WAXMAN INDUSTRIES INC, POS AM, 1994-08-19

WAXMAN INDUSTRIES INC
POS AM, 1994-08-19
HARDWARE & PLUMBING & HEATING EQUIPMENT & SUPPLIES

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* AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 1994 *
* *
* *
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REGISTRATION NO.: 33-44511

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

POST-EFFECTIVE AMENDMENT NO. 4

TO FORM S-2 REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

WAXMAN INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

DELAWARE 34-0899894
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

5074
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)

ARMOND WAXMAN
24460 AURORA ROAD 24460 AURORA ROAD
BEDFORD HEIGHTS, OHIO 44146 BEDFORD HEIGHTS, OHIO 44146
(216) 439-1830 (216) 439-1830
(NAME, ADDRESS, INCLUDING ZIP (NAME, ADDRESS, INCLUDING ZIP CODE, AND
CODE, AND TELEPHONE NUMBER, TELEPHONE NUMBER, INCLUDING AREA CODE,
INCLUDING AREA CODE, OF OF AGENT FOR SERVICE)
REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES)

COPIES TO:
SCOTT M. ZIMMERMAN, ESQ.
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 758-9500

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:

[x]
-
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:
[ ]

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WAXMAN INDUSTRIES, INC.

CROSS REFERENCE SHEET

PURSUANT TO ITEM 501(B) OF REGULATION S-K

<TABLE>
<CAPTION>
ITEM OF FORM S-2 PROSPECTUS CAPTION OR LOCATION
---------------- ------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus Outside Front Cover Page of Prospectus

2. Inside Front and Outside Back Cover
Page of Prospectus Available Information; Inside Front Cover
and Outside Back Cover Pages of Prospectus

3. Summary Information, Risk Factors and Prospectus Summary; The Company; Selected
Ratio of Earnings to Fixed Charges Financial Data; Risk Factors; Consolidated Financial Statements

4. Use of Proceeds Prospectus Summary; Use of Proceeds

5. Determination of Offering Price Not Applicable

6. Dilution Not Applicable

7. Selling Security Holders Selling Security Holders; Plan of
Distribution

8. Plan of Distribution and Underwriting Outside Front Cover Page of Prospectus;
Plan of Distribution

9. Description of Securities to be Registered Prospectus Summary; Outside Front Cover
Page of Prospectus; Description of Notes;
Description of Warrants; Description of
Capital Stock

10. Interests of Named Experts and Counsel Legal Matters

11. Information with Respect to the Registrant Outside Front Cover Page of Prospectus; Available
Information; Prospectus Summary; Risk Factors; The
Company; The 1991 Refinancing; The 1994
Reorganization; Capitalization; Price Range of
Common Stock; Dividends; Selected Financial Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Principal Stockholders; Consolidated
Financial Statements
12. Incorporation of Certain Information by
Reference Not applicable

13. Disclosure on Commission Position on
Indemnification of Securities Act
Liabilities Not Applicable
</TABLE>

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***************************************************************************
* *
* SUBJECT TO COMPLETION; PRELIMINARY PROSPECTUS DATED AUGUST 19, 1994 *
* *
* 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. *
* *
***************************************************************************

PROSPECTUS
WAXMAN INDUSTRIES, INC.

$12,500,000 PRINCIPAL AMOUNT OF 12.25% FIXED RATE
SENIOR SECURED NOTES DUE SEPTEMBER 1, 1998

$7,500,000 PRINCIPAL AMOUNT OF FLOATING RATE
SENIOR SECURED NOTES DUE SEPTEMBER 1, 1998

957,000 COMMON STOCK PURCHASE WARRANTS

957,000 SHARES OF COMMON STOCK

This Prospectus relates to the offer and sale of (i) $12,500,000
principal amount of 12.25% Fixed Rate Senior Secured Notes due September 1,
1998 (the "Fixed Rate Notes") of Waxman Industries, Inc. (the "Company"), (ii)
$7,500,000 principal amount of Floating Rate Senior Secured Notes due September
1, 1998 (the "Floating Rate Notes") of the Company, (iii) 957,000 Common Stock
Purchase Warrants (the "Warrants") and (iv) 957,000 shares of the Company's
Common Stock, $.01 par value (the "Common Stock") issuable upon exercise of the
Warrants. The Fixed Rate Notes and Floating Rate Notes offered hereby are
sometimes collectively referred to as the "Notes." The Notes, the Warrants and
the shares of Common Stock offered hereby are sometimes collectively referred
to herein as the "Securities." The Securities will be sold by the holders
thereof (the "Selling Security Holders"). See "Selling Security Holders."

The Notes and Warrants were originally issued by the Company in a
private placement to certain institutional investors. The original principal
amount of the Fixed Rate Notes was $42,500,000 and the original number of
Warrants was 1,000,000. See "The 1991 Refinancing." The Company has
subsequently repurchased $10,850,000 principal amount of the Fixed Rate Notes.
In addition, $19,150,000 principal amount of Fixed Rate Notes and 43,000
Warrants have been traded publicly since the registration of the Securities in
June 1992, and, therefore, such Fixed Rate Notes and Warrants, respectively, do
not require registration hereunder. There is currently a limited public market
for the Notes and the Warrants. The payment of the Company's Obligations under
the Notes and the performance of the Company's obligations under the Indenture
(as defined below) are guaranteed (the "Guarantee") by Waxman USA Inc., a
wholly owned subsidiary of the Company ("Waxman USA"). The Notes and the
Guarantee are secured by the Waxman USA's pledge of all of the capital stock of
Barnett Inc. ("Barnett"), Waxman Consumer Products Group Inc. ("Consumer
Products") and WOC Inc. ("WOC"), each a direct subsidiary of Waxman USA and an
indirect subsidiary of the Company. There can be no assurance that the value
of the capital stock of Barnett, Consumer Products and WOC will be sufficient
to satisfy the outstanding principal and accrued interest under the Notes in
the event of a default under the Notes. Substantially all of the assets of
Barnett, Consumer Products and WOC are pledged to the lenders under the
Domestic Credit Facility (as hereinafter defined) and the Domestic Term Loan
(as hereinafter defined) and thus the pledge of the capital stock of Barnett,
Consumer Products and WOC for the benefit of the holders of the Notes is
structurally subordinated to the rights of such lenders. The capital stock of
Barnett, Consumer Products and WOC is privately held by, and constitute
substantially all of the assets of Waxman USA, which in turn constitutes
substantially all of the assets of the Company. The Company is dependent on
distributions from Barnett, Consumer Products and WOC in order to meet its debt
service obligations, including its payment obligations with respect to the
Notes. See "Risk Factors -- Reliance on Operations of Subsidiaries;
Structural" and "-- Restrictions Imposed by Terms of Indebtedness."

<PAGE> 4
During each of November 1993 and April 1994, respectively, the Company
commenced a consent solicitation from holders of the Notes to waive
noncompliance with certain financial covenants contained in the indenture
governing the Notes (the "Indenture") and to amend certain provisions of the
Indenture. Effectiveness of such waivers and amendments required the consent
of the holders of at least 66-2/3% of the outstanding principal amount of the
Notes. On November 10, 1993 and May 3, 1994, respectively, the Company
successfully completed such consent solicitations, having received consents
from the requisite amount of holders. See "Business - Recent Developments,"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

The Notes are redeemable at the option of the Company, in whole or in
part, at the redemption prices set forth therein, plus accrued interest.
Annual sinking fund payments on each of September 1, 1996 and September 1, 1997
are calculated to retire 68% of the issue prior to maturity. The Company may
deliver previously redeemed Notes in lieu of cash in making sinking fund
payments. The Notes also provide for partial special mandatory redemptions in
certain situations set forth therein. In the event of a Change in Control (as
defined in the Indenture), holders of the Notes will have the right to require
the Company to repurchase such holders' Notes at the purchase price set forth
therein, together with accrued interest, if any, to the date of purchase.

The indebtedness evidenced by the Notes ranks PARI PASSU in right of
payment with all existing and future Senior Indebtedness (as defined in the
Indenture) and senior in right of payment to all existing and future
Subordinated Indebtedness (as defined in the Indenture). The indebtedness
evidenced by the Notes will not be subordinate in right of payment to any
existing or, without the consent of the holders of the Notes, future
indebtedness of the Company. The Fixed Rate Notes and Floating Rate Notes are
equal inter sese in right of payment under the Indenture.

The Warrants provide for the purchase of an aggregate of 957,000
shares of Common Stock at an exercise price of $4.60 per share, subject to
adjustment in certain events described herein. The Company would receive all
of the proceeds from the exercise of the Warrants. The Warrants are
exercisable immediately and expire on September 1, 1996. The Company may offer
to the registered holder the option, in lieu of exercising the Warrants, of
surrendering the Warrants, in whole or in part, for a cash payment set forth
herein.

The Common Stock is traded on the New York Stock Exchange (the
"NYSE") (symbol: WAX). On August 12, 1994, the closing price per share of
Common Stock, as reported by the NYSE, was $1.88. The Common Stock is also
traded on the Chicago Stock Exchange. There is currently a limited public
market for the Notes and the Warrants.

The Securities are being offered for the accounts of the Selling
Security Holders. See "Selling Security Holders". The Company has agreed to
pay all of the expenses of this offering but will not receive any of the
proceeds from the sale of the Securities being offered hereby. The aggregate
proceeds to the Selling Security Holders from the sale of the Securities will
be the purchase price of the Securities sold, less the aggregate agents'
commissions and underwriters' discounts, if any, and other expenses of issuance
and distribution not borne by the Company. See "Plan of Distribution."

The Selling Security Holders directly, through agents designated from
time to time or through dealers or underwriters also to be designated, may sell
the Securities from time to time on terms to be determined at the time of sale.
To the extent required, the specific Securities to be sold, the names of the
Selling Security Holders, the purchase price, the public offering price, the
names of any such agents, dealers or underwriters and any applicable
commissions or discount with respect to a particular offer will be set forth in
an accompanying Prospectus supplement.

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The Selling Security Holders and any broker-dealers, agents or
underwriters that participate with the Selling Security Holders in the
distribution of the Securities may be deemed to be "Underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Act"), and any
commissions received by them and any profit on the resale of the Securities
purchased by them may be deemed to be underwriting commissions or discounts
under the Act. See "Plan of Distribution" for indemnification arrangements.

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

THE DATE OF THIS PROSPECTUS IS , 1994.

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<PAGE> 6
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements, and
other information filed by the Company with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: New York Regional Office, 75 Park Place,
New York, New York 10007; and Chicago Regional Office, 230 South Dearborn
Street, Room 3190, Chicago, Illinois 60604. Copies of such material can also
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The
Company's Common Stock is listed on the NYSE. Reports, proxy and information
statements may also be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.

This Prospectus does not contain all the information set forth in the
Registration Statement (the "Registration Statement") filed with the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement and
the exhibits thereto, copies of which are on file at the offices of the
Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the offices of the Commission.

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO,
AND SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCES IN
THIS PROSPECTUS TO A PARTICULAR FISCAL YEAR REFER TO THE 12-MONTH PERIOD ENDED
ON JUNE 30 IN THAT YEAR. UNLESS THE CONTEXT OTHERWISE INDICATES, ALL
REFERENCES TO THE "COMPANY" ARE TO THE CONTINUING OPERATIONS OF WAXMAN
INDUSTRIES, INC. AND ITS SUBSIDIARIES AND DIVISIONS AND TO THE BUSINESS
CONDUCTED THROUGH SUCH SUBSIDIARIES AND DIVISIONS.

THE COMPANY

The Company believes it is one of the leading suppliers of plumbing
products to the home repair and remodeling market in the United States. The
Company conducts its business in the United States primarily through its
wholly-owned subsidiaries, Barnett and Consumer Products. The Company
distributes plumbing, electrical and hardware products, in both packaged and
bulk form, to over 45,000 customers in the United States, including
do-it-yourself ("D-I-Y") retailers, mass merchandisers, smaller independent
retailers and plumbing and electrical repair and remodeling contractors. The
Company's consolidated net sales (excluding sales from discontinued operations)
were $204.8 million in fiscal 1993.

The Company's domestic business is conducted primarily through Barnett
and Consumer Products. Through their nationwide network of warehouses and
distribution centers, Barnett and Consumer Products provide their customers
with a single source for an extensive line of competitively priced quality
products. The Company's strategy of being a low-cost supplier is facilitated
by its purchase of a significant portion of its products from low-cost foreign
sources. Barnett's marketing strategy is directed predominantly to repair and
remodeling contractors and independent retailers, as compared to Consumer
Products' strategy of focusing on mass merchandisers and larger D-I-Y
retailers.

Based on management's experience and knowledge of the industry, the
Company believes that Barnett is the only national mail order and telemarketing
operation distributing plumbing, electrical and hardware products in the United
States. Barnett's marketing strategy is comprised of frequent catalog and
promotional mailings, supported by 24-hour telemarketing operations. Barnett
has averaged 15% net sales growth per annum during the period from fiscal 1991
to fiscal 1993 through (i) the expansion of its warehouse network to increase
its market penetration, (ii) the introduction of new product offerings and
(iii) the introduction of an additional catalog targeted at a new customer
base. Barnett's net sales were $82.9 million in fiscal 1993.

Consumer Products markets and distributes its products to a wide
variety of retailers, primarily national and regional warehouse home centers,
home improvement centers and mass merchandisers. An integral element of
Consumer Products' marketing strategy of serving as a single source supplier is
offering mass merchandisers and D-I-Y retailers innovative comprehensive
marketing and merchandising programs designed to improve their profitability,
efficiently manage shelf space, reduce inventory levels and maximize floor
stock turnover. Consumer Products' customers currently include national
retailers such as Kmart, Builders Square, Home Depot and Wal-Mart, as well as
large regional D-I-Y retailers. According to the most recent rankings of the
largest D-I-Y retailers published by National Home Center News, an industry
trade publication, Consumer Products' customers include 16 of the 25 largest
D-I-Y retailers in the United States. Management believes that Consumer
Products is the only supplier to the D-I-Y market that carries a complete line
of plumbing, electrical and floor protective hardware products, in both package
and bulk form. Consumer Products' net sales were $67.5 million in fiscal 1993
and have remained generally consistent since fiscal 1991.

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The Company, through its smaller domestic operations, also distributes
a full line of security hardware products and copper tubing, brass fittings and
other related products. Net sales from these other operations were $48.1
million in fiscal 1993.

The Company's business strategy is designed to capitalize on the
growth prospects for Barnett and Consumer Products. The Company's current
strategy includes the following elements:

- EXPANSION OF BARNETT. Since its acquisition in 1984,
Barnett's revenues and operating income have grown at compound
annual rates of 11.3% and 11.1% respectively. The Company
intends to continue to expand Barnett's national warehouse
network and expects to open as many as four new warehouses
during each of the next several fiscal years. Barnett expects
to find this expansion using cash flow from operations and/or
available borrowings under the Domestic Credit Facility and
Domestic Term Loan. Barnett also intends to continue
expanding its product offerings, allowing its customers to
utilize its catalogs as a means of one-stop shopping for many
of their needs. In an effort to further increase
profitability, Barnett is also increasing the number of higher
margin product offerings bearing its proprietary trade names
and trademarks.

- ENHANCE COMPETITIVE POSITION OF CONSUMER PRODUCTS. During the
past 24 months, Consumer Products has restructured its sales
and marketing functions in order to better serve the needs of
its existing and potential customers. Consumer Products
restructured its sales department be defining formal regions
of the country for which regional sales managers would have
responsibility. Prior to the restructuring, sales managers
had responsibility for specific customers without regard to
location. In addition, as part of the restructuring, in
fiscal 1993 a marketing department was established, separate
and apart from the sales department. The marketing department
is staffed with product managers who have the responsibility
of identifying new product programs. The restructuring of the
sales and marketing departments is complete at this time.
Consumer Products' strategy is to achieve consistent growth by
expanding its business with existing customers and by
developing new products and new customers. In order to
increase business with existing customers, Consumer Products
is focusing on developing strategic alliances with its
customers. Consumer Products seeks to (i) introduce new
products within existing categories, as well as new product
categories, (ii) improve customer service, (iii) introduce
full service marketing programs and (iv) achieve higher
profitability for both the retailer and Consumer Products.

The Reorganization (described below) was an important element of this
strategy because it lowered the Company's cash interest expense, permitting the
Company to reinvest a greater portion of its cash flow in its domestic
businesses; stabilized the Company's capital structure by, among other things,
eliminating the impact of the adverse operating results of the Company's
discontinued Canadian operations on the Company's domestic operations; and
generally provided the Company with greater operating and financial
flexibility.

DISCONTINUED OPERATIONS

Effective March 31, 1994, the Company adopted a plan to dispose of its
Canadian subsidiary, Ideal Plumbing Group, Inc. ("Ideal"). Unlike the
Company's United States operations which supply products to customers in the
home repair and remodeling market through mass retailers, Ideal primarily
served customers in the Canadian new construction market through independent
contractors. Accordingly, Ideal is reported as a discontinued operation at
March 31, 1994 and the consolidated financial statements and financial
information contained herein as of such date have been reclassified to

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<PAGE> 9
report separately Ideal's net assets and results of operations. Prior period
consolidated financial statements and financial information have been
reclassified to conform to the current period presentation.

Ideal determined in April 1994 that, as of March 31, 1994, it was in
violation of several financial covenants included in its Canadian bank credit
agreements, including those relating to the maintenance of a specified working
capital ratio, interest coverage ratio and borrowing base formulas. In
addition, on April 15, 1994, Ideal failed to make a Cdn. $150,000 payment on
the term loan portion of such credit agreements.

At the time the plan of disposition was adopted, the Company expected
that the disposition would be accomplished through a sale of the business to a
group of investors which included members of Ideal's management. Such
transaction would have required the consent of the lenders under Ideal's
Canadian bank credit agreements as borrowings under such credit agreements were
collateralized by all of the assets and capital stock of Ideal. The bank
considered the management group's acquisition proposal; however, the proposal
was subsequently rejected. On May 5, 1994, without advance notice, the bank
filed an involuntary bankruptcy petition against Ideal citing defaults under
the bank credit agreements (borrowings under these agreements are non-recourse
to Waxman Industries, Inc.). The Company has not contested the bank's efforts
to effect the orderly disposition of Ideal. On May 30, 1994, Ideal was
declared bankrupt by the Canadian courts and, as a result, the Company's
ownership and control of Ideal effectively ceased on such date. Upon the
petition of Ideal's Canadian lenders, Coopers and Lybrand Ltd. was appointed as
trustee to liquidate the assets of Ideal. As of the date of this Prospectus,
the Company has been advised that Ideal is no longer operating and that certain
of Ideal's brand operations have been sold but that the trustee has not yet
liquidated the remaining inventory, accounts receivable and fixed assets of
Ideal.

Ideal's defaults under its Canadian bank credit agreements and
subsequent bankruptcy do not trigger a "cross default" under, or result in any
violation of the debt covenants contained in, the Company's or its
subsidiaries' outstanding debt obligations other than under the Company's
$155,000 principal amount outstanding of Convertible Debentures. In addition,
neither the Company nor any of its subsidiaries has any liability to creditors
of Ideal as a result of Ideal's bankruptcy.

THE OFFERING

SECURITIES OFFERED $12,500,000 principal amount of 12.25% Fixed
Rate Senior Secured Notes due September 1, 1998.

$7,500,000 principal amount of Floating Rate
Senior Secured Notes due September 1, 1998.

957,000 Common Stock Purchase Warrants

957,000 Shares of Common Stock (issuable upon
exercise of the Warrants)

Fixed Rate Notes:

Interest Payment Dates March 1 and September 1

Interest Rate 12.25%

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<PAGE> 10
Optional Redemption Redeemable at the option of the Company, in
whole or in part, at the redemption prices
set forth herein, together with accrued
interest.

Mandatory Redemption Annual sinking fund payments of $14,450,000
on each of September 1, 1996 and September 1,
1997. The Company may deliver Fixed Rate
Notes which have previously been redeemed in
lieu of cash in making sinking fund payments.
The Fixed Rate Notes also provide for partial
special mandatory redemptions in certain
situations.

Repurchase at Option
of Noteholder In the event of a Change in Control (as
defined in the Indenture), holders of the
Fixed Rate Notes will have the right to
require the Company to repurchase such
holders' Fixed Rate Notes at 102% of the
principal amount thereof, together with
accrued interest, if any, to the date of
purchase.

Floating Rate Notes:

Interest Payment Dates March 1, June 1, September 1 and December 1

Interest Rate Floating rate based on LIBOR for any
quarterly period plus 300 basis points.

Optional Redemption Redeemable at the option of the Company, in
whole or in part, at the redemption prices
set forth herein, together with accrued
interest.

Mandatory Redemption Annual sinking fund payments of $2,550,000 on
each of September 1, 1996 and September 1,
1997. The Company may deliver Floating Rate
Notes which have previously been redeemed in
lieu of cash in making sinking fund payments.
The Floating Rate Notes also provide for
partial special mandatory redemptions in
certain situations.

Repurchase at Option
of Noteholder In the event of a Change in Control (as
defined in the Indenture), holders of the
Floating Rate Notes will have the right to
require the Company to repurchase such
holders' Floating Rate Notes at 102% of the
principal amount thereof, together with
accrued interest, if any, to the date of
purchase. A Change in Control includes a
management buyout or similar transaction by
the Company's management and/or directors and
their respective affiliates (but does not
include any such transaction by the member of
the Waxman Family Group (as defined in the
Indenture)).

Warrants: 957,000 Common Stock Purchase Warrants, each
representing the right to purchase a share of
Common Stock at an exercise price of $4.60
per share. The Warrants provide for
adjustments

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<PAGE> 11

to the exercise price in certain events,
including, but not limited to, the
declaration of dividends or making of a
distribution on the outstanding shares of the
Company's Common Stock or the subdivision or
reclassification of the outstanding shares of
the Company's Common Stock into a greater or
smaller number of shares. The Warrants are
exercisable immediately and expire on
September 1, 1996. The Company may offer to
the registered holder the option, in lieu of
exercising the Warrants, of surrendering the
Warrants, in whole or in part, for a cash
payment equal to the product of (i) the
Closing Price (as defined in the Warrant
Agreement) for a share of Common Stock on the
last business day prior to the date of
surrender of the warrant certificate less the
exercise price, and (ii) the number of shares
of Common Stock to which the holder is
entitled pursuant to the Warrants surrendered
therefor.

RANKING The Notes are PARI PASSU in right of payment
with all Senior Indebtedness (as defined in
the Indenture) and senior in right of payment
to all Subordinated Indebtedness (as defined
in the Indenture). The Fixed Rate Notes and
Floating Rate Notes are equal INTER SESE in
right of payment.

SECURITY The Notes are secured by the pledge by the
Company of all of the capital stock of
Barnett Inc., Waxman Consumer Products Group
Inc. and WOC Inc., each an indirect
subsidiary of the Company.

GUARANTEE The payment of the Company's obligations
under the Notes and the performance of the
Company's obligations under the Indenture are
guaranteed by Waxman USA.

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<PAGE> 12
SUMMARY FINANCIAL DATA
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)

The summary historical financial data for the fiscal years 1989
through 1993 are derived from the Company's audited consolidated financial
statements. The historical information as of and for the nine month periods
ended March 31, 1993 and 1994 is unaudited, but in the Company's opinion
reflects all adjustments (consisting only of normal recurring adjustments)
which are necessary to present fairly the Company's financial position and
results of operations as of such dates and for such periods. Results for the
nine months ended March 31, 1994 are not necessarily indicative of the results
to be expected for the fiscal year ending June 30, 1994. Effective March 31,
1994, the Company adopted a plan to dispose of its Canadian subsidiary, Ideal.
Accordingly, Ideal is reported as a discontinued operation at March 31, 1994,
and the prior period consolidated financial statements have been reclassified
to conform to the current period presentation.

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<PAGE> 13
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED JUNE 30, MARCH 31,
-------------------------------------------------------- -------------------
1989 1990 1991 1992 1993 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Net sales $194,585 $186,315 $186,327 $197,738 $204,778 $153,957 $160,245
Cost of sales 128,038 120,976 121,397 127,115 137,244 102,035 104,180
-------- --------- -------- ------- ------- ------- --------
Gross profit 66,547 65,338 64,930 70,623 67,534 51,922 56,065
Operating expenses 48,479 49,452 50,263 51,824 56,081 39,729 41,769
Restructuring and other
nonrecurring charges -- -- -- 3,900 6,762 -- --
-------- -------- -------- ------- ------- ------- --------
Operating income (loss) 18,068 15,886 14,667 14,899 4,691 12,193 14,296
Interest expense, net 8,136 12,796 17,462 20,025 20,365 15,242 15,635
-------- --------- -------- ------- ------- ------- --------
Income (loss) from continuing operations
before income taxes,
extraordinary charges and
cumulative effect of accounting
change 9,932 3,090 (2,795) (5,126) (15,674) (3,049) (1,339)
Provision (benefit) for income taxes 3,794 958 (680) (768) 216 (1,429) --
-------- --------- -------- ------- ------- ------- --------
Income (loss) from continuing operations
before extraordinary charges
and cumulative effect of
accounting change 6,138 2,132 (2,115) (4,358) (15,890) (1,620) (1,339)
Discontinued Operations - Ideal
Income (loss) from discontinued
operations, net of taxes 1,183 4,656 4,343 1,146 (11,240) 1,300 (3,249)
Loss on disposal, without
tax benefit -- -- -- -- -- -- (38,343)
-------- --------- -------- ------- ------- ------- --------
Income (loss) before extraordinary
charges and cumulative effect of
accounting change 7,321 6,788 2,228 (3,212) (27,130) (320) (42,931)
Extraordinary charges, early
repayment of debt -- (320) -- (1,186) -- -- (6,625)
Cumulative effect of accounting change -- -- -- -- (2,110) (2,110) --
-------- --------- -------- ------- ------- ------- --------
Net income (loss) $ 7,321 $ 6,468 $ 2,228 $(4,398) $(29,240) $(2,430) $(49,556)
======== ========= ======== ======= ======== ======= ========

</TABLE>
- 11 -

<PAGE> 14

NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------------------------------------- ------------------
1989 1990 1991 1992 1993 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Primary earnings per share:
Income (loss) from continuing
operations before extraordinary
charges and cumulative effect
of accounting change $ .67 $ .22 $ (.22) $ (.44) $ (1.36) $ (.14) $(.11)
Discontinued Operations:
Income (loss) from discontinued
operations .13 .48 .45 .11 (.97) .11 (.28)
Loss on disposal -- -- -- -- -- -- (3.29)
Extraordinary charge -- (.03) -- (.12) -- -- (.57)
Cumulative effect of accounting change -- -- -- -- (.18) (.18) --
-------- -------- -------- -------- -------- ------- --------
Net income (loss) $ .80 $ .67 $ .23 $ (.45) $ (2.51) $ (.21) $ (4.25)
======== ======== ======== ======== ======== ======= ========
Cash dividends per share:
Common stock $ .10 $ .12 $ .12 $ .12 $ .08 .06 $ --
Class B common stock .08 .11 .12 .12 .08 .06 --
Ratio of earnings to fixed charges(2) 2.0x 1.2x -- -- -- -- --
OTHER DATA(1):
EBITDA(3) $ 21,581 $ 20,299 $ 19,407 $ 24,523 $ 19,551 $ 17,242 $19,237
Depreciation and amortization 3,513 4,413 4,740 5,724 8,099 5,049 4,940
Capital expenditures 3,453 2,806 1,110 3,193 1,336 791 2,280
Cash interest expense 8,938 14,303 18,377 20,203 19,536 14,627 15,011
Ratio of EBITDA to cash interest
expense(4) 2.41x 1.42x 1.06x 1.21x 1.00x 1.18x 1.28x
BALANCE SHEET DATA (AT END OF PERIOD)(1):
Working capital $117,777 $136,989 $133,654 $135,886 $119,187 $133,862 $ 79,457
Total assets(5) 235,485 249,892 236,437 237,481 197,051 222,733 174,677
Total debt 178,976 177,118 167,274 151,000 164,403 158,994 175,206
Stockholders' equity (deficit) (5) 26,934 39,242 38,066 40,827 7,496 37,258 (37,949)

</TABLE>

- 12 -
<PAGE> 15
WAXMAN INDUSTRIES

NOTES TO SUMMARY FINANCIAL DATA

(1) Data relating to continuing operations reflects the acquisition of
Western American Manufacturing, Inc. in November 1990, which was
accounted for as a purchase. Discontinued operations data relates to
Ideal which was acquired in May 1989 and accounted for as a purchase.

