AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1996

REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MORGAN PRODUCTS LTD.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)

06-1095650
(I.R.S. Employer
Identification Number)
------------------------
469 MCLAWS CIRCLE, WILLIAMSBURG, VIRGINIA 23185
(757) 564-1700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------------
MR. DOUGLAS H. MACMILLAN
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
469 MCLAWS CIRCLE
WILLIAMSBURG, VA 23185
(757) 564-1700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPIES OF ALL COMMUNICATIONS TO:

FRODE JENSEN, III, ESQ. CURT B. GLEAVES, ESQ.
Winthrop, Stimson, Putnam & Roberts Foster Pepper & Shefelman
Financial Centre One Main Place
695 East Main Street 101 S.W. Main Street, 15th Floor
Stamford, CT 06901-6760 Portland, OR 97204-3223
(203) 348-2300 (503) 221-0607

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If the registrant elects to deliver its latest annual report to
security-holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE

PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE REGISTRATION FEE

Common Stock, par value $.10 per share 4,010,000 shares $7.375 $29,573,750.00 $10,197.84

(1) ESTIMATED SOLELY FOR PURPOSES OF CALCULATING THE REGISTRATION FEE PURSUANT
TO RULE 457(C) OF THE SECURITIES ACT OF 1933.
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

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

PROSPECTUS SUBJECT TO COMPLETION, DATED OCTOBER 1, 1996

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

3,400,000 SHARES

[LOGO]

MORGAN PRODUCTS LTD.

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

Of the 3,400,000 shares (the "Shares") of common stock, par value $.10 per
share (the "Common Stock"), of Morgan Products Ltd. ("Morgan" or the "Company")
offered hereby, 1,500,000 Shares are being sold by the Company and 1,900,000
Shares are being sold by Saugatuck Capital Company Limited Partnership
("Saugatuck" or the "Selling Shareholder"). The Company will not receive any of
the proceeds from the sale of Shares by the Selling Shareholder. See "Selling
Shareholder." The Common Stock is listed on the New York Stock Exchange, under
the symbol MGN. On September 30, 1996, the last reported transaction in the
Common Stock on the New York Stock Exchange was at $7.50 per share. See "Common
Stock Price Range and Dividend Policy."
------------------------

SEE "RISK FACTORS" ON PAGES 8 TO 12 OF THIS PROSPECTUS FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------

UNDERWRITING PROCEEDS TO
DISCOUNTS AND PROCEEDS TO SELLING
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDER(3)

Per Share..................... $ $ $ $
Total(4)...................... $ $ $ $

(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $ .

(3) Before deducting expenses payable by the Selling Shareholder estimated at
$ .

(4) The Company has granted to the Underwriter an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of 510,000
additional shares at the price to public less the underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriter exercises such option in full, the total price to public,
underwriting discounts and commissions, and proceeds to the Company will be
$ , $ and $ , respectively. See "Underwriting."

The Shares being offered hereby are offered, subject to prior sale, when, as
and if accepted by the Underwriter, subject to certain other conditions
including the Underwriter's right to reject orders in whole or in part. It is
expected that delivery of the Shares will be made on or about , 1996
at the office of Black & Company, Inc., Portland, Oregon.
------------------------

BLACK & COMPANY, INC.
---------------

The date of this Prospectus is , 1996

[INSIDE FRONT COVER PAGE]

[PHOTOGRAPH COLLAGE DEPICTING VARIOUS INTERIOR AND EXTERIOR DOORS MANUFACTURED
BY THE COMPANY AND WINDOW SYSTEMS DISTRIBUTED BY THE COMPANY; PHOTOGRAPHIC CHART
DEPICTING THE COMPONENTS OF A COMPANY--MANUFACTURED DOOR]

[RESERVED FOR PHOTOGRAPHS]

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

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY CONTAINED ELSEWHERE IN THIS PROSPECTUS, AS WELL AS THE
INFORMATION APPEARING IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN.

CERTAIN INFORMATION CONTAINED IN THIS SUMMARY, ELSEWHERE IN THIS PROSPECTUS
AND DOCUMENTS INCORPORATED BY REFERENCE HEREIN, INCLUDING INFORMATION UNDER
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND INFORMATION WITH RESPECT TO THE COMPANY'S EXPECTED OPERATIONS,
EXPECTED FINANCIAL RESULTS, COST SAVINGS, PLANS AND STRATEGY FOR ITS BUSINESS
AND RELATED FINANCING, ARE FORWARD-LOOKING STATEMENTS. FOR A DISCUSSION OF
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS, SEE "RISK FACTORS."

THE COMPANY

The Company is a leading marketer, manufacturer and distributor of premium
wood door systems and other specialty building products primarily under the
brand names "Morgan" and "Nicolai." The Company also distributes millwork
products manufactured by third parties, including, in nine of its fourteen
distribution centers, premium window systems manufactured by Andersen
Corporation ("Andersen"). The Company's manufactured products are sold through
the Company's distribution centers as well as through independent distributors,
home center chains and other retail stores throughout most of the United States.
The Company believes that approximately half of its sales are to the residential
and light commercial improvement, maintenance and repair markets, and the
balance is to the residential and light commercial new construction markets.

The Company is organized into three primary operating business units: Morgan
Manufacturing, which is headquartered in Oshkosh, Wisconsin and directs the
Company's manufacturing operations; Morgan Distribution, which is headquartered
in Mechanicsburg, Pennsylvania and directs the Company-operated distribution
centers; and Morgan National Accounts, which is headquartered in Williamsburg,
Virginia and serves large home center chains, marketing and merchandising
millwork and specialty building products for Morgan Manufacturing and Morgan
Distribution. The Company's manufactured and distributed products are virtually
all considered to be "millwork."

The Company believes that it is well-positioned in the millwork industry to
capitalize on its well-known brand names, market leadership in wood panel doors,
outstanding reputation for product quality and customer service, multi-channel
distribution capabilities and access to financial resources, all of which it
believes are substantial competitive advantages. However, during the late 1980's
and early 1990's, the Company was hurt by reduced housing starts, industry
overcapacity, rising raw material prices, and other business and economic
conditions which led to reduced demand for the Company's products, substantial
manufacturing overcapacity, and poor financial results.

Since 1994, the Company has adopted a comprehensive strategic plan to
restore profitability and regain industry leadership by providing customers with
quality products and optimum service at the best price/value relationship. As
part of this plan, the Company has made several key management changes,
including the naming of a new chief executive officer in 1994 and the recent
naming of new management in each of the Morgan Manufacturing, Morgan
Distribution and Morgan National Accounts units to establish a qualified and
experienced leadership team committed to achieving Morgan's strategic plan.
These recent additions, combined with the Company's existing management, have
enabled the Company to strengthen and enhance its core competencies in
operations finance, manufacturing operations management and
marketing/merchandising.

manufacturing has been consolidated in the Company's Oshkosh, Wisconsin
facility. The Company has committed to approximately $6.0 million in capital
expenditures for a new high-speed door assembly line to significantly improve
the efficiency and manufacturing capacity of the Oshkosh facility and reduce
manufacturing lead times. Management has also committed to control manufacturing
costs and has achieved substantial savings through innovative raw material
purchasing and manufacturing practices. The Company has also taken steps to
increase revenues by making its manufacturing business more customer-focused and
by better managing relationships with its distributors and home center
customers. The Company is developing a "good, better, best" merchandising
strategy which is intended to improve its product mix and to meet a broader
range of consumer needs and price ranges, to increase the likelihood that the
customer will purchase a higher quality and priced product. If successful, this
approach would result in a higher average gross margin for the Company's total
mix of products.

At Morgan Distribution, management has implemented a number of strategic
initiatives to increase the profitability of its distribution business. In 1995,
the Company took steps to focus its efforts on increasing sales of Andersen
products and as a result, Morgan's sales of Andersen products for the first half
of 1996 increased by approximately 14% over the first half of 1995, which the
Company believes is a significantly greater increase than what was realized by
the other Andersen distributors in the market areas served by the Company.
Management believes that Morgan has substantially strengthened its relationship
with Andersen and has regained its position as one of the largest distributors
of Andersen products in the United States. The Company has also adopted
initiatives to place greater sales emphasis on a mix of products which yield a
higher profitability and has implemented activity-based costing analysis and
value pricing systems to better price certain products and services. In
addition, the Company has also taken steps to reduce costs by streamlining
management, restructuring its transportation fleet and delivery systems and
reviewing its purchasing practices.

An important part of the Company's strategic plan is to expand its
distribution capabilities in the South and other areas where the Company
believes opportunities for significant growth may exist. In August 1996, the
Company acquired substantially all of the business and assets of Tennessee
Building Products, Inc., a regional millwork and specialty building products
distributor and light manufacturer headquartered in Nashville, Tennessee, and
its subsidiary, Titan Building Products, Inc. (collectively, "TBP"). In 1995 and
for the first six months of 1996, TBP had sales of $46.8 million and $24.4
million, respectively, and would have contributed $.05 per share to the
Company's earnings on a pro forma basis during each of such periods. With this
acquisition (the "TBP Acquisition") the Company expanded its operations to
include Nashville and Chattanooga, Tennessee; Charlotte, North Carolina;
Greenville, South Carolina; and Huntsville, Alabama. The Company intends to
further grow its distribution business, including through acquisitions, as
opportunities permit.

In order to enhance the Company's relationships with home centers and other
large Morgan Manufacturing and Morgan Distribution retail accounts, the Company
established its Morgan National Accounts unit as a separate operation in 1995.
Morgan National Accounts serves these larger customers as a single Morgan
relationship contact and through Morgan National Accounts the Company will be
able to support category management services and to work with these accounts to
develop a more profitable product mix.

As the final major element of its strategic initiatives, the Company is
committed to improving its management information systems. A new Company-wide
integrated management information system has been selected and is in the process
of implementation. Upon completion of this project, the Company will have
achieved significant progress in meeting its goal of being the industry leader
in customer-friendly order processing and fulfillment systems as well as having
contributed to substantial cost savings internally.

including through acquisitions, as opportunities permit. With respect to its
manufacturing operations, the Company's immediate focus is to complete the
successful implementation and start-up of the new high-speed door assembly line
at the Oshkosh facility in order to fully realize the advantages in capacity,
flexibility, reduced lead times and other efficiencies that such line is
expected to afford and to take full advantage of the benefits of the
consolidation stemming from the sale of the Lexington facility. In addition, the
Company intends to continue to pursue general cost-reduction and
efficiency-enhancing measures.

SELLING SHAREHOLDER

Saugatuck, the Selling Shareholder, is a venture capital partnership which
acquired a controlling interest in the Company in 1984. Mr. Frank J. Hawley,
Jr., the Chairman of the Board of Directors of the Company, is the managing
partner of Laurel Partners, the general partner of Saugatuck. See "Selling
Shareholder."

Under the terms of Saugatuck's partnership agreement, Saugatuck was
terminated on December 31, 1995 and is in the process of winding up its affairs.
The Shares offered by the Selling Shareholder are being offered in order to
further the liquidation of Saugatuck.

In connection with the liquidation of Saugatuck, Mr. Hawley and Mr. Owen S.
Crihfield will receive 97,561 and 2,439 shares of Common Stock of the Company,
respectively, immediately following the Offering. Neither Saugatuck nor Laurel
Partners will own any Common Stock of the Company following the Offering. Mr.
Hawley's holdings will increase by the 97,561 shares distributed to him, which,
when added to the 50,000 shares owned by him individually, will result in his
beneficially owning 147,561 shares or 1.5% of the Common Stock which will be
outstanding after the Offering (assuming that the Underwriter's over-allotment
option is not exercised). Mr. Crihfield will be the holder of 2,439 shares after
the Offering. See "Certain Transactions" for a discussion of transactions
between the Selling Shareholder and the Company during the last three years.

THE OFFERING

Common Stock offered by the Company........... 1,500,000 Shares(1)

Common Stock offered by the Selling
Shareholder................................. 1,900,000 Shares

Estimated net proceeds to the Company......... $

Common Stock to be outstanding after this
offering (the "Offering")................... 10,149,308 shares(1)(2)

Use of proceeds received by the Company....... Reduction of bank debt. See "Use of
Proceeds."

NYSE Symbol................................... MGN

- ------------------------
(1) Excludes up to 510,000 Shares of Common Stock subject to an over-allotment
option granted to the Underwriter. See "Underwriting."

(2) Excludes a total of 843,300 shares of Common Stock reserved under the Morgan
Products Ltd. Incentive Stock Option Plan (the "Stock Option Plan") and the
Non-employee Director Stock Option Plan (the "Director Plan"), 120,865
shares reserved under the Morgan Products Ltd. 1992 Employee Stock Purchase
Plan, and 90,000 shares of Common Stock as to which the Company has agreed
to grant an option to Mr. Brett D. Hoyt. See "Management."

RISK FACTORS

See "Risk Factors" beginning on page 8 for a discussion of certain risks
that should be considered in connection with an investment in the Common Stock
offered hereby.

SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL INFORMATION

The following summary historical and pro forma combined financial
information of the Company was derived from, and should be read in conjunction
with, the historical financial statements of the Company and TBP and the pro
forma combined financial information of the Company, including the notes
thereto, that appear elsewhere in this Prospectus. The unaudited pro forma
combined statement of operations data give effect to the TBP Acquisition and the
Offering as if they had occurred on January 1, 1995. The unaudited pro forma
combined balance sheet data give effect to the TBP Acquisition and the Offering
as if they had occurred on June 29, 1996.

SUMMARY HISTORICAL FINANCIAL DATA

THREE SIX
MONTHS ENDED MONTHS ENDED
YEAR ENDED DECEMBER 31, -------------------- ----------------------
---------------------------------- JULY 1, JUNE 29, JULY 1, JUNE 29,
1993 1994 1995 1995 1996 1995 1996
---------- ---------- ---------- --------- --------- ---------- ----------

(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $ 392,702 $ 358,357 $ 338,026 $ 84,262 $ 95,208 $ 164,926 $ 169,744
Gross profit........................... 52,797 52,398 47,463 11,553 14,379 23,521 24,877
Sales, general and administrative
expenses............................. 49,347 47,001 46,685 11,343 12,187 23,085 22,712
Provision for restructuring(1)......... 0 11,291 51 0 881 9 881
Operating income (loss)................ 3,450 (5,894) 727 210 1,311 427 1,284
Interest/other expense................. (2,248) (3,307) (3,313) (909) (719) (1,606) (1,232)
Income (loss) before income taxes...... 1,202 (9,201) (2,586) (699) 592 (1,179) 52
Net income (loss)...................... 952 (9,401) (2,628) (729) 562 (1,239) 3
Earnings (loss) per share.............. .11 (1.10) (.30) (.08) .06 (0.14) 0.00
Weighted average common and common
equivalent shares outstanding(2)..... 8,495 8,549 8,644 8,642 8,697 8,642 8,684

AT
AT DECEMBER 31, ----------------------
---------------------------------- JULY 1, JUNE 29,
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------

BALANCE SHEET DATA:
Working capital........................ $ 77,225 $ 61,639 $ 58,674 $ 67,319 $ 61,319
Total assets........................... 133,280 113,308 109,515 120,518 112,440
Long-term debt......................... 46,669 33,245 35,574 41,456 32,057
Stockholders' equity................... 64,481 55,192 52,835 54,078 52,963
Long-term debt, net of cash to total
capitalization....................... 40.1% 32.9% 36.6% 41.9% 36.1%
Stockholders' equity per share (2)..... $ 7.59 $ 6.39 $ 6.11 $ 6.26 $ 6.12

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

(1) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a discussion of income before the provision for
restructuring and earnings per share before the provision for restructuring.

(2) Stockholders' equity per share represents stockholders' equity divided by
common shares outstanding at the respective period end.

SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 29, 1996
----------------- -----------------

STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $ 384,848 $ 194,131
Gross profit....................................... 58,852 31,076
Sales, general and administrative expenses......... 56,245 27,818
Provision for restructuring........................ 51 881
Operating income................................... 2,556 2,377
Interest/other expense............................. (3,808) (1,418)
Income (loss) before income taxes.................. (1,252) 959
Net income (loss).................................. (1,294) 910
Earnings (loss) per share.......................... (0.13) 0.09
Weighted average common and common equivalent
shares outstanding............................... 10,144 10,184

AT JUNE 29, 1996
------------------------------------

MORGAN PRO FORMA
HISTORICAL COMBINED
----------------- -----------------
BALANCE SHEET DATA:
Working capital.................................... $ 61,319 $ 70,687
Total assets....................................... 112,440 133,199
Long-term debt..................................... 32,057 37,549
Stockholders' equity............................... 52,963 63,126

THE COMPANY

The Company's business has been conducted through various predecessors since
1855. Morgan was organized in 1983 by Saugatuck to acquire the assets of the
building materials business of C-E Morgan, Inc., a subsidiary of Combustion
Engineering, Inc., which had operated the Company's business since 1972.

The Company is a leading marketer, manufacturer and distributor of premium
wood door systems and other specialty building products primarily under the
brand names "Morgan" and "Nicolai." The Company also distributes millwork
products manufactured by third parties, including, in nine of its fourteen
distribution centers, premium window systems manufactured by Andersen. The
Company's manufactured products are sold through the Company's distribution
centers as well as through independent distributors, home center chains and
other retail stores throughout most of the United States. The Company believes
that approximately half of its sales are to the residential and light commercial
improvement, maintenance and repair markets, and the balance is to the
residential and light commercial new construction markets.

The Company's executive offices are located at 469 McLaws Circle,
Williamsburg, Virginia 23185; and its telephone number is (757) 564-1700.

RISK FACTORS

HISTORY OF LOSSES

The Company has incurred a net loss in four of the last five fiscal years .
The Company's net losses for 1991, 1992, 1994 and 1995, respectively, were $8.1
million, $10.2 million, $9.4 million and $2.6 million. From 1991 to 1995,
stockholders' equity decreased from $73.6 million to $52.8 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Although the Company has taken steps over the past few years to reduce
costs, improve efficiency and to increase revenues, there can be no assurance
that the Company will be able to achieve and maintain profitability. The
Company's ability to sustain profitability is dependent upon a number of
factors, including the continued successful implementation of its manufacturing
improvement and cost reduction efforts, as well as various factors beyond the
Company's control, such as the impact of raw material price fluctuations, the
demand for the Company's higher quality products and the effect of general
economic conditions on the Company's markets. The failure of the Company to
sustain profitability could hinder its ability to service its debt, to make
capital expenditures and to take advantage of business opportunities, the
failure to perform any one of which could have a material adverse effect on the
Company's financial condition and results of operations.

CONSOLIDATION OF MANUFACTURING OPERATIONS; FUTURE NON-RECURRING CHARGES

In 1994 the Company closed its Springfield, Oregon and Weed, California
manufacturing facilities and in the second quarter of 1996 the Company sold its
Lexington, North Carolina door manufacturing facility. The entire manufacturing
operation and product line of doors previously manufactured in Lexington has
been shifted to the Company's Oshkosh, Wisconsin door manufacturing facility.
Accordingly, all of its door manufacturing operations have been consolidated at
its Oshkosh facility. It is expected that the Company will incur restructuring
expenses in the third and fourth quarters of 1996 of approximately $2.6 to $3.0

million related to the sale of its Lexington facility and the consolidation of
all door manufacturing operations into its Oshkosh facility. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Restructuring of Operations" and "--Recent Developments."

In order to expand its capacity to meet anticipated demand and to reduce its
costs of production, the Company is installing a new high-speed door assembly
line at its Oshkosh facility. It is expected that delivery, installation and
start-up of the new line will be completed during the first quarter of 1997.
Delays in the timely delivery, installation or start-up of the equipment or
performance shortfall could have a material adverse effect on the profitability
of the Company. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Recent Developments" and "Business--Operations and
Products."

Further, since all of its manufacturing facilities are now at one location,
a catastrophic loss or destruction of the facility or a general labor dispute at
this site, would stop all production of its doors and would have a material
adverse effect on the Company and its results of operations.

RELATIONSHIP WITH ANDERSEN

Approximately 40% of the Company's 1995 sales were derived from products
sold under the "Andersen" name. The Company's agreement with Andersen grants to
the Company the non-exclusive right to distribute certain of Andersen's products
in specified territories and provides that Andersen can terminate any of the
Company's distributorships at any time upon 60 days notice. The Company believes
that such a termination provision is Andersen's standard arrangement with its
distributors. Although the Company currently has no indication that a
termination or significant modification of the Company's relationship with
Andersen is being considered, such a termination or significant modification
would have a material adverse impact on the Company's profitability.

Andersen currently sells its products exclusively through distributors such
as the Company. In 1994, Andersen realigned its distribution territories which
resulted in some reduction in the territories in which the Company was permitted
to sell Andersen products, although such realignment also reduced the number of
third parties who have also been granted the right to sell Andersen products in
such territories. Such realignment contributed to a decline in unit sales by
Morgan of Andersen products in 1994 by approximately 20% compared to 1993.
Although the Company has no current indication that Andersen is planning another
such realignment or that Andersen might implement a different distribution
system such as direct sales, the occurrence of such an event could have a
material adverse effect on the Company's profitability. See
"Business--Operations and Products" and "Business--Competition."

ACQUISITION STRATEGY

In furtherance of the Company's expansion strategy, it acquired TBP, a
regional millwork and specialty building products distributor and light
manufacturer headquartered in Nashville, Tennessee, in August 1996. See "The
Company" and "Business." The Company's growth strategy includes the possible
acquisition of additional distribution businesses. The Company's ability to
accomplish its strategy will depend upon a number of factors including, among
others, the Company's ability to identify acceptable acquisition candidates, to
consummate the acquisition of such businesses on terms that are favorable to the
Company, to retain, hire and train professional management and sales personnel
at each such acquired business, and to promptly and profitably integrate the
acquired operations into the Company. No assurance can be given that the Company
will be successful with respect to such factors or that any acquired operations
will be profitable or be successfully integrated into the Company.

Acquiring additional distribution businesses will require additional capital
and the consent of the Company's lenders and may have a significant impact on
the Company's financial position. Any such acquisitions may involve the use of
cash (including, indirectly, cash generated by the net proceeds of this
Offering), the issuance of additional debt or the issuance of one or more
classes or series of classes of the

Company's equity securities, which could have a dilutive effect on the
then-outstanding capital stock of the Company. Acquisitions could result in the
accumulation of substantial goodwill and intangible assets, which may result in
substantial amortization charges to the Company which could reduce reported
earnings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Liquidity and Capital Resources" and
"Business--Strategy."

KEY CUSTOMERS OF MANUFACTURED PRODUCTS

The Company does not have formal distribution agreements with any of its
independent distributors or home center chain customers which, in 1995,
purchased approximately 80% of the products manufactured by the Company's
manufacturing unit, accounting for approximately 24% of total Company sales.
Such distribution relationships may generally be terminated by either party at
any time. The Company's largest independent distributor purchased approximately
11% of the products manufactured by the Company, accounting for approximately 3%
of total Company sales. The Company's largest home center chain customer
purchased approximately 23% of the products manufactured by the Company,
accounting for slightly less than 10% of total Company sales. The loss of one or
more independent distributors or home center chains may have a material adverse
effect on the Company. See "Business--Operations and Products."

ECONOMIC AND SEASONALITY FACTORS AFFECTING INDUSTRY

Historically, the level of the Company's business activity has been
cyclical, fluctuating with economic cycles, in particular, with housing starts
and remodelling levels. Housing starts and remodelling are, in turn, heavily
influenced by mortgage interest rates, consumer debt levels, changes in
disposable income, employment growth, consumer confidence and, on a short term
basis, weather conditions. There can be no assurance that a downturn in these
factors affecting housing starts and remodelling will not occur and if housing
and remodelling starts are materially reduced, it is likely such reduction would
have a material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Significant Industry
Trends/Uncertainties." The Company's business is somewhat seasonal with the
Company's lowest sales traditionally occurring in the first and fourth quarters.
Since a high percentage of the Company's overhead and expenses are relatively
fixed throughout the year, profits tend to be lower in quarters with lower
sales.

FLUCTUATIONS IN PRICE OF RAW MATERIAL

The Company's manufacturing operation is dependent upon outside suppliers
for all of its raw material needs and, therefore, is subject to price increases
and delays in receiving supplies of such materials. Wood constitutes
approximately 90% of the Company's raw material costs. The cost of wood
generally fluctuates significantly from quarter to quarter and is influenced by
regulatory constraints which reduce supply from public timberlands and by
housing starts which affect demand. No assurance can be given that the Company
will continue to have available the necessary raw material at a reasonable price
or that significant increases in material costs would not have a material
adverse effect on the Company. See "Business--Operations and Products."

COMPETITION

Competition in the residential specialty building products market is
substantial, both from within the United States and from foreign manufacturers
and importers of building products. The Company has numerous competitors at the
manufacturers' level in the interior and exterior premium wood door market,
although the Company believes that it has the largest market share among the
manufacturers of interior and exterior premium wood panel doors. The Company's
distribution centers compete principally with other distributors of specialty
building products, including window systems, manufactured by third parties and
manufacturers of specialty building products which sell directly to the
Company's target customers.

The Company's manufactured product lines and the Andersen window systems that it
distributes are positioned primarily at the premium price end of their
respective markets. In addition, the Company's agreement with Andersen restricts
the ability of the Company to offer for sale the window systems of other
manufacturers through those of the Company's distribution locations carrying
Andersen products. The Company believes, therefore, that producers and
distributors of lower priced or lower cost products may enjoy a competitive
advantage where price is the consumer's primary concern and that the Company may
be competitively disadvantaged in certain market areas by being restricted in
offering its customers a more varied product mix. In addition, certain of the
Company's competitors may have greater financial and other resources than the
Company and may have greater sales than the Company. Competition could adversely
affect the Company's operating results by forcing the Company to reduce its
sales prices, offer enhanced credit terms, increase customer discounts or
incentives, increase spending for shipping or providing other services. See
"Business--Operations and Products" and "Business--Competition."

RESTRICTIVE COVENANTS

The Company's financing agreements include certain covenants that, among
other things, restrict the ability of the Company to: dispose of assets; incur
additional indebtedness; incur guarantee obligations; prepay other indebtedness;
pay dividends; create liens on assets; enter into sale and leaseback
transactions; make investments, loans or advances; make acquisitions; engage in
mergers or consolidations; change the business conducted by the Company; make
capital expenditures; or engage in certain transactions with affiliates and
otherwise restrict certain corporate activities. In addition, under the
financing agreements, the Company is required to comply with specified financial
ratios and tests, including minimum interest coverage ratios, maximum leverage
ratios, annual capital expenditures limitations and net worth tests. There can
be no assurance that these requirements will be met in the future.

DEPENDENCE ON KEY PERSONNEL

The success of the Company depends to a large extent on a number of key
employees, and the loss of the services provided by them could materially
adversely affect the Company. In particular, the loss of the services provided
by Larry R. Robinette, the President, Chief Executive Officer and a director of
the Company, could materially adversely affect the Company. Mr. Robinette
entered into an employment agreement with the Company for a period ending
December 31, 1997 with automatic one year renewal terms, unless either party
delivers written notice of its desire not to renew 180 days prior to the end of
such term. See "Management."

ABSENCE OF DIVIDENDS

The Company has never paid cash dividends on its Common Stock. The Company
currently anticipates that it will retain all available funds for use in the
operation and expansion of its business and does not anticipate paying any cash
dividends on the Common Stock in the foreseeable future. Any payment of future
dividends and the amounts thereof will be dependent upon the Company's earnings,
financial condition, cash flow and other factors deemed relevant by the
Company's Board of Directors. The Company is restricted in its ability to pay
dividends during the period ending July 13, 1998 by its bank agreements. See
"Common Stock Price Range and Dividend Policy."

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS

The Company's Amended and Restated Certificate of Incorporation authorizes
the Board of Directors to issue 5,000,000 shares of Preferred Stock, par value
$.10 per share. The Board of Directors is expressly authorized to divide the
shares of Preferred Stock into one or more classes or series and to fix and
determine the voting powers and other rights and preferences of such Preferred
Stock. Although the Company has no current plans to issue any shares of
Preferred Stock, issuance of such Preferred Stock could materially and adversely
affect the voting powers and other rights of the holders of Common Stock.

The issuance of Preferred Stock or of rights to purchase Preferred Stock could
be used to discourage an unsolicited acquisition proposal. In addition, the
possible issuance of Preferred Stock could discourage a proxy contest, make more
difficult the acquisition of a substantial block of the Company's Common Stock
or limit the price that investors might be willing to pay in the future for
shares of the Company's Common Stock.

In addition, certain provisions of Delaware law applicable to the Company
could delay or make more difficult a merger, tender offer or proxy contest
involving the Company. Section 203 of the Delaware General Corporation Law
("Section 203") prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the Board of Directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder; (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
(x) by persons who are directors and also officers and (y) by employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (iii) on or subsequent to such date, the business
combination is approved by the Board of Directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Shares offered hereby
by the Company are estimated to be $ million ($ million if the
Underwriter's over-allotment option is exercised in full), after deducting the
underwriting discount and estimated offering expenses payable by the Company.
The principal purposes of the sale of the Shares by the Company are to increase
the Company's equity base and reduce indebtedness to banks. All of the proceeds
received by the Company will be used to reduce indebtedness to banks currently
used for working capital including debt incurred in connection with the TBP
Acquisition. In addition, with consent of the lender, the bank debt may be drawn
on for future acquisitions. The bank debt currently bears interest at floating
rates, the weighted average of which is currently 8.33% per annum, and matures
on July 13, 1998.

The Company will not receive any proceeds from the sale of the Shares of
Common Stock offered hereby by the Selling Shareholder.

