<PAGE>

-------------------------------------------------------------------------------
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark one)

        [X]       Quarterly Report Pursuant To Section 13 or 15(d) of the
                  Securities Exchange Act of 1934 For the quarter period ended
                  November 30, 1999

                                       OR

        [ ]       Transition Report Pursuant to Section 13 or 15(d) of the
                  Securities Exchange Act of 1934 For the transition period from
                  _______ to ________


                         COMMISSION FILE NUMBER: 1-7736


                                TAB PRODUCTS CO.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          DELAWARE                                       94-1190862
  (STATE OF INCORPORATION)                   (IRS EMPLOYER IDENTIFICATION NO.)

                               1400 PAGE MILL ROAD
                           PALO ALTO, CALIFORNIA 94304
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (650) 852-2400
              (REGISTRANT'S TELEPHONE NUMBER - INCLUDING AREA CODE)

                                 NOT APPLICABLE
                     FORMER NAME, FORMER ADDRESS AND FORMER
                          FISCAL YEAR, IF CHANGED SINCE
                                  LAST REPORT.

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common shares outstanding as
of November 30, 1999 - 5,214,589.

This report, including all exhibits and attachments, contains 47 pages.

<PAGE>

                                TAB PRODUCTS CO.

                                      INDEX

                    PART I.  FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                   PAGE NO.
<S>                                                                             <C>
ITEM 1            FINANCIAL STATEMENTS:

                  Consolidated Condensed Balance Sheets
                  November 30, 1999 and May 31, 1999                                    3

                  Consolidated Condensed Statements of Earnings
                  Three months and Six months ended November 30,
                  1999 and 1998                                                         4

                  Consolidated Condensed Statements of Cash Flows
                  Six months ended November 30, 1999 and 1998                           5

                  Supplemental Financial Data - Notes                                   6

ITEM 2            Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                   9

ITEM 3            Quantitative and Qualitative Disclosure About
                  Market Risks                                                         17


                               PART II. OTHER INFORMATION

ITEM 4            Submission of Matters to a Vote of Security Holders                  19

ITEM 6            Exhibits                                                             19

                  Signatures                                                           20
</TABLE>


                                       2

<PAGE>

                                TAB PRODUCTS CO.
                CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
                        (000'S OMITTED EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                               NOVEMBER 30,                 MAY 31,
                                                                   1999                      1999
                                                             ----------------           ---------------
<S>                                                         <C>                        <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                   $       2,587             $      6,972
   Short-term investments                                              4,262                    2,941
   Accounts receivable, less allowances of
     $1,024 and $936 for doubtful accounts                            27,507                   26,397
   Inventories                                                         7,500                    8,834
   Prepaid income taxes and other expenses                            10,383                    6,210
                                                             ----------------           ---------------

                      TOTAL CURRENT ASSETS                            52,239                   51,354
                                                             ----------------           ---------------

Property, plant and equipment, net of accumulated
  depreciation of $36,891 and $43,339                                 16,870                   19,642
Goodwill, net                                                          2,996                    3,131
Other assets                                                           3,086                    1,201
                                                             ----------------           ---------------

TOTAL ASSETS                                                   $      75,191             $     75,328
                                                             ----------------           ---------------
                                                             ----------------           ---------------


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current portion of long-term debt                           $       3,438             $      3,437
   Accounts payable                                                    8,959                    7,648
   Compensation payable                                                2,147                    2,086
   Other accrued liabilities                                           5,818                   11,221
                                                             ----------------           ---------------

                     TOTAL CURRENT LIABILITIES                        20,362                   24,392
                                                             ----------------           ---------------

Long-term debt                                                         3,195                    3,953
                                                             ----------------           ---------------

Deferred taxes and other non-current liabilities                       3,581                    3,855
                                                             ----------------           ---------------

STOCKHOLDERS' EQUITY:
   PREFERRED STOCK: $.01 par value, authorized
     500,000 shares, issued-none                                          -                        -
   COMMON STOCK: $.01 par value, authorized
     25,000,000 shares, issued-November 1999-
     7,611,116 shares and May 1999-7,606,116 shares                       76                       76
   Additional paid-in capital                                         15,285                   15,255
   Deferred compensation                                              (1,424)                      -
   Retained earnings                                                  68,559                   63,031
   TREASURY STOCK: November 1999-2,396,527 shares
     and May 1999-2,578,427 shares                                   (31,114)                 (32,320)
   Accumulated other comprehensive loss                               (3,329)                  (2,914)
                                                             ----------------           ---------------


                      TOTAL STOCKHOLDERS' EQUITY                      48,053                   43,128
                                                             ----------------           ---------------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                     $      75,191             $     75,328
                                                             ----------------           ---------------
                                                             ----------------           ---------------
</TABLE>

SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.


                                       3

<PAGE>

                                TAB PRODUCTS CO.
            CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
                        (000'S OMITTED EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                                   NOVEMBER 30,                           NOVEMBER 30,
                                                      ---------------------------------------  -----------------------------------
                                                             1999                1998               1999               1998
                                                      -------------------  ------------------  ----------------  -----------------
<S>                                                   <C>                  <C>                 <C>               <C>
REVENUES                                                     $   31,201          $   38,631        $   63,195         $   76,075
                                                      -------------------  ------------------  ----------------  -----------------

COSTS AND EXPENSES:
    Cost of revenues                                             18,561              24,221            37,805             48,098
    Selling, general and administrative                          14,591              13,927            28,248             27,091
    Research and development                                        204                 206               397                462
                                                      -------------------  ------------------  ----------------  -----------------
       TOTAL COSTS AND EXPENSES                                  33,356              38,354            66,450             75,651
                                                      -------------------  ------------------  ----------------  -----------------

       OPERATING INCOME (LOSS)                                   (2,155)                277            (3,255)               424

Gain on sale of Field Service Group                                  -                   -             13,794                 -
Interest, net, and other                                             16                (133)             (127)              (271)
                                                      -------------------  ------------------  ----------------  -----------------
       Earnings (loss) before income taxes                       (2,139)                144            10,412                153

Provision (benefit) for income taxes                               (898)                 65             4,373                 69
                                                      -------------------  ------------------  ----------------  -----------------
       NET EARNINGS (LOSS)                                   $   (1,241)         $       79        $    6,039         $       84
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------

Basic net earnings (loss) per share                          $    (0.24)         $     0.02        $     1.19         $     0.02
                                                      -------------------  ------------------  ----------------  -----------------
                                                      -------------------  ------------------  ----------------  -----------------

Shares used in computing basic
 net earnings (loss) per share                                5,113,919           5,114,414         5,069,957          5,143,079
                                                      ===================  ==================  ================  =================

Diluted net earnings (loss) per share                        $    (0.24)         $     0.02        $     1.19         $     0.02
                                                      ===================  ==================  ================  =================

Shares used in computing diluted
 net earnings (loss) per share                                5,113,919           5,148,532         5,087,374          5,221,761
                                                      ===================  ==================  ================  =================
</TABLE>


SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.