(2) For purposes of calculating this ratio, "earnings" consist of income
(loss) from continuing operations before income taxes, extraordinary
charges and cumulative effect of accounting change and fixed charges,
and "fixed charges" consist of interest expense, including the
interest portion of rental obligations on capitalized and operating
leases (which is deemed by the Company to be one-third of all of its
rental obligations with respect to operating leases). Fiscal 1991
earnings were insufficient to cover fixed charges by $2.8 million.
Fiscal 1992 earnings were insufficient to cover fixed charges by $5.1
million. Fiscal 1993 earnings were insufficient to cover fixed
charges by $15.7 million. Earnings for the nine months ended March
31, 1993 and 1994 were insufficient to cover fixed charges by $3.0
million and $1.3 million, respectively.

(3) EBITDA represents income (loss) from continuing operations before
income taxes, extraordinary charges and cumulative effect of
accounting change plus interest expense, nonrecurring charges (which
were primarily non-cash), depreciation and amortization. The Company
has included EBITDA data (which is not a measure of financial
performance under generally accepted accounting principles) because
such data is used by certain investors to measure the ability to
service debt. EBITDA is not presented herein as an alternative to net
income, as an indicator of the Company's operating performance, or to
cash flows, as a measure of liquidity, but rather to provide
additional information relating to the Company's ability to service
its debt.

(4) For purposes of calculating this ratio, cash interest expense does not
include amortization of deferred financing costs.

(5) Certain March 31, 1993 Balance Sheet Data has been restated for the
cumulative effect of an accounting change.

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<PAGE> 16
RISK FACTORS

Prospective purchasers of the Securities should consider carefully all
of the information set forth in this Prospectus and, in particular, should
evaluate the following risks before purchasing the Securities offered hereby.

ABSENCE OF PUBLIC MARKET. At present, the Securities are owned by a
small number of investors and there is currently a limited public market for
the Securities. The Securities will not be listed on any exchange and no
assurance can be given that an active market will develop for the Securities
or, if such an active market develops, as to the liquidity of such market.

If an active trading market does not develop, purchasers of the
Securities may have difficulty liquidating their investment and the Securities
may not be readily accepted as collateral for loans. Accordingly, no
assurances can be given as to the price at which holders of the Securities will
be able to sell the Securities, if at all, and it is possible that the Notes
will trade at a price below their face value.

The liquidity of and the market prices for the Securities can be
expected to vary with changes in market and economic conditions, the financial
condition and prospects of the Company and other factors that generally
influence the market prices of securities, including fluctuations in the market
for high yield securities generally. Such fluctuations in the high yield
market may significantly affect the liquidity and market price of the Notes
independent of the financial performance of and prospects for the Company.

LEVERAGE. The Company has a high degree of leverage. At March 31,
1994, the outstanding consolidated indebtedness (excluding trade payables and
accrued liabilities) of the Company's continuing operations was $175.2 million.
On a pro forma basis, at March 31, 1994, after giving effect to the
Reorganization, the outstanding amount of such indebtedness (excluding trade
payables and accrued liabilities) would have been approximately $186.4 million.
This high degree of leverage may have important consequences, including the
following: (i) the ability of the Company to obtain additional financing in the
future for working capital, capital expenditures, debt service requirements or
other purposes may be impaired; (ii) a substantial portion of the Company's
cash flow from operations will be required to satisfy debt service obligations;
(iii) the Company may be more highly leveraged than companies with which it
competes, which may place it at a competitive disadvantage; and (iv) the
Company's high degree of leverage may make it more vulnerable in the event of a
downturn in its business and may limit its ability to capitalize on business
opportunities. Although the Company believes that its operating cash flow as
well as amounts available under the Domestic Credit Facility (as defined
herein) will be sufficient to fund working capital, capital expenditures and
debt service requirements for the next 24 months, the Company's ability to
satisfy its obligations will be dependent upon its future performance, which is
subject to prevailing economic conditions and financial, business and other
factors, including factors beyond the Company's control. Commencing March
1995, the Company is required to make quarterly principal payments of $1.0
million under its Domestic Term Loan. In addition, the Company is required to
make mandatory sinking fund payments of $17.0 million on each of September 1,
1996 and September 1, 1997 with respect to the Notes and a single payment of
$8.75 on June 1, 1998 with respect to the Senior Subordinated Notes. In
addition, the Domestic Credit Facility and the Domestic Term Loan mature on May
20, 1997, subject to extension in certain events. The Company currently
believes that additional equity must be injected into the business before any
significant deleveraging can occur. However, there can be no assurances as to
the timing or likelihood of such deleveraging.

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<PAGE> 17

To the Company's knowledge, neither its high degree of leverage nor
the bankruptcy of Ideal has resulted in the refusal by any of its customers,
suppliers or manufacturers to do business with the Company or in the alteration
of material terms which had a material impact on the Company's business.

SECURITY FOR THE NOTES; VALUE OF THE COLLATERAL. The Notes are
secured by a pledge of all of the outstanding shares of capital stock of
Barnett, Consumer Products and WOC (collectively, the "Operating Companies").
Since none of such subsidiaries has publicly traded securities, the value of
their capital stock will not be readily ascertainable and will depend upon the
market value of the assets and business of such subsidiaries. There can be no
assurance that the proceeds from the sale or sales of the capital stock pledged
to secure the Notes would be sufficient to satisfy any amounts due thereunder.

The rights of the Trustee to foreclose upon and dispose of the pledged
collateral is likely to be significantly impaired by applicable bankruptcy law
if a bankruptcy proceeding were to be commenced by or against the Company,
prior to the Trustee's having disposed of the pledged collateral. Under Title
XI of the United States Code (the "Bankruptcy Code"), a secured creditor, such
as the Trustee, is prohibited from disposing of security upon foreclosure in a
bankruptcy case, even though the debtor is in default under the applicable debt
instruments, without bankruptcy court approval. Moreover, in general, the
Bankruptcy Code prohibits the bankruptcy court from giving such permission if
the secured creditor is given "adequate protection." The meaning of the term
"adequate protection" may vary according to circumstances, but it is intended
in general to protect the value of the secured creditor's interest in the
collateral and may include cash payments or the granting of additional
security, if and at such times as the court in its discretion determines, for
any diminution in the value of the collateral as a result of the stay of
disposition during the pendency of the bankruptcy case. In view of the lack of
a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how
long payments under the Notes could be delayed following commencement of a
bankruptcy case, whether or when the Trustee could dispose of the pledged
collateral or whether or to what extent holders of the Notes would be
compensated for any delay in payment or loss of value of the pledged collateral
through the requirement of "adequate protection."

If there was an Event of Default (as defined herein) under the
Indenture which resulted in a foreclosure upon the collateral, such foreclosure
would constitute an event of default under the Domestic Credit Facility and the
Domestic Term Loan, which are secured by a pledge of substantially all of the
assets of the Operating Companies and 65% of the capital stock of the Company's
foreign subsidiaries other than Ideal. An event of default under the Domestic
Credit Facility and Domestic Term Loan includes customary events of default,
including the failure to pay principal, interest or premium on such
indebtedness, the failure to comply with the governing debt instrument, a cross
acceleration in excess of $5,000,000, certain events of bankruptcy and
judgments in excess of $5,000,000. Upon an event of default under the Domestic
Credit Facility or the Domestic Term Loan (which event of default could also
result in an event of default under the Indenture), the holders of such debt
would be permitted to accelerate such debt and to enforce their security
interest in substantially all of the assets or the capital stock of the
Operating Companies. There can be no assurance that the assets or capital
stock of the Operating Companies would be sufficient to repay in full
borrowings under the Domestic Credit Facility or the Domestic Term Loan, if
they became due, thereby diminishing or eliminating the value of the shares of
capital stock securing the Notes. In addition, any enforcement (including
foreclosure) of the security interests securing the Domestic Credit Facility or
the Domestic Term Loan or any other indebtedness of Waxman USA or the Operating
Companies could have a material adverse effect on the market price of the
capital stock of such subsidiaries and on the ability of the Trustee to realize
value through sales of the collateral pledged to secure Notes.

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<PAGE> 18

RELIANCE ON OPERATIONS OF SUBSIDIARIES; STRUCTURAL SUBORDINATION. The
Company is a holding company whose only material assets are the capital stock
of its subsidiaries, including, indirectly, all of its operating subsidiaries.
The Company conducts no business other than the provision of management
services to its subsidiaries, and is dependent on distributions from its
domestic subsidiaries in order to meet its debt service obligations including
its payment obligations with respect to the Senior Subordinated Notes and the
Notes. The Company has no other sources of funds for repayment of its debt
obligations and operating expenses. There can be no assurance that
distributions from its subsidiaries will be adequate to fund the required
payments under the Company's debt obligations. In addition, certain of the
instruments evidencing the Debt Financing, the Company's other debt obligations
and applicable state laws impose significant restrictions on the payment of
dividends and the making of loans by the Company's subsidiaries to the Company
(other than certain permitted exceptions, including payments made pursuant to
an intercorporate agreement and a tax sharing agreement). If an initial public
offering of the capital stock of any of the Company's subsidiaries is
consummated, the ability of such subsidiaries to pay dividends would be
diminished to the extent of any such capital stock sold to the public and the
ability of the Company's subsidiaries to make loans to the Company would be
limited to the extent that such transactions would have to be fair to the
holders of such capital stock.

The Company derives substantially all of its operating income from
wholly-owned subsidiaries. As a result of this holding company structure, the
creditors of the Company, including the holders of the Notes, are structurally
subordinated to all creditors of such subsidiaries with respect to the assets
and capital stock of such subsidiaries, including the lenders pursuant to the
Debt Financing and trade creditors. Accordingly, in the event of a
dissolution, bankruptcy or reorganization of the Company, the holders of the
Notes will not be entitled to receive amounts from the Company's subsidiaries
until after payment in full of all creditors of the subsidiaries of the
Company. All of the Debt Financing is at the subsidiary level.

RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS. The terms and
conditions of the instruments evidencing the Debt Financing, as well as other
indebtedness of the Company impose restrictions that affect, among other
things, the ability of the Company and/or its subsidiaries to incur debt, pay
dividends, make acquisitions, create liens, sell assets, make certain
investments and materially change the nature or conduct of its business. The
breach of any of the foregoing covenants would result in a default under the
applicable debt instrument permitting the holders of indebtedness outstanding
thereunder, subject to applicable grace periods, to accelerate such
indebtedness. Any such acceleration may cause a cross-default under the
instruments evidencing other indebtedness of the Company, and there can be no
assurance that the Company would have sufficient funds to repay or assets to
satisfy such obligations.

CONTROL BY PRINCIPAL STOCKHOLDERS; CERTAIN ANTI-TAKEOVER EFFECTS.
Approximately 16.7% of the outstanding shares of the Company's common stock,
par value $.01 per share, and 80.1% of the outstanding shares of the Company's
Class B common stock are held by Melvin and Armond Waxman, brothers and
respectively, the Chairman of the Board and Co-Chief Executive Officer and the
President and Co-Chief Executive Officer of the Company (the "Principal
Stockholders"). These holdings represent 61.1% of the outstanding voting power
of the Company. Consequently, the Principal Stockholders have sufficient
voting power to elect the entire Board of Directors of the Company and, in
general, to determine the outcome of any corporate transaction or other matter
submitted to the stockholders for approval, including any merger,
consolidation, sale of all or substantially all of the Company's assets or
"going private" transactions, and to prevent or cause a change in control of
the Company. In addition, Messrs. Melvin and Armond Waxman may have an
interest in pursuing transactions, including transactions with affiliates, that
in their judgment could enhance the value of the Company's capital stock,

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<PAGE> 19

even though such transactions might involve risks to the holders of the Notes.
In addition, certain provisions in the Company's Certificate of Incorporation,
By-laws and debt instruments, including the Change in Control provisions in the
Indenture, may be deemed to have the effect of discouraging a third party from
pursuing a non-negotiated takeover of the Company and preventing certain
changes in control.

DEFICIENCY OF EARNINGS TO FIXED CHARGES. In fiscal 1993, 1992 and
1991 and the nine months ended March 31, 1994 and 1993, the Company's earnings
(as defined in footnote 2 to Selected Financial Data) were insufficient to
cover its fixed charges by $15.7 million, $5.1 million, $2.8 million, $1.3
million and $3.0 million, respectively. The Company's business strategy,
described herein, is designed to capitalize on the growth prospects for Barnett
and Consumer Products and thereby increase earnings. The Company believes that
the successful implementation of its business strategy will enable it to reduce
or eliminate the deficiency of earnings to fixed charges. However, there can
be no assurances regarding when such deficiencies will be reduced or eliminated
or that the deficiencies experienced in the past will not reoccur.

FOREIGN SOURCING. In fiscal 1993, products manufactured outside of
the United States accounted for approximately 21% of the total product
purchases made by the Company's continuing operations. Foreign sourcing
involves a number of risks, including the availability of letters of credit,
maintenance of quality standards, work stoppages, transportation delays and
interruptions, political and economic disruptions, foreign currency
fluctuations, expropriation, nationalization, the imposition of tariffs and
import and export controls and changes in governmental policies (including
United States' policy toward the foreign country where the products are
produced), which could have an adverse effect on the Company's business. The
occurrence of certain of these factors would delay or prevent the delivery of
goods ordered by the Company's customers, and such delay or inability to meet
delivery requirements would have an adverse effect on the Company's results of
operations and could have an adverse effect on the Company's relationships with
its customers. In addition, the loss of a foreign manufacturer could have a
short-term adverse effect on the Company's business until alternative supply
arrangements were secured.

RELIANCE ON KEY CUSTOMERS. During fiscal 1993, Kmart and its
subsidiaries, Consumer Products' largest customer, accounted for approximately
12% of the Company's continuing operations' net sales. During the same period,
Consumer Products' ten largest customers accounted for approximately 23% of the
Company's continuing operations' net sales. The loss of or a substantial
decrease in the business of Consumer Products' largest customers could have a
material adverse effect on the Company's continuing operations.

THE COMPANY

The Company believes it is one of the leading suppliers of plumbing
products to the home repair and remodeling market in the United States. The
Company distributes electrical and hardware products, in addition to plumbing
products, in both packaged and bulk form, to approximately 45,000 customers,
including independent retailers, wholesalers and plumbing and electrical repair
and remodeling contractors. The Company is able to serve as a single source
supplier of a wide range of competitively priced, high-quality products, which
has been a significant factor in helping it to attract and retain customers.
The Company also distributes a full line of security hardware products and
copper tubing, brass fittings and other related products. The Company's
domestic business is conducted primarily through Barnett and Consumer Products.

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<PAGE> 20
The Company, which was founded in 1934, was incorporated in 1962 in
Ohio and reincorporated in Delaware in 1989. The Company's principal executive
offices are located at 24460 Aurora Road, Bedford Heights, Ohio 44146;
telephone (216) 439-1830. Unless the context otherwise indicates, the term
"Company" refers to Waxman Industries, Inc. and its subsidiaries. The term
"Waxman" refers only to Waxman Industries, Inc.

USE OF PROCEEDS

The Company will receive none of the proceeds from the sale of the
Securities by the Selling Security Holders.

If all of the 957,000 Warrants offered hereby are exercised at the
exercise price of $4.60 per share, the Company would receive $4,402,200, which
would be added to the Company's working capital and used for general corporate
purposes.

THE 1991 REFINANCING

The Securities were originally issued by the Company on September 17,
1991 in a private placement to certain institutional investors as part of a
refinancing of the Company's senior bank indebtedness. The Company originally
issued $42.5 million principal amount of Fixed Rate Notes, $7.5 million
principal amount of Floating Rate Notes and 1.0 million Warrants. The proceeds
of the private placement, along with $10 million of cash on hand, were used by
the Company to repay its $60 million term loan with four U.S. banks.

The Company concurrently entered into a three-year secured revolving
credit agreement with a U.S. bank to provide for working capital needs. The
credit facility initially provided for borrowings of up to $24 million, secured
by the inventories and accounts receivable of Waxman and certain of its
domestic subsidiaries. The credit facility was amended and restated, effective
April 1, 1993, to increase the availability to $30 million. The credit
facility was repaid and terminated in connection with the "Reorganization"
discussed below.

THE 1994 REORGANIZATION

On May 20, 1994, the Company issued Series A 12 3/4% Senior Secured
Deferred Coupon Notes Due 2004 having an initial accreted value of $50,000,000
(the "Deferred Coupon Notes") together with warrants (the "Exchange Warrants")
to purchase 2,950,000 shares of common stock, par value $.01 per share, of the
Company ("Common Stock") in exchange for $50,000,000 aggregate principal amount
of the Company's outstanding Senior Subordinated Notes pursuant to a private
exchange offer (the "Private Exchange Offer") which was a part of a series of
interrelated transactions (the "Reorganization"). In addition to the Private
Exchange Offer, the components of the Reorganization included (i) the
solicitation of the consents of the holders of the Notes to certain waivers
(the "Waiver") of and the adoption of certain amendments (the "Amendment") to
the Indenture (the "Consent Solicitation"), (ii) the establishment of a $55
million revolving credit facility (the "Domestic Credit Facility") and a $15
million term loan (the "Domestic Term Loan"; and together with the Domestic
Credit Facility, the "Debt Financing"), (iii) the solicitation of the consents
of the holders of the Senior Subordinated Notes to certain waivers of and the
adoption of certain amendments to the indenture governing the Senior
Subordinated Notes (the "Subordinated Note Solicitation") and (iv) the
repayment of the borrowings under the Company's then existing domestic
revolving credit facilities (including $27.6 under the Company's then

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<PAGE> 21
existing working capital credit facility and $1.2 million under the $5.0
million revolving credit facility of Barnett (the "Barnett Financing")).

In connection with the Reorganization, the Company restructured (the
"Corporate Restructuring") its domestic operations such that after giving
effect thereto the Company became a holding company whose only material assets
are the capital stock of its subsidiaries. As part of the Corporate
Restructuring, the Company formed (a) Waxman USA, as a holding company for the
subsidiaries that comprise and support the Company's domestic operations, (b)
Consumer Products, a wholly owned subsidiary of Waxman USA, to own and operate
Waxman Industries' Consumer Products Group Division (the "Consumer Products
Division"; all references herein to "Consumer Products" shall include the
Consumer Products Division and Waxman Consumer Products Group Inc., unless the
context otherwise requires), and (c) WOC, a wholly owned subsidiary of Waxman
USA, to own and operate Waxman USA's domestic subsidiaries, other than Barnett
and Consumer Products. On May 20, 1994, the Company effected the Corporate
Restructuring by (i) contributing the capital stock of Barnett to Waxman USA,
(ii) contributing the assets and liabilities of the Consumer Products Division
to Consumer Products, (iii) contributing the assets and liabilities of its
Madison Equipment Division to WOC, (iv) contributing the assets and liabilities
of its Medal Distributing Division to WOC, (v) merging U.S. Lock Corporation
("U.S. Lock") and LeRan Copper & Brass, Inc. ("LeRan"), each a wholly owned
subsidiary of the Company, into WOC, (vi) contributing the capital stock of
TWI, International, Inc. ("TWI") to Waxman USA and (vii) contributing the
capital stock of Western American Manufacturing, Inc. ("WAMI") to TWI.

As a result of the Corporate Restructuring, the corporate structure of
the Company and its subsidiaries is as follows:

+-----------------------------------------------------------------------------+
| WAXMAN INDUSTRIES, INC. |
+-------------------------------------+---------------------------------------+
|
+------------------------+--------------------------+
| |
+------------+-----------+ +-----------------+------------+
| WAXMAN USA INC. | | IDEAL HOLDING GROUP, INC.(1) |
+------------+-----------+ +-------------------------+----+
| |
| |
+--------+----+------------------+------------------+ |
| | | | |
+---+-----+ +----+-----+ +---+-----+ +--------+-----+ +------+---+
| BARNETT,| | WAXMAN | | WOC INC.| | TWI, | | IDEAL |
| INC. | | CONSUMER | | | |INTERNATIONAL,| | PLUMBING |
| | | PRODUCTS | | | | INC. | | GROUP, |
| | |GROUP INC.| | | | | | INC.(1) |
+---------+ +----------+ +---------+ +----+---------+ +----------+
|
+----+---------+
| CWI |
| INTERNATIONAL|
| CHINA LIMITED|
+--------------+

______________________
Each subsidiary depicted above is a wholly owned subsidiary.

(1) Ideal Holding Group, Inc.'s sole asset, Ideal Plumbing Group, Inc., is
currently being liquidated pursuant to Canadian bankruptcy laws.

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<PAGE> 22
<TABLE>
CAPITALIZATION

(IN THOUSANDS)

The following table sets forth the consolidated capitalization of the
Company at March 31, 1994 and as adjusted to reflect the Reorganization.

<CAPTION>
Actual As Adjusted
<S> <C> <C>
Current portion of long-term debt $3,178 $3,178
===== =====
Bank debt:
Domestic credit facilities 30,794 ---
Domestic Credit Facility (2) --- 29,468
Domestic Term Loan (2) --- 15,000
Senior Secured Notes due September 1, 1998, net of discount 38,646 38,646
Senior Subordinated Notes due June 1, 1999 98,750 48,750
Senior Secured Deferred Coupon Notes due June 1, 2004,
net of discount (5) --- 47,500
Convertible Debentures 2,030 2,030
Other notes payable, net of current portion 1,808 1,808
----- -----
Total long-term debt (1) 172,028 183,202
------- -------

Stockholders' equity:

Preferred stock, $.01 par value, 2,000 shares authorized; none issue $ --- $ ---
Common stock, $.01 par value, 22,000 shares authorized; 9,484 issued
and outstanding (3) 95 95
Class B common stock, $.01 par value, 6,000 shares authorized; 2,230
issued and outstanding (4) 23 23
Paid-in capital (5) 18,598 21,098
Retained deficit (55,993) (55,993)
-------- --------
Stockholders' equity before cumulative currency translation adjustments (37,277) (34,777)
Cumulative currency translation adjustments (672) (672)
--------- ---------
Total stockholders' equity (37,949) (35,449)
-------- --------
Total capitalization $134,079 $147,753
======= =======
<FN>
(1) For a description of the Company's debt, see Notes 5 and 9 to the
Notes to Consolidated Financial Statements as of March 31, 1994.

(2) Proceeds from the Domestic Credit Facility and Domestic Term Loan were
used to repay borrowings under the Company's then existing credit
facilities, accrued interest and fees and expenses associated with the
Reorganization.

(3) Does not include 1,000 shares of Common Stock reserved for issuance
upon exercise of the Warrants, 2,950 shares of Common Stock reserved
for issuance upon exercise of the Exchange Warrants or 212 shares of
Common Stock reserved for issuance upon conversion of the Convertible
Debentures. Also does not include 1,226 shares of Common Stock
reserved for issuance under the exercise of stock options outstanding
as of March 31, 1994.

(4) The Class B Common Stock is generally not transferable but is
convertible into Common Stock on a share-for-share basis at any time.
See "Description of Capital Stock."

(5) A portion of the proceeds of the Exchange Units will be allocated to
the Exchange Warrants. As a result, an adjustment has been made to
increase paid-in capital by $2,500. The related $2,500 reduction in
the recorded principal amount of the Deferred Coupon Notes will be
amortized as interest expense over the life of the Deferred Coupon
Notes.

</TABLE>

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<PAGE> 23
PRICE RANGE OF COMMON STOCK

The Company's Common Stock is listed on the New York Stock Exchange
("NYSE") under the symbol "WAX". The Company's Class B Common Stock does not
trade in the public market due to restricted transferability. However, the
Class B Common Stock may be converted into Common Stock on a share-for-share
basis at any time.

The following table sets forth the high and low closing prices of the
Common Stock as reported by the NYSE for fiscal years 1994, 1993 and 1992.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
---------------------------
1995 1994 1993 1992
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter $2.00 $1.75 $3.88 $2.25 $4.63 $3.38 $5.25 $3.75
Second Quarter 2.50 1.38 4.13 3.38 5.38 4.25
Third Quarter 3.25 2.00 5.25 3.75 8.38 4.88
Fourth Quarter 2.50 1.81 5.38 3.38 7.00 4.00
</TABLE>

On August 12, 1994, the closing price of the Common Stock, as reported
on the NYSE, was $1.88. As of August 12, 1994, there were 1,097 holders of
record of Common Stock and 145 holders of record of Class B Common Stock.

DIVIDENDS

The Company paid dividends of $.08 and $.12 per share on each class of
common stock in fiscal 1993 and 1992, respectively. On October 4, 1993, the
Company announced that it has suspended the payment of cash dividends on each
class of its common stock. Restrictions contained in the Company's debt
instruments currently prohibit the declaration and payment of any cash
dividends.

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<PAGE> 24
SELECTED FINANCIAL DATA
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)

The selected historical financial data for the fiscal years 1989
through 1993 are derived from the Company's audited consolidated financial
statements. The historical information as of and for the nine month periods
ended March 31, 1993 and 1994 is unaudited, but in the Company's opinion
reflects all adjustments (consisting only of normal recurring adjustments)
which are necessary to present fairly the Company's financial position and
results of operations as of such dates and for such periods. Results for the
nine months ended March 31, 1994 are not necessarily indicative of the results
to be expected for the fiscal year ending June 30, 1994. Effective March 31,
1994, the Company adopted a plan to dispose of its Canadian subsidiary, Ideal.
Accordingly, Ideal is reported as a discontinued operation at March 31, 1994,
and the prior period consolidated financial statements have been reclassified
to conform to the current period presentation.

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<PAGE> 25
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
-------------------------------------------------- ----------------
1989 1990 1991 1992 1993 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> C> <C>
INCOME STATEMENT DATA(1):
Net sales $194,585 $186,315 $186,327 $197,738 $204,778 $153,957 $160,245
Cost of sales 128,038 120,976 121,397 127,115 137,244 102,035 104,180
-------- -------- -------- -------- -------- -------- --------
Gross profit 66,547 65,338 64,930 70,623 67,534 51,922 56,065
Operating expenses 48,479 49,452 50,263 51,824 56,081 39,729 41,769
Restructuring and other
nonrecurring charges -- -- -- 3,900 6,762 -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss) 18,068 15,886 14,667 14,899 4,691 12,193 14,296
Interest expense, net 8,136 12,796 17,462 20,025 20,365 15,242 15,635
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing operations
before income taxes,
extraordinary charges and
cumulative effect of accounting
change 9,932 3,090 (2,795) (5,126) (15,674) (3,049) (1,339)
Provision (benefit) for income taxes 3,794 958 (680) (768) 216 (1,429) --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing operations
before extraordinary charges
and cumulative effect of
accounting change 6,138 2,132 (2,115) (4,358) (15,890) (1,620) (1,339)
Discontinued Operations - Ideal
Income (loss) from discontinued
operations, net of taxes 1,183 4,656 4,343 1,146 (11,240) 1,300 (3,249)
Loss on disposal, without
tax benefit -- -- -- -- -- -- (38,343)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
charges and cumulative effect of
accounting change 7,321 6,788 2,228 (3,212) (27,130) (320) (42,931)
Extraordinary charges, early
repayment of debt -- (320) -- (1,186) -- -- (6,625)
Cumulative effect of accounting change -- -- -- -- (2,110) (2,110) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) $ 7,321 $ 6,468 $ 2,228 $ (4,398) $(29,240) $ (2,430) $(49,556)
======== ======== ======== ======== ======== ======== ========

</TABLE>

- 23 -
<PAGE> 26
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
------------------------------------------------------- ------------------
1989 1990 1991 1992 1993 1993 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Primary earnings per share:
Income (loss) from continuing
operations before extraordinary
charges and cumulative effect
of accounting change $ .67 $ .22 $ (.22) $ (.44) $ (1.36) $ (.14) $ (.11)
Discontinued Operations:
Income (loss) from discontinued
operations .13 .48 .45 .11 (.97) .11 (.28)
Loss on disposal -- -- -- -- -- -- (3.29)
Extraordinary charge -- (.03) -- (.12) -- -- (.57)
Cumulative effect of accounting change -- -- -- -- (.18) (.18) --
-------- -------- -------- -------- -------- -------- -------
Net income (loss) $ .80 $ .67 $ .23 $ (.45) $ (2.51) $ (.21) $ (4.25)
======== ======== ======== ======== ======== ======== =======
Cash dividends per share:
Common stock $ .10 $ .12 $ .12 $ .12 $ .80 .06 $ --
Class B common stock .08 .11 .12 .12 $ .08 .06 --
Ratio of earnings to fixed charges(2) 2.0x 1.2x -- -- -- -- --
OTHER DATA(1):
EBITDA(3) $ 21,581 $ 20,299 $ 19,407 $ 24,523 $ 19,551 $ 17,242 $ 19,237
Depreciation and amortization 3,513 4,413 4,740 5,724 8,099 5,049 4,940
Capital expenditures 3,453 2,806 1,110 3,193 1,336 791 2,280
Cash interest expense 8,938 14,303 18,377 20,203 19,536 14,627 15,011
Ratio of EBITDA to cash interest
expense(4) 2.41x 1.42x 1.06x 1.21x 1.00x 1.18x 1.28x
BALANCE SHEET DATA (AT END OF PERIOD)(1):
Working capital $117,777 $136,989 $133,654 $135,886 $119,187 $133,862 $ 79,457
Total assets(5) 235,485 249,892 236,437 237,481 197,051 222,733 174,677
Total debt 178,976 177,118 167,274 151,000 164,403 158,994 175,206
Stockholders' equity (deficit) (5) 26,934 39,242 38,066 40,827 7,496 37,258 (37,949)
</TABLE>

- 24 -
<PAGE> 27
WAXMAN INDUSTRIES

NOTES TO SELECTED FINANCIAL DATA

(4) For purposes of calculating this ratio, cash interest expense does not
include amortization of deferred financing costs.