COMMON STOCK PRICE RANGE
AND
DIVIDEND POLICY

The Common Stock commenced trading on the New York Stock Exchange on March
7, 1988 (NYSE Symbol: MGN). As of September 10, 1996, there were approximately
2,874 holders of record of such Common Stock. The Company has never paid cash
dividends on its Common Stock. The Company currently anticipates that it will
retain all available funds for use in the operation and expansion of its
business and does not anticipate paying any cash dividends on the Common Stock
in the foreseeable future. Any payment of future dividends and the amounts
thereof will be dependent upon the Company's earnings, financial condition, cash
flow and other factors deemed relevant by the Company's Board of Directors. The
Company is restricted in its ability to pay dividends through July 13, 1998 by
its bank agreements. See "Risk Factors--Restrictive Covenants." The following
table sets forth the high and low sale prices of the Company's Common Stock
reported in the New York Stock Exchange Consolidated Transaction Reporting
System.

HIGH LOW
--------- ---------

1994:
First Quarter............................................................... $ 8- 7/8 $ 5- 7/8
Second Quarter.............................................................. 6- 3/4 4- 3/4
Third Quarter............................................................... 5- 7/8 4- 1/2
Fourth Quarter.............................................................. 6- 1/4 5

1995:
First Quarter............................................................... $ 6- 1/2 $ 5- 3/4
Second Quarter.............................................................. 6- 7/8 5- 3/8
Third Quarter............................................................... 7- 3/4 5- 5/8
Fourth Quarter.............................................................. 7 5- 1/4

1996:
First Quarter............................................................... $ 6 $ 5
Second Quarter.............................................................. 6- 1/2 4- 7/8
Third Quarter............................................................... 8- 1/8 6- 1/8

On September 30, 1996, the last reported transaction in the Common Stock on
the New York Stock Exchange was at $7.50 per Share.

CAPITALIZATION

The following table sets forth (i) the capitalization of the Company as of
June 29, 1996 ("Actual"), (ii) the capitalization of the Company as of June 29,
1996 on a pro forma combined basis to give effect to the TBP Acquisition ("Pro
Forma Acquisition"), and (iii) the capitalization of the Company as of June 29,
1996, as adjusted to give effect to the TBP Acquisition and the Offering (at an
assumed public offering price of $7.50 per Share) and the application of the
proceeds therefrom ("Pro Forma as Adjusted"). See "Use of Proceeds." This table
should be read in conjunction with the historical and pro forma combined
financial information of the Company included elsewhere in this Prospectus.

JUNE 29, 1996
-----------------------------------
PRO FORMA PRO FORMA
ACTUAL ACQUISITION AS ADJUSTED
--------- ----------- -----------
(DOLLARS IN THOUSANDS)

LONG-TERM DEBT, NET OF CURRENT PORTION:
Revolving credit facilities(1)................................ $ 25,300 $ 40,910 $ 30,747
Other long-term debt:
Industrial revenue bonds.................................. 1,400 1,400 1,400
Obligations under capital leases(2)....................... 2,975 2,975 2,975
Obligations under financing leases........................ 1,808 1,808 1,808
Other..................................................... 574 619 619
--------- ----------- -----------
Total long-term debt.................................. 32,057 47,712 37,549
--------- ----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, 8,648,822, 8,648,822 and 10,148,822 shares
outstanding, respectively............................... 865 865 1,015
Paid-in capital........................................... 33,779 33,779 43,792
Retained earnings......................................... 18,632 18,632 18,632
Treasury stock, 2,386 shares, at cost..................... (48) (48) (48)
Unearned compensation--restricted stock................... (265) (265) (265)
--------- ----------- -----------
Total stockholders' equity(3)......................... 52,963 52,963 63,126
--------- ----------- -----------
Total capitalization.......................................... $ 85,020 $ 100,675 $ 100,675
--------- ----------- -----------
--------- ----------- -----------

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

(1) See Note 5 of the Notes to Annual Consolidated Financial Statements of the
Company and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

(2) See Note 6 of the Notes to Annual Consolidated Financial Statements of the
Company.

(3) Excludes a total of 843,300 shares of Common Stock reserved under the Stock
Option Plan and the Director Plan, 120,865 shares reserved under the Morgan
Products Ltd. 1992 Employee Stock Purchase Plan, and 90,000 shares of Common
Stock as to which the Company has agreed to grant an option to Mr. Hoyt. See
"Management."

SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL INFORMATION

Set forth below are selected historical consolidated financial data of the
Company at July 1, 1995 and June 29, 1996 and for the three and six months then
ended, and at December 31, 1991, 1992, 1993, 1994 and 1995 and for the years
then ended. Also set forth below are unaudited pro forma combined financial data
of the Company at June 29, 1996 and for the six months then ended, and for the
fiscal year ended December 31, 1995.

The selected historical consolidated financial data of the Company for the
three and six months ended July 1, 1995 and June 29, 1996 is unaudited, but, in
the opinion of management, such information reflects all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
financial data for the interim periods. The results for the interim periods
presented are not necessarily indicative of the results for the corresponding
full years. The selected historical consolidated financial data of the Company
at December 31, 1994 and 1995 and for each of the three years in the period
ended December 31, 1995 were derived from the historical consolidated financial
statements of the Company for such periods that were audited by Price Waterhouse
LLP, independent accountants, whose report appears elsewhere in this Prospectus.
The selected historical consolidated financial data of the Company at December
31, 1991, 1992 and 1993 and for the years ended December 31, 1991 and 1992 were
derived from the historical audited consolidated financial statements of the
Company for such periods.

The Company's Unaudited Pro Forma Combined Statements of Operations and the
Company's Unaudited Pro Forma Combined Balance Sheet give effect to the TBP
Acquisition and the Offering described in Note 1 hereto as if such events had
been consummated as of January 1, 1995 (in the case of the Unaudited Pro Forma
Combined Statements of Operations) and on June 29, 1996 (in the case of the
Unaudited Pro Forma Combined Balance Sheet). The Unaudited Pro Forma Combined
Financial Statements of the Company do not purport to present the financial
position or results of operations of the Company had the events assumed herein
occurred on the dates indicated, nor are they necessarily indicative of the
results of operations which may be expected to occur in the future.

The TBP Acquisition will be accounted for by the Company as a purchase
whereby the basis for accounting for TBP's assets and liabilities will be based
upon their fair values at the date of the TBP Acquisition. Pro forma
adjustments, including the preliminary purchase price allocation resulting from
the TBP Acquisition as described in Note 1 of the Notes to the Unaudited Pro
Forma Combined Financial Statements, represent the Company's preliminary
determination of these adjustments and are based upon preliminary information,
assumptions and operating decisions which the Company considers reasonable under
the circumstances. Final amounts may differ from those set forth herein.

The selected historical and pro forma combined financial information of the
Company were derived from, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical consolidated financial statements of the Company and TBP,
including the notes thereto, that appear elsewhere in this Prospectus.

SELECTED HISTORICAL FINANCIAL DATA

THREE SIX
MONTHS ENDED MONTHS ENDED
YEAR ENDED DECEMBER 31, ---------------------- --------------------
----------------------------------------------------- JULY 1, JUNE 29, JULY 1, JUNE 29,
1991 1992 1993 1994 1995 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- ----------- --------- ---------

(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Net sales............... $ 353,144 $ 387,393 $ 392,702 $ 358,357 $ 338,026 $ 84,262 $ 95,208 $ 164,926 $ 169,744
Gross profit............ 44,924 51,833 52,797 52,398 47,463 11,553 14,379 23,521 24,877
Sales, general and
administrative
expenses.............. 47,721 50,824 49,347 47,001 46,685 11,343 12,187 23,085 22,712
Provision for
restructuring(1)...... 5,571 7,866 0 11,291 51 0 881 9 881
Operating income
(loss)................ (8,368) (6,857) 3,450 (5,894) 727 210 1,311 427 1,284
Interest/other expense.. (4,141) (4,325) (2,248) (3,307) (3,313) (909) (719) (1,606) (1,232)
Income (loss) before
income taxes.......... (12,509) (11,182) 1,202 (9,201) (2,586) (699) 592 (1,179) 52
Net income (loss)....... (8,131) (10,178) 952 (9,401) (2,628) (729) 562 (1,239) 3
Earnings (loss) per
share................. (.96) (1.20) .11 (1.10) (.30) (.08) .06 (0.14) 0.00
Weighted average common
and common equivalent
shares outstanding.... 8,466 8,490 8,495 8,549 8,644 8,642 8,697 8,642 8,684

AT
AT DECEMBER 31, --------------------
----------------------------------------------------- JULY 1, JUNE 29,
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------

BALANCE SHEET DATA:
Working capital......... $ 71,274 $ 69,534 $ 77,225 $ 61,639 $ 58,674 $ 67,319 $ 61,319
Total assets............ 136,003 130,355 133,280 113,308 109,515 120,518 112,440
Long-term debt.......... 39,958 44,414 46,669 33,245 35,574 41,456 32,057
Stockholders' equity.... 73,640 63,499 64,481 55,192 52,835 54,078 52,963
Long-term debt, net of
cash to total
capitalization........ 34.1% 38.8% 40.1% 32.9% 36.6% 41.9% 36.1%
Stockholders' equity per
share(2).............. $ 8.68 $ 7.48 $ 7.59 $ 6.39 $ 6.11 $ 6.26 $ 6.12

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

(2) Stockholders' equity per share represents stockholders' equity divided by
common shares outstanding at the respective period end.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1995

(IN THOUSANDS, EXCEPT PER SHARE DATA)

PRO FORMA PRO FORMA OFFERING PRO FORMA
MORGAN TBP ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
-------- ------- ---------------- --------- ------------ ---------

STATEMENT OF OPERATIONS DATA:
Net sales............................. $338,026 $46,822 $-- $384,848 $-- $384,848
Cost of goods sold.................... 290,563 35,013 420(2)(4) 325,996 -- 325,996
-------- ------- ------- --------- ------ ---------
Gross profit.......................... 47,463 11,809 (420) 58,852 -- 58,852
-------- ------- ------- --------- ------ ---------
Operating expenses:
Sales and marketing................... 35,652 6,739 -- 42,391 -- 42,391
General and administrative............ 11,033 2,505 316(2) 13,854 -- 13,854
Management fees....................... -- 1,719 (1,719)(3) -- -- --
Provision for restructuring........... 51 -- -- 51 -- 51
-------- ------- ------- --------- ------ ---------
46,736 10,963 (1,403) 56,296 -- 56,296
-------- ------- ------- --------- ------ ---------
Operating income...................... 727 846 983 2,556 -- 2,556
-------- ------- ------- --------- ------ ---------
Other (expense) income:
Interest.............................. (3,763) (73) (1,473)(5) (5,309) 892(11) (4,417)
Other................................. 450 159 -- 609 -- 609
-------- ------- ------- --------- ------ ---------
(3,313) 86 (1,473) (4,700) 892 (3,808)
-------- ------- ------- --------- ------ ---------
Income (loss) before income taxes..... (2,586) 932 (490) (2,144) 892 (1,252)
Provision for income taxes............ 42 316 (316)(6) 42 -- 42
-------- ------- ------- --------- ------ ---------
Net income (loss) before minority
interest............................ (2,628) 616 (174) (2,186) 892 (1,294)
Minority interest in earnings of
subsidiary.......................... -- 129 (129)(7) -- -- --
-------- ------- ------- --------- ------ ---------
Net income (loss)..................... $ (2,628) $ 487 $ (45) $ (2,186) $ 892 $ (1,294)
-------- ------- ------- --------- ------ ---------
-------- ------- ------- --------- ------ ---------
Earnings (loss) per share............. $ (0.30) $ (0.25) $ (0.13)
-------- --------- ---------
-------- --------- ---------
Weighted average common and common
equivalent shares outstanding....... 8,644 8,644 10,144(11)
-------- --------- ---------
-------- --------- ---------

See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 29, 1996

(IN THOUSANDS, EXCEPT PER SHARE DATA)

PRO FORMA PRO FORMA OFFERING PRO FORMA
MORGAN TBP ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
-------- ------- ---------------- ----------- ------------ ------------

STATEMENT OF OPERATIONS DATA:
Net sales........................ $169,744 $24,387 $ -- $194,131 $-- $194,131
Cost of goods sold............... 144,867 18,060 128(2)(4) 163,055 -- 163,055
-------- ------- -------- ----------- ------ ------------
Gross profit..................... 24,877 6,327 (128) 31,076 -- 31,076
-------- ------- -------- ----------- ------ ------------
Operating expenses:
Sales and marketing.............. 16,641 3,713 -- 20,354 -- 20,354
General and administrative....... 6,071 1,235 158(2) 7,464 -- 7,464
Management fees.................. -- 1,127 (1,127)(3) -- -- --
Provision for restructuring...... 881 -- -- 881 -- 881
-------- ------- -------- ----------- ------ ------------
23,593 6,075 (969) 28,699 -- 28,699
-------- ------- -------- ----------- ------ ------------
Operating income................. 1,284 252 841 2,377 -- 2,377
-------- ------- -------- ----------- ------ ------------
Other (expense) income:
Interest......................... (1,369) (27) (725)(5) (2,121) 446(11) (1,675)
Other............................ 137 120 -- 257 -- 257
-------- ------- -------- ----------- ------ ------------
(1,232) 93 (725) (1,864) 446 (1,418)
-------- ------- -------- ----------- ------ ------------
Income before income taxes....... 52 345 116 513 446 959
Provision for income taxes....... 49 145 (145)(6) 49 -- 49
-------- ------- -------- ----------- ------ ------------
Net income before minority
interest....................... 3 200 261 464 446 910
Minority interest in earnings of
Subsidiary..................... -- 83 (83)(7) -- -- --
-------- ------- -------- ----------- ------ ------------
Net income....................... $ 3 $ 117 $ 344 $ 464 $ 446 $ 910
-------- ------- -------- ----------- ------ ------------
-------- ------- -------- ----------- ------ ------------
Earnings per share............... $ 0.00 $ 0.05 $ 0.09
-------- ----------- ------------
-------- ----------- ------------
Weighted average common and
common equivalent shares
outstanding.................... 8,684 8,684 10,184(11)
-------- ----------- ------------
-------- ----------- ------------

See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 29, 1996
(IN THOUSANDS)

PRO FORMA PRO FORMA OFFERING PRO FORMA
MORGAN TBP ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
-------- ------- ----------- --------- ---------------- -----------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents............. $ 2,105 $ 153 $ (153)(1) $ 2,105 $ -- $ 2,105
Accounts receivable, net.............. 32,906 6,640 -- 39,546 -- 39,546
Inventories........................... 52,924 6,443 1,193(1) 60,560 -- 60,560
Other current assets.................. 804 254 (58)(1) 1,000 -- 1,000
-------- ------- ----------- --------- ---------------- -----------
Total current assets.............. 88,739 13,490 982 103,211 -- 103,211
-------- ------- ----------- --------- ---------------- -----------

PROPERTY, PLANT & EQUIPMENT, net...... 19,490 1,361 700(1) 21,551 -- 21,551

OTHER ASSETS.......................... 4,211 167 4,059(8) 8,437 -- 8,437
-------- ------- ----------- --------- ---------------- -----------

TOTAL ASSETS...................... $112,440 $15,018 $5,741 $133,199 $ -- $133,199
-------- ------- ----------- --------- ---------------- -----------
-------- ------- ----------- --------- ---------------- -----------

LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt....................... $ 221 $ 985 $-- $ 1,206 $ -- $ 1,206
Current maturities of long-term debt.. 928 81 -- 1,009 -- 1,009
Accounts payable...................... 16,060 2,602 (443)(1) 18,219 -- 18,219
Other current liabilities............. 10,211 1,909 (30)(9) 12,090 -- 12,090
-------- ------- ----------- --------- ---------------- -----------
Total current liabilities......... 27,420 5,577 (473) 32,524 -- 32,524
-------- ------- ----------- --------- ---------------- -----------

LONG-TERM DEBT.......................... 32,057 45 15,610(10) 47,712 (10,163)(11) 37,549

SALARY CONTINUATION PLAN OBLIGATION..... -- 191 (191)(1) -- -- --

MINORITY INTEREST....................... -- 792 (792)(1) -- -- --

STOCKHOLDERS' EQUITY:
Common stock.......................... 865 23 (23) 865 150(11) 1,015
Paid-in capital....................... 33,779 3,671 (3,671) 33,779 10,013(11) 43,792
Retained earnings..................... 18,632 4,719 (4,719) 18,632 -- 18,632
-------- ------- ----------- --------- ---------------- -----------
53,276 8,413 (8,413) 53,276 10,163 63,439
Treasury stock........................ (48) -- -- (48) -- (48)
Unearned compensation--
restricted stock.................... (265) -- -- (265) -- (265)
-------- ------- ----------- --------- ---------------- -----------
Total stockholders' equity........ 52,963 8,413 (8,413)(1) 52,963 10,163 63,126
-------- ------- ----------- --------- ---------------- -----------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY.......................... $112,440 $15,018 $5,741 $133,199 $ -- $133,199
-------- ------- ----------- --------- ---------------- -----------
-------- ------- ----------- --------- ---------------- -----------

See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. The Company's Unaudited Pro Forma Combined Financial Statements assume
the following transactions occurred (1) as of January 1, 1995 for purposes of
the Unaudited Pro Forma Combined Statements of Operations and (2) on June 29,
1996 for purposes of the Unaudited Pro Forma Combined Balance Sheet:

(a) TBP Acquisition--Under the terms of the Asset Purchase Agreement,
certain assets of TBP were excluded and certain liabilities were not assumed.
Accordingly, the pro forma adjustments reflect decreases in cash ($153), other
current assets ($58), other assets ($167), accounts payable ($443), other
current liabilities ($1,207), salary continuation plan obligation ($191), and
minority interest ($792), along with a corresponding increase to TBP
stockholders' equity ($2,255).

The TBP Acquisition was financed through borrowings of $15,300 under the
Company's existing credit facility and will include a purchase price adjustment
based on the change in net book value from December 31, 1995 to the TBP
Acquisition closing date, estimated at June 29, 1996 to be $1,177.

The excess of cost over fair value of net assets acquired resulting from the
preliminary purchase price allocation is assumed to be as follows:

Pro forma purchase price--
Fixed amount stated in Asset Purchase Agreement................ $ 15,300
Variable amount related to assumed purchase price adjustment;
calculated based on TBP net book value and excluded assets
and liabilities at June 29, 1996............................. 1,177
Acquisition costs.............................................. 310
---------
Total pro forma purchase price............................... 16,787
---------
Pro forma historical net book value of assets acquired--
Book value per historical financial statements................. 8,413
Net liabilities excluded as described above.................... 2,255
---------
Total pro forma historical net book value of assets
acquired................................................... 10,668
---------
Excess of purchase price over net book value of assets
acquired....................................................... 6,119
---------
Allocated to:
Inventories.................................................. 1,193
Machinery and equipment...................................... 700
Intangible assets............................................ 500
---------
Remaining excess of cost over fair value of net assets acquired
(goodwill)..................................................... $ 3,726
---------
---------

The foregoing preliminary purchase price allocation is based on available
information and certain assumptions the Company considers reasonable. The final
purchase price allocation will be based upon a determination of the fair value
of the net assets acquired at the date of the TBP Acquisition as determined by
valuations and other studies, including an audit of the closing balance sheet,
which are not yet complete. The final purchase price allocation may differ from
the preliminary allocation.

(b) The issuance of 1,500,000 Shares of Common Stock in connection with the
Offering.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

2. The pro forma adjustment to reflect the effect of the preliminary
purchase price allocation on cost of goods sold and general and administrative
expense assumes:

YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 29, 1996
------------------- -------------------

Cost of goods sold--
Depreciation of amounts allocated to machinery and
equipment over six years............................ $ 117 $ 58
----- -----
General and administrative expenses--
Amortization of amounts allocated to intangible assets
over three years.................................... $ 167 $ 83
Amortization of goodwill over 25 years................ 149 75
----- -----
$ 316 $ 158
----- -----
----- -----

3. The management fees previously charged by a related party to TBP will not
be incurred after the TBP Acquisition due to the cancellation of the management
agreement.

4. The Company has elected the FIFO inventory method for the costing of
inventory; as such, the LIFO effect on cost of goods sold of $303 and $70 for
the year ended December 31, 1995 and the six months ended June 29, 1996,
respectively, was eliminated.

5. The pro forma adjustment to interest expense assumes:

YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 29, 1996
----------------- -------------------

Additional interest expense related to--
$15,610 of net additional borrowings under the
Company's credit facility........................... $ 1,370 $ 674
Purchase price adjustment of $1,177................... 103 51
------ -----
$ 1,473 $ 725
------ -----
------ -----

Interest expense is calculated assuming an average rate of 8.78% and 8.63%
for 1995 and 1996, respectively.

6. The pro forma adjustment to the provision for income taxes assumes no
federal or state income taxes as income would be offset by the Company's
existing net operating loss position.

7. The allocation of income to a minority interest will not occur after the
TBP Acquisition due to the elimination of the minority shareholder.

8. The pro forma adjustment to other assets assumes:

Eliminate excluded assets in the Asset Purchase Agreement........... $ (167)
Record certain intangible assets.................................... 500
Record goodwill related to the TBP Acquisition...................... 3,726
---------
$ 4,059
---------
---------

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

9. The pro forma adjustment to other current liabilities assumes:

Eliminate excluded liabilities in the Asset Purchase Agreement..... $ (1,207)
Record purchase price adjustment................................... 1,177
---------
$ (30)
---------
---------

10. The pro forma adjustment to long-term debt assumes:

Record net additional borrowings under the Company's credit facility:

Cash purchase price to seller...................................... $ 15,300
Acquisition transaction costs...................................... 310
---------
$ 15,610
---------
---------

11. The pro forma adjustment to reflect the sale of 1,500,000 Shares of
Common Stock offered by the Company at a per share price of $7.50 and the
anticipated application of the net proceeds therefrom. See "Use of Proceeds."

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

The following discussion should be read in conjunction with the Consolidated
Financial Statements of the Company and the notes thereto included elsewhere in
this Prospectus. Included is a discussion of certain significant business trends
and uncertainties as well as other certain forward-looking statements. For a
discussion of important factors that could cause actual results to differ
materially from the forward-looking statements, see "Risk Factors."

RESTRUCTURING OF OPERATIONS

Since 1994, the Company has incurred substantial restructuring charges
primarily as a result of the implementation of the Company's strategic plan. See
"Business--Strategy" and Note 2 to Notes to Annual Consolidated Financial
Statements of the Company. In 1994 and 1995, the Company incurred $11.3 million
and $51,000 in restructuring charges, respectively, to cover the costs of
closing the Company's Springfield, Oregon door and Weed, California veneer
plants, the downsizing of Morgan Manufacturing, Company-wide management
structure changes (including terminations and the elimination of certain
positions), the restructuring of the Morgan Distribution operations, the
relocation of the Company's corporate headquarters, and other cost reduction and
consolidation actions.

In the second quarter of 1996, the Company sold its Lexington, North
Carolina door manufacturing facility. The entire production line of doors
previously manufactured in Lexington has been shifted to the Company's Oshkosh
door manufacturing facility. The Company recorded an additional restructuring
charge in the second quarter of 1996 of $881,000, of which $356,000 related to
the sale of the Lexington facility and the consolidation of door manufacturing
operations into the Oshkosh facility, and the balance of which was used to cover
incremental costs related to the Springfield and Weed plant closings and the
reorganization of the management structure at Morgan Manufacturing. It is
anticipated that the Company will incur additional restructuring expenses in the
third and fourth quarters of 1996 of approximately $2.6 to $3.0 million. These
expense estimates are approximately $1.0 to $1.4 million higher than previously
announced by the Company due to unexpectedly high labor, materials handling, and
shipping and logistical costs incurred as a result of increasing production
levels at the Oshkosh facility to nearly double fourth quarter 1995
requirements. Such increased output at Oshkosh is necessary to meet current
demand as well as to replace door output previously generated at Lexington. The
increased production requirement and related inefficiencies encountered by the
Company due to the consolidation process have also resulted in increased lead
times to fill orders in September and early October 1996 from three weeks to
approximately eight weeks.

Management believes that upon completion of the installation and start-up of
the new high-speed door assembly line at the Oshkosh facility, which is
anticipated to occur in the first quarter of 1997, such lead time increases will
be reversed and, in fact, that normal lead times may be reduced by up to two
weeks. When the new high-speed door assembly line is fully operational,
management believes that the Oshkosh facility will be operating at approximately
70% of capacity, based upon current production levels. The consolidation of all
door manufacturing at a single facility is believed to offer the Company
significant cost savings as well as providing customers with the advantage of
purchasing a full range of solid wood door products and wood species from a
single manufacturing facility. See "Risk Factors--Consolidation of Manufacturing
Operations." Pending such full installation and start-up of the new high-speed
door assembly line, the Company expects to incur the additional costs described
above to bring lead times back to within acceptable ranges. Management's efforts
to control lead times will be assisted as manufacturing equipment continues to
be transferred to Oshkosh from Lexington, thereby diminishing difficulties
caused by equipment breakdown and current lack of back-up equipment.

RECENT DEVELOPMENTS

An important part of the Company's strategic plan is to expand its
distribution capabilities in the South and other areas where the Company
believes opportunities for significant growth may exist. In a first step toward
achieving that objective, in August 1996, the Company acquired substantially all
of the business and assets of TBP, a regional millwork and specialty building
products distributor and light manufacturer headquartered in Nashville,
Tennessee. With the TBP Acquisition, the Company expanded its operations to
include Nashville and Chattanooga, Tennessee; Charlotte, North Carolina;
Greenville, South Carolina; and Huntsville, Alabama. The total purchase price
paid by the Company in connection with the TBP Acquisition was approximately
$15.3 million in cash plus assumed liabilities which were approximately $4.0
million at June 29, 1996. In 1995 TBP had sales of $46.8 million, and would have
contributed $.05 per share to the Company's earnings on a pro forma basis. For
the first six months of 1996, TBP had sales of $24.4 million and would have
contributed $.05 per share to the Company's earnings on a pro forma basis. See
"Risk Factors--Acquisition Strategy" and the Unaudited Pro Forma Combined
Financial Statements of the Company.

The Company is currently in the process of installing in its Oshkosh
facility a production line for a new and much more efficient method of
manufacturing solid wood doors. The Company estimates that it will make a total
investment of approximately $6.0 million in new machinery and equipment and
other process-related improvements associated with the new high-speed door
assembly line, virtually all of which will be incurred by the end of 1996.
Management believes that this project will substantially improve the efficiency
and manufacturing capacity of the Oshkosh facility, reduce manufacturing lead
times by as much as two weeks and will provide the Company with opportunities
for growth in new and expanded product areas, such as patio doors. In addition,
management estimates that consolidation of its door manufacturing operations at
the Oshkosh facility, combined with the Company's new high-speed door assembly
line, will generate annual savings to the Company of approximately $3.0 million.
Actual delivery and installation of equipment and machinery began in the first
quarter of 1996, with full-scale production to commence during the first quarter
of 1997. See "Risk Factors--Consolidation of Manufacturing Operations."

As of December 31, 1995, the Company had unused operating loss carryforwards
for tax purposes of approximately $15.7 million, which expire in years 2002
through 2010. These operating loss carryforwards will be utilized by the Company
to offset future tax liabilities to the extent taxable income is generated. At
such time as the Company believes it is more likely than not that these
operating loss carryforwards will be utilized, the valuation reserve recorded
against the deferred tax asset will be reversed. This will result in a tax
benefit in the period the valuation reserve is reversed. Once the valuation
reserve is fully reversed, the Company will record income tax expense to the
extent taxable income is generated. However, the expense will not result in a
cash outlay until the operating loss carryforwards are completely utilized.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 29, 1996 VS. THREE MONTHS ENDED JULY 1, 1995

The Company's net sales for the second quarter of 1996 were $95.2 million,
representing a 13.0% increase over the same period in 1995, when sales were
$84.3 million. The increase in sales reflected an 11.8% increase in sales of
distributed products and a 21.0% improvement in sales of manufactured products.
Based upon F.W. Dodge statistics for April, May and June of 1995 and 1996,
single family housing starts were at a seasonally adjusted annual rate of 1.130
million units. This increase of 19.0% over the same period in 1995 reflected an
increase in construction activity. However, the Northeast region, where the
Company derives a significant portion of its business, experienced a 3.6%
decrease.

For the second quarter of 1996, the Company reported net income of $.6
million or $.06 per share compared to a net loss of $.7 million or $.08 per
share for the same period in 1995, on average shares outstanding of 8,697,176
and 8,642,173, respectively. Included in the second quarter 1996 results was a
restructuring charge of $.9 million related to the closing of the Company's
Lexington, North Carolina

manufacturing plant and incremental exit costs at the previously discontinued
operations at Springfield, Oregon and Weed, California. Excluding the $.9
million restructuring charge for 1996, the Company reported net income of $1.5
million or $.17 per share. The increase in net income, exclusive of the
restructuring charge, was primarily caused by higher sales volume and improved
profit margins. The 1995 second quarter included a $.5 million unfavorable
inventory adjustment at the Company's distribution center in Virginia.

The gross profit increase of $2.8 million from the second quarter of 1995 to
the corresponding period of 1996 was primarily the result of the aforementioned
sales volume increase, cost reductions, material cost improvements, and the
impact of the 1995 inventory losses at Virginia.

Operating expenses for the second quarter of 1996 were $12.2 million,
excluding the restructuring charge, or 12.8% of net sales, compared to 1995
second quarter operating expenses of $11.3 million, or 13.5% of net sales. The
increase in operating expenses was primarily due to employment-related costs,
including increased performance-based bonus accruals in 1996 as compared to
1995, as well as severance pay caused by certain terminations made for cost
reduction purposes in 1996. However, operating expenses as a percentage of net
sales for the second quarter of 1996 declined from the same period in 1995 due
to net sales increasing at a greater rate than the operating expenses.

The provision for income taxes for the three month periods in both years
related to the recording of state taxes. The provision for federal taxes was
offset by the Company's net operating loss position.