                                       4

<PAGE>

                                TAB PRODUCTS CO.
           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (000'S OMITTED)

<TABLE>
<CAPTION>
                                                                                SIX MONTHS ENDED
                                                                                  NOVEMBER 30,
                                                                             1999               1998
                                                                      -----------------   -----------------
<S>                                                                   <C>                 <C>
OPERATING ACTIVITIES:

     Net earnings                                                         $     6,039        $         84
     Adjustments to Reconcile Net Earnings to Net Cash
     Provided by Operating Activities:
     Depreciation and amortization                                              2,125               2,458
     Gain on sale of Field Service Group                                      (13,794)                 -
     Changes in operating assets and liabilities:
          Accounts receivable                                                  (1,052)             (2,676)
          Inventories                                                            (870)             (1,049)
          Prepaid income taxes and other expenses                              (1,720)               (213)
          Other assets                                                            570                  60
          Accounts payable                                                      1,091               2,901
          Compensation payable                                                     (6)             (1,842)
          Other accrued liabilities                                              (412)                 93
                                                                      -----------------   -----------------
NET CASH REQUIRED BY OPERATING ACTIVITIES                                      (8,029)               (184)
                                                                      -----------------   -----------------

INVESTING ACTIVITIES:

     Sale of Field Service Group                                               13,405
     Purchase of property, plant and equipment, net                              (878)             (3,239)
     Purchases of short-term investments                                       (3,811)             (2,961)
     Sales of short-term investments                                            2,490               4,398
                                                                      -----------------   -----------------
NET CASH PROVIDED (REQUIRED) BY INVESTING ACTIVITIES                           11,206              (1,802)
                                                                      -----------------   -----------------

FINANCING ACTIVITIES:

     Repayment of long-term debt                                                 (790)               (781)
     Cash restricted to collateralize loan                                     (6,000)                 -
     Proceeds from issuance of common stock                                        -                  25
     Repurchase of Treasury Stock                                                (218)               (641)
     Dividends paid                                                              (511)               (513)
                                                                      -----------------   -----------------
NET CASH REQUIRED BY FINANCING ACTIVITIES                                      (7,492)             (1,910)
                                                                      -----------------   -----------------

Effect of exchange rate changes on cash                                           (70)                (68)
                                                                      -----------------   -----------------

Decrease in cash and cash equivalents                                          (4,385)             (3,964)

Cash and cash equivalents at beginning of period                                6,972               7,199
                                                                      -----------------   -----------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                $     2,587        $      3,235
                                                                      =================   =================
</TABLE>

SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.


                                       5

<PAGE>

                                TAB PRODUCTS CO.
                 SUPPLEMENTAL FINANCIAL DATA - NOTES (UNAUDITED)

1.   BASIS OF PRESENTATION

     The Company's unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
and, in the opinion of management, reflect all adjustments (consisting only
of normal recurring adjustments) considered necessary to fairly state the
Company's financial position, results of operations, and cash flows for the
periods presented. These consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements
included in the Company's Annual Report Form 10-K for the fiscal year ended
May 31, 1999. No diluted loss per share information for the three months
ended November 30, 1999 has been presented in the accompanying consolidated
condensed statements of earnings since potential common shares from
conversion of stock options are antidilutive. The results of operations for
the six-month period ended November 30, 1999 are not necessarily indicative
of the results to be expected for any subsequent quarter or for the entire
fiscal year ending May 31, 2000. The May 31, 1999 balance sheet was derived
from audited consolidated financial statements, but does not include all
disclosures required by generally accepted accounting principles.

Certain amounts have been reclassified to conform to the current year
presentation.

2.   INVENTORY

     Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                  NOVEMBER 30, 1999            MAY 31, 1999
                                               ------------------------   -----------------------
<S>                                            <C>                        <C>
         Finished goods                             $         2,465          $       2,415
         Work in process                                        242                  2,538
         Raw materials                                        4,793                  3,881
                                               ------------------------   -----------------------
                                                    $         7,500          $       8,834
                                               ------------------------   -----------------------
                                               ------------------------   -----------------------
</TABLE>

3.   DIVIDENDS

      Dividends declared for the six month periods ended November 30, 1999
and 1998 were as follows:

<TABLE>
<CAPTION>
         RECORD DATE                    SHARES OUTSTANDING         DIVIDEND PER SHARE
         -----------                    ------------------         ------------------
<S>                                     <C>                        <C>
         Fiscal 2000:
           August 25, 1999                    5,024,589                  $   .05
           November 24, 1999                  5,214,589                  $   .05

         Fiscal 1999:
           August 25, 1998                    5,171,514                  $   .05
           November 25, 1998                  5,084,889                  $   .05
</TABLE>


                                       6

<PAGE>

ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)

TAB PRODUCTS CO., NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(CONTINUED)

4.   SEGMENT REPORTING

     Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly
by the chief operating decision maker, or chief decision making group, in
deciding how to allocate resources and in assessing performance. The
President and Chief Executive Officer is the Company's chief decision maker.
The Company operates and is managed internally by four geographic operating
segments. The operating segments include United States, Canada, the
Netherlands and Australia. Outside the United States, each operating segment
has a general manager that reports to the Chief Executive Officer. Within the
United States, the Vice Presidents of Operations, Marketing and Sales report
directly to the Chief Executive Officer.