(5) Certain March 31, 1993 Balance Sheet Data has been restated for the
cumulative effect of an accounting change.

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<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

GENERAL.

The Company operates in a single business segment--the distribution of
plumbing, electrical and hardware products. The Company's business is
conducted in the United States primarily through Barnett and Consumer Products.

The Company's recent operating results have been adversely affected by
restructuring as well as several other nonrecurring charges. In fiscal 1993,
the Company recorded $6.8 million of restructuring and other nonrecurring
charges as well as $1.2 million of charges included in operating expenses which
the Company believes are nonrecurring. In fiscal 1992, the Company recorded
$3.9 million of restructuring and other nonrecurring charges.

The fiscal 1993 restructuring charge consists of $4.6 million related
to the expected losses in connection with the disposal of three small operating
units. The decision to dispose of the three entities was based in part on the
Company's strategy to refocus and build on its core businesses in the U.S.
(i.e., Consumer Products and Barnett). The Company completed the sale of one
of these operating units in October 1993. The Company was unable to come to
terms with the prospective buyer of the other two entities and the consummation
of a sale of these businesses is not expected to occur in the foreseeable
future, if at all. The remainder of the restructuring charge includes $1.6
million of costs incurred to consolidate administrative functions and transfer
two of Consumer Products' domestic packaging facilities to Mexico in order to
take advantage of that country's lower labor costs and $0.6 million related to
the Company's decision not to proceed with the securities offering of Barnett
in fiscal 1993, as it was unlikely that such offering would be consummated in
the near future. In addition, fiscal 1993 operating expenses include $1.2
million of accelerated amortization relating to certain warehouse start-up and
catalog costs to conform with prevailing industry practice. The change to
accelerated amortization was made during the fourth quarter of fiscal 1993 and
applied retroactively to July 1, 1992. The $1.2 million of accelerated
amortization, which is included in selling, general and administrative expense,
is primarily the result of the introduction of a new catalog, and in
management's opinion, is not indicative of the expected impact of accelerated
amortization on future operating results.

The fiscal 1992 restructuring charge consisted of a $3.9 million
capital loss realized upon the sale of the Company's portfolio of debt
securities.

Effective March 31, 1994, the Company adopted a plan to dispose of its
Canadian subsidiary, Ideal. Unlike the Company's U.S. operations which supply
products to customers in the home repair and remodeling market through mass
retailers, Ideal primarily serves customers in the Canadian new construction
market through independent contractors. This action was prompted by a number of
factors which had adversely affected Ideal's results of operations over the
past several years and more recently had resulted in severe liquidity problems
and jeopardized Ideal's ability to continue conducting its operations. At the
time the plan of disposition was adopted, the Company expected that the
disposition would be accomplished through a sale of the business to a group of
investors which included members of Ideal's management. Such transaction would
have required the consent of Ideal's Canadian banks as borrowings under its
bank credit agreements were collateralized by all of the assets and capital
stock of Ideal. The bank considered the management group's acquisition
proposal; however, the proposal was subsequently rejected. On May 5, 1994,
without advance notice, Ideal's Canadian bank filed an involuntary bankruptcy
petition against Ideal citing defaults under the bank credit agreements
(borrowings under these agreements are non-recourse to Waxman Industries). The
Company has not contested the bank's efforts

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<PAGE> 29
to effect the orderly disposition of Ideal. On May 30, 1994, Ideal was
declared bankrupt by the Canadian court and, as a result, the Company's
ownership and control of Ideal effectively ceased on such date. The estimated
loss on disposal totals $38.3 million, without tax benefits, and represents a
complete write-off of the Company's investment in Ideal. See Notes 3 and 12 to
Notes to Consolidated Financial Statements.

At March 31, 1994, Ideal is reported as a discontinued operation and
the Company's consolidated financial statements have been reclassified to
report separately Ideal's net assets and results of operations. Prior period
consolidated financial statements have been reclassified to conform to the
current period presentation.

The following table sets forth certain items reflected in the
Company's Consolidated Statements of Income expressed as a percentage of net
sales.

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-----------------------
NINE MONTHS ENDED
YEARS ENDED JUNE 30, MARCH 31,
-------------------- ---------
1993 1992 1991 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross profit 33.0% 35.7% 34.8% 35.0% 33.7%
Operating expenses 27.4 26.2 27.0 26.1 25.8
Restructuring and other
nonrecurring charges 3.3 2.0 -- -- --
Operating income (loss) 2.3 7.5 7.9 8.9 7.9
Interest expense, net 9.9 10.1 9.4 9.7 9.9
Income (loss) from continuing
operations before income taxes,
extraordinary charge and
cumulative effect of accounting
change (7.6) (2.6) (1.5) (0.8) (2.0)
Income (loss) before extraordinary
charge and cumulative effect
of accounting change (13.2) (1.6) 1.2 (26.8) (0.2)
Net income (loss) (14.3) (2.2) 1.2 (30.9) (1.6)
</TABLE>

NINE MONTHS ENDED MARCH 31, 1994 VERSUS MARCH 31, 1993

NET SALES.

Net sales from continuing operations for the 1994 nine month period
increased 4.1%, from $154.0 million to $160.2 million. The Company's net
sales were adversely affected by the sale of H. Belanger Plumbing Accessories
(Belanger) in October 1993. Belanger's net sales for the 1994 nine month
period totaled $1.5 million as compared to $5.0 million in the 1993 nine month
period. Net sales increased 6.5% for the nine months ended March 31, 1994
after excluding the impact of Belanger. The net sales increases are primarily
the result of the continued growth of Barnett. Barnett's net sales increased
$8.7 million or 14.2% from $61.2 million in the 1993 nine month period to $69.9
million in the 1994 nine month period. Sales of new products accounted for
$5.0 million of the increase for the 1994 nine month period. The remainder of
Barnett's increases were the result of opening additional mail order
warehouses, as well as the growth of Barnett's existing customer base. Barnett
opened two additional warehouses during the 1994 nine month period, increasing
the total number of warehouses to 28. Also contributing to the increases in
net sales were higher net sales from Consumer Products. Consumer Product's net
sales increased 4.5% from $50.9 million in the 1993 nine month period to $53.2
million in the 1994 nine month period. The increase in Consumer Product's net
sales is primarily the result of the sale of additional

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<PAGE> 30

existing product lines to several of its existing customers. Management
believes that the change in the continuing operations' net sales is primarily
the result of changes in volume.

GROSS PROFIT.

The Company's gross margins increased from 33.7% in the 1993 nine
month period to 35.0% in the 1994 nine month period. The increase in the
Company's gross margins is primarily a result of improved margins at Barnett.
Barnett's gross margins have been favorably impacted by increased sales of
higher margin proprietary branded products. The favorable impact of Barnett's
margins was offset, in part, by lower gross margins at Consumer Products.
Consumer Products' margins declined as a result of proportionately lower sales
of higher margin packaged products, as well as competitive pressures within its
market relating to the pricing of new business. Management does not believe
that the decline in margin is a continuing trend as currently expected business
opportunities involve higher margin products. The sale of Belanger had no
significant affect on gross margin. Excluding the impact of Belanger, gross
margin would have been 33.6% in the 1993 nine month period as compared to 35.0%
in the 1994 nine month period.

OPERATING EXPENSES.

The Company's operating expenses from the Company increased 5.1% for
the 1994 nine month period from $39.7 million in the 1993 nine month period to
$41.8 million in the 1994 nine month period. Operating expenses increased 8.3%
for the 1994 nine month period from $38.1 million in the 1993 nine month period
to $41.2 in the 1994 nine month period excluding the sale of Belanger. These
increases were due primarily to increases in operating expenses for Barnett.
Barnett's operating expenses increased approximately $2.5 million in the 1994
nine month period. The majority of the increase in Barnett's operating
expenses related to increased warehouse and selling and advertising costs. The
increase in warehouse and selling and advertising costs was $.5 million and
$1.0 million, respectively. These increases primarily related to the opening
of new mail order warehouses during the 1994 nine month period and increased
promotional activity.

OPERATING INCOME.

The Company's operating income totaled $14.3 million or 8.9% of net
sales and $12.2 million or 7.9% of net sales for the 1994 and 1993 nine month
periods, respectively.

The Company's operating income increased 17.3% for the 1994 nine month
period, as compared with the comparable prior year periods. Excluding the
impact of Belanger, which was sold in October 1993, operating income increased
18.8%. The improved operating income was the result of higher gross margins
offset, in part, by increased operating expenses.

INTEREST EXPENSE.

The Company's interest expense totaled $15.6 million for the 1994 nine
month period, compared with $15.2 million for the 1993 nine month period.
Average borrowings outstanding increased from $158.7 million and $158.1 million
in the 1993 nine month period, to $168.5 million for the same period in the
current year. The increase in average borrowings outstanding is due to
increased working capital needs relating to the growth of the Company's
operations. The weighted average interest rate decreased from 12.6% in the
1993 nine month period to 12.1% in the same period in the current fiscal year.
As a result of the debt refinancing, there will be a savings of cash interest
expense of $6.9 million annually for five years. In addition, as a result of
the debt refinancing, the level of debt increased approximately $11.0 million.
The additional indebtedness will offset, in part, the cash interest savings
discussed above. The Company's weighted average interest is expected to
increase by approximately 0.5% as a result of the completion of the
refinancing.

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<PAGE> 31
INCOME TAXES.

In accordance with the provisions of SFAS 109, the Company is unable
to benefit losses in the current year. The Company has $11.5 million of
available domestic net operating loss carryforwards which expire in 2008, the
benefit of which has been reduced 100% by a valuation allowance. The Company
will continue to evaluate the valuation allowance and to the extent that the
Company is able to recognize tax benefits in the future, such recognition will
favorably affect future results of operations. See Note 5 for a discussion of
anticipated additional net operating losses which would result from the
disposition of Ideal.

LOSS FROM CONTINUING OPERATIONS.

The Company's loss from continuing operations for the 1994 nine month
period, the loss from continuing operations totaled $1.3 million compared with
a loss of $1.6 million in the 1993 nine month period. The increase in the loss
from continuing operations in the current year periods is due to the Company's
inability to tax benefit losses in the current year.

DISCONTINUED OPERATIONS.

The Company's net loss from discontinued operations for the 1994 nine
month period totaled $3.2 million, compared with net income of $1.3 million in
the 1993 nine month period. The Company recognized a loss on the disposal of
Ideal of approximately $38.3 million in the 1994 third quarter.

EXTRAORDINARY CHARGE.

The Company recognized a $6.6 million extraordinary charge, without
tax benefit, in the 1994 third quarter as a result of the refinancing of the
$50 million of Subordinated Notes as well as borrowings under the domestic bank
credit facilities. The extraordinary charge included the fees paid upon the
exchange of the Subordinated Notes along with the accelerated amortization of
unamortized debt discount and issuance costs.

Although no specific transaction is currently contemplated, the
Company believes that additional financing transactions will be required during
the next twenty-four months to provide funds to satisfy, or to refinance the
notes requiring, its sinking fund payments. See "-- Liquidity and Capital
Resources." The Company expects that additional extraordinary charges will be
incurred as a result of any such financing transactions. There can, however,
be no assurances with respect to the timing and magnitude of any such
extraordinary changes.

NET LOSS.

The Company's net loss (including those relating to Ideal) for the
1994 nine month period totaled $49.6 million compared with a net loss of $2.4
million in the 1993 nine month period. The 1993 nine month period includes a
$2.1 million charge for the cumulative effect of a change in accounting for
warehouse and catalog costs, which was made during the fourth quarter of fiscal
1993 and was applied retroactively to July 1, 1992.

FISCAL 1993 VERSUS FISCAL 1992

NET SALES.

The Company's net sales from continuing operations for fiscal 1993
totaled $204.8 million compared with $197.7 million in fiscal 1992, an increase
of 3.6%. Barnett's net sales increased 14.9% from $72.1 million in fiscal 1992
to $82.9 million in fiscal 1993. New product introductions accounted for $5.6
million of this increase. In addition, the new catalog of maintenance products
introduced in January 1992 generated approximately $2.2 million in incremental
sales. The remainder of Barnett's increase was the result of the

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<PAGE> 32
opening of additional mail order warehouses, as well as the growth of Barnett's
existing customer base. Barnett opened three additional mail order warehouses
during fiscal 1993, increasing the total number of warehouses to 26. The
increase from Barnett was offset, in part, by lower net sales from Consumer
Products. Consumer Products' net sales totaled $67.5 million in fiscal 1993
compared with $70.0 million in fiscal 1992, a decrease of 3.6%. Management
believes that the change in the domestic operations' net sales is primarily the
result of changes in volume.

GROSS PROFIT.

The Company's gross margin was 33.0% in fiscal 1993 compared with
35.7% in fiscal 1992. Barnett's gross margin declined approximately one-half
of one percentage point and Consumer Products' gross margin declined
approximately four percentage points. The majority of Consumer Products'
decline in margin is attributable to proportionately lower sales of higher
margin packaged products as well as competitive pressures within its markets
relating to the pricing of new business. Management expect Consumer Products'
margin decline to continue in the first part of fiscal 1994.

OPERATING EXPENSES.

The Company's operating expenses totaled $56.1 million or 27.4% of net
sales, in fiscal 1993 compared with $51.8 million, or 26.2% of net sales, in
fiscal 1992, an increase of $4.3 million, or 8.2%. Approximately $1.2 million
of this increase relates to accelerated amortization of certain warehouse
start-up and catalog costs during fiscal 1993 to conform with prevailing
industry practice. This change was made during the fourth quarter and was
applied retroactively to July 1, 1992. The effect of this change on fiscal
1993 results was to increase amortization expense by $1.2 million. This
increase is primarily the result of the introduction of a new catalog, and in
management's opinion, is not indicative of the expected impact of accelerated
amortization on future operating results. The cumulative effect of this change
on prior years totaled $2.1 million and is reported separately in the income
statement, without tax benefit, as a change in accounting. Excluding the
impact of this item, operating expenses were up 6.7% primarily due to increases
at Barnett. Barnett's operating expenses (excluding the accelerated
amortization) increased approximately $2.1 million or 13.4%, which is less than
Barnett's 14.9% increase in net sales between the years. Approximately $1.3
million of Barnett's increase in operating expenses is related to the opening
of new mail order warehouses. Consumer Products' operating expenses increased
approximately $0.4 million between years.

RESTRUCTURING AND OTHER NON-RECURRING CHARGES.

As discussed above, the Company recorded several nonrecurring charges
during fiscal 1993 including an $6.8 million restructuring charge. Fiscal 1992
results include a $3.9 million restructuring charge which represented a capital
loss realized upon the sale of the Company's portfolio of debt securities.

OPERATING INCOME.

The Company's operating income totaled $4.7 million in fiscal 1993
compared with $14.9 million in fiscal 1992, a decrease of 68.5%. Current year
results were negatively impacted by the $4.2 million restructuring charge
described above, and the $1.2 million of accelerated amortization described
above. The remainder of the decrease was primarily attributable to a $2.5
million decline of Consumer Products' gross margin.

INTEREST EXPENSE.

The Company's net interest expense totaled $20.4 million for fiscal
year 1993 compared with $20.0 million for fiscal year 1992, an increase of
1.7%. Average borrowings outstanding totaled $159.1 million in fiscal 1993, as
compared with $159.7 million in fiscal 1992. Weighted average borrowings in
fiscal 1992

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<PAGE> 33
included amounts which the Company borrowed under a domestic term loan which
were invested in highly liquid short-term securities and used for working
capital purposes until the Company obtained its revolving credit facility in
September 1991. Excluding the impact of these borrowings, average borrowings
for fiscal 1992 were $156.4 million. The weighted average interest rate for
fiscal year 1993 was 12.9% compared with 13.2% in the prior year.

LOSS FROM CONTINUING OPERATIONS.

The Company's fiscal 1993 loss from continuing operations totaled
$15.9 million compared with a loss of $4.4 million in fiscal 1992.

DISCONTINUED OPERATIONS.

The Company's fiscal 1993 net loss from discontinued operations
totaled $11.2 million compared with net income of $1.1 million in fiscal 1992.

NET INCOME (LOSS).

The Company's fiscal 1993 net loss totaled $29.2 million and includes
a $2.1 million charge for the cumulative effect of the change in accounting
discussed above. The net loss for fiscal 1992 was $4.4 million and included a
$1.2 million extraordinary charge for the early repayment of debt. The Company
has not been able to benefit from any of its current year losses for tax
purposes. As a result, it has available $11.5 million of domestic net
operating loss carryforwards to offset future tax provisions. See "Impact of
New Accounting Standards" for a discussion of the new accounting standard for
income taxes and the impact it will have on the Company.

FISCAL 1992 VERSUS FISCAL 1991

NET SALES.

The Company's net sales from continuing operations for fiscal 1992
totaled $197.7 million compared with $186.3 million in fiscal 1991, an increase
of 6.1%. Barnett's net sales increased 15.4% from $62.5 million in fiscal 1991
to $72.1 million in fiscal 1992. New product introductions accounted for $5.9
million of this increase. In addition, the new catalog of maintenance products
introduced in January 1992 generated approximately $1.1 million of net sales in
fiscal 1992. The remainder of Barnett's increase was the result of the opening
of additional mail order warehouses, as well as the growth of Barnett's
existing customer base. During fiscal 1992, Barnett opened four additional
mail order warehouses bringing its total number of warehouses to 23. Consumer
Products' net sales in fiscal 1992 totaled $70.0 million, an increase of 1.9%
over fiscal 1991 sales of $68.7 million.

GROSS PROFIT.

The Company's gross margin was 35.7% in fiscal 1992 compared with
34.8% in fiscal 1991. Barnett's gross margin increased approximately one-third
of one percentage point as a result of a more profitable product mix and the
use of more economical sources of purchased materials. Consumer Products'
gross margin remained constant between years.

OPERATING EXPENSES.

The Company's operating expenses totaled $51.8 million, or 26.2% of
net sales, in fiscal 1992 compared with $50.3 million, or 27.0% of net sales,
in fiscal 1991, an increase of $1.5 million, or 3.1%. Barnett's

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operating expenses increased approximately $2.2 million of which approximately
$0.7 million is related to the opening of new mail order warehouses.

RESTRUCTURING AND OTHER NONRECURRING CHARGES.

During the fourth quarter of fiscal 1992, the Company's results were
affected by nonrecurring charges totaling $3.9 million, which represents a
capital loss realized upon the sale of the Company's portfolio of debt
securities.

OPERATING INCOME.

The Company's operating income was $14.9 million in fiscal 1992
compared with $14.7 million in fiscal 1991, an increase of 1.6%. Such increase
was primarily the result of the higher net sales and gross profit levels.

INTEREST EXPENSE.

Net interest expense totaled $20.0 million for fiscal 1992 compared
with $17.5 million for fiscal 1991. Average borrowings outstanding totaled
$159.7 million in fiscal 1992 compared with $153.3 million in the prior year.
The increase in average borrowings relates primarily to borrowings for
short-term working capital needs. In addition, borrowings for fiscal 1992
include amounts borrowed under the Company's domestic term loan which were
invested in highly liquid short-term securities during the first quarter of the
fiscal year. The amounts invested were subsequently used in connection with
the repayment of the domestic term loan. Excluding the impact of these
borrowings, average borrowings for fiscal 1992 were $156.4 million. The
weighted average interest rate for fiscal 1992 increased to 13.2% from 12.3% in
the prior year primarily due to the issuance of the Notes in September 1991,
the proceeds from which were used to retire borrowings under the Company's then
existing credit facilities.

LOSS FROM CONTINUING OPERATIONS.

The Company's fiscal 1992 loss from continuing operations totaled $4.4
million compared with a loss of $2.1 million in fiscal 1991.

DISCONTINUED OPERATIONS.

The Company's fiscal 1992 net income from discontinued operations
totaled $1.1 million compared with net income of $4.3 million in fiscal 1991.

EXTRAORDINARY CHARGE.

During the fourth quarter of fiscal 1992, the Company repurchased
certain debt securities and incurred an extraordinary charge which totaled $1.2
million (net of the applicable income tax benefit). The extraordinary charge
included the market premium paid and the accelerated amortization of
unamortized debt discount and issuance costs.

NET INCOME (LOSS).

The Company's fiscal 1992 net loss totaled $4.4 million and included a
$1.2 million extraordinary charge for the early repayment of debt. Net income
for fiscal 1991 was $2.2 million.

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LIQUIDITY AND CAPITAL RESOURCES

On May 20, 1994, the Company completed a financial restructuring which
was undertaken to modify the Company's capital structure to facilitate the
growth of its domestic businesses by reducing cash interest expense and
increasing the Company's liquidity. See Note 12 to Notes to Consolidated
Financial Statements.

As part of the restructuring, the Company exchanged $50 million of its
Senior Subordinated Notes for $50 million initial accreted value of Deferred
Coupon Notes. Approximately $48.8 million of the Senior Subordinated Notes
remain outstanding. The Deferred Coupon Notes have no cash interest
requirements until June 1, 1999. As a result of the exchange, the Company's
cash interest requirements have been reduced by approximately $6.9 million
annually for five years. In addition, the $50 million of Senior Subordinated
Notes exchanged can be used to satisfy the Company's mandatory redemption
requirements with respect to such issue and, as such, the $20 million mandatory
redemption payments due on June 1, 1996 and 1997 have been satisfied and the
mandatory redemption payment due on June 1, 1998 has been reduced to $8.8
million. The Company does, however, continue to have annual mandatory
redemption payments of $17.0 million commencing on September 1, 1996 with
respect to the Notes.

As part of the Reorganization, the Operating Companies entered into a
$55 million, four-year, secured credit facility with an affiliate of Citibank,
N.A., as agent for certain financial institutions. The Domestic Credit
Facility, which has an initial term of three years, will be extended for an
additional year if the Notes have been redeemed within 33 months after the
initial borrowing under the Domestic Credit Facility. The Domestic Credit
Facility is subject to borrowing base formulas. Borrowings under the Domestic
Credit Facility bear interest at (i) the per annum rate of 1.5% plus the
highest of (a) the prime rate of Citibank N.A., (b) the federal funds rate plus
0.5% and (c) a formula with respect to three month certificates of deposit of
major United States money market banks or (ii) LIBOR plus 3.0%. These rates
will be increased by 0.5% until such time as the Domestic Term Loan, discussed
below, has been repaid in full. These rates will be reduced by up to 0.5% if
Waxman USA achieves certain performance criteria based on the ratio of EBITDA
to fixed charges. The facility includes a letter of credit subfacility of $20
million. The Domestic Credit Facility is secured by the accounts receivable,
inventory, certain general intangibles and unencumbered fixed assets of the
Operating Companies and 65% of the capital stock of one subsidiary of TWI and
100% of the capital stock of another such subsidiary. In addition, the
facility requires the Operating Companies to maintain cash collateral accounts
into which all available funds will be deposited and applied to service the
facility on a daily basis. The Domestic Credit Facility prohibits dividends
and distributions by the Operating Companies except in certain limited
instances. The Domestic Credit Facility contains customary negative,
affirmative and financial covenants and conditions. On the date hereof,
availability under the Domestic Credit Facility is approximately $____ million.

The Domestic Credit Agreement contains customary events of default,
including the following: (i) any Operating Company shall fail to make any
payment of principal or interest or any other amount due under the agreements
related to the Domestic Credit Facility or fail to perform any covenant (after
the expiration of any applicable grace period) thereunder, or any
representation or warranty made in connection therewith shall prove to have
been incorrect in any material respect when made or demand made; (ii) the
Company or any of its subsidiaries (other than Ideal Holding Group and its
subsidiaries) shall fail to pay any indebtedness having a principal amount of
$5,000,000 or more; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such indebtedness, if the
effect of such event or condition is to accelerate, or to permit the
acceleration of (after the expiration of any applicable period of grace), the
maturity of such indebtedness; or any such indebtedness shall become or be
declared to be due and payable, or required to be repaid (other than by a
regularly scheduled required prepayment), or the Company or any of its
subsidiaries (other than Ideal Holding Group and its subsidiaries) shall be
required to repurchase or offer to repurchase such indebtedness, prior to the
stated maturity thereof; (iii) certain events of bankruptcy with respect to the
Company or any of its subsidiaries (other than Ideal Holding Group and its
subsidiaries); (iv) there shall occur any Change of Control (as defined in the
Domestic Credit Facility); (v) there shall occur a Material Adverse Change (as

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defined in the Domestic Credit Facility) or an event which would have a
Material Adverse Effect (as defined in the Domestic Credit Agreement).

As part of the Reorganization, the Operating Companies entered into a
$15.0 million three-year term loan with Citibank, N.A., as agent. The Domestic
Term Loan bear interest at a rate per annum equal to 2.0% over the interest
rate under the Domestic Credit Facility and is secured by a junior lien on the
collateral under the Domestic Credit Facility. A one-time fee of 1.0% of the
principal amount outstanding under the Domestic Term Loan will be payable if
such loan is not repaid within 6 months after May 20, 1994. Principal payments
on the Domestic Term Loan of $1.0 million each will be required quarterly
commencing at the end of the third quarter following May 20, 1994. The
Domestic Term Loan will be required to be prepaid if Waxman USA completes a
financing sufficient to retire the Subordinated Notes, the Notes and the
Domestic Term Loan. The Domestic Term Loan contains negative, affirmative and
financial covenants, conditions and events of default substantially the same as
those under the Domestic Credit Facility. See Note 12 to Notes to Consolidated
Financial Statements for a more complete discussion of the new domestic credit
facility and domestic term loan.

On June 17, 1994, the Company purchased $1.875 million of its $2.03
million outstanding 9.5% Convertible Subordinated Debentures due 2007 pursuant
to its offer to purchase made on April 28, 1994.

The Company does not have any commitments to make substantial capital
expenditures. However, the Company does expect to open 3 to 4 Barnett
warehouses over the next twelve months. The average cash cost to open a Barnett
warehouse is approximately $0.5 million, including approximately $250,000 for
inventory and approximately $250,000 for fixed assets, leasehold improvements
and startup costs.

The Company expects to incur approximately $0.5 million of costs
relating to the disposition of Ideal.

The Company currently has no significant principal repayment
requirements. Commencing March 1995, the Company will be required to make
quarterly principal payments of $1.0 million under its Domestic Term Loan. In
addition, the Company is required to make mandatory sinking fund payments of
$17.0 million relating to its Senior Secured Notes on each of September 1, 1996
and 1997. The Company is also required to make a mandatory sinking fund
payment of $8.75 million relating to its 13 3/4% Senior Subordinated Notes on
June 1, 1998.