SIX MONTHS ENDED JUNE 29, 1996 VS. SIX MONTHS ENDED JULY 1, 1995

The Company's net sales for the 1996 six-month period were $169.7 million,
representing a 2.9% increase from the 1995 six-month period, when net sales were
$164.9 million. The increase in net sales was primarily the result of a 1.5%
increase in the sales of distributed products and a 7.3% increase in the sales
of manufactured products. This increase was a reflection of an increase in
construction activity. According to F.W. Dodge, single family housing starts for
the first six months of 1996 were 21.0% greater than for the same period in
1995. However, the Northeast region, where the Company derives a significant
portion of its business, experienced only a 3.0% increase.

The Company reported breakeven net income for the first six months in 1996
compared to a net loss of $1.2 million or $.14 per share for 1995 on average
shares outstanding of 8,684,274 and 8,641,620, respectively. Excluding the $.9
million restructuring charge in 1996, the Company reported earnings of $.9
million or $.10 per share. The increase in net income, exclusive of the
restructuring charge, was primarily caused by the impact of a higher sales
volume, material and other cost reductions, and the 1995 inventory losses at
Virginia on gross profit, as well as reduced operating expenses and lower
interest expense. These favorable items were somewhat offset by less favorable
pricing and mix, and higher overhead costs.

The gross profit increase of $1.4 million from the first six months of 1995
to the corresponding period of 1996 was primarily the result of the effect of
the aforementioned increase in sales at both the manufacturing and distribution
divisions, in addition to the impact of the 1995 inventory losses in the
Company's Virginia distribution center. The gross profit percentage improved
from 14.3% in the first half of 1995 to 14.7% in 1996. Excluding the
restructuring charges in 1996, operating expenses for the six-month period
decreased $.4 million from 1995 to 1996. Operating expenses for 1996 were $22.7
million or 13.4% of net sales (excluding the restructuring charge), compared to
1995 expenses of $23.1 million or 14.0% of net sales. The decline in operating
expenses was a consequence of tighter cost controls on non-personnel costs and
lower salaries. These were partially offset by higher 1996 accruals for
incentive bonuses and profit sharing, as compared to 1995.

Interest expense in the first six months of 1996 was $.5 million lower than
for the similar period of 1995. Of this, $.3 million was due to the
capitalization of interest incurred in connection with the door manufacturing
expansion. The remainder was a result of lower bank debt levels and lower
interest rates in 1996.

The provision for income taxes in both years related to the recording of
state taxes. The provision for federal taxes was offset by the Company's net
operating loss position.

YEAR ENDED DECEMBER 31, 1995 VS. YEAR ENDED DECEMBER 31, 1994

The Company's net sales for 1995 were $338.0 million, representing a
decrease of 5.7% from 1994 net sales of $358.4 million. The reduction in net
sales resulted from a 9.4% drop in the sales of manufactured products and a 4.0%
decline in the sales of distributed products. Management believes that the sales
declines were a reflection of the overall weakness in the residential
construction and repair and remodeling markets, including the attendant
competitive pressures on pricing and margins. Lower wood costs also contributed
to a rollback in unit selling prices.

The Company reported a net loss of $2.6 million or $.30 per share for 1995
compared to a net loss of $9.4 million or $1.10 per share for 1994, on average
shares outstanding of 8,643,941 and 8,549,159, respectively. Included in the
1994 results was a net restructuring charge of $11.3 million ($1.32 per share)
to cover the cost of closing the Springfield, Oregon plant and the Weed,
California veneer operation and to provide for other cost reductions and
consolidation within Morgan.

Excluding the $11.3 million restructuring charge for 1994, the Company had
net income of $1.9 million. The $4.5 million decrease in net income from 1994,
before the restructuring charge, reflected lower gross profit partially offset
by lower operating expenses.

The gross profit decrease of $4.9 million from 1994 to 1995 was primarily
the result of the aforementioned decrease in sales at both the manufacturing and
distribution divisions. A $.5 million inventory shortage reflecting management
problems which have been corrected at the Virginia distribution center, under
absorption of fixed overhead and material substitutions at the manufacturing
facilities, and declining sales prices depressed the gross margins at both
divisions from 1994 levels. The Company's gross profit as a percentage of net
sales receded from 14.6% in 1994 to 14.0% in 1995.

Operating expenses for 1995 were $46.7 million, or 13.8% of net sales,
compared to 1994 operating expenses of $58.3 million, or 16.3% of net sales.
Excluding the restructuring charge, 1994 operating expenses were $47.0 million,
or 13.1% of net sales. The $.3 million decrease in 1995 from 1994 (excluding the
restructuring charge) was achieved despite $1.1 million greater spending for
advertising and sales promotion and $.7 million to recruit and relocate a new
management team.

Interest expense and other non-operating income were unchanged from 1994 at
$3.3 million, representing 1.0% of sales in 1995 and .9% of net sales in 1994.
Higher debt levels in 1994 were offset by lower borrowing rates.

The provisions for income taxes in both 1995 and 1994 related to the
recording of state taxes. There was no provision for federal taxes in either
period given the Company's net operating loss position. See Note 10 of Notes to
Annual Consolidated Financial Statements of the Company.

YEAR ENDED DECEMBER 31, 1994 VS. YEAR ENDED DECEMBER 31, 1993

The Company's net sales for 1994 were $358.4 million, representing a
decrease of 8.7% from 1993 net sales of $392.7 million. The reduction in net
sales resulted from a 13.3% decrease in sales of manufactured products and a
7.5% decrease in sales of distributed products. Management believes that the
decline in sales of products distributed by the Company was due to Andersen's
reallocation of sales regions among its network of distributors, and by an
anticipated up-front loss of some business as a result of margin improvement
programs, which were expected to generate additional profit in 1995 and beyond.
Management also believes part of the decline in sales of products manufactured
by the Company was due to the ongoing weakness in demand for high quality wood
doors in a very cost conscious market. In addition, the manufacturing sales
decline reflected the loss of low margin business following the closing of the
Springfield, Oregon plant.

The Company reported a net loss of $9.4 million or $1.10 per share for 1994
compared to net income of $1.0 million or $.11 per share for 1993, on average
shares outstanding of 8,549,159 and 8,494,602, respectively. Included in the
1994 results was a net restructuring charge of $11.3 million ($1.32 per share)
to cover the cost of closing the Springfield plant and the Weed, California
veneer operation and to provide for other cost reductions and consolidation
within Morgan.

Excluding the $11.3 million restructuring charge for 1994, the Company had
income of $1.9 million. The increase in income from 1993, net of the
restructuring charge, was primarily caused by a decrease in operating expenses
partially offset by a decrease in gross profit and an increase in other expense.

The gross profit decrease of $.4 million from 1993 to 1994 was primarily the
result of the aforementioned decrease in sales at both the manufacturing and
distribution divisions. Partially offsetting this was an improvement in gross
margins for products distributed and manufactured. The Company's gross profit as
a percentage of net sales improved from 13.4% in 1993 to 14.6% in 1994.

Operating expenses for 1994 were $58.3 million, or 16.3% of net sales,
compared to 1993 operating expenses of $49.3 million, or 12.6% of net sales.
Excluding the restructuring charge, 1994 operating expenses were $47.0 million,
or 13.1% of net sales. Contributing to the year-to-year decline in operating
expenses (excluding the restructuring charge) were decreases in
employment-related costs, travel and entertainment, advertising and promotion,
and bad debt expenses.

Other expense increased $1.1 million from 1993 to 1994, primarily due to the
1993 disposition of idle assets in excess of their carrying value by
approximately $1.0 million which offset other expense. Interest expense
decreased to $3.8 million in 1994 from $4.0 million in 1993 due to lower debt
levels throughout 1994. Partially offsetting this was the impact of higher
borrowing rates.

The provision for income taxes in both 1994 and 1993 relates to the
recording of state taxes. There was no provision for federal taxes in either
period given the Company's net operating loss position. See Note 10 of Notes to
Annual Consolidated Financial Statements of the Company.

During 1994, the Company adopted Statement of Financial Accounting Standards
No. 112, "Employer's Accounting for Postemployment Benefits." This adoption had
no material effect on net income.

SIGNIFICANT INDUSTRY TRENDS/UNCERTAINTIES

Management believes that housing starts have a significant influence on the
Company's level of business activity. Currently available industry data suggests
that housing starts for single family dwellings will improve in 1996 over 1995,
particularly in the Midwest region. For the first six months of 1996, F.W. Dodge
has reported that single family housing starts were 16.0% higher than in the
similar period of 1995 for the U.S. as a whole and 18.0% higher in the Midwest.
However, management believes that industry growth may moderate as the year
progresses.

Management also believes that the Company's ability to continue to penetrate
the residential repair and remodeling markets through sales to home center
chains may have a significant influence on the Company's level of business
activity. Management believes this market will continue to grow in importance to
the Company. Management further believes that in certain areas of the United
States, sales by distributors directly to the end-user may over time replace, as
the primary channel of distribution, the distribution method of selling to the
retail dealer, who then sells to the end-user. The Company intends to respond
aggressively to such changes in distribution methods, including, where
opportunities permit, through the acquisition of distribution businesses that
sell directly to the end-user.

In the past, raw material prices have fluctuated substantially for pine and
fir lumber. Fir prices at 1995 year-end remained at record high levels, while
pine lumber prices declined by 18.5% during 1995. Due to intense competitive
pricing, this has resulted in reduced selling prices rather than increased
profit margins.

For the first six months of 1996, fir prices continued to remain unchanged at
the record level, while pine prices escalated 6.5% from the 1995 year-end price.
As a result, the Company continues its efforts to expand the utilization, where
appropriate, of engineered materials in wood door components and to switch to
alternate wood species. In addition, the Company has established new offshore
material resources. Management believes that these actions, together with
aggressive pricing increases where competitive factors allow, will partially
offset the impact of the high cost of raw material.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital requirements are related to its sales which,
because of the dependency of sales on housing starts and the repair and
remodeling market, are weather dependent and, therefore, to a degree seasonal in
nature. This seasonality affects the need for working capital inasmuch as it is
necessary to carry larger inventories and receivables during certain months of
the year. The Company expects that the new high-speed door assembly line at the
Oshkosh facility will significantly improve the efficiency and volume capacity
of the present Oshkosh manufacturing operations and reduce manufacturing lead
times, thereby reducing the amount of capital invested in inventory by the
Company as well as by its customers.

Working capital at June 29, 1996 was $61.3 million with a current ratio of
3.2 to 1.0, while at December 31, 1995 working capital was $58.7 million with a
current ratio of 3.8 to 1.0. The increase in working capital was primarily the
result of a $12.1 million increase in receivables reflecting the aforementioned
seasonality of the Company's operations. This increase was partially offset by
inventories which were lower by $.4 million, a $5.8 million increase in current
liabilities, and improved cash planning and management.

Long-term debt, net of cash, decreased to $30.0 million at June 29, 1996,
from $30.4 million at December 31, 1995. The Company's ratio of long-term debt,
net of cash, to total capitalization decreased from 36.6% at December 31, 1995
to 36.1% at June 29, 1996. These decreases since December 31, 1995 were
primarily due to the $.5 million decrease in long-term debt, net of cash and
higher stockholders' equity. The higher working capital requirements were more
than offset by the $4.1 million proceeds from the sale of the Lexington plant.
The Company maintains a credit agreement with a group of banks which provides
for a revolving credit facility of up to $65.0 million and includes a letter of
credit facility of up to $9.0 million through July 13, 1998. Under the credit
agreement, loans may be priced at the Company's election at rates based on a
spread over either the prime rate or LIBOR. Subsequent to June 29, 1996, the
Company borrowed $15.3 million under its credit facility to finance the TBP
Acquisition. The Company was in compliance with the specific financial covenants
in its amended credit agreement as of the date of this Prospectus.

Cash used by operating activities amounted to $3.0 million for the six
months ended June 29, 1996, primarily to support the higher level of
receivables. By comparison, the six months ended July 1, 1995, reflected cash
used by operating activities of $9.4 million. Investing activities in the first
six months of 1996 generated $3.3 million, compared to the corresponding period
in 1995, when investing activities used $2.4 million. The 1996 investing
activities included $.9 million in cash provided by the surrender of life
insurance policies on former executives, $1.5 million expended for asset
acquisitions, and $4.1 million generated by asset disposals. Financing
activities used $3.3 million through June 29, 1996, primarily to repay debt.
During the same period in 1995, financing activities provided $8.0 million in
cash. The $11.3 million difference in the financing requirements between the
first six months of 1995 and of 1996 primarily reflected the need to finance the
cash used by operating activities, which was $6.3 million greater in 1995 due to
higher working capital, as well as a $.6 million decline in capital spending in
1996, proceeds of $.9 million from the surrender of life insurance policies, and
$4.1 million from the disposal of property and equipment.

SEASONAL NATURE OF BUSINESS

The building product industry is seasonal, particularly in the Northeast and
Midwest regions of the United States, where inclement weather during the winter
months usually reduces the level of building activity in both the improvement,
maintenance and repair market and the new construction market. The Company's
lowest sales levels generally occur during the first and fourth quarters. Since
a high percentage of the Company's overhead and expenses are relatively fixed
throughout the year, profits tend to be lower in quarters with lower sales.

The table below sets forth the Company's quarterly net sales during the
years ended December 31, 1994 and 1995:

1994 1995
------------------------ ------------------------

NET SALES % OF TOTAL NET SALES % OF TOTAL
----------- ----------- ----------- -----------

(MILLIONS) (MILLIONS)

First Quarter...................................................... $ 82.8 23.1% $ 80.7 23.9%
Second Quarter..................................................... 95.2 26.6 84.2 24.9
Third Quarter...................................................... 95.2 26.6 90.7 26.8
Fourth Quarter..................................................... 85.2 23.7 82.4 24.4
----------- ----- ----------- -----
Total Year......................................................... $ 358.4 100.0% $ 338.0 100.0%
----------- ----- ----------- -----
----------- ----- ----------- -----

See Note 14 of Notes to Annual Consolidated Financial Statements of the
Company for further quarterly information.

THE MILLWORK INDUSTRY

Virtually all of the products manufactured and distributed by the Company
are considered millwork. Millwork includes wood windows (including vinyl-clad
wood), doors, moldings, stairways, mantels, cabinets and flooring. Millwork is
also generally considered to include vinyl and aluminum windows, steel and
fiberglass doors, plastic moldings and other nonwood products. Based upon 1994
United States Department of Commerce statistics (1995 statistics are not yet
available), the fabricated wood products portion of millwork is a $10.1 billion
industry. Manufacturers of residential specialty millwork products in the United
States are a highly fragmented group that management believes includes
approximately 2,000 companies, ranging from local custom millwork manufacturers
to larger regional and national producers.

The market for millwork products is significantly affected by the
fundamental economic factors that affect the housing industry in general,
including demographic trends, growth in personal disposable income, the
availability and cost of financing, and consumer confidence.

Total residential door production in the U.S. in 1995 was 53.1 million units
according to a recent National Wood Window and Door Association ("NWWDA") market
report. From a functional viewpoint, residential doors fall into several major
categories, including: interior passage and French, interior closet, exterior
front entrance, and exterior service and French doors. Historically, certain
geographic areas have demonstrated preferences for particular species of wood
doors (pine, oak, fir, etc.). The NWWDA market report indicates that total wood
door production (which includes molded hardboard, flush, and solid wood doors)
in 1995 was roughly 22% exterior doors and 78% interior doors. Wood doors
comprise approximately 29% of the 11.5 million unit exterior door market and 95%
of the 41.6 million unit interior door market.

Solid wood doors, which are referred to in the industry as stile and rail or
panel doors, constitute a subset of wood doors at the premium end of the price
spectrum. The NWWDA estimated total 1995 production of residential solid wood
doors was 4.9 million units or slightly more than 9% of the entire residential
wood door market. Nearly three quarters of solid wood doors are for interior
residential usage.

As a consequence of the position of solid wood doors as a premium product,
they are most often found in custom built single family homes. The builder is
the primary decision maker on type, style and brand. However, the more expensive
the home, the greater the likelihood that the buyer will be involved in the
decision. Management believes that roughly 70% of solid wood door purchases are
from either a lumberyard or a wholesaler/distributor, with the share of each
being about equal. Traditionally, installation is nearly always done by the
builder or his subcontractor.

Morgan Manufacturing participates only in the traditional solid wood door
market segment. In 1995, Morgan Manufacturing sold approximately 346,000
exterior doors and 565,000 interior doors, which represents market shares of
approximately 26% and 16%, respectively, based upon 1995 NWWDA figures. On a
combined basis, management believes that Morgan's overall market share is about
19% of the solid wood market, which would make it the market leader.

Morgan Distribution competes in the millwork market and offers a broad range
of products including, at most locations, Andersen windows, Therma-Tru Steel
doors, Premdor molded and flush doors, as well as moldings, mantels, stairports
and other products. In 1995, approximately 40% of the Company's sales were
Andersen windows. Andersen produces high-quality, premium-priced windows, and
has been a technological leader in developing energy-efficient window systems.
Andersen believes that it has a dominant position in the wood window market,
with a market share larger than the next four windowmakers combined. Andersen
window systems are sold through nine of the Company's fourteen distribution
centers and management believes that Morgan is one of the largest distributors
of Andersen products.

The 1995 NWWDA report estimates that the 1995 residential window market was
44.5 million windows, with 48% being wood (including vinyl clad wood), 19%
aluminum, and 33% vinyl. As with wood doors, wood windows represent the upper
end of the product line.

BUSINESS

GENERAL

The Company is a leading marketer, manufacturer and distributor of premium
wood door systems and other specialty building products primarily under the
brand names "Morgan" and "Nicolai." The Company also distributes millwork
products manufactured by third parties, including, in nine of its fourteen
distribution centers, premium window systems manufactured by Andersen. The
Company's manufactured products are sold through the Company's distribution
centers as well as through independent distributors, home center chains and
other retail stores throughout most of the United States. The Company believes
that approximately half of its sales are to the residential and light commercial
improvement, maintenance and repair markets, and the balance is to the
residential and light commercial new construction markets.

STRATEGY

The Company has taken a series of major initiatives to implement this plan
and to respond to continuing challenges in the industry. At Morgan
Manufacturing, three manufacturing facilities have been closed or sold and, with
the sale of the Lexington, North Carolina manufacturing facility, all door
manufacturing has been consolidated in the Company's Oshkosh, Wisconsin
facility. The Company has committed to approximately $6.0 million in capital
expenditures for a new high-speed door assembly line to significantly improve
the efficiency and manufacturing capacity of the Oshkosh facility and reduce
manufacturing lead times. Management has also committed to control manufacturing
costs and has achieved substantial savings through innovative raw material
purchasing and manufacturing practices. The Company has also taken steps to
increase revenues by making its manufacturing business more customer-focused and
by better managing relationships with its distributors and home center
customers. The Company is developing a "good, better, best" merchandising
strategy which is intended to improve its product mix and to meet a broader
range of consumer needs and price ranges, to increase the likelihood that the
customer will purchase a higher quality and priced product. If successful, this
approach would result in a higher average gross margin for the Company's total
mix of products.

An important part of the Company's strategic plan is to expand its
distribution capabilities in the South and other areas where the Company
believes opportunities for significant growth may exist. In August 1996, the
Company acquired substantially all of the business and assets of TBP, a regional
millwork and specialty building products distributor and light manufacturer
headquartered in Nashville, Tennessee. In 1995 and for the first six months of
1996, TBP had sales of $46.8 million and $24.4 million, respectively,

and would have contributed $.05 per share to the Company's earnings on a pro
forma basis during each of such periods. With the TBP Acquisition the Company
expanded its operations to include Nashville and Chattanooga, Tennessee;
Charlotte, North Carolina; Greenville, South Carolina; and Huntsville, Alabama.
The Company intends to further grow its distribution business, including through
acquisitions, as opportunities permit.

The Company intends to continue aggressively pursuing successful completion
of the plan with initiatives to complement, expand and advance the steps
previously taken. Specifically, the Company intends, with respect to its
distribution business, to continue to emphasize the growth of the operations,
including through acquisitions, as opportunities permit. With respect to its
manufacturing operations, the Company's immediate focus is to complete the
successful implementation and start-up of the new high-speed door assembly line
at the Oshkosh facility in order to fully realize the advantages in capacity,
flexibility, reduced lead times and other efficiencies that such line is
expected to afford and to take full advantage of the benefits of the
consolidation stemming from the sale of the Lexington facility. In addition, the
Company intends to continue to pursue general cost-reduction and
efficiency-enhancing measures.

OPERATIONS AND PRODUCTS

MANUFACTURING. The Company's manufacturing operations produce premium solid
wood interior and exterior doors, entrance systems, and other specialty millwork
such as fireplace mantels. The Company offers a broad product line of solid wood
doors, and many doors are available with special features such as
energy-efficient glass, carved panels, leaded glass and other options. Various
woods, including pine, fir and oak, are used to meet customer preferences.
Company-manufactured products, sold primarily under the "Morgan" and "Nicolai"
trade names, constituted approximately 30% of 1995 sales.

As part of the Company's strategy, all of its door manufacturing operations
have been consolidated at its Oshkosh facility. In addition, the Company is in
the process of installing a new high-speed door assembly line at its Oshkosh
facility. This new assembly line, which includes proprietary processes and
custom designed equipment, will be used to produce high volume runs of products
and is expected to add capacity to produce an additional 10,000 doors per week.
The Company estimates that it will make a total investment of approximately $6.0
million in new machinery and equipment and other process-related improvements
associated with the new high-speed door assembly line, the substantial total of
which will be incurred by the end of 1996. Management believes that this project
will enhance the Company's competitiveness by significantly improving the
efficiency and volume capacity of the Oshkosh facility and may provide the
Company with opportunities for growth in new and expanded product areas. The new
assembly line is also expected to reduce manufacturing lead times by as much as
two weeks, thereby reducing the amount of inventory which the Company, as well
as its customers, must carry. Actual delivery and installation of equipment and
machinery began in the first quarter of 1996, with full-scale production to
commence during the first quarter of 1997. When the new high-speed door assembly
line is fully operational, management believes that the Oshkosh facility will be
operating at approximately 70% of

capacity, based upon current production levels. The consolidation of all door
manufacturing at a single facility is believed to offer the Company significant
cost savings as well as providing customers with the advantage of purchasing a
full range of solid wood door products and wood species from a single
manufacturing facility. In addition, because of the flexible design of the new
high-speed door assembly line, the Company will be able to make quick
change-overs to provide the customer with the full range of products, as
requested. However, see "Risk Factors--Consolidation of Manufacturing
Operations."

In addition to its Oshkosh facility, the Company operates a facility in
Weed, California which warehouses Company-manufactured products and performs
certain light manufacturing functions with respect to such products, primarily
to service home center customers of the Company in the western United States.
Certain of the former TBP locations also perform some light manufacturing,
primarily with respect to shop windows, which are sold under the "Tennessee
Building Products" and "Titan Building Products" names.

The Company's primary raw material is wood which the Company purchases
almost entirely in cut stock or higher grade form. The Company purchases
softwoods from a variety of suppliers located in Idaho, Washington, Oregon and
California and hardwoods from various suppliers in Tennessee and in the Great
Lakes region. The cost of solid, long clear lengths of the Company's traditional
softwoods and hardwoods has fluctuated during the last several years, generally
as a result of changes in supply and demand, and, in the case of softwood, as a
result of the curtailment of logging on public land. As a result the Company
continues to expand the utilization, where appropriate, of veneered and
laminated solid wood components in the manufacture of its products. The Company
believes that it is not dependent upon any single supplier for any of its raw
material. The Company has also begun a program of importing certain styles and
species of finished wood doors, primarily from the far east, in order to fill
out its product line offering.

The Company's manufactured products are sold throughout most of the United
States through fourteen Company-operated distribution centers, independent
distributors, home center chains and other retail stores. The Company has
relationships with approximately 200 independent distributors and home center
chains, which, in 1995, purchased approximately 80% of the products manufactured
by the Company's manufacturing unit. Although the Company has longstanding
relationships with its independent distributors and home center customers, some
in excess of forty years, the Company does not have formal distribution
agreements with any of such parties. Such distribution relationships may
generally be terminated by either party at any time. The Company's largest
independent distributor purchased approximately 11% of the products manufactured
by the Company, accounting for approximately 3% of total Company sales. The
Company's largest home center chain customer purchased approximately 23% of the
products manufactured by the Company, accounting for slightly less than 10% of
total Company sales. The loss of one or more independent distributors or home
center chains may have a material adverse effect on the Company.

DISTRIBUTION. The Company distributes specialty building products
manufactured by Morgan Manufacturing and by third parties, including, in nine of
the Company's fourteen distribution centers, Andersen window systems.
Approximately 10% of Morgan Distribution's sales are sales of
Company-manufactured products. The major products distributed by the
Company-operated distribution centers are Morgan doors, mantels and stairway
systems; Andersen premium window systems; Therma-Tru steel and composite doors;
flush doors; molded doors; wood bi-fold and louvered doors; and moldings. See
"--Properties" for a discussion of the Company-operated distribution centers.

In 1995 approximately 78% of the Company's total sales were generated by
Company-operated distribution centers, including sales of products produced by
the Company's manufacturing operations. Andersen products, which are sold under
the "Andersen" trademark through nine of the Company's fourteen distribution
centers and which the Company has sold for about forty years, accounted for
approximately 40% of the Company's sales in 1995. Andersen produces high
quality, premium priced

windows, and has been a technological leader in developing energy-efficient
window systems. Andersen has informed the Company that it sells exclusively
through distributors such as the Company. The Company's agreement with Andersen
grants to the Company the non-exclusive right to distribute certain of
Andersen's products in specified territories and provides that Andersen can
terminate any of the Company's distributorships at any time upon 60 days notice.
The Company believes that such non-exclusive territory and termination
provisions are Andersen's standard arrangements with its distributors. See "Risk
Factors--Relationship with Andersen."

Recently, Andersen has determined to sell its Fibrex-TM- window systems
through retail stores aimed at the replacement window buyer, which retail stores
will be devoted exclusively to the promotion and sale of such systems. These
stores will be established in various areas throughout the country and will be
principally owned and operated by independent distributors. Andersen has
designated the Company to open the first such "Renewal-TM- by Andersen" store in
Overland Park, Kansas. Fibrex-TM- is a proprietary material developed by
Andersen that is made of a composite of wood fibers and vinyl and is considered
to be superior in certain characteristics to pure vinyl core window systems. In
the event the Kansas location is successful, the Company and Andersen may
consider establishing additional stores.

The Company's distribution centers warehouse, assemble, and ship products to
customers,which are generally within a 150-mile radius of each center. All of
the Company's distribution centers are operated as stand-alone profit centers
and major supplier purchasing negotiations are controlled centrally in order to
obtain the best prices for total volume purchased and to minimize inventory
levels. Approximately 50% of the products sold through the Company's warehouses
(i.e., excluding direct shipments to distribution customers from manufacturers)
have been enhanced by value-added light manufacturing services provided by the
Company before shipping. For example, the Company assembles and pre-hangs door
systems and assembles and/or mulls window systems and specialty shaped windows.
The Company's assembly and modification allow the builder, contractor or
consumer to install pre-assembled units at a lower cost than modifying and
assembling component parts at the job site. At the Company's locations acquired
from TBP, the Company provides such value-added assembly and modification light
manufacturing services with respect to approximately 75% of the products sold.
Andersen window systems are not distributed through the former TBP locations;
however, the manufacturing of shop windows and window components, which are then
sold by the Company under the "Tennessee Building Products" and the "Titan
Building Products" names, is also performed at several former TBP locations.

The Company intends to grow its distribution business, including through
acquisitions, as opportunities permit. See "--Strategy" and "Risk
Factors--Acquisition Strategy."

NATIONAL ACCOUNTS. In 1995, Morgan National Accounts began serving large
retail chains by marketing and merchandising millwork and specialty building
products for Morgan Manufacturing and Morgan Distribution. This allows the
Company to offer such customers a single contact with respect to such customers'
entire buying and selling processes, and enables the Company to more effectively
participate in category management and to work with these accounts to develop a
more profitable product mix.

COMPETITION

Manufacturers of residential specialty millwork products in the United
States are a highly fragmented group which management believes includes
approximately 2,000 companies with annual revenues ranging from less than $1.0
million to hundreds of millions of dollars. Competition in the residential
specialty building products market is substantial, both from within the United
States and from foreign manufacturers and importers of building products. The
Company has numerous competitors at the manufacturers' level in the interior and
exterior premium wood door market, although the Company believes that it has the
largest market share among the manufacturers of interior and exterior premium
wood panel doors. The Company believes that it competes with other manufacturers
on the basis of the breadth of its product lines, the reliability and speed of
its service and the quality and design of its products.

The Company's distribution centers compete principally with other
distributors of specialty building products manufactured by third parties,
distributors of window systems, and manufacturers of specialty building products
which sell directly to the Company's target customers. For example, the Company
generally competes with up to two other distributors of Andersen products in
each territory in which the Company has been granted the right to distribute, as
well as manufacturers and distributors of premium wood window products that
compete with Andersen products. As in its manufacturing business, the Company
believes that it competes in the distribution arena primarily on the basis of
the breadth of its product lines, the quality and speed of its service and the
quality and design of its products. The Company also believes that it has a
leading position in premium interior and exterior doors and wood windows in the
market areas surrounding most of its distribution centers. The Company is also
committed to accommodating the purchase requirements of its customers by
providing value-added services which are tailored to address each customer's
unique needs.

SALES AND MARKETING

As of September 1, 1996, the Company employed approximately ten salespersons
with respect to its manufacturing operations, who sell directly to independent
distributors and approximately 119 salespersons with respect to its distribution
operations, who sell directly to building supply dealers, builders and
remodelers and pre-fabricated home manufacturers. In addition, as of September
1, 1996, Morgan National Accounts employed two salespersons who manage the
Company's relationships with large home center chains.

