and $40,304 at December 31,
1996 due to the related entity.

Tamor also purchases various raw materials from other related parties at
prevailing market prices. Payments to such related parties were $4,707,730 in
1994, $6,826,000 in 1995 and $14,270,000 in 1996. Accounts payable trade
includes $1,396,584 at December 31, 1995 and $1,679,826 at December 31, 1996 due
to the related entities.

Housewares pays commissions to related parties. These commissions amounted
to $334,917 in 1994, $154,862 in 1995 and $1,193,770 in 1996.

Housewares leases its office facilities as a tenant-at-will from a real
estate entity partially owned by the President of Housewares. Rent expense was
$52,588 in 1994, $48,591 in 1995 and $46,936 in 1996.

8. STATE TAXES ON INCOME

State taxes on income (benefit) consist of the following:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current.......................................... $93,000 $ 20,000 $115,000
Deferred......................................... -- (45,000) 45,000
------- -------- --------
Total............................................ $93,000 $(25,000) $160,000
======= ======== ========
</TABLE>

A provision for Federal income taxes is not made due to the election by the
Companies, and consent by their stockholders, to include their respective shares
of the taxable income or loss of the Companies in their individual tax returns.
As a result, no Federal income tax is imposed on the Companies.

Under Massachusetts state tax rules, Subchapter S corporate earnings are
taxed at different rates depending on sales volume as well as includable in the
stockholders' Massachusetts income tax returns.

F-41
<PAGE> 113

TAMOR PLASTICS CORPORATION
AND HOUSEWARE SALES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred state tax assets at December 31, 1996 consist of Massachusetts
investment tax credit carryforwards and other temporary differences aggregating
$125,000 less a valuation allowance of the same amount due to the expected
ownership change which would result in a change in the Company's tax status and
the elimination of all differences in the book and tax basis of assets and
liabilities.

9. COMMITMENTS AND CONTINGENCIES

Employment Agreement

Tamor has an employment agreement with an officer who is also a stockholder
of Tamor. The agreement provides for compensation above a minimum amount
determined by the board of directors, inflationary increases, and additional
compensation equal to four percent of Tamor's income before taxes. Minimum
annual compensation under the agreement is as follows:

<TABLE>
<CAPTION>
Year ended December 31,
<S> <C>
1997................................................... $ 165,000
1998................................................... 165,000
1999................................................... 165,000
2000................................................... 165,000
2001................................................... 165,000
Thereafter............................................. 197,000
----------
Total.................................................. $1,022,000
==========
</TABLE>

Retirement Plan

Housewares has a profit sharing retirement plan in which eligible employees
may elect to contribute up to 15% of their annual compensation and the Company
will match up to 2% of an employee's annual compensation. In addition, the
Company contributes an amount once a year based upon profits for the year.
Pension expense was $50,358 in 1994, $45,575 in 1995 and $51,403 in 1996.

10. SIGNIFICANT CUSTOMERS

The Companies have two significant customers that each comprise more than
10% of total sales in 1994, 1995 and 1996. Sales to these customers represent
approximately 31% and 17% of total sales in 1994, 33% and 12% of total sales in
1995, and 28% and 11% of total sales in 1996.

11. SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest and state income taxes was as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Interest..................................... $508,918 $1,096,590 $1,204,106
State income taxes........................... 30,476 93,401 14,364
</TABLE>

NONCASH INVESTING AND FINANCING ACTIVITIES:

The Company issued a note payable for $1,052,809 to the estate of a former
stockholder for the purchase of treasury stock in 1996.

The Companies incurred capital lease obligations of $5,243,529 in 1995 and
$36,700 in 1996.

F-42
<PAGE> 114

TAMOR PLASTICS CORPORATION
AND HOUSEWARE SALES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

12. MERGER

On January 1, 1995, Victory Button Company, Inc. was merged with and into
Tamor Plastics Corporation. Both corporations were commonly owned by the same
stockholders. The merger was accounted for as a pooling of interests, and
accordingly, the accompanying financial statements include the accounts and
operations of Victory Button Company, Inc. for all periods prior to the merger.

13. TREASURY STOCK

The stockholders' have a stock redemption agreement which requires each
stockholder desiring to sell their stock to first offer the stock for sale to
the Company, and if not purchased by the Company, to the other stockholders, at
agreed upon book value. The stock redemption agreement will be rescinded upon
the closing of the stock sale as described in Note 1.

Upon the death of any stockholder, the Company is required to purchase the
decedent's stock at agreed upon book value. During 1996, 11.23 shares were
purchased by the Company for $1,482,228 including a note payable to the former
stockholders estate for $1,052,809 (See Note 6).

F-43
<PAGE> 115
Quality juvenile organization products.

Photo #1
Photo of child with various juvenile organization products

Photo #2
Photo of display of lap desk

Photo #3
Photo of child's toys, toybox and skates

Unique line of
exterior shutters.

Photo #4 Photo #5
Photo of house displaying shutters Photo of shutter
<PAGE> 116

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
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 DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 9
Use of Proceeds........................ 15
Price Range of Common Stock............ 15
Capitalization......................... 16
Dividend Policy........................ 16
Unaudited Pro Forma Condensed Combined
Financial Statements................. 17
Selected Historical Financial Data..... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 23
Business............................... 38
Management............................. 48
Certain Relationships and Related
Transactions......................... 57
Principal and Selling Shareholders..... 59
Description of Company's Securities.... 61
Shares Eligible for Future Sale........ 62
Description of the Credit Agreement and
Other Debt........................... 63
Underwriting........................... 66
Legal Matters.......................... 67
Experts................................ 68
Additional Information................. 68
Documents Incorporated by Reference.... 69
Financial Statements................... F-1
</TABLE>

======================================================
======================================================
3,500,000 SHARES

HOME PRODUCTS INTERNATIONAL, INC. LOGO

COMMON STOCK

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

PROSPECTUS
------------------------

EVEREN SECURITIES, INC.

MONTGOMERY SECURITIES

JUNE 24, 1997
======================================================