As a result of the issuance of the Deferred Coupon Notes which reduces
cash interest requirements by approximately $6.9 million annually until June 1,
1999, the Company believes that funds generated from operations along with
funds available under the Company's revolving credit facility will be
sufficient to satisfy the Company's liquidity requirements (including the
Domestic Term Loan principal payments) for the next twenty-four months. The
Company believes that additional financing transactions will be required to
provide funds to satisfy, or to refinance the notes requiring, its sinking fund
payments.

DISCUSSION OF CASH FLOWS

For the 1994 nine month period, the Company's continuing operations
generated $1.2 million of cash flow from operations which included a use of
$3.1 million of cash for increased working capital. The Company's working
capital levels have increased in response to its higher net sales levels. Cash
flow used for investments totaled $2.6 million. During October 1993, the
Company generated approximately $3.0 million of cash from the sale of Belanger.
Capital expenditures totaled approximately $2.3 million in the 1994 nine month
period. Changes in other assets increased approximately $3.3 million as a
result of costs associated with the refinancing. Financing activities
generated approximately $9.5 million of cash flow as the Company increased
amounts outstanding under its revolving credit facilities.

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FIXED CHARGE COVERAGE RATIO

Fiscal 1991 earnings were insufficient to cover fixed charged by $2.8
million. Fiscal 1992 earnings were insufficient to cover fixed charges by $5.1
million. Fiscal 1993 earnings were insufficient to cover fixed charges by
$15.7 million. Earnings for the nine months ended March 31, 1993 and 1994 were
insufficient to cover fixed charges by $3.0 million and $1.3 million,
respectively. The Company's business strategy, described herein, is designed
to capitalize on the growth prospects for Barnett and Consumer Products and
thereby increase earnings. The Company believes that the successful
implementation of its business strategy will enable it to reduce or eliminate
the deficiency of earnings to fixed charges. However, there can be no
assurances regarding with such deficiencies will be reduced or eliminated or
that the deficiencies experienced in the past will not reoccur.

IMPACT OF NEW ACCOUNTING STANDARDS

In February 1992, the Financial Accounting Standards Board (the FASB)
issued SFAS No. 109, "Accounting for Income Taxes." The Company adopted SFAS
No. 109 during the first quarter of its fiscal year ending June 30, 1994. SFAS
No. 109 requires the Company to recognize income tax benefits for loss
carryforwards which have not previously been recorded. The tax benefits
recognized must be reduced by a valuation allowance in certain circumstances.
The Company did not recognize a benefit and such adoption did not have a
material effect upon its results of operations or financial position. However,
to the extent that the Company is able to recognize tax benefits in the future,
such recognition will favorably affect future results of operations. The FASB
has also issued SFAS No. 106, "Employers' Accounting for Postretirement
Benefits other than Pensions" and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The Company does not currently maintain any
postretirement or postemployment benefit plans or programs which would be
subject to such accounting standards.

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BUSINESS

GENERAL

The Company believes that it is one of the leading suppliers of
plumbing products to the home repair and remodeling market in the United
States. The Company distributes plumbing, electrical and hardware products, in
both packaged and bulk form, to D-I-Y retailers, mass merchandisers, smaller
independent retailers and plumbing, electrical repair and remodeling
contractors.

The Company's business is conducted through its indirect wholly owned
subsidiaries, Barnett, Consumer Products, WOC and TWI. Through their
nationwide network of warehouses and distribution centers, Barnett and Consumer
Products provide their customers with a single source for an extensive line of
competitively priced, quality products. The Company's strategy of being a
low-cost supplier is facilitated by its purchase of a significant portion of
its products from low-cost foreign sources. Barnett's marketing strategy is
directed predominantly to contractors and independent retailers, as compared to
Consumer Products' strategy of focusing on mass merchandisers and larger D-I-Y
retailers. The Company's continuing operations' consolidated net sales were
$204.8 million in fiscal 1993.

BUSINESS STRATEGY

During the 1980's, the Company achieved significant revenue increases
through a combination of internal growth and strategic acquisitions of
businesses that marketed similar or complementary product lines. During the
1990's, the Company has initiated steps and is continuing to focus on
integrating the acquired businesses and improving operating efficiencies. The
Company's current strategy includes the following elements:

- EXPANSION OF BARNETT. Since its acquisition in 1984,
Barnett's revenues and operating income have grown at compound
annual rates of 11.3% and 11.1%, respectively, as a result of
(i) the expansion of its warehouse network, (ii) the
introduction of new product offerings and (iii) the
introduction in January 1992 of an additional catalog targeted
at a new customer base. The Company intends to continue to
expand Barnett's national warehouse network and expects to
open as many as four new warehouses during each of the next
several fiscal years. Barnett intends to fund this expansion
using cash flow from operations and/or available borrowings
under the Domestic Credit Facility and the Domestic Term Loan.
Barnett also intends to continue expanding its product
offerings, allowing its customers to utilize its catalogs as a
means of one-stop shopping for many of their needs. In an
effort to further increase profitability, Barnett is also
increasing the number of higher margin product offerings
bearing its proprietary trade names and trademarks.

- ENHANCE COMPETITIVE POSITION OF CONSUMER PRODUCTS. During the
past 24 months, Consumer Products has restructured its sales
and marketing functions in order to better serve the needs of
its existing and potential customers. Consumer Products
restructured its sales department by defining formal regions
of the country for which regional sales managers would have
responsibility. Prior to the restructuring, sales managers
had responsibility for specific customers without regard to
location. In addition, as part of the restructuring, in
fiscal 1993 a marketing department was established, separate
and apart from the sales department. The marketing department
is staffed with product managers who have the responsibility
of identifying new product programs. The restructuring of the
sales and marketing departments is complete at this time.
Consumer Products' strategy is to achieve consistent growth by
expanding its business with existing customers and by
developing new products and new customers. In order to
increase business with existing customers, Consumer Products
is focusing on developing strategic alliances with its
customers. Consumer Products seeks to (i) introduce new
products within existing

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categories, as well as new product categories, (ii) improve customer
service, (iii) introduce full service marketing programs and (iv)
achieve higher profitability for both the retailer and Consumer
Products. Management believes that Consumer Products is well
positioned to benefit from the trend among many large retailers to
consolidate their purchases among fewer vendors.

BARNETT

Barnett markets over 8,000 products to more than 32,000 active
customers through comprehensive quarterly catalogs, supplemented by monthly
promotional flyers and supported by telemarketing operations. Barnett services
its customers, who are primarily plumbing and electrical contractors serving
the repair and remodeling markets and independent retailers, through its
growing, nationwide network of 28 mail order warehouses. Barnett also
distributes a specialized quarterly catalog of maintenance products (also
supplemented by monthly promotional flyers) that is directed only to customers
responsible for the maintenance of hotels, motels, office buildings, healthcare
facilities and apartment complexes. The Company believes that this marketing
strategy effectively positions Barnett to continue to expand its customer base
and increase sales to existing customers. In fiscal 1993, Barnett's largest
customer accounted for less than 2% of Waxman USA's net sales and its top-ten
customers accounted for less than 6% of Waxman USA's net sales. Barnett's
average sale is $350. Barnett's net sales were approximately $83 million in
fiscal 1993.

Barnett was acquired by the Company in 1984. Since the acquisition,
Barnett has increased its number of warehouses from three to 28 and the number
of items in its catalog from 2,000 to 8,000. During this period, the number of
active accounts serviced by Barnett increased from 6,000 to over 32,000.
Barnett has added ten warehouses during the last three full fiscal years and
two warehouses to date in calendar 1994. Barnett plans to open up to four
warehouses annually for the next several years. Barnett has been able to
maintain its overall operating margins throughout its expansion.

Based on management's experience and knowledge of the industry, the
Company believes, in the absence of any applicable statistics, that Barnett is
the only national mail order and telemarketing operation distributing plumbing,
electrical and hardware products in the United States. The Company believes
that Barnett has significant advantages over its regional and national
competitors. Due to its size and volume of purchases, Barnett is able to
obtain purchase terms which are more favorable than those available to its
competition, enabling it to offer prices which are generally lower than those
available from its competitors. In addition to Barnett's competitive pricing
strategy, by offering over 8,000 products, Barnett is able to provide its
customers with a single source of supply for all of their needs.

MARKETING AND DISTRIBUTION

Barnett markets its products nationwide principally through regular
catalog and promotional mailings to existing and potential customers, supported
by telemarketing operations providing 24-hour-a-day, toll-free ordering and an
expanding network of 28 warehouses allowing for delivery to customers generally
within one day of the receipt of an order. The telemarketing operations are
utilized to make telephonic sales presentations to certain potential customers
only after these customers have received written promotional materials.
Barnett's telemarketing operations (as well as all other administrative
functions) are centralized at Barnett's Jacksonville, Florida headquarters.

CATALOGS

Barnett's in-house art department produces the design and layout for
its catalogs and promotional mailings, including the quarterly catalog, the
monthly promotional flyers and Barnett's catalog of maintenance products.
Barnett's catalogs are indexed and illustrated, provide simplified pricing and
highlight new product offerings.

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Barnett mails its principal catalog, containing plumbing, electrical
and hardware products, to over 32,000 active customers, including hardware and
building supply stores, lumberyards and plumbing, electrical repair and
remodeling contractors. The quarterly catalog is supplemented by monthly
promotional flyers mailed to approximately 180,000 active and potential
customers. In 1992, Barnett introduced a new semi-annual catalog of
maintenance products designed to appeal to customers responsible for the
maintenance of hotels, motels, healthcare facilities, office buildings and
apartment complexes. Since the maintenance catalog was introduced in 1992,
Barnett has added approximately 6,000 new maintenance accounts.

Barnett makes its initial contact with potential customers primarily
through promotional flyers. Barnett obtains the names of prospective customers
through the rental of mailing lists from outside marketing information services
and other sources. Barnett uses sophisticated proprietary information systems
to analyze the results of individual catalog and promotional flyer mailings and
uses the information derived from these mailings to target future mailings.
Barnett updates its mailing lists frequently to delete inactive customers.

TELEMARKETING

Barnett's telemarketing operations have been designed to make ordering
its products as convenient and efficient as possible. Barnett offers its
customers a nationwide toll-free telephone number which accepts orders on a
24-hour-a-day basis. Calls are handled by members of Barnett's well-trained
staff of 42 telemarketers who utilize Barnett's proprietary, on-line order
processing system. This system provides the telemarketing staff with access to
information about products, pricing and promotions which enables them to better
serve the customer. Barnett's telemarketing staff handles approximately 1,600
incoming calls per day.

After an order is received, a computer credit check is performed and
if credit is approved, the order is transmitted to the warehouse located
nearest the customer and is shipped within 24 hours.

In addition to receiving incoming calls, Barnett's telemarketing
operations are also utilized to make telephonic sales presentations to
potential customers who have received promotional flyers from Barnett. Also,
for several months prior to the opening of new mail order warehouses, Barnett
utilizes its telemarketing operations to generate awareness of Barnett, its
product offerings and the upcoming opening of new mail order warehouses located
near the target customers.

Barnett's telemarketing operations and information systems provide its
management with current market information such as customer purchasing patterns
and purchases, competitive pricing data, and potential new products. This
information allows Barnett to quickly react to and capitalize on business
opportunities.

WAREHOUSES

Barnett currently has four warehouses in Texas, three in Florida and
two in each of Pennsylvania, New York and California. The remaining 15
warehouses are dispersed among an equal number of states. Barnett's warehouses
are located in areas meeting certain criteria for overall population and
potential customers. Typical warehouses have approximately 15,000 to 18,000
square feet of space of which up to 600 square feet are devoted to
over-the-counter sales. Barnett has initiated a program to enlarge product
displays in the counter area of the warehouses in order to display the breadth
of its expanding product line.

Barnett's experience indicates that customers prefer to order from
local suppliers and that many local tradespeople prefer to pick up their orders
in person rather than to have them delivered. Therefore, Barnett intends to
continue the expansion of its warehouse network in order to reduce the distance
between it and the customer. For the year ended June 30, 1993, approximately
23% of Barnett's net sales were picked up by Barnett's customers.

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The factors considered in site selection include the number of
prospective customers in the local target area, the existing sales volume in
such area and the availability and cost of warehouse space, as well as other
demographic information. From its experience in opening 25 new warehouses
since its acquisition by the Company, Barnett has gained substantial expertise
in warehouse site selection, negotiating leases, reconfiguring space to suit
its needs, and stocking and opening new warehouses. The average investment
required to open a warehouse is approximately $500,000, including approximately
$250,000 for inventory.

PRODUCTS

Barnett markets an extensive line of over 8,000 plumbing, electrical
and hardware products, many of which are sold under its proprietary trade names
and trademarks. This extensive line of products allows Barnett to serve as a
single source supplier for many of its customers. Since the beginning of the
current fiscal year, Barnett has added approximately 1,100 new products,
including a new line of builders' hardware and light bulbs. Many of these
products are higher margin products bearing Barnett's proprietary trade names
and trademarks. Barnett tracks sales of new products the first year they are
offered and new products that fail to meet specified sales criteria are
discontinued. Barnett believes that its customers respond favorably to the
introduction of new product lines in areas that allow the customers to realize
additional cost savings and to utilize Barnett's catalogs as a means of
one-stop shopping for many of their needs.

In an effort to further increase profitability and to further enhance
Barnett's reputation as a leading supplier of plumbing, electrical and hardware
products, Barnett is presently increasing the number of its higher margin
product offerings bearing its proprietary trade names and trademarks.
Proprietary products offer customers high quality, lower cost alternatives to
the brand name products Barnett sells. Barnett's catalogs and monthly
promotional flyers emphasize the comparative value of such items. Barnett's
products are generally covered by a one year warranty, and returns (which
require prior authorization from Barnett) have historically been immaterial in
amount.

The following is a discussion of Barnett's principal product groups:

PLUMBING PRODUCTS. Barnett's plumbing products include faucets and
faucet parts, sinks, disposals, vanities and cabinets, tub and shower
accessories, and toilets and toilet tank repair items. Barnett's plumbing
products are sold under its proprietary trademarks Premier(TM) and Regent(TM).
Barnett also sells branded products of leading plumbing manufacturers.

ELECTRICAL PRODUCTS. Barnett's electrical products include such items
as light bulbs, light fixtures, circuit panels and breakers, switches and
receptacles, wiring devices, chimes and bells, telephone and audio/video
accessories and various appliance repair items. Certain of Barnett's
electrical products are sold under its own proprietary trademarks, such as
Premier(TM) light bulbs, and the proprietary trademarks of leading manufacturers
of electrical supplies.

HARDWARE PRODUCTS. Barnett sells a broad range of hardware products,
including hand tools and power tools, patio and closet door repair accessories,
window hardware, paint supplies, fasteners, safety equipment, cleaning supplies
and garden hoses and sprinklers.

CONSUMER PRODUCTS

Consumer Products markets and distributes approximately 9,000 products
to a wide variety of retailers, primarily D-I-Y warehouse home centers, home
improvement centers, mass merchandisers, hardware stores and lumberyards.
Representative of Consumer Products' large national retailers are Kmart,
Builders Square and Wal-Mart. Representative of Consumer Products' large
regional D-I-Y retailers are Channel Home Centers and Fred Meyer Inc. According
to rankings of the largest D-I-Y retailers published in NATIONAL HOME CENTER
NEWS,

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an industry trade publication, Consumer Products' customers include 16 of the
25 largest D-I-Y retailers in the United States. Consumer Products works
closely with its customers to develop comprehensive marketing and merchandising
programs designed to improve their profitability, efficiently manage shelf
space, reduce inventory levels and maximize floor stock turnover. Management
believes that Consumer Products is the only supplier to the D-I-Y market that
carries a complete line of plumbing, electrical and floor protective hardware
products, in both packaged and bulk form. Consumer Products also offers
certain of its customers the option of private label programs. The Company
believes that Consumer Products will also benefit from the continued growth of
the D-I-Y market which, according to DO-IT-YOURSELF RETAILING, an industry
trade publication, is expected to expand at a compound annual rate of
approximately 6% over the next four years as well as from the expected growth
of existing customers, several of which have announced expansion plans. In
fiscal 1993, Kmart and its subsidiaries accounted for approximately 12% of the
Company's continuing operations' net sales. No other customer was responsible
for more than 2% of the Company's continuing operations' net sales in fiscal
1993. Consumer Products' top ten customers accounted for approximately 24% of
the Company's continuing operations' net sales in fiscal 1993.

During the 1980's, Consumer Products significantly expanded its
business through a combination of internal growth and strategic acquisitions.
The Company's acquisition strategy focused on businesses which marketed similar
or complementary product lines to customers or markets not previously served or
through channels not previously utilized by the Company. In recent years,
Consumer Products has integrated the acquired businesses to enhance the
Company's purchasing power, improving operating efficiencies and enabling
Consumer Products to cross-sell a broader range of products to a larger
customer base. These improvements have enabled Consumer Products to withstand
financial downturns suffered by several important regional retailers to whom
Consumer Products sells its products and to significantly increase its sales to
several national retailers. Consumer Products' net sales were approximately
$67.5 million in fiscal 1993.

In recent years, the rapid growth of large mass merchandisers and
D-I-Y retailers has contributed to a significant consolidation of the United
States retail industry and the formation of large, dominant, product specific
and multi-category retailers. These retailers demand suppliers who can offer a
broad range of quality products and can provide strong marketing and
merchandising support. Due to the consolidation in the D-I-Y retail industry,
a substantial portion of Consumer Products' net sales are generated by a small
number of customers. During the past 18 months, Consumer Products has
restructured its sales and marketing functions in order to better position
itself to meet the demands of the retailers. Management believes that its
strategy of developing new products and forming strategic alliances with its
customers will enable Consumer Products to effectively compete and achieve
consistent growth. Consumer Products supplies products to its customers
pursuant to individual purchase orders and has no long-term written contract
with its customers.

MARKETING AND DISTRIBUTION

Consumer Products' marketing strategy includes offering mass
merchandisers and D-I-Y retailers a comprehensive merchandising program which
includes design, layout and setup of selling areas. Sales and service
personnel assist the retailer in determining the proper product mix in addition
to designing department layouts to effectively display products and optimally
utilize available floor and shelf space. Consumer Products supplies
point-of-purchase displays for both bulk and packaged products, including
color-coded product category signs and color-coordinated bin labels to help
identify products, and backup tags to signify products that require reordering.
Consumer Products also offers certain of its customers the option of private
label programs for their plumbing and floor care products. In-house design,
assembly and packaging capabilities enable Consumer Products to react quickly
and effectively to service its customers' changing needs. In addition,
Consumer Products' products are packaged and designed for ease of use, with
"how to" instructions included to simplify installation, even for the
uninitiated D-I-Y consumer.

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<PAGE> 43
Consumer Products' sales and service representatives visit stores
regularly to take reorders and recommend program improvements. These
representatives also file reports with Consumer Products, enabling it to stay
abreast of changing consumer demand and identify developing trends. In
addition, Consumer Products has identified a growing trend among retailers to
purchase on a "just-in-time" basis in order to reduce their inventory levels
and increase returns on investment. In order to support its customers'
"just-in-time" requirements, Consumer Products has significantly improved its
EDI capabilities.

Consumer Products operates and distributes its products through four
strategically located distribution facilities in Cleveland, Ohio, Lancaster,
Pennsylvania, Dallas, Texas and Reno, Nevada.

PRODUCTS

The following is a discussion of the principal product groups:

PLUMBING PRODUCTS. Consumer Products' plumbing products include valves
and fittings, rubber products, repair kits and tubular products such as traps
and elbows. Many of Consumer Products' plumbing products are sold under the
proprietary trade names Plumbcraft(R), PlumbKing(R), Plumbline(TM) and KF(R).
In addition, Consumer Products offers certain of its customers the option of
private label programs. Consumer Products also offers proprietary lines of
faucets under the trade name Premier(R), as well as a line of shower and bath
accessories under the proprietary trade name Spray Sensations(TM).

ELECTRICAL PRODUCTS. Consumer Products' electrical products include
items such as plugs, adapters, outlets, wire, circuit breakers and various
tools and test equipment. Consumer Products sells many of its electrical
products under the proprietary trade name Electracraft(R). Consumer Products
also sells a line of outdoor weatherproof electrical products, a full line of
ceiling fan accessories, a line of telephone accessories and connecting
devices, a line of audio and video accessories and lamp and light fixture
replacement parts and replacement glassware.

FLOOR PROTECTIVE HARDWARE PRODUCTS. Consumer Products' floor
protective hardware products include casters, doorstops and other floor,
furniture and wall protective items. Consumer Products markets a complete line
of floor protective hardware products under the proprietary trade name KF(R) and
also under private labels.

OTHER OPERATIONS

The Company has several other operations which are conducted through
WOC and TWI. These operations in the aggregate generated net sales of $48.0
million in fiscal 1993, which accounted for approximately 23.5% of the net
sales from the Company's continuing operations during the period. The most
significant of these operations are U.S. Lock, a supplier of security hardware
products, and LeRan, a supplier of copper tubing and specialty plumbing
products. U.S. Lock and LeRan, as well as Madison Equipment and Medal
Distributing, are operated as separate divisions of WOC. TWI includes the
foreign sourcing operations which support the Company's continuing operations.

U.S. LOCK

U.S. Lock, which was acquired by the Company in 1988, carries a full
line of security hardware products, including locksets, door closers and
locksmith tools. Many of these products are sold under the U.S. Lock(R) and
Legend(TM) trademarks. U.S. Lock markets and distributes its products primarily
to locksmiths through a telemarketing sales team. U.S. Lock's telemarketing
effort is supplemented with a catalog that is mailed annually to 6,000 existing
customers and promotional flyers. Since its acquisition by the Company, U.S.
Lock has increased its number of warehouses from one to four, three of which
are shared with Barnett.

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<PAGE> 44
Shared facilities allow the Company to realize additional efficiencies by
consolidating space requirements and reducing personnel costs.

LERAN

LeRan, which was acquired by the Company in 1985, is a supplier of
copper tubing and fittings, brass valves and fittings, malleable fittings and
related products. Its customers include liquid petroleum gas dealers,
lumberyards, plumbing and mechanical contractors and D-I-Y retailers. LeRan
markets its products primarily through salesmen and outside service
representative organizations. These efforts are supported by a catalog, which
is mailed semiannually to 7,000 existing customers, monthly promotional flyers
and a telemarketing program. LeRan currently services its customers from four
regional warehouses, two of which are shared with Barnett.

OTHER OPERATIONS

WOC's other operations also include its Madison Equipment division, a
supplier of electrical products, and its Medal Distributing division, a
supplier of hardware products.

PURCHASING, PACKAGING AND ASSEMBLY

Products bearing the Company's proprietary trade names and trademarks
are assembled and packaged in its Taiwan, Mainland China and Mexico facilities.
The products packaged in Taiwan and China are purchased locally in bulk and,
after assembly and packaging, are shipped to the Company's various distribution
centers in the United States. The Company also outsources the packaging of
certain products. For the year ended June 30, 1993, products purchased
overseas, primarily from Taiwan, accounted for approximately 22.9% of the total
product purchases made by the Company's continuing operations.

TWI, through its subsidiaries, operates the Taiwan and Mainland China
facilities, which assemble and package plumbing and electrical products. In
addition, the facility in Mainland China manufactures and packages plastic
floor protective hardware. The Company believes that these facilities give it
competitive advantages, in terms of cost and flexibility in sourcing. Both
labor and physical plant costs are significantly below those in the United
States.

During fiscal 1991, the Company purchased WAMI, a small manufacturer
of plumbing pipe nipples in Tijuana, Mexico. Pipe nipples are short lengths of
pipe from 1/2 of an inch to 6 feet long, threaded at each end. As a result of
this acquisition, the Company is now vertically integrated in the manufacture
and distribution of pipe nipples. Since the acquisition, in order to take
advantage of lower labor costs, the Company has relocated certain of its United
States packaging operations to TWI's WAMI subsidiary in Mexico.

Substantially all of the other products purchased by Waxman USA are
manufactured for it by third parties. Waxman USA estimates that it purchases
products and materials from over approximately 1,300 suppliers and is not
dependent on any single unaffiliated supplier for any of its requirements.

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<PAGE> 45
The following table sets forth the approximate percentage of net sales
attributable to the Company's principal product groups:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C> <C>
Plumbing 74% 73% 71%
Electrical 10 9 10
Hardware 16 18 19
---- ----- ----

Total Net Sales 100% 100% 100%
=== === ===
</TABLE>

IMPORT RESTRICTIONS

Under current United States government regulations all products
manufactured offshore are subject to import restrictions. The Company
currently imports goods from Mexico under the preferential import regulations
commonly known as "807' and as direct imports from China and Taiwan. The "807'
arrangement permits an importer who purchases raw materials in the United
States and then ships the raw materials to an offshore factory for assembly, to
reimport the goods, without quota restriction and to pay a duty only on the
value added in the offshore factory.

Where the Company chooses to directly import goods purchased outside
of the United States, the Company may be subject to import quota restrictions,
depending on the country in which assembly takes place. These restrictions may
limit the amount of goods of a particular category that a country may export to
the United States. If the Company cannot obtain the necessary quota, the
Company will not be able to import the goods into the United States. Export
visas for the goods purchased offshore by the Company are readily available.

The above arrangements, both 807 and quota restrictions, may be
superseded by more favorable regulations with respect to Mexico under the North
American Free Trade Agreement ("NAFTA"), or may be limited by revision or
cancelled at any time by the United States government. The Company does not
believe that its relative competitive position will be adversely affected by
NAFTA. As a result of the passage of NAFTA, importation from Mexico will
become more competitive in the near future relative to importation from other
exporting countries.

COMPETITION

Waxman USA faces significant competition from different competitors
within each of its product lines, although it has no competitor offering the
range of products in all of the product lines that Waxman USA offers. Waxman
USA believes that its buying power, extensive inventory, emphasis on customer
service and merchandising programs have contributed to its ability to compete
successfully in its various markets. In the areas of electrical and hardware
supplies, Waxman USA faces significant competition from smaller companies which
specialize in particular types of products and larger companies which
manufacture their own products and have greater financial resources than Waxman
USA. Barnett's mail order business competes principally with local
distributors of plumbing, electrical and hardware products. Waxman USA
believes that competition in sales to both mail order customers and retailers
is primarily based on price, product quality and selection, as well as customer
service, which includes speed of responses for mail order customers and
packaging and merchandising for retailers.

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<PAGE> 46
EMPLOYEES

As of March 31, 1994, the Company's continuing operations employed
1,245 persons, 300 of whom were clerical and administrative personnel, 145 of
whom were sales service representatives and 800 of whom were either production
or warehouse personnel. Approximately 8% of the employees of the Company's
continuing operations are represented by collective bargaining units. The
Company considers its relations with its employees, including those represented
by collective bargaining units, to be satisfactory.

TRADEMARKS

Several of the trademarks and trade names used by the Company are
considered to have significant value in its business. See "Business--
Barnett--Products," "--Consumer Products--Products" and "--Other Operations."

PROPERTIES

The following table sets forth, as of March 31, 1994, certain
information with respect to the Company's principal physical properties:

<TABLE>
<CAPTION>
APPROXIMATE LEASE
SQUARE EXPIRATION
LOCATION FEET PURPOSE DATE
-------- ---- ------- ----
<S> <C> <C> <C>
24460 Aurora Road 21,000 Corporate Office Owned
Bedford Hts., OH

24455 Aurora Road 125,000 Consumer Products Corporate Office and Warehouse 6/30/02
Bedford Hts., OH(1)

330 Vine Street 80,000 Consumer Products Office and Warehouse 2/28/96
Sharon, PA

2029 McKenzie Drive 60,000 Consumer Products Office and Warehouse 5/31/94
Dallas, TX(2)

945 Spice Island Drive 71,000 Consumer Products Office and Warehouse 7/31/98
Sparks, NV(3)

1842 Colonial Village Lane 72,000 Consumer Products Office and Warehouse 5/31/00
Lancaster, PA

3333 Lenox Avenue 60,000 Barnett Corporate Office and Warehouse 10/31/03
Jacksonville, FL

300 Jay Street 56,000 LeRan Corporate Office and Warehouse Owned
Coldwater, MI

No. 10, 7th Road 56,000 Office, Packaging, and Warehouse Owned
Industrial Park
Taichung, Taiwan
Republic of China
</TABLE>

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<PAGE> 47
(1) Aurora Investment Co., a partnership owned by Melvin and Armond Waxman
together with certain other members of their families, is the owner
and lessor of this property. The Company has the option to renew the
leases for a five-year term at the market rate at the time of renewal.

