SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K


                [X] Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                   For the fiscal year ended November 30, 1997

             [ ] Transaction Report Pursuant to Section 13 or 15(d)
                          of the Securities Act of 1934

                           Commission File No. 1-9440

                             HARROW INDUSTRIES, INC.
             (Exact name of Registrant as specified in its charter)

         Delaware                                       52-1499075
(State of Incorporation)                   (I.R.S. Employer Identification No.)

                2627 East Beltline, S.E., Grand Rapids, MI 49546

               Registrant's telephone number, including area code

                                 (616) 942-1440

           Securities registered pursuant to Section 12(b) of the Act:

           $65,000,000 12-3/8% Senior Subordinated Debentures due 2002

           Securities registered pursuant to Section 12(g) of the Act:

                                      None



     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 with the Commission and (2) has been subject
to such filing requirements for the past 90 days. Yes _X_  No ___
<PAGE>
ITEM 1. BUSINESS

General

     Through its subsidiaries and divisions,  Harrow Industries, Inc. ("Harrow",
or the "Company")  designs,  manufactures and markets a wide variety of products
primarily  for  the  consumer,   home  remodeling,   commercial  retrofit,   new
residential and commercial construction, access control, and time and attendance
markets.  The Company's major products include professional and consumer pruning
and  harvesting  hand tools,  consumer and  architectural  hardware,  electronic
locking systems,  biometric identification devices, custom residential cabinetry
and water source heat pumps.  Subsequent to November 30, 1997,  the Company sold
its  custom  cabinetry  division  (see  Note  L to  the  Consolidated  Financial
Statements.)

     Harrow's  business  is  affected by various  general  economic  conditions,
including the rate of new construction, which is related to the availability and
cost of financing and other economic conditions.  Management's strategy has been
to limit  Harrow's  sensitivity  to changes  in the  economy  by  maintaining  a
diversified product base and emphasizing the development of products marketed to
the commercial  security and home remodeling and do-it-yourself  markets,  which
management believes have historically been less sensitive to economic downturns.
There can be no assurances,  however,  that a significant decline in the rate of
new construction would not have a material adverse effect on Harrow's business.

     Some of Harrow's operations have seasonal  characteristics.  This generally
produces lower results in Harrow's  first and third fiscal  quarters than in the
second and fourth  quarters.  Since most of its  operations are driven by orders
received  throughout the year,  backlog is not a significant  factor to Harrow's
overall  business.  The  largest  customer  of Harrow,  served by two  unrelated
divisions,  accounts for  approximately  10% of consolidated net sales. No other
customer accounts for 5% or more of consolidated sales.

Segment Information

     Harrow  operates in three industry  segments:  (1) security  products,  (2)
hardware and tools, and (3) other building products.

     Information  concerning sales,  operating income,  identifiable  assets and
certain  other  information  by  industry  segment  is  found  in  Note O to the
Consolidated Financial Statements.

     In accordance  with  management's  philosophy  that Harrow's  operations be
decentralized  and  its  subsidiaries  and  divisions  be  granted   significant
autonomy,  most aspects of the operations,  including  purchasing,  engineering,
manufacturing and marketing are conducted locally. Management believes that this
philosophy  permits  its  various  businesses  to respond  more  quickly to, and
operate more effectively in, the markets they serve.  Following is a description
of the businesses operating in each of the three industry segments.
<PAGE>
Security Products Group

     Locknetics Security Engineering

     Locknetics   Security   Engineering   ("LSE")   located   in   Forestville,
Connecticut,  designs,  manufactures and distributes  electronic locking systems
including  electromagnetic and  electromechanical  security products and systems
primarily for security system wholesalers, contract hardware, locksmith dealers,
alarm wholesalers and automatic door operator manufacturers.

     LSE  products  are sold  through  its own sales  force  and  manufacturers'
representatives.

     Recognition Systems, Inc.

     Recognition Systems,  Inc. ("RSI"),  acquired as of the beginning of fiscal
1995, is located in Campbell,  California and was founded in 1986 with a charter
to develop,  manufacture and market biometric  identification devices based upon
the  measurement  of three  dimensional  hand geometry by using a  sophisticated
combination of infrared cameras, electronic circuitry and associated algorithms.

     RSI sells its  products  into  three  markets  - access  control,  time and
attendance and personal  identification - through a nationwide  network of sales
representative  agencies.  International  sales are typically made to authorized
country distributors who resell within their territories.

Hardware and Tools Group

     H.B. Ives

     H.B.  Ives  ("Ives"),  Harrow's  largest  operation,  is  headquartered  in
Wallingford,  Connecticut with manufacturing and distribution  facilities in New
Haven,   Connecticut,   Michigan  City,  Indiana,  and  Olathe,  Kansas,  and  a
distribution  center in Los  Angeles,  California.  A  significant  increase  or
decrease in Ives' operating performance could have a material effect on Harrow's
overall performance.

     Ives  manufactures  a  broad  line  of  commercial  and  consumer  hardware
including entry sets,  door  coordinators,  exterior door hardware,  door stops,
surface bolts, and cabinet and bath hardware. Through separate operations,  Ives
also  manufactures  wire products and storage hooks as well as decorative  brass
hardware and plumbing fittings.

     Sales to the consumer residential hardware market are direct in the case of
some large customers, and through independent wholesalers to other customers who
are serviced by  manufacturers'  representatives.  Ives sells to the  contractor
hardware and plumbing  markets  through  distributors  serviced by its own sales
force.
<PAGE>
     Corona Clipper

     Corona  Clipper  ("Corona"),   located  in  Corona,  California,   designs,
manufactures  and distributes  pruning and harvesting  tools,  shears,  saws and
other  hand-held  gardening  tools for homeowners and nurseries.  A line of high
quality  professional  pruning  and  harvesting  tools is sold for  agricultural
applications in the grape,  citrus,  avocado and apple  industries as well as to
distributors that service professional landscapers.

     Corona  sells to the  retail  market  through  a  combination  of  in-house
salespeople  and  manufacturers'  representatives.  Its  customers  include mass
merchandisers,  home improvement  centers,  hardware chains and various lawn and
garden distributors. The professional market for pruning tools is served through
a combination of in-house salespeople and manufacturers' representatives.

Other Building Products Group

     Rutt

     Rutt, located in Goodville, Pennsylvania, is a leading manufacturer of high
quality  custom  kitchens,  bath  and  other  cabinetry  primarily  to the  home
renovation  markets.  Rutt is perceived  to be the quality  leader in the custom
residential cabinet market.

     Rutt's  cabinetry  is made to order and is of such high  quality  that Rutt
receives,  through the efforts of its own sales force, extensive  representation
by dealers in affluent  residential  areas of the country.  Rutt  currently  has
products on display in over 130 authorized dealer  locations.  Approximately 80%
of Rutt's sales are to the home  renovation  market.  Subsequent to November 30,
1997,  the  Company  sold its Rutt  operation  (see  Note L to the  Consolidated
Financial Statements).

     FHP Manufacturing

     FHP Manufacturing ("FHP"),  located in Fort Lauderdale,  Florida, is one of
the largest manufacturers of water source heat pumps in the United States. These
units are sold throughout North America under the trade name Florida Heat Pump.

     FHP is a leader in  heating  and  cooling  technology  that uses the energy
available in natural water supplies. Tests show that FHP units are significantly
more energy efficient than conventional  units, which offsets the higher capital
and  installation  costs of FHP equipment for customers  with certain  levels of
heating and cooling requirements.

     FHP  sells  through  manufacturers'  representatives  to  large  mechanical
contractors and through multi-branch  stocking  distributors who in turn sell to
smaller dealers. FHP acts as its own distributor in parts of southern Florida.
<PAGE>
Employees

     As of January 1, 1998,  Harrow  employed 984  employees,  including  744 in
production (management and hourly), 96 in marketing and sales and 144 in finance
and administration. During the year, hourly production employees can increase by
as many as 50 employees, depending on seasonal workloads in some Harrow plants.

ITEM 2. PROPERTIES

     The following table sets forth the facilities of Harrow,  excluding  public
warehouse space, by location and operation. Each location (except the facilities
designated as warehouses and sales showrooms) include administrative offices:

<TABLE>
    Location of                   Owned                Leased
Division/Subsidiary            (Square Ft.)        (Square Ft.)             Use
<S>                             <C>                 <C>               <C>
Grand Rapids, MI                --                   4,264(1)         Corporate Offices.
Coopersville, MI                --                   6,660(1)         Management Information Services
New Haven, CT                   100,000               --              Manufacture of builder and consumer
   (H.B. Ives)                                                          hardware, warehouse and shipping
                                                                        facilities.
Wallingford, CT                 --                  46,700(1)         Sales office and warehouse and shipping
   (H.B. Ives)                                                          facilities.
Michigan City, IN                69,000               --              Manufacture of wire hardware,
   (H.B. Ives)                                                          warehouse and shipping facilities.
Olathe, KS                       61,916               --              Manufacture of plumbing fixtures and
   (H.B. Ives)                                                          brass hardware, warehouse and shipping
                                                                        facilities.
Forestville, CT                 --                  54,470(1)         Manufacture of electronic locking
   (LSE)                                                                systems and accessories, warehouse and
                                                                        shipping facilities.
Goodville, PA                   174,843               --              Manufacture of custom cabinetry,
   (Rutt)                                                               warehouse and shipping facilities.
Los Angeles, CA                 --                   2,668(1)         Sales showroom sublet to independent
   (Rutt)                                                               dealer.
Atlanta, GA                     --                   1,958(1)         Sales showroom sublet to independent
   (Rutt)                                                               dealer.
Chicago, IL                     --                   3,451(1)         Sales showroom sublet to independent
   (Rutt)                                                               dealer.
<PAGE>
Fort Lauderdale, FL              93,600               --              Manufacture of heat pumps, warehouse
   (FHP)                                                                and shipping facilities.
Corona, CA                       73,000               --              Manufacture of pruning tools and other
   (Corona Clipper)                                                     forged products, warehouse and shipping
                                                                        facilities.
Campbell, CA                    --                 13,694(1)          Manufacture of biometric identification
   (RSI)                                                                devices, warehouse and shipping
                                                                        facilities.
</TABLE>
(1)      Lease Terms:
         Grand Rapids, MI--Annual Rental $54,366--expiration September 30, 1998.
         Coopersville,  MI--Annual Rental $84,585--expiration  February 5, 1999.
         Wallingford,  CT--Annual Rental $316,180--expiration December 31, 2002.
         Forestville,  CT--Annual Rental  $333,188--expiration May 31, 2008. Los
         Angeles, CA--Annual Rental $72,481--expiration March 31, 2005;
                  Sub-lease Rental $72,481--expiration March 31, 2005.
         Atlanta, GA--Annual Rental $42,321--expiration April 30, 2000;
                  Sub-lease Rental $42,321--expiration April 30, 2000.
         Chicago, IL--Annual Rental $85,861--expiration November 30, 2005;
                  Sub-lease  Rental   $85,861--expiration   November  30,  2005.
         Campbell, CA--Annual Rental $128,176--expiration September 30, 1998.

ITEM 3. LEGAL PROCEEDINGS

     The  Company is  involved  in  proceedings  with  respect to  environmental
matters  including  sites where the Company has been identified as a potentially
responsible  party under federal and state  environmental  laws and regulations.
While it is not possible to quantify  with  certainty  the  potential  impact of
actions regarding environmental matters, particularly any future remediation and
other  compliance  efforts,  in the opinion of management,  compliance  with the
present environmental protection laws will not have a material adverse effect on
the financial  condition or competitive  position of the Company.  However,  the
Company's   efforts  to  comply  with   increasingly   stringent   environmental
regulations may have an adverse effect on the Company's future earnings.

     Provisions  of $45,000 in 1997,  $453,000 in 1996 and $428,000 in 1995 were
recorded  to cover the  costs of  remedial  actions  expected  to be taken  with
respect to the cleanup of these sites.  As of November 30, 1997,  the  remaining
recorded  liability related to these issues totaled $739,000,  of which $400,000
was provided to cover estimated remediation costs of a former plant site. Annual
remediation costs for this site currently  approximate  $75,000, and remediation
is expected to be completed in as few as three years or as many as twenty years.

     The Company is also subject to legal  proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the amount of
ultimate  liability with respect to these actions will not materially affect the
consolidated financial position of the Company.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's common stock is not registered nor is it publicly traded. See
Item  12  for  information  concerning  the  distribution  of  ownership  of the
Company's common stock.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
                                                                                             Fiscal Year Ended (1)
                                    November 30,       December 1,     December 3,        November 27,        November 28,
                                         1997             1996            1995                1994               1993
                                    ------------       -----------     -----------        ------------        ------------
                                                     (Thousands of Dollars, Except Per Share Data and Ratios)
<S>                                <C>                 <C>             <C>                <C>                 <C>
Statement of operations data:
   Net sales (2) ...............   $ 160,906           $ 148,327       $ 131,730          $ 136,898           $ 126,449
   Net earnings (loss) .........       7,402               5,315           3,403              1,615                (226)
   Net earnings (loss) per
      share of common stock (3)         8.17                4.76            2.91               1.29                (.41)
   Ratio of earnings to fixed
      charges (4) ..............       2.95x                2.24x           1.63x              1.37x               1.03x
Balance sheet data:
   Total assets ................   $  82,948           $  74,720       $  68,989          $  61,378           $  58,622
   Long-term debt and other
      noncurrent liabilities (5)      65,431              56,295          52,510             50,337              50,088
   Stockholders' equity
      (deficit) (6) ............      (3,695)                536            (399)           (3,730)              (5,122)
</TABLE>
(1)   Fiscal 1995 includes 53 weeks; all other fiscal years shown include 52
      weeks.

(2)   Net sales have been  restated  for fiscal 1993 through 1996 to reflect the
      reclassification  of  volume  rebates  and  outbound  freight  expense  as
      deductions   from  net  sales   rather   than  as   elements  of  selling,
      administrative and general expenses as previously reported.

(3)   Earnings  per  share of  common  stock are  calculated  based on  weighted
      average  outstanding  shares  of  892,685  in  1997,  1,074,046  in  1996,
      1,100,000 in 1995, 1,096,671 in 1994 and 1,043,340 in 1993.

(4)   Earnings used in computing the ratio of earnings to fixed charges  consist
      of pretax earnings before fixed charges. Fixed charges consist of interest
      expense, amortization of deferred financing costs and the interest portion
      of rental expense.

(5)   Includes long-term debt, deferred income taxes,  deferred compensation and
      redeemable preferred and common stock.

(6)   Includes the effects of the restructuring  transactions  which occurred in
      1987, as described in Note M to the Consolidated Financial Statements.
<PAGE>
ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Liquidity and Capital Resources

     The Company's cash requirements  relate primarily to the seasonal financing
of working  capital,  the purchase of property,  plant and  equipment,  business
acquisition opportunities, the servicing of outstanding debt and cash dividends.
Cash  provided by operating  activities  continues to be the major source of the
Company's funds and is expected to satisfy a substantial  portion of future cash
needs.  These  funds have been  augmented  by  long-term  debt under a revolving
credit agreement.

     Cash  provided by  operating  activities  totaled  $9.0  million in 1997 as
compared  to $5.7  million in 1996 and $6.4  million in 1995.  Cash  provided by
operating activities before considering changes in working capital totaled $10.9
million in 1997,  $8.2  million in 1996 and $5.2  million in 1995  reflecting  a
continuous  improvement  in net  earnings.  Increased  investments  in  accounts
receivable and  inventories  were required in each year as a result of growth in
the Company's  businesses.  These  investments were partially funded in 1997 and
1996 by related  increases  in accounts  payable and accrued  expenses.  Similar
accounts  payable  increases  in 1995 were more than  adequate  to fund the 1995
increase in accounts receivable and inventories. Working capital at November 30,
1997 was $19.8 million  compared to $18.6 million at the end of fiscal 1996. The
Company's  current ratio of 1.9 to 1 at the end of 1997  declined  slightly from
2.0 to 1 at the end of 1996.

     Capital  expenditures  were $5.2 million in 1997,  $3.1 million in 1996 and
$3.6 million in 1995. The  expenditures  were primarily for capacity  expansion,
new products,  replacement  and cost reduction.  Capital  additions for 1998 are
expected  to  approximate  $5.8  million  and  will be  primarily  for  capacity
expansion, new products and replacement.

     On February 28, 1997, the Company purchased substantially all of the assets
of Broadway  Industries,  Inc. for cash,  including  related  expenses,  of $3.9
million under a transaction approved by a bankruptcy court on February 14, 1997.
Broadway  manufactures and markets high quality decorative plumbing fixtrues and
bath and cabinet hardware.

     Under the terms of a revolving credit agreement,  the Company may borrow up
to $37  million  under a formula  which  includes an amount  based on  qualified
accounts  receivable  and  inventories,   plus  a  term  loan  amount  initially
established at $15 million. As of November 30, 1997, the available unused credit
under the agreement  approximated $9 million.  The agreement also provides for a
standby credit facility of $8 million to finance possible future acquisitions or
other specified transactions.

     The Company's Senior  Subordinated  Debentures  require annual sinking fund
payments;  however,  as a result of prior year  repurchases  of  debentures,  no
principal maturities are due until 2001, when $6.5 million is due.
<PAGE>
     During  fiscal  1997,  the Company  acquired  119,436  shares of its junior
preferred  stock and  191,608  shares  of its  common  stock  for $6.8  million.
Subsequent  to November 30, 1997,  the Company  acquired an  additional  116,121
shares of its common  stock for $7.8  million by  utilizing  $5.0 million of its
standby credit facility and $2.8 million of the  formula-based  revolving credit
facility.

Effects of Inflation

     The Company believes inflation has not had a material overall effect on its
operations during the past three years.

Results of Operations - 1997 Compared to 1996

     Consolidated  net sales  increased  by 8.5% from $148.3  million in 1996 to
$160.9 million in 1997. Net sales of the security  products segment increased by
30.1% from $23.2  million in 1996 to $30.1  million in 1997.  Significant  sales
increases were realized for both biometric identification devices (hand readers)
and  electronic and  electromagnetic  security  products and systems.  Increased
penetration into the time and attendance market resulted in exceptional  revenue
growth for hand readers.  Net sales of the hardware and tools segment  increased
by 5.6% from $80.8 million in 1996 to $85.3 million in 1997.  Sales increases of
consumer, building and architectural hardware were partially offset by decreased
sales of pruning and harvesting  tools resulting from the elimination of certain
low margin business.  Sales of plumbing  fixtures as a result of the acquisition
of Broadway added approximately $3 million to net sales. Net sales for the other
building  products segment increased by 2.4% from $44.4 million in 1996 to $45.4
million in 1997. Both product lines in this segment (custom  cabinetry and water
source heat pumps) experienced small sales increases.

     Gross margin increased by 12.7% from $52.1 million in 1996 to $58.8 million
in 1997. As a percentage of net sales, gross margin increased from 35.2% in 1996
to 36.5% in 1997. The improvement in gross margin percentage was due to the more
rapid sales growth of the higher margin  security  businesses,  selective  price
increases,   lower  healthcare  costs,   favorable   material  costs  and  labor
productivity improvements.

     Selling,  administrative  and general  expenses  increased 10.9% from $37.0
million in 1996 to $41.0 million in 1997. As a percentage of net sales, selling,
administrative  and general  expenses  increased  from 24.9% in 1996 to 25.5% in
1997.  Engineering and product  development costs,  higher commissions and other
volume  related  expenses  and high  initial  expenses  related to the  Broadway
acquisition  comprised a significant  portion of the  increase.  The increase in
expenses as a percentage  of sales is also  impacted by the more rapid growth of
security   businesses  which  have  comparably  higher  percentage  selling  and
administrative expenses.

     Operating income increased $2.6 million from $15.1 million in 1996 to $17.7
million in 1997. Operating income as a percentage of net sales improved to 11.0%
in 1997 compared to 10.2% in 1996.
<PAGE>
     Interest  expense  decreased  from $6.4  million in 1996 to $5.6 million in
1997 due to the full year impact of lower average  interest rates resulting from
the  1996  redemption  of  subordinated  debentures  and  renegotiation  of  the
Company's revolving credit agreement.

     Earnings  before income taxes  increased to $12.2 million in 1997 from $8.8
million in 1996 due to increased  operating  income  resulting from higher sales
and the impact of refinancing debt at a lower interest rate.

     The 1997 and 1996  provisions  for income taxes exceed the amount  expected
using the statutory  rate of 34% due primarily to state income taxes and the tax
effect of nondeductible goodwill amortization.

     Net earnings  were $7.4 million  ($8.17 per share) in 1997 compared to $5.3
million ($4.76 per share) in 1996.

Results of Operations - 1996 Compared to 1995

     Consolidated  net sales  increased by 12.6% from $131.7  million in 1995 to
$148.3 million in 1996. Net sales of the security  products segment increased by
14.4% from  $20.2  million in 1995 to $23.2  million  in 1996 due  primarily  to
increased sales of electronic and electromagnetic security products and systems.
Net sales of the  hardware  and tools  segment  increased  by 12.1%  from  $72.0
million in 1995 to $80.8 million in 1996.  Both major product lines  experienced
sales gains, however, the percentage increase in sales of consumer, building and
architectural  hardware  was more  modest than the  increase  for  consumer  and
professional  pruning and  harvesting  tools.  Net sales for the other  building
products segment  increased by 12.5% from $39.4 million in 1995 to $44.4 million
in 1996. Both product lines in this segment experienced sales increases although
the  percentage  for custom  cabinetry  was somewhat  greater than that of water
source heat pumps.