Most of the Company's advertising and promotion for its manufactured
products is directed to the wholesale and retail trade through catalogs,
brochures, retail product displays, newspapers, trade magazines and trade shows.
In addition, the Company engages in a cooperative advertising program with its
distributors and dealers through brochures, product displays, radio and
television. Through its advertising program, the Company emphasizes the
residential improvement, maintenance and repair markets and promotes the Morgan
name and logos, and the Nicolai name and logo. The Company also trains
independent distributors and building supply dealers through seminars held at
its Oshkosh, Wisconsin marketing and training facility. In addition, certain
third-party manufacturers of products which the Company distributes, especially
Andersen, advertise both to trade and directly to the consumer through
nationwide print and television advertising.

BACKLOG

The Company's backlogs of orders for manufactured products at December 31,
1994 and 1995 were approximately $7.3 million and $6.5 million, respectively. At
June 29, 1996, the Company's backlog for orders for manufactured products was
approximately $6.7 million. The Company anticipates that substantially all of
the backlog orders in existence at June 29, 1996 will be delivered by the end of
the current fiscal year. All of such current backlog orders are cancelable prior
to shipment from the factory. Backlog levels for manufactured products vary
during the course of the year because of the seasonality of the Company's
business. Customer orders at the Company's distribution centers are generally
filled within one to five days and, accordingly, there is no appreciable backlog
level with respect to the Company's distribution operations.

INTELLECTUAL PROPERTY

The Company's name, the Morgan Doorman logo and the trade names, "Marquis,"
"GlassWrap," "Compression Glazed," and the Nicolai name and logo are registered
trademarks. The Company uses its stylized "M" logo and its trademarks and trade
names "Centry," "SwingSet," "Energy Guard," "Fire-Guard," "Sureguard,"
"Triomphe," "NORTHWOODS," "WHERE QUALITY COMES NATURALLY," "Tennessee Building
Products," "Titan Building Products," "Windows, Doors & More," "Tennessee
Kitchen and Bath," "Tennessee Glass Company" and "Tennessee Kitchen Center" in
connection with the sale of Company-manufactured products and/or the Company's
distribution operations. The Company considers its trademarks, trade names and
logos to be valuable to the conduct of its business. The Company has filed
several patent applications related to its new high-speed door assembly line
with the U.S. Patent and Trademark Office. The Company also owns certain patents
which it does not consider material to the operation of its business.

EMPLOYEES

As of September 1, 1996 the Company employed 1,626 persons, of whom 535 were
employed at the Company's manufacturing facilities, 1,079 were employed at the
Company's distribution centers, and 12 were employed at the corporate
headquarters. Approximately 500 employees are represented by labor unions.
During 1995, the Company negotiated labor agreements at Birch Run, Michigan
which will terminate on November 6, 1998; Decatur, Illinois which will terminate
on July 15, 1998; Shawnee, Kansas which will terminate on March 31, 1998;
Scranton, Pennsylvania which will terminate on December 11, 1998; Mechanicsburg,
Pennsylvania which will terminate on February 19, 1998; and two agreements at
Oshkosh, Wisconsin which will terminate on May 10, 1998 and May 24, 1998,
respectively. The Company also negotiated labor agreements during 1996 at
Decatur, Illinois and West Chicago, Illinois, which will terminate on January 8,
1999 and January 15, 1999, respectively. All such agreements were negotiated
without any work interruption. Management believes that employee relationships
are generally good.

SEASONAL NATURE OF BUSINESS

The building products industry is seasonal to some extent, particularly in
the Northeast and Midwest regions of the United States, where inclement weather
during the winter months usually reduces the level of building activity in the
improvement, maintenance and repair markets and in the new construction markets.
Since a high percentage of the Company's manufacturing overhead and expenses are
relatively fixed throughout the year, profits tend to be lower in quarters with
lower sales. The Company's lowest sales traditionally occur during the first and
fourth quarters.

PROPERTIES

The Company operates the following facilities as of September 30, 1996:

APPROXIMATE LEASE
MANUFACTURING LOCATIONS SQUARE FEET EXPIRING
- ------------------------------------------------------------------------------------------ ------------ -----------

Oshkosh, Wisconsin (2 facilities)
Manufacturing Operations
(28 buildings; 27.6 acres)............................................................ 512,000(1) (Owned)
Manufacturing Division Office......................................................... 16,000 2000
Weed, California.......................................................................... 417,605(2) 1999(3)

APPROXIMATE LEASE
DISTRIBUTION AND SHOWROOM LOCATIONS SQUARE FEET EXPIRING
- ------------------------------------------------------------------------------------------ ------------ -----------

Birch Run, Michigan....................................................................... 113,022 2005
Charlotte, North Carolina................................................................. 115,010 2000
Chattanooga, Tennessee (3 facilities):
Warehouse............................................................................. 20,000 2006
Peachtree Planning Center (showroom).................................................. 2,100 1998
Tennessee Kitchen & Bath (showroom)................................................... 2,200 1997(3)
Decatur, Illinois......................................................................... 93,000 2001(4)
Denver, Colorado.......................................................................... 39,970 1997
Greenville (Greer), South Carolina........................................................ 15,000 1999(4)
Harrisburg (Mechanicsburg), Pennsylvania (2 facilities):
Office................................................................................ 15,569 1998(4)
Warehouse............................................................................. 134,906 2002(4)
Huntsville, Alabama (showroom)............................................................ 1,737 1999
Kansas City, Kansas (2 facilities)
Shawnee Warehouse..................................................................... 79,500 2000(4)
Renewal-TM- by Andersen Center........................................................ 2,860 1999
Nashville, Tennessee (2 facilities):
Glass facility and Peachtree Planning Center (showroom)............................... 26,000 2000
Warehouse and showroom................................................................ 170,000 2011
Scranton (Dunmore), Pennsylvania.......................................................... 80,917 1998(6)
Washington, D.C. (Gainesville, Virginia).................................................. 79,500 2006(4)
West Chicago, Illinois.................................................................... 100,925 2001(3)
West Columbia (Cayce), South Carolina..................................................... 89,480 2001(3)
Wilmington (Newark), Delaware............................................................. 97,421 2000(3)

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

(1) This manufacturing facility is owned by the Company and is subject to a
mortgage in connection with certain industrial revenue bonds. See Note 5 to
Notes to Annual Consolidated Financial Statements of the Company. All other
manufacturing facilities and all of the distribution facilities are leased
by the Company.

(2) In 1990, the Company ceased production of fir doors at this facility. In May
1994, the Company ceased production of veneer at this location. The Company
continues to use approximately 50,000 square feet for patio door assembly
and warehousing. The Company has sublet 50,000 square feet to a third party.

(3) Optional renewal term of five years or less.

(4) Optional renewal term in excess of five years.

(5) The Company recently renewed the lease reducing the square footage from
94,500.

(6) In October 1994, the Company has sublet 31,025 square feet to a third party.

Facility leases generally provide for fixed monthly rental payments, plus
the payment, in most cases, of real estate taxes, utilities, liability insurance
and maintenance. In a few locations, the leases provide escalation clauses
requiring the payment of additional rent according to certain indices or in
specified amounts. The termination dates of these leases vary widely. See Note 6
of Notes to Annual Consolidated Financial Statements of the Company and Note 6
to Notes to Consolidated Financial Statements of TBP, respectively. The Company
believes that its distribution facilities and manufacturing capacity are
sufficient to serve its needs in its existing markets, subject to the completed
installation and start-up of the Company's new high-speed door assembly line.
See "Risk Factors--Consolidation of Manufacturing Operations."

The Company's corporate headquarters are located in Williamsburg, Virginia.
The lease for the corporate headquarters location expires in the year 2002 and
covers approximately 6,909 square feet of space.

LEGAL PROCEEDINGS

The Company is not involved in any material pending legal proceedings.

MANAGEMENT

The following table sets forth the names and ages of the executive officers
and directors of the Company as of September 30, 1996. Company officers are
appointed by the Board of Directors and such appointments are effective until
resignation or earlier removal by the Board of Directors.

NAME AGE POSITION
- ---------------------------------------------------- ----- ----------------------------------------------------

Frank J. Hawley, Jr................................. 68 Chairman of the Board; Director
Larry R. Robinette.................................. 52 President and Chief Executive Officer; Director
Douglas H. MacMillan................................ 50 Vice President, Chief Financial Officer and
Secretary
Dennis C. Hood...................................... 59 Senior Vice President--Human Resources and
Administration
Peter Balint........................................ 47 Executive Vice President--Market Development and
National Accounts
David A. Braun...................................... 39 Vice President and President--Morgan Distribution
Brett D. Hoyt....................................... 45 Vice President and President--Morgan Manufacturing
Dawn E. Neuman...................................... 34 Treasurer and Assistant Secretary
John S. Crowley..................................... 73 Director
Howard G. Haas...................................... 72 Director
William R. Holland.................................. 57 Director
Alton F. Doody, Jr.................................. 61 Director
Edward T. Tokar..................................... 49 Director
Byron H. Tony Stebbins.............................. 64 Director
Patrick J. McDonough, Jr............................ 65 Director

Mr. Hawley has been Chairman of the Board and a director of the Company
since December 1983. Since 1982, he has been the managing partner of Laurel
Partners, the general partner of Saugatuck, a venture capital partnership and an
affiliate of the Company. Since September 1986, he has been the managing partner
of Bedford Partners, the general partner of Saugatuck Capital Company Limited
Partnership II ("Saugatuck II"), a venture capital partnership. Since October
1992, he has been the managing partner of Greyrock Partners Limited Partnership,
the general partner of Saugatuck Capital Company Limited Partnership III
("Saugatuck III"), a venture capital partnership. Since September 1986, he has
been president and principal stockholder of Saugatuck Associates, Inc.
("Saugatuck Associates"), a risk capital management firm which provides
investment advice and assistance to Saugatuck, and since October 1992 Mr. Hawley
has been the president and principal shareholder of Saugatuck Associates II,
Inc., a risk capital management firm which provides investment advice and
assistance to Saugatuck III.

Mr. Robinette was appointed President and Chief Executive Officer of Morgan
Products Ltd. on September 6, 1994. He was the President and CEO of Anchor
Hocking Packaging of Cincinnati, Ohio, a subsidiary of CarnaudMetalbox, from
1993 to 1994. From 1990 until Anchor Hocking Packaging was acquired in 1993 by
CarnaudMetalbox from Newell Company, Mr. Robinette served as its President. He
was President of Anchor Industrial Glass of Lancaster, Ohio from 1989 until
1990. From 1987 to 1989, Mr. Robinette was the Vice President of Operations and
OEM Sales at Mirro Co., a subsidiary of Newell Company, and from 1986 to 1987,
he served as Vice President of Operations, Corporate Staff of Newell Company.
From 1983 to 1986, Mr. Robinette was the Vice President of Operations of Newell
Window Furnishings. From 1980 to 1983, he served as the Vice President of
Operations of the EZ Paintr Division of Newell Company. Prior to 1980, Mr.
Robinette was employed at General Motors. Mr. Robinette has been a director of
the Company since November of 1994.

Mr. MacMillan joined the Company in August 1991 as Vice President, Chief
Financial Officer and Secretary of the Company. From 1987 to July 1991, he was
the Chief Financial Officer of Varlen Corporation, a diversified manufacturer
serving the scientific instrument, automotive, heavy truck and railroad markets.
From 1981 to 1987, he held various executive financial positions with Sealy
Incorporated.

Mr. Hood was appointed Senior Vice President of Human Resources and
Administration of the Company in December 1994. Mr. Hood joined the Company as
Vice President-Human Resources in June 1986. From January 1985 until he joined
the Company, Mr. Hood was Vice President-Human Resources of the Air Systems
Division of the Trane Company, a subsidiary of American Standard, Inc., engaged
in the manufacture of commercial and residential heating and air conditioning
equipment. From March 1978 until January 1985, Mr. Hood was manager of
industrial relations, branch operations of the Trane Company.

Mr. Balint was appointed Executive Vice President of Market Development and
National Accounts of the Company effective as of September 30, 1996. Prior to
his appointment to his current position, Mr. Balint served as President of the
Company's manufacturing unit. From 1992 to May 1995, Mr. Balint served as Vice
President of Sales and Marketing for the SNE Enterprises Division of Plygem
Industries. From 1983 to 1992, Mr. Balint held various marketing and managerial
positions with Sherwin-Williams Corporation. From 1974 to 1983, Mr. Balint
served in various managerial positions with EZ Paintr, a division of the Newell
Company.

Mr. Braun was appointed Vice President of the Company and President of the
Company's distribution unit on May 15, 1996. From August of 1995 to May 15,
1996, Mr. Braun served as Vice President and Controller of the Company's
distribution unit. Prior to that Mr. Braun served as Division Controller of
RobertShaw Controls from 1994 to August of 1995. Mr. Braun served as Senior Vice
President of Lisa Frank, Inc. from 1993 to 1994 and served as Vice President and
Chief Financial Officer of HGP Industries, Inc. since 1991. From 1987 to 1991,
Mr. Braun served as Vice President and Controller of EZ Paintr, a division of
the Newell Company. From 1986 to 1987 he served in various managerial positions
at EZ Paintr.

Mr. Hoyt was appointed Vice President of the Company and President of the
Company's manufacturing unit effective as of September 30, 1996. From May 1989
to September 1996, Mr. Hoyt served as Vice President-Operations of Mirro Co., a
subsidiary of Newell Company. From October 1986 to May 1989, Mr. Hoyt served as
Vice President-Operations of Newell Window Furnishings, a division of the Newell
Company and from April 1984 to October 1986 he served as Materials Manager of
Newell Window Furnishings. From March 1983 to April 1984, Mr. Hoyt served as
Group Manager of EZ Paintr, a division of the Newell Company, and from August
1981 to March 1983 he served as Manager of Industrial Engineering of EZ Paintr.

Ms. Neuman was appointed Treasurer and Assistant Secretary in May 1995. From
May 1994 to May 1995, she was Assistant Treasurer and Assistant Secretary, from
July 1989 to May 1994 she was the Company's Tax Manager, and from May 1988 to
June 1989 she was the Senior Tax and Benefits Specialist. Prior to joining the
Company, she was a tax consultant with Price Waterhouse from August 1984 to May
1988.

Mr. Crowley has been a private investor since 1994 and served as Managing
Director of Saugatuck Associates from 1987 to 1993. From 1983 to 1987 he was the
organizer and General Partner of Round Hill Associates, a private investment
fund engaged in management buyouts, and president of Round Hill Associates
Management Company. Mr. Crowley is also a director of General Housewares Corp.
Mr. Crowley has been a director of the Company since November 1986.

Mr. Haas has been Chairman of Howard G. Haas Associates, a consulting firm,
since 1986. From 1967 to 1986 Mr. Haas was the President and Chief Executive
Officer of Sealy Incorporated; Mr. Haas is also a

member of the faculty of the Graduate School of Business at the University of
Chicago. Mr. Haas has been a director of the Company since September 1987.

Mr. Holland has been Chairman of the Board and Chief Executive Officer of
United Dominion Industries, a diversified manufacturing company since 1987;
prior to 1987 he served in various senior executive positions with such company.
Mr. Holland has been a director of the Company since July 1991.

Dr. Doody is the Founder and Chairman of the Doody Group (since November,
1990), a New Orleans, Louisiana consulting firm serving consumer goods
manufacturers and retailers throughout the world. Dr. Doody was co-founder of
Management Horizons, Inc., a marketing consulting firm, now a division of Price
Waterhouse. He also founded Applied Retail Systems. He serves as a director on
several boards, including Newell Company; Grant Investments, Inc.; and Hyde Park
Restaurants, Inc. He is a Senior Fellow at the A.B. Freeman School of Business,
Tulane University, and a member of the Dean's advisory Council. Dr. Doody has
been a Director of the Company since November 1994.

Mr. Tokar has been, from 1985 to present, Vice President-Investments,
AlliedSignal Inc., responsible for the overall investment management of employee
benefit asset funds worldwide. Mr. Tokar has been employed at AlliedSignal since
1977 in various management positions. He is a director of Noel Group, Inc., a
trustee of the Morgan Grenfell Investment Funds, an advisor to various
investment partnerships, and a trustee of the College of William and Mary. Mr.
Tokar has been a director of the Company since November 1994.

Mr. Stebbins has been, from 1986 to present, Senior Vice President--Market
Development, at Newell Company. Mr. Stebbins has been employed at Newell since
1973 in various executive positions. He has served on numerous professional and
corporate boards including the Hardware, Home Improvement Council--City of Hope;
American Hardware Manufacturers Association; the President's Council of the Home
Center Industry; and the Hardware Marketing Council. Mr. Stebbins has been a
director of the Company since November 1994.

Mr. McDonough has been, from 1988 to present, Chairman and CEO of Olympic
Manufacturing Group, Inc., a private company located in Massachusetts. He spent
22 years with the Black & Decker Manufacturing Company; his last two assignments
were as President of the U.S. company and Chief Administrative Officer in the
Office of the CEO. After leaving Black & Decker, he formed McDonough &
Associates, a management consulting firm that specialized in corporate strategic
planning and re-engineering. Mr. McDonough has been a Director of the Company
since November 1994.

FAMILY RELATIONSHIPS. There is no family relationship between any of the
Company's directors or executive officers.

EXECUTIVE COMPENSATION

The following table sets forth information with respect to all cash and
non-cash compensation for services rendered to the Company in all capacities for
fiscal years 1995, 1994, and 1993, of those persons who were, at December 31,
1995 (i) the Chief Executive Officer and (ii) the other three most highly
compensated executive officers of the Company. No other executive officer of the
Company had a total salary plus bonus exceeding $100,000 in 1995.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
-------------------------------------------- ---------------------------------------

RESTRICTED AWARDS OF
NAME AND PRINCIPAL OTHER ANNUAL STOCK STOCK LONG-TERM
POSITION YEAR SALARY BONUS COMPENSATION(2) AWARDS OPTIONS PAYOUTS
- ------------------------- ---- -------- ------------- --------------- ------------- ----------- ---------
Larry R. Robinette....... 1995 $350,000 $ 0 $437,423(4) $ 0 20,000 $0
President, Chief
Executive 1994(5) $113,077 $ 186,440 $ 1,792 $700,000(6) 250,000 $0
Officer and Director

Douglas H. MacMillan..... 1995 $197,522 $ 0 $199,567(7) $ 0 10,000 $0
Vice President, Chief
Financial 1994 $189,042 $ 62,311(8) $ 6,008 $ 0 70,000(9) $0
Officer and Secretary 1993 $186,923 $ 0 $ 5,104 $ 0 0 $0

Dennis C. Hood........... 1995 $150,020 $ 19,500(8) $107,075(10) $ 0 10,000 $0
Senior Vice President-- 1994 $124,632 $ 47,325(8) $ 6,093 $ 0 55,000(9) $0
Human Resources and 1993 $118,256 $ 0 $ 5,321 $ 0 0 $0
Administration

Peter Balint............. 1995(11) $126,935 $ 40,000(12) $ 82,947(13) $ 0 50,000 $0
Executive Vice
President--
Market Development and
National Accounts

NAME AND PRINCIPAL ALL OTHER
POSITION COMPENSATION(3)
- ------------------------- ---------------
Larry R. Robinette....... $11,593
President, Chief
Executive $ 3,393
Officer and Director
Douglas H. MacMillan..... $ 7,670
Vice President, Chief
Financial $ 5,671
Officer and Secretary $ 5,815
Dennis C. Hood........... $ 5,828
Senior Vice President-- $ 3,739
Human Resources and $ 3,682
Administration
Peter Balint............. $ 3,231
Executive Vice
President--
Market Development and
National Accounts

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

(1) Includes amounts earned in the respective fiscal year, whether or not
deferred.

(2) Represents payments by the Company for moving expenses, excess life
insurance, leased automobiles, tax preparation fees, personal financial
planning fees, and tax gross-up on amounts included in taxable compensation
(other than salary and bonuses).

(3) Represents contributions by the Company under Section 401(k) of the Code
pursuant to the 401(k) Plan, as well as excess 401(k) amounts contributed in
excess of permitted 401(k) contributions under the Deferred Compensation
Plan.

(4) Includes $338,719 of moving expenses paid on Mr. Robinette's behalf and
$74,746 of tax gross-up.

(5) Represents Mr. Robinette's compensation in 1994 from September 6, 1994
through December 31, 1994.

(6) Includes 140,000 restricted shares of Common Stock granted to a trust for
the benefit of Mr. Robinette in 1994 as an incentive to join the Company
with a then fair market value of $5.00 per share. The value of these shares
at December 31, 1995 was $822,500. The Company has never paid cash dividends
on its Common Stock, but, if paid, Mr. Robinette's shares would be entitled
to receive such dividends.

(7) Includes $139,807 of moving expenses paid on Mr. MacMillan's behalf and
$43,456 of tax gross-up.

(8) Pursuant to binding elections previously made, a portion of each named
executive officer's bonus was deferred for the purchase of Convertible
Appreciation Rights (CARs), which can accrue value in connection with
improvements in stockholder value.

(9) This includes repriced options. On August 31, 1994, the Board of Directors
approved the repricing to fair market value of officer options with grant
dates of August 9, 1991 and May 20, 1992.

(10) Includes $69,516 of moving expenses paid on Mr. Hood's behalf and $26,730
of tax gross-up.

(11) Represents Mr. Balint's compensation in 1995 from May 15, 1995 through
December 31, 1995.

(12) Represents a signing bonus paid to Mr. Balint pursuant to his employment
agreement.

(13) Includes $50,178 of moving expenses paid on Mr. Balint's behalf and $29,009
of tax gross-up.

OPTION/SAR GRANTS IN 1995

ALTERNATIVE TO
5%
NUMBER OF % OF TOTAL AND 10%
SHARES OPTIONS/ SARS APPRECIATION:
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR(1) $/SHARE(2) DATE VALUE $(3)
- ----------------------------------- ------------- --------------- ----------- ----------------- ----------------

Larry R. Robinette................. 20,000 7.5% $ 5.75 August 4, 2005 $ 78,000
Douglas H. MacMillan............... 10,000 3.7% 5.75 August 4, 2005 39,000
Dennis C. Hood..................... 10,000 3.7% 5.75 August 4, 2005 39,000
Peter Balint....................... 50,000 18.7% 5.75 August 4, 2005 195,000

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

(1) Based on 267,500 total options granted to employees in 1995.

(2) All exercise prices are equal to fair market value on the date of grant.

(3) The estimated grant date present values reflected in the above table are
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the values
of the options reflected in the above table include:

(a) Exercise prices on the options are equal to the fair market value of the
underlying stock on the dates of the grant.

(b) The option term of ten years.

(c) Interest rates that represent the interest rate on a U.S. Treasury
security on the dates of grant with maturity dates corresponding to those
of the option terms.

(d) Volatilities calculated using daily stock prices for the one-year period
prior to the grant dates.

(e) Dividends at the rate of $0.00 per share representing the annualized
dividends paid with respect to a share of Common Stock at the dates of
grant. The Company has never paid a cash dividend with respect to Common
Stock.

OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUE

The following table sets forth certain information as to the individuals
listed in the Summary Compensation Table with regard to stock options exercised
during the fiscal year and year-end option value as of December 31, 1995.

VALUE OF
UNEXERCISED
IN THE
MONEY
NUMBER OF OPTIONS
SHARES UNDERLYING HELD AT
NUMBER OF UNEXERCISED OPTIONS FISCAL
SHARES HELD AT FISCAL YEAR-END YEAR- END(1)
ACQUIRED ON VALUE -------------------------- -----------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------------------------- ----------------- ------------- ----------- ------------- -----------

Larry R. Robinette......................... 0 $ 0 125,000 145,000 $ 109,375
Douglas H. MacMillan....................... 0 $ 0 70,000 10,000 $ 27,499
Dennis C. Hood............................. 0 $ 0 61,333 16,667 $ 15,416
Peter Balint............................... 0 $ 0 16,667 33,333 $ 2,083

NAME UNEXERCISABLE
- ------------------------------------------- -------------

Larry R. Robinette......................... $ 111,875
Douglas H. MacMillan....................... $ 1,251
Dennis C. Hood............................. $ 2,084
Peter Balint............................... $ 4,167

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

(1) Total value of options based on the Common Stock's closing price on the New
York Stock Exchange of $5.875 as of December 29, 1995.

EMPLOYMENT AGREEMENTS

Effective September 6, 1994, the Company and Mr. Robinette entered into an
employment agreement. Pursuant to the agreement, Mr. Robinette is employed as
President and Chief Executive Officer of the Company through December 31, 1997
and receives an annual base salary of $350,000. Mr. Robinette is furnished with
the use of a Company automobile and participation in group health, term life
insurance and other employee benefit plans available to other executive
personnel. He is eligible for four weeks paid vacation in each calendar year. He
is also eligible to participate in the Bonus Plan (as defined below under
"--Employee Benefits"). In addition, Mr. Robinette received a signing bonus of
$150,000. As part of this agreement, Mr. Robinette was awarded an option to
purchase 250,000 shares of Common Stock under the Stock Option Plan at an
exercise price of $5.00 per share which was the fair market value on the date of
grant. These options vest over a three-year period, with 25% vesting immediately
upon employment and 25%, 35% and 15% vesting on each of August 19, 1995, 1996
and 1997, respectively. In addition, a trust for Mr. Robinette's benefit was
granted 140,000 restricted shares of stock at a then fair market value of $5.00
per share. These shares vest 33 1/3% per year for three years beginning on
August 19, 1994. Under the trust agreement, the restricted shares will vest
automatically upon termination as a result of death or disability, termination
as a result of any reason other than cause (as defined therein), or termination
as a result of the acquisition by a third party of all of the assets or
outstanding voting stock of the Company. After the expiration of the initial
term of Mr. Robinette's employment on December 31, 1997, the term of his
employment will automatically renew for successive one year terms, unless either
party delivers written notice of its desire not to renew 180 days prior to the
end of such term. The agreement provides that if the Company elects not to renew
the term of Mr. Robinette's agreement at the end of the initial term or any
renewal term, Mr. Robinette will continue to receive base salary for a period of
one year.

On May 1, 1995, the Company and Mr. Balint entered into an employment
agreement. Pursuant to the agreement, Mr. Balint receives an annual base salary
of $200,000. Mr. Balint is furnished with the use of a Company automobile and
participation in group health, term life insurance and other employee benefit
plans available to other executive personnel. He is eligible for four weeks paid
vacation in each calendar year. He is also eligible to participate in the Bonus
Plan. In addition, Mr. Balint received a signing bonus of $40,000 in 1995.
Pursuant to the agreement, Mr. Balint was awarded an option to purchase 50,000
shares of Common Stock under the Stock Option Plan at an exercise price of $5.75
which was equal to the fair market value on the date of grant. These options
vest 33 1/3% per year for three years beginning on May 17, 1995. If Mr. Balint's
employment by the Company is terminated prior to May 1, 1997, he will be
eligible for severance pay equal to his base salary for twelve months. This
severance arrangement is not applicable if Mr. Balint is terminated for cause,
or because of death, disability, voluntary retirement or resignation.

SEVERANCE PLANS

The Company has provided a Special Severance/Retention Plan for Messrs.
Robinette, MacMillan and Hood. This plan provides for severance benefits in the
event a participant is involuntarily terminated for any reason other than cause,
or where a participant voluntarily terminates for certain prescribed reasons
outlined in the plan. If terminated, the participant will receive severance pay
equal to two times the sum of the participant's base salary and the average
bonus award earned in the three fiscal years prior to the date of the
termination. Participants terminated are also eligible to continue the full
fringe benefit program for a twenty-four month period. If Mr. Robinette receives
benefits under this Plan, he will not be eligible for severance under his
employment agreement.

In addition, the Company has adopted a special policy providing for
severance payments in the event of an acquisition. Under this policy, which is
applicable to Messrs. Robinette, MacMillan and Hood, an acquisition is defined
as a change of management or control where (a) at least 35% of the Common Stock
is redeemed by the Company, purchased by any person or exchanged for shares in
any other corporation; or (b) at least 51% of the Company's assets are acquired
by any person; or (c) during any period of two

consecutive years, individuals who at the beginning of such period constitute
the board (and any new director whose election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who were either directors at the beginning of the period or were similarly
elected) cease, for any reason, to constitute a majority thereof; or (d) the
Company is merged or consolidated with or into another corporation. Should the
employment of any of these executives be terminated within thirty months
following an acquisition, the executive will be paid a severance benefit equal
to two and one-half times the sum of his annual base salary then in effect and
the average bonus earned over the three fiscal years prior to termination. In
addition, the terminated executive would receive a full year's bonus at the
targeted level, as determined under the Bonus Plan. Further, such terminated
executive would receive any unused or accrued vacation pay, and would be
eligible to receive those fringe benefits he had been receiving prior to his
termination for a period of thirty months. In order to avoid the imposition of
excise taxes, participants' benefits are capped at the "golden parachute" excise
tax limit set forth in Section 280G of the Internal Revenue Code (unless
removing the cap results in a greater after-tax benefit to the participant). In
exchange for this severance benefit, the covered executive, for a period of
twenty-four calendar months after termination shall not, directly or indirectly:
(i) use, attempt to use, disclose or otherwise make known to any person or
entity knowledge or information of which the executive became aware during his
employment including lists of customers or suppliers, trade secrets or similar
information and information of a confidential nature including, without
limitation, information relating to the business, properties, accounting or
similar functions of the Company, (ii) engage or become interested in any
business conducted by the Company, and (iii) employ, retain or arrange to
participate in the employment of any person who is an employee or consultant of
the Company or its affiliates.

EMPLOYEE BENEFITS

STOCK OPTION PLAN. In June 1985, the Company adopted the Morgan Products
Ltd. Incentive Stock Option Plan (the "Stock Option Plan") which, as amended,
provides for the issuance of options at a price determined by the Compensation
Committee, a committee of the Board of Directors, which cannot be less than the
fair market value at the date of grant.

As of September 20, 1996, an aggregate of 900,000 shares were authorized
under the Stock Option Plan, options for an aggregate of 743,500 were
outstanding with exercise prices ranging from $5.00 to $6.625 and options for
106,700 shares of Common Stock had been exercised leaving 49,800 shares
available for future grants. The options granted become exercisable immediately
or in two, three, four, or five installments from the date of grant, and all of
the options granted expire no more than ten years from the date of grant.