(2) The Company has the option to renew the lease for a two-year term.

In addition to the properties shown in the table, the Company owns 15
warehouses and leases 55 warehouses ranging in size from 6,000 to 50,000 square
feet (of these properties, Barnett leases 27 warehouses and Consumer Products
leases six warehouses).

The Company believes that its facilities are suitable for its
operations and provide the Company with adequate capacity.

LEGAL PROCEEDINGS

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

ENVIRONMENTAL REGULATIONS

The Company is subject to certain federal, state and local
environmental laws and regulations. The Company believes that it is in
material compliance with such laws and regulations applicable to it. To the
extent any subsidiaries of Waxman Industries are not in compliance with such
laws and regulations, Waxman Industries, as well as such subsidiaries, may be
liable for such non-compliance. However, in any event, the Company is not
aware of any such liabilities which could have a material adverse effect on it
or any of its subsidiaries.

RECENT DEVELOPMENTS

BELANGER SALE. In October 1993, the Company completed the sale of all
of the capital stock of one of its Canadian operations, H. Belanger Plumbing
Accessories, Ltd. ("Belanger") to a group led by the management of Belanger in
exchange for cash and a promissory note. Belanger, based in Montreal, is
engaged in the distribution of plumbing specialty products, including bulk and
packaged products to plumbing and hardware wholesalers and retailers. During
fiscal 1993, Belanger had net sales of U.S. $6.3 million.

CONSENT SOLICITATION. On April 22, 1994, the Company began soliciting
consents (the "Consent Solicitation") from the holders of the Notes to a waiver
(the "Waiver") of compliance by the Company with certain provisions of the
Indenture and an amendment (the "Amendment") to certain provisions of the
Indenture. The Waiver waived any event of default resulting from (i) a
cross-default by Ideal Holding Group, Inc. and/or any of its subsidiaries
(together, the "Ideal Group"), (ii) the bankruptcy or insolvency of any member
of the Ideal Group and (iii) the rendering of any judgments against any member
of the Ideal Group. The effect of the Waiver was to remove cross-defaults in
the Indenture relating to the Ideal Group so that adverse factors affecting
Ideal's business do not adversely impact upon the financial condition of the
Company's domestic operations. Effectiveness of the Waiver and the Amendment
required the consent of holders of at least 66 2/3% of the outstanding
principal amount of the Notes, which was obtained on May 3, 1994.

The Amendment, among other things (i) provided for the guarantee by
Waxman USA of the obligations of the Company under the Notes and the Indenture
and that the Company's obligations under

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<PAGE> 48
the Notes and Waxman USA's obligations under its guarantee shall be secured by
a pledge of the capital stock of Consumer Products and WOC, in addition to
Barnett, the capital stock of which previously secured the Company's
obligations under the Notes; (ii) modified the restrictions on investments by
the Company and its subsidiaries under the Indenture to prohibit further
investments in, or advances or loans to members of the Ideal Group in amounts
in excess of Cdn. $450,000; (iii) modified the restrictions on mergers and
transfers of assets and on the disposition of assets and subsidiary stock under
the Indenture to permit the Company to effect the Corporate Restructuring; (iv)
modified the restrictions on payments by the Company's subsidiaries of
dividends and other distributions to, and guarantees of indebtedness of, the
Company and its subsidiaries under the Indenture in order to permit (a) the
Company's subsidiaries to pay dividends to the Company and its subsidiaries in
an amount required by the Company to pay interest on the Notes and on the
Senior Subordinated Notes, (b) the Company's subsidiaries to pay to the Company
amounts owed by the subsidiaries pursuant to an intercorporate services
agreement and a tax sharing agreement and (c) Waxman USA to guarantee the
Notes; (v) (a) modified the net worth covenant in the Indenture to eliminate
the potential effects from (x) the ideal Group and (y) charges relating to any
subsequent non-cash interest on the Deferred Coupon Notes and/or amortization
on the Exchange Warrants and (b) reduced the minimum net worth required to be
maintained by the Company under the Indenture to the Company's net worth at
June 30, 1994 minus $5.0 million; (vi) modified the limitation on the
incurrence of debt by the Company under the Indenture to (a) permit the Company
to issue the Deferred Coupon Notes and (b) provide that the Company's
Consolidated Operating Cash Flow Ratio calculated for purposes of (x)
determining the amount of debt which may be incurred by the Company and (y) the
Consolidated Operating Cash Flow maintenance covenant shall exclude any effect
of the Ideal Group or charges relating to non-cash interest on the Deferred
Coupon Notes and/or amortizations on the Exchange Warrants; (vii) modified the
limitation on the incurrence of debt by the Company or its subsidiaries under
the Indenture to permit the Domestic Credit Facility, the Domestic Term Loan,
the Waxman USA Permitted Indebtedness (as hereinafter defined) and the
guarantee by Waxman USA of the Notes; (viii) modified the limitations on
subsidiary payment restrictions under the Indenture to provide that Barnett,
Consumer Products, WOC and Waxman USA may, pursuant to agreements relating to
indebtedness permitted under clause (vii) above, agree to restrictions on their
respective payments of dividends, loans or transfers of assets to the Company
as long as such restrictions do not materially impair their ability, absent a
default under such agreements, to pay dividends in amounts not exceeding their
respective net income for the purpose of paying interest on the Notes or to
make required payments to the Company under an intercorporate services
agreement and a tax sharing agreement with the Company; (ix) modified the
restriction on subordinated debt repurchases by the Company under the Indenture
to permit the redemption by the Company of all its outstanding Convertible
Debentures and the Exchange Offer; (x) modified the restriction on liens under
the Indenture to permit Barnett, Consumer Products and WOC to grant liens on
their respective properties in connection with any indebtedness incurred by
them which is permitted under clauses (i), (vi) and (vii) above; (xi) modified
the events of default under the Indenture to exclude (a) any cross-default by
any member of the Ideal Group, (b) the bankruptcy or insolvency of any member
of the Ideal Group and (c) the rendering of any judgments against any member of
the Ideal Group; and (xii) provided for the payment by the Company of an amount
equal to 1.0% of the aggregate principal amount of outstanding Notes to the
Trustee for the benefit of the holders of the Notes on December 31, 1994 in the
event that the Notes are not redeemed on or prior to such date. See
"Description of Notes."

SUBORDINATED NOTE CONSENT SOLICITATION. Concurrently with the Consent
Solicitation, the Company solicited consents from the holders of its Senior
Subordinated Notes to a waiver (the "Subordinated Note Waiver") of compliance
by the Company with certain provisions of the Subordinated Note Indenture and
an amendment (the "Subordinated Note Amendment") to certain provisions of the
Subordinated Note Indenture. The Subordinated Note Waiver and Subordinated
Note Amendment were similar in many respects to the Waiver and Amendment,
respectively, and were primarily intended to remove cross-defaults in the
Subordinated Note Indenture relating to the Ideal Group and to permit the
Corporate

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<PAGE> 49
Restructuring to occur. Effectiveness of the Subordinated Note Waiver and
Subordinated Note Amendment required the consent of holders of at least 66 2/3%
of the outstanding principal amount of the Senior Subordinated Notes, which was
obtained on May 3, 1994 with respect to the Subordinated Note Waiver and May
19, 1994 with respect to the Subordinated Note Amendment.

DISCONTINUED OPERATIONS. Effective March 31, 1994, the Company
adopted a plan to dispose of its Canadian subsidiary, Ideal. Unlike the
Company's United States operations which supply products to customers in the
home repair and remodeling market through mass retailers, Ideal primarily
served customers in the Canadian new construction market through independent
contractors. Accordingly, Ideal is reported as a discontinued operation at
March 31, 1994 and the consolidated financial statements and financial
information contained herein as of such date have been reclassified to report
separately Ideal's net assets and results of operations. Prior period
consolidated financial statements and financial information have been
reclassified to conform to the current period presentation.

REORGANIZATION. On May 20, 1994, the Company issued the Deferred
Coupon Notes, having an initial accreted value of $50,000,000, together with
the Exchange Warrants in exchange for $50,000,000 aggregate principal amount of
the Company's outstanding Senior Subordinated Notes pursuant to the Private
Exchange Offer which was a part of the Reorganization. In addition to the
Private Exchange Offer, the components of the Reorganization included (i) the
Senior Subordinated Consent Solicitation with respect to the Subordinated Note
Waiver and the Subordinated Note Amendment, (ii) the establishment of the
Domestic Credit Facility and the Domestic Term Loan, (iii) the Consent
Solicitation with respect to the Waiver and the Amendment and (iv) the
repayment of the borrowings under the Company's then existing domestic
revolving credit facilities (including $27.6 under the Company's then existing
working capital credit facility and $1.2 million under the Barnett Financing).

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<PAGE> 50
In connection with the Reorganization, the Company effected the
Corporate Restructuring, such that after giving effect thereto the Company
became a holding company whose only material assets are the capital stock of
its subsidiaries. As part of the Corporate Restructuring, the Company formed
(a) Waxman USA, as a holding company for the subsidiaries that comprise and
support the Company's domestic operations, (b) Consumer Products, a wholly
owned subsidiary of Waxman USA, to own and operate Waxman Industries' Consumer
Products Group Division and (c) WOC, a wholly owned subsidiary of Waxman USA,
to own and operate Waxman USA's domestic subsidiaries, other than Barnett and
Consumer Products. On May 20, 1994, the Company effected the Corporate
Restructuring by (i) contributing the capital stock of Barnett to Waxman USA,
(ii) contributing the assets and liabilities of the Consumer Products Division
to Consumer Products, (iii) contributing the assets and liabilities of its
Madison Equipment Division to WOC, (iv) contributing the assets and liabilities
of its Medal Distributing Division to WOC, (v) merging U.S. Lock and LeRan,
each a wholly owned subsidiary of the Company, into WOC, (vi) contributing the
capital stock of TWI to Waxman USA and (vii) contributing the capital stock of
WAMI to TWI.

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<PAGE> 51
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The members of the Board of Directors, executive officers and key
employees of the Company and their respective ages and positions are as
follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Melvin Waxman 59 Chairman of the Board and Co-Chief Executive
Officer
Armond Waxman 55 President, Co-Chief Executive Officer, Treasurer
and Director
John S. Peters 45 Senior Vice President, Operations
William R. Pray 46 Senior Vice President
Laurence S. Waxman 37 Senior Vice President
Neal R. Restivo 34 Vice President, Finance and Chief Financial
Officer
Irving Z. Friedman 61 Director
Samuel J. Krasney 68 Director
Judy Robins 45 Director
</TABLE>

Set forth below is a biographical description of each director,
executive officer and key employee of the Company mentioned above.

Mr. Melvin Waxman was elected Co-Chief Executive Officer of the
Company in May 1988. Mr. Waxman has been a Chief Executive Officer of the
Company for over 20 years and has been a director of the Company since 1962.
Mr. Waxman has been Chairman of the Board of the Company since August 1976.
Melvin Waxman and Armond Waxman are brothers.

Mr. Armond Waxman was elected Co-Chief Executive Officer of the
Company in May 1988. Mr. Waxman has been the President and Treasurer of the
Company since August 1976. Mr. Waxman has been a director of the Company since
1962 and was Chief Operating Officer of the Company from August 1976 to May
1988. Armond Waxman and Melvin Waxman are brothers.

Mr. Peters was elected to the position of Senior Vice President,
Operations of the Company in April 1988, after serving as Vice President,
Operations of the Company since February 1985. Prior to that Mr. Peters had
been Vice President, Personnel/Administration of the Company since February
1979.

Mr. Pray was elected Senior Vice President of the Company in February
1991 and is also President of Barnett, a position he has held since 1987. Mr.
Pray joined Barnett in 1979 as Vice President of Sales and Marketing.

Mr. Laurence Waxman was elected Senior Vice President of the Company
in November 1993 and is also President of the Consumer Group Division, a
position he has held since 1988. Mr. Waxman joined the Company in 1981. Mr.
Laurence Waxman is the son of Melvin Waxman.

Mr. Restivo was elected Vice President, Finance and Chief Financial
Officer of the Company in November 1993, after serving as Vice President,
Corporate Controller since November 1990, and as Corporate Controller of the
Company since November 1989. From August 1982 until November 1989,

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<PAGE> 52
Mr. Restivo was employed by the public accounting firm of Arthur Andersen &
Co., where he was an audit manager since 1988.

Mr. Friedman has been a director of the Company since 1989. Mr.
Friedman has been a certified public accountant with the firm of Krasney Polk
Friedman & Fishman for more than five years.

Mr. Krasney has been a director of the Company since 1977. In
September 1993, Mr. Krasney retired from his position of Chairman of the Board,
President and Chief Executive Officer of Banner Aerospace, Inc., a distributor
of parts in the aviation aftermarket, a position he had held since June 1990.
In September 1993, Mr. Krasney also retired from The Fairchild Corporation
(formerly Banner Industries, Inc.) where he had been Vice Chairman of the Board
since 1985. Fairchild is a manufacturer and distributor of fasteners to the
aerospace industry and industrial products for the plastic injection molding
industry and other industrial markets and is a furnisher of telecommunication
services to office buildings. Mr. Krasney is also a director of FabriCenters
of America, Inc.

Mrs. Robins has been a director of the Company since 1980. Mrs.
Robins has owned and operated an interior design business for more than five
years. Mrs. Robins is the sister of Melvin and Armond Waxman. Mrs. Robins'
husband is the Secretary of the Company.

BOARD OF DIRECTORS

The number of directors on the Board of the Company is presently fixed
at five. Directors are elected at the annual meeting of stockholders and hold
office for one year and until their successors are elected. the Company has an
Executive Committee, Audit Committee, Compensation Committee and Stock Option
Committee. Messrs. Melvin and Armond Waxman and Krasney serve on the Executive
Committee, Messrs. Friedman and Krasney serve on the Audit Committee and the
Stock Option Committee and Mrs. Robins and Messrs. Krasney and Friedman serve
on the Compensation Committee.

DIRECTOR REMUNERATION

Each director who is not an employee of the Company received a fee of
$3,000 per fiscal quarter for services as a director during fiscal 1993 plus a
fee of $1,000 plus traveling expenses for each Board meeting he or she
attended. In addition to the foregoing compensation, each director who is not
an employee of the Company received options during fiscal 1993 to purchase
10,000 shares of the Company's Common Stock at a price of $4.25 per share.

EXECUTIVE COMPENSATION

The following table sets forth the cash compensation paid for services
rendered during fiscal 1993 to the Co-Chief Executive Officers and the three
other most highly compensated executive officers of the Company in the fiscal
years indicated:

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<PAGE> 53
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
----------------------
All Other
Awards Payouts Compensation
------ ------- ------------
Annual Compensation(1) Restricted LTIP
Year Salary($) Bonus($)(2) Stock($) Options(#) Payouts($) ($)(3)(4)
---- --------- ----------- -------- ---------- ---------- ---------
Name and Principal Position
---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Melvin Waxman 1993 365,000 100,000 __ 250,000 __ 65,293
Chairman of the Board and 1992 400,000 125,000 __ __ __ __
Co-Chief Executive Officer 1991 400,000 125,000 __ __ __ __

Armond Waxman 1993 378,942 100,000 __ 250,000 __ 50,464
President and Co-Chief 1992 400,000 125,000 __ __ __ __
Executive Officer 1991 400,000 125,000 __ __ __ __

Jerome C. Jacques(5) 1993 192,067 45,000 __ 50,000 __ 16,175
Senior Vice President -- 1992 200,000 50,000 __ 12,500 __ __
Finance and Chief Financial 1991 200,000 50,000 __ __ __ __
Officer

William R. Pray 1993 200,000 45,000 __ 25,000 __ 14,789
Senior Vice President 1992 173,000 50,000 __ 7,500 __ __
1991 171,000 38,000 __ 10,000 __ __

John S. Peters 1993 132,644 25,000 __ 45,000 __ 14,137
Senior Vice President -- 1992 125,000 25,000 __ 7,500 __ __
Operations 1991 125,000 25,000 __ __ __ __
</TABLE>

(1) Certain executive officers received compensation in fiscal 1991, 1992
and 1993 in the form of perquisites, the amount of which does not
exceed reporting thresholds.

(2) Messrs. Pray and Peters received their bonuses under the Company's
Profit Incentive Plan.

(3) In accordance with the transitional provisions applicable to the rules
of the Securities and Exchange Commission, disclosure of All Other
Compensation is not required for 1991 and 1992.

(4) Includes Company contributions to the Company's Profit-Sharing
Retirement Plan and premiums on split-dollar life insurance policies.
Profit Sharing Plan contributions were as follows: $2,289 each for
Messrs. Melvin and Armond Waxman, and Pray, $1,637 for Mr. Peters and
$2,289 for Mr. Jacques. Premiums on split-dollar life insurance
policies were as follows: $63,004 for Melvin Waxman, $48,175 for
Armond Waxman, $12,500 each for Messrs. Pray and Peters and $13,886
for Mr. Jacques.

(5) Mr. Jacques' employment with the Company was terminated in November
1993.

EMPLOYMENT AGREEMENTS

Mr. Peters entered into an employment agreement with the Company which
became effective as of January 1, 1992 and terminates on December 31, 1995.
Pursuant to such employment agreement, Mr. Peters is to serve as Senior Vice
President, Operations of the Company, and is also to serve in such substitute
or further offices or positions with the Company or any subsidiary or affiliate
of the Company as shall, from time to time, be assigned by the Board of
Directors of the Company. Mr. Peters' employment agreement provides for a
minimum annual salary of $125,000, which salary will be reviewed annually by
the Company. Increases in salary and the granting of bonuses to Mr. Peters
will be determined by the Company, in its sole discretion, based on such
individual's performance and

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<PAGE> 54
contributions to the success of the Company, his responsibilities and duties
and the salaries of other senior executives of the Company. The employment
agreement also contains provisions which restrict Mr. Peters from competing
with the Company during the term of the agreement and for two years following
the termination thereof.

Mr. Pray has an employment agreement with Barnett and the Company
which became effective as of July 1, 1990 and which terminates on June 30,
2000. Pursuant to this employment agreement, Mr. Pray is to serve as President
of Barnett and provide services to Barnett in such managerial areas as Mr. Pray
served in the past and such additional duties as shall be assigned to Mr. Pray
by the Co-Chief Executive Officers of the Company. Mr. Pray's employment
agreement provides for a minimum annual salary of $165,000 for the first year
of the employment agreement and provides that for each year thereafter the
minimum annual salary will be increased by eight percent of the prior year's
salary or any salary amount separately agreed to in writing by Mr. Pray,
Barnett and the Company. Mr. Pray is also eligible to receive additional
discretionary bonuses as may from time to time be determined in the sole
discretion of the Board of Directors of the Company. The employment agreement
also contains provisions which restrict Mr. Pray from competing with the
Company during the term of the agreement and for two years following the
termination thereof.

STOCK OPTION AND SAR GRANTS

The following table sets forth the information noted for all grants of
stock options made by the Company during fiscal 1993 to each of the executive
officers named in the Summary Compensation Table:

<TABLE>
<CAPTION>
OPTIONS/SAR(1) GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FORE
OPTIONS GRANTED TO EXERCISE OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- --- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Melvin Waxman 100,000 9.6 5.00 Sept 1997 138,000 305,500
150,000 14.4 4.25 Feb 2003 400,988 1,016,175
Armond Waxman 100,000 9.6 5.00 Sept 1997 138,000 305,500
150,000 14.4 4.25 Feb 2003 400,988 1,016,175
Jerome C. Jacques(3) 25,000 2.4 5.00 Sept 1997 34,500 76,375
25,000 2.4 4.25 Feb 2003 66,831 169,362
William R. Pray 25,000 2.4 5.00 Sept 1997 34,500 76,375
John S. Peters 20,000 1.9 5.00 Sept 1997 27,600 61,100
25,000 2.4 4.25 Feb 2003 66,831 169,362

<FN>
(1) There were no SARs granted to any of the executive officers named in
this table in fiscal 1993.

(2) The potential realizable values represent future opportunity and have not been reduced to present
value in 1993 dollars. The dollar amounts included in these columns are the result of calculations at
assumed rates set by the Securities and Exchange Commission for illustration purposes, and these rates
are not intended to be a forecast of the Common Stock price and are not necessarily indicative of the
values that may be realized by the named executive officer.

(3) All of the options granted to Mr. Jacques have terminated as a result of the termination of his
employment with the Company.

</TABLE>

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<PAGE> 55
STOCK OPTION AND SAR EXERCISES

The following table sets forth the information noted for all exercises
of stock options and SARs during fiscal 1993 by each of the executive officers
named in the Summary Compensation Table:

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

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF
SHARES OPTIONS AT FISCAL UNEXERCISED
ACQUIRED YEAR-END(#) IN-THE-MONEY
ON VALUE EXERCISABLE/ OPTIONS AT
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE YEAR-END($)
---- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Melvin Waxman -- -- 30,000/270,000 --
Armond Waxman -- -- 30,000/270,000 --
Jerome C. Jacques(1) -- -- 29,500/63,000 --
William R. Pray -- -- 13,000/37,000 --
John S. Peters -- -- 9,000/51,000 --
</TABLE>

(1) All of the options granted to Mr. Jacques have terminated as a result
of the termination of his employment with the Company.

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<PAGE> 56
PRINCIPAL STOCKHOLDERS

CAPITAL STOCK

The following table sets forth, as of June 1, 1994 (except as noted in
footnote 7 below), the number of shares beneficially owned by each director, by
the directors and executive officers of the Company as a group and by each
holder of at least five percent of Common Stock, and the respective percentage
ownership of the outstanding Common Stock and Class B Common Stock and voting
power held by each such holder and group. The mailing address for Messrs.
Melvin and Armond Waxman is the executive office of the Company.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
BENEFICIALLY OWNED OWNERSHIP PERCENTAGE
------------------ --------- OF
CLASS B CLASS B AGGREGATE
NAME OF COMMON COMMON COMMON COMMON VOTING
BENEFICIAL OWNER STOCK STOCK STOCK STOCK POWER
- ---------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Melvin Waxman(1) 970,782 1,011,932 10.2% 45.4% 34.9%
Armond Waxman(2) 862,607 826,082 9.1 37.1 28.7
Samuel J. Krasney(3) 17,250 6,750 * * *
Judy Robins(4) 77,250 78,750 * 3.5 2.7
Irving Z. Friedman(5) 10,500 -- * -- *
Directors and officers
as a group (10
individuals)(6) 2,052,914 1,978,766 21.2 88.8 68.3
Weiss, Peck & Greer(7) 1,182,500 -- 12.5 -- 3.7
One New York Plaza
New York, NY 10004
</TABLE>

* less than 1%

(1) Includes (i) 100 shares of Common Stock owned by a member of Mr.
Melvin Waxman's immediate family, as to which shares Mr. Waxman
disclaims beneficial interest and (ii) 97,500 shares of Common Stock
which Mr. Waxman has the right to acquire within 60 days upon the
exercise of stock options.

(2) Includes (i) 55,825 shares of Common Stock and 55,800 shares of Class
B Common Stock owned by members of Mr. Armond Waxman's immediate
family, as to which shares Mr. Waxman disclaims beneficial interest
and (ii) 97,500 shares of Common Stock which Mr. Waxman has the right
to acquire within 60 days upon the exercise of stock options.

(3) Includes (i) 4,500 shares of Common Stock and 4,500 shares of Class B
Common Stock owned by Mr. Krasney's wife, as to which shares Mr.
Krasney disclaims beneficial interest and (ii) 10,500 shares of Common
Stock which Mr. Krasney has the right to acquire within 60 days upon
the exercise of stock options.

(4) Includes 10,500 shares of Common Stock which Mrs. Robins has the
right to acquire within 60 days upon the exercise of stock options.

(5) Consists of 10,500 shares of Common Stock which Mr. Friedman has the
right to acquire within 60 days upon the exercise of stock options.

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<PAGE> 57
(6) Includes 278,500 shares of Common Stock which the directors and
officers of the Company have the right to acquire within 60 days upon
the exercise of stock options.

(7) The information set forth in the table with respect to Weiss, Peck &
Greer was obtained from Amendment No. 2 to a Statement on Schedule
13G, dated February 11, 1994, filed with the Commission. Such
statement reflects Weiss, Peck & Greer's beneficial ownership as of
December 31, 1993.

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<PAGE> 58
DESCRIPTION OF NOTES

The Notes were issued under an Indenture dated as of September 1, 1991
(the "Indenture") between the Company and United States Trust Company of New
York, as trustee (the "Trustee") and amended pursuant to the First Supplemental
Indenture dated as of November 15, 1993, the Second Supplemental Indenture
dated as of March 25, 1994 and the Third Supplemental Indenture dated as of May
20, 1994. Holders of the Notes (the "Noteholders") are referred to the
Indenture, as amended, and the Trust Indenture Act of 1939, as amended (the
"1939 Act"), for a statement of the terms of the Notes. The following summary
of the provisions of the Notes is qualified in its entirety by reference to the
Indenture, as amended, which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The provisions of the Fixed Rate
Notes and Floating Rate Notes are identical unless otherwise noted. The term
"Company" as used in this section means Waxman Industries, Inc., excluding its
subsidiaries. Capitalized terms not otherwise defined herein have the meanings
assigned to them in the Indenture.

GENERAL

Principal (and premium, if any) and interest on the Notes will be
payable, and the Notes may be presented for transfer and exchange or payment,
at an office or agency maintained by the Company or by home office payment
directly to the Noteholders if the Company has so agreed with such Noteholders.
No service charge will be charged for any registration of transfer or exchange
of Notes; however, the Company may require payment of a sum sufficient to cover
any transfer taxes or similar governmental charges payable in connection
therewith. The Company will pay interest on the Fixed Rate Notes on March 1
and September 1 of each year (beginning March 1, 1992) at the rate of 12.25%
per annum to the persons who are registered Noteholders at the close of
business on February 15 or August 15, as the case may be, immediately preceding
the respective interest payment date. The Company will pay interest on the
Floating Rate Notes on March 1, June 1, September 1 and December 1 of each year
(beginning December 1, 1991) at the rate per annum equal to LIBOR (as defined
therein) for such quarterly period plus 300 basis points (one basis point
equalling .01%) to the persons who are registered Noteholders at the close of
business on February 15, May 15, August 15 and November 15, as the case may be,
immediately preceding the respective interest payment date. The Notes are in
registered form without coupons in denominations of $1,000 and in integral
multiples of $1,000.

Initially, the Trustee will act as Paying Agent and Registrar. United
States Trust Company of New York is also acting as Warrant Agent under the
Warrant Agreement and as Agent under the Pledge Agreement. The Company may
change the Paying Agent and Registrar by notifying the Trustee. The Company
may also change the Warrant Agent and the Agent by notice.

SECURITY

The Notes are secured obligations of the Company, in aggregate
principal amount of $20,000,000 ($12,500,000 of Fixed Rate Notes and $7,500,000
of Floating Rate Notes), which will mature on September 1, 1998. Pursuant to
the terms of the Guarantee, the payment of the Company's obligations under the
Notes and the performance of the Company's obligations under the Indenture are
guaranteed by Waxman USA. Separate Financial Statements of Waxman USA are not
included herein, as the aggregate assets and earnings of Waxman USA are
substantially equivalent to the assets and earnings of the Company. Pursuant
to the terms of the Pledge Agreement, as amended on May 20, 1994 (the "Pledge
Agreement"), the Notes (and the Guarantee) are secured by the Company's pledge
of all of its right, title and interest in and to all of the capital stock of
Barnett, Consumer Products and WOC now or hereafter owned by the Company. All
presently outstanding capital stock of Barnett, Consumer Products and WOC is
currently being held by United States Trust Company of New York (the "Agent")

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<PAGE> 59
pursuant to the Pledge Agreement. The Pledge Agreement provides that upon the
occurrence of an Event of Default that is not cured within the applicable time
period, the Agent shall have the rights and remedies of a secured party under
the Uniform Commercial Code and shall have full power and authority to sell or
otherwise dispose of the Pledged Stock and, after giving written notice of such
Event of Default to the Company, vote the Pledged Stock in accordance with the
instructions of the Security Holders. In addition, the Pledge Agreement
provides that (i) if there exists no Event of Default, the Company shall be
entitled to exercise all voting rights and power; (ii) upon the dissolution,
winding up, liquidation or reorganization of Barnett, Consumer Products and
WOC, any sum to be paid or any property to be distributed with respect to the
Pledged Stock shall be paid to the Agent; and (iii) if there shall exist an
Event of Default, the Agent shall be entitled to receive and retain any and all
dividends declared upon any of the Pledged Stock. As required by the
Indenture, the Company has provided the Trustee with a certificate of an
independent appraiser that, in such appraiser's opinion, the fair value to the
Company, as of June 11, 1992, of the Pledged Stock (which at the time consisted
of only the capital stock of Barnett) was $70 million. However, there can be
no assurance that the value of the Pledged Stock, or the net proceeds of any
sale or other disposition of the Pledged Stock (after deducting all reasonable
costs and expenses of collection, custody, sale or other disposition), will be
sufficient to satisfy the outstanding principal and accrued interest on the
Notes upon the occurrence of an Event of Default. In the event of such a
shortfall in net proceeds, the Holders of the Notes will be unsecured creditors
of the Company with respect to amounts under the Notes which remain unpaid.