Information about segments:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                           NOVEMBER 30,                           NOVEMBER 30,
                                                -----------------------------------   -------------------------------------
                                                     1999               1998               1999                 1998
                                                ----------------   ----------------   ----------------    -----------------
<S>                                             <C>                <C>                <C>                 <C>
Revenues:
        United States                               $   24,736        $    30,933        $    50,496         $     61,826
        Canada                                           4,288              4,513              8,432                8,520
        Netherlands                                      1,258              2,169              2,235                3,763
        Australia                                          919              1,016              2,032                1,966
                                                ----------------   ----------------   ----------------    -----------------
        Consolidated Total                          $   31,201        $    38,631            $63,195         $     76,075
                                                ----------------   ----------------   ----------------    -----------------
                                                ----------------   ----------------   ----------------    -----------------

Income (Loss) before income taxes:
        United States                               $   (1,812)       $      (181)       $    10,910         $       (101)
        Canada                                            (432)              (179)              (648)                (536)
        Netherlands                                        190                524                245                  871
        Australia                                          (85)               (20)               (95)                 (81)
                                                ----------------   ----------------   ----------------    -----------------
        Consolidated Total                          $   (2,139)      $        144        $    10,412         $        153
                                                ----------------   ----------------   ----------------    -----------------
                                                ----------------   ----------------   ----------------    -----------------

Depreciation and amortization:
        United States                               $      862        $     1,118        $     1,842         $      2,215
        Canada                                             112                105                221                  178
        Netherlands                                         13                 12                 30                   29
        Australia                                           20                 19                 32                   36
                                                ----------------   ----------------   ----------------    -----------------
        Consolidated Total                          $    1,007        $     1,254        $     2,125         $      2,458
                                                ----------------   ----------------   ----------------    -----------------
                                                ----------------   ----------------   ----------------    -----------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                    NOVEMBER 30, 1999        MAY 31, 1999
                                                                                    -----------------      -----------------
<S>                                                                                 <C>                    <C>
Long-lived assets:
        United States                                                                     $ 18,917               $ 19,692
        Canada                                                                                 707                    786
        Netherlands                                                                            126                    133
        Australia                                                                              206                    232
                                                                                    -----------------      -----------------
        Consolidated Total                                                                $ 19,956               $ 20,843
                                                                                    -----------------      -----------------
                                                                                    -----------------      -----------------
</TABLE>

Geographic revenues are based on the country from which customers are
invoiced. Income before tax is net sales less operating expenses, interest or
other expenses, but prior to income taxes.


                                       7

<PAGE>

ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)

TAB PRODUCTS CO., NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(CONTINUED)

5.   NET EARNINGS (LOSS) PER SHARE

     Basic earnings per share is computed by dividing net earnings by the
weighted average common shares outstanding for the period while diluted
earnings per share also includes the dilutive impact of stock options. No
diluted loss per share information for the three months ended November 30,
1999 has been presented since potential common shares from conversion of
stock options are antidilutive with respect to income from operations. Basic
and diluted earnings per share for the quarters and six-months ended November
30, 1999 and 1998, respectively, are calculated as follows (in thousands,
except share data):

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                               NOVEMBER 30,                           NOVEMBER 30,
                                                   --------------------------------------  ------------------------------------
                                                          1999                1998               1999               1998
                                                   -------------------  -----------------  -----------------  -----------------
<S>                                                <C>                  <C>                <C>                <C>

NET EARNINGS (LOSS)                                    $     (1,241)       $         79       $      6,039        $         84
                                                   -------------------  -----------------  -----------------  -----------------
  BASIC:
       Weighted average common shares
        outstanding used in computing
        basic net earnings per share                      5,113,919           5,114,414          5,069,957           5,143,079
                                                   -------------------  -----------------  -----------------  -----------------
   BASIC NET EARNINGS (LOSS) PER SHARE                 $      (0.24)       $       0.02       $       1.19        $       0.02
                                                   -------------------  -----------------  -----------------  -----------------
                                                   -------------------  -----------------  -----------------  -----------------
   DILUTED:
       Weighted average common shares
       outstanding                                        5,113,919           5,114,414          5,069,957           5,143,079
       Dilutive options outstanding                             -                34,118             17,417              78,682
                                                   -------------------  -----------------  -----------------  -----------------
       Shares used in computing diluted
       net earnings per share                             5,113,919           5,148,532          5,087,374           5,221,761
                                                   -------------------  -----------------  -----------------  -----------------
   DILUTED NET EARNINGS (LOSS) PER SHARE               $      (0.24)       $       0.02       $       1.19        $       0.02
                                                   -------------------  -----------------  -----------------  -----------------
                                                   -------------------  -----------------  -----------------  -----------------
</TABLE>

6.       COMPREHENSIVE INCOME (LOSS)

         The components of comprehensive income (loss), net of tax, are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                       NOVEMBER 30,                           NOVEMBER 30,
                                          ---------------------------------------  -----------------------------------
                                                    1999                 1998              1999                1998
                                          -------------------  ------------------  ----------------  -----------------
<S>                                       <C>                  <C>                 <C>               <C>
Net earnings (loss)                           $   (1,241)          $        79        $     6,039       $         84
Foreign currency translation                        (442)                   30               (415)              (407)
                                          -------------------  ------------------  ----------------  -----------------
Comprehensive income (loss)                   $   (1,683)          $       109        $     5,624       $       (323)
                                          -------------------  ------------------  ----------------  -----------------
                                          -------------------  ------------------  ----------------  -----------------
</TABLE>

Accumulated other comprehensive income (loss), net of tax, presented on the
accompanying consolidated condensed balance sheets consists of the following
(in thousands):

<TABLE>
<CAPTION>
                                                          NOVEMBER 30,                 MAY 31,
                                                              1999                      1999
                                                     ------------------------  ------------------------
<S>                                                  <C>                       <C>
Foreign currency translation                              $          (948)          $          (533)
Minimum pension liability                                          (2,381)                   (2,381)
                                                     ------------------------  ------------------------

Accumulated other comprehensive loss                      $        (3,329)          $        (2,914)
                                                     ------------------------  ------------------------
                                                     ------------------------  ------------------------
</TABLE>


                                       8

<PAGE>

ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)

TAB PRODUCTS CO., NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(CONTINUED)

7.   STOCK REPURCHASE

     During the three and six months ended November 30, 1999, the Company
repurchased 30,000 and 33,100 shares of Common Stock under the Company's
authorized repurchase program at a cost of $196,000 and $218,000,
respectively. As of November 30, 1999, the Company intends to repurchase an
additional 266,900 shares in the future to the extent such purchases are
consistent with the Company's investment objectives.