     Gross margin increased from $46.0 million in 1995 to $52.1 million in 1996.
As a percentage of net sales, gross margin increased slightly from 35.0% in 1995
to 35.2%  in 1996.  Higher  sales  volume,  a  favorable  workers'  compensation
insurance  experience  adjustment,   and  improved  manufacturing   efficiencies
contributed to the gross margin improvement. Offsetting these factors were lower
margins on sales of certain  consumer  pruning tools and higher  warranty  costs
which affected custom cabinetry gross margins.

     Selling,  administrative  and general  expenses  increased  5.5% from $35.1
million in 1995 to $37.0 million in 1996.  Commission  and other volume  related
costs comprise a significant  portion of the increase.  Engineering  and product
development costs also contributed to the increase. These increases were reduced
by  $500,000 to reflect an  insurance  recovery  of prior  period  environmental
remediation  and related costs.  Selling,  administrative  and general  expenses
include  provisions  of $1.0 million in 1995 and $500,000 in 1996 to provide for
estimated  postemployment  benefits  and  certain  other  costs  related  to the
Company's  president and chief executive officer.  As a percentage of net sales,
selling,  administrative  and general  expenses  decreased from 26.6% in 1995 to
24.9% in 1996.
<PAGE>
     Operating income increased $4.1 million from $11.0 million in 1995 to $15.1
million in 1996. Operating income as a percentage of net sales improved to 10.2%
in 1996 compared to 8.3% in 1995.

     Interest  expense  decreased  from $6.6  million in 1995 to $6.4 million in
1996 due primarily to lower average interest rates resulting from the redemption
of  subordinated  debentures and the  renegotiation  of the Company's  revolving
credit agreement.

     A gain from the sale of the Leigh  businesses  of  $270,000  is included in
other income in 1995.

     Earnings  before  income  taxes  increased by 92.5% to $8.8 million in 1996
compared to $4.6 million in 1995 due primarily to increased  sales and resulting
operating income.

     The 1996  provision for income taxes exceeds the amount  expected using the
statutory  rate of 34% due primarily to state income taxes and the tax effect of
nondeductible  goodwill  amortization.  The 1995  provision for income taxes was
less than the  expected  amount due to a tax benefit  from the sale of the Leigh
businesses and an adjustment to reduce prior years'  estimated  liabilities as a
result of the expiration of the statute of limitations for fiscal 1991.

     Net earnings  were $5.3 million  ($4.76 per share) in 1996 compared to $3.4
million ($2.91 per share) in 1995.

Impact of Year 2000

     Some of the Company's older computer programs were written using two digits
rather than four to define the  applicable  year.  As a result,  those  computer
programs have time-  sensitive  software that recognize a date using "00" as the
year 1900  rather  than the year  2000.  This  could  cause a system  failure or
miscalculations  causing  disruptions  of  operations,  including,  among  other
things, a temporary inability to process transactions,  send invoices, or engage
in similar normal business activities.

     Harrow  has been  addressing  the  year  2000  problem  since  early  1990.
Standards  and  procedures  were put in place to  establish  a  methodology  for
creating  century  compliant  software.  As a normal  function of the  Company's
application development methodology, all new programs were created compliant and
over  time,  as  normal  program  maintenance  is  accomplished,  most  existing
applications and programs were converted to be year 2000 compliant.

     During the fourth  quarter  fiscal 1997, a formal year 2000  assessment was
made to identify  remaining  areas  requiring  updates.  As of January 31, 1998,
approximately 75% of the Company's  software  portfolio was year 2000 compliant.
The year 2000  assesment  also  included  a detailed  work plan to  correct  the
remaining programs prior to mid-1999.
<PAGE>
     During  the  fourth  quarter  1998,   the  Company  will  initiate   formal
communications with all of its significant  suppliers and customers to determine
to what extent the  Company's  data  interfaces  are  vulnerable  to third party
failure to remedy  their own year 2000 issues.  There is no  guarantee  that the
systems of other  companies on which Harrow  business  units rely will be timely
converted and will not have any adverse effect on Harrow's systems.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated balance sheets of Harrow Industries, Inc. and subsidiaries
as of November  30,  1997 and  December  1, 1996,  and the related  consolidated
statements of stockholders' equity (deficit), operations and cash flows for each
of the three fiscal years in the period ended  November 30, 1997,  and the notes
thereto,  are  included  with the  financial  statement  schedules in a separate
section of this report.


ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURES

          Not applicable.
<PAGE>
                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth certain information  regarding the executive
officers and  directors of the  Company.  Officers  serve at the pleasure of the
Board of  Directors.  Directors  serve until the election and  qualification  of
their successors.


Name                              Age   Position
Donald G. Calder (1)              60    Chairman, Chief Executive Officer and 
                                             Director
James S. Dahlke                   47    President, Chief Operating Officer and 
                                             Director
George L. Ohrstrom, Jr. (1)       70    Vice President and Director
John S. Hogan                     43    Vice President, Chief Financial Officer
                                             and Treasurer
Gary L. Humphreys                 55    Vice President and Corporate Controller
Donald D. Fenstermacher           56    Vice President of Management Information
                                             Services
Betsy F. Raymond                  39    Vice President of Human Resources and
                                             Secretary
Robert A. Hoagland                59    President of H.B. Ives
Clifford A. Young, Jr.            55    President of FHP Manufacturing
James J. Scott                    45    President of Locknetics Security 
                                             Engineering
James C. McGovern                 55    President of Corona Clipper
William W. Wilson                 72    President of Recognition Systems, Inc.
W. Lawrence Banks (1) (2)         59    Director
David H. Benson                   60    Director
Derrick N. Key                    50    Director
George F. Ohrstrom (1) (2)        44    Director
Georg Graf Schall-Riaucour (3)    57    Director
Eriberto R. Scocimara             61    Director

(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Chairman of Audit Committee.
<PAGE>
     Donald G. Calder has been a Director  of the Company  since 1972 and a Vice
President of Harrow or its predecessor from 1972 through August 1989. On January
30, 1997, Mr. Calder was appointed  Chairman and Chief Executive  Officer of the
Company.  Mr. Calder is President of G.L. Ohrstrom & Co., Inc. and was a partner
of its  predecessor,  G.L.  Ohrstrom & Co. from 1970 to October 1996. Mr. Calder
devotes a substantial  amount of his time in connection  with his duties at G.L.
Ohrstrom & Co. He is a Director  of  Carlisle  Companies  Incorporated,  Central
Securities Corporation,  Brown-Forman  Corporation,  Roper Industries,  Inc. and
several privately held companies.

     James S. Dahlke was appointed  President and Chief Operating Officer of the
Company  on June 17,  1996 and was  appointed  as a Director  of the  Company on
January 30, 1997. Prior to joining Harrow, Mr. Dahlke served as President, Chief
Executive Officer and Director of Medalist  Industries,  Inc. from 1995 to 1996,
and was  President  of the  Waukesha  Fluid  Handling  unit of  United  Dominion
Industries from 1988 to 1995.

     George L. Ohrstrom,  Jr. has been a director and a Vice President of Harrow
or its  predecessor  since 1962.  Mr.  Ohrstrom is Chairman and Chief  Executive
Officer  of  G.L.  Ohrstrom  &  Co.,  Inc.,  and  was  managing  partner  of its
predecessor, G.L. Ohrstrom & Co., from 1960 to October 1996. He is a director of
Carlisle Companies  Incorporated and Roper Industries,  Inc. Mr. Ohrstrom is the
father of George F. Ohrstrom.

     John S. Hogan was appointed Vice President and Chief  Financial  Officer in
January 1990 and has been  Treasurer of Harrow since January 1987.  From 1979 to
January 1987 he was Corporate  Accounting  Manager of Harrow or its predecessor.
Prior to joining Harrow he had been on the audit staff of Ernst & Young LLP, the
Company's independent auditors.

     Gary L.  Humphreys  joined  Harrow in October  1994 as Vice  President  and
Corporate  Controller.  Mr.  Humphreys  was a partner of Ernst & Young LLP,  the
Company's independent auditors, from October 1976 to September 1994.

     Donald D.  Fenstermacher  joined  Harrow in 1984 as Director of  Management
Information Services. He was elected Vice President effective May 1, 1990.

     Betsy F. Raymond joined Harrow in 1991 as Vice President of Human Resources
and Assistant  Corporate Secretary and was elected Corporate Secretary effective
February 1, 1992.

     Robert A. Hoagland has been President of H.B. Ives since 1991.

     Clifford A. Young, Jr. has been President of FHP since 1971.

     James J. Scott has been President of Locknetics Security  Engineering since
1989.

     James C. McGovern has been President of Corona Clipper since 1992.
<PAGE>
     William W. Wilson was named President of the Company's Recognition Systems,
Inc.  subsidiary in October of 1996. He served as RSI's Vice  President of Sales
and Marketing from 1990 to June 1995 and provided business  development services
to RSI as a consultant from July of 1995 until his appointment as President.

     W. Lawrence  Banks has been a Director of the Company since 1980. Mr. Banks
has been a  director  of Robert  Fleming & Co.,  Limited,  an  English  merchant
banking firm, for more than five years and is a Deputy Chairman thereof,  and he
is Chairman of Robert Fleming, Inc., its U.S. investment banking subsidiary. Mr.
Banks is also a director of Roper Industries, Inc.

     David H.  Benson has served as a Director  of Harrow  since  1980.  He is a
merchant banker at Kleinwort Benson Limited, an English merchant banking firm.

     Derrick N. Key has been a Director of the Company since  February 1996. Mr.
Key has been a director and Chief Executive  Officer of Roper  Industries,  Inc.
since December 1991. He is also a director of two private companies.

     George F. Ohrstrom has been a Director of Harrow since 1986.  Mr.  Ohrstrom
is  Vice-Chairman  of  G.L.  Ohrstrom  & Co.,  Inc.  and  was a  partner  of its
predecessor, G.L. Ohrstorm & Co. from 1987 to October 1996.

     Georg Graf  Schall-Riaucour  was  appointed  to the Board of  Directors  on
January 25, 1995. He has been general manager of  Wittelsbacher  Ausgleichsfonds
since May 1994, prior to which,  since 1971 he was senior partner of the Munich,
Germany  law firm of Stever & Belten.  Mr.  Graf  Schall-Riacour  is Director of
Roper Industries, Inc. and several privately held U.S. companies.

     Eriberto  R.  Scocimara  has been a director  of Harrow or its  predecessor
since 1972. Mr. Scocimara has been President and Chief Executive  Officer of the
Hungarian-American  Enterprise  Fund, a  privately-managed  investment  company,
since April 1994, and he has been the President of Scocimara & Company, Inc., an
investment  management company,  since 1984. Mr. Scocimara was a partner of G.L.
Ohrstrom  & Co.  from 1969 to 1984.  Mr.  Scocimara  is a director  of  Carlisle
Companies,  Incorporated,  Roper Industries,  Inc.,  Quaker Fabric  Corporation,
Cofinec S.A., Evronet Services, Inc. and several privately owned companies.
<PAGE>
ITEM 11. SUMMARY COMPENSATION TABLE

     The following table sets forth cash  compensation  earned during the fiscal
year ended November 30, 1997 for the chief executive  officer and the other four
most highly  compensated  executive  officers whose aggregate cash  compensation
exceeded $100,000.
<TABLE>
                                                                Annual Compensation            Long-Term
           Name and Principal                 Fiscal Year     Salary          Bonus          Compensation*
                 Position                       Ended           $               $                 $
------------------------------------------  -------------    ----------      ---------       ------------
<S>                                              <C>         <C>             <C>             <C>
Donald G. Calder                                 1997        149,000          -
Chairman and CEO                                 1996        149,000          -
James S. Dahlke                                  1997        250,000          250,000
President and COO                                1996        115,385           62,500
Robert A. Hoagland                               1997        177,320          148,417
President of H.B. Ives                           1996        170,500          130,092
                                                 1995        165,500          102,362

Clifford A. Young, Jr.                           1997        161,200          124,769
President of FHP                                 1996        155,000          131,750         58,022
                                                 1995        149,700          127,245         12,280

John S. Hogan                                    1997        150,000          127,500
Vice President & CFO                             1996        144,500          122,825         28,485
                                                 1995        140,300          100,525         20,743

James J. Scott                                   1997        135,044          114,787
President of Locknetics                          1996        127,100          108,290         14,888
                                                 1995        123,100          104,327
</TABLE>
*Payments  from  Long-Term  Growth  Account were for the purchase of performance
shares  under the prior bonus  plan.  Performance  shares were last  awarded for
fiscal 1990. Final payments under the prior plan were made in February 1996.

     All directors  are  compensated  at $15,000 per annum in their  capacity as
directors  of the  Company.  Directors  may elect to  receive  one-half  of this
compensation in company common stock. The number of shares of common stock to be
paid to the  directors  as  compensation  is based on a valuation of such common
stock  using the then most  recent  sales  price,  or if greater  the  quarterly
valuation  determined by Dresdner Kleinwort Benson plc. Mr. Banks is compensated
an additional $7,500 for his involvement in various  committees.  Members of the
Audit  Committee  receive $500 per meeting.  The Chairman of the Audit Committee
receives $750 per meeting.
<PAGE>
     Donald G. Calder was acting Chairman from October 8, 1996 until January 30,
1997 when he was elected Chairman and CEO.

     James S. Dahlke was granted  options in 1996 to  purchase an  aggregate  of
20,000 shares of common stock, 4,000 shares of which were immediately vested and
exercisable,  and 16,000 shares which vest and become  exercisable  ratably from
1997 through 2000 at 4,000 shares per year.  During 1997,  Mr. Dahlke  exercised
options to purchase 5,000 shares of common stock.

Compensation Plans
     Bonus Plan

     Harrow maintains an  Executive/Middle  Management  Performance Program (the
"Bonus Plan") in which officers  (with the exception of George L. Ohrstrom,  Jr.
and Donald G. Calder) and  presidents  of divisions and  subsidiaries  of Harrow
designated by the  president of Harrow are  eligible.  An individual is eligible
only if he is a  full-time  employee  for the full 12 months of the fiscal  year
covered by the Bonus Plan.

     The Bonus Plan  includes  an annual (the  "Annual  Plan")  component  and a
long-term (the "Long-Term Plan") component.  Under the Annual Plan, participants
may earn a cash bonus of up to 55% of base salary,  based upon a  comparison  of
actual results with financial and nonfinancial  goals  established for the year.
The  incentive to be earned  ranges from 16% to 55% of salary,  if results equal
85% of established goals to 110% or more of goals.

     The Long-Term Plan provides incentive compensation for achievement of three
year objectives.  Under the Long-Term Plan participants may earn a cash bonus of
up to 30% of base salary based upon aggregate  profitability  (60% of total) and
individual  nonfinancial  strategic  objectives  (40% of total).  The  financial
portion of the bonus is based upon a  comparison  of three year  actual  results
with operating income targets.

Retirement Plans

     Harrow Products,  Inc., an indirect subsidiary of the Company,  maintains a
retirement plan, the Retirement Plan for the Employees of Harrow Products, Inc.,
("the HPI Retirement Plan") in which all eligible employees participate. It is a
non-contributory, defined benefit pension plan, under which a participant with a
vested  benefit  receives a benefit  at age 65 equal to 1.075% of Final  Average
Salary up to covered  compensation,  plus 1.7% of Final Average Salary in excess
of covered compensation,  times credited service (maximum of 30 years.) "Covered
Compensation" is the average of 35 years of Social Security wage bases ending in
the year of Social Security  Retirement age. "Final Average Salary" means salary
excluding   bonuses,   overtime  or  any  other   additional  or   non-recurring
compensation  and is  computed  using the  highest  60 of the last 120 months of
service prior to retirement,  or age 65, whichever is earlier.  Credited Service
starts at age 21 and Vesting Service at age 18. Employees retiring after age 55,
but  before age 65  receive  reduced  annual  benefits.  Benefits  under the HPI
Retirement Plan vest after five years of Vesting Service.
<PAGE>
     The table below shows the approximate annual retirement benefits payable to
executive officers for life from normal retirement date (age 65) pursuant to the
Retirement  Plan. For purposes of determining the pension benefits payable under
the HPI Retirement Plan, estimated years of Credited Service at age 65 under the
HPI Retirement Plan for the individuals  named in the compensation  table are as
follows: Mr. Calder, 29 years; Mr. Dahlke, 19 years; Mr. Hoagland, 13 years; Mr.
Hogan, 30 years; Mr. Scott, 28 years; Mr. Young, 30 years.
<TABLE>
Final
Average                                                                 Years of Service
Earnings*                             10                 15                  20                25                  30
--------                         -----------------------------------------------------------------------------------------------
<S>                                  <C>                 <C>                 <C>               <C>                <C>
 $100,000                            $15,200             $22,800             $30,400           $38,000            $ 45,600
  125,000                             19,400              29,100              38,800            48,600              58,300
  150,000                             23,700              35,500              47,400            59,200              71,000
  175,000                             26,800              40,700              54,700            68,700              82,600
  200,000                             29,700              45,800              61,900            78,000              94,100
  225,000                             32,000              49,700              67,500            85,200             102,900
  250,000                             32,000              49,700              67,500            85,200             102,900
  275,000                             32,000              49,700              67,500            85,200             102,900
  300,000                             32,000              49,700              67,500            85,200             102,900
</TABLE>
*Earnings  used to  calculate  benefits  are  capped by the limit  described  in
Section 401(a)(17) of the Internal Revenue Code; the limit for 1997 is $160,000.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth  certain  information  as to the number of
shares of Harrow common stock  beneficially  owned as of the date of this report
by each  stockholder  known to  Harrow to own  beneficially  more than 5% of the
outstanding  shares for such common stock,  by each director and by all officers
and  directors  as  a  group.  Except  as  otherwise  indicated,   each  of  the
stockholders  named below has sole voting and  investment  power with respect to
the shares of common stock beneficially owned by him.
<TABLE>
                                                               Company Common Stock
                                                     Number of Shares
   Name and Address of Beneficial Owner             Beneficially Owned             Percentage
<S>                                                    <C>                            <C>
Blackburn Fund, Ltd.                                    52,643                        7.35%
P.O. Box 10654
Tampa, FL 33674
Citicorp Venture Capital, Ltd.                          57,429                        8.02%
153 East 53rd Street
New York, NY 10043
Wittelsbacher Ausgleichsfonds                           51,992 (1)                    7.26%
Schumannstrasse 10
D81679 Munchen
Federal Republic of Germany
W. Lawrence Banks                                        1,181                          *
David H. Benson                                          1,521                          *
Donald G. Calder                                        22,632 (2)                    3.16%
James S. Dahlke                                          5,181                          *
Gary L. Humphreys                                        5,000                          *
John S. Hogan                                           26,000                        3.63%
Derrick N. Key                                             181                          *
George F. Ohrstrom                                       7,761                        1.08%
George L. Ohrstrom, Jr.                                 29,914 (3)                    4.18%
Betsy F. Raymond                                         8,392                        1.17%
Georg Graf Schall-Riaucour                                 181 (1)                      *
<PAGE>
Eriberto R. Scocimara                                   28,607 (4)                    4.00%
All Directors and Officers as a group                  154,051 (5)                   21.51%
</TABLE>
*Less than 1%.

(1) Georg  Graf  Schall-Riaucour,  a director  of the  Company,  is the  general
director of  Wittelsbacher  Ausgleichsfonds,  and as such, is authorized to vote
and dispose of such shares.  Mr. Graf  Schall-Riaucour  disclaims any beneficial
interest in the shares.

(2) Does not include  total of 28,511  shares  owned by his wife and his wife as
custodian for minor children and in which he disclaims any beneficial ownership.

(3)  Includes 631 shares held in a trust of which he is a  co-fiduciary  sharing
voting and investment powers and in which he disclaims any beneficial interest.

(4) Does not include  10,500 shares owned by his wife, and in which he disclaims
any beneficial ownership.

(5) Does not include disclaimed shares referred to in Notes (1), (2) or (4).


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         None.


                                    PART IV.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

a)    1 and 2.  List of Financial Statements and Financial Statement Schedules:

                The  response  to this  portion  of Item  14 is  submitted  as a
                separate section of this report.

      3.        Exhibit Index:

                Reference  is made to the  Exhibit  Index  which  is  found as a
                separate section of this report.
<PAGE>
b) Reports on Form 8-K:

                No reports on Form 8-K have been filed during the fourth quarter
                of the fiscal year ended November 30, 1997.

                The registrant  filed a Form 8-K on December 19, 1997 disclosing
                the sale of substantially all of the assets of its Rutt Division
                effective as of December 1, 1997.

c)              Exhibits:

                Exhibits  pertaining  to  this  Form  10-K  are  submitted  as a
                separate section of this report.

d)              Financial Statement Schedules:

                The  response  to this  portion  of Item  14 is  submitted  as a
                separate section of this report.
<PAGE>
                                   SIGNATURES


     Pursuant to the requirement of Section 13 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, on the 27th of February, 1998.