CERTAIN DEFINITIONS

"CHANGE IN CONTROL" means the acquisition by any person or two or more
persons acting together as a partnership, limited partnership, syndicate or
other group for such acquisition purposes (other than the Waxman Family Group)
of the power to direct or cause the direction of the management and policies of
the Company (or of the properties and assets substantially as an entirety of
the Company), directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.

"COMPANY BORROWING BASE" means, as of any date, an amount equal to (i)
85% of the face amount of all accounts receivable owned by the Company or its
domestic Subsidiaries (other than Barnett), as of such date that are not more
than 90 days past due plus (ii) 50% of the book value (calculated on a FIFO
basis) of all inventory owned by the Company or its domestic Subsidiaries
(other than Barnett) as of such date, all calculated on a consolidated basis
and in accordance with GAAP.

"CONSOLIDATED NET INCOME" for any period means the aggregate of the
net income (or loss) of the Company and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP applied on a consistent
basis; PROVIDED, HOWEVER, that (a) the net income of any person in which the
Company or any of its Subsidiaries has a joint interest with a third party
(which interest does not constitute a majority interest in such person) shall
be included only to the extent of the amount of dividends or distributions paid
to the Company or any Subsidiary; (b) the net income of any Subsidiary of the
Company that is subject to any restriction or limitation on the declaration or
payment of dividends or other distributions shall be excluded to the extent of
such restriction or limitation; (c) the net income (or loss) of any person
acquired in a pooling of interests transaction for any fiscal period ending
prior to the date of such acquisition shall be excluded; (d) if the aggregate
of all sales or other dispositions of capital assets other than in the ordinary
course of business by the Company and any of its Subsidiaries during the period
results in a net gain, such net gain shall be excluded and if such aggregate
amount results in a net loss, such net loss shall be deducted; (e) the net gain
or net loss resulting from any change in accounting shall be excluded; and (f)
any extraordinary items shall be excluded.

"CONSOLIDATED OPERATING CASH FLOW" means Consolidated Net Income
before interest, taxes, depreciation and amortization of intangibles.

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<PAGE> 60
"CONSOLIDATED OPERATING CASH FLOW COVERAGE RATIO" means, for any
period and with respect to any Person, the ratio of (i) Consolidated Operating
Cash Flow to (ii) net interest expense and preferred stock dividend expense, if
any, of the Company and its Subsidiaries for such period, in each case on a
consolidated basis, determined in accordance with GAAP. Notwithstanding the
foregoing, the calculation of the Company's Consolidated Operating Cash Flow
Coverage Ratio for all purposes of the Indenture (including for purposes of
Sections 5.10(b) and 5.12) shall exclude (i) the effect of any item of income,
gain, loss or charge or any other effect of or related to Ideal Holding Group,
Inc., a wholly owned subsidiary of the Company, and any subsidiary thereof (the
"Ideal Group") on the Company's Consolidated Operating Cash Flow, consolidated
net interest expense and consolidated preferred stock dividend expense and (ii)
from consolidated net interest expense any charges relating to non-cash
interest on the 12 3/4% Senior Secured Deferred Coupon Notes of the Company Due
2004 offered pursuant to the Company's Offer to Exchange and Consent
Solicitation dated April 21, 1994 (the "Offer to Exchange") and/or amortization
of the warrants to purchase common stock of the Company offered pursuant to the
Offer to Exchange from and after June 30, 1994.

"CONSOLIDATED OPERATING INCOME" means Consolidated Net Income before
interest, taxes and amortization of intangibles.

"CONSOLIDATED TANGIBLE ASSETS" means the total amount of consolidated
assets of the Company (less applicable reserves and other properly deductible
items) after deducting therefrom (i) goodwill, trade names, trademarks,
patents, unamortized debt discount and expense, and other like intangibles; and
(ii) investments of the Company (that are not Qualified Investments) in excess
of 10% of Consolidated Tangible Assets (computed before reducing Consolidated
Tangible Assets by such excess non-Qualified Investments).

"CONSOLIDATED TANGIBLE NET WORTH" means the Consolidated Tangible
Assets of the Company less the consolidated total liabilities of the Company.

"CORPORATE RESTRUCTURING" means (i) the formation by the Company of
(a) Waxman USA, as a holding company for the subsidiaries that comprise and
support the Company's domestic operations, (b) Consumer Products, a wholly
owned subsidiary of Waxman USA, to own and operate the Company's Consumer
Products Group Division (the "Consumer Products Division"), and (c) WOC, a
wholly owned subsidiary of Waxman USA, to own and operate the Company's
domestic operations, other than those of Barnett and Consumer Products, (ii)
the contribution of the capital stock of Barnett from the Company to Waxman
USA, (iii) the contribution of the assets and liabilities of the Consumer
Products Division from the Company to Consumer Products, (iv) the contribution
of the assets and liabilities of the Company's Madison Equipment Division from
the Company to WOC, (v) the contribution of the assets and liabilities of the
Company's Medal Distributing Division from the Company to WOC, (vi) the merger
of U.S. Lock Corporation ("U.S. Lock") and LeRan Copper & Brass, Inc.
("LeRan"), each a wholly owned subsidiary of the Company, into WOC, (vii) the
contribution of the capital stock of TWI, International, Inc. ("TWI") from the
Company to Waxman USA and (viii) the contribution of the capital stock of
Western American Manufacturing, Inc. ("WAMI") from the Company to TWI.

"GUARANTEE" shall mean the Guarantee dated as of May 20, 1994, whereby
Waxman USA is guaranteeing the payment of the Company's obligations under the
Notes and the performance of the Company's obligations under this Indenture.

"INDEBTEDNESS" means, with respect to any person, (i) any liability,
contingent or otherwise, of such person (A) for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such person or only
to a portion thereof), (B) evidenced by a note, debenture or similar instrument
(including a purchase money obligation) given in connection with the
acquisition of any

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<PAGE> 61
property or assets, including securities, (C) for any letter of credit or
performance bond in favor of such person, or (D) for the payment of money
relating to a Capitalized Lease Obligation; (ii) any liability of others of the
kind described in the preceding clause (i), which the person has guaranteed,
directly or indirectly, or which is otherwise its legal liability; (iii) any
obligation secured by a Lien to which the property or assets of such person are
subject, whether or not the obligations secured thereby shall have been assumed
by or shall otherwise be such person's legal liability; (iv) any and all
deferrals, renewals, extensions and refundings of, or amendments, modifications
or supplements to, any liability of the kind described in any of the preceding
clauses (i), (ii) or (iii); and (v) any unfunded pension liabilities reflected
or required to be reflected on such person's balance sheet.

"MATERIAL ACQUISITION" means any merger, consolidation, acquisition or
lease of assets, acquisition of securities or other business combination or
acquisition, or any two of such transactions that are part of a common plan to
acquire a business or group of related businesses in each case, if the assets
and/or securities thus acquired in the aggregate would constitute a significant
subsidiary, as defined under Regulation S-X of the Securities Act.

"NET WORTH" of any person as of any date shall mean the stockholders'
equity of such person and its consolidated subsidiaries determined as of the
end of the immediately preceding fiscal quarter, excluding, in the case of the
Company (i) cumulative currency translation adjustments as of the date of
determination, (ii) the effect of any item of income, gain, loss or charge or
any other effect of or related to the Ideal Group and (iii) charges relating to
non-cash interest on the 12 3/4% Senior Secured Deferred Coupon Notes Due 2004
of the Company offered pursuant to the Offer to Exchange and/or amortization of
the warrants to purchase common stock of the Company offered pursuant to the
Offer to Exchange from and after June 30, 1994, each determined in accordance
with GAAP.

"QUALIFIED INVESTMENTS" means (a) Investments by the Company or any
Subsidiary in (i) commercial paper rated P-1 or A-1, certificates of deposit of
banks with capital and surplus aggregating at least $100,000,000 and having P-1
or A-1 commercial paper ratings, and direct obligations of the United States
Government or agencies thereof having a maturity of less than one year; (ii)
loans or advances in the usual or ordinary course of business other than to
Subsidiaries or Affiliates (except as required by the Company's cash management
policies in the usual and ordinary course of business or as permitted by (iv)
or (v) below); (iii) the Company's existing Investments and renewals thereof,
so long as principal amounts are not increased, weighted average life is not
decreased, nor priority ranking increased; (iv) equity Investments by the
Company in or loans or advances by the Company to a Subsidiary (other than
Ideal or Belanger), so long as such loans and advances do not exceed $5,000,000
in the aggregate; and (v) loans or advances by the Company to or equity
Investments by the Company in Ideal or Belanger, so long as such loans,
advances and Investments do not exceed $10,000,000 in the aggregate but in any
event not in excess of Cdn. $450,000 in the aggregate following May 20, 1994;
and (b) purchases and acquisitions of plant, property and equipment that is a
part of, or is used in connection with the ordinary course of business of the
Company.

"SENIOR INDEBTEDNESS" means (i) the Notes and all Indebtedness and
other monetary obligations under the Notes, (ii) Indebtedness or amounts owed
to banks and other financial institutions and (iii) any Indebtedness permitted
by the Indenture which is not Subordinated Indebtedness.

"SUBORDINATED INDEBTEDNESS" means the principal of and interest on any
Indebtedness of the Company (whether outstanding on the date of the Indenture
or thereafter created, incurred, assumed or guaranteed) which, pursuant to the
terms of the instrument creating or evidencing the same, is subordinated in
right of payment to the Notes.

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<PAGE> 62
"WAXMAN FAMILY GROUP" means Melvin Waxman, Armond Waxman, Judy Robins,
Louise Brody, Eva Waxman and each of their respective spouses, children and
other members of their immediate family (including grandchildren), and any
trust of which any of them are the beneficiaries or over which they exercise
voting control.

OPTIONAL REDEMPTION

The Fixed Rate Notes may be redeemed at any time prior to maturity at
the option of the Company in whole or in part, upon 45 days' notice mailed to
the Noteholders' registered address at the following prices (expressed as a
percentage of the principal amount), if redeemed during the twelve months
commencing September 1 of the year indicated below, in each case together with
interest accrued to the redemption date:

<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C> <C>
1993 107.35%
1994 104.90
1995 102.45
1996 and thereafter 100.00
</TABLE>

The Floating Rate Notes may be redeemed in whole or in part, on any
Interest Payment Date at a redemption price equal to 103% of the principal
amount thereof, if redeemed prior to September 1, 1996 or 100% of the principal
thereof, if redeemed on or after September 1, 1996 plus interest accrued to the
redemption date. A Notice of Redemption is to be mailed at least 15 days but
not more than 60 days before the redemption date to each Noteholder at its
registered address.

MANDATORY REDEMPTION

The Indenture requires the Company to redeem Fixed Rate Notes in the
aggregate principal amount of $14,450,000, and Floating Rate Notes in the
aggregate principal amount of $2,550,000, annually on each of September 1, 1996
and September 1, 1997 (at a redemption price of 100% of their principal amount
plus accrued interest to the redemption date), calculated to retire 68% of the
issue prior to maturity. A Notice of Redemption is to be mailed at least 15
days but not more than 60 days before the redemption date to each Noteholder at
its registered address. The Company may, at its option, receive credit against
mandatory redemption payments for the principal amount of the Notes that the
Company has previously redeemed pursuant to the optional redemption provisions
described above.

The Indenture further provides that the Company will make Special
Mandatory Redemption Offers upon the occurrence of the following specified
events:

(A) MAINTENANCE OF NET WORTH. In the event that the Company's Net
Worth at the end of any two (2) consecutive fiscal quarters declines
below the Minimum Net Worth, the Company shall, on the last day of the
second following fiscal quarter, make an offer in accordance with
Section 4.04 hereof (a "Special Mandatory Redemption Offer"), to the
Holders to redeem, regardless of whether on such day the Company's Net
Worth is above or below the Minimum Net Worth, (A) $5,000,000
aggregate principal amount of the Securities, or (B) such lower amount
still outstanding, at a Redemption Price of 102% of the principal
amount thereof plus accrued and unpaid interest to the Special
Mandatory Redemption Date, and shall continue to make like Special
Mandatory Redemption Offers semiannually thereafter until such time as
all outstanding Securities have been redeemed; PROVIDED, HOWEVER, that
if the Company's Net Worth is equal to or above the Minimum Net Worth
as at the last day of any fiscal quarter subsequent to the end

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of such two (2) fiscal quarters, the Company's obligation to make
Special Mandatory Redemption Offers on dates after such quarter end
shall terminate; and PROVIDED, FURTHER, that if the Company's Net
Worth shall thereafter be less than the Minimum Net Worth as at the
last day of any two (2) consecutive subsequent fiscal quarters, the
Company's semiannual Special Mandatory Redemption Offers shall again
commence on the last day of the second following fiscal quarter. For
the purposes of this section, "Minimum Net Worth" shall equal the
Company's Net Worth at June 30, 1994 minus $5,000,000. In each case,
the Minimum Net Worth required to be maintained by the Company will be
calculated by reducing such number by (i) any extraordinary charges
attributable to the repayment of Indebtedness subsequent to June 30,
1993 (ii), any loss incurred subsequent to June 30, 1993 in connection
with the sale by the Company of any Capital Stock of any Subsidiary or
any sale of substantially all of the assets of any Subsidiary or
division of the Company and (iii) any costs, including consent fees,
incurred in connection with the consent solicitation described in the
Company's Consent Solicitation Statement dated November 3, 1993, as
supplemented from time to time, relating to the Senior Subordinated
Notes, and the related and concurrent solicitation of consents from
Holders of the Securities. The Company's obligation to make any
Special Mandatory Redemption Offer pursuant to this section shall be
in addition to, and not in lieu of, any obligation to make a Special
Mandatory Redemption Offer as a result of the events described in
paragraphs (b) and (c) below.

(b) DISPOSITION OF ASSETS AND SUBSIDIARY STOCK. The Company will not,
and will not permit any Subsidiary to, sell, lease, transfer, or
otherwise dispose of any part of its properties or assets, other than
the sale, lease, transfer or other disposition of inventory or
equipment in the ordinary course of business and excluding
transactions between Subsidiaries or between the Company and
Subsidiaries permitted under certain sections of the Indenture, nor
will the Company sell or allow to be sold any Capital Stock of any
Subsidiary:

(i) unless (A) the consideration received is equal to or greater than
the fair market value of the assets or Capital Stock sold, (B) at
least 85% of the consideration is in cash or cash equivalents, (C) (1)
the Company uses the full amount of the Net Proceeds from any such
sale, lease, transfer or disposition up to an aggregate of $75,000,000
to make a Special Mandatory Redemption Offer to redeem an equal
principal amount of the Notes at a Redemption Price of 102% of the
principal amount thereof plus accrued and unpaid interest to the
Special Mandatory Redemption Date or (2) the Company reinvests such
Net Proceeds within 12 months in the Company's consolidated business,
other than in the manufacture or distribution of product lines (x)
which are not similar or complementary to product lines presently
manufactured or distributed by the Company or its Subsidiaries and (y)
which would not be distributed or marketed to the same types of
customers as presently served by the Company or its Subsidiaries; and
(D) the Company uses the full amount of total aggregate Net Proceeds
from such sale, lease, transfer or disposition in excess of an
aggregate of $75,000,000 to make a Special Mandatory Redemption Offer
to redeem an equal principal amount of the Notes at a Redemption Price
of 102% of the principal amount thereof plus accrued and unpaid
interest to the Special Mandatory Redemption Date; PROVIDED, that the
Company shall use Net Proceeds from any such sale, lease, transfer or
disposition to which the provisions of paragraph (c) below apply (a
"Barnett Transaction") only in accordance with such paragraph (c).

(ii) if the Net Proceeds from any such sale, lease, transfer or other
disposition, together with the sum of all Net Proceeds from similar
transactions completed during the four full fiscal quarters ending
immediately prior to such transaction, are greater than 15% of the
Company's Consolidated Tangible Assets as of the end of the most
recent fiscal quarter, or if the operating income for the four full
fiscal quarters attributable to such assets or Capital Stock is
greater than 15% of the Company's Consolidated Operating Income for
the four full fiscal quarters ending

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immediately prior to such transaction, and, in either case, the
Company does not make a Special Mandatory Redemption Offer to redeem
an equal amount of the Notes at a Redemption Price of 102% of the
principal amount thereof plus accrued and unpaid interest to the
Special Mandatory Redemption Date. The Company may use Net Proceeds
from transactions to which this paragraph applies to redeem
Subordinated Indebtedness to the extent such Net Proceeds are not used
to redeem Notes pursuant to clauses (i) and (ii) after a Special
Mandatory Redemption Offer has been made by the Company and not
accepted by Security Holders.

Notwithstanding the foregoing, the Company and its Subsidiaries may
(a) sell, lease, transfer or otherwise dispose of assets or Capital Stock of
Subsidiaries in a transaction outside the ordinary course of business (other
than a Barnett Transaction), PROVIDED that (i) the consideration received is
equal to or greater than the fair market value of the assets or Capital Stock
sold, (ii) at least 85% of the consideration is in cash or cash equivalents and
(iii) the Net Proceeds from all such transactions, after giving effect to the
contemplated transaction, completed during the 12 months prior to such
transaction do not exceed $3,000,000 in the aggregate and (b) effect the
Corporate Restructuring without being required to make a Special Mandatory
Offer.

(c) Sale of Company's Interest in Barnett. In the event of a sale by
Barnett of shares of its Capital Stock, such that after such sale the
Company owns less than 50% of the outstanding Capital Stock of
Barnett, counting as exercised or converted all warrants, options and
convertible securities held by persons other than the Company, the
Company shall make a Special Mandatory Redemption Offer to redeem 100%
of the Notes at a Redemption Price of 102% of the principal amount
thereof plus accrued and unpaid interest to the Special Mandatory
Redemption Date. In the event of a sale by Barnett of shares of its
Capital Stock whereby the Company maintains a 50% or greater interest
in Barnett:

(i) and the valuation of Barnett immediately prior to the consummation
of the sale is greater than or equal to $70,000,000, as determined by
the transaction price, then Barnett may use the Net Proceeds from the
offering for any purpose permitted under the Indenture except for
Investments in the manufacture or distribution of product lines (x)
which are not similar or complementary to produce lines presently
manufactured or distributed by the Company or its Subsidiaries and (y)
which would not be distributed or marketed to the same types of
customers as presently served by the Company or its Subsidiaries, with
no obligation to offer to redeem the Notes; or

(ii) and the valuation of Barnett immediately prior to the
consummation of the sale is less than $70,000,000, as determined by
the transaction price, then the Company must make a Special Mandatory
Redemption Offer to redeem, at a Redemption Price of 102% of the
principal amount thereof plus accrued and unpaid interest to the
Special Mandatory Redemption Date, the amount of Notes necessary to
reduce the ratio of the outstanding principal amount of the Notes to
the value of the Company's remaining interest in Barnett to 1:1.4, as
determined by the transaction price;

PROVIDED, HOWEVER, that if Barnett distributes, dividends, loans, advances or
otherwise transfers to the Company or any Subsidiaries or Affiliates of the
Company (other than Barnett or any Subsidiary of Barnett) any Net Proceeds from
such sale of Capital Stock of Barnett, the Company shall use such Net Proceeds
in accordance with the provisions of paragraph (b) above, as if it received
such Net Proceeds from a transaction to which the provisions of paragraph (b)
above apply.

In the event of a sale by the Company of 50% or more of the Company's
shares of Capital Stock of Barnett, the Company shall make a Special
Mandatory Redemption Offer to redeem 100% of

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the Notes at a Redemption Price of 102% of the principal amount
thereof plus accrued and unpaid interest to the Special Mandatory
Redemption Date.

In the event of a sale by the Company of less than 50% of the
Company's shares of Capital Stock of Barnett, the Company shall make a
Special Mandatory Redemption Offer to redeem, at a Redemption Price of
102% of the principal amount thereof plus accrued and unpaid interest
to the Special Mandatory Redemption Date, the amount of Notes
necessary to reduce the ratio of the outstanding principal amount of
Notes to the value of the Company's remaining shares of Capital Stock
of Barnett to 1:1.4, as determined by the transaction price.

SPECIAL PAYMENT

The Indenture provides that unless on or prior to December 31, 1994,
the Company shall have satisfied and discharged its obligations under the
Indenture, then on December 31, 1994, the Company shall irrevocably deposit
with the Trustee for the ratable benefit of the holders of the Notes an amount
in cash equal to 1.0% of the aggregate principal amount of Notes outstanding on
such date

REPURCHASE AT OPTION OF NOTEHOLDER

In the event of a Change in Control, holders of the Notes will have
the right to require the Company to repurchase such holders' Notes at a price
of 102% of the principal amount thereof plus accrued interest, if any, to the
date of purchase. Upon the occurrence of such event, the Company will make an
offer to repurchase all of the Notes, which offer will comply with all
applicable tender offer rules, including, but not limited to, Section 14(e) of
the Exchange Act and Rule 14e-1 thereunder.

This provision of the Indenture is intended to protect the holders of
the Notes against a diminution in the value of the Notes in the event of
certain extraordinary corporate transactions such as a recapitalization,
leveraged buyout or similar transaction. In the event of such a transaction
which constitutes a Change in Control, holders will have the option of
continuing to hold the Notes or liquidating their investment by requiring the
Company to repurchase the Notes. However, the provision will have no effect in
the event of an extraordinary transaction which results in the Waxman Family
Group retaining control of the Company and thus does not constitute a Change in
Control.

RANKING

The Notes are PARI PASSU in right of payment with all Senior
Indebtedness and senior in right of payment to all Subordinated Indebtedness.
The Fixed Rate Notes and Floating Rate Notes are equal INTER SESE in right of
payment. The Indenture contains certain restrictions on the ability of the
Company and its Subsidiaries to incur additional Indebtedness, including Senior
Indebtedness. See "Certain Covenants - Limitation on Incurrence of
Indebtedness by the Company" and "- Limitation on Indebtedness and Convertible
Preferred Stock of Subsidiaries."

A significant portion of the Company's operations is conducted through
Subsidiaries. The rights of the Company and its creditors, including the
holders of the Notes, to participate in the assets of any Subsidiary upon any
liquidation or reorganization of such Subsidiary or otherwise will be subject
to the prior claims of creditors of such Subsidiary, except to the extent that
the Company may itself be a creditor with recognized claims against the
Subsidiary. The ability of the Company to pay principal and interest on the
Notes may be dependent upon the payment to it of dividends, interest or other
charges by the Subsidiaries.

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CERTAIN COVENANTS

LIMITATION ON DIVIDENDS, ACQUISITIONS OF CAPITAL STOCK AND INVESTMENTS IN
SUBSIDIARIES

The Indenture provides that the Company shall not, and shall not
permit any Subsidiary to, directly or indirectly, (i) declare or pay any
dividends on or make any distributions, in cash or otherwise, in respect of its
Capital Stock to holders of Capital Stock of the Company or, except for payment
to the Company, to holders of Capital Stock of any Subsidiary of the Company,
or (ii) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any Subsidiary (other than Qualified Investments), or
(iii) make any payments or contributions to, guaranties of any Indebtedness of
or Investments in, any Subsidiary or any Affiliate of the Company or of any
Subsidiary (other than Qualified Investments) or (iv) make any other
Investments other than Qualified Investments (any such transaction described in
(i), (ii), (iii) or (iv) being hereinafter referred to as a "Restricted
Payment") if, at the time of such Restricted Payment, or after giving effect
thereto: (A) an Event of Default shall have occurred and be continuing; or (B)
the aggregate amount expended subsequent to the date of the original issuance
of the Notes for all such Restricted Payments (the amount of any Restricted
Payment, if other than cash, to be the fair market value of such payment)
exceeds the sum of (x) the sum of (i) 50% of the Company's cumulative
Consolidated Net Income earned subsequent to June 30, 1991 in any fiscal
quarter at the end of which the ratio of the Company's Total Consolidated
Indebtedness to Net Worth is equal to or greater than 2.0 to 1 and (ii) 30% of
the Company's cumulative Consolidated Net Income earned subsequent to June 30,
1991 in any fiscal quarter at the end of which the Company's Total Consolidated
Indebtedness to Net Worth is less than 2.0 to 1; (y) the Net Proceeds of the
issuance or sale after the initial issuance of the Notes of Capital Stock of
the Company, net of amounts used for the redemption of Notes; and (z) the net
cash proceeds of the issuance or sale after the initial issuance of the Notes
of any Indebtedness of the Company which has been converted pursuant to its
terms into shares of Capital Stock of the Company; PROVIDED, HOWEVER, that
clause (B) shall not prevent (I) the payment of any dividend within 90 days
after the date of declaration thereof if, at the date of declaration and, after
giving effect to any such dividend payments, the Company is in compliance with
the provisions of this section, (II) the retirement of any shares of the
Company's Capital Stock by exchange for or out of the proceeds of a
substantially concurrent sale (other than to a Subsidiary) of other shares of
the Company's Capital Stock, (III) the payment of any dividend or distribution
payable in Capital Stock of the Company, or (IV) the payment of cash dividends
on the Company's Common Stock and Class B Common Stock with respect to each of
the four fiscal quarters subsequent to the original issuance of the Notes at a
rate per share not in excess of $0.12 per annum (as adjusted for stock splits,
dividends, subdivisions or combinations); and PROVIDED, FURTHER, HOWEVER, that
the Company may not pay dividends on the Company's Common Stock and Class B
Common Stock with respect to any fiscal quarter at a rate per share in excess
of $0.12 per annum (as adjusted for stock splits, dividends, subdivisions or
combinations) unless the ratio of the Company's Total Consolidated Indebtedness
to Net Worth at the end of such fiscal quarter is less than 2.0 to 1, after
giving effect to the Restricted Payment as if it had occurred in such fiscal
quarter. The Indenture provides that the Company will not, and will not permit
any Subsidiary to, directly or indirectly, make or acquire any Investment, or
purchase or otherwise acquire any plant, property or equipment, other than
Qualified Investments, except as permitted by this covenant.

Notwithstanding the foregoing, the Indenture shall not prohibit the
Company from permitting (i) Barnett, Consumer Products and WOC (collectively,
the "Operating Companies") to declare or pay dividends on or make
distributions, in cash or otherwise, in each case without duplication, to
Waxman USA and Waxman USA to declare or pay dividends on or make distributions,
in cash or otherwise, in amounts required by the Company to pay, and the
Company may pay, interest on the Notes and on the Company's 13 3/4% Senior
Subordinated Notes dues June 1, 1999, (ii) Waxman USA, Barnett, Consumer
Products, WOC, TWI and WAMI to make cash payments to the Company pursuant to
(x) that certain Intercorporate Agreement dated as of the date hereof among the
Company, Waxman USA, Consumer

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<PAGE> 67
Products, Barnett and WOC (the "Intercorporate Agreement") and, (y) so long as
such Subsidiary of the Company is included in the Company's consolidated
federal income tax return, that certain Tax Sharing Agreement dated as of the
date hereof among the Company, Waxman USA, Consumer Products, Barnett, WOC, TWI
and WAMI (the "Tax Sharing Agreement), and (iii) Waxman USA to guarantee the
obligations of the Company under the Notes and this Indenture pursuant to the
Guarantee. Any amounts expended pursuant to the preceding sentence shall not
be Restricted Payments for purposes of this Indenture.