All options granted under the Stock Option Plan must be evidenced by an
option agreement between the Company and the option recipient embodying all of
the terms and conditions of the option grant, provided that no option shall be
transferable or assignable other than by will or laws of descent and
distribution. See "--Summary Compensation Table," "--Options/SAR Grants in 1995"
and "--Option Exercises in 1995 and Year-end Option Value" for a discussion of
participation by Messrs. Robinette, MacMillan, Hood and Balint in the Stock
Option Plan.

The Company has agreed to grant an option to Mr. Hoyt, Vice President of the
Company and President of Morgan Manufacturing, to purchase 90,000 shares of the
Company's Common Stock with an exercise price of the fair market value per share
on the date of grant. Such commitment was made to Mr. Hoyt to induce him to
become an employee of the Company. Such option was not granted to Mr. Hoyt
pursuant to the Stock Option Plan.

EXECUTIVE PERFORMANCE INCENTIVE PLAN AND CERTAIN OTHER BONUSES. On November
3, 1994, the Company adopted the Executive Performance Incentive Plan, as
amended (the "Bonus Plan") which provides for a bonus to executive officers is
an amount equal to 50% of their base salary upon attainment of the target goal.
The targets are tied directly to the Company's or business unit's attainment of
a pre-specified

earnings goal. The maximum incentive to any executive under the Bonus Plan is
equal to 70% of the executive's base salary in any one calendar year, and no
payment is made if an achievement level of 80% of the targeted goal is not met.

Since Company performance in 1995 was below the minimum threshold of 80% of
the targeted goal, no bonuses were paid to any executive officer under the Bonus
Plan for the 1995 year. However, as noted above under "--Employment Agreements,"
Mr. Balint received a signing bonus of $40,000 as part of his employment
agreement, and Mr. Hood received a discretionary bonus of $19,500 due to the
achievement of specific objectives established for his functional area in 1995.

401(K) PLAN. Pursuant to the Company's Profit Sharing Savings and
Retirement Plan (the "401(k) Plan"), in which all salaried employees and certain
groups of hourly employees participate, the Company matches fifty percent of
participant contributions to the 401(k) Plan. Company contributions are limited
to three percent of the participant's total compensation. At the discretion of
the Board of Directors, the Company may make additional contributions. Profit
sharing costs and the Company's matching contributions to the 401(k) Plan
charged to operations were $1.1 million and $.4 million for 1994 and 1995,
respectively. Plan assets consist of equity and fixed income securities and
insurance annuity contracts.

COMPENSATION OF DIRECTORS

All directors receive reimbursement for all expenses incurred in connection
with attendance at board meetings and all directors, other than Messrs. Hawley
and Robinette, receive a fee of $1,500 per meeting of the board, $1,500 per
committee meeting, and a retainer of $3,000 per quarter. Non-employee directors
are also entitled to receive stock options under the Non-employee Director Stock
Option Plan (the "Director Plan") adopted in May 1992. The Director Plan
provides for the automatic grant of non-qualified stock options to purchase
1,000 shares of Common Stock at a purchase price equal to the fair market value
at the date of grant upon a non-employee Director's election or re-election to
the Board of Directors. An aggregate of 50,000 shares of Common Stock is
available for grant under the Director Plan. The options granted become
exercisable in three annual installments from the date of grant, and all of the
options granted expire ten years from the date of grant. As of the date of this
Prospectus a total aggregate of 23,000 options had been granted under the
Director Plan. After the Offering, Mr. Hawley will receive an annual chairman's
fee of $100,000 and will become eligible to receive grants of options under the
Director Plan. See "Security Ownership and Certain Beneficial Owners and
Management."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee consists of Messrs. Hawley, Holland, and
Stebbins. Mr. Hawley is an officer of the Company and may be considered an
employee of the Company. Mr. Hawley receives reimbursement for all expenses
incurred in connection with attendance at board meetings and as of the
completion of the Offering, Mr. Hawley will receive an annual chairman's fee of
$100,000. See "Certain Transactions" for a further description of insider
participation.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of September 20, 1996, the number of
shares of Common Stock owned beneficially, to the knowledge of the Company, by
each beneficial owner of more than 5.0% of the Common Stock, by each director,
by each named executive officer, and by all executive officers and directors of
the Company as a group. Unless otherwise indicated in a footnote, each person
listed in the table possesses sole voting and investment power with respect to
the shares indicated.

PERCENTAGE
NAME AND ADDRESS OF NUMBER OF
BENEFICIAL OWNER OF SHARES COMMON STOCK
- -------------------------------------------------------------------------------- --------- ------------

Saugatuck Capital Company....................................................... 2,028,652(1)(2) 23.5%
Limited Partnership
One Canterbury Green
Stamford, CT 06901
Laurel Partners................................................................. 2,028,652(1)(2) 23.5
One Canterbury Green
Stamford, CT 06901
Frank J. Hawley, Jr. ........................................................... 2,078,652(1)(2) 24.0
One Canterbury Green
Stamford, CT 06901
Owen S. Crihfield............................................................... 2,028,652(1)(2) 23.5
One Canterbury Green
Stamford, CT 06901
The Parnassus Fund.............................................................. 940,000(3) 10.9
One Market
Stuart Tower, Suite 1600
San Francisco, CA 94105
Heartland Advisors, Inc. ....................................................... 861,800(4) 10.0
790 North Milwaukee Street
Milwaukee, WI 53202
Pioneering Management Corporation............................................... 835,600(5) 9.7
Sixty State Street
Boston, MA 02109-1820
Dimensional Fund Advisors Inc. ................................................. 439,800(6) 5.1
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Peter Balint.................................................................... 33,383(7) *
David A. Braun.................................................................. 13,333(8) *
John S. Crowley................................................................. 3,000(9) *
Alton F. Doody, Jr. ............................................................ 3,433(10) *
Howard G. Haas.................................................................. 6,900(11) *
William R. Holland.............................................................. 3,500(12) *
Dennis C. Hood.................................................................. 71,300(13) *
Douglas H. MacMillan............................................................ 80,333(14) *
Patrick J. McDonough, Jr. ...................................................... 333(15) *
Dawn E. Neuman.................................................................. 8,903(16) *
Larry R. Robinette.............................................................. 219,167(17) 2.5
Byron H. Tony Stebbins.......................................................... 333(18) *
Edward T. Tokar................................................................. 2,333(19) *
All Directors and Executive Officers as a group (14 persons).................... 2,524,903(20) 29.2

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

* Number equals less than one percent (1%) of outstanding shares of Common
Stock.

(1) This number includes an aggregate of 28,652 shares beneficially owned (as
such term is defined under Rule 13d-3 under the Securities Exchange Act of
1934, as amended) by George T. Brophy, J. Phillipe

Latreille, Robert L. Slagle, Dan S. Schriber, Donald C. Houghton and George
E. Mangarelli, each a former employee of the Company, as to which Saugatuck
may be deemed, as of September 20, 1996, to have shared power to vote or
direct the voting of and shared power to dispose or direct the disposition
of pursuant to the terms of a Stockholders Agreement (Restated) dated as of
January 13, 1984, as amended (the "Stockholders Agreement"). The
Stockholders Agreement will cease, upon the completion of this Offering and
the sale or distribution by Saugatuck of all its Shares, to be effective.
See "Selling Shareholder" for a discussion of percentage ownership of shares
of Common Stock immediately following the Offering by Saugatuck, Laurel
Partners, Mr. Hawley and Mr. Crihfield.

(2) Messrs. Hawley and Crihfield are deemed to be the beneficial owners of these
shares by virtue of their being general partners of Laurel Partners, the
general partner of Saugatuck. In addition, Mr. Hawley is an officer and
director of the Company. Laurel Partners is deemed to be the beneficial
owner of these shares by virtue of its being the general partner of
Saugatuck. In addition, the shares beneficially owned by Mr. Hawley include
50,000 shares owned individually.

(3) Based on information filed with the Securities and Exchange Commission, The
Parnassus Fund has sole voting power but no dispositive power with respect
to these shares. Immediately following the Offering, The Parnassus Fund will
have beneficial ownership of approximately 9.3% of the total number of
shares of Common Stock then outstanding (assuming that the Underwriter's
over-allotment option is not exercised), unless such party purchases
additional Shares in the Offering.

(4) Based on information filed with the Securities and Exchange Commission,
Heartland Advisors, Inc. has sole voting power with respect to 847,200
shares and sole dispositive power over 861,800 shares. Immediately following
the Offering, Heartland Advisors, Inc. will have beneficial ownership of
approximately 8.5% of the total number of shares of Common Stock then
outstanding (assuming that the Underwriter's over-allotment option is not
exercised), unless such party purchases additional Shares in the Offering.

(5) Based on information filed with the Securities and Exchange Commission,
Pioneering Management Corporation has sole voting power and shared
dispositive power with respect to these shares. Immediately following the
Offering, Pioneering Management Corporation will have beneficial ownership
of approximately 8.2% of the total number of shares of Common Stock then
outstanding (assuming that the Underwriter's over-allotment option is not
exercised), unless such party purchases additional Shares in the Offering.

(6) Based on information filed with the Securities and Exchange Commission,
Dimensional Fund Advisors, Inc. has sole voting and dispositive power with
respect to these shares. Immediately following the Offering, Dimensional
Fund Advisors, Inc. will have beneficial ownership of approximately 4.6% of
the total number of shares of Common Stock then outstanding (assuming that
the Underwriter's over-allotment option is not exercised), unless such party
purchases additional Shares in the Offering.

(7) This amount includes 33,333 shares of Common Stock as to which Mr. Balint
has options to purchase which were granted pursuant to the Stock Option Plan
and which are currently exercisable or exercisable within 60 days. In
addition, Mr. Balint has individual beneficial ownership of 50 shares, which
are in his wife's name. Mr. Balint disclaims beneficial ownership of those
shares.

(8) This amount represents 13,333 shares of Common Stock as to which Mr. Braun
has options to purchase which were granted pursuant to the Stock Option Plan
and which are currently exercisable or exercisable within 60 days.

(9) This amount consists of 3,000 shares of Common Stock as to which Mr. Crowley
has options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable or exercisable within 60 days.

(10) This amount includes 333 shares of Common Stock as to which Dr. Doody has
options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable or exercisable within 60 days, as well as
3,100 shares owned individually.

(11) This amount includes of 3,000 shares of Common Stock as to which Mr. Haas
has options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable or exercisable within 60 days, as well as
3,900 shares owned individually.

(12) This amount includes of 3,000 shares of Common Stock as to which Mr.
Holland has options to purchase which were granted pursuant to the Director
Plan and which are currently exercisable or exercisable within 60 days, as
well as 500 shares owned individually.

(13) This amount includes 68,000 shares of Common Stock as to which Mr. Hood has
options to purchase which were granted pursuant to the Stock Option Plan and
which are currently exercisable or exercisable within 60 days, as well as
1,900 shares owned individually and 1,400 shares which are owned by his wife
but as to which Mr. Hood shares voting and dispositive power.

(14) This amount includes 73,333 shares of Common Stock as to which Mr.
MacMillan has options to purchase which were granted pursuant to the Stock
Option Plan and which are currently exercisable or exercisable within 60
days, as well as 7,000 shares owned individually.

(15) This amount represents 333 shares of Common Stock as to which Mr. McDonough
has options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable or exercisable within 60 days.

(16) This amount includes 7,500 shares of Common Stock as to which Ms. Neuman
has options to purchase which were granted pursuant to the Stock Option Plan
and which are currently exercisable or exercisable within 60 days, as well
as 1,403 shares owned individually.

(17) This amount consists of 219,167 shares of Common Stock as to which Mr.
Robinette has options to purchase which were granted pursuant to the Stock
Option Plan and which are currently exercisable or exercisable within 60
days. This amount does not include 140,000 restricted shares of Common Stock
which were granted to a trust for the benefit of Mr. Robinette pursuant to
his employment agreement. Until the shares are distributed from the trust,
Mr. Robinette exercises no voting power or dispositive power with respect to
these shares.

(18) This amount represents 333 shares of Common Stock as to which Mr. Stebbins
has options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable or exercisable within 60 days.

(19) This amount includes 333 shares of Common Stock as to which Mr. Tokar has
options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable or exercisable within 60 days, as well as
2,000 shares owned individually.

(20) This amount includes an aggregate of 2,000,000 shares beneficially owned by
Saugatuck and Laurel Partners. See footnotes (1) and (2) above. This amount
also includes the aggregate amount of 542,798 shares of Common Stock which
all executive officers and directors as a group have options to purchase and
which are currently exercisable or exercisable within 60 days, as well as
shares owned or beneficially owned individually by such executive officers
and directors; this amount excludes, however, 90,000 shares as to which the
Company has agreed to grant Mr. Hoyt an option to purchase. See "--Employee
Benefits."

SELLING SHAREHOLDER

Saugatuck, the Selling Shareholder, is a venture capital partnership which
organized the Company in November 1983 to acquire the assets of the building
materials business of C-E Morgan, Inc., a subsidiary of Combustion Engineering,
Inc., which had operated the business since 1972. On January 13, 1984, the
Company completed a leveraged acquisition of the operating assets of C-E Morgan.
The acquisition was funded with the proceeds of the private sale of the
Company's stock and subordinated notes and from the proceeds of the incurrence
of long term debt with certain institutional lenders.

In connection with the liquidation of Saugatuck, Mr. Hawley and Mr.
Crihfield will receive 97,561 and 2,439 shares of Common Stock of the Company,
respectively, immediately following the Offering. Neither Saugatuck nor Laurel
Partners, the general partner of Saugatuck, will own any Common Stock of the
Company following the Offering. Mr. Hawley's holdings will increase by the
97,561 shares distributed to him, which, when added to the 50,000 shares owned
by him individually, will result in his beneficially owning 147,561 shares or
1.5% of the Common Stock which will be outstanding after the Offering (assuming
that the Underwriter's over-allotment option is not exercised). Mr. Crihfield
will be the holder of 2,439 shares after the Offering. See "Certain
Transactions" for a discussion of transactions between the Selling Shareholder
and the Company during the last three years.

CERTAIN TRANSACTIONS

The Company paid Saugatuck Associates, an affiliate of Saugatuck, of which
Mr. Hawley, the Chairman of the Board of the Company, is the sole stockholder
and an executive officer, an annual fee of $125,000 under a consulting and
management assistance agreement dated as of January 13, 1984, until the
termination of such agreement effective as of the completion of the Offering.
Pursuant to such agreement Saugatuck Associates provided strategic planning,
management and financial services to the Company.

After the Offering, Mr. Hawley will receive an annual chairman's fee of
$100,000 for services provided to the Company as its chairman.

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, $.10 par value per share, and 5,000,000 shares of preferred stock,
par value $.10 per share (the "Preferred Stock"). As of September 28, 1996,
8,649,308 shares of Common Stock were outstanding and no shares of Preferred
Stock were outstanding. Upon the issuance of the Shares of Common Stock offered
hereby, 10,149,308 shares of Common Stock will be outstanding (assuming no
exercise of the Underwriter's over-allotment option and excluding a total of
843,300 shares of Common Stock reserved under the Stock Option Plan and the
Director Plan, 120,865 shares reserved under the Morgan Products Ltd. 1992
Employee Stock Purchase Plan, and 90,000 shares of Common Stock as to which the
Company has agreed to grant an option to purchase to Mr. Hoyt).

Holders of Common Stock are entitled to one vote per share on matters to be
voted upon by the stockholders, to receive dividends out of funds legally
available for distribution when and if declared by the Board of Directors and to
share ratably in the assets of the Company legally available for distribution to
its stockholders in the event of liquidation, dissolution or winding-up of the
Company. Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights and shares of Common Stock are not subject to redemption. The
outstanding shares of Common Stock are, and the shares offered hereby will be,
upon issuance and payment therefor, fully paid and nonassessable. Pursuant to
the Restated Certificate of Incorporation of the Company, as amended, the Board
of Directors of the Company may authorize the division of the shares of
Preferred Stock into one or more series, to fix and determine voting powers, and
any such preferences, or other special rights, qualifications or limitations
permitted by the laws of the State of Delaware.

The right of the Company to declare and pay dividends on, or distribute cash
or property with respect to, any shares of Common Stock (other than dividends
payable solely in shares of its capital stock or stock splits) is limited by the
terms of its credit agreement with a group of banks through July 13, 1998. Under
the terms of the agreement, no such dividends or distributions may be made with
respect to shares of Common Stock. See Note 5 of Notes to Annual Consolidated
Financial Statements of the Company.

The Company is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in a business combination (as defined therein) with an "interested
stockholder" (defined generally as any person who beneficially owns 15% or

more of the outstanding voting stock of the Company or any person affiliated
with such person) for a period of three years following the date that such
stockholder became an interested stockholder, unless (i) prior to such date the
board of directors of the corporation approved either the business combination
or the transaction that resulted in the stockholder becoming and interested
stockholder; (ii) upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation at the time the transaction
commenced (excluding for purposes of determining the number of shares
outstanding those shares owned (a) by directors who are also officers of the
corporation and (b) by employee stock plans in which employee participants do
not have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender offer or exchange offer); or (iii) on or
subsequent to such date the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder.

The transfer agent and registrar for the Common Stock of the Company is
Harris Trust and Savings Bank.

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement") between the Company and Black & Company, Inc. (the
"Underwriter"), the Underwriter has agreed to purchase an aggregate of 3,400,000
Shares of the Common Stock from the Company and the Selling Shareholder at the
price to public set forth on the cover page of this Prospectus, less the
underwriting discounts and commissions.

The nature of the Underwriter's obligations under the Underwriting Agreement
is such that all Shares of Common Stock offered hereby, excluding Shares covered
by the over-allotment option granted to the Underwriter, must be purchased if
any are purchased. The Underwriting Agreement provides that the obligations of
the Underwriter are subject to a number of conditions, including the accuracy of
the representations and warranties of, and the performance of the covenants and
obligations by, the Company under the Underwriting Agreement, the delivery of
certificates of officers, a letter of independent auditors and opinions of
counsel and other conditions customary in transactions of this type.

The Company has been advised that the Underwriter proposes to offer the
Shares of Common Stock to the public initially at the price to public and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriter may allow, and such dealers may reallow, a concession not
in excess of $ per share to other dealers. The price to public and
concessions and reallowances to dealers may be changed by the Underwriter.

The Company, the Selling Shareholder and the Underwriter have agreed to
indemnify each other against certain liabilities, including certain liabilities
under the Securities Act of 1933, as amended. Such indemnification may be
limited or unavailable in certain circumstances, including where legally
unavailable.

The Underwriter has informed the Company that the Underwriter does not
expect to use discretionary authority to confirm sales to accounts over which
the Underwriter exercises discretionary authority.

The Company, its officers and directors and the Selling Shareholder have
agreed that, for a period of 180 days after the date of this Prospectus, they
will not offer, sell or otherwise dispose of any shares of Common Stock, in the
open market or otherwise, without the prior written consent of the Underwriter.

The foregoing is a brief summary of the provisions of the Underwriting
Agreement and does not purport to be a complete statement of its terms and
conditions. A copy of the Underwriting Agreement has been filed as an exhibit to
the Registration Statement of which this Prospectus is a part.

LEGAL MATTERS

The legality of the Common Stock offered hereby will be passed upon for the
Company by Winthrop, Stimson, Putnam & Roberts, Financial Centre, 695 East Main
Street, Stamford, Connecticut 06901-6760. Certain legal matters are being passed
upon for the Underwriter by Foster Pepper & Shefelman, One Main Place, 101 S.W.
Main Street, 15th Floor, Portland, Oregon 97204-3223. Mr. Kenneth E. Roberts, a
partner of Foster Pepper & Shefelman, owns 10,000 shares of Common Stock of the
Company as of the date hereof.

EXPERTS

The consolidated financial statements of Morgan at December 31, 1994 and
1995 and for each of the three years in the period ended December 31, 1995,
included in this Prospectus have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of such
firm as experts in auditing and accounting.

The financial statements of TBP as of December 31, 1994 and 1995, and for
each of the three years in the period ended December 31, 1995, appearing in this
Prospectus and Registration Statement have been audited by Kraft Bros., Esstman,
Patton & Harrell, PLLC, independent accountants, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, files reports
with the Securities and Exchange Commission (the "Commission"). Reports filed by
the Company may be inspected without charge and copied, upon payment of
prescribed rates, at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such materials may be obtained from
the web site that the Commission maintains at http://www.sec.gov.

The Company is listed on the New York Stock Exchange. Reports concerning the
Company can also be inspected at the offices of the New York Stock Exchange at
20 Broad Street, New York, NY 10005.

The Company has filed with the Commission a registration statement on Form
S-2 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents are specifically incorporated by reference herein:

Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1995 (Commission
File No. 1-9843).

Quarterly Report on Form 10-Q, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period ended March 30, 1996 (Commission
File No. 1-9843).

Quarterly Report on Form 10-Q, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period ended June 29, 1996 (Commission
File No. 1-9843).

Amendment on Form 10-Q/A-1 to Quarterly Report on Form 10-Q, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period
ended June 29, 1996, filed with the Commission on August 22, 1996 (Commission
File No. 1-9843).

Current Report on Form 8-K, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, filed with the Commission on September 13, 1996
(Commission File No. 1-19843)

Current Report on Form 8-K, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, filed with the Commission on September 26, 1996
(Commission File No. 1-19843).

Amendment on Form 8-K/A to Current Report on Form 8-K filed September 13, 1996,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, filed
with the Commission on September 27, 1996 (Commission File No. 1-19843).

The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to: Morgan Products
Ltd., 469 McLaws Circle, Williamsburg, VA 23185, Attention: Chief Financial
Officer, telephone number (757) 564-1700.

Statements contained in this Prospectus as to the contents of any contract
or document are not necessarily complete, and in each instance reference is made
to the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified shall not be deemed to
constitute a part of this Prospectus except as so modified, and any statement so
superseded shall not be deemed to constitute part of this Prospectus.

INDEX TO FINANCIAL STATEMENTS

PAGE
---------

MORGAN PRODUCTS LTD.:

ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Accountants, Price Waterhouse LLP................................................. F-2

Consolidated Income Statements for the three years ended December 31, 1995.............................. F-3

Consolidated Balance Sheets at December 31, 1994 and 1995............................................... F-4

Consolidated Statements of Cash Flows for the three years ended December 31, 1995....................... F-5

Consolidated Statements of Stockholders' Equity for the three years
ended December 31, 1995............................................................................... F-6

Notes to Annual Consolidated Financial Statements....................................................... F-7

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Income Statements for three and six months
ended July 1, 1995 and June 29, 1996 (unaudited)...................................................... F-19

Consolidated Balance Sheets at July 1, 1995, December 31, 1995 and June 29, 1996 (unaudited)............ F-20

Consolidated Statements of Cash Flows for the six months
ended July 1, 1995 and June 29, 1996 (unaudited)...................................................... F-21

Notes to Interim Consolidated Financial Statements...................................................... F-22

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY:

Report of Independent Accountants, Kraft Bros., Esstman, Patton & Harrell, PLLC......................... F-25

Consolidated Statements of Operations for the three years ended December 31, 1995 and for the six months
ended June 30, 1995 and 1996 (unaudited).............................................................. F-26

Consolidated Balance Sheets at December 31, 1994 and 1995 and June 30, 1996 (unaudited)................. F-27

Consolidated Statements of Cash Flows for the three years ended December 31, 1995
and six months ended June 30, 1995 and 1996 (unaudited)............................................... F-28

Consolidated Statements of Changes in Stockholder's Equity for the three years ended December 31, 1995
and the six months ended June 30, 1996 (unaudited).................................................... F-29

Notes to Consolidated Financial Statements.............................................................. F-30

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Morgan Products Ltd.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Morgan Products Ltd.
at December 31, 1994 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PRICE WATERHOUSE LLP

Milwaukee, Wisconsin
January 25, 1996 (except for
matters discussed in Note 13, as
to which the date is September 30, 1996)

F-2

MORGAN PRODUCTS LTD.

CONSOLIDATED INCOME STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------

Net sales.................................................................... $ 392,702 $ 358,357 $ 338,026
Cost of goods sold........................................................... 339,905 305,959 290,563
---------- ---------- ----------
Gross profit............................................................... 52,797 52,398 47,463
---------- ---------- ----------
Operating expenses:
Sales and marketing........................................................ 38,859 36,251 35,652
General and administrative................................................. 10,488 10,750 11,033
Provision for restructuring (Note 2)....................................... -- 11,291 51
---------- ---------- ----------
49,347 58,292 46,736
---------- ---------- ----------
Operating income (loss)...................................................... 3,450 (5,894) 727
---------- ---------- ----------
Other income (expense):
Interest................................................................... (3,968) (3,776) (3,763)
Other...................................................................... 1,720 469 450
---------- ---------- ----------
(2,248) (3,307) (3,313)
---------- ---------- ----------
Income (loss) before income taxes............................................ 1,202 (9,201) (2,586)
Provision for income taxes................................................... 250 200 42
---------- ---------- ----------
Net income (loss)............................................................ $ 952 $ (9,401) $ (2,628)
---------- ---------- ----------
---------- ---------- ----------
Income (loss) per share...................................................... $ .11 $ (1.10) $ (.30)
---------- ---------- ----------
---------- ---------- ----------
Weighted average common and common equivalent shares outstanding............. 8,495 8,549 8,644
---------- ---------- ----------
---------- ---------- ----------

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

F-3

MORGAN PRODUCTS LTD.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING)

AT DECEMBER 31,
----------------------
1994 1995
---------- ----------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................... $ 6,195 $ 5,135
Accounts receivable (less allowance of $722 in 1995 and $953 in 1994)................... 24,361 20,801
Inventories (Note 3).................................................................... 54,957 53,422
Other current assets.................................................................... 997 422
---------- ----------
Total current assets................................................................ 86,510 79,780
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, NET (Note 4)............................................... 20,780 23,500
OTHER ASSETS (Notes 1 and 9).............................................................. 6,018 6,235
---------- ----------
Total assets........................................................................ $ 113,308 $ 109,515
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 5)........................................... $ 1,205 $ 954
Accounts payable........................................................................ 11,510 11,121
Accrued compensation and employee benefits.............................................. 8,176 5,625
Income tax payable...................................................................... 203 111
Other current liabilities............................................................... 3,777 3,295
---------- ----------
Total current liabilities........................................................... 24,871 21,106
---------- ----------
LONG-TERM DEBT (Note 5)................................................................... 33,245 35,574
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY (Note 7):
Common stock, $.10 par value, 8,640,713 and 8,647,483 shares outstanding,
respectively.......................................................................... 864 865
Paid-in capital......................................................................... 33,733 33,771
Retained earnings....................................................................... 21,257 18,629
---------- ----------
55,854 53,265
Treasury stock, 2,386 shares, at cost................................................... (48) (48)
Unearned compensation--restricted stock................................................. (614) (382)
---------- ----------
Total stockholders' equity.......................................................... 55,192 52,835
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................................ $ 113,308 $ 109,515
---------- ----------
---------- ----------

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

F-4

MORGAN PRODUCTS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
-------------------------------

1993 1994 1995
--------- --------- ---------
CASH GENERATED (USED) BY OPERATING ACTIVITIES:
Net income (loss).................................................................. $ 952 $ (9,401) $ (2,628)
Add (deduct) noncash items included in income:
Depreciation and amortization.................................................... 5,055 4,794 3,694
Provision for doubtful accounts.................................................. 697 (54) 214
Provision for restructuring...................................................... -- 11,291 8
Gain on sale of property, plant and equipment.................................... (1,394) (142) (44)
Other............................................................................ 6 85 232
Cash generated (used) by changes in components of working capital:
Accounts receivable.............................................................. (6,877) 7,957 3,346
Inventories...................................................................... (2,273) 5,334 1,606
Accounts payable................................................................. 2,342 (1,982) (389)
Other working capital............................................................ (1,487) (3,406) (3,401)
--------- --------- ---------
NET CASH GENERATED (USED) BY OPERATING ACTIVITIES.................................. (2,979) 14,476 2,638

CASH GENERATED (USED) BY INVESTING ACTIVITIES:
Acquisition of property, plant and equipment..................................... (1,946) (1,173) (5,212)
Proceeds from disposal of property, plant and equipment.......................... 3,759 4,193 117
Acquisition of other assets, net................................................. (893) (1,581) (720)
--------- --------- ---------
NET CASH GENERATED (USED) BY INVESTING ACTIVITIES.................................. 920 1,439 (5,815)
--------- --------- ---------

CASH GENERATED (USED) BY FINANCING ACTIVITIES:
Net change in short-term debt.................................................... (5,651) 999 --
Proceeds from long-term debt..................................................... 11,226 25,000 3,223
Repayments of long-term debt..................................................... (4,250) (39,200) (1,145)
Common stock issued for cash..................................................... 31 27 39
--------- --------- ---------

NET CASH GENERATED (USED) BY FINANCING ACTIVITIES.................................. 1,356 (13,174) 2,117
--------- --------- ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................... (703) 2,741 (1,060)

CASH AND CASH EQUIVALENTS:
Beginning of period.............................................................. 4,157 3,454 6,195
--------- --------- ---------
End of period.................................................................... $ 3,454 $ 6,195 $ 5,135
--------- --------- ---------
--------- --------- ---------

CASH PAID (RECEIVED) DURING THE YEAR FOR:
Interest......................................................................... $ 3,598 $ 3,733 $ 3,885
Income taxes..................................................................... 149 (9) 134

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

F-5

MORGAN PRODUCTS LTD.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS)

UNEARNED
COMPENSATION-
COMMON PAID-IN RETAINED TREASURY RESTRICTED
STOCK CAPITAL EARNINGS STOCK STOCK
----------- --------- --------- ----------- ---------------

Balance at December 31, 1992........................... $ 849 $ 32,991 $ 29,707 $ (48) $ --
Net income............................................. -- -- 952 -- --

Other.................................................. 1 30 (1) -- --
----- --------- --------- --- -----
Balance at December 31, 1993........................... 850 33,021 30,658 (48) --
Net loss............................................... -- -- (9,401) -- --
Issuance of restricted stock........................... 14 686 -- -- (700)
Amortization of unearned compensation.................. -- -- -- -- 86

Other.................................................. --........ 26 -- -- --
----- --------- --------- --- -----
Balance at December 31, 1994........................... 864 33,733 21,257 (48) (614)
Net loss............................................... -- -- (2,628) -- --
Amortization of unearned compensation.................. -- -- -- -- 232

Other.................................................. 1 38 -- -- --
----- --------- --------- --- -----
Balance at December 31, 1995........................... $ 865 $ 33,771 $ 18,629 $ (48) $ (382)
----- --------- --------- --- -----
----- --------- --------- --- -----

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

F-6

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS--Morgan Products Ltd. ("Morgan" or the "Company")
manufactures and purchases products (virtually all considered to be millwork)
which are sold to the residential and light commercial building materials
industry and are used for both newconstruction and improvements, maintenance and
repairs. In view of the nature of its products and the method of distribution,
management believes that the Company's business constitutes a single industry
segment.