                                             HARROW INDUSTRIES, INC.
                                             (Registrant)


                                             By     /s/Donald G. Calder
                                                    Donald G. Calder
                                                    Chairman of the Board


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934 this
report has been signed by the following  persons in the capacities  indicated on
the 27th day of February, 1998:

     Signature                                        Title


/s/ Donald G. Calder                           Chairman of the Board
    Donald G. Calder                           (Chief Executive Officer)


/s/ James S. Dahlke                            President and Director
    James S. Dahlke

/s/ John S. Hogan                              Treasurer
    John S. Hogan                              (Chief Financial Officer)


/s/ Gary L. Humphreys                          Controller
    Gary L. Humphreys                          (Chief Accounting Officer)


/s/ W. Lawrence Banks                          Director
    W. Lawrence Banks


                                               Director
    David H. Benson
<PAGE>
/s/ George F. Ohrstrom                         Director
    George F. Ohrstrom


/s/ George L. Ohrstorm, Jr.                    Director
    George L. Ohrstrom, Jr.


/s/ Eriberto R. Scocimara                      Director
    Eriberto R. Scocimara


/s/ Georg Graf Schall-Riaucour                 Director
    Georg Graf Schall-Riaucour

/s/ Derrick N. Key                             Director
    Derrick N. Key
<PAGE>







                      (THIS PAGE LEFT BLANK INTENTIONALLY.)
<PAGE>
                                  Exhibit Index

                                                                            Page

    *3.1  Certificate of Incorporation .....................................
   **3.2  Bylaws............................................................
   **4.1  Indenture with United States Trust Company of New York............
**** 4.3  Loan and Security Agreement with Fleet Capital Corporation........
  **10.1  Securities Purchase Agreement.....................................
 ***10.3  Harrow Industries, Inc. Executive/Middle Management Performance
               Plan.........................................................
  **10.4  Harrow Products, Inc. Retirement Plan.............................
  **10.6  Deferred Compensation Agreement between Harrow Products, Inc.
               and Stanley B. O'Kane........................................
****10.8  Employment Agreement with James S. Dahlke.........................
   10.16  Option Agreement, dated October 15, 1997 and Amendments dated
               November 14, 1997 and December 9, 1997, between Robert
               Fleming & Co. Limited and Harrow Industries, Inc.............
   10.17  Economic Value Added Executive Incentive Plan effective
               beginning in fiscal 1998.....................................
      11  Computation of earnings per share.................................
      12  Computation of ratio of earnings to fixed charges.................
 *****21  List of Subsidiaries..............................................

*Incorporated herein by reference to Form 10-K for year ended November 27, 1987.

**Incorporated  herein by  reference  to Harrow  Industries,  Inc.  Registration
Statement (No. 33-12266) on Form S-1 filed April 16, 1987.

***Incorporated  herein by  reference  to Form 10-K for the  fiscal  year  ended
December 1, 1991.

****Incorporated herein by reference to Form 10-K for fiscal year ended December
1, 1996.

*****Incorporated  herein by  reference  to Form 10-K for the fiscal  year ended
December 3, 1995.
<PAGE>
                           ANNUAL REPORT ON FORM 10-K

                       ITEM 14(a)(1) AND (2), (c) AND (d)

          LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          FINANCIAL STATEMENT SCHEDULE

                                CERTAIN EXHIBITS

                       FISCAL YEAR ENDED NOVEMBER 30, 1997

                    HARROW INDUSTRIES, INC. AND SUBSIDIARIES

                             GRAND RAPIDS, MICHIGAN
<PAGE>
              FORM 10-K ITEM 8, ITEM 14(a)(1) AND (2), (c) AND (d)

                    Harrow Industries, Inc. and Subsidiaries

          List of Financial Statements and Financial Statement Schedule


The following consolidated  financial statements of Harrow Industries,  Inc. and
subsidiaries are included in Item 8:

         o Consolidated balance  sheets-November 30, 1997 and December 1, 1996

         o Consolidated  statements of  stockholders'  equity  (deficit)- Fiscal
           years ended November 30, 1997,  December 1, 1996 and December 3, 1995

         o Consolidated statements of operations-Fiscal years ended November 30,
           1997, December 1, 1996 and December 3, 1995 

         o Consolidated statements of cash flows-Fiscal years ended November 30,
           1997, December 1, 1996 and December 3, 1995

         o Notes to consolidated financial statements-November 30, 1997,
           December 1, 1996 and December 3, 1995

The following  consolidated  financial  statement schedule of Harrow Industries,
Inc. and subsidiaries is included in Item 14(d):

         o Schedule II-Valuation and qualifying accounts

All other  schedules for which  provision is made in the  applicable  accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
<PAGE>
                         Report of Independent Auditors

Board of Directors
Harrow Industries, Inc.

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Harrow
Industries,  Inc. and subsidiaries as of November 30, 1997 and December 1, 1996,
and the related  consolidated  statements  of  stockholders'  equity  (deficit),
operations and cash flows for each of the three fiscal years in the period ended
November 30, 1997.  Our audits also  included the financial  statement  schedule
listed in the Index at Item 14(a).  These financial  statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule 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 consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated financial position of Harrow
Industries, Inc. and subsidiaries at November 30, 1997 and December 1, 1996, and
the  consolidated  results of their  operations and their cash flows for each of
the three fiscal years in the period ended November 30, 1997 in conformity  with
generally  accepted  accounting  principles.  Also, in our opinion,  the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole,  presents  fairly,  in all material  respects,  the
information set forth therein.

                                                    ERNST & YOUNG LLP


Grand Rapids, Michigan
January 9, 1998
<PAGE>
<TABLE>
                    Harrow Industries, Inc. and Subsidiaries

                           Consolidated Balance Sheets


                                                                    November 30, 1997     December 1, 1996
                                                                    ==================    ================
<S>                                                                 <C>                    <C>  
Assets
Current assets:
   Cash and cash equivalents                                         $ 337,000            $ 3,088,000
     Accounts receivable, less allowances
     (1997--$1,372,000; 1996--$1,043,000)                           23,016,000             19,085,000
     Inventories:
       Finished products                                             4,223,000              3,735,000
       Work in process                                               5,638,000              4,321,000
       Raw materials                                                 4,460,000              3,488,000
                                                                   ===========           ============
                                                                    14,321,000             11,544,000
     Deferred income taxes                                           2,320,000              2,175,000
     Other current assets                                            1,027,000                631,000
                                                                   ===========           ============
   Total current assets                                             41,021,000             36,523,000

   Property, plant and equipment:
     Land                                                            2,513,000              2,312,000
     Buildings                                                      14,085,000             11,105,000
     Machinery and equipment                                        32,435,000             28,546,000
                                                                   ===========            ===========
                                                                    49,033,000             41,963,000
     Less accumulated depreciation                                  27,349,000             24,239,000
                                                                   ===========            ===========
                                                                    21,684,000             17,724,000

   Other assets:
     Intangible assets, less accumulated 
       amortization (1997--$7,803,000; 1996--$6,911,000)            11,721,000             12,613,000
     Prepaid pension costs                                           8,251,000              7,595,000
     Other                                                             271,000                265,000
                                                                   ===========            ===========
                                                                    20,243,000             20,473,000
                                                                   -----------            -----------
                                                                   $82,948,000            $74,720,000
                                                                   ===========            ===========
</TABLE>
<PAGE>
<TABLE>
                                                                     November 30, 1997   December 1, 1996
                                                                     ==================  ================
<S>                                                                   <C>                <C>
Liabilities and stockholdersO equity (deficit) Current liabilities:
   Accounts payable ...............................................   $  7,327,000        $  6,662,000
   Accrued compensation ...........................................      5,943,000           5,057,000
   Income taxes ...................................................        911,000             615,000
   Other accrued expenses .........................................      7,031,000           5,555,000
Total current liabilities .........................................     21,212,000          17,889,000

Long-term debt ....................................................     51,539,000          47,388,000

Other noncurrent liabilities:
   Deferred income taxes ..........................................      5,585,000           5,405,000
   Deferred compensation ..........................................        481,000             547,000
                                                                                      
                                                                         6,066,000           5,952,000

Redeemable junior preferred and common stock ......................      7,826,000           2,955,000

Stockholders' equity (deficit):
     Junior preferred stock, par value $0.01 per share--
     authorized: 470,000 shares; issued: 399,964 shares,
     including 119,436 shares of treasury stock in 1997

                                                                             4,000              4,000
     Common stock, par value $0.01 per share--
     authorized and issued: 1,100,000 shares,
     including treasury stock (1997--267,853
     shares; 1996--82,150 shares)

                                                                            11,000            11,000
     Additional paid-in capital ...................................      4,063,000         4,006,000
     Retained earnings ............................................     22,065,000        14,803,000
     Cost of treasury stock (deduct) ..............................     (7,904,000)       (1,225,000)
     Deficit arising from restructuring transactions ..............    (14,108,000)      (14,108,000)
     Redeemable stock reclassified (deduct) .......................     (7,826,000)       (2,955,000)
                                                                      ------------       -----------
                                                                        (3,695,000)          536,000
                                                                      ------------       -----------
                                                                      $ 82,948,000      $ 74,720,000
                                                                      ============      ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

            Consolidated Statements of StockholdersO Equity (Deficit)
<TABLE>


                                                                                Fiscal year ended
                                                             ========================================================

                                                             November 30, 1997   December 1, 1996   December 3, 1995
                                                             ================== ==================  =================
<S>                                                          <C>                <C>                 <C>
Junior preferred stock
Balance at beginning and end of year .....................   $      4,000      $      4,000         $      4,000

Common stock
Balance at beginning and end of year .....................         11,000            11,000               11,000

Additional paid-in capital
Balance at beginning of year .............................      4,006,000         4,006,000            4,006,000
Issuance of treasury stock ...............................         57,000  
                                                             ------------       -----------           ----------
Balance at end of year ...................................      4,063,000         4,006,000            4,006,000

Retained earnings
Balance at beginning of year .............................     14,803,000         9,688,000            6,485,000
Net earnings .............................................      7,402,000         5,315,000            3,403,000
Cash dividends on junior preferred stock ($0.50 per share)       (140,000)         (200,000)            (200,000)
                                                             ------------       -----------           ----------
Balance at end of year ...................................     22,065,000        14,803,000            9,688,000

Accumulated translation adjustments
Balance at beginning of year .............................                                              (128,000)
Sale of foreign subsidiary ...............................                                               128,000
Balance at end of year ...................................                                                   -0-

Cost of treasury stock
Balance at beginning of year .............................     (1,225,000)
Redeemable  stock  purchased  for  treasury
  (1997--119,436  shares of junior
  preferred stock and 191,608 shares of common
  stock; 1996--82,150 shares of common stock) ............     (6,768,000)       (1,225,000)
Treasury  stock issued upon  exercise of stock
  options (5,000 shares ..................................         75,000
Treasury stock issued (905 shares) .......................         14,000
                                                             ------------       ------------ 
Balance at end of year ...................................     (7,904,000)       (1,225,000)

Deficit arising from restructuring transactions
Balance at beginning and end of year .....................    (14,108,000)      (14,108,000)         (14,108,000)

Redeemable stock reclassified
Balance at beginning of year .............................     (2,955,000)
Increase in stock subject to mandatory redemption
  (1997--39,000  shares of junior  preferred stock
  and 195,023 shares of common
  stock; 1996--80,436 shares of junior  preferred
  stock and 194,856 shares of common stock) ..............    (11,639,000)       (4,180,000)
Redeemable stock purchased for treasury
 (1997--119,436 shares of junior preferred stock
 and 191,608 shares of common stock;
 1996--82,150 shares of common stock) ....................      6,768,000         1,225,000
                                                             ------------       -----------
Balance at end of year ...................................     (7,826,000)       (2,955,000)
StockholdersO equity (deficit) at end of year ............   $ (3,695,000)      $   536,000          $  (399,000)
                                                             ============       ===========          ===========
</TABLE>
( ) Denotes deduction.
See accompanying notes to consolidated financial statements.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

                      Consolidated Statements of Operations
<TABLE>

                                                                    Fiscal year ended
                                                ==========================================================
                                                 November 30, 1997   December 1, 1996   December 3, 1995
                                                ===================  ================== ==================
<S>                                             <C>                  <C>                <C>
Net sales                                       $160,906,000         $148,327,000       $131,730,000
Cost of products sold                            102,139,000           96,190,000         85,681,000
                                                ============         ============       ============
Gross margin                                      58,767,000           52,137,000         46,049,000

   Selling, administrative and
   general expenses                               41,048,000           36,995,000         35,060,000
                                                ============         ============       ============
Operating income                                  17,719,000           15,142,000         10,989,000

Other expenses (income):
   Interest expense                                5,561,000            6,398,000          6,617,000
   Interest income                                  (158,000)             (31,000)           (20,000)
   Other                                             114,000              (70,000)          (203,000)
                                                ============         ============       ============
                                                   5,517,000            6,297,000          6,394,000
                                                ============         ============       ============
Earnings before income taxes                      12,202,000            8,845,000          4,595,000

Income taxes                                       4,800,000            3,530,000          1,192,000
                                                ============         ============       ============
Net earnings                                    $  7,402,000       $    5,315,000     $    3,403,000
                                                ============         ============       ============

   Earnings attributable to common stock        $  7,296,000       $    5,115,000     $    3,203,000
                                                ============         ============       ============

Net earnings per share                                 $8.17                $4.76              $2.91
                                                ============         ============       ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows


<TABLE>
                                                                              Fiscal year ended
                                                          =========================================================

                                                          November 30, 1997    December 1, 1996   December 3, 1995
                                                          ==================  ================== ==================
<S>                                                       <C>                 <C>                 <C>
Operating activities
Net earnings                                              $  7,402,000        $ 5,315,000        $ 3,403,000
   Adjustments necessary to reconcile net
   earnings to net cash provided by 
   operating activities:
     Depreciation and amortization                           4,104,000          4,224,000          3,437,000
     Pension income                                           (656,000)          (720,000)          (590,000)
     Deferred income taxes (credit)                             35,000           (520,000)          (799,000)
     Other                                                     (16,000)           (58,000)          (278,000)
     Changes in operating assets and liabilities:
       Accounts receivable                                  (2,948,000)        (2,632,000)          (974,000)
       Inventories                                          (1,898,000)        (1,138,000)          (995,000)
       Other current assets                                   (396,000)           200,000           (290,000)
       Accounts payable and accrued expenses                 3,324,000          1,011,000          3,452,000
Net cash provided by operating activities                    8,951,000          5,682,000          6,366,000

Investing activities
Additions to property, plant and equipment                  (5,217,000)        (3,059,000)        (3,612,000)
Purchase of business, less cash acquired                    (3,863,000)                           (9,556,000)
Sale of business                                                                                   5,351,000
Other                                                           (7,000)           184,000             53,000
                                                            ==========        ============       ===========
Net cash used in investing activities                       (9,087,000)        (2,875,000)        (7,764,000)

Financing activities
Proceeds from long-term borrowings                          11,580,000         26,102,000         12,442,000
Payments of long-term debt                                  (7,433,000)       (25,072,000)       (11,087,000)
Cash dividends on preferred stock                             (140,000)          (200,000)          (200,000)
   Redeemable stock purchased, net of treasury
   stock issued                                             (6,622,000)        (1,225,000)
                                                            ==========        ============       ============
Net cash provided by (used in) financing activities         (2,615,000)          (395,000)         1,155,000
Increase (decrease) in cash and cash equivalents            (2,751,000)         2,412,000           (243,000)

Cash and cash equivalents at beginning of year               3,088,000            676,000            919,000
Cash and cash equivalents at end of year                  $    337,000       $  3,088,000       $    676,000
                                                            ==========        ===========        ===========
Other cash flow information
   Interest payments                                      $  5,397,000        $  6,324,000       $ 6,320,000
   Income tax payments                                       4,469,000           3,906,000         1,798,000
</TABLE>
( ) Denotes reduction in cash and cash equivalents.

See accompanying notes to consolidated financial statements.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

            November 30, 1997, December 1, 1996 and December 3, 1995


Note A-Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Harrow Industries,
Inc. ("the Company") and its wholly owned subsidiaries. Upon consolidation,  all
intercompany accounts, transactions and profits are eliminated.

Fiscal Year

The  Company's  fiscal  year is the 52- or 53-week  period  ending on the Sunday
nearest the end of November. Fiscal 1997 and 1996 included 52 weeks; fiscal 1995
included 53 weeks.

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  amounts  reported  in the  consolidated  financial  statements  and
accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash  equivalents  include  cash on deposit  and amounts due from banks
that mature within 90 days of purchase.

Inventories

The majority of inventories are stated at the lower of last-in, first-out (LIFO)
cost or market.  The  remainder  of  inventories  are valued  using the lower of
first-in, first-out (FIFO) cost or market.

Property, Plant and Equipment

Property,  plant and  equipment  are  recorded  on the basis of cost and include
expenditures for new facilities, major renewals and betterments.  Normal repairs
and maintenance are expensed as incurred.

Depreciation of plant and equipment is computed using the  straight-line  method
over the estimated useful lives of the respective assets.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note A-Summary of Significant Accounting Policies (continued)

Amortization of Intangible Assets

Goodwill  (the excess of purchase  price over net tangible  assets of businesses
acquired) is amortized principally over 20 years using the straight-line method.
Deferred loan issue costs are amortized  using the  effective  interest  method.
Other  intangible  assets are amortized over periods  ranging from 5 to 17 years
using the straight-line method.

Advertising Costs

Advertising costs are expensed as incurred and approximated 2% of net sales.

Income Taxes

The provision for income taxes is based on earnings reported in the consolidated
financial statements.  A deferred income tax asset or liability is determined by
applying  currently  enacted  tax laws and  rates  to the  cumulative  temporary
differences  between the carrying value of assets and  liabilities for financial
statement  and income tax  purposes.  Deferred  income tax  expense  (credit) is
measured by the change in the net deferred income tax asset or liability  during
the year.

Stock Options

The Company follows Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees,  and related  interpretations  in accounting  for
employee  stock  options.  Under APB  Opinion  No. 25,  compensation  expense is
recognized to the extent that the estimated market value of the underlying stock
exceeds the exercise price of the stock options at the date of grant.

Earnings Per Share

Earnings per share are computed  based on the weighted  average number of shares
of common  stock  outstanding  (1997--892,685  shares;  1996--1,074,046  shares;
1995--1,100,000  shares).  Net  earnings  are  reduced  in  the  computation  by
preferred stock dividend requirements.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note A--Summary of Significant Accounting Policies (continued)

Earnings Per Share (continued)

In February 1997,  the Financial  Accounting  Standards  Board (the FASB) issued
Statement of Financial  Accounting Standards (SFAS) No. 128, Earnings Per Share.
SFAS No. 128 requires dual  presentation of basic and diluted earnings per share
on the face of the  statement  of  operations.  Basic  earnings  per  share  are
computed by dividing net earnings  attributable  to common stock by the weighted
average number of common shares outstanding during the period.  Diluted earnings
per share  reflect the  potential  dilution  from the exercise or  conversion of
securities  into  common  stock,  such as stock  options.  SFAS No.  128 will be
effective for the Company for the first quarter of 1998 and requires restatement
of prior  periods.  The  Company  does not  expect  the new  standard  to have a
material effect on earnings per share amounts reported.

Industry Segments

In June 1997,  the FASB issued SFAS No. 131,  Disclosures  about  Segments of an
Enterprise and Related Information.  SFAS No. 131 significantly  changes the way
public business  enterprises  report  information  about  operating  segments in
annual financial  statements and requires that those enterprises report selected
information  about reportable  segments in interim  financial  reports issued to
shareholders.  It also  establishes  standards  for  related  disclosures  about
products and services,  geographic areas of operation and major customers.  SFAS
No. 131 will be  effective  for the  Company in fiscal  1999 and for  subsequent
interim periods. Management has not yet evaluated the effect of the new rules on
its reported segment disclosures.

Financial Instruments and Risk Management

The  Company's  financial  instruments  consist  of cash and  cash  equivalents,
accounts receivable, accounts payable and long-term debt. The Company's estimate
of the fair value of these  financial  instruments  approximates  their carrying
amounts at November 30, 1997.  Fair value was determined  using  discounted cash
flow analyses and current  interest rates for similar  instruments.  The Company
does not hold or issue financial instruments for trading purposes.

The Company does not generally  require  collateral  or other  security on trade
accounts receivable.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note A--Summary of Significant Accounting Policies (continued)

Reclassifications

Certain amounts reported in 1996 and 1995 have been reclassified to conform with
the presentation used in 1997.

Note B-Inventories

Inventories of  $12,787,000 at November 30, 1997 and  $10,953,000 at December 1,
1996 are stated at cost,  determined by the LIFO method.  If the FIFO method had
been used, the amounts would have been  $3,113,000  and  $3,004,000  higher than
reported at November 30, 1997 and December 1, 1996, respectively.