8.   LEVERAGED STOCK PURCHASE PLAN

     In October 1999, the Company implemented a Stock Purchase and Stock
Bonus Plan (Plan) with certain executive officers and key employees of the
Company. The Plan allows an employee to borrow funds from the Company to
acquire a specified number of common shares. An equivalent number of shares
of common stock was also granted to each individual. The stock grant vests
after three years. All of the certificates are held by the Company as
collateral against the note receivable. The note and accrued interest will be
forgiven after three years, if the employee continues employment with the
Company during that period. The Company used 215,000 shares of Treasury Stock
to implement the Plan. The note receivable and deferred compensation related
to the stock grant are offset in Stockholders' Equity.

9.   RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. Under SFAS No. 133, entities are
required to carry all derivatives on the balance sheet at fair value. The
accounting for changes in the fair value of a derivative instrument depends
on whether it has been designated and qualifies as part of a hedging
relationship and, if so, the reason for holding it. This statement will be
effective for all annual and interim periods beginning after June 15, 2000.
The effect of adopting the Standard is currently being evaluated, but is not
expected to have a material effect on the Company's financial position or
results of operations.

10.  EVENTS SUBSEQUENT TO NOVEMBER 30, 1999

     Effective October 5, 1999, the Company announced a definitive agreement
to sell its corporate headquarters buildings and the associated land leases
at Stanford Research Park to Eagle Ridge Partners, a real estate investment
group. The agreement was finalized on December 8, 1999 and will close
effective February 15, 2000, subject to satisfaction of standard closing
conditions. The gross sales price is $18 million and will result in a gain
for the Company.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     This report, including without limitation the following section
regarding Management's Discussion and Analysis of Financial Condition and
Results of Operations, contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, regarding the Company and
its business, financial condition, results of operations and prospects. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"foreseeable," "estimates," and similar expressions or variations of such
words are intended to identify forward-looking statements. Additionally,
statements concerning future matters such as the development of new products,
enhancements or technologies, possible changes in legislation and other
statements regarding matters that are not historical are forward-looking
statements.

     Although forward-looking statements in this report reflect the good
faith judgment of the Company's management, such statements can only be based
on facts and factors currently known by the Company. Consequently,
forward-looking statements are inherently subject to risks and uncertainties
and actual results and outcomes may differ


                                       9

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (CONTINUED)

materially from the results and outcomes discussed in the forward-looking
statements. Factors that could cause or contribute to such differences in
results and outcomes include without limitation those discussed in "Business
Environment and Risk Factors" as well as those discussed elsewhere in this
report. Readers are urged not to place undue reliance on these
forward-looking statements, which speak only as of the date of this report.
Readers are urged to carefully review and consider the various disclosures
made by the Company in this report, which attempt to advise interested
parties of the risks and factors that may affect the Company's business,
financial condition, results of operations and prospects.

     The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the Consolidated
Financial Statements of the Company.

FINANCIAL CONDITION

     Pursuant to the Agreement for Purchase and Sale of Assets (the
"Agreement"), by and between the Company and Bell & Howell Document
Management Products Company, a wholly-owned subsidiary of Bell & Howell
Company ("Bell & Howell"), the Company has sold its Field Service Group to
Bell & Howell. The Company's Field Service Group consisted of assets that
include existing service contracts and certain related tangible and
intangible assets and certain liabilities. The price of the Purchased Assets,
as defined in the Agreement, consisted of an initial cash payment from Bell &
Howell to the Company of $11,200,000, the assumption of liabilities and
obligations of the Company valued at $5,900,000 and a final payment of
$2,200,000 paid in August 1999 based on final adjustments to certain accounts
attributable to the Field Service Group. The sale was effective as of June 1,
1999. In order for the Company to obtain consent for the sale from one of its
lenders, the Company placed a portion of the cash payment received from Bell
& Howell in a restricted bank account and pledged the funds as collateral for
the existing loan. In exchange for the pledge of collateral the lender
modified the covenants of the loan and approved the sale transaction.

     On June 22, 1999, the Company announced the consolidation of its paper
manufacturing operations to its main plant located in Mayville, Wisconsin. In
the second quarter of fiscal year 2000, the Company closed its paper
manufacturing facility located in Turlock, California and transferred the
inventory and equipment to Mayville. As a result of the consolidation, the
Company recorded a pre-tax charge of approximately $435,000 in the first
quarter of fiscal year 2000.

     Effective October 5, 1999, the Company announced a definitive agreement
to sell its corporate headquarters buildings and the associated land leases
at Stanford Research Park to Eagle Ridge Partners, a real estate investment
group. The agreement was finalized on December 8, 1999 and will close
effective February 15, 2000, subject to satisfaction of standard closing
conditions. The gross sales price is $18 million and will result in a gain
for the Company.

     At November 30, 1999 the Company had cash and short-term investments of
$6.8 million, a decrease of $3.1 million from the $9.9 million at May 31,
1999. The decrease in cash resulted from operating losses, tax payments,
capital expenditures, repayment of debt, repurchase of stock and dividends
paid. The Company's working capital position at November 30, 1999 was $31.9
million as compared with $27.0 million at May 31, 1999. The current ratio of
2.6 at November 30, 1999 was higher than the current ratio of 2.1 reported
for May 31, 1999. The increase in working capital and current ratio is the
result of the sale of the Field Service Group. Accounts receivable increased
$1.1 million from $26.4 million on May 31, 1999 to $27.5 million on November
30, 1999. As part of the sale of the Field Service Group, the accounts
receivable related to that operation as of the date of the sale of $4.0
million were retained by the Company and collection of these receivables is
the Company's responsibility. As of November 30, 1999 $3.3 million of that
balance had been collected. Accounts receivable increased $2.5 million due to
product shipments associated with professional services projects which cannot
be fully collected until the services are complete. Inventories at November
30, 1999 were $7.5 million as compared to $8.8 million at May 31, 1999. The
decrease in inventory levels is due to Field Service inventories which were
included in the sale.

     In order for the Company to obtain consent for the sale of the Field
Service Group from one of its lenders, the Company chose to place a portion
of the cash payment received from the sale in a restricted bank account and
pledge the funds as collateral for the existing loan. The funds are
classified as other current assets and other non-current assets based on
classification of the collateralized debt. Other current assets increased
$4.2 million from $6.2 million at May


                                       10

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (CONTINUED)

31, 1999 to $10.4 million at November 30, 1999 and other non-current assets
increased $1.9 million from $1.2 million at May 31, 1999 to $3.1 million at
November 30, 1999 primarily due to the collateralization.