CONSOLIDATION--The consolidated financial statements include the accounts of
all business units of Morgan. All intercompany transactions, profits and
balances are eliminated.

EARNINGS PER SHARE AND SHARE DATA--Earnings per share are computed using the
weighted average number of common and, when applicable, common equivalent shares
outstanding during the period.

INVENTORIES--Inventories are valued at the lower of cost or market. Cost is
determined on the first-in, first-out (FIFO) method.

PROPERTIES AND OTHER ASSETS--Property, plant and equipment are stated at
cost and depreciated on a straight line basis over the estimated useful lives of
the assets, which generally range from 35 years for buildings, 10 to 20 years
for building equipment and improvements, and 5 to 10 years for machinery and
equipment. Expenditures which substantially increase value or extend useful life
are capitalized. Expenditures for maintenance and repairs are charged against
income as incurred.

Included in other assets are software costs, which are amortized over their
estimated useful lives, and deferred debt issue costs, which are amortized over
the life of the related debt agreement.

The Company reviews the carrying value of Properties and Other Assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Measurement of any impairment would
include a comparison of estimated future operating cash flows anticipated to be
generated during the remaining life of the assets to the net carrying value of
the assets.

FAIR VALUE OF FINANCIAL INSTRUMENTS--Cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses are reflected in the financial
statements at fair value because of the short-term maturity of those
instruments. The fair value of the Company's long-term debt is discussed in Note
5.

STATEMENT OF CASH FLOWS--The Company considers all highly liquid debt
instruments with a maturity of 91 days or less at the time of purchase to be
cash equivalents.

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

STOCK-BASED COMPENSATION--Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to

F-7

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
continue to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the grant over the
amount an employee must pay to acquire the stock. Stock-based compensation costs
would not have been significantly different in 1995 had compensation been
recognized using the fair value approach.

NOTE 2--PROVISION FOR RESTRUCTURING

In the fourth quarter of 1993, the Company announced that it had retained
the investment banking firm of Dillon, Read & Company, Inc. to help evaluate
strategic alternatives for the Company, including the possible sale of its
Morgan Manufacturing business unit. In the second quarter of 1994, management
further announced that Dillon, Read ended divestiture discussions and that the
Company had decided to retain and realign the manufacturing business.

On May 28, 1994, the Company recorded an $11.3 million restructuring charge
to cover the cost of closing the Springfield, Oregon plant, and the Weed,
California veneer operation and to provide for other cost reductions and
consolidation with in the Company. This charge incorporates the costs of certain
personnel actions including severance, outplacement, relocation and future
workers' compensation claims; costs of moving, reworking, selling, or writing
off inventory; holding costs for idle facilities until they can be sold; and the
revaluation of idle assets to estimated net realizable value based on
independent appraisal information.

During the third quarter of 1994, the Company reviewed the charges with
respect to matters reserved for in the original restructuring and determined
that certain estimated costs would not be as high as originally anticipated.
However, certain other cost reduction and restructuring actions were approved
and provided for during the third quarter which offset the lower expenses
originally anticipated. Accordingly, $.4 million of the restructuring reserve
was reallocated for the downsizing of two distribution centers, and $.5 million
was reallocated to cover the restructuring and relocation of the corporate
headquarters operation.

During the first quarter of 1995, management again evaluated its
restructuring reserves and determined that certain estimated costs would not be
as high as had been expected and adjusted the reserve appropriately. In
addition, incremental restructuring activities for Morgan Distribution (as
described below) were approved during the first quarter.

Since his arrival in September 1994, the Company's new Chief Executive
Officer and other members of senior management have been evaluating what actions
are necessary to improve Morgan Distributions's profitability. A multi-year plan
involving necessary management structure changes, a new management information
system and future facility requirements was developed. The first phase of this
restructuring plan was implemented during the first quarter of 1995. A new
organizational structure was announced that eliminated several management
positions. The costs of severance and certain other cost reductions was provided
for during the first quarter of 1995 which more than offset the
lower-than-originally-anticipated

F-8

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--PROVISION FOR RESTRUCTURING (CONTINUED)
expenses of the 1994 restructuring. No charges were made for change in physical
facilities since there were no actions implemented in 1995 with respect to these
facilities.

RESERVE UTILIZED RESERVE AT
AT MAY 28, ---------------------- DEC. 31,
1994 CASH NONCASH REALLOCATED 1994
----------- --------- ----------- ------------- -------------

Employee benefits (1)..................................... $ 4.8 $ (1.7) $ -- $ (.4) $ 2.7
Inventory (2)............................................. 3.7 (.6) (1.2) (.1) 1.8
Fixed assets.............................................. 1.1 -- -- .2 1.3
Holding and other costs (3)............................... 1.7 (1.4) -- .3 .6
----- --------- ----- --- ---
Total restructuring reserve............................... $ 11.3 $ (3.7) $ (1.2) $ -- $ 6.4
----- --------- ----- --- ---
----- --------- ----- --- ---

RESERVE UTILIZED RESERVE AT
AT DEC. 31, ---------------------- DEC. 31,
1994 CASH NONCASH REALLOCATED 1995
------------- --------- ----------- ------------- -------------

Employee benefits (4)..................................... $ 2.7 $ (2.5) $ -- $ 1.2 $ 1.4
Inventory (2)............................................. 1.8 -- -- -- 1.8
Fixed assets.............................................. 1.3 -- -- (.9) .4
Holding and other costs (3)............................... .6 (.1) -- (.3) .2
--- --------- ----- --- ---
Total restructuring reserve............................... $ 6.4 $ (2.6) $ -- $ -- $ 3.8
--- --------- ----- --- ---
--- --------- ----- --- ---

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

(1) Costs associated with severance, outplacement and future workers'
compensation claims due to the closing of the Springfield, Weed veneer, and
other facilities.

(2) Primarily costs associated with inventory that could not be utilized or
costs of reworking inventory for use in other facilities due to closing of
the Springfield, Weed veneer, and other facilities.

(3) Costs associated with continuing utility and property tax due to the closing
of the Springfield, Weed veneer, and other facilities.

(4) Costs associated with severance, outplacement and future workers'
compensation claims due to the closing of the Springfield facilities,
downsizing and the Morgan Manufacturing division office, and the
restructuring of the corporate headquarters.

The downsizing of the distribution centers and the closing of the
Springfield and Weed veneer facilities were substantially completed during 1994.
All 158 Springfield employees, 29 Weed veneer employees and 5 Oshkosh employees
were terminated. This represented a 25% reduction in workforce at the Morgan
Manufacturing division. By November of 1994, the sale of the Springfield plant
and Springfield and Weed veneer machinery and equipment was completed. During
1995, the management of both the Morgan Manufacturing and Morgan Distribution
divisions was changed and the corporate headquarters was restructured and moved
to Williamsburg, Virginia in order to reduce occupancy expense, facilitate
personnel cost reductions, and locate closer to the Company's traditional major
markets. The Company is continuing to evaluate its plans for capacity reduction
and consolidation in light of industry trends, current demand and likely growth
opportunities.

F-9

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--INVENTORIES

Inventories consisted of the following at (in thousands of dollars):

DECEMBER 31,
--------------------

1994 1995
--------- ---------
Raw materials........................................................... $ 9,685 $ 9,120
Work-in-process......................................................... 5,272 6,536
Finished goods.......................................................... 40,000 37,766
--------- ---------
Total inventories................................................... $ 54,957 $ 53,422
--------- ---------
--------- ---------

NOTE 4--PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at (in thousands of
dollars):

DECEMBER 31,
--------------------

1994 1995
--------- ---------
Land and improvements................................................... $ 2,765 $ 2,765
Buildings and improvements.............................................. 15,593 16,806
Machinery and equipment................................................. 21,948 22,313
Capitalized building and equipment leases............................... 5,328 5,328
Less accumulated depreciation and amortization.......................... (24,950) (27,705)
Construction in progress................................................ 96 3,993
--------- ---------
Total property, plant and equipment................................. $ 20,780 $ 23,500
--------- ---------
--------- ---------

At December 31, 1995, and 1994, accumulated amortization relating to
capitalized building and equipment leases was approximately $4.2 million and
$3.6 million respectively.

NOTE 5--LONG-TERM DEBT

Long-term debt consisted of the following at (in thousands of dollars):

DECEMBER 31,
--------------------

1994 1995
--------- ---------
Revolving credit facilities............................................. $ 25,000 $ 28,223
Industrial revenue bonds................................................ 2,300 2,000
Obligations under capital leases (Note 6)............................... 3,820 3,330
Obligations under financing leases...................................... 2,306 2,229
Other................................................................... 1,024 746
--------- ---------
34,450 36,528
Less current maturities................................................. (1,205) (954)
--------- ---------
Total long-term debt................................................ $ 33,245 $ 35,574
--------- ---------
--------- ---------

On July 14, 1994, the Company signed a new revolving credit agreement with a
group of banks which provides for a revolving credit facility of up to $65
million and includes a letter of credit facility of up to $9 million, through
July 13, 1997. See Note 13 to the Notes to Annual Consolidated Financial
Statements.

F-10

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--LONG-TERM DEBT (CONTINUED)
This credit facility is secured by certain accounts receivable, inventories,
equipment, real estate and general intangibles of the Company. Available
borrowings under the revolving credit facility bear interest at the option of
the Company at the prime rate plus an incremental 1.25 percentage points or at
the LIBOR rate plus an incremental 2.75 percentage points. The Company also pays
an annual commitment fee of .5% on the average unused portion of the revolving
credit line and certain additional fees. At December 31, 1995, the weighted
average interest rate on the outstanding revolving credit facilities was 8.78%.

The credit facility contains certain covenants including limitations on the
acquisition and disposition of assets, on the payment of dividends, on the
pledging of assets other than those pledged under the industrial revenue bonds,
and the requirement that the Company maintain minimum tangible net worth,
leverage, and interest coverage ratios. As a result of lower-than-planned
performance, the Company was not in compliance with restrictive bank covenants
at July 1, 1995 and again at September 30, 1995. The banks issued a waiver for
the first non-compliance. The Company negotiated and executed an amendment to
the credit agreement which adjusted the September and ongoing covenants so that
they more realistically reflect the current market conditions in which the
Company competes. The Company was in compliance with all of the amended credit
agreement covenants at December 31, 1995.

As of December 31, 1995, the Company had utilized $.8 million of its $9
million letter of credit facility and had borrowings of $28.2 million under the
revolving credit facility.

The industrial revenue bond outstanding at December 31, 1995 bears a
floating interest rate equal to eighty percent (80%) of the bond equivalent
yield applicable to 91-day United States Treasury bills. These bonds are secured
by assets with a book value of $17.5 million and $2.1 million in letters of
credit.

During 1991, the Company entered into a sale-leaseback transaction which,
based upon the applicable terms, is accounted for as a financing lease. The term
of the agreement is 15 years beginning on December 30, 1991 and expiring on
December 29, 2006 with an interest rate of 9.73% annually.

Future annual maturities of the Company's long-term debt as of December 31,
1995 are presented below (in thousands of dollars):

1996............................................................... $ 954
1997............................................................... 29,228
1998............................................................... 942
1999............................................................... 998
2000............................................................... 1,168
Later years........................................................ 3,238
---------
Future annual maturities on long-term debt..................... $ 36,528
---------
---------

The carrying value of the Company's debt obligations at December 31, 1995
approximates fair value.

F-11

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--LEASE OBLIGATIONS

Certain leased equipment and distribution facilities have been capitalized
by the Company. The Company also leases certain facilities, equipment and
vehicles under noncancelable agreements which are operating leases.

Future minimum lease payments required under long-term leases in effect at
December 31, 1995 are as follows (in thousands of dollars):

CAPITAL OPERATING TOTAL
--------- ----------- ---------

1996.......................................................... $ 824 $ 3,369 $ 4,193
1997.......................................................... 722 2,072 2,794
1998.......................................................... 722 1,684 2,406
1999.......................................................... 722 1,377 2,099
2000.......................................................... 722 1,045 1,767
Later years................................................... 4,148 753 4,901
--------- ----------- ---------
7,860 $ 10,300 $ 18,160
--------- ----------- ---------
--------- ----------- ---------
Less imputed interest......................................... (4,530)
---------
Total lease obligations................................... $ 3,330
---------
---------

For 1995, 1994, and 1993, rental expense, including usage charges on the
long-haul fleet, was $6.3 million, $6.6 million, and $6.7 million respectively.

NOTE 7--STOCKHOLDERS' EQUITY

COMMON STOCK--The number of authorized shares of Common Stock is 20,000,000
shares.

PREFERRED STOCK--The number of authorized shares of Preferred Stock is
5,000,000 shares.

STOCK OPTION PLAN--In June 1985, the Company adopted a Stock Option Plan
which, as amended, provides for (i) the issuance of incentive stock options at a
purchase price approximating the fair market value at the date of grant and (ii)
the issuance of non-qualified options at a price determined by the Compensation
Committee, a committee of the board of Directors, which cannot be less than 85%
of the market price at the date of grant. In May 1989, the stockholders ratified
a proposal that amended the Company's Stock Option Plan to increase from 500,000
to 750,000 the number of shares of Common Stock reserved for issuance under the
plan.

At the annual meeting in May 1995, the stockholders voted to amend the plan
and authorized an additional 150,000 shares of Common Stock be set aside for the
granting of options. As of December 31, 1995, the Company has set aside 793,300
shares of Common Stock for the granting of such options. The options granted
become exercisable immediately or in two, three, four, or five installments from
the date of grant, and all of the options granted expire no more than ten years
from the date of grant.

F-12

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--STOCKHOLDERS' EQUITY (CONTINUED)
The following table provides summary information regarding stock options
under the Stock Option Plan:

1994 1995
----------- -----------

Options outstanding at January 1................................ 583,200 614,000
Granted......................................................... 492,500 267,500
Exercised....................................................... -- (3,500)
Canceled........................................................ (461,700) (189,500)
----------- -----------
Outstanding at December 31(1)................................... 614,000 688,500
----------- -----------
----------- -----------

Option price range at December 31................... $5.00-$9.62 $5.00-$6.62
Options exercisable at December 31.................. 327,495 299,299
Options available for grant at December 31.......... 32,800 104,800

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

(1) Options outstanding at December 31, 1995 and 1994 of 688,500 and 614,000
respectively, consist solely of non-qualified options.

In May 1992, the stockholders approved the adoption of a Non-employee
Director Stock Option Plan (the "Director Plan"). The Director Plan provides for
the automatic grant of non-qualified stock options to purchase 1,000 shares of
Common Stock at a purchase price equal to the fair market value at the date of
grant upon a non-employee Director's election or re-election to the board of
Directors. An aggregate of 50,000 shares of Common Stock is available for grant
under the Director Plan. The options granted become exercisable in three annual
installments from the date of grant, and all of the options granted expire ten
years from the date of grant.

The following table provides summary information regarding stock options
under the Director Plan:

1994 1995
--------- ---------

Options outstanding at January 1................................ 8,000 9,000
Granted......................................................... 3,000 7,000
Exercised....................................................... -- --
Canceled........................................................ (2,000) --
--------- ---------
Outstanding at December 31...................................... 9,000 16,000
--------- ---------
--------- ---------

Option price range at December 31................... $5.75-$9.12 $5.75-$9.12
Options exercisable at December 31.................. 2,997 5,997
Options available for grant at December 31.......... 41,000 34,000

On August 19, 1994, the Company issued 140,000 restricted shares of the
Company's Common Stock to the Chief Executive Officer. These shares were awarded
to a trust of which the Chief Executive Officer is the beneficiary, subject to
certain restrictions and forfeiture provisions. The shares vest ratably over a
three-year period ending August 19, 1997. The restrictions limit the sale or
transfer of shares during the restricted period. The trust will immediately vest
in the shares of Common Stock upon death, disability, or termination of the
Chief Executive Officer as described in the plan. The unamortized value of the
Common Stock totaling $700,000 was recorded at the date of award based upon the
market value of shares

F-13

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--STOCKHOLDERS' EQUITY (CONTINUED)
as a separate component of stockholders' equity and is being amortized to
expense over the three-year vesting period.

On August 19, 1994, the Company also granted the Chief Executive Officer
options to purchase 250,000 shares of Common Stock at an exercise price of $5
per share under the Company's Stock Option Plan. This was the fair market value
at the date of grant. Vesting in these options will be over a three-year period
with 62,500 shares or 25% vested immediately. This grant is included in the
table.

NOTE 8--SHARE PURCHASE RIGHTS PLAN

On March 14, 1989, the Board of Directors of the Company declared a dividend
of one share purchase right for each outstanding share of Common Stock. The
dividend was payable on March 24, 1989 to shareholders of record on that date.
Once exercisable, each right entitles its holder to purchase one share of Common
Stock for $70.00 per share (subject to adjustment). The rights are not
exercisable until 10 days after a tender offer or exchange offer is announced
which would cause the offeror to own 25% of the outstanding Common Stock,
whichever is earlier.

At any time prior to the tenth day following the share acquisition date
(unless extended), the Company may redeem the rights at a cost of $.01 per
right. Unless so redeemed, the rights will expire March 15, 1999. The Company's
directors may amend the rights plan before rights are exercisable, and
thereafter in any manner which does not adversely affect the interest of the
rights holders.

NOTE 9--EMPLOYEE BENEFIT PLANS

The Company has a profit sharing and 401(k) savings plan for all salaried
employees and certain groups of hourly employees. The Company matches 50% of
participant contributions to the savings plan, with Company contributions
limited to 3% of the participant's compensation. At the discretion of the Board
of Directors, the Company may make an additional contribution, which has been
targeted at 3% of each participant's compensation.

Profit sharing costs and the Company's matching contributions to the
employee savings plan charged to operations were $.6 million, $1.1 million, and
$.4 million for 1993, 1994, and 1995 respectively.

The Company has pension plans which cover some of its hourly employees.
These plans generally provide a stated benefit amount for each year of service.
In addition, Morgan's former Nicolai Company subsidiary had two salaried pension
plans which were curtailed during 1986 and one hourly pension plan which was
curtailed in 1988.

Net pension expense for 1993, 1994, and 1995 was $71,000, $119,00, and
$345,000 respectively. The projected benefit obligations as of December 31, 1994
and December 31, 1995 were $12.0 million and $14.2 million respectively. The
projected benefit obligations were determined using assumed discount rates of
8.5% and 7.5% at December 31, 1994 and 1995 respectively. The expected long-term
rate of return on plan assets was 8.5% at both December 31, 1994 and 1995. Net
assets available for plan benefits, at fair market value, as of December 31,
1994 and 1995 were $12.1 million and $13.6 million respectively. Prepaid pension
expense at December 31, 1994 and 1995 was $1.9 million and $1.8 million
respectively, and is included in other assets in the accompanying balance sheet.

F-14

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9--EMPLOYEE BENEFIT PLANS (CONTINUED)
Plan assets consist of equity and fixed income securities and insurance
annuity contracts. It is the policy of the Company to fund at least the minimum
required amount in accordance with the requirements of the Employee Retirement
Income Security Act of 1974.

For the hourly employees not covered by company pension or profit sharing
plans, the Company makes contributions to multi-employer pension plans based on
compensable hours worked in accordance with union contracts. Under certain
conditions, principally withdrawal from such plans, the Company may have further
obligations for pensions with respect to such employees, but the amount thereof,
if any, cannot be determined at the present time.

NOTE 10--INCOME TAXES

Effective January 1, 1993, the Company prospectively adopted Statement of
Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes."
FAS 109 is an asset and liability approach to accounting for deferred income
taxes that requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, FAS 109 generally considers all expected future events other than
enactments of changes in the tax law or rates. Previously, the Company accounted
for income taxes under the FAS 96 asset and liability approach, which gave no
recognition to future events other than the recovery of assets and the
settlement of liabilities at their carrying amounts. The adoption of FAS 109 has
no material effect on net income in any period.

The components of the income tax provision consisted of the following (in
thousands of dollars):

YEAR ENDED DECEMBER 31,
-------------------------------

1993 1994 1995
--------- --------- ---------
Current:
Federal........................................................... $ -- $ -- $ (78)
State............................................................. 250 200 120
--------- --------- ---------
Total current................................................. 250 200 42
--------- --------- ---------
Deferred:
Federal........................................................... -- -- --
State............................................................. -- -- --
--------- --------- ---------
Total deferred................................................ -- -- --
--------- --------- ---------
Income tax provision.................................................. $ 250 $ 200 $ 42
--------- --------- ---------
--------- --------- ---------

F-15

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--INCOME TAXES (CONTINUED)
The reconciliation between the U.S. Federal statutory tax rate expressed as
a percentage of pre-tax income (loss) and the effective tax rate was as follows:

YEAR ENDED DECEMBER 31,
-------------------------------

1993 1994 1995
--------- --------- ---------
U.S. Federal income tax rate....................................... 34.0% (34.0)% (34.0)%
Non-utilization (utilization) of operating loss carryforward....... (33.4) 33.1 28.6
State income taxes, net of federal benefit......................... 5.9 1.2 2.1
Non-deductible items............................................... 2.5 1.5 3.5
Other.............................................................. 11.8 .4 1.4
--------- --------- ---------
Effective tax rate............................................. 20.8% 2.2% 1.6%
--------- --------- ---------
--------- --------- ---------

Temporary differences and carryforwards which gave rise to deferred tax
assets and liabilities consisted of the following at (in thousands of dollars):

DECEMBER 31,
--------------------

1994 1995
--------- ---------
Gross deferred tax assets:
Operating loss carryforwards........................................... $ 3,601 $ 5,345
Accrued expenses and reserves.......................................... 3,818 2,457
Post-retirement benefits............................................... 174 140
Other.................................................................. 97 172
--------- ---------
7,690 8,114
Valuation allowance.................................................... (6,161) (6,779)
--------- ---------
1,529 1,335
--------- ---------
Gross deferred tax liabilities:
Depreciation and amortization.......................................... (949) (776)
Pensions............................................................... (580) (559)
--------- ---------
(1,529) (1,335)
--------- ---------
Net deferred tax assets.................................................... $ -- $ --
--------- ---------
--------- ---------

The valuation allowance primarily reflects operating loss carryforwards for
which utilization is uncertain.

As of December 31, 1995, the Company has unused operating loss carryforwards
for tax purposes of approximately $15.7 million, which expire in years 2002
through 2010. No benefit for the remaining operating loss carryforwards has been
recognized in the consolidated financial statements. Should an ownership change
occur, as defined under Section 382 of the Internal Revenue Code, the Company's
ability to utilize the operating loss carryforwards would be restricted.

F-16

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11--RELATED PARTIES

As of December 31, 1995, Saugatuck Capital Company Limited Partnership
("Saugatuck") in the aggregate, beneficially owned approximately 24% of the
Company's Common Stock. During 1995, the Company paid Saugatuck $125,000 for
services rendered.

NOTE 12--COMMITMENTS AND CONTINGENCIES

Andersen Corporation ("Andersen"), whose products accounted for 40% of 1995
net sales, distributes its products only through independent distributors such
as the Company. The Company and its predecessors have distributed Andersen
products for over 40 years; however, the Company's agreement with Andersen
provides that Andersen can terminate any of the Company's distributorships at
any time upon a 60-day notice. A termination or significant modification of the
distribution relationship with Andersen could have a material adverse effect on
revenues and earnings.

As of December 31, 1995, the Company had capital expenditure purchase
commitments outstanding of approximately $1.6 million.

NOTE 13--SUBSEQUENT EVENTS (UNAUDITED)

During the second quarter of 1996, the Company sold its Lexington, North
Carolina door manufacturing facility for $4.1 million. Production that was
previously manufactured in Lexington will be shifted to the Company's Oshkosh,
Wisconsin manufacturing facility during the third and fourth quarters of 1996.
The Company recorded an additional restructuring charge in the second quarter of
$.4 million related to the sale of the Lexington facility. It is expected that
the Company will incur additional aggregate restructuring expense of
approximately $2.6 to $3.0 million in the third and fourth quarters of 1996
related to the sale of the Lexington facility and the consolidation of
operations at Oshkosh. Also in the second quarter, a $.5 million restructuring
reserve was recorded for incremental costs related to the 1994 plant closings in
Springfield, Oregon and Weed, California and the 1995 reorganization of the
Manufacturing Division Office in Oshkosh, Wisconsin.

During the second quarter of 1996, the Company signed an amendment to extend
its revolving credit facility through July 13, 1998. See Note 5 to the Notes to
Annual Consolidated Financial Statements.

On August 30, 1996, the Company acquired certain assets and assumed certain
liabilities of Tennessee Building Products, Inc. and its subsidiary, Titan
Building Products, Inc. (collectively, "TBP"), for $15.3 million, subject to
certain purchase price adjustments. The acquisition, which was financed through
borrowings on the Company's revolving credit agreement, will be accounted for as
a purchase. TBP, which had annual sales for the year ended December 31, 1995 of
approximately $46.8 million, is a distributor of windows, doors, kitchen
cabinets, and other millwork and glass products, to residential builders and
other customers. TBP is headquartered in Nashville, Tennessee, with facilities
in Charlotte, North Carolina; Chattanooga, Tennessee; Greenville, South
Carolina; and Huntsville, Alabama.

On September 11, 1996, the Company's Board of Directors authorized a public
stock offering of 1,500,000 Shares of its Common Stock (plus 510,000 Shares to
cover the Underwriter's over-allotment), which is expected to generate proceeds
of approximately $10.2 million, net of expenses (assuming that the Underwriter's
over-allotment is not exercised). All proceeds from the sale will be used to
repay borrowings under the Company's revolving credit agreement. It is expected
that the public offering will be completed in the fourth quarter of 1996.

F-17

MORGAN PRODUCTS LTD.

NOTES TO ANNUAL CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13--SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
On September 30, 1996, the Company's Board of Directors authorized the
termination of the Share Purchase Rights Plan as discussed further in Note 8 to
the Notes to Annual Consolidated Financial Statements.

NOTE 14--INTERIM FINANCIAL INFORMATION (UNAUDITED)

Summarized quarterly financial data for 1994 and 1995 is presented below (in
thousands, except for per share data):

1ST QUARTER 2ND QUARTER
-------------------- --------------------

1994 1995 1994 1995
--------- --------- --------- ---------
Net sales......................................... $ 82,803 $ 80,664 $ 95,238 $ 84,262
Gross profit...................................... 12,844 11,968 13,603 11,553
Net income (loss)................................. (345) (510) (10,724) (729)
Earnings (loss) per share......................... $ (.40) $ (.06) $ (1.26) $ (.08)

3RD QUARTER 4TH QUARTER
-------------------- --------------------

1994 1995 1994 1995
--------- --------- --------- ---------
Net sales......................................... $ 95,139 $ 90,723 $ 85,177 $ 82,377
Gross profit...................................... 14,030 12,445 11,921 11,497
Net income (loss)................................. 1,448 111 220 (1,500)
Earnings (loss) per share......................... $ .17 $ .01 $ .03 $ (.17)

The building products industry is seasonal, causing the Company's lowest
sales to occur during the first and fourth quarters.

F-18

MORGAN PRODUCTS LTD.