Note C-Intangible Assets

Intangible  assets consist of the following at November 30, 1997 and December 1,
1996:
<TABLE>
                                                                                   Accumulated
                                                 Cost                             Amortization
                                  ===================================  ===================================
                                        1997              1996               1997              1996
                                  ===================================  ===================================
   <S>                            <C>              <C>                 <C>              <C>
   Goodwill                       $11,784,000      $11,784,000         $2,457,000       $1,966,000
   Patents                          2,106,000        2,106,000            689,000          492,000
   Deferred loan issue costs        3,064,000        3,064,000          2,408,000        2,301,000
   Other                            2,570,000        2,570,000          2,249,000        2,152,000
                                  ===================================  ===================================
                                  $19,524,000      $19,524,000         $7,803,000       $6,911,000
                                  ===================================  ===================================
</TABLE>
Note D-Long-term Debt

Long-term debt consists of the following obligations:
<TABLE>
                                                                     November 30, 1997   December 1, 1996
                                                                     ================== ==================
   <S>                                                               <C>                <C>
   Senior subordinated debentures, less unaccreted discount          $25,961,000        $25,951,000
   Revolving credit obligation                                        25,578,000         21,437,000
                                                                     $51,539,000        $47,388,000
                                                                     ================== ==================
</TABLE>
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note D-Long-term Debt (continued)

The  senior  subordinated  debentures  in the face  amount of  $25,984,000  bear
interest at 12.375%,  mature on April 15, 2002 and may be redeemed at the option
of the Company, in whole or in part, at any time at par plus accrued interest to
the date of redemption.  The debentures  require annual sinking fund payments of
$6,500,000.  Sinking fund payments may be deferred to the extent that debentures
purchased on the open market are tendered for cancellation. As a result of prior
year repurchases of debentures, no principal maturities are due until 2001, when
a net amount of  $6,484,000  is due.  The  indenture  governing  the  debentures
restricts,  among other things, the incurrence of additional senior indebtedness
by both the Company and its  subsidiaries,  the sale of substantially all assets
to  another  corporation,  the  payment  of  dividends  on common  stock and the
redemption of capital stock until such time as consolidated stockholders' equity
exceeds $1,000,000.

The revolving credit agreement allows for borrowings of up to $37,000,000  under
a formula that  includes an amount based on qualified  accounts  receivable  and
inventories,  plus a term loan amount  initially  established  at $15,000,000 on
July 31, 1996 and reducing  thereafter  at a rate of $146,000  monthly.  Amounts
available are also subject to various  reserve  requirements,  as established by
the lender.  As of November  30, 1997,  the  available  unused  credit under the
agreement   approximated   $9,000,000.   Borrowings   under  the  agreement  are
collateralized by accounts  receivable,  inventories,  general intangible assets
and certain real estate, are due on July 31, 2001, and bear interest principally
at LIBOR (5.75% at November 30, 1997) plus a variable  amount (1.25% at November
30, 1997) based upon the  Company's  ratio of debt to  earnings.  The Company is
required to pay an annual fee equal to 0.375% of the total  unused  credit under
the  agreement.  The agreement  also provides for a standby  credit  facility of
$8,000,000  to  finance   possible   future   acquisitions  or  other  specified
transactions.  Subsequent to November 30, 1997, the Company utilized  $5,000,000
of this standby  facility to acquire  certain  shares of its common  stock.  The
Company is  required  to pay an annual  fee equal to 0.25% of the unused  credit
available  under this portion of the  agreement.  At the  expiration  date,  the
Company and the lender may agree to extend the agreement for successive one-year
terms. The terms of the credit agreement require the Company, amon other things,
to maintain certain financial ratios and minimum levels of working capital, cash
flow and net worth. The agreement also restricts the Company's  ability to merge
or consolidate, issue additional debt or purchase its common stock. In addition,
the  agreement   restricts  leases,   acquisitions,   dispositions  and  capital
expenditures.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note E-Leases

Certain office, warehouse and showroom space, machinery, motor vehicles and data
processing  equipment are leased under various  operating lease agreements which
expire at various dates through 2008. The Company is required to pay real estate
taxes and other occupancy costs under the facility leases.

Future  minimum  rental  payments due under  noncancelable  operating  leases at
November   30,   1997   are  as   follows:   1998-$1,507,000;   1999-$1,199,000;
2000-$943,000; 2001--$662,000; thereafter-$2,457,000.

Rent expense was $2,069,000 in 1997,  $2,270,000 in 1996 and $2,126,000 in 1995.
Contingent rentals were not significant in any of these years.

Note F-Retirement Plans

The  Company  has a  noncontributory,  defined  benefit  pension  plan  covering
substantially all of its employees. The plan provides benefits that are based on
the  employee's  years of service and final average  earnings (as defined).  The
Company  intends to annually  contribute  amounts deemed  necessary,  if any, to
maintain the plan on a sound actuarial basis.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


Note F-Retirement Plans (continued)

The following  summarizes the status of the CompanyOs pension assets and related
obligations:
<TABLE>
                                                                     November 30, 1997   December 1, 1996
                                                                     ================== ==================
<S>                                                                  <C>                <C>
Pension assets at fair value                                         $44,167,000        $39,555,000
Actuarial present value of accumulated plan benefits:
     Vested                                                           25,020,000         24,126,000
     Nonvested                                                           510,000            641,000
                                                                     ===========        ===========
                                                                      25,530,000         24,767,000
   Effect of estimated future increases in compensation                5,876,000          5,120,000
                                                                     ===========        ===========
   Projected benefit obligation on service rendered to date           31,406,000         29,887,000
                                                                     ===========        ===========
   Net pension assets                                                $12,761,000        $ 9,668,000
                                                                     ===========        ===========
   Components of net pension assets:
     Prepaid pension costs recognized in other assets                $ 8,251,000       $  7,595,000
     Unrecognized amounts, net of amortization:
       Transition assets                                               1,114,000          1,458,000
       Prior service costs                                               (63,000)           (68,000)
       Net actuarial gains                                             3,459,000            683,000
                                                                     ===========        ===========
                                                                     $12,761,000        $ 9,668,000
                                                                     ===========        ===========
</TABLE>
The assumed discount rate used in determining the actuarial present value of the
projected  benefit  obligation  was 7.25% at November  30, 1997 and  December 1,
1996.  The  assumed  rate  of  increase  in  future  compensation  used  in  the
computations was 4% for both 1997 and 1996.

At November  30, 1997,  plan assets were  invested in equity  securities  (58%),
fixed  income  funds  (33%),  real  estate  investments  (8%)  and cash and cash
equivalents  (1%). The expected  long-term return on pension assets was 9.5% for
1995 through 1997.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note F--Retirement Plans (continued)

The following is a summary of net pension income recognized by the Company:
<TABLE>
                                                             1997             1996              1995
                                                      =====================================================
   <S>                                                <C>               <C>              <C>
   Service cost pertaining to benefits
    earned during the year                            $1,142,000        $1,057,000       $   840,000
   Interest cost on projected benefit obligation       2,113,000         1,949,000         1,832,000
   Actual net investment income                       (6,215,000)       (5,626,000)       (6,704,000)
   Net amortization and deferral                       2,304,000         1,900,000         3,442,000
                                                      =====================================================
   Net pension income                                 $ (656,000)      $  (720,000)     $  (590,000)
                                                      =====================================================
</TABLE>
The Company  established a Section 401(k) plan in 1996 for  substantially all of
its  employees.  Employees may make  voluntary  contributions  to the plan up to
certain limits. The Company does not currently match employee contributions.

Note G-Junior Preferred Stock

The junior preferred stock is nonvoting and may be redeemed at the option of the
Company  for $10 per share  provided  that,  so long as any senior  subordinated
debentures are  outstanding,  such redemption may only be made with the proceeds
received by the Company from the issuance of equity  securities  of the Company,
from indebtedness that is junior in right of payment to the senior  subordinated
debentures  or  if,  after  giving  effect  to  such  redemptions,  consolidated
stockholders' equity exceeds $1,000,000.  Annual noncumulative  dividends on the
junior preferred stock are $0.50 per share.

Note H--Stock Repurchase and Option Agreements

Robert Fleming & Co. Limited ("Flemings")  acquired a total of 119,436 shares of
the Company's  junior  preferred stock and 389,879 shares of its common stock in
three separate  transactions  during 1997 and 1996, and  simultaneously  entered
into agreements with the Company whereby Flemings  received options to sell such
shares to the  Company  ("put  options")  and the  Company  received  options to
acquire such shares from Flemings ("call options") under certain  conditions.  A
director of the Company is also a director of Flemings.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note H--Stock Repurchase and Option Agreements (continued)

During 1997 and 1996, the Company  acquired all of the junior  preferred  shares
and a total of 273,758  shares of common  stock  subject to put and call options
agreements.  The  remaining  116,121  shares of common  stock  subject to option
arrangements are classified as redeemable stock in the accompanying consolidated
balance  sheet at November 30, 1997.  The shares were acquired by the Company on
December  31,  1997  for  cash  of  $7,826,000,  including  related  transaction
expenses.  Funds used to acquire  these shares were  provided from the Company's
revolving credit facility.

The Company  granted  options in 1996 to a key employee to purchase an aggregate
of 20,000 shares of common stock,  4,000 shares of which were immediately vested
and exercisable and 16,000 shares of which vest and become  exercisable  ratably
from 1997  through  2000 at 4,000  shares per year.  The  exercise  price of the
options  approximates  the market price of the underlying  shares at the date of
grant and, therefore,  no compensation expense has been recognized.  Options for
5,000 shares were exercised in 1997.

Note I-Income Taxes

The provisions for income taxes consist of the following:
<TABLE>
                                        1997             1996              1995
                                 =====================================================
   <S>                               <C>               <C>              <C>
   Currently payable:
     Federal                         $4,165,000        $3,600,000       $1,690,000
     State                              600,000           450,000          240,000
     Canadian                                                               61,000
                                 =====================================================
                                      4,765,000         4,050,000        1,991,000
   Deferred (credit):
     Federal                             35,000          (460,000)        (748,000)
     State                                                (60,000)           6,000
     Canadian                                                              (57,000)
                                 =====================================================
                                         35,000          (520,000)        (799,000)
                                     $4,800,000        $3,530,000       $1,192,000
                                 =====================================================
</TABLE>
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note I-Income Taxes (continued)

A  reconciliation  of the  Company's  total  income tax  expense  and the amount
computed by applying the  statutory  federal  income tax rate of 34% to earnings
before income taxes is as follows:
<TABLE>
                                                            1997             1996              1995
                                                     ================================================
<S>                                                  <C>               <C>              <C>
Income taxes at statutory rate                       $4,149,000        $3,007,000       $1,562,000
   State income taxes, net of federal income
   tax reduction                                        396,000           257,000          162,000
   Excess basis in stock of Canadian
   subsidiary sold                                                                        (292,000)
   Foreign tax credits realized                         (60,000)          (60,000)        (104,000)
   Nondeductible goodwill amortization                  167,000           233,000          100,000
   Elimination of excess taxes provided in
   prior years                                                                            (205,000)
   Other                                                148,000            93,000          (31,000)
                                                     $4,800,000        $3,530,000       $1,192,000
                                                     ================================================
</TABLE>
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note I-Income Taxes (continued)

Significant  components of the Company's  deferred  income tax  liabilities  and
assets are as follows:
<TABLE>
                                                                        November 30,       December 1,
                                                                            1997               1996
                                                                     ================== ==================
   <S>                                                               <C>                <C>
   Deferred income tax liabilities:
     Excess tax depreciation                                         $2,269,000         $2,321,000
     Prepaid pension costs                                            3,077,000          2,833,000
     Patents                                                            469,000            534,000
     Other                                                               11,000              7,000
                                                                     ==========        ===========
   Total deferred income tax liabilities                              5,826,000          5,695,000

   Deferred income tax assets:
     Accounts receivable and inventory
     valuation allowances                                               977,000            739,000
     Accrued liabilities                                              1,346,000          1,437,000
     Deferred compensation accruals                                     206,000            228,000
     Foreign tax credit carryforwards                                    49,000            652,000
     Other                                                               32,000             61,000
   Total deferred income tax assets                                   2,610,000          3,117,000

   Valuation allowance for deferred income tax assets                   (49,000)          (652,000)
   Net deferred income tax assets                                     2,561,000          2,465,000
   Net deferred income tax liabilities                               $3,265,000         $3,230,000
                                                                     ==========        ===========
</TABLE>
At November  30,  1997,  the Company  has  foreign tax credit  carryforwards  of
$49,000 that are available to reduce U.S. income taxes on certain foreign source
income through 2000. For financial reporting purposes, a valuation allowance has
been  recognized  to  offset  the  deferred  income  tax asset  related  to this
carryforward  due to the  uncertainty of the Company's  ability to realize these
benefits in the future.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)



Note J-Contingencies

The Company is involved in proceedings  with respect to  environmental  matters,
including  sites  where  the  Company  has  been  identified  as  a  potentially
responsible  party under federal and state  environmental  laws and regulations.
While it is not possible to quantify  with  certainty  the  potential  impact of
actions regarding environmental matters, particularly any future remediation and
other  compliance  efforts,  in the opinion of management,  compliance  with the
present environmental  protection laws will not hav a material adverse effect on
the financial  condition or competitive  position of the Company.  However,  the
Company's   efforts  to  comply  with   increasingly   stringent   environmental
regulations may have an adverse effect on the Company's future earnings.

The Company is also  subject to legal  proceedings  and claims that arise in the
ordinary  course of its business.  In the opinion of  management,  the amount of
ultimate  liability with respect to these actions will not materially affect the
consolidated financial position of the Company.

Note K-Purchase of Business

On February 28, 1997, the Company  purchased  substantially all of the assets of
Broadway Industries,  Inc. ("Broadway") for cash, including related expenses, of
$3,863,000  under a transaction  approved by a bankruptcy  court on February 14,
1997.  Broadway  manufactures  and  markets  high  quality  decorative  plumbing
fixtures and bath and cabinet hardware. The acquisition, which was accounted for
under the purchase method, was financed principally through borrowings under the
Company's  revolving  credit  facility.  Broadway had net sales of approximately
$9,500,000  in 1996.  Pro forma  consolidated  net  earnings  for 1997 and 1996,
assuming the acquisition had occurred as of the beginning of fiscal 1996,  would
not have varied significantly from the amounts reported.

Note L-Subsequent Event

On December 5, 1997, the Company sold  substantially  all the assets of its Rutt
Division ("Rutt") for cash of $12,000,000. The Company also received $700,000 in
subordinated  notes  receivable  from certain  major Rutt dealers as part of the
sale.  The  sale  will  result  in the  recognition  of a gain of  approximately
$4,800,000 in the first quarter of fiscal 1998. Rutt  manufactures  high quality
kitchen,  bath and other  cabinetry  that is sold  through an  extensive  dealer
network to the home renovation and new home construction  markets.  Consolidated
net sales included  $22,033,000 in 1997,  $21,547,000 in 1996 and $18,299,000 in
1995  related to the Rutt  business,  and  operating  income of the business was
$1,717,000 in 1997, $1,405,000 in 1996 and $1,031,000 in 1995.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note M-Restructuring Transactions

In connection with a series of mutually dependent transactions completed in 1987
to acquire the common stock of Harrow  Corporation,  a subsidiary of the Company
was merged with and into  Harrow  Corporation.  As a result of the  merger,  the
existing  stockholders of Harrow Corporation received cash and equity securities
that exceeded the book value of their interest in its net assets by $14,108,000.
This  excess  is  reflected  as a  reduction  of  stockholdersO  equity  in  the
consolidated  balance  sheets.  The  consolidated  financial  statements  of the
Company have been prepared on a historical cost basis.

Note N-Quarterly Results of Operations (unaudited)

The following is a tabulation of the quarterly results of operations:
<TABLE>
                                             First Quarter      Second Quarter     Third Quarter     Fourth Quarter
                                             -------------      --------------     -------------     --------------
   <S>                                       <C>                <C>                <C>               <C>
   Year ended November 30, 1997:
     Net sales                               $38,070,000        $41,206,000        $39,072,000       $42,558,000
     Gross margin                             13,496,000         14,991,000         14,047,000        16,233,000
     Net earnings                              1,279,000          1,728,000          1,376,000         3,019,000
     Net earnings per share                         1.34               1.87               1.54              3.56


   Year ended December 1, 1996:
     Net sales                               $37,390,000        $38,356,000        $36,095,000       $36,486,000
     Gross margin                             12,537,000         13,245,000         13,187,000        13,168,000
     Net earnings                                759,000          1,792,000          1,370,000         1,394,000
     Net earnings per share                         0.64               1.59               1.22              1.32
</TABLE>
Quarterly  net  earnings  per  share for  fiscal  1997 and 1996 do not equal the
annual amount due to changes in average common stock outstanding.  Net sales and
gross  margins for fiscal 1996 and the first three  quarters of fiscal 1997 have
been  restated  from  that  previously  reported  in Form  10-Q to  reflect  the
reclassification  of volume rebates and outbound  freight as deductions from net
sales rather than as elements of selling,  administrative  and general expenses.
Net earnings are unchanged from amounts previously reported.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note O-Industry Segments

The Company operates in three industry segments that are described below:

Security Products Group

This segment includes the design, manufacture and distribution of electronic and
electromagnetic  security  products  and  systems and  biometric  identification
devices to the nonresidential  access control market.  Biometric  identification
devices  are  also   distributed   to  the  time  and  attendance  and  personal
identification  markets.  Sales are made through a combination of in-house sales
personnel and manufacturers' representatives.

Hardware and Tools Group

This segment  includes the manufacture and distribution of a diversified line of
brass and aluminum  architectural,  builder and consumer hardware, wire hardware
products  and storage  hooks and a broad line of forged  pruning and  harvesting
tools,  shears,  saws and other hand-held garden tools. A significant portion of
this  segment's  sales are to consumers that are served through a retail network
that includes a number of major home centers. Architectural and builder hardware
products are also sold through distributors to the contractor hardware market. A
line of professional  pruning and harvesting tools are sold through distributors
for  agricultural  applications  and  professional  landscaping.  Wire  hardware
products are also marketed to certain industrial customers.

Other Building Products

This segment  includes the  manufacture  and  distribution  of water source heat
pumps and custom kitchen, bath and other cabinetry.  Heat pumps are sold through
manufacturers'  representatives  to large  mechanical  contractors  and  through
multi-branch stocking  distributors who in turn sell to smaller dealers.  Custom
cabinetry is sold through an extensive dealer network to the home renovation and
new home construction markets.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note O-Industry Segments (continued)

The following is a summary of sales and operating income by industry segment:
<TABLE>
                                                            1997             1996              1995
                                                     =====================================================
   <S>                                               <C>               <C>              <C>
   Sales to unaffiliated customers:
     Security products                               $  30,137,000     $  23,165,000    $  20,247,000
     Hardware and tools                                 85,330,000        80,782,000       72,040,000
   Other building products                              45,439,000        44,380,000       39,443,000
                                                      $160,906,000      $148,327,000     $131,730,000
                                                     =====================================================

   Operating income:
     Security products                               $   5,315,000    $    3,742,000   $    4,192,000
     Hardware and tools                                  9,871,000         9,475,000        8,169,000
   Other building products                               6,787,000         6,277,000        5,115,000
                                                        21,973,000        19,494,000       17,476,000

Corporate:
     Interest expense                                   (5,561,000)       (6,398,000)      (6,617,000)
     Interest income                                       158,000            31,000           20,000
     Nonoperating income (expense)                        (114,000)           70,000          203,000
     General expenses                                   (4,254,000)       (4,352,000)      (6,487,000)
   Earnings before income taxes                         12,202,000         8,845,000        4,595,000

   Income taxes                                          4,800,000         3,530,000        1,192,000
   Net earnings                                      $   7,402,000    $    5,315,000   $    3,403,000
                                                     =====================================================
</TABLE>
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




Note O-Industry Segments (continued)

Other industry segment information is as follows:
<TABLE>
                                                            1997             1996              1995
                                                     =====================================================
   <S>                                               <C>               <C>              <C>
   Identifiable assets:
     Security products                               $17,826,000       $14,721,000      $13,988,000
     Hardware and tools                               36,146,000        30,496,000       30,338,000
     Other building products                          16,736,000        15,270,000       13,535,000
     Corporate                                        12,240,000        14,233,000       11,128,000
                                                     $82,948,000       $74,720,000      $68,989,000
                                                     =====================================================
   Depreciation and amortization:
     Security products                               $ 1,102,000      $  1,173,000     $    716,000
     Hardware and tools                                1,837,000         1,829,000        1,716,000
     Other building products                             966,000           855,000          688,000
     Corporate                                           199,000           367,000          317,000
                                                     $ 4,104,000      $  4,224,000     $  3,437,000
                                                     =====================================================
   Capital additions:
     Security products                               $ 1,257,000     $     644,000    $     505,000
     Hardware and tools                                2,213,000         1,481,000        1,879,000
     Other building products                           1,706,000           925,000        1,120,000
     Corporate                                            41,000             9,000          108,000
                                                     $ 5,217,000      $  3,059,000     $  3,612,000
                                                     =====================================================
</TABLE>
Corporate  assets  include cash and cash  equivalents,  deferred  income  taxes,
prepaid pension costs,  deferred loan issue expenses and other general corporate
assets.