LIMITATION ON INCURRENCE OF INDEBTEDNESS BY THE COMPANY

The Indenture provides that the Company will not create, incur,
guarantee or assume any Indebtedness, in addition to Indebtedness evidenced by
the Notes, except for:

(a) Indebtedness of the Company pursuant to the 12 3/4% Senior Secured
Deferred Coupon Notes Due 2004 offered pursuant to the Offer to Exchange and
additional Indebtedness in an amount up to $5,000,000, the proceeds of which
are applied for working capital purposes, provided that no such working capital
Indebtedness may be incurred if, after giving effect thereto, the total
Indebtedness incurred and outstanding under this subsection would exceed the
Company Borrowing Base; and provided, further, that no such Indebtedness may be
created, incurred, assumed or suffered to exist if all or any portion of the
proceeds therefrom are (or are to be) applied in connection with the
manufacture or distribution of, or entry into any line of business (through
merger, consolidation, acquisition, purchase of all or substantially all of the
assets of any person or business or otherwise) relating to, product lines (i)
which are not similar or complementary to product lines presently manufactured
or distributed by the Company or its Subsidiaries and (ii) which would not be
distributed or marketed to the same types of customers as presently served by
the Company or its Subsidiaries;

(b) other Indebtedness if, after giving effect thereto and the
application of the proceeds thereof, the Company's Consolidated
Operating Cash Flow Ratio is greater than and the ratio of the
Company's Total Consolidated Indebtedness to Total Capitalization is
less than, the following:

<TABLE>
<CAPTION>
FOR THE TOTAL CONSOLIDATED
FISCAL YEAR ENDING CONSOLIDATED OPERATING INDEBTEDNESS TO
JUNE 30, CASH FLOW RATIO TOTAL CAPITALIZATION
-------- --------------- --------------------
<S> <C> <C>
1994 1.8 to 1 79%
1995 1.9 to 1 77%
Thereafter 2.0 to 1 75%
</TABLE>

Notwithstanding anything to the contrary contained in paragraphs (a)
or (b) above, the Company (excluding Subsidiaries) may not have
outstanding Senior Indebtedness in an aggregate amount in excess of
$100,000,000 at any one time.

(c) Indebtedness incurred solely for the purpose of renewing,
extending or refunding Indebtedness that was incurred in compliance
with the provisions of paragraph (a) or (b) of this covenant or was
existing as of the date of the initial issuance of the Notes; PROVIDED
that the principal amount of any Indebtedness incurred pursuant to
this paragraph (c) shall not exceed the principal amount, and the
weighted average life of any Indebtedness incurred pursuant to this
paragraph (c) shall not be less than the weighted average life, of the
Indebtedness being renewed, extended or refunded, and if the
Indebtedness to be renewed, extended or refunded was incurred pursuant
to paragraph (b) above, the priority of payment of the Indebtedness
pursuant to this

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paragraph (c) relative to the Notes is the same as or subordinate to
that of the Indebtedness being renewed, extended or refunded.

LIMITATION ON INDEBTEDNESS AND PREFERRED STOCK OF SUBSIDIARIES

The Indenture provides that:

(a) The Company shall not permit any Subsidiary to issue any
preferred stock or to create, incur, guarantee or assume Indebtedness
except for the following: (i) Indebtedness owed to the Company; (ii)
Subsidiary Indebtedness existing at the date of the initial issuance
of the Notes; (iii) Indebtedness that is non-recourse to the Company
outstanding at the time a Subsidiary becomes a Subsidiary; (iv)
Indebtedness of the Operating Companies in an amount up to
$70,000,000, the proceeds of which are used for general corporate
purposes (the "Permitted Operating Companies Indebtedness"); (v)
Indebtedness of Waxman USA incurred to refinance Indebtedness of the
Company and any fees, expenses and premiums incurred in connection
with such refinancing (the "Permitted Waxman USA Indebtedness"); (vi)
Indebtedness of Waxman USA incurred pursuant to the Guarantee; and
(vii) extensions, renewals and refundings of (ii), (iii), (iv), (v)
and (vi), so long as principal amounts are not increased, and, in the
case of clauses (ii) and (iii) above, the weighted average life of any
such Indebtedness is not decreased and the extended, renewed or
refunded Indebtedness does not have a more senior priority ranking.

(b) Notwithstanding anything to the contrary in this covenant,
the Company may permit Ideal or Belanger to create, incur, guarantee
or assume any Indebtedness, in an amount up to Canadian $35,000,000
if, after giving effect thereto and the application of the proceeds
thereof, the Company's Consolidated Operating Cash Flow Ratio is
greater than and the ratio of the Ideal's Total Consolidated
Indebtedness to Total Capitalization is less than the following:

<TABLE>
<CAPTION>
FOR THE TOTAL CONSOLIDATED
FISCAL YEAR ENDING CONSOLIDATED OPERATING INDEBTEDNESS TO
JUNE 30, CASH FLOW RATIO TOTAL CAPITALIZATION
-------- --------------- --------------------
<S> <C> <C>
1994 1.7 to 1 81%
1995 1.8 to 1 79%
Thereafter 1.9 to 1 77%
</TABLE>

PROVIDED, HOWEVER, that in no event may the aggregate outstanding
amount of Indebtedness of Ideal and Belanger exceed Canadian
$95,000,000.

MAINTENANCE OF CONSOLIDATED OPERATING CASH FLOW COVERAGE RATIO

The Indenture provides that the Company's Consolidated Operating Cash
Flow Coverage Ratio for (i) the full fiscal quarter ending on September 30,
1993, (ii) the two full consecutive fiscal quarters ending on December 31,
1993, (iii) the three full consecutive fiscal quarters ending on March 31, 1994
and (iv) the four full consecutive fiscal quarters ending on June 30, 1994 or
on the last day of any fiscal quarter thereafter shall not be less than
1.1 to 1.

LIMITATION ON SUBSIDIARY PAYMENT RESTRICTIONS

The Indenture provides that the Company will not, and will not permit
any Subsidiary to, create or otherwise cause or suffer to exist or become
effective any consensual restriction or encumbrance on the ability of any
Subsidiary (a) to pay dividends or make any other distributions on such
Subsidiary's

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<PAGE> 69
Capital Stock to, or pay any Indebtedness owing to, or repurchase or redeem any
of such Subsidiary's Capital Stock from, the Company or any other Subsidiary,
(b) to make any loans or advances to the Company or any other Subsidiary, or
(c) to transfer any of its property or assets to the Company or any other
Subsidiary, except for (i) the restrictions contained herein and in the Ideal
Credit Agreement, (ii) the restrictions contained in any agreement or
instrument relating to Indebtedness incurred by Ideal in accordance with
Section 5.11(b) or Indebtedness in existence on the date of the initial
issuance of the Notes, provided that the terms and conditions of such agreement
or instrument relating to the limitations referred to in (a), (b) and (c) above
are no more restrictive on any Subsidiary than the terms and conditions of the
Ideal Credit Agreement, and (iii) restrictions, agreed to by Waxman USA or the
Operating Companies, in any agreement or instrument relating to Permitted
Waxman USA Indebtedness and Permitted Operating Companies Indebtedness,
respectively; provided, however, that such restrictions do not materially
impair the ability of Waxman USA or the Operating Companies to declare and pay
dividends or make distributions of up to 100% of their respective net income to
permit the Company to meet its debt service obligations on the Securities in
the absence of a default under any such agreement or instrument and provided,
further, that such restrictions do not materially impair the ability of Waxman
USA or the Operating Companies to make cash payments to the Company, in
addition to such dividends and distributions, in the absence of a default under
any such agreement or instrument, pursuant to (i) the Intercorporate Agreement
and, (ii) so long as such Subsidiary is included in the Company's consolidated
federal income tax returns, the Tax Sharing Agreement.

SUBORDINATED DEBT REPURCHASES

The Indenture provides that the Company may not purchase, redeem or
otherwise acquire or retire (other than pursuant to mandatory redemptions or at
maturity) any Subordinated Indebtedness if the total of such purchases exceeds
the sum of (i) the sum of (x) 75% of the sum of Consolidated Net Income plus
increases in deferred taxes and less decreases in deferred taxes, plus
depreciation and amortization of intangibles, less capital expenditures, less
(y) 100% of the sum of cash dividends or distributions on the Company's Capital
Stock, amounts paid to make Mandatory Redemptions of the Notes, repurchases of
Capital Stock or any investments (other than Qualified Investments), in each
case subsequent to June 30, 1991; (ii) the net proceeds of the issuance or sale
after the initial issuance of the Notes of Capital Stock or Subordinated
Indebtedness of the Company, net of any amounts used for the repurchase of
Notes; (iii) the net proceeds of the issuance or sale after the date of the
initial issuance of the Notes of any Indebtedness of the Company which has been
converted into shares of Capital Stock of the Company; and (iv) $3,000,000.

Notwithstanding the foregoing, the Company may purchase, redeem or
otherwise acquire or retire any Subordinated Debt using Net Proceeds from sales
of the Company's assets not used to redeem the Notes after a Special Mandatory
Redemption Offer has been made to the Security Holders. Notwithstanding
anything to the contrary herein, the provisions of this section shall not be
violated by the purchase, redemption or other acquisition or retirement by the
Company of any or all of its (i) outstanding 13 3/4% Senior Subordinated Notes
due June 1, 1999 pursuant to the Offer to Exchange and (ii) outstanding 9 1/2%
Convertible Subordinated Debentures due March 15, 2007.

RESTRICTION ON LIENS

The Indenture provides that so long as any of the Notes shall be
outstanding, the Company will not create, grant or suffer to exist, directly or
indirectly, a Lien upon any property of any character owned by the Company or
any Subsidiary, whether now owned or hereafter acquired, except (i) Liens
existing at the date of the initial issuance of the Securities, Liens granted
by the Operating Companies on their respective assets to secure Permitted
Operating Companies Indebtedness, Liens granted by

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Waxman USA on the Capital Stock of its Subsidiaries to secure the Guarantee
and/or Permitted Waxman USA Indebtedness and Liens granted by the Company on
the Capital Stock of its Subsidiaries (other than the Ideal Group) to secure
its 12 3/4% Senior Secured Deferred Coupon Notes Due 2004 offered pursuant to
the Offer to Exchange; (ii) Liens to secure Indebtedness permitted under the
Indenture, PROVIDED that the aggregate amount of all assets subject to such
liens at any time does not exceed 15% of Consolidated Tangible Assets; (iii)
renewal of Liens permitted under (i) and (ii); and (iv) Customary Permitted
Liens.

LIMITATIONS ON MATERIAL ACQUISITIONS

The Indenture provides that the Company will not, and will not permit
any Subsidiary to, make a Material Acquisition unless (a) no Default or Event
of Default exists at the time of or after giving effect to such Material
Acquisition; (b) after giving effect to such Material Acquisition (on a pro
forma basis, as if such Material Acquisition and any related financing
transaction had occurred at the beginning of the four-quarter period
immediately preceding such Material Acquisition), the Company would be
permitted to incur $1.00 of additional Indebtedness pursuant to the Limitation
on Incurrence of Indebtedness covenant discussed above; (c) the Company has a
Consolidated Tangible Net Worth after giving effect to such Material
Acquisition not less than the Company's Consolidated Tangible Net Worth prior
to such Material Acquisition, as reduced by any goodwill acquired in or
resulting from such Material Acquisition up to $10,000,000; and (d) the
business or property which is the subject of such Material Acquisition is in a
line of business relating to product lines (i) which are similar or
complementary to product lines presently manufactured or distributed by the
Company or its Subsidiaries and (ii) which would be distributed or marketed to
the same types of customers as presently served by the Company or its
Subsidiaries.

MERGERS, CONSOLIDATIONS AND SALES OF ASSETS

The Indenture provides that the Company may not consolidate with or
merge with or into any other corporation, or permit any other entity to merge
with or into the Company or any Subsidiary, or transfer or lease in a single
transaction or through a series of transactions all or substantially all of its
properties and assets as an entirety or substantially as an entirety to any
person or group of affiliated persons, unless (1) either the Company shall be
the continuing person, or the resulting or surviving person (if other than the
Company) expressly assumes all the obligations of the Company under the Notes
and the Indenture; (2) such person formed by such consolidation or surviving
such merger or to which the properties and assets of the Company as an entirety
or substantially as an entirety are transferred shall have a Consolidated
Tangible Net Worth (immediately after and giving effect to such transaction),
equal to or greater than that of the Company (immediately preceding such
transaction); (3) immediately before and immediately after giving effect to
such transaction, no Event of Default and no Default shall have occurred and be
continuing; (4) the person formed by such consolidation or surviving such
merger or to which the properties and assets of the Company as an entirety or
substantially as an entirety are transferred (immediately after giving effect
to such transaction) is able to incur additional Indebtedness of at least $1.00
under the Limitation on Incurrence of Indebtedness covenant discussed above;
and (5) certain other conditions are satisfied. Notwithstanding the foregoing,
the Company and its Subsidiaries shall be permitted to effect the Corporate
Restructuring.

DEFAULTS AND REMEDIES

The Indenture provides that an Event of Default occurs if (i) the
Company defaults in the payment of the principal of or premium, if any, on the
Notes whether due upon maturity, redemption or otherwise; (ii) the Company
defaults for 15 days in payment of interest on the Notes; (iii) the Company
fails to comply with any of its other agreements in the Indenture, the Notes or
certain related agreements for the period and after the notice specified below;
(iv) the Company or any Subsidiary defaults in (A) the

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payment of interest on other indebtedness or the performance of any other
agreement, term or condition contained in any agreement under which other
indebtedness is created or secured, if the effect of such default is to cause
in excess of $5,000,000 in aggregate principal amount of such indebtedness to
become due prior to its stated maturity or (B) the payment of principal of
other indebtedness, if the effect of such default is to permit the holders of
such indebtedness to cause in excess of $5,000,000 in aggregate principal
amount of such indebtedness to become due prior to its stated maturity; (v) any
executive officer of the Company fails, after such executive officer becomes
aware that an Event of Default has occurred, to promptly notify the Security
Holders of such Event of Default and provide a written statement to the
Security Holders setting forth the details of the Event of Default and any
action with respect thereto taken or contemplated to be taken by the Company;
(vi) the security interest of the Security Holders is not perfected,
enforceable or valid; (vii) the Company or any Material Subsidiary becomes
insolvent, fails to pay its debts generally as they become due, commences a
voluntary case under any applicable bankruptcy law, consents to a judgment in
an involuntary case under any applicable bankruptcy law, consents to the
appointment of a custodian of its property or makes a general assignment for
the benefit of its creditors; (viii) a court enters a judgment in respect of
the Company or any Material Subsidiary in an involuntary bankruptcy case and
such judgment remains unstayed for a period of 60 consecutive days or any
bankruptcy proceeding is commenced against the Company or any Material
Subsidiary and is not dismissed within 30 days; (ix) final judgments involving
aggregate uninsured liability exceeding $2,500,000 are rendered against the
Company or any Subsidiary and remain undischarged for a period of 60 days; or
(x) the Trustee receives notice from the Company or holders of at least 25% in
principal amount of the outstanding Notes of the occurrence of a material
default under, or a material breach of, the agreements (other than the
Indenture) relating to the issuance of the Notes. For purposes of this
section, the terms "Subsidiary" and "Material Subsidiary" shall not include any
members of the Ideal Group and in no event shall any event of default exist as
a result of any action or inaction of or relating to any member of the Ideal
Group or of the Company with respect to the Ideal Group or any member thereof.

A default under clause (iii) above is not an Event of Default unless
the Company does not cure the default within 30 days after it receives notice
of the default from the Trustee or the holders of at least 25% in principal
amount of the outstanding Notes, other than defaults under the provisions
relating to Restricted Payments and the incurrence of Indebtedness, with
respect to which the Company has ten days after notice to cure a default, and
other than the failure by the Company to effect a Special Mandatory Redemption
Offer or the repurchase offer required upon a Change of Control, either of
which will constitute an Event of Default without notice or the passage of
time.

The Indenture provides that the Trustee shall, within 90 days after
the occurrence of a Default which is continuing and which is known to the
Trustee, give the holders of Notes notice of all uncured defaults known to it;
PROVIDED that, except in the case of default in the payment of principal,
premium, if any, or interest on the Notes, including payment upon mandatory
redemption, the Trustee shall be protected in withholding such notice if it in
good faith determines that the withholding of such notice is in the interest of
the Security Holders.

In case an Event of Default (other than an Event of Default resulting
from bankruptcy, insolvency or reorganization) shall have occurred and be
continuing, the Trustee or the holders of at least 25% in principal amount of
the Notes outstanding by notice in writing, may declare to be due and payable
immediately the principal of, premium, if any, and accrued interest on the
Notes. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization shall occur, such amount with respect
to all the Notes shall be due immediately and payable without any declaration
or any act on the part of the Trustee or the holders of the Notes. Such
declaration may be annulled and past defaults may be waived (except, unless
theretofore cured, a default in payment of principal, premium, if any, or
interest) by the holders of 66 2/3% in principal amount of the Notes
outstanding upon

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conditions provided in the Indenture. Except to enforce the right to receive
payment of principal or interest when due, no holder of a Note may institute
any proceeding with respect to the Indenture or for any remedy thereunder
unless such holder has previously given to the Trustee written notice of a
continuing Event of Default and unless the holders of at least 25% in principal
amount of the Notes outstanding have made a written request to the Trustee to
institute proceedings in respect of such Event of Default, have offered the
Trustee reasonable indemnity against loss, liability and expense to be thereby
incurred and the Trustee has failed so to act for 60 days after receipt of the
same and no inconsistent direction has been given to the Trustee from the
holders of a majority in principal amount of the Notes outstanding during such
60 day period.

The Indenture requires the Company to file annually with the Trustee a
statement regarding compliance by the Company with certain covenants in the
Indenture, specifying any defaults of which the signers may have knowledge.

AMENDMENT, SUPPLEMENT AND WAIVER

Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the holders of at least 66 2/3% in
principal amount of the Notes outstanding, and any past default or
non-compliance with any provisions may be waived with the consent of the
holders of a majority in principal amount of the Notes. Without the consent of
Noteholders, the Company may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency or to evidence the succession of
another corporation or to provide for uncertificated Notes in addition to or in
place of certificated Notes or to make any change that does not adversely
affect the rights of any Noteholder. However, without the consent of the
holders of the Notes, the Company may not amend or supplement the Indenture or
the Notes, nor shall a waiver be effective, to, among other things, extend the
maturity, reduce the rate or extend the time of payment of interest, modify the
terms or manner of payment of the principal, premium, if any, or interest on
the Notes in any other way, change redemption provisions in a manner adverse to
the holders or reduce the percentage of holders necessary to amend or
supplement the Indenture.

REGISTRATION RIGHTS; LIQUIDATED DAMAGES

The Company entered into a registration rights agreement with the
initial purchases of the Notes, dated September 17, 1991 (the "Registration
Rights Agreement") pursuant to which the Company agreed, for the benefit of the
holders of the Notes, to use its best efforts to, and at its cost, (i) on or
before December 16, 1991, file a registration statement (the "Shelf
Registration Statement") with the Commission with respect to a registered shelf
offering of the Notes, (ii) on or before March 16, 1992, cause the Shelf
Registration Statement to be declared effective under the Securities Act and
(iii) keep the Shelf Registration Statement continuously effective for a period
(the "Target Effective Period") of at least 24 months.

The Registration Rights Agreement provides that if the Shelf
Registration Statement is not filed on or before December 16, 1991 or declared
effective on or before March 16, 1992, the Company shall pay liquidated damages
to each holder of "restricted" Notes in an amount equal to $.10 per $1,000
outstanding principal amount of such Notes per week for the first thirteen
weeks immediately following such date. The weekly liquidated damages shall
increase to an amount equal to $.15 per $1,000 outstanding principal amount of
such Notes for the first week following each of such 13-week periods and for
each week thereafter so long as the Shelf Registration is not filed or declared
effective, as the case may be. If at any time within the Target Effective
Period such Shelf Registration Statement shall no longer be effective (an
"Ineffective Date"), the Company shall pay liquidated damages equal to $.05 per
$1,000 outstanding principal amount of such Notes per week to each holder of
such Notes beginning with

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the week including the Ineffective Date. The weekly liquidated damages shall
increase by an amount equal to $.05 per $1,000 outstanding principal amount of
such Notes on the last day of each 13-week period thereafter for so long as the
Shelf Registration Statement is not declared effective. Liquidated damages
shall be deemed to commence to accrue on the day on which the event triggering
such liquidated damages occurs. The liquidated damages to be paid to holders
of "restricted" Notes pursuant to the Registration Rights Agreement shall cease
to accrue, (i) with respect to the liquidated damages for failure to file on or
prior to December 16, 1991, on the day such Shelf Registration Statement is
filed, (ii) with respect to the liquidated damages for failure to be declared
effective on or prior to the March 16, 1992, on the day such Shelf Registration
Statement is declared effective, or (iii) with respect to the liquidated
damages for the suspension of effectiveness of such Shelf Registration
Statement, on the day of reinstatement of effectiveness of such Shelf
Registration Statement.

The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, reference to all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.

SATISFACTION AND DISCHARGE OF INDENTURE

The Company may terminate its obligations, with certain exceptions,
under the Notes and the Indenture if all Notes previously authenticated and
delivered (other than destroyed, lost or stolen Notes which have been replaced
or paid) have been delivered to the Trustee for cancellation and the Company
has paid all sums payable by it under the Indenture or if (i) the Company
irrevocably deposits in trust with the Trustee money or United States
Government Obligations sufficient to pay principal of and interest on the Notes
in cash to maturity or redemption, as the case may be, and to pay all other
sums payable to the Trustee under the Indenture and, (ii) no Default or Event
of Default shall have occurred or be continuing, (iii) such deposit will not
result in a breach of, or constitute a default under the Indenture or any other
instrument to which the Company is a party or by which it or its property is
bound, (iv) the Company delivers to the Trustee an opinion of independent
counsel to the effect that the Holders of the Notes will not recognize income,
gain or loss for federal income tax purposes and that the Holders will have no
federal income tax consequences as a result of such deposit, and (v) certain
other conditions are satisfied.

REPORTS TO NOTEHOLDERS

So long as any of the Notes remain outstanding, the Company shall
cause annual reports on Form 10-K and quarterly reports on Form 10-Q containing
financial statements and other information concerning the business and affairs
of the Company to be mailed to the Noteholders.

THE TRUSTEE

The Trustee is permitted to engage in other transactions with the
Company; PROVIDED, HOWEVER, that if the Trustee acquires certain conflicting
interests specified in the 1939 Act, it must eliminate such conflicts or
resign. Presently, United States Trust Company of New York also serves as
Agent under the Pledge Agreement and as Warrant Agent under the Warrant
Agreement.

The holders of a majority in principal amount of Notes then
outstanding will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
PROVIDED that such direction would not conflict with any rule of law or with
the terms of the Indenture and would not be unduly prejudicial to the rights of
another Noteholder or that may subject the Trustee to personal liability. The
Indenture provides that, in case an Event of Default shall occur (and not be
cured), the Trustee will be required to use the same degree of care and skill
in the exercise of its

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powers as a prudent person would use in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any of the
Noteholders, unless it shall have received security and indemnity satisfactory
to it.

DESCRIPTION OF WARRANTS

The Warrants, which are governed by the terms and conditions of the
Warrant Agreement, are immediately exercisable into 957,000 shares of Common
Stock at an exercise price of $4.60 per share. The exercise price of the
Warrants and the number of shares of Common Stock issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events
including but not limited to, the declaration of dividends or making of a
distribution on the outstanding shares of the Company's Common Stock in shares
of its Common Stock or the subdivision or reclassification of the outstanding
shares of the Company's Common Stock into a greater or smaller number of
shares. The Warrants expire on September 1, 1996. The Company may offer to
the registered holder the option, in lieu of exercising the Warrants, of
surrendering the Warrants, in whole or in part, for a cash payment equal to the
product of (i) the Closing Price (as defined in the Warrant Agreement) for a
share of Common Stock on the last business day prior to the date of surrender
of the warrant certificate less the exercise price, and (ii) the number of
shares of Common Stock to which the holder is entitled pursuant to the Warrants
surrendered therefor.

As long as any Warrant remains outstanding, the Company is not
permitted to (i) issue any shares of its Class B Common Stock or options,
rights, warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase shares of its Class B Common Stock; (ii)
authorize, issue, grant or sell incentive stock options, non-qualified stock
options or any other option to subscribe for or purchase shares of Common Stock
if the aggregate number of shares of Common Stock which may be purchased under
all such options exceeds 2,400,000; and (iii) authorize or grant incentive
stock options, non-qualified stock options or any other option to subscribe for
or purchase any shares of any class of common stock of the Company other than
the Common Stock.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 2,000,000
shares of Preferred Stock, $.01 par value, 22,000,000 shares of Common Stock,
$.01 par value, and 6,000,000 shares of Class B Common Stock, $.01 par value.
As of June 14, 1994, no shares of Preferred Stock, 9,489,657 shares of Common
Stock and 2,222,505 shares of Class B Common Stock were issued and outstanding.

COMMON STOCK AND CLASS B COMMON STOCK

Each share of Common Stock entitles the holder to one vote on all
matters submitted to the stockholders, including the election of directors, and
each share of Class B Common Stock entitles the holder to ten votes on all such
matters. Except as set forth below, all actions submitted to a vote of
stockholders are voted on by holders of Common Stock and Class B Common Stock
voting together as a single class. The holders of Common Stock and Class B
Common Stock vote separately as classes with respect to any amendments to the
Company's Certificate of Incorporation that alter or change the powers,
preferences or special rights of their respective classes of stock so as to
affect them adversely, and with respect to such other matters as may require
class votes under the Delaware General Corporation Law.

Dividends on the Class B Common Stock may not exceed those on the
Common Stock. Each share of Common Stock and Class B Common Stock is equal in
respect of rights to dividends and other

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distributions in stock or property of the Company (including distributions upon
liquidation of the Company), except that in the case of dividends or other
distributions payable on the Common Stock and the Class B Common Stock in
shares of such stock, including distributions pursuant to split-ups or
divisions of the Common Stock or the Class B Common Stock, only Common Stock
will be distributed with respect to Common Stock and only Class B Common Stock
will be distributed with respect to Class B Common Stock. In no event will
either the Common Stock or the Class B Common Stock be split, divided or
combined unless the other is split, divided or combined equally.

The Class B Common Stock is not transferable by a holder except to or
among such holder's spouse, certain of such holder's relatives and certain
trusts established for their benefit. The Class B Common Stock is convertible
into Common Stock on a share-for-share basis at any time.

If the number of outstanding shares of Class B Common Stock at any
time falls below 250,000 (as adjusted for any stock splits, combinations, stock
dividends or further issuances of Class B Common Stock), the outstanding shares
of Class B Common Stock will automatically be converted into shares of Common
Stock.

The Class B Common Stock may tend to have an anti-takeover effect.
Since voting control of the Company is vested primarily in the holders of the
Class B Common Stock, the issuance of the Class B Common Stock could render
more difficult, or discourage, a hostile merger proposal, a tender offer or a
proxy contest, even if such actions were favored by a majority of the holders
of Common Stock. As of June 1, 1994, Melvin Waxman and Armond Waxman
beneficially owned an aggregate of approximately 80.1% of the outstanding Class
B Common Stock and 61.1% of the aggregate outstanding voting power of the
Company.

The transfer agent and registrar for the Common Stock and Class B
Common Stock is National City Bank, Cleveland, Ohio.

PREFERRED STOCK

The Preferred Stock may be issued from time to time in one or more
series, and the Board of Directors is authorized to fix the dividend rights and
terms, any conversion rights, any voting rights, any redemption rights and
terms (including sinking fund provisions), the rights in the event of
liquidation and any other rights, preferences, privileges and restrictions of
any series of Preferred Stock, as well as the number of shares constituting
such series and the designation thereof. The Preferred Stock, if issued, will
rank senior to the Company Common Stock as to dividends and as to liquidation
preference. Holders of Preferred Stock will have no preemptive rights. The
issuance of shares of Preferred Stock could have an anti-takeover effect under
certain circumstances. The issuance of shares of Preferred Stock could enable
the Board of Directors to render more difficult or discourage an attempt to
obtain control of the Company by means of a merger, tender offer or other
business combination transaction directed at the Company by, among other
things, placing shares of Preferred Stock with investors who might align
themselves with the Board of Directors, issuing new shares to dilute stock
ownership of a person or entity seeking control of the Company or creating a
class or series of Preferred Stock with voting rights. The issuance of shares
of the Preferred Stock as an anti-takeover device might preclude stockholders
from taking advantage of a situation which they believed could be favorable to
their interests. No shares of Preferred Stock are outstanding, and the Company
has no present plans to issue any shares of Preferred Stock.