CONSOLIDATED INCOME STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

FOR THE THREE MONTHS
FOR THE SIX MONTHS ENDED ENDED
------------------------ ------------------------
JULY 1, JUNE 29, JULY 1, JUNE 29,
1995 1996 1995 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------

Net sales................................................... $ 164,926 $ 169,744 $ 84,262 $ 95,208
Cost of goods sold.......................................... 141,405 144,867 72,709 80,829
----------- ----------- ----------- -----------
Gross profit.............................................. 23,521 24,877 11,553 14,379
----------- ----------- ----------- -----------
Operating expenses:
Sales & marketing......................................... 17,927 16,641 8,909 8,553
General & administrative.................................. 5,158 6,071 2,434 3,634
Provision for restructuring............................... 9 881 0 881
----------- ----------- ----------- -----------
Total................................................... 23,094 23,593 11,343 13,068
----------- ----------- ----------- -----------
Operating income (loss)..................................... 427 1,284 210 1,311
----------- ----------- ----------- -----------
Other income (expense):
Interest.................................................. (1,866) (1,369) (984) (776)
Other..................................................... 260 137 75 57
----------- ----------- ----------- -----------
Total................................................... (1,606) (1,232) (909) (719)
----------- ----------- ----------- -----------
Income (loss) before income taxes........................... (1,179) 52 (699) 592
Provision for income taxes.................................. 60 49 30 30
----------- ----------- ----------- -----------
Net income (loss)........................................... $ (1,239) $ 3 $ (729) $ 562
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income (loss) per share..................................... $ (0.14) $ 0.00 $ (0.08) $ 0.06
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of common and common equivalent
shares outstanding........................................ 8,642 8,684 8,642 8,697
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

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

F-19

MORGAN PRODUCTS LTD.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING)

DECEMBER 31, JULY 1, JUNE 29,
1995 1995 1996
------------ ----------- -----------

(UNAUDITED) (UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalent.............................................. $ 5,135 $ 2,489 $ 2,105
Accounts receivable, net.............................................. 20,801 32,741 32,906
Inventories........................................................... 53,422 55,859 52,924
Other current assets.................................................. 422 1,214 804
------------ ----------- -----------
Total current assets.............................................. 79,780 92,303 88,739
------------ ----------- -----------
OTHER ASSETS............................................................ 6,235 6,178 4,211
PROPERTY, PLANT & EQUIPMENT, NET........................................ 23,500 22,037 19,490
------------ ----------- -----------
TOTAL ASSETS............................................................ $ 109,515 $ 120,518 $ 112,440
------------ ----------- -----------
------------ ----------- -----------

LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt....................................................... $ 0 $ 0 $ 221
Current maturities of long-term debt.................................. 954 1,002 928
Accounts payable...................................................... 11,121 14,629 16,060
Accrued compensation and employee benefits............................ 5,625 6,535 6,231
Income tax payable.................................................... 111 147 123
Other current liabilities............................................. 3,295 2,671 3,857
------------ ----------- -----------
Total current liabilities......................................... 21,106 24,984 27,420
------------ ----------- -----------
LONG-TERM DEBT.......................................................... 35,574 41,456 32,057
------------ ----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value, 8,647,483, 8,642,788 and 8,648,822
shares outstanding, respectively.................................... 865 864 865
Paid-in capital....................................................... 33,771 33,743 33,779
Retained earnings..................................................... 18,629 20,017 18,632
------------ ----------- -----------
53,265 54,624 53,276
Treasury stock, 2,386 shares, at cost................................... (48) (48) (48)
Unearned compensation--restricted stock................................. (382) (498) (265)
------------ ----------- -----------
Total stockholders' equity........................................ 52,835 54,078 52,963
------------ ----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY.......................... $ 109,515 $ 120,518 $ 112,440
------------ ----------- -----------
------------ ----------- -----------

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

F-20

MORGAN PRODUCTS LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

FOR THE SIX MONTHS ENDED
------------------------

JULY 1, JUNE 29,
1995 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
CASH GENERATED (USED) BY OPERATING ACTIVITIES:
Net income (loss).................................................................... $ (1,239) $ 3
Add (deduct) noncash items included in income:
Depreciation and amortization.................................................... 1,967 1,842
Provision for doubtful accounts.................................................. 0 57
(Gain) loss on sale of property, plant, & equipment.............................. (50) (17)
Provision for restructuring...................................................... 9 881
Other............................................................................ (142) 117
Cash generated (used) by changes in components of working capital:
Accounts receivable.............................................................. (8,380) (12,162)
Inventories...................................................................... (902) 431
Accounts payable................................................................. 3,119 4,939
Other working capital............................................................ (3,739) 869
----------- -----------
NET CASH GENERATED (USED) BY OPERATING ACTIVITIES...................................... (9,357) (3,040)
----------- -----------
CASH GENERATED (USED) BY INVESTING ACTIVITIES:
Acquisition of property, plant, & equipment.......................................... (2,117) (1,518)
Proceeds from disposal of property, plant, & equipment............................... 43 4,127
Proceeds from surrender of life insurance policies................................... 0 925
Acquisition of other assets, net..................................................... (291) (210)
----------- -----------
NET CASH GENERATED (USED) BY INVESTING ACTIVITIES...................................... (2,365) 3,324
----------- -----------
CASH GENERATED (USED) BY FINANCING ACTIVITIES:
Proceeds from issuance of debt....................................................... 26 496
Increase in revolving credit debt, net............................................... 8,330 (3,223)
Payments on debt..................................................................... (318) (565)
Common stock issued for cash......................................................... 10 8
Other................................................................................ (32) (30)
----------- -----------
NET CASH GENERATED (USED) BY FINANCING ACTIVITIES...................................... 8,016 (3,314)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS.............................................. (3,706) (3,030)
Beginning of period.................................................................. 6,195 5,135
----------- -----------
End of period........................................................................ $ 2,489 $ 2,105
----------- -----------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest......................................................................... $ 1,428 $ 1,702
Income taxes..................................................................... 116 37

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

F-21

MORGAN PRODUCTS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 29, 1996

(UNAUDITED)

NOTE 1--BASIS OF PRESENTATION

The financial statements at June 29, 1996 and July 1, 1996, and for the
three and six months then ended, are unaudited; however, in the opinion of
management, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the financial position at these dates and
the results of operations and cash flows for these periods have been included.
The results for the three and six months ended June 29, 1996 are not necessarily
indicative of the results that may be expected for the full year or any other
interim period.

NOTE 2--INVENTORIES

Inventories consisted of the following at (in thousands of dollars):

JULY 1, JUNE 29,
DECEMBER 31, 1995 1996
1995 (UNAUDITED) (UNAUDITED)
------------ ----------- -----------

Raw material........................................ $ 9,120 $ 9,409 $ 8,756
Work-in-process..................................... 6,536 7,234 7,222
Finished goods...................................... 37,766 39,216 36,946
------------ ----------- -----------
Total inventories................................. $ 53,422 $ 55,859 $ 52,924
------------ ----------- -----------
------------ ----------- -----------

Inventories are valued at the lower of cost or market. Cost is determined on
the first-in, first-out (FIFO) method.

NOTE 3--PROVISION FOR RESTRUCTURING

An $11.3 million restructuring charge was incurred in the second quarter of
1994. The original restructuring charge covered the cost of closing the
Springfield, Oregon plant, the Weed, California veneer operation and other cost
reductions and consolidations within Morgan. During the third and fourth
quarters of 1994, the Company reviewed the charges reserved for in the
restructuring and determined that certain estimated costs would not be as high
as originally anticipated. At that time, certain other cost reduction and
restructuring actions were approved and provided for, which offset the lower
expenses. The additional expenses related to the restructuring of the Morgan
Distribution operations and costs associated with the relocation of the
Corporate headquarters. At the end of 1994, $4.9 million of the original $11.3
million had been used and the closing of the two plants was substantially
complete. The remaining reserve at the end of 1994 related primarily to other
cost reductions and consolidation to be taken within the Company, and the
Corporate headquarters relocation.

F-22

MORGAN PRODUCTS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 29, 1996 (CONTINUED)

(UNAUDITED)

NOTE 3--PROVISION FOR RESTRUCTURING (CONTINUED)
plan was implemented during the first quarter of 1995. A new organizational
structure was announced that eliminated several management positions. The costs
of severance and certain other cost reductions were provided for during the
first quarter which more than offset the lower than originally anticipated
expenses of the 1994 restructuring. No charges were made for change in physical
facilities since no actions were implemented in 1995 with respect to these
facilities.

The Company completed the relocation of the Corporate headquarters from
Lincolnshire, Illinois to Williamsburg, Virginia during the third quarter of
1995. Most, but not all, of the expenses relating to the relocation were charged
against the restructuring reserve in that period.

During the fourth quarter, no significant activity occurred in the reserve.
At December 31, 1995, a $3.8 million reserve balance remained.

During the first quarter of 1996, restructuring expenses charged against the
restructuring reserve totaled $279,000, substantially all of which were employee
benefits resulting from severances.

In the second quarter of 1996, the Company sold its Lexington, North
Carolina door manufacturing facility for $4.1 million. The entire product line
of doors previously manufactured in Lexington will be shifted to the Company's
Oshkosh, Wisconsin door manufacturing facility during the third and fourth
quarters of 1996. The Company recorded an additional restructuring charge in the
second quarter of $356,000 related to the sale of the Lexington facility. It is
expected that the Company will incur additional aggregate restructuring expenses
of approximately $1.6 million in the third and fourth quarters of 1996 related
to the sale.

Also in the second quarter, a $470,000 reserve was recorded for incremental
costs related to the 1994 plant closings in Springfield, Oregon and Weed,
California and the 1995 reorganization of the Manufacturing Division Office in
Oshkosh, Wisconsin (due to changes in cost estimates). At June 29, 1996, the
reserve balance was $3.8 million.

NOTE 4--CREDIT AGREEMENT

The Company maintains a credit agreement with a group of banks which
provides for a revolving credit facility of up to $65.0 million through July 13,
1998, and includes a letter of credit facility of up to $9.0 million through
July 13, 1998. During the second quarter, the Company and the lender signed an
amendment extending the existing agreement. The amendment became effective June
30, 1996 and has terms similar to or more favorable to the Company than those
previously in effect. At June 29, 1996 the Company had borrowings of $25.0
million under the revolving credit facility. The credit agreement requires the
Company, among other things, to maintain minimum tangible net worth, leverage
and interest coverage ratios.

NOTE 5--SUBSEQUENT EVENTS

On August 30, 1996, the Company acquired certain assets and assumed certain
liabilities of TBP for $15.3 million, subject to certain purchase price
adjustments. The TBP Acquisition, which was financed through borrowings on the
Company's revolving credit agreement, will be accounted for as a purchase. TBP,
which had annual sales of approximately $46.8 million for the year ended
December 31, 1995, is a

F-23

MORGAN PRODUCTS LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 29, 1996 (CONTINUED)

(UNAUDITED)

NOTE 5--SUBSEQUENT EVENTS (CONTINUED)
distributor of windows, doors, kitchen cabinets, and other millwork and glass
products, to residential builders and other customers. TBP is headquartered in
Nashville, Tennessee, with facilities in Charlotte, North Carolina; Chattanooga,
Tennessee; Greenville, South Carolina; and Huntsville, Alabama.

On September 11, 1996, the Company's Board of Directors authorized a public
stock offering of 1,500,000 Shares of its Common Stock (plus 510,000 Shares to
cover the Underwriter's over-allotment), which is expected to generate proceeds
of approximately $10.2 million, net of expenses (assuming that the Underwriter's
over-allotment is not exercised). All of the proceeds from the sale will be used
to repay borrowings under the Company's revolving credit agreement. It is
expected that the public offering will be completed in the fourth quarter of
1996.

On September 30, 1996, the Company's Board of Directors authorized the
termination of the Share Purchase Rights Plan.

F-24

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Tennessee Building Products, Inc.
Nashville, Tennessee

We have audited the accompanying consolidated balance sheets of Tennessee
Building Products, Inc. and Subsidiary as of December 31, 1995 and 1994, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Tennessee
Building Products, Inc. and Subsidiary as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

As discussed in Note 14 to the financial statements, on July 28, 1996, the
Companies entered into an agreement to sell substantially all of their assets
and operations.

/s/ KRAFT BROS., ESSTMAN, PATTON & HARRELL,
PLLC

Nashville, Tennessee
February 16, 1996
(except for Note 14
which is dated
August 30, 1996.)

F-25

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------- ----------------------------

1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------

(UNAUDITED)

Sales--Net........................... $ 41,893,893 $ 47,527,285 $ 46,822,159 $ 22,681,907 $ 24,386,783

Cost of goods sold................... 31,695,827 36,051,409 35,012,962 17,203,225 18,059,877
------------- ------------- ------------- ------------- -------------

Gross profit......................... 10,198,066 11,475,876 11,809,197 5,478,682 6,326,906
------------- ------------- ------------- ------------- -------------

Operating expenses
Warehouse and distribution......... 3,028,990 3,373,987 3,479,527 1,736,821 1,889,583
Selling............................ 2,832,170 3,066,661 3,259,047 1,556,536 1,823,763
General and administrative......... 2,346,406 2,339,469 2,505,132 1,202,293 1,235,176
Management fees--Note 9............ 1,386,410 1,470,854 1,719,061 773,347 1,126,571
------------- ------------- ------------- ------------- -------------

Total operating expenses....... 9,593,976 10,250,971 10,962,767 5,268,997 6,075,093
------------- ------------- ------------- ------------- -------------

Operating income..................... 604,090 1,224,905 846,430 209,685 251,813
------------- ------------- ------------- ------------- -------------

Other income and (expense)
Interest expense................... (164,647) (168,114) (73,268) (61,422) (26,718)
Miscellaneous--net--Note 7......... 205,008 110,442 159,340 95,769 120,139
------------- ------------- ------------- ------------- -------------
40,361 (57,672) 86,072 34,347 93,421
------------- ------------- ------------- ------------- -------------

Income before provision for income
taxes.............................. 644,451 1,167,233 932,502 244,032 345,234
------------- ------------- ------------- ------------- -------------

Provision for income taxes
(Benefit)--Note 4
Current............................ 270,987 458,379 358,461 117,169 176,360
Deferred........................... 2,000 (32,808) (42,112) (41,923) (31,395)
------------- ------------- ------------- ------------- -------------
272,987 425,571 316,349 75,246 144,965
------------- ------------- ------------- ------------- -------------

Income before minority interest...... 371,464 741,662 616,153 168,786 200,269

Minority interest in earnings of
subsidiary......................... 81,985 156,901 128,877 41,791 83,526
------------- ------------- ------------- ------------- -------------

Net income........................... $ 289,479 $ 584,761 $ 487,276 $ 126,995 $ 116,743
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------

See accompanying notes to consolidated financial statements.

F-26

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING)

DECEMBER 31,
---------------------------- JUNE 30,
1994 1995 1996
------------- ------------- -------------
(UNAUDITED)
-------------

ASSETS
CURRENT ASSETS
Cash and cash equivalents--Note 13................................ $ 313,627 $ 827,023 $ 152,627
Accounts receivable--trade, less allowance for doubtful accounts:
1995--$664,408; 1994--$614,608--Notes 5 and 13.................. 5,539,676 6,021,346 6,640,255
Federal and state income taxes receivable......................... -- 114,585 7,395
Inventories--Notes 2 and 5........................................ 6,526,039 5,912,959 6,442,642
Prepaid expenses and other........................................ 173,351 115,225 246,401
------------- ------------- -------------
TOTAL CURRENT ASSETS.......................................... 12,552,693 12,991,138 13,489,320
PROPERTY AND EQUIPMENT--at cost, less accumulated
depreciation--Notes 3 and 5....................................... 1,268,846 1,271,082 1,361,315
OTHER ASSETS
Deferred income taxes--Note 4..................................... 43,988 86,100 117,495
Cash surrender value of officer's life insurance.................. 21,155 49,833 49,833
------------- ------------- -------------
$ 13,886,682 $ 14,398,153 $ 15,017,963
------------- ------------- -------------
------------- ------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable--trade........................................... $ 1,650,191 $ 2,380,082 $ 2,601,462
Accrued taxes and expenses--Note 12............................... 1,423,414 1,349,798 1,062,557
Federal and state income taxes payable............................ 226,906 4,553 -
Accrued management fees--Note 9................................... 1,207,435 1,352,932 846,571
Note payable--revolving credit line obligation.................... -- -- 984,639
Current portion of long-term debt--Note 5......................... 101,354 81,139 81,139
------------- ------------- -------------
TOTAL CURRENT LIABILITIES..................................... 4,609,300 5,168,504 5,576,368
------------- ------------- -------------
LONG-TERM DEBT, less current portion--Note 5........................ 860,848 88,002 45,199
------------- ------------- -------------
SALARY CONTINUATION PLAN OBLIGATION--Note 11........................ 27,238 136,198 190,678
------------- ------------- -------------
MINORITY INTEREST................................................... 580,131 709,008 792,534
------------- ------------- -------------
COMMITMENTS AND CONTINGENCIES--Notes 6, 10, 11 and 13
STOCKHOLDERS' EQUITY
Common stock--$1 par value, authorized 100,000 shares; issued and
outstanding 22,500 shares....................................... 22,500 22,500 22,500
Additional paid-in capital........................................ 3,671,393 3,671,393 3,671,393
Retained earnings................................................. 4,115,272 4,602,548 4,719,291
------------- ------------- -------------
7,809,165 8,296,441 8,413,184
------------- ------------- -------------
$ 13,886,682 $ 14,398,153 $ 15,017,963
------------- ------------- -------------
------------- ------------- -------------

See accompanying notes to consolidated financial statements.

F-27

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
---------------------------------------- ------------------------

1993 1994 1995 1995 1996
------------ ------------ ------------ ---------- ------------
OPERATING ACTIVITIES
Net income for the period............................ $ 289,479 $ 584,761 $ 487,276 $ 126,995 $ 116,743
------------ ------------ ------------ ---------- ------------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation......................................... 288,713 325,229 308,163 171,053 189,048
Deferred income taxes................................ 2,000 (32,808) (42,112) (41,923) (31,395)
Minority interest in earnings of subsidiary.......... 81,985 156,901 128,877 41,791 83,526
(Gain) loss on dispositions of property and
equipment.......................................... (20,050) 18,420 1,698 1,098 (4,850)
(Increase) decrease in:
Accounts receivable--trade......................... 1,386,410 (558,246) (481,670) 141,801 (618,909)
Federal and state income taxes receivable.......... (421,311) -- (114,585) (110,842) 107,190
Inventories........................................ (5,881) (593,589) 613,080 898,322 (529,683)
Prepaid expenses and other......................... 252,722 41,526 58,126 (5,096) (131,176)
Increase (decrease) in:
Account payable--trade............................. (56,125) (48,158) 729,891 143,877 221,380
Accrued taxes and expenses......................... 414,299 94,572 (73,616) (365,533) (287,241)
Federal and state income taxes payable............. 32,027 164,874 (222,353) (226,906) (4,553)
Accrued management fees............................ -- 1,207,435 145,497 (720,216) (506,361)
Salary continuation plan obligation................ -- 27,238 108,960 54,480 54,480
------------ ------------ ------------ ---------- ------------
TOTAL ADJUSTMENTS.................................... 1,954,789 803,394 1,159,956 (18,094) (1,458,544)
------------ ------------ ------------ ---------- ------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES......................................... 2,244,268 1,388,155 1,647,232 108,901 (1,341,801)
------------ ------------ ------------ ---------- ------------
INVESTING ACTIVITIES
Acquisition of property and equipment................ (415,872) (682,723) (317,897) (77,557) (281,014)
Proceeds from disposition of property and
equipment.......................................... 17,600 6,805 5,800 6,399 6,583
Increase in cash surrender value of officer's life
insurance.......................................... -- (21,155) (28,678) -- --
------------ ------------ ------------ ---------- ------------
NET CASH USED IN INVESTING ACTIVITIES................ (398,272) (697,073) (340,775) (71,158) (274,431)
------------ ------------ ------------ ---------- ------------
FINANCING ACTIVITIES
Increase in (reduction of) notes payable............. (1,978,841) (554,571) (793,061) 228,581 941,836
------------ ------------ ------------ ---------- ------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES......................................... (1,978,841) (554,571) (793,061) 228,581 941,836
------------ ------------ ------------ ---------- ------------
NET INCREASE (DECREASE) IN CASH FOR THE PERIOD....... (132,845) 136,511 513,396 266,324 (674,396)
CASH AND CASH EQUIVALENTS-- BEGINNING OF PERIOD...... 309,961 177,116 313,627 313,627 827,023
------------ ------------ ------------ ---------- ------------
CASH AND CASH EQUIVALENTS--END OF PERIOD............. $ 177,116 $ 313,627 $ 827,023 $ 579,951 $ 152,627
------------ ------------ ------------ ---------- ------------
------------ ------------ ------------ ---------- ------------

See accompanying notes to consolidated financial statements.

F-28

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARES OUTSTANDING)

COMMON STOCK ADDITIONAL
-------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- --------- ------------ ------------ ------------

BALANCE--JANUARY 1, 1993......................... $ 22,500 $ 22,500 $ 2,841,147 $ 3,241,032 $ 6,104,679
Net income for the year.......................... -- -- -- 289,479 289,479
Capital contribution from stockholders-- Note
9.............................................. -- -- 830,246 -- 830,246
--------- --------- ------------ ------------ ------------
BALANCE--DECEMBER 31, 1993....................... 22,500 22,500 3,671,393 3,530,511 7,224,404
Net income for the year.......................... -- -- -- 584,761 584,761
--------- --------- ------------ ------------ ------------
BALANCE--DECEMBER 31, 1994....................... 22,500 22,500 3,671,393 4,115,272 7,809,165
Net income for the year.......................... -- -- -- 487,276 487,276
--------- --------- ------------ ------------ ------------
BALANCE--DECEMBER 31, 1995....................... 22,500 22,500 3,671,393 4,602,548 8,296,441
Net income for the six months (Unaudited)........ -- -- -- 116,743 116,743
--------- --------- ------------ ------------ ------------
BALANCE--JUNE 30, 1996 (Unaudited)............... $ 22,500 $ 22,500 $ 3,671,393 $ 4,719,291 $ 8,413,184
--------- --------- ------------ ------------ ------------
--------- --------- ------------ ------------ ------------

See accompanying notes to consolidated financial statements.

F-29

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION FOR JUNE 30, 1995 AND 1996 IS NOT PRESENTED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
Tennessee Building Products, Inc., Nashville, Tennessee ("Parent"), and its
78.96%-owned subsidiary, Titan Building Products, Inc., Charlotte, North
Carolina ("Subsidiary"). Material intercompany accounts and transactions have
been eliminated in consolidation.

The Companies are suppliers of building products, with warehouse and
showroom locations in Nashville and Chattanooga, Tennessee, Charlotte, North
Carolina, and Greenville, South Carolina, as well as a showroom only in
Huntsville, Alabama. The Company also has a division that specializes in glass
products located in Nashville, Tennessee.

CASH AND CASH EQUIVALENTS

For purposes of the statements of cash flows, all highly liquid debt
instruments with a maturity date at purchase of three months or less are
considered cash equivalents. There were no cash equivalents as of December 31,
1995 or 1994.

INVENTORIES

Inventories are reported at lower of cost or market, with cost determined by
the last-in, first-out (LIFO) method for the majority of inventories, and the
first-in, first-out (FIFO) method for the balance.

PROPERTIES AND DEPRECIATION

Properties are reported at cost and include improvements that significantly
add to utility or extend useful lives. Costs of maintenance and repairs are
charged to expense. When depreciable assets are disposed of, the cost and
related accumulated depreciation are removed from the accounts, and any gain
(except on trade-ins) or loss is included in earnings for the period. Gains on
trade-ins are applied to reduce the cost of the new acquisition. Depreciation
and amortization are calculated principally by the straight-line method to
allocate the cost of depreciable assets over their estimated useful lives.

INCOME TAXES

The Parent Company is classified as an S corporation under the Internal
Revenue Code. For federal income tax purposes, earnings of the Parent Company
are taxable to the stockholders individually, and the Parent does not incur
federal income tax obligations. Such status has no effect on the Company's state
income tax obligation.

The Subsidiary is classified as a C corporation for federal income tax
purposes.

Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities. Such differences will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.

F-30

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR JUNE 30, 1995 AND 1996 IS NOT PRESENTED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Substantially all consolidated retained earnings at December 31, 1995, 1994
and 1993, result from either accumulations of the Parent prior to the date the S
election became effective, or accumulations attributable to the Subsidiary.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 107, "DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS." SFAS 107 requires companies to disclose the fair value of their
financial instruments, whether or not recognized in the consolidated balance
sheet, where it is practical to estimate that value. In management's opinion,
the carrying amount of all financial instruments approximates market value.

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

CASH

The carrying amount approximates fair value.

LONG-TERM DEBT

The carrying amounts of the Company's borrowings under its bank
line-of-credit and acquisition loans with variable interest rates
approximate their fair value.

SALARY CONTINUATION PLAN OBLIGATION

The carrying amount of the Company's salary continuation plan
obligation, which is discounted to present value based on current rates,
is considered to approximate its fair value.

RECLASSIFICATION

Certain items on the income statements have been reclassified from the
previously issued audited financial statements, with no effect to net income, to
comply with reporting requirements under Regulation S-X of the Securities and
Exchange Commission.

UNAUDITED INTERIM STATEMENTS

The interim financial information included herein is unaudited; however, the
information reflects all adjustments (consisting solely of normal recurring
adjustments) that are, in the opinion of management, necessary to a fair
presentation of the financial position, results of operations and cash flows for
the interim periods.

F-31

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR JUNE 30, 1995 AND 1996 IS NOT PRESENTED)

NOTE 2--INVENTORIES

A summary of ending inventories included in the determination of cost of
goods sold for the years ended December 31, 1993, 1994 and 1995, follows:

1992 1993 1994 1995
------------ ------------ ------------ ------------

Inventories stated at LIFO:
At lower of cost (first-in, first-out method) or
market............................................... $ 6,729,998 $ 7,255,648 $ 7,779,764 $ 6,885,542
Adjustment to LIFO..................................... (1,111,927) (1,618,906) (1,744,301) (1,441,121)
------------ ------------ ------------ ------------
5,618,071 5,636,742 6,035,463 5,444,421
Inventories stated at lower of cost
(FIFO) or market....................................... 308,498 295,708 490,576 468,538
------------ ------------ ------------ ------------
$ 5,926,569 $ 5,932,450 $ 6,526,039 $ 5,912,959
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

NOTE 3--PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following as of December 31:

1994 1995
------------ ------------

Automobiles and trucks............................................ $ 1,049,852 $ 1,164,554
Warehouse machinery and equipment................................. 1,085,423 1,080,749
Office machinery and equipment.................................... 559,944 619,149
Leasehold improvements............................................ 430,742 618,720
Construction in progress.......................................... 212,623 42,426
------------ ------------
3,338,584 3,525,598
Less accumulated depreciation..................................... 2,069,738 2,254,516
------------ ------------
$ 1,268,846 $ 1,271,082
------------ ------------
------------ ------------

Depreciation expense totals $288,713, $325,229 and $308,163 in 1993, 1994
and 1995, respectively. The general range of useful lives is 3 to 30 years for
leasehold improvements and 3 to 10 years for all other depreciable assets. Fully
depreciated assets amount to approximately $1,532,600 as of December 31, 1995.

F-32

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR JUNE 30, 1995 AND 1996 IS NOT PRESENTED)

NOTE 4--INCOME TAXES

A schedule of the provision for income taxes, substantially all of which is
attributable to pre-tax earnings of the Subsidiary, follows:

1993 1994 1995
---------- ---------- ----------

Federal:
Current................................................ $ 213,548 $ 391,595 $ 288,846
Deferred............................................... 853 (8,345) (17,652)
---------- ---------- ----------
214,401 383,250 271,194
---------- ---------- ----------
State:
Current................................................ 57,439 66,784 69,615
Deferred............................................... 1,147 (24,463) (24,460)
---------- ---------- ----------
58,586 42,321 45,155
---------- ---------- ----------
Provision for income taxes............................... $ 272,987 $ 425,571 $ 316,349
---------- ---------- ----------
---------- ---------- ----------
Total income taxes paid.................................. $ 239,913 $ 328,362 $ 695,399
---------- ---------- ----------
---------- ---------- ----------

The net deferred tax asset included in other assets in the accompanying
balance sheets consists of the following amounts of deferred tax assets and
liabilities as of December 31:

1994 1995
--------- ----------

Deferred tax asset..................................................... $ 70,656 $ 121,327
Deferred tax liability................................................. (26,668) (35,227)
--------- ----------
Net deferred tax asset................................................. $ 43,988 $ 86,100
--------- ----------
--------- ----------

The deferred tax effects of principal temporary differences as of December
31, 1994 and 1995, are shown in the following table:

1994 1995
---------- ----------

Property and equipment................................................ ($ 25,161) ($ 34,535)
Allowance for doubtful accounts....................................... 63,653 75,863
Inventory capitalization.............................................. 3,861 36,600
Salary continuation plan obligation................................... 1,635 8,172
---------- ----------
$ 43,988 $ 86,100
---------- ----------
---------- ----------

F-33

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR JUNE 30, 1995 AND 1996 IS NOT PRESENTED)

NOTE 4--INCOME TAXES (CONTINUED)
The following is a reconciliation of the actual provision for income taxes
with the provision computed at the federal statutory rate (34%):

1993 1994 1995
---------- ---------- ----------

Provision computed at statutory rate..................... $ 219,113 $ 396,859 $ 317,051
Effect of accounting losses of Parent Company
(S Corporation) for which there is no current tax
benefit................................................ 5,493 8,692 5,422
Tax effect of state income taxes......................... 34,199 27,932 29,802
State income tax refund.................................. -- (29,975) --
Other.................................................... 14,182 22,063 (35,926)
---------- ---------- ----------
Provision for income taxes............................... $ 272,987 $ 425,571 $ 316,349
---------- ---------- ----------
---------- ---------- ----------

NOTE 5--LONG-TERM DEBT

Long-term debt consists of the following as of December 31:

1994 1995
---------------------- ---------------------
TOTAL CURRENT TOTAL CURRENT
BALANCE PORTION BALANCE PORTION
---------- ---------- ---------- ---------

Revolving credit line obligations--
SunTrust Bank (1)........................... $ 686,156 $ -- $ -- $ --
Revolving credit line obligation--
NationsBank (2)............................. 276,046 101,354 169,141 81,139
---------- ---------- ---------- ---------
$ 962,202 $ 101,354 $ 169,141 $ 81,139
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------

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

(1) The Company is a party to a certain Loan Agreement (the "Agreement") with
SunTrust Bank (formerly Third National Bank) in Nashville, Tennessee (the
"Bank"), which provides for a maximum $2,000,000 Line of Credit and
$3,000,000 Revolving Credit. The loans were scheduled to mature September,
1995. Subsequent to year end, the Agreement was extended to mature in
September, 1996. Borrowings against these lines, which had a zero balance at
December 31, 1995, are evidenced by notes which bear interest, payable
monthly, at the Bank's "base rate". The notes are collateralized by a
security interest in all accounts receivable and inventories.

In addition to various other terms and conditions, the Agreement requires the
Company to maintain certain minimum balances and ratios pertaining
principally to net worth and debt. The Company is also required to maintain
a zero outstanding balance under the $2,000,000 Line of Credit Note for at
least 30 consecutive days each year.