Intersegment  sales and export sales were not  significant  for the fiscal years
presented.  Sales to one major home center  approximated 10% of consolidated net
sales. No other single customer  accounts for more than 10% of the  consolidated
net sales.
<PAGE>
                    Harrow Industries, Inc. and Subsidiaries

                  Schedule II-Valuation and Qualifying Accounts


<TABLE>
            Column A                    Column B                         Column C                     Column D           Column E
================================  =====================  ========================================    ===========       =============
                                                                        Additions
                                                         ========================================
                                                               (1)                   (2)
                                       Balance at         Charged to Costs    Charged to Other       Deductions-        Balance at
          Description              Beginning of Period     and Expenses       Accounts-Describe      Describe          End of Period
================================   ====================  ==================  ====================    ===========       =============
   <S>                               <C>                    <C>                 <C>                  <C>                 <C>
   Fiscal year ended 
     November 30, 1997:
       Allowance for
       doubtful accounts            $1,043,000              $510,000                                 $181,000 (A)        $1,372,000
       Allowance for excess
       and obsolete inventory          753,000               348,000                                                      1,101,000

   Fiscal year ended 
     December 1, 1996:
       Allowance for
       doubtful accounts               824,000               247,000                                   28,000 (A)         1,043,000
       Allowance for excess 
       and obsolete inventory          660,000                93,000                                                        753,000

   Fiscal year ended 
     December 3, 1995:
       Allowance for
       doubtful accounts               674,000               381,000                                  231,000 (A)           824,000
       Allowance for excess 
       and obsolete inventory          576,000               253,000                                  169,000 (B)           660,000


A-Accounts charged off, net of recoveries.

B-Excess and obsolete inventory disposed of.
</TABLE>
<PAGE>
EXHIBIT 10.16

                             HARROW INDUSTRIES, INC.
                            2627 East Beltline, S.E.
                          Grand Rapids, Michigan 49546

                                October 15, 1997

Robert Fleming & Co. Limited
25 Copthall Avenue
London EC2R 7DR
ENGLAND

Gentlemen:

     Reference  is made to that  certain  Outline  Heads  Terms  (the  "Heads of
Terms"), a copy of which is annexed hereto as Exhibit A, executed July 11, 1997,
by Harrow Industries,  Inc.  ("Harrow") relating to the agreement between Robert
Fleming & Co.  Limited  ("Flemings")  and Harrow with respect to the purchase by
Flemings or its agent,  such number of shares of Common  Stock,  par value $0.01
per share (the "Common Stock"), of Harrow, a Delaware  corporation,  as proposed
in Heads of Terms,  structured  as a "dutch  auction" or other  tender offer for
Common  Stock at a price  per share not in excess of $60 per share nor less than
$50 per share, for a total purchase price not to exceed US$5,000,000. The shares
of Common  Stock so  purchased  by or on behalf of Flemings  (as the same may be
adjusted,  split,  combined,  reclassified or otherwise changed) are hereinafter
referred to as the "Option Shares".

     The manner of  exercise  of the  Options,  the number of  Tranches  and the
applicable  Option  Price (each as defined  below) per Tranche set forth  herein
have been  determined  by the parties  based on an  assumption  of a purchase of
83,333  shares of Common Stock at $60 per Share.  In the event that  Flemings or
its agent does not purchase  83,333  shares of Common Stock at a per share price
of $60,  the  parties  may agree to amend this Letter  Agreement  to  accurately
reflect such change.

     We have agreed that upon the terms and  conditions set forth in this Letter
Agreement,  Harrow shall have the option to purchase from Flemings, and Flemings
shall  have the  option  to sell to  Harrow,  all of the  Option  Shares  in the
tranches set forth below (each, a "Tranche") at the applicable  Option Price (as
defined below) per Tranche. Our agreement is as follows:

     1. Option of Harrow to  Purchase  Option  Shares.  Subject to the terms and
conditions of this Letter  Agreement,  if a Call Event (as hereinafter  defined)
shall occur  Harrow shall have the option (the "Call  Option") to purchase  from
Flemings (and, upon the exercise of
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                                October 15, 1997
                                                                          Page 2


such option,  Flemings shall sell to Harrow) all of the Option Shares comprising
one or more Tranche at the applicable Option Price (as hereinafter defined). The
Call Option  shall be  exercisable  at any time after the  occurrence  of a Call
Event (the "Option Exercise  Period"),  but shall not be exercisable  later than
5:00 p.m., London Time, on December 31, 2001.

     2.  Option of  Flemings  to Sell  Option  Shares.  Subject to the terms and
conditions of this Letter Agreement, if a Call Event occurs, Flemings shall have
the option (the "Put Option") to sell to Harrow (and,  upon the exercise of such
option, Harrow shall purchase from Flemings) all of the Option Shares comprising
one or more  Tranche at the  applicable  Option  Price.  The Put Option shall be
exercisable for the Option Exercise Period,  but shall not be exercisable  later
than 5:00 p.m., London time, on December 31, 2001.

     3. Manner of Exercise of Options.

          (a) The  Call  Option  and the Put  Option  (referred  to  hereinafter
     collectively  as the  "Option" or  "Options")  with  respect to any Tranche
     shall be  exercisable  by giving to the other party,  at the address and in
     the manner  contemplated  by Section  11(i) hereof,  written  notice of the
     exercise thereof. Such notice shall specify (i) the Tranche with respect to
     which  the Call  Option  or the Put  Option,  as the case may be,  is being
     exercised  and (ii) a date (not  earlier  than ten (10)  calendar  days nor
     later than thirty (30)  calendar days from the date of such notice) for the
     closing  (the  "Closing")  of the  purchase  and sale of the Option  Shares
     comprising  such  Tranche  pursuant to the  exercise of such  option.  Each
     Closing shall take place in London unless the parties otherwise agree. Upon
     the mailing or facsimile  transmission  of notice duly  exercising the Call
     Option or the Put Option,  as the case may be, such option  shall be deemed
     to have been exercised by the party giving such notice, irrespective of the
     actual date of Closing.  In the event that both the Call Option and the Put
     Option  with  respect  to  a  particular  Tranche  are  exercised  and  the
     respective  notices of exercise shall specify different dates and/or places
     for the Closing, then the notice bearing the earlier postmark or other time
     identification  mark shall control unless otherwise  specifically agreed to
     by the parties.

          (b)  Assuming  the  maximum  number  of  shares  of  Common  Stock are
     purchased by or on behalf of  Flemings,  the Call Option and the Put Option
     shall each be  exercisable  in Tranches,  as set forth below.  In the event
     fewer  shares of Common  Stock are  purchased,  the number of Tranches  and
     shares in each Tranche shall be adjusted such that the Tranches  contain an
     equal number of shares (to the extent  possible)  and the Tranche  Purchase
     Price (as hereinafter defined) is approximately $1,000,000.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                                October 15, 1997
                                                                          Page 3
<TABLE>
Identification of Tranche          Comprised Of:
<S>                                <C>
Tranche A                          16,667 shares of Common Stock

Tranche B                          16,667 shares of Common Stock

Tranche C                          16,667 shares of Common Stock

Tranche D                          16,666 shares of Common Stock

Tranche E                          16,666 shares of Common Stock
</TABLE>
          (c) The Call  Option  and the Put  Option,  as the case may be, may be
     exercised,  if at  all,  with  respect  to a  single  Tranche  or  multiple
     Tranches, but in no event no later than 5:00 p.m., London time, on December
     31, 2001.

          (d) At the Closing, in consideration of the sale, assignment, transfer
     and delivery of the Option  Shares  comprising  the Tranche with respect to
     which the Call Option or Put Option,  as the case may be, was exercised and
     against delivery to Harrow of certificates representing such Option Shares,
     (i) Harrow  shall  deliver to Flemings  an amount in cash or by  electronic
     transfer of immediately  available funds (or such other means of payment as
     the  parties  may agree in  writing)  equal to the Option  Price,  and (ii)
     Flemings  shall  deliver  to Harrow  certificates  representing  the Option
     Shares  comprising  the  Tranche  with  respect  to which  the  Option  was
     exercised, duly endorsed for transfer or accompanied by duly executed stock
     powers.

     4. Definitions.

     Option  Price.  As used herein,  the term "Option  Price" per Tranche shall
mean the applicable  price set forth in the table below. The Option Prices shown
assume a Tranche  purchase price by Flemings (the "Tranche  Purchase  Price") of
$1,000,000;  any  variation  in the Tranche  Purchase  Price  shall  result in a
pro-rata change in the Option Prices and the Call Event threshold  amounts,  set
forth below; provided that in no event shall the Call Event threshold amounts be
less than $1,000,000 plus the applicable Tranche Purchase Price.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                                October 15, 1997
                                                                          Page 4

<TABLE>
If Put Option or Call Option is            The Applicable Option Price for
exercised on or prior to:                  Tranches A, B, C, D or E shall be.
<S>                                        <C>
December 31, 1997                          $1,080,000

June 30, 1998                              $1,150,000

December 31, 1998                          $1,230,000

December 31, 1999                          $1,400,000

December 31, 2000                          $1,575,000

December 31, 2001                          $1,750,000
</TABLE>

          (a) Call Event.  As used  herein,  a "Call  Event"  shall be deemed to
     occur  if the  Consolidated  Net  Worth  of  Harrow  (as  reflected  in the
     consolidated  financial  statements  of Harrow as at the end of any  month,
     which  financial  statements  shall  be  prepared  to the  satisfaction  of
     Flemings) as at the end of any month shall exceed (i) for all periods on or
     prior to December 31, 1997, $2,080,000, (ii) for all periods on or prior to
     June 30,  1998,  $2,150,000,  (iii) for all periods on or prior to December
     31,  1998,  $2,230,000,  (iv) for all periods on or prior to  December  31,
     1999,  $2,400,000,  (v)  for  all  periods  on or  prior  to  December  31,
     2000,$2,575,000,  or (vi) for all periods on or prior to December 31, 2001,
     $2,750,000.  The date of the Call  Event  shall be deemed to be the date of
     the end of the  month  for  which  the  consolidated  financial  statements
     referred to in this  paragraph  4(b) are  prepared.  For the  avoidance  of
     doubt, there may be more than one Call Event.

     5. Fleming's Representations and Warranties.

     Flemings represents and warrants to Harrow as follows:

          (a) Flemings has the full power and authority to execute,  deliver and
     carry  out the  terms  and  provisions  of  this  Letter  Agreement  and to
     consummate  the  transactions   contemplated  hereby,  and  has  taken  all
     necessary  action to authorize the execution,  delivery and  performance of
     this Letter Agreement;

          (b) Flemings is duly organized,  validly existing and in good standing
     as a corporation under the laws of England;

          (c) This  Letter  Agreement  has been  duly  and  validly  authorized,
     executed  and  delivered by Flemings  and  constitutes  a valid and binding
     obligation of Flemings,  enforceable in accordance with its terms,  subject
     to applicable principles of equity, bankruptcy, reorganization, insolvency,
     or other laws affecting the enforcement of creditors' rights generally;
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                                October 15, 1997
                                                                          Page 5


          (d) At the time that the Put Option or the Call Option with respect to
     a particular Tranche is exercised, and at the Closing with respect thereto,
     (i) Flemings shall have taken no action that would have caused the creation
     of any liens, claims,  options,  proxies,  voting,  agreements,  charges or
     encumbrances  of  whatever  nature  against  or with  respect to the Option
     Shares comprising such Tranche,  and (ii) Flemings shall not (except as set
     forth herein) have disposed of any interest in the Option Shares;

          (e) The  execution of this Letter  Agreement by Flemings does not, and
     the  performance  by  Flemings  of  its  obligations  hereunder  will  not,
     constitute a violation  of,  conflict with or result in a default under any
     contract, commitment, agreement, understanding,  arrangement or restriction
     of any kind to which  Flemings is a party or by which  Flemings is bound or
     any  judgment,  decree or order  applicable  to  Flemings,  nor is Flemings
     required to obtain the approval of any third party or organization to enter
     into  and  perform  this  Letter  Agreement,  except  to  the  extent  such
     violation,  conflict or default would not have a material adverse effect on
     Flemings'  ability to  consummate  the  transactions  contemplated  by this
     Letter Agreement in accordance with applicable law; and

          (f) Neither the  execution  and delivery of this Letter  Agreement nor
     the performance by Flemings of its  obligations  hereunder will violate any
     provisions of English law  applicable to Flemings or require any consent or
     approval of, or filing with or notice to any public body or authority under
     any provision of English law  applicable to Flemings,  except to the extent
     such  violation or failure to obtain any consent or approval would not have
     a  material   adverse  effect  on  Flemings'   ability  to  consummate  the
     transactions  contemplated  by this Letter  Agreement  in  accordance  with
     applicable law.

     6. Harrow's Representations and Warranties.

     Harrow represents and warrants to Flemings as follows:

          (a) Harrow is a corporation  duly organized,  validly  existing and in
     good  standing  under the laws of  Delaware.  Harrow has the full power and
     authority  to execute,  deliver and carry out the terms and  provisions  of
     this Letter Agreement and consummate the transaction  contemplated  hereby,
     and has taken all necessary  action to authorize the  execution,  delivery,
     and performance of this Letter Agreement;

          (b) This  Letter  Agreement  has been  duly  and  validly  authorized,
     executed  and  delivered  by Harrow  and  constitutes  a valid and  binding
     agreement of Harrow,  enforceable in accordance with its terms,  subject to
     applicable principles of equity,  bankruptcy,  reorganization insolvency or
     other laws affecting the enforcement of creditors' rights generally;

          (c) The execution of this Letter Agreement by Harrow does not, and the
     performance by Harrow of its obligations  hereunder will not,  constitute a
     violation  of,  conflict  with or result in a default  under any  contract,
     commitment,  agreement,  understanding,  arrangement  or restriction of any
     kind to  which  Harrow  is a party  or by  which  Harrow  is  bound  or any
     judgment,  decree or order applicable to Harrow,  nor is Harrow required to
     obtain the
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                                October 15, 1997
                                                                          Page 6



     approval  of any  person or  organization  to enter into and  perform  this
     Letter  Agreement  other than those which  shall have been  obtained at the
     time this Letter Agreement is performed;

          (d) The Option Shares are duly authorized,  validly issued, fully paid
     and nonassessable; and

          (e) Neither the execution and delivery of this Letter  Agreement,  nor
     the  performance  by Harrow of its  obligations  hereunder will violate any
     provision  of law  applicable  to Harrow  (including,  without  limitation,
     applicable  securities  law and  regulations)  or  require  any  consent or
     approval of, or filing with or notice to any public body or authority under
     any  provision  of law  applicable  to  Harrow  (except  for such  periodic
     reporting  requirements  as may be  applicable  to Harrow  under the United
     States  Securities  Exchange Act of 1934 (the "Exchange  Act") or the rules
     and regulations promulgated thereunder).

          (f) None of the  information  prepared or to be prepared by Harrow and
     furnished to Flemings or its agent in connection with the tender offer with
     respect to the Common  Stock or  disclosed  or  required  to be  disclosed,
     pursuant  to the  Exchange  Act or  otherwise,  by Harrow  contains or will
     contain any untrue  statement  of  material  fact or omits or will omit any
     material fact  necessary to make the  statements  therein,  in light of the
     circumstances under which they were made, not misleading.

     7. Certain Covenants.

          (a) In connection with entering into this Letter Agreement,  Harrow is
     establishing  an  account  in its  name to be  maintained  at  Flemings  in
     accordance with its customary practices  concerning the maintenance of cash
     accounts  of  customers  and  bearing  interest  at an annual  rate of five
     percent (5%),  compounded  quarterly,  and Harrow is  depositing  into such
     account an amount equal to the aggregate of all the Tranche Purchase Prices
     paid by Flemings,  representing an equal amount in respect of each Tranche.
     The amount so deposited in respect of a particular Tranche may be withdrawn
     by Harrow if an Option in  respect  of that  Tranche  is  exercised  or, at
     Harrow's  option,  may be applied  towards the Option Price related to such
     Tranche as is then  exercised.  Harrow  agrees  that if at any time  Harrow
     fails to pay any sums due to Flemings, Flemings may set off or transfer any
     sum standing to the credit of any account Harrow may have with Flemings, or
     any other sums that Flemings is holding on Harrow's  behalf,  in or towards
     satisfaction  of Harrow's  monies,  obligations and liabilities to Flemings
     under any document or agreement whatsoever.  Where such set-off or transfer
     requires the conversion of one currency into another, such conversion shall
     be  calculated  at  Flemings'  then  prevailing  spot rate of exchange  for
     purchasing the currency considered.

          (b)  Until  such  time as all of the  Options  in  respect  of all the
     Tranches  granted herein shall have been exercised or shall have expired or
     otherwise  lapsed,  Harrow agrees to furnish Flemings with its consolidated
     financial  statements  as at the  end of  each  month  (which  need  not be
     audited),  which financial  statements shall be furnished within 30 days of
     the end of the  month to  which  they  relate,  together  with  appropriate
     certification executed by a duly
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                                October 15, 1997
                                                                          Page 7


     authorized  officer of Harrow  attesting to the  Consolidated  Net Worth of
     Harrow as at the end of each such  month.  The  agreement  to furnish  such
     financial statements may be satisfied by the delivery to Flemings of copies
     of such filings,  if any, as Harrow makes with the United States Securities
     and Exchange Commission.

          (c) At or prior to the  commencement  of the tender offer with respect
     to the Common  Stock,  Harrow will furnish  Flemings  the legal  opinion of
     Curtis,  Mallet-Prevost,  Colt & Mosle,  counsel to Harrow, with respect to
     those matter set forth in Section 6 of this Letter Agreement.

          (d) Harrow will provide  Flemings with full disclosure of all relevant
     information.

     8. Indemnification. Harrow agrees that it will indemnify and hold harmless,
Flemings, its stockholders,  employees,  agents,  affiliates and each person, if
any, that controls  Flemings and its affiliates within the meaning of Section 20
of the  Exchange Act and Section 15 of the  Securities  Act of 1933 (the "Act"),
each as amended (any and all of whom are referred to as an "Indemnified Party"),
from and against any and all losses,  claims,  damages or  liabilities,  and all
actions in respect  thereof  (including,  but not limited to, all legal or other
expenses  reasonably  incurred by an  Indemnified  Party in connection  with the
preparation  for or defense of any claim,  action or proceeding,  whether or not
resulting in any liability),  sustained or incurred by an Indemnified Party: (i)
arising,  out of, or in connection  with, any untrue statement or alleged untrue
statement  of a  material  fact  contained  in  any of the  financial  or  other
information  furnished to Flemings or its agent by Harrow in connection with the
Transactions  including,  without  limitation,  the  Offer to  Purchase,  or the
omission (or alleged  omission)  therefrom of a material fact  necessary to make
the  statements  therein,  in light of the  circumstances  under which they were
made, not misleading;  or (ii) with respect to, caused by, or otherwise  arising
out of any transaction contemplated by this Letter Agreement (including, without
limitation,  the proposed offer to purchase) or Flemings performing the services
contemplated  hereunder;  provided,  however,  Harrow  will not be liable  under
clause (ii) hereof to the extent that any loss,  claim,  damage or  liability is
found in a final judgment by a court of competent  jurisdiction to have resulted
from Flemings' gross  negligence or bad faith in performing such services or for
any losses or damages not related to the proposed transactions.

     If the  indemnification  provided in this  Section 8 is  unavailable  to an
Indemnified  Party  (including,  for purposes of the remainder of this Section 8
Harrow and its  stockholders,  employees,  agents  and any  person who  controls
Harrow within the meaning of Section 20 of the Exchange Act or Section 15 of the
Act) under the preceding paragraph in respect of any losses,  claims, damages or
liabilities referred to therein,  such other party, in lieu of indemnifying such
Indemnified  Party,  shall  contribute  to any  amounts  paid or payable by such
Indemnified  Party in such  proportion as is appropriate and equitable under all
of the circumstances.

     The foregoing indemnification and contribution provisions of this Section 8
are not in lieu of, but in addition to, any rights which any  Indemnified  Party
may have hereunder or otherwise.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                                October 15, 1997
                                                                          Page 8



     Each party  hereto  agrees to notify the other  promptly  of the  assertion
against it or any other person of any claim or the commencement of any action or
proceeding  relating to any  activity  contemplated  by this  Letter  Agreement;
provided, however, that the failure to so notify the other party shall not alter
either party's rights or obligations  under this Letter  Agreement except to the
extent such other party is actually prejudiced by such failure.

     9. Specific Performance.  Harrow and Flemings acknowledge and agree that in
the event of any breach of this Letter Agreement,  the non breaching party would
be  irreparably  harmed and could not be made whole by monetary  damages.  It is
accordingly agreed that Harrow and Flemings,  in addition to any other remedy to
which  they  may be  entitled  at law or in  equity,  shall  be  entitled  to an
injunction  or  injunctions  to  prevent  breaches  of the  provisions  of  this
Agreement and/or to compel specific  performance of this Letter Agreement in any
action, which action may take place in a state court of New York, as provided in
Section 11(h) hereof.

     10.  Expenses.  Upon the  completion of the purchase of the Common Stock by
Flemings  or its  agent,  Harrow  will  pay  Flemings  for  its own  account  an
arrangement fee of $125,000. In addition, Harrow will reimburse Flemings for all
of Flemings's  out-of-pocket  expenses  (including  attorneys fees and expenses)
incurred in connection with the transactions contemplated hereby.