     Current liabilities decreased $4.0 million from $24.4 million at May 31,
1999 to $20.4 million at November 30, 1999. Significant transactions which
affect current liabilities include the transfer of deferred revenue to Bell &
Howell of $5.4 million as a result of the sale of the Field Service Group.
Management believes that the Company's cash and cash equivalents, available
credit facilities and operational cash flow will adequately finance
anticipated growth, capital expenditures and debt obligations for the
foreseeable future.

     Investments in property, plant and equipment, which were primarily
focused on enterprise management information systems and associated
infrastructure investments, were $0.4 million and $0.9 million for the three
months and six months ended November 30, 1999. Capital expenditures to
support operations for fiscal 2000 are expected to total approximately $3.0
million, which includes approximately $1.0 million to relocate the Company's
headquarters.

     At November 30, 1999, the Company had $6.6 million of debt outstanding
which bears interest at rates ranging from 6.9% to 8.7%. For the six months
ended November 30, 1999, the Company made $0.8 million in scheduled debt
repayments.

     In July 1999, the Company approved a new authorization to repurchase up
to 300,000 shares of Common Stock from time to time at prevailing market
prices. The authorization is effective until July 2000. During the three and
six months ended November 30, 1999, the Company repurchased 30,000 and 33,100
shares of Common Stock under the Company's authorized repurchase program at a
cost of $196,000 and $218,000, respectively. As of November 30, 1999, the
Company intends to repurchase the remaining 266,900 shares in the future to
the extent such purchases are consistent with the Company's investment
objectives.

     For the six month period ended November 30, 1999 and 1998, the Company
paid cash dividends of $511,000 and $513,000, respectively.

     The Company has an unsecured revolving line of credit of $15 million
with a bank which expires on October 31, 2000. The credit line does not
require compensating balances and there were no borrowings outstanding under
the line of credit at November 30, 1999. Effective January 29, 1999, the
Company entered into a master lease agreement with a technology equipment
leasing company for a total lease line of $0.5 million. As of November 30,
1999, the Company utilized the line to lease computer equipment with a cost
of $0.1 million. The lease is classified as an operating lease.


                                       11

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS

     For comparative purposes, the following unaudited pro forma consolidated
condensed statement of operations for the three and six months ended November
30, 1998 is presented as if the sale of the Field Service Group had occurred
on June 1, 1998.

                                TAB PRODUCTS CO.
             PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED NOVEMBER 30, 1998
                                                                  ---------------------------------------------------------
                                                                                            PRO FORMA
                                                                        HISTORICAL         ADJUSTMENTS        PRO FORMA
                                                                    -------------------  -----------------  ---------------
<S>                                                               <C>                    <C>                <C>
REVENUES                                                                $      38,631       $     (3,703)     $     34,928
                                                                    -------------------  -----------------  ---------------
COSTS AND EXPENSES:
    Cost of revenues                                                           24,221             (3,352)           20,869
    Selling, general and administrative                                        13,927                               13,927
    Research and development                                                      206                                  206
                                                                    -------------------  -----------------  ---------------

       TOTAL COSTS AND EXPENSES                                                38,354             (3,352)           35,002
                                                                    -------------------  -----------------  ---------------

       OPERATING INCOME (LOSS)                                                    277               (351)              (74)

Interest, net, and other                                                         (133)                                (133)
                                                                    -------------------  -----------------  ---------------

       EARNINGS (LOSS) BEFORE INCOME TAXES                                        144               (351)             (207)

Provision (benefit) for income taxes                                               65               (147)              (82)
                                                                    -------------------  -----------------  ---------------

       NET EARNINGS (LOSS)                                              $          79       $       (204)     $       (125)
                                                                    -------------------  -----------------  ---------------
                                                                    -------------------  -----------------  ---------------

<CAPTION>
                                                                             SIX MONTHS ENDED NOVEMBER 30, 1998
                                                                  ---------------------------------------------------------
                                                                                            PRO FORMA
                                                                        HISTORICAL         ADJUSTMENTS        PRO FORMA
                                                                    -------------------  -----------------  ---------------
<S>                                                               <C>                    <C>                <C>
REVENUES                                                                $      76,075       $     (7,181)     $     68,894
                                                                    -------------------  -----------------  ---------------
COSTS AND EXPENSES:
    Cost of revenues                                                           48,098             (6,592)           41,506
    Selling, general and administrative                                        27,091                               27,091
    Research and development                                                      462                                  462
                                                                    -------------------  -----------------  ---------------

       TOTAL COSTS AND EXPENSES                                                75,651             (6,592)           69,059
                                                                    -------------------  -----------------  ---------------

       OPERATING INCOME (LOSS)                                                    424               (589)             (165)

Interest, net, and other                                                         (271)                                (271)
                                                                    -------------------  -----------------  ---------------

       EARNINGS (LOSS) BEFORE INCOME TAXES                                        153               (589)             (436)

Provision (benefit) for income taxes                                               69               (247)             (178)
                                                                    -------------------  -----------------  ---------------
       NET EARNINGS (LOSS)                                              $          84       $       (342)      $      (258)
                                                                    -------------------  -----------------  ---------------
                                                                    -------------------  -----------------  ---------------
</TABLE>

Certain amounts have been reclassified to conform to the current year
presentation.


                                       12

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

REVENUES for the second quarter of fiscal 2000 amounted to $31.2 million,
down $3.7 million or 10.6% from the $34.9 million pro forma revenue reported
in the second quarter of fiscal 1999. Revenues for the six months ended
November 30, 1999 were $63.2 million, down $5.7 million or 8.3% from pro
forma revenues of $68.9 million reported in the first six months of the prior
fiscal year. The Company experienced lower sales in manufactured products
through its Branch channel. Sales from international operations were lower by
$1.6 million, primarily in Europe.

BACKLOG of orders has historically not been a significant factor in
understanding the business of the Company because the order-to-ship cycle was
primarily completed within 30 to 60 days and revenue is generally recognized
upon product shipment. The Branch channel shift to projects with large
customers has created a lengthening order-to-execution period and a resultant
increase in backlog which is reflected in a lengthening order to revenue
period. The Company's order booking to invoice ratio ("book-to-bill") in the
third and fourth quarters of fiscal year 1999 were below previous quarters at
 .84:1.0 resulting in declining backlog and product shipments. The
book-to-bill ratio in the first six months of fiscal 2000 improved to
1.13:1.0, but the carry-over effect of the lower third and fourth quarter
order volumes impacted the first and second quarter revenues and
profitability.