Combined borrowings under the agreements ranged up to a maximum of $1,972,000
in 1995 ($3,544,000 in 1994) and averaged $668,000 ($2,169,434 in 1994), at
an average effective interest rate of 8.07% (6.73% in 1994).

F-34

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR JUNE 30, 1995 AND 1996 IS NOT PRESENTED)

NOTE 5--LONG-TERM DEBT (CONTINUED)
(2) The Company has an additional line of credit, based on an agreement entered
into in October, 1989, with NationsBank. Borrowings under the agreement are
evidenced by notes maturing January 1, 2000, April 1, 2001, November 1, 1997
and June 1, 1998. The notes require monthly interest payments computed at an
annual rate of 1/4 of 1% below the Bank's published prime rate, and are
collateralized by a security interest in certain machinery, equipment and
vehicles. The maximum amount outstanding under the line may not exceed the
aggregate net book value of such collateral. Accordingly, the current
portion of the obligation as of December 31, 1995, is reflected in the
amount of the projected decrease in net book value of the assets pledged.
Borrowings under the line, which had a balance of $169,141 at December 31,
1995, ranged up to a maximum of $276,046 ($364,213 in 1994), and averaged
$274,663 in 1995 ($336,417 in 1994), at an average effective interest rate
of 9.01% in 1995 (7.08% in 1994). In addition to other conditions, the
agreement requires the Company to maintain a certain minimum debt to
tangible net worth ratio (as defined), and prohibits the Company from
incurring a net operating loss for four consecutive quarters. The obligation
is secured by equipment with a net book value of $185,000 as of December 31,
1995.

Aggregate annual principal maturities of all long-term debt are as follows:
1996--$81,139; 1997-- $54,180; 1998--$21,627; and 1999 -$12,195.

Total interest paid on all indebtedness amounted to: 1994 - $168,114;
1995--$73,268.

NOTE 6--OPERATING LEASES

The Company is lessee under various cancelable and noncancelable operating
leases. Following is a summary of rental expense incurred under all operating
leases by major class:

1993 1994 1995
------------------------------- ------------------------------- --------------------
RELATED RELATED RELATED
PARTIES OUTSIDERS TOTAL PARTIES OUTSIDERS TOTAL PARTIES OUTSIDERS
--------- --------- --------- --------- --------- --------- --------- ---------

Real property....................... $ 444,189 $ 273,856 $ 718,045 $ 444,189 $ 309,450 $ 753,639 $ 493,765 $ 373,068
Equipment........................... -- 48,637 48,637 -- 59,889 59,889 -- 57,268
Vehicles............................ -- 158,544 158,544 -- 164,869 164,869 -- 144,727
--------- --------- --------- --------- --------- --------- --------- ---------
Total............................. $ 444,189 $ 481,037 $ 925,226 $ 444,189 $ 534,208 $ 978,397 $ 493,765 $ 575,063
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------

TOTAL
-----------

Real property....................... $ 866,833
Equipment........................... 57,268
Vehicles............................ 144,727
-----------
Total............................. $ 1,068,828
-----------
-----------

The rental expense for real property paid to related parties has not been
reduced by sublease rentals received on a portion of the Chattanooga warehouse
in the amount of $1,800, $43,380 and $51,213 in 1993, 1994 and 1995,
respectively. The sublease agreement expires in November, 1996.

The lease on the Nashville, Tennessee warehouse and office facility runs
through December 31, 2002. The lease on the Charlotte, North Carolina warehouse
and office facility has been renewed through February 28, 2000. During 1993,
1994 and 1995, applicable lease provisions under the North Carolina facility
lease were amended for additional square footage added to the leased premises at
similar rental rates. The leases require monthly rental payments plus payment of
all property taxes and insurance.

The Company also leases certain vehicles under short-term arrangements and
various items of warehouse equipment.

F-35

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR JUNE 30, 1995 AND 1996 IS NOT PRESENTED)

NOTE 6--OPERATING LEASES (CONTINUED)
Real property leases, some of which are with a related partnership whose
partners are the principal officers and stockholders of the Company, also
require payment of related repairs, utilities, property taxes and insurance. A
schedule of minimum future rentals required under all noncancelable operating
leases, including the renewal lease of the Charlotte, North Carolina facility
referred to above, follows:

RELATED
PARTIES OUTSIDERS TOTAL
------------ ------------ ------------

1996................................................ $ 510,996 $ 413,435 $ 924,431
1997................................................ 510,996 400,511 911,507
1998................................................ 510,996 383,309 894,305
1999................................................ 510,996 336,520 847,516
2000................................................ 510,996 53,619 564,615
Thereafter.......................................... 1,021,992 -- 1,021,992
------------ ------------ ------------
$ 3,576,972 $ 1,587,394 $ 5,164,366
------------ ------------ ------------
------------ ------------ ------------

NOTE 7--MISCELLANEOUS INCOME AND EXPENSE

Miscellaneous income and expense consisted of the following in 1993, 1994,
and 1995:

1993 1994 1995
---------- ---------- ----------

Rebates.................................................. $ 23,547 $ 12,361 $ 24,792
Service charges on accounts receivable................... 113,332 130,190 113,320
Rental income............................................ 6,501 48,630 55,746
Other--net............................................... 10,088 9,751 30,478
Gain (loss) on dispositions of property and equipment.... 20,050 (18,420) (1,698)
Collection expense....................................... (38,566) (43,022) (32,667)
Bank service charges..................................... (25,717) (29,048) (30,631)
Sales tax refunds........................................ 95,773 -- --
---------- ---------- ----------
Miscellaneous income--net................................ $ 205,008 $ 110,442 $ 159,340
---------- ---------- ----------
---------- ---------- ----------

NOTE 8--EMPLOYEE BENEFIT PLANS

The Company sponsors a 401(k) profit-sharing plan covering employees who are
at least 21 years old, and have at least one year of service with the Company.

The amount of annual employer contributions to the plan is discretionary, as
determined by the Board of Directors, up to the maximum deduction allowable for
federal income tax purposes. The Company contributed $75,000 to the plan for
1993, and $50,000 each year for 1994 and 1995.

NOTE 9--TRANSACTIONS WITH RELATED PARTIES

The Parent Company has a management agreement with F & S Management Company,
a Tennessee general partnership (the "Partnership"), whose owners are the two
principal officers and stockholders of

F-36

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR JUNE 30, 1995 AND 1996 IS NOT PRESENTED)

NOTE 9--TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
the Company. The agreement provides for the Company to pay the Partnership an
annual management fee based on a formula tied to the Parent's taxable income
before management fee.

Management fees paid or payable under the agreement amounted to $1,386,410,
$1,470,854 and $1,719,061 for 1993, 1994 and 1995, respectively, of which the
unpaid balances of $1,207,435 and $1,352,932 as of December 31, 1994 and 1995,
respectively, are reported under current liabilities.

Accrued management fees under the agreement for 1993 were paid on December
31, 1993, by issuance of a note payable to the Partnership, of which a portion
of the 1993 note was simultaneously distributed out of the Partnership to the
partners and contributed by them back to the Company as additional paid-in
capital.

NOTE 10--SELF-INSURANCE PROGRAM

The Company has a self-insured program for its employees' medical claims. A
portion of these costs are covered by employee payroll deductions. The Company's
maximum liability for any one year (less employee contributions) is $60,000 per
claim. The Company's total expense under the plan amounted to $497,859, $393,169
and $401,704 in 1993, 1994 and 1995, respectively.

NOTE 11--SALARY CONTINUATION PLAN

During 1994, the Company formalized a nonqualified salary continuation plan
for certain key officers. Plan benefits provided under the plan are contingent
on the continuous employment of the officer with the Company through retirement
and compliance with other terms specified in the agreement. The agreement
provides that monthly payments will be made to the officer or his beneficiary
for fifteen years beginning upon the earliest to occur of the officer's death or
retirement. The principal cost of the plan is being accrued on the straight-line
basis over the anticipated remaining period of active employment, based on the
present value of the expected retirement benefit. The recognized liability
relating to the plan amounted to $27,238 in 1994 and $136,198 in 1995. The
recognized expense relating to the plan amounted to $27,238 in 1994 and $108,960
in 1995.

NOTE 12--ACCRUED TAXES AND EXPENSES

Accrued taxes and expenses consist of the following as of December 31:

1994 1995
------------ ------------

Accrued payroll................................................... $ 581,103 $ 493,435
Accrued commissions............................................... 176,190 235,303
Sales tax collected and payable................................... 214,903 219,074
Accrued contribution to 401(k) plan............................... 50,000 50,000
Accrued taxes and licenses........................................ 158,497 147,117
Accrued group health insurance.................................... 165,000 159,911
Accrued professional fees......................................... 44,000 39,406
Other............................................................. 33,721 5,552
------------ ------------
$ 1,423,414 $ 1,349,798
------------ ------------
------------ ------------

F-37

TENNESSEE BUILDING PRODUCTS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION FOR JUNE 30, 1995 AND 1996 IS NOT PRESENTED)

NOTE 13--CONCENTRATIONS OF CREDIT RISK

The Company maintains cash and cash equivalent balances at a financial
institution in Tennessee. Accounts at the institution are insured by the Federal
Deposit Insurance Corporation up to $100,000. Uninsured balances per bank
amounted to approximately $749,000 at December 31, 1995.

The majority of the Company's sales are derived from customers within a
50-mile radius of Charlotte, North Carolina and a 100-mile radius of Nashville,
Tennessee. The Company extends trade credit to its customers which consist
principally of building contractors. Concentrations of credit risk with respect
to trade receivables are limited, since the risk is spread over a large number
of customers that make up the Company's customer base. The Company controls
credit risk through credit approvals, credit limits and monitoring procedures.
The Company performs in-depth credit evaluations for all new customers. Bad debt
expenses have not been material.

NOTE 14--SALE OF BUSINESS

On July 28, 1996, the Companies and their shareholders entered into an
agreement with Morgan Products Ltd. to sell substantially all of the assets,
less certain liabilities, and operations of the Companies for a selling price of
approximately $15,300,000. The closing date is to be determined upon performance
of certain items specified in the agreement, with good faith efforts of both
parties to accomplish closing by September 30, 1996.

F-38

PHOTOS & MAP

[INSIDE BACK COVER PAGE]

[MAP OF UNITED STATES, INDICATING COMPANY LOCATIONS; PICTURE OF CORPORATE
HEADQUARTERS; PICTURE OF SALES FLOOR DISPLAY]

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

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY OR THE SELLING SHAREHOLDER SINCE THE DATE HEREOF.
------------------------

TABLE OF CONTENTS

PAGE
---------

Prospectus Summary.............................. 3
The Company..................................... 8
Risk Factors.................................... 8
Use of Proceeds................................. 12
Common Stock Price Range and Dividend Policy.... 13
Capitalization.................................. 14
Selected Historical and Pro Forma Combined
Financial Information......................... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 23
The Millwork Industry........................... 29
Business........................................ 30
Management...................................... 39
Security Ownership of Certain Beneficial Owners
and Management................................ 47
Selling Shareholder............................. 49
Certain Transactions............................ 50
Description of Capital Stock.................... 50
Underwriting.................................... 51
Legal Matters................................... 52
Experts......................................... 52
Available Information........................... 52
Incorporation of Certain Information by
Reference..................................... 52
Index to Financial Statements................... F-1

3,400,000 SHARES

[LOGO]

MORGAN PRODUCTS LTD.
COMMON STOCK

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

PROSPECTUS

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

BLACK & COMPANY, INC.
, 1996

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

PART II:
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Set forth below is an estimate (except for the Commission registration fee
and the National Association of Securities Dealers, Inc. ("NASD") filing fee) of
the fees and expenses payable by the Company and the Selling Shareholder in
connection with the distribution of the Common Stock:

SELLING
COMPANY SHAREHOLDER TOTAL
------------ ----------- ------------

Securities and Exchange Commission registration fee................ $ 10,198 $ -- $ 10,198
NASD filing fee.................................................... $ 3,384 $ -- $ 3,384
NYSE listing fee................................................... * * *
Legal fees and expenses............................................ * * *
Accountants' fees and expenses..................................... * * *
Printing and engraving expenses.................................... * * *
Blue sky fees and expenses......................................... * * *
Transfer Agent and Registrar fees and expenses.....................
Miscellaneous...................................................... * * *
------------ ----------- ------------
Total...................................................... $ * $ * $ *
------------ ----------- ------------
------------ ----------- ------------

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

* To be completed by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law makes provision for the
indemnification of officers and directors in terms sufficiently broad to
indemnify officers and directors of the Company under certain circumstances from
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended. The Certificate of Incorporation and By-laws
of the Company, and agreements between the Company and its officers and
directors, provide for indemnification of the Company's officers and directors
against costs and expenses incurred in connection with any action or suit to
which such person is a party to the fullest extent permitted by the Delaware
General Corporation Law.

The Company also has in place directors and officers insurance, insuring the
directors and officers of the Company against certain liabilities they may incur
in the performance of their duties.

See item 17(a) of this Registration Statement regarding the position of the
Securities and Exchange Commission on indemnification for liabilities arising
under the Securities Act, of 1933, as amended.

ITEM 16. EXHIBITS.

(a) Exhibits:

EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------

*1 Form of Underwriting Agreement between Morgan and the Underwriter.
3.1 Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the
Company's Form 10-K for the Fiscal Year ended December 31, 1987 (Commission File No. 0-13911)).

II-1

EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------

3.2 By-laws of the Company, as amended (incorporated by reference to Exhibit 3.2 to the Company's Form
10-K for the Fiscal Year ended December 31, 1987 (Commission File No. 0-13911)).
4.1 Stockholders Agreement Restated among the Company, Saugatuck Capital Company Limited Partnership,
George T. Brophy and certain other stockholders of the Company, dated as of January 13, 1984, as
amended (incorporated by reference to Exhibits 4.12 and 4.13 to the Company's Registration
Statement (Registration No. 33-00344), Exhibit 4.16 to the Company's Quarterly Report for the
Quarter ended March 29, 1986 (Commission File No. 0-13911) and Exhibit 4.9 of the Company's Form
10-K for the Fiscal Year ended December 31, 1986 (Commission File No. 0-13911)).
4.2 Rights Agreement, dated as of March 15, 1989, between the Company and Manufacturers Hanover Trust
Company, as Rights Agent (incorporated by reference to Exhibit 1-2 to the Company's Form 8-A
Registration Statement (Commission File No. 1-9843)).
*5 Opinion of Winthrop, Stimson, Putnam & Roberts as to the legality of the Common Stock.
10.1 Loan and Security Agreement among the Company, certain banks, and Barclay's Business Credit, Inc.
as agent, dated as of July 14, 1994 (incorporated by reference to Exhibit 10.1 to the Company's
Form 10-K for the Fiscal Year ended December 31, 1994 (Commission File No. 1-9843)).
10.2 Trust Indenture, dated as of December 1, 1991, by and between the City of Oshkosh, Wisconsin and
Marine Bank of Springfield, as Trustee (incorporated by reference to Exhibit 10.11 to the
Company's Form 10-K for the Fiscal Year ended December 31, 1991 (Commission File No. 1-9843)).
10.3 Loan Agreement, dated as of December 1, 1991, by and between the City of Oshkosh, Wisconsin and
the Company (incorporated by reference to Exhibit 10.12 to the Company's Form 10-K for the
Fiscal Year ended December 31, 1991 (Commission File No. 1-9843)).
10.4 Mortgage and Security Agreement with Assignment of Rents, dated as of December 1, 1991, from the
Company to Harris Trust and Savings Bank (incorporated by reference to Exhibit 10.18 to the
Company's Form 10-K for the Fiscal Year ended December 31, 1991 (Commission File No. 1-9843)).
10.5 Letter Agreement regarding termination of employment between the Company and Arthur L. Knight, Jr.
dated May 31, 1994 (incorporated by reference to Exhibit 10.8 of the Company's Form 10-K for the
Fiscal Year ended December 31, 1994 (Commission File No. 1-9843)).
10.6 Employment Agreement and Trust Under Employment Agreement between the Company and Larry R.
Robinette dated August 19, 1994 (incorporated by reference to Exhibit 10.9 of the Company's Form
10-K for the Fiscal Year ended December 31, 1994 (Commission File No. 1-9843)).
10.7 Severance policy for certain Covered Executives (incorporated by reference to Exhibit 10.13 of the
Company's Form 10-K for the Fiscal Year ended December 31, 1992 (Commission File No. 1-9843)).
10.8 Consulting and Management Assistance Agreement between the Company and Hawley Management Company
(now named Saugatuck Associates, Inc.) dated as of January 13, 1984 (incorporated by reference
to Exhibit 10.14 to the Company's Registration Statement on Form S-1 (Registration No.
33-00344)).
10.9 Amended 1994 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.14 of
the Company's Form 10-K for the Fiscal Year ended December 31, 1994 (Commission File No.
1-9843)).

II-2

EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------

10.10 Convertible Appreciation Rights Plan, dated June 1, 1992 (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report for the Quarter ended July 4, 1992 (Commission File No.
1-9843)).
10.11 The Company's 1992 Non-employee Director Stock Option Plan (incorporated by reference to Exhibit
10.19 of the Company's Form 10-K for the Fiscal Year ended December 31, 1992 (Commission File
No. 1-9843)).
10.12 The Company's Incentive Stock Option Plan (1995) (incorporated by reference to Exhibit 10.19 of
the Company's Form 10-K for the Fiscal Year ended December 31, 1994 (Commission File No.
1-9843)).
10.13 The Company's 1988 Stock Purchase Plan (incorporated by reference to the Appendix to the
Prospectus contained in Post-Effective Amendment No. 1 to the Company's Registration Statement
on Form S-8 (Registration No. 33-23882)).
10.14 Amendments and modifications to the Severance Agreements of Messrs. LaCroix, Schlegel, MacMillan
and Hood (incorporated by reference to Exhibit 10.14 of the Company's Form 10-K for the Fiscal
Year ended December 31, 1995 (Commission File No. 1-9843)).
10.15 Change in Control Severance Policy between the Company and Larry R. Robinette dated September 13,
1995 (incorporated by reference to Exhibit 10.15 of the Company's Form 10-K for the Fiscal Year
ended December 31, 1995 (Commission File No. 1-9843)).
10.16 Updated and revised Special Severance/Retention Plan for Executive Officers (incorporated by
reference to Exhibit 10.16 of the Company's Form 10-K for the Fiscal Year ended December 31,
1995 (Commission File No. 1-9843)).
10.17 Employment agreement between the Company and Peter Balint dated May 1, 1995 (incorporated by
reference to Exhibit 10.17 of the Company's Form 10-K for the Fiscal Year ended December 31,
1995 (Commission File No. 1-9843)).
10.18 Amendments dated May 17, 1995 to the Company's 1995 Incentive Stock Option Plan (incorporated by
reference to Exhibit 10.18 of the Company's Form 10-K for the Fiscal Year ended December 31,
1995 (Commission File No. 1-9843)).
10.19 Amendments dated December 20, 1995 to the Company's Deferred Compensation Plan (incorporated by
reference to Exhibit 10.19 of the Company's Form 10-K for the Fiscal Year ended December 31,
1995 (Commission File No. 1-9843)).
10.20 Agreement between Morgan Distribution, Mechanicsburg, Pennsylvania and the United Steelworkers of
America, AFL-CIO-CLC, Local 7415, dated February 18, 1995 (incorporated by reference to Exhibit
10.20 of the Company's Form 10-K for the Fiscal Year ended December 31, 1995 (Commission File
No. 1-9843)).
10.21 Agreement between Morgan Distribution, Shawnee, Kansas and the International Brotherhood of
Teamsters, Local 541, dated April 1, 1995 (incorporated by reference to Exhibit 10.21 of the
Company's Form 10-K for the Fiscal Year ended December 31, 1995 (Commission File No. 1-9843)).
10.22 Agreement between the Company, Oshkosh, Wisconsin and the Midwestern Industrial Council and
affiliated Local 1363 of the United Brotherhood of Carpenters and Joiners of America, dated May
7, 1995 (incorporated by reference to Exhibit 10.22 of the Company's Form 10-K for the Fiscal
Year ended December 31, 1995 (Commission File No. 1-9843)).
10.23 Agreement between the Company, Oshkosh, Wisconsin and the Teamsters "General," Local 200, dated
May 21,1995 (incorporated by reference to Exhibit 10.23 of the Company's Form 10-K for the
Fiscal Year ended December 31, 1995 (Commission File No. 1-9843)).

II-3

EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------

10.24 Agreement between the Company, Decatur, Illinois and the International Brotherhood of Teamsters,
AFL-CIO, Local 279, dated July 15, 1995 (incorporated by reference to Exhibit 10.24 of the
Company's Form 10-K for the Fiscal Year ended December 31, 1995 (Commission File No. 1-9843)).
10.25 Agreement between Morgan Distribution, Birch Run, Michigan and the International Brotherhood of
Teamsters, Local 486, dated November 4, 1995 (incorporated by reference to Exhibit 10.25 of the
Company's Form 10-K for the Fiscal Year ended December 31, 1995 (Commission File No. 1-9843)).
10.26 Form of Indemnification Agreement, dated November 3, 1994 between the Company and each of William
R. Holland; Alton F. Doody, Jr.; Patrick J. McDonough, Jr.; Larry R. Robinette; Byron H.
Stebbins; Edward T. Tokar; Douglas H. MacMillan; and Dawn E. Neuman; and dated October 30, 1995
between the Company and Peter Balint (incorporated by reference to Exhibit 10.26 of the
Company's Form 10-K for the Fiscal Year ended December 31, 1995 (Commission File No. 1-9843)).
10.27 Amendment #4, dated October 30, 1995, to the Loan and Security Agreement among the Company,
certain banks and Barclay's Business Credit, Inc. (succeeded by Fleet Capital, dated July 14,
1994 (incorporated by reference to Exhibit 10.27 of the Company's Form 10-K for the Fiscal Year
ended December 31, 1995 (Commission File No. 1-9843)).
10.28 Lease for office space in Williamsburg, Virginia, between the Company and Jim Griffith Builder,
Inc., dated March 2, 1995 and amended October 3, 1995 (incorporated by reference to Exhibit
10.28 of the Company's Form 10-K for the Fiscal Year ended December 31, 1995 (Commission File
No. 1-9843)).
10.29 Letter agreement exercising the Company's option to extend the current lease at the Morgan
Manufacturing facility in Weed, California (incorporated by reference to Exhibit 10.29 of the
Company's Form 10-K for the Fiscal Year ended December 31, 1995 (Commission File No. 1-9843)).
10.30 Office lease for Morgan Manufacturing Division Office in Oshkosh, Wisconsin, dated October 13,
1995 (incorporated by reference to Exhibit 10.30 of the Company's Form 10-K for the Fiscal Year
ended December 31, 1995 (Commission File No. 1-9843)).
10.31 Letter Agreements, dated December 1994, between each of the Company's eleven distribution centers
and Andersen Corporation (incorporated by reference to Exhibit 10.31 of the Company's Form 10-K
for the Fiscal Year ended December 31, 1995 (Commission File No. 1-9843)).
10.32 Purchase agreement with JELD-WEN, Inc. for the Lexington, North Carolina door manufacturing
facility (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the Second
Quarter of the Fiscal Year ended December 31, 1996 (Commission File No. 1-9843)).
10.33 Agreement between Local 705, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and
Helpers of America, AFL-CIO and Morgan Distribution at West Chicago, IL (incorporated by
reference to Exhibit 10.2 of the Company's Form 10-Q for the Second Quarter of the Fiscal Year
ended December 31, 1996 (Commission File No. 1-9843)).
10.34 Asset Purchase Agreement dated as of July 22, 1996 by and among the Company, Tennessee Building
Products, Inc., Titan Building Products, Inc., James Fishel, James Schulman and Tennessee
Building Products, Inc. (incorporated by reference to Exhibit 10.3 of the Company's Form
10-Q/A-1 for the Second Quarter of the Fiscal Year ended December 31, 1996 (Commission File No.
1-9843)).

II-4

EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------

10.35 Amendment #5, dated June 30, 1996, to the Loan and Security Agreement among the Company, certain
banks and Barclay's Business Credit, Inc. (succeeded by Fleet Capital), dated July 14, 1994
(incorporated by reference to Exhibit 1 of the Company's Current Report on Form 8-K filed with
the Commission on September 26, 1996 (Commission File No. 1-9834)).
10.36 Amendment #6, dated August 30, 1996, to the Loan and Security Agreement among the Company, certain
banks and Barclay's Business Credit, Inc. (succeeded by Fleet Capital), dated July 14, 1994
(incorporated by reference to Exhibit 2 of the Company's Current Report on Form 8-K filed with
the Commission on September 26, 1996 (Commission File No. 1-9834)).
10.37 Employment Agreement between the Company and Dawn Neuman dated May 30, 1995 (incorporated by
reference to Exhibit 3 of the Company's Current Report on form 8-K filed with the Commission on
September 26, 1996 (Commission File No. 1-9834)).
10.38 Amendment dated February 8, 1996 to the Employment Agreement of Dawn Neuman (incorporated by
reference to Exhibit 4 of the Company's Current Report on form 8-K filed with the Commission on
September 26, 1996 (Commission File No. 1-9834)).
10.39 Severance Agreement between the Company and David A. Braun dated October 1, 1995 (incorporated by
reference to Exhibit 5 of the Company's Current Report on form 8-K filed with the Commission on
September 26, 1996 (Commission File No. 1-9834)).
10.40 Agreement between United Paperworkers International Union, Region IX, AFL-CIO, Local No. 7828,
Decatur, Illinois dated January 2, 1996 (incorporated by reference to Exhibit 6 of the Company's
Current Report on form 8-K filed with the Commission on September 26, 1996 (Commission File No.
1-9834)).
10.41 Non-Competition Agreement by and among the Company, Tennessee Building Products, Inc., Titan
Building Products, Inc., James Fishel, James Schulman and John Whipple dated August 30, 1996
(incorporated by reference to Exhibit 7 of the Company's Current Report on form 8-K filed with
the Commission on September 26, 1996 (Commission File No. 1-9834)).
10.42 Lease Agreement by and between Titan and Sunbelt Properties for property located at 37-A Freedom
Court, Greer, South Carolina, dated February 15, 1995 (incorporated by reference to Exhibit 8 of
the Company's Current Report on Form 8-K filed with the Commission on September 26, 1996
(Commission File No. 1-9834)).
10.43 Lease Agreement by and between Titan and SCI NC Limited Partnership for property located at 1407-A
Westinghouse Blvd., Charlotte, North Carolina, dated February 15, 1995 (incorporated by
reference to Exhibit 9 of the Company's Current Report on Form 8-K filed with the Commission on
September 26, 1996 (Commission File No. 1-9834)).
10.44 Lease Agreement by and between the Company and F&S Properties for property located at Foster and
Glenrose Avenue, Nashville, Tennessee, dated August 30, 1996 (incorporated by reference to
Exhibit 10 of the Company's Current Report on Form 8-K filed with the Commission on September
26, 1996 (Commission File No. 1-9834)).
10.45 Lease Agreement by and between the Company and F&S Properties for property located at 651 Thompson
Lane, Nashville, Tennessee, dated August 30, 1996 (incorporated by reference to Exhibit 11 of
the Company's Current Report on Form 8-K filed with the Commission on September 26, 1996
(Commission File No. 1-9834)).
10.46 Lease Agreement by and between the Company and F&S Properties for property located at 2131 Polymar
Drive, Chattanooga, Tennessee, dated August 30, 1996 (incorporated by reference to Exhibit 12 of
the Company's Current Report on Form 8-K filed with the Commission on September 26, 1996
(Commission File No. 1-9834)).
**23.1 Consent of Price Waterhouse LLP.

II-5

EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------

**23.2 Consent of Kraft Bros., Esstman, Patton & Harrell, PLLC.
*23.3 Consent of Winthrop, Stimson, Putnam & Roberts (included in Exhibit 5).
**24 Power of Attorney (included on signature page).

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

* To be filed by amendment.

** Filed herewith.

ITEM 17. UNDERTAKINGS.

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-6

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the city of Williamsburg, State of Virginia, on October 1, 1996.

MORGAN PRODUCTS LTD.

By: /s/ DOUGLAS H. MACMILLAN
-----------------------------------------
Douglas H. MacMillan
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND SECRETARY

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Larry R. Robinette and Douglas H. MacMillan, and
each or any of them, his true and lawful attorney-in-fact and to act for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting said
attorney-in-fact and agent, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent or any of them, or their or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------- ------------------

/s/ FRANK J. HAWLEY, JR.
------------------------------------------- Chairman of the Board and Director October 1, 1996
Frank J. Hawley, Jr.

/s/ LARRY R. ROBINETTE President, Chief Executive Officer
------------------------------------------- and Director October 1, 1996
Larry R. Robinette (Principal Executive Officer)

/s/ DOUGLAS H. MACMILLAN Vice President, Chief Financial
------------------------------------------- Officer and Secretary October 1, 1996
Douglas H. Macmillan (Principal Financial Officer)

II-7

SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------- ------------------

/s/ JOHN S. CROWLEY
------------------------------------------- Director October 1, 1996
John S. Crowley

/s/ HOWARD G. HAAS
------------------------------------------- Director October 1, 1996
Howard G. Haas

/s/ WILLIAM R. HOLLAND
------------------------------------------- Director October 1, 1996
William R. Holland

/s/ PATRICK J. MCDONOUGH, JR.
------------------------------------------- Director October 1, 1996
Patrick J. McDonough, Jr.

/s/ ALTON F. DOODY, JR.
------------------------------------------- Director October 1, 1996
Alton F. Doody, Jr.

/s/ BYRON H. TONY STEBBINS
------------------------------------------- Director October 1, 1996
Byron H. Tony Stebbins

/s/ EDWARD T. TOKAR
------------------------------------------- Director October 1, 1996
Edward T. Tokar

II-8

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------

23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Kraft Bros., Esstman, Patton & Harrell, PLLC.
24.1 Power of Attorney (included on signature page).