     11. Miscellaneous.

          (a) This  Letter  Agreement  (including  the Heads of  Terms)  and the
     Engagement  Letter  dated  October 15, 1997  between  Flemings  and Harrow,
     together  constitute that entire  understanding  of the parties hereto with
     respect to the subject matter hereof and  supersedes  all prior  agreements
     and  understandings,  whether oral or written,  between the parties  hereto
     with respect to the subject matter hereof. This Letter Agreement may not be
     amended orally, but only by an instrument in writing by each of the parties
     to this Letter Agreement.

          (b) This Letter Agreement shall inure to the benefit of and be binding
     upon the parties hereto and their respective  successors and assigns.  This
     Letter Agreement and the rights granted hereunder may not be transferred by
     Harrow  without  the  consent  of  Flemings,  which  consent  shall  not be
     unreasonably  withheld,  provided,  that  (i)  Flemings  is  provided  with
     evidence  reasonably  satisfactory  to it that such a  transfer  is in full
     compliance  with all applicable laws and  regulations  (including,  without
     limitation,   applicable   securities  law  and   regulations),   and  (ii)
     arrangements  reasonably satisfactory to Flemings shall have been made with
     respect to the deposit referred to in Section 7(a) hereof. In the event any
     such transfer occurs,  Harrow shall give written notice thereof to Flemings
     in  accordance  with the  provisions  of Section 11(i) hereof within thirty
     (30)  days  of the  effectuation  of such  transfer.  Neither  this  Letter
     Agreement or any rights hereunder may be assigned or otherwise  transferred
     by Flemings except to an affiliate thereof.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                                October 15, 1997
                                                                          Page 9


          (c)  Notwithstanding  the foregoing,  nothing in this Letter Agreement
     shall be deemed to restrict Flemings, at any time after the Put Options and
     Call Options granted hereunder lapse and become no longer  exercisable with
     respect to all Tranches in accordance with the terms hereof,  from selling,
     assigning,  transferring,  conveying or  otherwise  disposing of the Option
     Shares at any time to any person,  provided,  that prior notice of any such
     sale,  assignment,  transfer,  conveyance or other  disposition is given to
     Harrow. In the event of any such sale, assignment,  transfer, conveyance or
     other  disposition,  unless  there  is  at  the  relevant  time  a  payment
     obligation  on the part of Harrow in  respect  of the  exercise  of the Put
     Option  or  any  indemnification  obligation  in  respect  of  this  Letter
     Agreement,  the rights and obligations of the parties hereunder shall cease
     as to the Option Shares that are the subject thereof, and Harrow shall have
     the right to close the account  referred  to in Section  7(a) hereof and to
     withdraw all funds therefrom without penalty.

          (d)  Section  headings  contained  in this  Letter  Agreement  are for
     reference  purposes only and shall not affect the meaning or interpretation
     of this Letter Agreement.

          (e) All  representations,  warranties and agreements  contained herein
     shall survive the Closing related to any particular Tranche.

          (f) This Letter  Agreement  may be executed in  counterparts,  each of
     which shall, when executed, be an original and all of which shall be deemed
     to be one and the same instrument.

          (g) This  Letter  Agreement  shall be governed  by and  construed  and
     enforced  in  accordance  with the laws of the State of New  York,  without
     reference to the conflicts of law principles thereof.

          (h) Harrow and Flemings hereby agree that any suit,  claim,  action or
     proceeding, relating to or arising under this Letter Agreement may (without
     prejudice  to the ability of either  party to commence  proceedings  in any
     other  jurisdiction)  be  brought  in a  state  court  of New  York  having
     competent  subject matter  jurisdiction  over the matters set forth in this
     Letter  Agreement  or in a federal  court  sitting in New York (each a "New
     York  Court").  Each of Harrow and  Flemings  hereby  consents  to personal
     jurisdiction  in any such  action  brought  in any  such  New  York  Court,
     consents  to service of process  upon it in the matter set forth in Section
     11(i) hereof, and waives any objection it may have to venue in any such New
     York Court or to any claim that any such New York Court is an  inconvenient
     forum.

          (i) All notices and other  communications  under this Letter Agreement
     shall be in writing and delivery  thereof shall be deemed to have been made
     either  (A)  if  mailed,  when  received,  or (B) if  transmitted  by  hand
     delivery,  telegram,  telex,  telecopier  or facsimile  transmission,  when
     transmitted  to the party  entitled to receive the same,  at the  addressee
     indicated below or at such other address as such party shall have specified
     by written notice to the other parties hereto given in accordance herewith:
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                                October 15, 1997
                                                                         Page 10



         (A)      if to Flemings, addressed to:

                  Robert Fleming & Co. Limited
                  25 Copthall Avenue
                  London EC2R 7DR
                  England

                  Attention:        Michael J.C. Watts
                  Facsimile:        (+44) 171 256 5036
                  Telex: 297451

                  with copies to:

                  Baker & McKenzie
                  805 Third Avenue
                  New York, New York 10022

                  Attention:        Richard L. Nevins, Esq.
                  Facsimile:        (+1) 212 891 3819

         (B)      if to Harrow, addressed to:

                  Harrow Industries, Inc.
                  2627 East Beltline, S.E.
                  Grand Rapids, Michigan 49546

                  Attention:        John S. Hogan
                  Facsimile:        (+1) 616 942 2170

                  with copies to:

                  Curtis, Mallet-Prevost, Colt & Mosle
                  101 Park Avenue
                  New York, NY 10178

                  Attention:        Eileen P. Matthews, Esq.
                  Facsimile:        (+1) 212 697 1559

          (j) Should any litigation or  arbitration be commenced  (including any
     proceedings  in a  bankruptcy  court)  between the parties  hereto or their
     representatives  concerning  any provision of this Letter  Agreement or the
     rights and duties of any person or entity  hereunder,  the party prevailing
     in such  litigation or arbitration  shall be entitled,  in addition to such
     other 
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                                October 15, 1997
                                                                         Page 11



     relief as may be granted, to reasonable attorneys' and arbitration fees and
     the costs of litigation or arbitration.

          (k) Any  waiver  by any  party of a breach  of any  provision  of this
     Letter Agreement shall not operate as or be construed to be a waiver of any
     other breach of such  provision or of any breach of any other  provision of
     this  Letter  Agreement.  The  failure  of a party to  insist  upon  strict
     adherence  to any term of this  Letter  Agreement  on one or more  sections
     shall  not be  considered  a waiver  or  deprive  that  party of the  right
     thereafter  to insist upon strict  adherence to that term or any other term
     of this Letter Agreement.

          (1) No provision in this Letter  Agreement shall constitute any person
     a third party beneficiary.

          (m) If any term,  provision,  covenant or  restriction  of this Letter
     Agreement is held by a court of competent  jurisdiction  or other authority
     to  be  invalid,  void  or  unenforceable,  the  remainder  of  the  terms,
     provisions,  covenants  and  restrictions  of this Letter  Agreement  shall
     remain in full force and effect and shall in no way be  affected,  impaired
     or invalidated; provided; however, that in the event the provisions of this
     Letter Agreement dealing with the purchase and sale of the Option Shares is
     held to be invalid then this entire Letter Agreement shall be invalidated.

     If the  foregoing  correctly  reflects the terms of our  agreement,  please
countersign  the  enclosed  copy of this  letter  in the space  provided  below,
whereupon this letter shall constitute a binding agreement between us.

                                            Very truly yours,

                                            HARROW INDUSTRIES, INC.



                                            By: /s/ Donald G. Calder
                                                Name:  Donald G. Calder
                                                Title:    Chairman

Accepted and agreed to as of the date first above written:

ROBERT FLEMING & CO.  LIMITED


By:      /s/ J.M. Cole
         Name:  J. M. Cole
         Title:    Director
<PAGE>
                             HARROW INDUSTRIES, INC.
                            2627 East Beltline, S.E.
                          Grand Rapids, Michigan 49546



                                                 November 14, 1997

Robert Fleming & Co. Limited
25 Copthall Avenue
London EC2R 7DR
ENGLAND

Gentlemen:

     This letter sets forth the final amended agreement between Robert Fleming &
Co. Limited ("Flemings") and Harrow Industries,  Inc. ("Harrow") with respect to
the purchase by Flemings or its agent, of such number of shares of Common Stock,
par  value  $0.01  per  share  (the  "Common  Stock"),  of  Harrow,  a  Delaware
corporation, as proposed herein, structured as a "dutch auction" or other tender
offer for  Common  Stock at a price per share not in excess of $60 per share nor
less than $50 per share,  for a total purchase price (the "Purchase  Price") not
to exceed  US$10,000,000.  The tender offer, as amended,  expired on December 1,
1997 and 116,121  shares of Common Stock were  validly  tendered and a per share
price of $60 per share will be paid therefore by purchaser, for a total Purchase
Price of  $6,967,260.  The parties  desire to amend this  put/call  agreement to
reflect the actual  number of shares of Common  Stock  purchased,  the number of
shares  of  Common  stock  in  each  Tranche  (as  hereinafter  define)  and the
respective  Tranche Purchase Prices.  The shares of Common Stock so purchased by
or on  behalf  of  Flemings  (as the  same  may be  adjusted,  split,  combined,
reclassified or otherwise  changed) are  hereinafter  referred to as the "Option
Shares".

     The manner of  exercise  of the  Options,  the number of  Tranches  and the
applicable  Option  Price (each as defined  below) per Tranche set forth  herein
have been  determined by the parties based on 116,121  shares of Common Stock at
$60 per share.

     We have agreed that upon the terms and  conditions set forth in this Letter
Agreement,  Harrow shall have the option to purchase from Flemings, and Flemings
shall have the option to sell to Harrow,  all of the Option Shares in the as set
forth below  (each,  a  "Tranche")  at the  applicable  Option Price (as defined
below) per Tranche. Our agreement is as follows:

     1. Option of Harrow to  Purchase  Option  Shares.  Subject to the terms and
conditions of this Letter  Agreement,  if a Call Event (as hereinafter  defined)
shall occur  Harrow shall have the option (the "Call  Option") to purchase  from
Flemings (and, upon the exercise of
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                          Page 2


such option,  Flemings shall sell to Harrow) all of the Option Shares comprising
one or more Tranche at the applicable Option Price (as hereinafter defined). The
Call Option  shall be  exercisable  at any time after the  occurrence  of a Call
Event (the "Option Exercise  Period"),  but shall not be exercisable  later than
5:00 p.m., London Time, on December 31, 2005.

     2.  Option of  Flemings  to Sell  Option  Shares.  Subject to the terms and
conditions of this Letter Agreement, if a Call Event occurs, Flemings shall have
the option (the "Put Option") to sell to Harrow (and,  upon the exercise of such
option, Harrow shall purchase from Flemings) all of the Option Shares comprising
one or more  Tranche at the  applicable  Option  Price.  The Put Option shall be
exercisable for the Option Exercise Period,  but shall not be exercisable  later
than 5:00 p.m., London time, on December 31, 2005.

     3. Manner of Exercise of 0ptions.

          (a) The  Call  Option  and the Put  Option  (referred  to  hereinafter
     collectively  as the  "Option" or  "Options")  with  respect to any Tranche
     shall be  exercisable  by giving to the other party,  at the address and in
     the manner  contemplated  by Section  11(i) hereof,  written  notice of the
     exercise thereof. Such notice shall specify (i) the Tranche with respect to
     which  the Call  Option  or the Put  Option,  as the case may be,  is being
     exercised  and (ii) a date (not  earlier  than ten (10)  calendar  days nor
     later than thirty (30)  calendar days from the date of such notice) for the
     closing  (the  "Closing")  of the  purchase  and sale of the Option  Shares
     comprising  such  Tranche  pursuant to the  exercise of such  option.  Each
     Closing shall take place in London unless the parties otherwise agree. Upon
     the mailing or facsimile  transmission  of notice duly  exercising the Call
     Option or the Put Option,  as the case may be, such option  shall be deemed
     to have been exercised by the party giving such notice, irrespective of the
     actual date of Closing.  In the event that both the Call Option and the Put
     Option  with  respect  to  a  particular  Tranche  are  exercised  and  the
     respective  notices of exercise shall specify different dates and/or places
     for the Closing, then the notice bearing the earlier postmark or other time
     identification  mark shall control unless otherwise  specifically agreed to
     by the parties.

          (b) Based upon the actual number of shares of Common Stock  purchased,
     the Call Option and the Put Option shall each be  exercisable  in Tranches,
     as set forth below.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                          Page 3
<TABLE>
Identification of Tranche               Comprised Of:
<S>                                     <C>
Tranche A                               16,589 shares of Common Stock

Tranche B                               16,589 shares of Common Stock

Tranche C                               16,589 shares of Common Stock

Tranche D                               16,589 shares of Common Stock

Tranche E                               16,589 shares of Common Stock

Tranche F                               16,589 shares of Common Stock

Tranche G                               16,587 shares of Common Stock
</TABLE>
          (c) The Call  Option  and the Put  Option,  as the case may be, may be
     exercised,  if at  all,  with  respect  to a  single  Tranche  or  multiple
     Tranches, but in no event no later than 5:00 p.m., London time, on December
     31, 2005.

          (d) At the Closing, in consideration of the sale, assignment, transfer
     and delivery of the Option  Shares  comprising  the Tranche with respect to
     which the Call Option or Put Option,  as the case may be, was exercised and
     against delivery to Harrow of certificates representing such Option Shares,
     (i) Harrow  shall  deliver to Flemings  an amount in cash or by  electronic
     transfer of immediately  available funds (or such other means of payment as
     the  parties  may agree in  writing)  equal to the Option  Price,  and (ii)
     Flemings  shall  deliver  to Harrow  certificates  representing  the Option
     Shares  comprising  the  Tranche  with  respect  to which  the  Option  was
     exercised, duly endorsed for transfer or accompanied by duly executed stock
     powers.

     4. Definitions.

     Option  Price.  As used herein,  the term  "Option  Price" per Tranche (the
"Tranche Purchase Price") shall mean the applicable price set forth in the table
below.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                          Page 3


<TABLE>
If Put Option or Call Option is          The Applicable Option Price for
exercised on or prior to:                Tranches A, B, C, D, E, F and G
                                         shall be.
<S>                                      <C>              
December 31, 1997                        $1,074,949
June 30, 1998                            $1,144,621
December 31, 1998                        $1,224,247
December 31, 1999                        $1,393,452
December 31, 2000                        $1,567,634
December 31, 2001                        $1,741,815
December 31, 2002                        $1,990,646
December 31, 2003                        $2,239,476
December 31, 2004                        $2,488,307
December 31, 2005                        $2,786,904
</TABLE>
          (a) Call Event.  As used  herein,  a "Call  Event"  shall be deemed to
     occur  if the  Consolidated  Net  Worth  of  Harrow  (as  reflected  in the
     consolidated  financial  statements  of Harrow as at the end of any  month,
     which  financial  statements  shall  be  prepared  to the  satisfaction  of
     Flemings) as at the end of any month shall exceed (i) for all periods on or
     prior to December 31, 1997, $2,080,000, (ii) for all periods on or prior to
     June 30,  1998,  $2,150,000,  (iii) for all periods on or prior to December
     31,  1998,  $2,230,000,  (iv) for all periods on or prior to  December  31,
     1999,  $2,400,000,  (v) for all periods on or prior to December  31,  2000,
     $2,575,000,  (vi)  for all  periods  on or  prior  to  December  31,  2001,
     $2,750,000,  (vii)  for all  periods  on or prior  to  December  31,  2002,
     $3,000,000,  (viii)  for all  periods  on or prior to  December  31,  2003,
     $3,250,000,  (ix)  for all  periods  on or  prior  to  December  31,  2004,
     $3,500,000,  or (x) for all  periods  on or prior  to  December  31,  2005,
     $3,800,000.  The date of the Call  Event  shall be deemed to be the date of
     the end of the  month  for  which  the  consolidated  financial  statements
     referred to in this  paragraph  4(b) are  prepared.  For the  avoidance  of
     doubt, there may be more than one Call Event.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                          Page 5



     5. Flemings' Representations and Warranties.

     Flemings represents and warrants to Harrow as follows:

          (a) Flemings has the full power and authority to execute,  deliver and
     carry  out the  terms  and  provisions  of  this  Letter  Agreement  and to
     consummate  the  transactions   contemplated  hereby,  and  has  taken  all
     necessary  action to authorize the execution,  delivery and  performance of
     this Letter Agreement;

          (b) Flemings is duly organized,  validly existing and in good standing
     as a corporation under the laws of England;

          (c) This  Letter  Agreement  has been  duly  and  validly  authorized,
     executed  and  delivered by Flemings  and  constitutes  a valid and binding
     obligation of Flemings,  enforceable in accordance with its terms,  subject
     to applicable principles of equity, bankruptcy, reorganization, insolvency,
     or other laws affecting the enforcement of creditors' rights generally;

          (d) At the time that the Put Option or the Call Option with respect to
     a particular Tranche is exercised, and at the Closing with respect thereto,
     (i) Flemings shall have taken no action that would have caused the creation
     of any liens,  claims,  options,  proxies,  voting  agreements,  charges or
     encumbrances  of  whatever  nature  against  or with  respect to the Option
     Shares comprising such Tranche,  and (ii) Flemings shall not (except as set
     forth herein) have disposed of any interest in the Option Shares;

          (e) The  execution of this Letter  Agreement by Flemings does not, and
     the  performance  by  Flemings  of  its  obligations  hereunder  will  not,
     constitute a violation  of,  conflict with or result in a default under any
     contract, commitment, agreement, understanding,  arrangement or restriction
     of any kind to which  Flemings is a party or by which  Flemings is bound or
     any  judgment,  decree or order  applicable  to  Flemings,  nor is Flemings
     required to obtain the approval of any third party or organization to enter
     into  and  perform  this  Letter  Agreement,  except  to  the  extent  such
     violation,  conflict or default would not have a material adverse effect on
     Flemings's  ability to consummate  the  transactions  contemplated  by this
     Letter Agreement in accordance with applicable law; and

          (f) Neither the  execution  and delivery of this Letter  Agreement nor
     the performance by Flemings of its  obligations  hereunder will violate any
     provisions of English law  applicable to Flemings or require any consent or
     approval of, or filing with or notice to any public body or authority under
     any provision of English law  applicable to Flemings,  except to the extent
     such  violation or failure to obtain any consent or approval would not have
     a  material   adverse  effect  on  Flemings'   ability  to  consummate  the
     transactions  contemplated  by this Letter  Agreement  in  accordance  with
     applicable law.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                          Page 6



     6. Harrow's Representations and Warranties.

     Harrow represents and warrants to Flemings as follows:

          (a) Harrow is a corporation  duly organized,  validly  existing and in
     good  standing  under the laws of  Delaware.  Harrow has the full power and
     authority  to execute,  deliver and carry out the terms and  provisions  of
     this Letter Agreement and consummate the transaction  contemplated  hereby,
     and has taken all necessary action to authorize the execution, delivery and
     performance of this Letter Agreement;

          (b) This  Letter  Agreement  has been  duly  and  validly  authorized,
     executed  and  delivered  by Harrow  and  constitutes  a valid and  binding
     agreement of Harrow,  enforceable in accordance with its terms,  subject to
     applicable principles of equity, bankruptcy, reorganization,  insolvency or
     other laws affecting the enforcement of creditors' rights generally;

          (c) The execution of this Letter Agreement by Harrow does not, and the
     performance by Harrow of its obligations  hereunder will not,  constitute a
     violation  of,  conflict  with or result in a default  under any  contract,
     commitment,  agreement,  understanding,  arrangement  or restriction of any
     kind to  which  Harrow  is a party  or by  which  Harrow  is  bound  or any
     judgment,  decree or order applicable to Harrow,  nor is Harrow required to
     obtain the approval of any person or organization to enter into and perform
     this Letter  Agreement  other than those which shall have been  obtained at
     the time this Letter Agreement is performed;

          (d) The Option Shares are duly authorized,  validly issued, fully paid
     and nonassessable; and

          (e) Neither the execution and delivery of this Letter  Agreement,  nor
     the  performance  by Harrow of its  obligations  hereunder will violate any
     provision  of law  applicable  to Harrow  (including,  without  limitation,
     applicable  securities  law and  regulations)  or  require  any  consent or
     approval of, or filing with or notice to any public body or authority under
     any  provision  of law  applicable  to  Harrow  (except  for such  periodic
     reporting  requirements  as may be  applicable  to Harrow  under the United
     States  Securities  Exchange Act of 1934 (the "Exchange  Act") or the rules
     and regulations promulgated thereunder).

                  (f) None of the  information  prepared  or to be  prepared  by
Harrow and  furnished  to  Flemings or its agent in  connection  with the tender
offer with respect to the Common Stock or disclosed or required to be disclosed,
pursuant to the Exchange Act or  otherwise,  by Harrow  contains or will contain
any untrue  statement of material  fact or omits or will omit any material  fact
necessary to make the statements  therein,  in light of the circumstances  under
which they were made, not misleading.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                          Page 7




     7. Certain Covenants.

          (a) In connection with entering into this Letter Agreement,  Harrow is
     establishing  an  account  in its  name to be  maintained  at  Flemings  in
     accordance with its customary practices  concerning the maintenance of cash
     accounts  of  customers  and  bearing  interest  at an annual  rate of five
     percent (5%),  compounded  quarterly,  and Harrow is  depositing  into such
     account an amount equal to the aggregate of all the Tranche Purchase Prices
     paid by Flemings,  representing an equal amount in respect of each Tranche.
     The amount so deposited in respect of a particular Tranche may be withdrawn
     by Harrow if an Option in  respect  of that  Tranche  is  exercised  or, at
     Harrow's  option,  may be applied  towards the Option Price related to such
     Tranche as is then  exercised.  Harrow  agrees  that if at any time  Harrow
     fails to pay any sums due to Flemings, Flemings may set off or transfer any
     sum standing to the credit of any account Harrow may have with Flemings, or
     any other sums that Flemings is holding on Harrow's  behalf,  in or towards
     satisfaction  of Harrow's  monies,  obligations and liabilities to Flemings
     under any document or agreement whatsoever.  Where such set-off or transfer
     requires the conversion of one currency into another, such conversion shall
     be  calculated  at  Flemings's  then  prevailing  spot rate of exchange for
     purchasing the currency considered.