COST OF REVENUE, as a percentage of revenues, was 59.5% for the second
quarter of fiscal 2000 as compared to the 59.8% pro forma cost of revenue
reported in the second quarter of fiscal 1999. Cost of revenues for the
second quarter was $18.6 million as compared to the $20.9 million pro forma
amount reported in the comparable quarter of fiscal 1999. For the six months
ended November 30, 1999 cost of revenues was 59.8% as compared to 60.3% pro
forma cost of revenue in the first six months of the prior fiscal year. The
decrease in cost of revenues as a percentage of revenue was primarily due to
sales mix.

OPERATING EXPENSES were $14.8 million or 47.4% of total revenues for the
second quarter of fiscal 2000 as compared to $14.1 million or 40.5% of total
pro forma revenues for the second quarter of fiscal 1999. For the six months
ended November 30, 1999, operating expenses were $28.6 million or 45.3% of
total revenues as compared to $27.6 million or 40.0% of total pro forma
revenues for the prior fiscal year. The increase in operating expenses as a
percentage of revenues was primarily driven by increased sales compensation
programs and strategic corporate finance expenses.

INTEREST, NET, AND OTHER was $16,000 in net income in the second quarter of
fiscal 2000 as compared to $133,000 in net expense in the second quarter of
fiscal 1999. For the six months ended November 30, 1999 interest, net, and
other was $127,000 as compared to $271,000 in the prior fiscal year. The
increase for the three and six months ended November 30, 1999 was primarily
due to interest earned on the cash proceeds from the Field Service Group sale
and reduction of interest expense due to scheduled principle repayments.

NET LOSS PER SHARE for the three months ended November 30, 1999 was $0.24 for
both basic and diluted shares compared to a pro forma loss per share of $0.02
for both basic and diluted shares for the three months ended November 30,
1998. For the six months ended November 30, 1999 and 1998, equivalent
earnings per share were $1.19 and $0.05 loss, respectively, for both basic
and diluted shares.

EVENTS SUBSEQUENT TO NOVEMBER 30, 1999

     Effective October 5, 1999, the Company announced a definitive agreement
to sell its corporate headquarters buildings and the associated land leases
at Stanford Research Park to Eagle Ridge Partners, a real estate investment
group. The agreement was finalized on December 8, 1999 and will close
effective February 15, 2000. The gross sales price is $18 million and will
result in a gain for the Company.

     Due to the implementation of its Year 2000 compliance program, the
Company to date has not experienced any significant disruptions to its
operations. Additionally, the Company to date has no reported issues with its
products which could be affected by Year 2000. The Company believes that any
worst case Year 2000 problems could still arise and such problems would
probably relate to the systems of third parties.


                                       13

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS (CONTINUED)

RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1998, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. Under SFAS No. 133, entities are
required to carry all derivatives on the balance sheet at fair value. The
accounting for changes in the fair value of a derivative instrument depends
on whether it has been designated and qualifies as part of a hedging
relationship and, if so, the reason for holding it. This statement will be
effective for all annual and interim periods beginning after June 15, 2000.
The effect of adopting the Standard is currently being evaluated, but is not
expected to have a material effect on the Company's financial position or
results of operations.

BUSINESS ENVIRONMENT AND RISK FACTORS

     The Company's future operating results may be affected by various trends
and factors which the Company must successfully manage in order to achieve
favorable operating results. In addition, there are trends and factors beyond
the Company's control which affect its operations. Such trends and factors
include, but are not limited to, adverse changes in general economic
conditions or conditions in the specific markets for the Company's products,
governmental regulation, fluctuations in foreign exchange rates, and other
factors, including those listed below.

     DISTRIBUTION CHANNELS

     The Company is currently pursuing a strategy to refine and expand its
distribution channels. The Branch direct sales strategy has been shifted to
focus on projects with larger customers that bundle products and services as
a way of providing value-added solutions to the Company's customers. This has
resulted in a turnover in the Branch channel and additional training time
which in turn has resulted and may continue to result in lower Branch channel
sales.

     The Company is also expanding its call center operations and direct
replenishment business through this efficient distribution method. In
conjunction with handling inbound sales activity an initiative is underway to
generate sales through the use of outbound telemarketing.

     In June 1998, the Company notified its existing independent distributors
(indirect channel) that effective June 1, 1999 the existing distributor
contract would be canceled. A new contract was offered that eliminated the
exclusive territory rights in the existing contract with other material terms
and conditions remaining substantially the same. By February 1999,
approximately one third of the current independent distributors adopted the
new contract. In March 1999, the Company proposed an alternative contract
that allowed the independent distributors exclusivity on existing and
designated customers, but eliminated exclusivity on a territory basis. The
Company believes the removal of exclusivity is crucial to the Company's
ability to serve its larger nationwide customers where an independent's
resources cannot support the customer's professional services, technology and
project management needs. Approximately 98% of the current independent
distributors signed the revised contract. The signed distributors represent
approximately 99% of the total sales for this channel. The Company is also
seeking to expand its indirect distribution with the addition of dealers in
Branch territories to focus on small to mid-size customers.

     These changes in distribution may disrupt the selling process of the
Company resulting in lower sales. Additionally, the sales cycle for larger
scale projects is substantially longer than the Company's historical
sales-to-delivery cycle resulting in additional working capital requirements.
Market penetration of larger customers may not happen as quickly as
anticipated and may result in higher selling costs.

     RETAINING AND ATTRACTING QUALIFIED PERSONNEL

     The Company's future performance may depend in significant part upon
attracting and retaining key senior management, sales, manufacturing,
marketing and technical support personnel. Competition for such personnel is
intense and the inability to retain its current key personnel or to attract,
assimilate or retain other highly qualified personnel in the future on a
timely basis could have a material adverse effect on the Company's business,
results of operations and financial condition.


                                       14

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (CONTINUED)

BUSINESS ENVIRONMENT AND RISK FACTORS (CONTINUED)

     THE TREND TOWARD DIGITAL TECHNOLOGIES

     Recent market research indicates there may be an accelerated move to
digital technologies, such as imaging, by large paper intensive
organizations. This trend could weaken demand for our paper-based records
management supplies and records storage products. If we fail to match the
changing market with new document management products and services in the
digital arena, our business and prospects could be materially adversely
affected.