          (b)  Until  such  time as all of the  Options  in  respect  of all the
     Tranches  granted herein shall have been exercised or shall have expired or
     otherwise  lapsed,  Harrow agrees to furnish Flemings with its consolidated
     financial  statements  as at the  end of  each  month  (which  need  not be
     audited),  which financial  statements shall be furnished within 30 days of
     the end of the  month to  which  they  relate,  together  with  appropriate
     certification  executed by a duly authorized officer of Harrow attesting to
     the  Consolidated Net Worth of Harrow as at the end of each such month. The
     agreement  to furnish  such  financial  statements  may be satisfied by the
     delivery  to Flemings of copies of such  filings,  if any, as Harrow  makes
     with the United States Securities and Exchange Commission.

          (c) At or prior to the  commencement  of the tender offer with respect
     to the Common  Stock,  Harrow will furnish  Flemings  the legal  opinion of
     Curtis,  Mallet-Prevost,  Colt & Mosle,  counsel to Harrow, with respect to
     those matter set forth in Section 6 of this Letter Agreement,  with a bring
     down certificate delivered at the Closing.

          (d) Harrow will provide  Flemings with full disclosure of all relevant
     information.

     8. Indemnification. Harrow agrees that it will indemnify and hold harmless,
Flemings, its stockholders,  employees,  agents,  affiliates and each person, if
any, that controls  Flemings and its affiliates within the meaning of Section 20
of the  Exchange Act and Section 15 of the  Securities  Act of 1933 (the "Act"),
each as amended (any and all of whom are referred to as an "Indemnified Party"),
from and against any and all losses,  claims,  damages or  liabilities,  and all
actions in respect  thereof  (including,  but not limited to, all legal or other
expenses  reasonably  incurred by an  Indemnified  Party in connection  with the
preparation  for or defense of any claim,  action or proceeding,  whether or not
resulting in any liability),  sustained or incurred
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                          Page 8



by an Indemnified  Party:  (i) arising out of, or in connection with, any untrue
statement or alleged untrue statement of a material fact contained in any of the
financial or other  information  furnished to Flemings or its agent by Harrow in
connection with the Transactions  including,  without  limitation,  the Offer to
Purchase,  or the omission (or alleged  omission)  therefrom of a material  fact
necessary to make the statements  therein,  in light of the circumstances  under
which they were made,  not  misleading;  or (ii) with respect to,  caused by, or
otherwise  arising out of any transaction  contemplated by this Letter Agreement
(including,  without  limitation,  the  proposed  offer to purchase) or Flemings
performing the services contemplated hereunder;  provided,  however, Harrow will
not be liable  under  clause  (ii)  hereof to the extent  that any loss,  claim,
damage  or  liability  is found  in a final  judgment  by a court  of  competent
jurisdiction  to have resulted from Flemings'  gross  negligence or bad faith in
performing  such  services  or for any  losses or  damages  not  related  to the
proposed transactions.

     If the  indemnification  provided in this  Section 8 is  unavailable  to an
Indemnified  Party  (including,  for purposes of the remainder of this Section 8
Harrow and its  stockholders,  employees,  agents  and any  person who  controls
Harrow within the meaning of Section 20 of the Exchange Act or Section 15 of the
Act) under the preceding paragraph in respect of any losses,  claims, damages or
liabilities referred to therein,  such other party, in lieu of indemnifying such
Indemnified  Party,  shall  contribute  to any  amounts  paid or payable by such
Indemnified  Party in such  proportion as is appropriate and equitable under all
of the circumstances.

     The foregoing indemnification and contribution provisions of this Section 8
are not in lieu of, but in addition to, any rights which any  Indemnified  Party
may have hereunder or otherwise.

     Each party  hereto  agrees to notify the other  promptly  of the  assertion
against it or any other person of any claim or the commencement of any action or
proceeding  relating to any  activity  contemplated  by this  Letter  Agreement;
provided, however, that the failure to so notify the other party shall not alter
either party's rights or obligations  under this Letter  Agreement except to the
extent such other party is actually prejudiced by such failure.

     9. Specific Performance.  Harrow and Flemings acknowledge and agree that in
the event of any breach of this Letter Agreement,  the non breaching party would
be  irreparably  harmed and could not be made whole by monetary  damages.  It is
accordingly agreed that Harrow and Flemings,  in addition to any other remedy to
which  they  may be  entitled  at law or in  equity,  shall  be  entitled  to an
injunction  or  injunctions  to  prevent  breaches  of the  provisions  of  this
Agreement and/or to compel specific  performance of this Letter Agreement in any
action, which action may take place in a state court of New York, as provided in
Section 11(h) hereof.

     10.  Expenses.  Upon the  completion of the purchase of the Common Stock by
Flemings  or its  agent,  Harrow  will  pay  Flemings  for  its own  account  an
arrangement  fee equal to  US$154,508.90.  In  addition,  Harrow will  reimburse
Flemings for all of Flemings'  out-of-pocket  expenses (including attorneys fees
and expenses) incurred in connection with the transactions contemplated hereby.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                          Page 9



     11. Miscellaneous.

          (a) This Letter  Agreement as amended and the Engagement  Letter dated
     October  15,  1997  between  Flemings  and  Harrow  as  amended,   together
     constitute that entire  understanding of the parties hereto with respect to
     the  subject  matter  hereof  and  supersedes  all  prior   agreements  and
     understandings,  whether oral or written,  between the parties  hereto with
     respect to the subject  matter  hereof.  This Letter  Agreement  may not be
     amended orally, but only by an instrument in writing by each of the parties
     to this Letter Agreement.

          (b) This Letter Agreement shall inure to the benefit of and be binding
     upon the parties hereto and their respective  successors and assigns.  This
     Letter Agreement and the rights granted hereunder may not be transferred by
     Harrow  without  the  consent  of  Flemings,  which  consent  shall  not be
     unreasonably  withheld,  provided,  that  (i)  Flemings  is  provided  with
     evidence  reasonably  satisfactory  to it that such a  transfer  is in full
     compliance  with all applicable laws and  regulations  (including,  without
     limitation,   applicable   securities  law  and   regulations),   and  (ii)
     arrangements  reasonably satisfactory to Flemings shall have been made with
     respect to the deposit referred to in Section 7(a) hereof. In the event any
     such transfer occurs,  Harrow shall give written notice thereof to Flemings
     in  accordance  with the  provisions  of Section 11(i) hereof within thirty
     (30)  days  of the  effectuation  of such  transfer.  Neither  this  Letter
     Agreement or any rights hereunder may be assigned or otherwise  transferred
     by Flemings except to an affiliate thereof.

          (c)  Notwithstanding  the foregoing,  nothing in this Letter Agreement
     shall be deemed to restrict Flemings, at any time after the Put Options and
     Call Options granted hereunder lapse and become no longer  exercisable with
     respect to all Tranches in accordance with the terms hereof,  from selling,
     assigning,  transferring,  conveying or  otherwise  disposing of the Option
     Shares at any time to any person,  provided,  that prior notice of any such
     sale,  assignment,  transfer,  conveyance or other  disposition is given to
     Harrow. In the event of any such sale, assignment,  transfer, conveyance or
     other  disposition,  unless  there  is  at  the  relevant  time  a  payment
     obligation  on the part of Harrow in  respect  of the  exercise  of the Put
     Option  or  any  indemnification  obligation  in  respect  of  this  Letter
     Agreement,  the rights and obligations of the parties hereunder shall cease
     as to the Option Shares that are the subject thereof, and Harrow shall have
     the right to close the account  referred  to in Section  7(a) hereof and to
     withdraw all funds therefrom without penalty.

          (d)  Section  headings  contained  in this  Letter  Agreement  are for
     reference  purposes only and shall not affect the meaning or interpretation
     of this Letter Agreement.

          (e) All  representations,  warranties and agreements  contained herein
     shall survive the Closing related to any particular Tranche.
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                         Page 10



          (f) This Letter  Agreement  may be executed in  counterparts,  each of
     which shall, when executed, be an original and all of which shall be deemed
     to be one and the same instrument.

          (g) This  Letter  Agreement  shall be governed  by and  construed  and
     enforced  in  accordance  with the laws of the State of New  York,  without
     reference to the conflicts of law principles thereof.

          (h) Harrow and Flemings hereby agree that any suit,  claim,  action or
     proceeding  relating to or arising under this Letter Agreement may (without
     prejudice  to the ability of either  party to commence  proceedings  in any
     other  jurisdiction)  be  brought  in a  state  court  of New  York  having
     competent  subject matter  jurisdiction  over the matters set forth in this
     Letter  Agreement  or in a federal  court  sitting in New York (each a "New
     York  Court").  Each of Harrow and  Flemings  hereby  consents  to personal
     jurisdiction  in any such  action  brought  in any  such  New  York  Court,
     consents  to service of process  upon it in the matter set forth in Section
     11(i) hereof, and waives any objection it may have to venue in any such New
     York Court or to any claim that any such New York Court is an  inconvenient
     forum.

          (i) All notices and other  communications  under this Letter Agreement
     shall be in writing and delivery  thereof shall be deemed to have been made
     either  (A)  if  mailed,  when  received,  or (B) if  transmitted  by  hand
     delivery,  telegram,  telex,  telecopier  or facsimile  transmission,  when
     transmitted  to the party  entitled to receive the same,  at the  addressee
     indicated below or at such other address as such party shall have specified
     by written notice to the other parties hereto given in accordance herewith:

         (A)      if to Flemings, addressed to:

                  Robert Fleming & Co. Limited
                  25 Coptha Avenue
                  London EC2R 7DR
                  England

                  Attention:        Michael J.C. Watts
                  Facsimile:        (+44) 171 256 5036
                  Telex:   297451

                  with copies to:

                  Baker & McKenzie
                  805 Third Avenue
                  New York, New York 10022

                  Attention:        Richard L. Nevins, Esq.
                  Facsimile:        (+1) 212 891 3819
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                         Page 11



         (B)      if to Harrow, addressed to:

                  Harrow Industries, Inc.
                  2627 East Beltline, S.E.
                  Grand Rapids, Michigan 49546

                  Attention:        John S. Hogan

                  Facsimile:        (+1) 616 942 2170

                  with copies to:

                  Curtis, Mallet-Prevost, Colt & Mosle
                  101 Park Avenue
                  New York, NY 10178

                  Attention:        Eileen P. Matthews, Esq.
                  Facsimile:        (+1) 212 697 1559

          (j) Should any litigation or  arbitration be commenced  (including any
     proceedings  in a  bankruptcy  court)  between the parties  hereto or their
     representatives  concerning  any provision of this Letter  Agreement or the
     rights and duties of any person or entity  hereunder,  the party prevailing
     in such  litigation or arbitration  shall be entitled,  in addition to such
     other relief as may be granted,  to reasonable  attorneys' and  arbitration
     fees and the costs of litigation or arbitration.

          (k) Any  waiver  by any  party of a breach  of any  provision  of this
     Letter Agreement shall not operate as or be construed to be a waiver of any
     other breach of such  provision or of any breach of any other  provision of
     this  Letter  Agreement.  The  failure  of a party to  insist  upon  strict
     adherence  to any term of this  Letter  Agreement  on one or more  sections
     shall  not be  considered  a waiver  or  deprive  that  party of the  right
     thereafter  to insist upon strict  adherence to that term or any other term
     of this Letter Agreement.

          (1) No provision in this Letter  Agreement shall constitute any person
     a third party beneficiary.

          (m) If any term,  provision,  covenant or  restriction  of this Letter
     Agreement is held by a court of competent  jurisdiction  or other authority
     to be invalid, void or
<PAGE>
                                                    Robert Fleming & Co. Limited
                                                               November 14, 1997
                                                                         Page 12



unenforceable,   the   remainder  of  the  terms,   provisions,   covenants  and
restrictions of this Letter  Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated; provided; however, that in
the event the provisions of this Letter Agreement  dealing with the purchase and
sale of the  Option  Shares  is held  to be  invalid  then  this  entire  Letter
Agreement shall be invalidated.

     If the foregoing  correctly  reflects the ten-ns of our  agreement,  please
countersign  the  enclosed  copy of this  letter  in the space  provided  below,
whereupon this letter shall constitute a binding agreement between us.

                                     Very truly yours,

                                     HARROW INDUSTRIES, INC.

                                     By: /s/ Donald G. Calder
                                         Name:  Donald G. Calder
                                         Title:    Chairman


Accepted and agreed to as of the date first above written:

ROBERT FLEMING & CO.  LIMITED


By: ___________________________
         Name:   J. M. Cole
         Title:     Director
<PAGE>
                                  AMENDMENT TO
                             PUT AND CALL AGREEMENT


     This  Amendment  (this  "Amendment")  to the Put and Call  Agreement  dated
October 15, 1997, as amended as of November 14, 1997 (the "Put/Call Agreement"),
between Harrow Industries,  Inc., a Delaware  corporation  ("Harrow") and Robert
Fleming & Co. Limited,  a British merchant banking firm  ("Flemings") is made as
of the 9th day of December 1997 by and between such parties.

                                    RECITALS

     WHEREAS,  Harrow and Flemings entered into the Put/Call  Agreement and have
resolved to amend certain sections of agreement as hereinafter set forth.

     NOW,  THEREFORE,  in  consideration  of the  premises  and mutual  promises
contained herein and of other good and valuable  consideration,  the receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:

I. AMENDMENTS

     1. The first  paragraph  of the  Put/Call  Agreement  is hereby  amended by
deleting  the words "not to exceed  US$10,000,000"  from the first  sentence and
replacing them with the words "equal to US $6,967,260".

     2. The second  paragraph  of the first page of the  Put/Call  Agreement  is
hereby deleted in its entirety.

     3. Section 3(b) of the Put/Call  Agreement is hereby amended to read in its
entirety as follows:

          "(b) The Call Option and the Put Option shall each be  exercisable  in
     Tranches, as set forth below.
<TABLE>
         Identification of Tranche:              Comprised of:
         <S>                                     <C>
         Tranche A                               16,589 shares of Common Stock

         Tranche B                               16,589 shares of Common Stock

         Tranche C                               16,589 shares of Common Stock

         Tranche D                               16,589 shares of Common Stock
<PAGE>
         Tranche E                               16,589 shares of Common Stock

         Tranche F                               16,589 shares of Common Stock

         Tranche G                               16,589 shares of Common Stock"
</TABLE>
     4.  Section  4 of the  Put/Call  Agreement  shall be  amended  by  deleting
$1,000,000"   from  the  second  sentence  and  replacing  it  with  the  amount
"US$995,323";  and by deleting the table set forth therein and replacing it with
the following table:
<TABLE>
         If Put Option or Call Option is         This Applicable Option Price or
         exercised on or prior to:               Tranches A, B, C, D, E, F or G
                                                 shall be:
        <S>                                      <C>
         December 31, 1997                       $1,074,949

         June 30, 1998                           $1,144,621

         December 31, 1998                       $1,224,247

         December 31, 1999                       $1,393,452

         December 31, 2000                       $1,567,634

         December 31, 2001                       $1,741,815

         December 31, 2002                       $1,990,646

         December 31, 2003                       $2,239,476

         December 31, 2004                       $2,488,307

         December 31, 2005                       $2,786,904
</TABLE>
II. MISCELLANEOUS

     1. Capitalized  terms used herein and not otherwise  defined shall have the
meanings ascribed to such terms in the Put/Call Agreement.

     2. This Amendment shall be interpreted and construed in accordance with the
internal  laws of the  State of New  York  regardless  of the law that  might be
applied under principles of conflicts of law.
<PAGE>
     3. This Amendment and any  amendments,  waivers,  consents,  or supplements
hereto or  hereunder  may be  executed  in any  number of  counterparts,  and by
different parties hereto or thereto in separate counterparts, each of which when
so executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.  This Amendment shall
become effective upon the execution and delivery of a counterpart by each of the
parties hereto.

     4. Except as specifically modified by this Amendment, in all other respects
the terms and  conditions  of the  Put/Call  Agreement  are hereby  ratified and
confirmed by the parties thereto and shall remain in full force and effect.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
duly executed and delivered by their  respective duly authorized  officers as of
the date first written above.

                                     HARROW INDUSTRIES, INC.



                                     By:/s/ Donald G. Calder
                                        Name: Donald G. Calder
                                        Title:   Chairman


                                     ROBERT FLEMING & CO. LIMITED



                                     By:_________________________________
                                         Name:
                                         Title:
<PAGE>
EXHIBHIT 10.17


                             Harrow Industries, Inc.
                  Economic Value Added Executive Incentive Plan

Plan Purpose

     The purpose of the Harrow  Industries,  Inc. Economic Value Added Incentive
Plan (the "EVA Plan") is to motivate and  encourage  Harrow  management  to work
together in the creation of economic value in order that the company may achieve
its strategic goals and continue to grow, prosper, and provide for the long term
interests of its shareholders.

Objectives of the Plan

     The specific objectives of the EVA Plan are as follows:

         1.       To  communicate  the  Company's  strategic  goals in a clearly
                  defined and quantifiable manner.

         2.       Encourage  employees  to  understand  they  all  have a direct
                  impact on operating results.

         3.       To provide the management  team with a common and  significant
                  financial  interest in creating  value through  improvement in
                  EVA.

         4.       Significantly increase the likelihood the Company will achieve
                  or surpass its five year plan forecast.

Philosophy

     The Company  believes  that  executive  rewards  should  track with Company
performance.  Rewards  should be  structured  to be  generous  in  periods  when
executives drive the Company toward the achievement of superior  performance and
scant  when  performance   falls  short.   Since  Harrow's   shareholders   have
historically held a long term outlook on their investment in the Company,  it is
essential  that the  financial  interests of the executive be based on a similar
long term period.
<PAGE>
Eligibility

     The following positions are eligible for participation in the Plan:

     President & Chief Operating Officer                (Harrow Products, Inc.)
     Vice President & Treasurer                         (Harrow Products, Inc.)
     Vice President HR & Secretary                      (Harrow Products, Inc.)
     Vice President & Controller                        (Harrow Products, Inc.)
     Vice President Information Services                (Harrow Products, Inc.)
     President                                          (Division/Subsidiary)
     Direct Reports                                     (Division/Subsidiary)

     Direct  Reports to  Division  or  Subsidiary  Presidents  are  eligible  to
participate at the sole discretion of the respective business unit President and
subject to  approval  by the  President  and Chief  Operating  Officer of Harrow
Products,  Inc. Typical positions at this level which would be eligible for this
Plan include the following:

         Sales & Marketing VP or Director
         Controller
         Manufacturing/Operations VP or Director
         Purchasing/Materials Management VP or Director
         Engineering VP or Director
         Human Resources VP or Director

     Other   positions   may  be  included  upon  the   recommendation   of  the
President/COO  of  Harrow  and  the  approval  of the  Chairman  of  the  Board.
Participants  in the  Plan  may not  participate  in any  other  incentive  pay,
commission override,  gainsharing, or other supplemental,  compensation program.
Participation in one year does not guarantee  participation in subsequent years.
Due to the varying nature of certain positions between business units, inclusion
of a position at one  division  will not  necessarily  mean a  similarly  titled
position at another unit would be included in the Plan.

Effective Date

     This Plan is  effective  upon  approval of the Board of Directors of Harrow
Industries, Inc. and will continue indefinitely at the discretion of the Board.
<PAGE>
Plan Administration

     The  President  and Chief  Operating  Officer of Harrow  Products,  Inc. is
responsible    for   the    ongoing    administration    of   the   Plan.    The
Executive/Compensation  Committee  of Harrow  Industries,  Inc.  shall  annually
review both the provisions of the Plan and approve all payouts hereunder.

Overview of Plan Structure

     The Plan rewards  Participants  based upon  achievement  in sustaining  and
increasing  their  operation's  EVA.  Economic  Value  Added  (EVA) is a single,
comprehensive  measurement  by which  division and  consolidated  performance is
evaluated.  "EVA" is defined as net  operating  profit  after tax (NOPAT) less a
capital  charge  based upon the tangible net  operating  assets  employed in the
business.  More detailed information regarding how the Company calculates EVA is
provided in Exhibit I.  Adjustments or exceptions to this calculation may not be
made without the approval of the President/COO and the Chairman of the Board.

     1. Target  Incentive:  Each  participant  is assigned a "Target  Incentive"
based on his or her level within the Plan.  The Target  Incentive is  determined
each year by multiplying the  participant's  base  compensation by the following
percentages:

        President & Chief Operating Officer                           70%
        Corporate Officers/ Bus. Unit Presidents                      60%
        Direct Reports to Bus. Unit Presidents                        30%

     2. Criteria for Incentive Awards: Based upon the Participant's level within
the Plan, the annual award is earned solely based on EVA, or on a combination of
EVA and the achievement of agreed upon personal objectives.  The percentage of a
Participant's total annual award based on EVA is as follows:

        President/Chief Operating Officer                             100%
        Corporate Officers / Bus. Unit Presidents                     90%
        Direct Reports to Bus. Unit Presidents                        80%

     3.  Calculation of Award and Creation of Incentive  "Pools":  Each business
unit and the corporation  annually determines its Economic Value Added using the
definition  of EVA provided in Exhibit I.  Provided a unit  achieves a specified
minimum growth in EVA (as provided in the table below), the unit earns a current
year incentive
<PAGE>
pool equal to its prior year  incentive  pool. If a business unit creates EVA in
excess of this minimum growth requirement,  20% of the excess EVA is contributed
to the current year incentive  pool.  Likewise,  if a business  unit's EVA falls
short of the minimum growth requirement,  20% of the decrease will be subtracted
from the pool. For purposes of determining  corporate incentive pool, the amount
is similarly increased or decreased by 10% based upon consolidated EVA.

                         Minimum EVA Growth Requirements

The minimum  required growth in EVA required to sustain the prior year incentive
pool is the higher of the following:
<TABLE>

                                  Minimum % of        Minimum $ Amount
                                  Prior Year EVA        of EVA Growth
<S>                                <C>                <C>
Ives Division                       6%                $150,000
LSE Division                        8%                $175,000
Rutt Division                       6%                $100,000
FHP Division                        7%                $150,000
Corona Division                     6%                $125,000
Recognition Systems, Inc.          10%                $100,000
Corporate (consolidated)            7%                $600,000
</TABLE>
     4. Determination of Individual EVA Awards: Each business unit and corporate
computes an annual Award Percentage  determined by dividing the applicable bonus
pool for the current year by the total  target  incentives  for all  individuals
participating  in the  bonus  plan.  An  individual's  EVA  incentive  award  is
determined by multiplying a participant's  Target Incentive  (number I above) by
applicable  EVA  percentage  (number 2 above)  and then by the Award  Percentage
(preceding sentence).

Awards to individual participants are not subject to any maximum. Conversely, if
the computed incentive pool is negative,  a participant's  deferred account will
be reduced accordingly.

     5.  Determination  of  Individual  Objective  Awards:  The Chief  Operating
Officer and each division or subsidiary  President will have separate  incentive
pools available for allocation to their respective  subordinates  based upon the
achievement  of mutually  agreed upon personal  objectives  for the  performance
year. The pool  available for allocation by each division  President is equal to
20% of the total  subordinate  Target  Incentives  multiplied by the  applicable
Award  Percentage  for the year.  The pool available for allocation by the Chief
Operating  Officer  is  equal to 10% of the  total  Target
<PAGE>
Incentives of other corporate  officers and business unit Presidents  multiplied
by their  applicable Award  Percentages for the year.  Awards from this pool are
made to  Participants  at the sole  discretion  of their  respective  President.
Amounts not awarded from the available pool in any  performance  year may not be
carried  over and awarded in a  subsequent  year.  Examples of  Incentive  Award
calculations can be found in Exhibit 111.

     6. Payment of Incentive Awards: Annual incentive awards to all Participants
employed by the Company on the last day of the  performance  year are calculated
and  paid  no  later  than  February  28 of the  year  following  the end of the
performance year. The amount of the annual payout is equal to one-third (1/3) of
the sum of 1) any unpaid  carryover  balance from prior  years,  2) any interest
credited  as of the end of the  performance  year,  and 3) the annual  incentive
award for the current  performance  year.  Participants  who terminate  during a
performance year for reasons other than death, disability, retirement, or due to
a change in control are not eligible for a pro-rated incentive award.

Prior Year Incentive Pool

     For purposes of computing  business unit and corporate  incentive pools for
the current  performance  year,  the prior year incentive  compensation  pool is
generally  equal to total prior year incentive  awards to all plan  participants
employed by the Company on the last day of the current  performance  year. Prior
year incentive awards to participants terminated prior to end of the performance
year are not  included.  However,  the prior  year pool does  include a proforma
annual  incentive  award for  participants  joining the Company during the year.
Proforma  amounts  included  are subject to approval  by the  President/COO  and
Chairman of the Company.

Transition Rules

     The initial prior year incentive  compensation pool for each business unit,
except  for  Recognition  Systems,  Inc.,  and the  corporate  office for use in
determining  performance  year 1998  incentive  awards is equal to the incentive
pools for performance year 1997 determined as if the Plan had been in effect for
that year. For purposes of determining 1997 proforma  incentive pools, the prior
year incentive pools are equal to the actual incentive compensation amounts paid
under  the  predecessor   plan  (the  Harrow   Products,   Inc.   Executive  and
Mid-Management Incentive Plan).
<PAGE>
     For  Recognition  Systems,  Inc., the initial prior year incentive pool for
use in determining  its performance  year 1998 incentive  awards is equal to the
total of amounts determined for each RSI Participant after restructuring his/her
actual  total  1997  compensation  into  base  pay  and  variable   compensation
components in a manner  consistent  with  comparable  Company  employees who are
Participants in the Plan.

Initial Carryover Balances

     For  purposes of  computing  annual  incentive  payouts,  participants  are
credited with an "Initial  Carryover  Balance"  generally  equal to the total of
actual incentive payments under the predecessor  incentive plan for fiscal years
1996 and 1997.

     Individuals who were not  Participants  in the predecessor  plan for all of
fiscal 1996 or 1997 are credited with an Initial Carryover Balance determined on
a proforma basis assuming they had been paid an incentive for the entire period.
The balance credited shall be based on a Target Incentive for the position.  Any
exception  must be  recommended  by the  respective  business unit President and
approved by the President/COO and Chairman of Harrow.

     The Initial Carryover Balance is not subject to interest charges or credits
or repayment  during a  Participant's  period of  employment.  In  determining a
Participant's  vested account balance, the Initial Carryover Balance is deducted
from a Participant's  total account  balance upon  termination of employment for
any reason.

Optional Deferrals

     A Participant may elect, prior to the beginning of the performance year, to
defer  receipt of any portion of his annual  incentive  award up to a maximum of
100% of the total award for that performance  year. The  Participant's  election
must also  indicate  the desired  payment  schedule of any  deferred  incentive,
including payment of any related interest credits.  Elections under this section
are irrevocable.

Interest on Mandatory and Optional Deferals

     Interest will be credited on any deferred  balances at an annual rate equal
to the  highest  rate the Company  pays at the time of the  deferral on its debt
capital  or  10%,   whichever  is  lower.   Interest  is  not  credited  on  the
Participant's Initial Carryover Balance.
<PAGE>
Treatment of New Employees

     An eligible employee who joins the Company during a performance  period may
be  included  in the  Plan  as a  Participant  at the  discretion  of his or her
respective  business unit President.  The new Participant  will be entitled to a
pro-rated  share  of an  annual  award.  Exceptions  must  be  approved  by  the
President/COO and Chairman of Harrow.

Acquisitions

     Upon  acquisition  of a  business,  an  initial  prior  year EVA amount and
incentive  compensation pool and the minimum future EVA growth  requirements for
use in determining  subsequent incentive awards under the Plan are determined by
the  Company's  President/COO  and  approved by the Chairman of the Board of the
Company.  The  initial  prior  year  incentive  compensation  pool  for  use  in
determining  subsequent  performance year incentive awards is equal to the total
of the variable amounts determined for each Plan Participant after restructuring
his/her  actual  total  prior  year  compensation  into  base  pay and  variable
compensation  components in a manner  consistent with other  comparable  Company
employees who are Participants in the Plan.

     Consolidated prior year EVA amounts and future EVA growth  requirements are
similarly  adjusted upon  acquisition  for use in determining  future  incentive
awards for  corporate  officers.  Prior year EVA  amounts  and future EVA growth
requirements are also adjusted for any business unit where the acquired business
is included in the determination of its EVA.

Terminations and Vesting of Deferred Balances

     In the  event a  Participant  terminates  his or her  employment  with  the
Company  voluntarily or involuntarily for reasons other than death,  disability,
retirement or a change in control, deferred balances are payable as follows:

Mandatory Deferred Balances (excluding Initial Carryover Balance)            50%
Optional Deferrals (if any)                                                 100%

     Payment  will be made to  terminated  Participants  at the  next  regularly
scheduled date for payment of incentive awards.
<PAGE>
     A participant is entitled to a pro-rated  award for the current year if his
employment is  involuntarily  terminated under the Executive  Severance  Policy.
Employees who voluntarily terminate are not eligible for such pro-rated.

Death, Disability, Retirement, and Changes in Control

     In the event a Participant  dies,  becomes disabled  (defined as qualifying
either  for  the  Company's  Long  Term   Disability  Plan  or  Social  Security
Disability),  or retires  (defined as qualifying for normal or early  retirement
under the  Company's  Retirement  Plan),  100% of the sum of  mandatory  and any
optional  deferred  balances  are  payable  to  the  Participant  (less  Initial
Carryover  Balances)  at the next  regularly  scheduled  date for the payment of
incentive  awards.  In the event of a change in control of the Company or one of
its business  units  (defined as  acquisition by a purchaser of more than 50% of
the Company's stock or substantially all the assets of the Company or one of its
units) 100% of the sum of  mandatory  and any  optional  deferred  balances  are
payable to the Participant (less Initial Carryover Balances) upon closing of the
transaction.

     A Participant is entitled to a pro-rated  award for the current year if the
event of death, disability, retirement, or change in control occurs prior to the
conclusion of a performance year.

Funding

     The Plan is an unfunded,  non-qualified  deferred compensation plan. Monies
that become due to Participants are unsecured obligations of the company.

Amendment and Termination of the Plan

     The Plan may be amended or terminated at any time and without prior notice,
at the sole discretion of the Board of Directors of Harrow Industries,  Inc. Any
deferred balances  (excluding any Initial Carryover  Balances) shall become 100%
vested upon termination of the Plan.
<PAGE>
                     Exhibit I - Economic Value Added (EVA)


Economic Value Added (EVA) is determined as follows:

                          EVA = NOPAT - CAPITAL CHARGE

NOPAT (net operating profit after taxes) is determined as follows:

     BUSINESS UNIT OPERATING INCOME+/-ADJUSTMENTS+/-INCOME TAXES

Business  unit  operating  income is defined as  operating  income as  regularly
determined  for purposes of both internal and external  reporting and subject to
annual audit by the Company's independent accounts.

Adjustments to business unit operating income consist of the following:

        o         Increases (+) or decreases (-) in the business unit's recorded
                  LIFO reserve
        o         Any recorded provision for incentive compensation under the
                  Plan (+)
        o         Any recorded provision for the amortization of intangible
                  assets (+)
        o         Any recorded provision for noncompete payments
        o         Any recorded pension income (-) or expense (+) which does
                  not represent cash received from or paid to the Company's
                  pension trusts
        o         Any items deemed to be strategic investments
        o         Amortization of any items deemed to be strategic investments
                  determined on a straight-line basis over an agreed upon
                  amortization period (-)

Strategic  investments  are items  greater  than  $100,000  that are expected to
result in operating  income in future  periods but are required to be recognized
as  expenses  or losses in the  current  fiscal  year under  generally  accepted
accounting  principles.  Examples of such items include research and development
expenses,  acquired  businesses  which are not  expected to  initially  generate
positive EVA, remerchandising programs and certain advertising cost. In order to
qualify as a strategic investment for incentive computation purposes, the amount
and  amortization  period of the investment must be planned and agreed to by the
President/COO and Chairman of the Company in advance of any expenditure or loss.
Generally  this is done as part of the annual  strategic  planning  review.  
<PAGE>
The  division  is  required  to  recognize  an  amortization  charge  in  future
performance  periods  regardless of whether the item actually  results in future
operating  income.  A capital  charge  (see  below) is also  imposed on any item
considered to be a strategic investment.

Income taxes are  determined by  multiplying  adjusted  business unit  operating
income by an average  tax rate of 40% and  subtracting  any  income tax  credits
attributed  directly to the  business  unit.  Such credits  include  foreign tax
credits utilized, foreign sales corporation (FSC) incentives,  jobs tax credits,
and research and development credits.

The capital charge is based on an average cost of debt and equity capital of 12%
applied to the tangible  net  operating  assets  employed in the  business.  Net
operating assets consist of the following:

  Cash (+ or -)
  Accounts receivable net of any allowances (+)
  Inventories (determined on a FFFO basis) net of any obsolescence or market
     reserves (+)
  Other assets (excluding intangible assets, prepaid pension costs, intercompany
     accounts and short-term investments or marketable securities) (+)
  Fixed assets (+)
  Strategic investments (+)
  Accounts payable and accrued expenses (-)
  Deferred compensation expense (excluding any amounts deferred under the 
     Plan) (-)
  Deferred income taxes (+ or -)

The  capital  charge  for all of above  captions  except  for fixed  assets  and
strategic  investments is determined by multiplying  the monthly average of such
items by the average  cost of debt and equity  capital.  The capital  charge for
land and  construction  in progress is  determined  by  multiplying  the monthly
average  of such  items by the  average  cost of debt and  equity  capital.  The
capital charges for depreciable  assets and strategic  investments are the level
charges  which when added to  depreciation  or  amortization  are  sufficient to
provide the investor with an annual after-tax return of 12% and recover the cost
of the investment over the depreciable life or amortization  period of the asset
(see attached tables for determining applicable capital charges.)
<PAGE>
               Depreciable Assets and Strategic Investment Charges
               (Expressed as Percent of Asset or Investment Cost)
<TABLE>
                           Depreciable Assets                                     Strategic Investments
                                Annual               Annual                                Annual         Annual
           Useful            Depreciation            Capital          Amortization         Income         Capital
            Life                Charge               Charge               Period           Charge         Charge
            <S>             <C>                      <C>                  <C>             <C>               <C>

              3             33.333%                   8.302%               3              33.333%           4.981%
              4             25.000%                   7.923%               4              25.000%           4.754%
              5             20.000%                   7.741%               5              20.000%           4.645%
              7             14.286%                   7.626%               7              14.286%           4.576%
              8             12.500%                   7.630%               8              12.500%           4.578%
              9             11.111%                   7.657%               9              11.111%           4.594%
             10             10.000%                   7.698%              10              10.000%           4.619%
             11              9.091%                  7.751%
             12              8.333%                  7.810%
             13              7.692%                  7.875%
             14              7.143%                  7.944%
             15              6.667%                  8.016%
             20              5.000%                  8.388%
             25              4.000%                  8.750%
             30              3.333%                  9.081%
             31              3.226%                  9.143%
             32              3.125%                  9.203%
             33              3.030%                  9.262%
             34              2.941%                  9.319%
             35              2.857%                  9.375%
             40              2.500%                  9.630%
</TABLE>
<PAGE>
                     Exhibit II - Incentive Pool Calculation

                                    Example 1

A business unit's prior year EVA was $2,000,000 and prior year incentive  awards
totaled $250,000. Its minimum growth requirement to sustain the prior year bonus
pool is the  greater  of 6% of  prior  year  EVA or  $100,000.  All  prior  year
participants remain in the plan and there are no new participants.  The business
unit's current year EVA is $2,370,000.
<TABLE>
<S>                                                                  <C>
Prior year EVA                                                        $2,000,000
Minimum growth requirement                                               120,000
                                                                      ----------
Minimum EVA required to sustain prior bonuses                         $2,120,000
                                                                      ==========

Current year EVA                                                      $2,370,000
Minimum required EVA                                                   2,120,000
                                                                      ----------
EVA growth in excess of required minimum                                 250,000
Sharing percentage                                                           20%
                                                                      ----------
Increase in bonus pool                                                   100,000
Prior year bonus pool                                                    250,000
                                                                      ----------
Current year bonus pool                                                 $350,000
                                                                      ==========
</TABLE>
<PAGE>
                                    Example 2

Same as Example 1 except current year EVA is $1,620,000.
<TABLE>
<S>                                                                   <C>
Prior year EVA                                                        $2,000,000
Minimum growth requirement                                               120,000
                                                                      ----------
Minimum EVA required to sustain prior bonuses                         $2,120,000
                                                                      ==========
Current year EVA                                                      $1,620,000
Minimum required EVA                                                   2,120,000
                                                                      ----------
Deficiency in current year EVA                                         (500,000)
Sharing percentage                                                           20%
                                                                      ----------
Decrease in bonus pool                                                 (100,000)
Prior year bonus pool                                                    250,000
                                                                      ----------
Current year bonus pool                                                 $150,000
                                                                      ==========
</TABLE>
<PAGE>
                Exhibit III - Determination of Individual Awards

                                    Example 1

A business  unit's  current year  incentive pool is $300,000 and its target pool
computed by multiply the  business  unit  president  salary by 60% and all other
business unit participants'  salaries by 30% is $200,000.  The base compensation
of an business unit executive other than the president is $80,000.
<TABLE>
<S>                                                                     <C>
Current year bonus pool                                                 $300,000

Target bonus pool                                                        200,000

Ratio of current bonus pool to target pool                                  150%

Participant's base salary                                                $80,000
Target bonus percentage                                                      30%
Target bonus                                                              24,000
Portion of award based on personal objectives @ 20%                        4,800
                                                                        --------
Target EVA bonus                                                          19,200
Ratio of current bonus pool to target pool                                  150%
Current year EVA bonus                                                    28,800
Current award for achievement of personal objectives                       7,000
                                                                         -------
Total incentive award                                                    $35,800
                                                                         =======
</TABLE>

                                    Example 2

Same as Example 1 except business unit participant is a division  president with
base compensation of $150,000.
<TABLE>
<S>                                                                     <C>
Current year bonus pool                                                 $300,000

Target bonus pool                                                        200,000

Ratio of current bonus pool to target pool                                  150%

Participant's base salary                                               $150,000
Target bonus percentage                                                      60%
Target bonus                                                              90,000
Portion of award based on personal objectives @ 10%                        9,000
                                                                        --------
Target EVA bonus                                                          81,000
Ratio of current bonus pool to target pool                                  150%
Current year EVA bonus                                                   121,500
Current award for achievement of personal objectives                      15,000
                                                                        --------
Total incentive award                                                   $136,500
                                                                        ========
</TABLE>
<PAGE>
<TABLE>
                    Harrow Industries, Inc. and Subsidiaries

        Exhibit 11--Statement Regarding Computation of Per Share Earnings


                                                                 Fiscal year ended
                                                 November 30,      December 1,     December 3,
                                                    1997               1996           1995
Primary
<S>                                            <C>                 <C>            <C>
Weighted average shares outstanding ........       892,685          1,074,046      1,100,000
Net effect of dilutive stock options - based
     on the treasury stock method using
     average market price ..................         9,078              1,454
Total ......................................       901,763          1,075,500      1,100,000


Net earnings ...............................    $7,402,000         $5,315,000     $3,403,000
Preferred stock dividend requirements ......      (105,000)          (200,000)      (200,000)
Total ......................................    $7,297,000         $5,115,000     $3,203,000

Per share amount ...........................         $8.09              $4.76          $2.91

Amount reported (Note) .....................         $8.17              $4.76          $2.91
</TABLE>
<TABLE>
                                                                             Fiscal year ended
                                                       November 30,              December 1,              December 3,
                                                           1997                     1996                     1995
<S>                                                   <C>                        <C>                      <C>
Fully diluted
Weighted average shares outstanding                       892,685                 1,074,046                1,100,000
Net effect of dilutive stock options - based
     on the treasury stock method using
     market price at end of period                          9,373                     2,931
Total                                                     902,058                 1,076,977                1,100,000


Net earnings                                           $7,402,000                $5,315,000               $3,403,000
Preferred stock dividend requirements                    (106,000)                 (200,000)                (200,000)
Total                                                  $7,296,000                $5,115,000               $3,203,000

Per share amount                                            $8.09                     $4.75                    $2.91
</TABLE>
Note: Reported earnings per share are based solely on average outstanding shares
since the  inclusion  of common stock  equivalents  (stock  options)  results in
dilution of less than 3%.
<PAGE>
<TABLE>
                  Harrow Industries, Inc. and Subsidiaries

        Exhibit 12--Statement Regarding Computation of Ratio of Earnings
                                to Fixed Charges


                                                                          Fiscal year ended
                                      November 30,        December 1,         December 3,         November 27,        November 28,
                                         1997                1996                1995                1994                1993
<S>                                  <C>                  <C>                <C>                  <C>                 <C>   
Earnings before income
   taxes                             $12,202,000          $8,845,000          $4,595,000          $2,591,000            $182,000
Fixed charges:
   Interest expense                    5,465,000           5,962,000           6,391,000           5,980,000           6,145,000
   Amortization of deferred
      financing costs                     96,000             436,000             226,000             333,000             343,000
   Interest portion of rental
      expense                            690,000             757,000             709,000             687,000             621,000
Total fixed charges                    6,251,000           7,155,000           7,326,000           7,000,000           7,109,000
Earnings                             $18,453,000         $16,000,000         $11,921,000          $9,591,000          $7,291,000

Ratio of earnings to fixed                 2.95x               2.24x               1.63x               1.37x               1.03x
charges
</TABLE>