     FLUCTUATIONS IN OPERATING RESULTS

     Factors affecting the Company's operating results and gross margins
include the volume of product sales, competitive pricing pressures, the
ability of the Company to match supply with demand, changes in product and
customer mix, market acceptance of new or enhanced versions of the Company's
products and services, changes in the channels through which the Company's
products and services are distributed, timing of new product announcements
and introductions by the Company and its competitors, fluctuations in product
costs, variations in manufacturing cycle times, fluctuations in manufacturing
utilization, the ability of the Company to achieve manufacturing volumes with
its new and existing products, exchange rate fluctuations, a change in the
Company's effective tax rate and changes in general economic conditions. All
of these factors are difficult to forecast and these or other factors can
materially affect the Company's quarterly or annual operating results or
gross margins. Period to period comparisons of our operating results and
gross margins may not be meaningful and you should not rely on them as an
indication of future performance.

     COMPETITION

     The Company expects competition to increase in the future from existing
competitors and from other companies that may enter the Company's existing or
future markets with similar or alternative document management solutions that
may be less costly or provide additional features. Such competition could
result in lower gross margins in the future, if the Company's average selling
prices decrease faster than its costs and could result in lost sales.

     DEPENDENCE ON SOLE SOURCE SUPPLIERS

     The Company purchases several critical components from single or sole
source vendors for which alternative sources are not currently developed.
Development of alternative suppliers would require a significant amount of
time to qualify in the case of certain of the Company's components. The
Company does not maintain long-term supply agreements with any of these
vendors. The inability to develop alternative sources for these single or
sole source components or to obtain sufficient quantities of these components
could result in delays or reductions in product shipments.

     NEW PROCESSES AND PRODUCTS AND MANUFACTURING VOLUMES

     On June 22, 1999, the Company announced the consolidation of its paper
manufacturing operations to its main plant located in Mayville, Wisconsin. In
the second quarter of fiscal year 2000, the Company closed its paper
manufacturing facility located in Turlock, California and transferred the
inventory and equipment to Mayville.

     There can be no assurance that the Company's manufacturing facilities
will achieve or maintain acceptable manufacturing volumes in the future. The
inability of the Company to achieve planned volumes from its manufacturing
facilities could have an adverse effect on the Company's business, financial
condition and results of operations. Any problems experienced by the Company
in its current or future transitions to new processes and products or the
consolidation of its manufacturing operations could have a material adverse
effect on the Company's business, financial condition and results of
operations.

     Recent market research indicates there may be an accelerated move to
digital technologies, such as imaging, by large paper intensive
organizations. This trend could result in a weakening of demand for the
Company's paper-based records management supplies and records storage
products. Failure of the Company to match the changing market with new
document management products and services in the digital arena could
materially adversely affect the Company's business, results of operations,
financial condition and prospects.


                                       15

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (CONTINUED)

BUSINESS ENVIRONMENT AND RISK FACTORS (CONTINUED)

     BACKLOG

     The backlog of orders has historically not been a significant factor in
understanding the business of the Company because the order-to-ship cycle was
primarily completed within 30 to 60 days and revenue is generally recognized
upon product shipment. The shift in the branch channel sales strategy to seek
projects with large customers has created a lengthening order-to-execution
period. Additionally, the professional services component of project sales is
recognized as revenue when the project is completed resulting in a longer
order-to-revenue cycle. Due to this shift in Branch sales strategy the
Company may experience the need for additional working capital to support the
longer order-to-collection cycle being experienced.

     The Company's order booking to invoice ratio ("book-to-bill") in the
third and fourth quarters of fiscal year 1999 were below previous quarters at
 .84:1.0 resulting in declining backlog and product shipments. The
book-to-bill ratio in the first half of fiscal 2000 improved to 1.13:1.0;
however, the carry-over effect of the lower third and fourth quarter order
volumes impacted the first half of fiscal 2000 revenues and profitability.
Orders from the independent distributor channel have begun to rebound with
98% of the dealers signing the new dealer agreement. We cannot assure that
the Company's book-to-bill ratio will continue at this rate.

     GOVERNMENT SALES

     Government revenues primarily expose the Company to risks from
reductions in budget allocations to support regulation and administrative
offices. The current reinventing government initiative opens opportunities to
help the government streamline workflow processes, reduce paperwork and
increase customer service which may provide short-term opportunities for the
Company. However, the long-term effect of a government initiative to
streamline processes could negatively impact the Company's revenue.

     PATENTS, PROPRIETARY RIGHTS AND RELATED LITIGATION

     The Company relies on a combination of patents, trademarks, copyright
and trade secret laws, confidentiality procedures and licensing arrangements
to protect its intellectual property rights. The Company has been notified in
the past and the Company may be notified in the future of claims that they
may be infringing upon patents or other intellectual property rights owned by
third parties. There can be no assurance that in the future any patents held
by the Company will not be invalidated, that patents will be issued for any
of the Company's pending applications or that any claims allowed from
existing or pending patents will be of sufficient scope or strength or be
issued in the primary countries where the Company's products can be sold to
provide meaningful protection or any commercial advantage to the Company.
Additionally, competitors of the Company may be able to design around the
Company's patents.

     EURO CONVERSION

     In January 1999, certain member countries of the European Union
established permanent, fixed conversion rates between their existing
currencies and the European Union's common currency (the Euro). The
transition period for the introduction of the Euro is scheduled to phase in
over a period ending January 1, 2002, with the existing currency being
completely removed from circulation on July 1, 2002. The timing of phasing
out all uses of the existing currencies will comply with the legal
requirements and also be scheduled to facilitate optimal coordination with
the plans of our vendors, distributors and customers. Work related to the
introduction of the Euro and the phasing out of the other currencies includes
converting information technology systems; recalculating currency risk; and
taking action, if needed, regarding continuity of contracts; and modifying
our processes for preparing tax, accounting, payroll and customer records.
Management believes the introduction of the Euro and the phasing out of the
other currencies will not have a material impact on the Company's
Consolidated Condensed Financial Statements.

     RISKS ASSOCIATED WITH INTERNATIONAL SALES

     International sales accounted for approximately 21% and 23%,
respectively, of the Company's total revenues in the second quarter of fiscal
years 2000 and 1999. Fluctuations in currencies could adversely affect the
Company's business, financial condition and results of operations. In
addition, gains and losses on the conversion to United States dollars of
accounts receivable, accounts payable and other monetary assets and
liabilities arising from international operations may contribute to
fluctuations in the Company's results of operations. Because sales of the
Company's


                                       16

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS (CONTINUED)

BUSINESS ENVIRONMENT AND RISK FACTORS (CONTINUED)

products have been denominated to date primarily in United States dollars,
increases in the value of the United States dollar could increase the price
of the Company's products so that they become relatively more expensive to
customers in the local currency of a particular country, leading to a
reduction in sales and profitability in that country. The Company is subject
to the risks of conducting business internationally, including foreign
government regulation and general geopolitical risks such as political and
economic instability, potential hostilities and changes in diplomatic and
trade relationships. Manufacturing and sales of the Company's products may
also be materially adversely affected by factors such as unexpected changes
in, or imposition of, regulatory requirements, tariffs, import and export
restrictions and other barriers and restrictions, longer payment cycles,
greater difficulty in accounts receivable collection, potentially adverse tax
consequences, the burdens of complying with a variety of foreign laws and
other factors beyond the Company's control. In addition, the laws of certain
foreign countries in which the Company's products are or may be developed,
manufactured or sold, may not protect the Company's intellectual property
rights to the same extent as do the laws of the United States and thus make
piracy of the Company's products a more likely possibility. There can be no
assurance that these factors will not have a material adverse effect on the
Company's business, financial condition or results of operations.

     MANAGEMENT OF GROWTH

     The Company has increased its expense levels to support its planned
growth. The Company expects to continue to increase its operating expenses by
hiring additional personnel to support expected growth, increased marketing
efforts and additional research and development activities. If the Company
does not achieve increased levels of revenues commensurate with these
increased levels of operating expenses, or if the Company's revenues decrease
or do not meet the Company's expectations for a particular period, the
Company's business, financial condition and results of operations will be
materially adversely affected.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

     The Company is exposed to market risk related to fluctuations in
interest rates and in foreign currency exchange rates.

     The Company's exposure to market risk due to fluctuations in interest
rates relates primarily to its short-term investment portfolio, which
consists of corporate debt securities, which are classified as
available-for-sale and were reported at an aggregate fair value of $4.3
million as of November 30, 1999. These available-for-sale securities are
subject to interest rate risk in as much as their fair value will fall, if
market interest rates increase. If market interest rates were to increase
immediately and uniformly by 10% from the levels prevailing at November 30,
1999, the fair value of the portfolio would not decline by a material amount.
The Company does not use derivative financial instruments to mitigate the
risks inherent in these securities. However, the Company does attempt to
reduce such risks by typically limiting the maturity date of such securities
to no more than nine months, placing its investments with high credit quality
issuers and limiting the amount of credit exposure with any one issuer. In
addition, the Company believes that it currently has the ability to hold
these investments until maturity, and therefore, believes that reductions in
the value of such securities attributable to short-term fluctuations in
interest rates would not materially affect the financial position, results of
operations or cash flows of the Company.

     The Company's exposure to market risk due to fluctuations in foreign
currency exchange rates relates primarily to the intercompany balance with
its Canadian subsidiary. Although the Company transacts business with various
foreign countries, settlement amounts are usually based on local currency.
Transaction gains or losses have not been significant in the past and there
is no hedging activity on Canadian dollars or other currencies. Based on the
intercompany balance of $1.0 million at November 30, 1999, a hypothetical 10%
adverse change in Canadian dollars against U.S. dollars would not result in a
material foreign exchange loss. Consequently, the Company does not expect
that reductions in the value of such intercompany balances or of other
accounts denominated in foreign currencies, resulting from even a sudden or
significant fluctuation in foreign exchange rates, would have a direct
material impact on the Company's financial position, results of operations or
cash flows.


                                       17

<PAGE>

     Notwithstanding the foregoing analysis of the direct effects of interest
rate and foreign currency exchange rate fluctuations on the value of certain
of the Company's investments and accounts, the indirect effects of such
fluctuations could have a material adverse effect on the Company's business,
financial condition and results of operations. For example, international
demand for the Company's products could be affected by foreign currency
exchange rates. In addition, interest rate fluctuations may affect the buying
patterns of the Company's customers. Furthermore, interest rate and currency
exchange rate fluctuations have broad influence on the general condition of
the U.S., foreign and global economies, which could materially and adversely
affect the Company.


                                       18

<PAGE>

                           PART II: OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Not applicable.

ITEM 2.  CHANGES IN SECURITIES

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         (a)      The company held its annual meeting of stockholders
                  on October 7, 1999.

         (b)      All of management's nominees as listed in the proxy
                  statement were elected.

         (c)      The votes for each Director are indicated below:

<TABLE>
<CAPTION>
                       Director                      For                 Withheld Authority
                  --------------------       --------------------     --------------------------
<S>                                          <C>                      <C>
                  R. R. Augsburger                4,305,382                  249,278
                  K. S. Hanson                    4,477,742                    76,918
                  P. C. Kantz                     4,456,412                    98,248
                  J. K. Myers                     4,479,918                    74,742
                  H. A. Wolf                      4,316,525                   238,135
</TABLE>

         (d)      The company's appointment of Deloitte & Touche LLP as
                  the independent accountants for the fiscal year
                  ending May 31, 2000 was approved. The vote is
                  indicated below:

<TABLE>
<S>                                            <C>
                  For                             4,443,000
                  Against                            65,051
                  Abstain                            46,609
                  Non-Vote                                0
</TABLE>

ITEM 5.  OTHER INFORMATION

         Not applicable.

ITEM 6.  EXHIBITS

<TABLE>
<S>               <C>      <C>
         (a)      10.1     Form of Tab Products Co. Stock Purchase Agreement relating to
                           the Leveraged Stock Purchase Program between the Company and
                           certain executive officers and key employees (1)

                  10.2     Bank of America Amendment No. 3 dated September 24, 1999 to
                           Business Loan Agreement dated November 1, 1998

                  27       Financial Data Schedule
</TABLE>

         (b)      Reports on Form 8-K

                  None


         ---------------------------------
         (1)  Compensatory Plan or Arrangement


                                       19

<PAGE>

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

                                            TAB PRODUCTS CO.
                                              (Registrant)



Date:    January 14, 2000                  /s/ David J. Davis
                                        ---------------------------------------
                                        David J. Davis, Senior Vice
                                        President, Operations and Chief
                                        Financial Officer



Date:    January 14, 2000                  /s/ William R. Kinzie
                                        ---------------------------------------
                                        William R. Kinzie, Corporate
                                        Controller and Chief Accounting
                                        Officer


                                       20