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CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion sets forth the material Federal income tax
consequences associated with the acquisition, ownership and disposition of the
Securities by prospective purchasers. This summary does not discuss all
aspects of Federal income taxation that may be relevant to a particular holder
of Securities in light of his personal investment circumstances or to certain
types of holders of Securities subject to special treatment under the Federal
income tax laws (for example, life insurance companies, tax-exempt
organizations and foreign corporations and individuals who are not citizens or
residents of the United States) and does not discuss any aspects of state,
local or foreign taxation. The discussion is addressed primarily to purchasers
who will hold the Securities as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended (the "Code"). Moreover, substantial uncertainties, resulting
from the lack of definitive judicial or administrative authority and
interpretation, apply to various tax aspects of the acquisition, ownership and
disposition of the Securities. As to such issues, the discussion sets forth
the positions that the Company believes to be correct and currently intends to
take. No assurance, however, can be given that the Service will not take
contrary or differing positions. No ruling from the Internal Revenue Service
(the "Service") has been or will be requested in any tax matters concerning the
offering. Prospective purchasers are urged to consult their own tax advisors
as to the precise Federal, state, local and other tax consequences of
acquiring, owning and disposing of the Securities.

THE NOTES

STATED INTEREST ON THE NOTES

In addition to the accrual of interest income under the original issue
discount rules discussed below, a holder of a Note will be required to report
as income for Federal income tax purposes the stated interest on such Note in
accordance with the holder's method of tax accounting.

ORIGINAL ISSUE DISCOUNT

In 1986, the Service issued proposed regulations (with certain
amendments made in 1989 and 1991) governing the inclusion in income of original
issue discount ("OID") by holders of debt instruments (the "1986 Proposed
Regulations"). The 1986 Proposed Regulations were to become effective for debt
instruments issued after July 1, 1982. On December 22, 1992, the Service
withdrew the 1986 Proposed Regulations and issued a new set of proposed
regulations governing the inclusion in income of original issue discount by
holders of debt instruments. With certain changes, these proposed regulations
were adopted and published in the Federal Register on February 2, 1994, and
substantially revised the 1986 Proposed Regulations (the "1994 Regulations").
(Together, the 1986 Proposed Regulations and the 1994 Regulations will be
referred to as the "OID Regulations.") The 1994 Regulations are only effective
for debt instruments issued on or after April 14, 1994, and, by their terms,
are not applicable to the Notes. In Treasury decision Section 517 relating to
the 1994 Regulations, the Service has stated that taxpayers may rely upon the
1986 Proposed Regulations as "substantial authority" under Section 6662 of the
Internal Revenue Code (relating to certain penalties for the understatement of
taxes) for debt instruments issued prior to their withdrawal. Thus, the
Company and the holders of the Securities may rely on the 1986 Proposed
Regulations as "substantial authority" with respect to the Notes and the
Warrants, which were issued on September 17, 1991, to avoid certain penalties,
if necessary. However, to the extent that the 1986 Proposed Regulations
conflict with the 1994 Regulations, the Service may apply the rules contained
in the 1994 Regulations for purposes of determining a taxpayer's substantive
tax liability.

In certain instances, the OID Regulations are potentially inconsistent
or are susceptible to varying interpretations. No assurance can be given that
the Service will agree with the positions the Company

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may take with respect to the OID Regulations. Purchasers are urged to consult
their own tax advisors regarding the application of the OID Regulations to an
investment in the Notes.

The amount of OID, if any, on a debt instrument is the difference
between its "issue price" and its "stated redemption price at maturity,"
subject, generally, to a statutory de minimis exception. The portion of
original issue discount, if any, accrued (and to be included in income) with
respect to a debt instrument with a maturity of more than one year will
generally be determined for each accrual period under the constant yield method
by multiplying the adjusted issue price of the debt instrument at the beginning
of the accrual period by its yield to maturity (determined on the basis of
semi-annual compounding), and subtracting from that product the amount of any
interest payments made during that accrual period which are based on a single
fixed rate and are payable unconditionally in cash or in property (other than
debt instruments of the issuer) at intervals of one year or less during the
entire term of the debt instrument ("Qualified Stated Interest"). The
resulting amount is allocated ratably to each day in the accrual period, and
the amount includible in a holder's income (whether on the cash or accrual
method of accounting) with respect to the debt instrument is the sum of the
resulting daily portions of OID for each day of the taxable year on which the
holder held the debt instrument. The adjusted issue price of a debt instrument
at the beginning of any accrual is equal to its original issue price increased
by all previously accrued original issue discount and reduced by the amount of
all previous payments made on such debt instrument other than payments of
Qualified Stated Interest. Generally, the tax basis of a debt instrument in
the hands of the holder will be increased by the amount of OID, if any, that is
included in the holder's income pursuant to these rules and will be decreased
by the amount of any payment received by the holder other than payments of
Qualified Stated Interest.

The 1986 Proposed Regulations provide that if a debt instrument is
issued as part of an investment unit, which includes a property right such as a
Warrant, and neither the property right nor the debt instrument is publicly
traded within ten (10) days after issuance (as was the case with respect to the
Notes and the Warrants), the original issue price of the debt instrument is the
present value of all payments under such debt instrument, discounted at a rate
based on yields of comparable debt instruments. The remaining original issue
price of the investment unit is allocated to the property right. Based upon
this rule, the Company has calculated the original issue price of each Note to
be $980.00 and each Warrant to be $1.00. The 1994 Regulations provide that the
issue price of an investment unit is to be allocated between the components of
the unit based on their relative fair market values but do not provide any
specific guidance on how the allocation is to be made. The Company intends to
rely on the guidance provided by the 1986 Proposed Regulations. There can,
however, be no assurance that the Service will agree with such allocation and
will not be successful in asserting a different allocation of the issue price
of the investment unit.

The 1994 Regulations contain certain aggregation rules that could be
interpreted to require that, for purposes of calculating and amortizing any
OID, the Fixed Rate Notes and the Floating Rate Notes be treated together as a
single debt instrument with a single issue price, maturity date, yield to
maturity and stated redemption price at maturity. If these aggregation rules
were to apply, the Fixed Rate Notes and the Floating Rate Notes, in the
aggregate, could be treated as a single "installment obligation." This
treatment could result in a distortion of the amount of OID otherwise
includible in income by holders. The Company believes that the aggregation
rules are inapplicable to the Fixed Rate Notes and the Floating Rate Notes and
intends to adopt the position that the Fixed Rate Notes and the Floating Rate
Notes are not subject to such rules for purposes of computing OID.

The Company will furnish annually to record holders of the Notes and
to the Service information with respect to OID, if any, accruing during the
calendar year (as well as interest paid during that year). Because this
information will be based upon the adjusted issue price of the Notes,
subsequent holders who purchase the Notes for an amount in excess of the
adjusted issue price will be required to determine for

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themselves the amount of OID, if any, they are required to report. Moreover,
as stated above, the Service may not agree with the original issue price
allocated by the Company to the Notes.

As a result of each issue of the Notes being offered together with
Warrants, both issues of the Notes were issued with OID. As discussed above,
the total amount of original issue discount with respect to each of such Notes
is the excess of its stated redemption price at maturity over its issue price.
The Company believes the amount of original issue discount per each $1,000 Note
is $20.00. Consequently, a holder of either the Fixed Rate Notes or the
Floating Rate Notes will be required to include in his gross income in advance
of the receipt of cash representing that income the sum of the daily portions
of OID on his Notes for each day during each taxable year or portion thereof on
which he holds such Notes. These amounts are in addition to the actual
interest payments on the Notes.

Holders of the Notes should be aware that there are the
above-described and other possible interpretations of the OID Regulations which
could result in differences in the amount or timing of OID on Notes and that
such alternative interpretations may also be reasonable. Moreover, there can
be no assurance that the Service will not interpret the OID Regulations in a
manner contrary to the positions described above.

ACQUISITION PREMIUM

Purchasers of a Note who purchase such debt instrument at an
acquisition premium will be entitled to a reduction in the daily portion of OID
they are required to include in income. A debt instrument is purchased at an
acquisition premium if it is not purchased at a "premium" (as defined in the
"Bond Premium" below) and immediately after its purchase (including a purchase
at original issuance) its adjusted basis exceeds its adjusted issue price. The
amount of such reduction will be equal to the daily portion of OID (as
otherwise determined to be includible) multiplied by a fraction the numerator
of which is the amount of such excess and the denominator of which is the total
OID remaining to be accrued on such debt instrument subsequent to the date of
purchase. Alternatively, a purchaser of a Note who purchases such debt
instrument after its original issuance at an acquisition premium may elect to
compute all interest under the Note as OID by treating the purchase as a
purchase at original issuance in the manner described under "Original Issue
Discount" above.

BOND PREMIUM

If the tax basis of the Note in the hands of a purchaser exceeds the
sum of all amounts payable on the Note after the purchase date (other than
Qualified Stated Interest), then such holder may be allowed to deduct the
excess of his basis over the amount payable at maturity as amortizable bond
premium over the term of such Note. The amount of bond premium which may be
deducted annually will be computed on the basis of the purchaser's yield to
maturity, determined by using his basis in the Notes and compounding at the
close of each accrual period. To amortize bond premium, the purchaser must
make an election that applies to all debt instruments held or subsequently
acquired by him. A purchaser who elects to amortize bond premium must reduce
his tax basis in the Notes by an amount equal to the amortized premium.

MARKET DISCOUNT ON RESALE

Purchasers of a Note should be aware that the resale of Notes may be
affected by the market discount provisions of the Code. Those rules generally
provide that, if a holder of a debt instrument purchases it at a market
discount and thereafter recognizes gain upon a disposition of the debt
instrument (including a gift), the lesser of such gain (or appreciation, in the
case of a gift) or the portion of the market discount that accrued while the
debt instrument was held by such holder will be treated as

06:WAXS2.809:ATB:et:3396-4:WAXMAN DISK 1007B
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<PAGE> 79
ordinary interest income at the time of the disposition. The market discount
rules also provide that a holder who acquires a debt instrument at a market
discount may be required to defer a portion of any interest expense that may
otherwise be deductible on any indebtedness incurred or maintained to purchase
or carry such debt instrument until the holder disposes of the debt instrument
in a taxable transaction. Debt instruments, like the Notes, which bear OID are
considered to have been purchased at a market discount if, subsequent to their
original issuance, they are purchased at a price below their issue price
increased by the original issue discount includible in the income of all prior
holders (and, probably, although the Code and the 1994 Regulations do not
expressly so provide, reduced by all payments other than Qualified Stated
Interest). Neither the rule treating accrued market discount as ordinary
income on disposition nor the rule deferring interest deductions applies if the
holder elects to include the accrued market discount in income currently.

The Notes provide for mandatory redemption in accordance with certain
provisions and also for optional redemption by the Company, in whole or in
part, prior to maturity. If Notes were redeemed in part, a holder of market
discount Notes would be required to include in gross income (as ordinary
income) the portion of the principal payment attributable to accrued market
discount on the Notes.

SALE, EXCHANGE OR REDEMPTION OF NOTES

In general, the sale, exchange or redemption of the Notes will result
in gain or loss equal to the difference between the amount realized and the
holder's adjusted tax basis in the Note immediately before the transaction.
Subject to the special rules under the Code relating to "market discount," any
such gain or loss on the sale, exchange or redemption will be capital gain or
loss.

THE WARRANTS

The sale of a Warrant by a holder other than to the Company will
result in the recognition of a capital gain or loss, PROVIDED that the Warrant
is a capital asset in the hands of the holder on the date of the sale. The
amount of the gain or loss will be the difference between the amount paid by
the holder for the Warrant and the sales price of the Warrant. The Company
believes that the amount of the original issue price properly allocable to the
purchase of a Warrant is $1.00. The tax consequences of a sale of a Warrant to
the Company (other than upon the exercise of a Warrant) are uncertain. Under
certain unusual circumstances, the Service may take the position that the
proceeds of the sale would be ordinary income.

As a general rule, no gain or loss will be recognized by a holder of a
Warrant on the purchase of Common Stock for cash on the exercise of the
Warrant. Gain may be recognized, however, to the extent a holder receives cash
in lieu of fractional shares of Common Stock. The adjusted tax basis of a
share of Common Stock received upon exercise of a Warrant will be equal to the
sum of the Holder's adjusted tax basis in the exercised Warrant and the
exercise price. The holding period for Common Stock received upon exercise of
a Warrant will commence with the date of exercise of the Warrant.

Each purchaser of Securities should consult his own tax advisor with
respect to the tax consequences to him, including the tax consequences under
state, local, foreign and other tax laws, of the ownership and disposition of
the Securities.

PLAN OF DISTRIBUTION

Any or all of the Securities may be sold from time to time to
purchasers directly by any of the Selling Security Holders. Alternatively, the
Selling Security Holders may from time to time offer the

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<PAGE> 80
Securities through underwriters, dealers or agents who may receive compensation
in the form of underwriting discounts, concessions or commissions from the
Selling Security Holders and/or the purchasers of Securities for whom they may
act as agents. The Selling Security Holders and any such underwriters, dealers
or agents that participate in the distribution of Securities may be deemed to
be underwriters under the Act, and any profit on the sale of the Securities by
them and any discounts, commissions or concessions received by them may be
deemed to be underwriting discounts and commissions under the Act. The
Securities may be sold from time to time in one or more transactions at a fixed
offering price, which may be changed, or at varying prices determined at the
time of sale or at negotiated prices.

At the time a particular offer of Securities is made, to the extent
required, a supplement to this Prospectus will be distributed (and a
post-effective amendment to the Registration Statement of which this Prospectus
is a part will be filed) which will identify and set forth the aggregate amount
of Securities being offered and the terms of the offering, including the name
or names of any underwriters, dealers or agents, the purchase price paid by any
underwriter for Securities purchased from the Selling Security Holders, any
discounts, commissions and other items constituting compensation from the
Selling Security Holders and/or the Company and any discounts, commissions or
concessions allowed or reallowed or paid to dealers, including the proposed
selling price to the public. In addition, an underwritten offering will
require clearance by the National Association of Securities Dealers, Inc. of
the underwriter's compensation arrangements. The Company will not receive any
of the proceeds from the sale by the Selling Security Holders of the Securities
offered hereby. All of the filing fees and other expenses of this Registration
Statement will be borne in full by the Company.

The Company entered into a registration rights agreement with the
original purchasers of the Securities to register their Securities under
applicable Federal and state securities laws at certain times. The Company
will pay substantially all of the expenses incident to the offering and sale of
the Securities to the public, other than commissions, concessions and discounts
of underwriters, dealers or agents. The registration rights agreement provides
for cross-indemnification of the Selling Security Holders and the Company, to
the extent permitted by law, for losses, claims, damages, liabilities and
expenses arising, under certain circumstances, out of any registration of the
Securities.

Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Securities may not simultaneously
engage in market making activities with respect to the Securities for a period
of nine business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, the Selling Security Holders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation Rules 10b-2, 10b-6 and
10b-7, which provisions may limit the timing of purchases and sales of the
Securities by the Selling Security Holders.

In order to comply with certain states' securities laws, if
applicable, the Securities will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In certain states the Securities
may not be sold unless the Securities have been registered or qualified for
sale in such state, or unless an exemption from registration or qualification
is available and is obtained.

The Securities originally issued by the Company in the private
placement contained legends as to their restricted transferability. Upon the
effectiveness of the Registration Statement of which this Prospectus forms a
part, these legends will no longer be necessary. Upon the transfer by the
Selling Security Holders of any of the Securities, new certificates
representing such Securities will be issued to the transferee, free of any such
legends.

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<PAGE> 81
<TABLE>

In addition to sales pursuant to the Registration Statement of which
this Prospectus forms a part, the Securities may be sold in accordance with
Rule 144 under the Act.

SELLING SECURITY HOLDERS

The following table provides certain information with respect to the
Securities beneficially owned by each Selling Security Holder. The Securities
offered by this Prospectus may be offered from time to time in whole or in part
by the persons named below or by their transferees, as to whom applicable
information will be set forth in a prospectus supplement to the extent
required.

<CAPTION>
PRINCIPAL
AMOUNT OF PRINCIPAL AMOUNT
FIXED RATE OF FLOATING RATE NUMBER OF
SELLING SECURITY HOLDER NOTES(1) NOTES(1) WARRANTS(1)
----------------------- -------- -------- -----------
<S> <C> <C> <C>
Citicorp Securities, Inc. $1,500,000 --- ---

Colonial High Yield Securities Fund 3,000,000 --- ---

Delta Airlines Master Trust --- --- 20,000

Eaton Vance High Income Portfolio --- --- 6,000

Eaton Vance Income Fund of Boston --- --- 14,000

Equifax Inc. --- --- 7,500

Fidelity Summer Street Trust: Fidelity
Capital and Income Fund --- --- 420,000

IDS Certificate Company --- $7,500,000 150,000

Keystone Custodian B-4 Fund --- --- 80,000

Keystone America Strategic Income Fund --- --- 10,000

Merrill, Lynch, Pierce, Fenner & Smith 4,500,000 --- ---

President and Fellows of Harvard College 500,000 --- 60,000

Sherborne Group Inc. Master Trust --- --- 2,500

SunAmerica High Income Fund 2,500,000 --- ---

The Ohio Casualty Insurance Company --- --- 60,000

T. Rowe Price High Yield Fund, Inc. --- --- 90,000

West American Insurance Company --- --- 30,000

[To be determined] 500,000 --- 7,000
---------- ---------- -------

TOTAL $12,500,000 $7,500,000 957,000
========== ========= =======
</TABLE>

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<PAGE> 82

(1) Each Selling Security Holder is registering the entire amount of
Securities set forth opposite its name above. Because the Selling
Security Holders may offer all or some part of the Securities which
they hold pursuant to this Prospectus and because this offering is not
being underwritten on a firm commitment basis, no estimate can be
given as to the amount of Securities to be offered for sale by the
Selling Security Holders nor the amount of Securities that will be
held by the Selling Security Holders upon termination of this
offering. See "Plan of Distribution". To the extent required, the
specific amount of Securities to be sold by a Selling Security Holder
in connection with a particular offer will be set forth in an
accompanying Prospectus Supplement.

LEGAL MATTERS

The legality of the Securities offered hereby has been passed upon for
the Company by Shereff, Friedman, Hoffman & Goodman, New York, New York.

EXPERTS

The audited consolidated financial statements of the Company as of
June 30, 1992 and 1993 and for each of the three years in the period ended June
30, 1993 appearing in this Prospectus and elsewhere in this Registration
Statement have been audited by Arthur Andersen & Co., independent certified
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.

Reference is made to said report which includes an explanatory
paragraph with respect to the change in method of accounting for certain
warehousing and catalog costs as discussed in Note 3 to the consolidated
financial statements.

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<PAGE> 83
<TABLE>

INDEX TO FINANCIAL STATEMENTS

<CAPTION>
Page
----
<S> <C>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

Unaudited Financial Statements:
Consolidated Balance Sheets as of March 31, 1994 and June 30, 1993 . . . . . . . . . . . F-2
Consolidated Statements of Income for the Nine and Three Months
Ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the Nine Months Ended
March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . F-7

Audited Financial Statements:
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . F-14
Consolidated Balance Sheets as of June 30, 1993 and 1992 . . . . . . . . . . . . . . . . F-15
Consolidated Statements of Income for the Years Ended
June 30, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17
Consolidated Statements of Stockholders' Equity for the
Years Ended June 30, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . F-18
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-19
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-20
Unaudited Supplementary Financial Information . . . . . . . . . . . . . . . . . . . . . . F-32

</TABLE>

F-1

WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

March 31, 1994 and June 30, 1993

ASSETS

<CAPTION>
March 31, June 30,
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 529 $ 406
Accounts receivable, net 37,297 32,432
Inventories 77,929 69,728
Prepaid expenses 4,800 4,844
Net assets held for sale - 10,266
Net assets (liabilities) of discontinued operations (500) 29,156
-------- ------

Total current assets 120,055 146,832
-------- --------

PROPERTY AND EQUIPMENT:
Land 1,852 1,420
Buildings 11,816 11,172
Equipment 19,953 18,229
-------- --------
33,621 30,821
Less accumulated depreciation
and amortization (16,675) (14,361)
-------- --------

Property and equipment, net 16,946 16,460
-------- --------

COST OF BUSINESSES IN EXCESS OF
NET ASSETS ACQUIRED, NET 24,955 24,448

OTHER ASSETS 12,721 9,311
-------- --------

$174,677 $197,051
======== ========

<FN>
The accompanying Notes to Consolidated Financial Statments
are an integral part of these balance sheets.
</TABLE>
F-2

<PAGE> 85
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

March 31, 1994 and June 30, 1993

LIABILITIES AND STOCKHOLDERS' EQUITY

<CAPTION>
March 31, June 30,
1994 1993
-------- -------
(in thousands, except per share amounts)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,178 $ 2,493
Accounts payable 23,197 18,604
Accrued liabilities 14,223 6,548
-------- --------
Total current liabilities 40,598 27,645
-------- --------

LONG-TERM DEBT, NET OF CURRENT PORTION 32,602 22,567

SENIOR SECURED NOTES 38,646 38,563

SUBORDINATED DEBT 100,780 100,780

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferrrred stock, $.01 par value per share:
Authorized and unissued 2,000 shares - -
Common Stock, $.01 par value per share:
Authorized 22,000 shares; Issued 9,484
at March 31, 1994 and 9,424 at
June 30, 1993 95 94
Class B common stock $.01 par value
per share:
Authorized 6,000 shares; Issued
2,229 at March 31, 1994 and
2,238 at June 30, 1993 23 23
Paid-in capital 18,598 18,467
Retained deficit (55,993) (6,437)
-------- --------
(37,277) 12,147
Cumulative currency translation
adjustments (672) (4,651)
-------- --------
Total stockholders' equity (deficit) (37,949) 7,496
-------- --------
$174,677 $197,051
======== ========

<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
</TABLE>
F-3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In Thousands, Except Per Share Data)

For the Nine Months and Three Months Ended March 31, 1994 and 1993

<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
1994 1993 1994 1993
------ ------- ------ ------

<S> <C> <C> <C> <C>
Net sales $ 160,245 $ 153,957 $ 52,311 $ 48,583

Cost of sales 104,180 102,035 33,761 31,810
------- ------- ------- ------

Gross profit 56,065 51,922 18,550 16,773

Operating expenses 41,769 39,729 14,137 12,868
------- ------- ------- ------

Operating income 14,296 12,193 4,413 3,905

Interest expense, net 15,635 15,242 5,293 5,089
------- ------- ------- ------

Loss from continuing operations before
income taxes, extraordinary charge and
cumulative effect of accounting change (1,339) (3,049) (880) (1,184)

Provision (benefit) for income taxes - (1,429) 61 (474)
------- ------- ------- ------

Loss from continuing operations before
extraordinary charge and cumulative
effect of accounting change (1,339) (1,620) (941) (710)

Discontinued Operations - Ideal
Income (loss) from discontinued
operations, net of taxes (3,249) 1,300 (4,250) (218)
Loss on disposal, without tax benefit (38,343) (38,343)
------- ------- ------- ------

Loss before extraordinary charge and
cumulative effect of accounting change (42,931) (320) (43,534) (928)

Extraordinary charge, early retirement
of debt, without tax benefit (6,625) - (6,625) -

Cumulative effect of change in accounting
for warehouse and catalog costs,
without tax benefit - (2,110) - -
------- ------- ------- ------

Net loss $ (49,556) $ (2,430) $ (50,159) $ (928)
======= ======= ======= ======
</TABLE>

..continued..
F-4
<PAGE> 87
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In Thousands, Except Per Share Data)

For the Nine Months and Three Months Ended March 31, 1994 and 1993

<CAPTION>
Nine Months Ended Three Months Ended
March 31, March 31,
1994 1993 1994 1993
------ ------- ------ ------
<S> <C> <C> <C> <C>
Primary and fully diluted earnings
(loss) per share:

From continuing operations $ (.11) $ (.14) $ (.08) $ (.06)

Discontinued operations:
Income (loss) from discontinued operations (.28) .11 (.36) (.02)
Loss on disposal (3.29) - (3.28) -

Extraordinary charge (.57) - (.57) -

Cumulative effect of accounting change - (.18) - -
------ ------ ------ ------

Net loss $ (4.25) $ (.21) $ (4.29) $ (.08)
====== ====== ====== ======

<FN>

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

</TABLE>
F-5

<PAGE> 88
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Nine Months Ended March 31, 1994 and 1993

<CAPTION>
1994 1993
-------- --------
(in thousands)
<S> <C> <C>
CASH FROM (USED FOR):
OPERATIONS
Loss from continuing operations $(1,339) $(1,620)
Adjustments to reconcile loss
from continuing operations:
Changes in assets and liabilities:
Depreciation and Amortization 5,573 5,696
Accounts receivable (1,026) (332)
Inventories ( 6,537) 1,336
Prepaid expenses 187 1,954
Accounts payable 3,261 (10,174)
Accrued liabilities 1,038 (549)
------- -------

Net cash from provided by (used for)
continuing operations 1,157 (3,689)

Earnings (loss) from discontinued operations (3,249) 1,300
Loss on disposal of discontinued operations (38,343) -
Other, net 3,979 (2,550)
Change in net assets of discontinued operations 29,656 300
------- -------

Net cash used for operating activities (6,800) (4,639)
------- -------

INVESTMENTS:
Proceeds from sale of business 3,006 -
Capital expenditures (2,280) (791)
Change in other assets (3,321) (1,811)
------ -------

Net cash used for investments (2,595) (2,602)
------- -------

FINANCING:
Net borrowings under credit agreements 9,848 8,348
Repayments of long-term debt (330) (453)
Dividends paid - (700)
-------- -------

Net cash from financing 9,518 7,195
------- -------

NET INCREASE (DECREASE) IN CASH 123 (46)

BALANCE, BEGINNING OF PERIOD 406 194
------- -------

BALANCE, END OF PERIOD $ 529 $ 148
======= =======

<FN>

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

</TABLE>
F-6

<PAGE> 89
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 1994 and 1993

(in thousands, except per share amounts)

Management believes that the information furnished in the accompanying
consolidated financial statements reflects all adjustments (consisting only of
normal recurring adjustments) which are necessary for a fair presentation of
the Company's financial position and results of operations for the periods
presented. The results of operations for the nine months and three months
ended March 31, 1994 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 1994 or any other period. The
information reported in the consolidated financial statements and the notes
below should be read in conjunction with the Company's Annual Report on Form
10-K/A for the fiscal year ended June 30, 1993.

1. Business
--------
The Company believes that it is one of the leading suppliers of
plumbing products to the home repair and remodeling market in the
United States. The Company distributes plumbing, electrical and
hardware products, in both packaged and bulk form, to do-it-yourself
(D-I-Y) retailers, mass merchandisers, smaller independent retailers
and plumbing, electrical repair and remodeling contractors. The
Company performs ongoing credit evaluations of its customers'
financial condition. The Company's largest customer accounted for
approximately 12.3% and 11.5% of the Company's net sales from
continuing operations for the nine months ended March 31, 1994 and
1993, respectively.

2. Consolidation and Prior-Year Reclassification
---------------------------------------------
The accompanying consolidated financial statements include the
accounts of Waxman Industries, Inc. and its wholly-owned subsidiaries
(the Company). All significant intercompany transactions and balances
are eliminated in consolidation.

The accompanying June 30, 1993 balance sheet has been restated to
reflect the discontinued operations discussed in Note 3 and the
reclassification of certain debt amounts from current to long-term as
a result of the Company's successful solicitation of consents to
obtain waivers of certain covenant violations that existed at June 30,
1993 and the subsequent modification of certain of the Company's debt
agreements. See Note 6.

3. Discontinued Operations - Ideal
-------------------------------
Effective March 31, 1994, the Company adopted a plan to dispose of its
Canadian subsidiary, Ideal Plumbing Group, Inc. (Ideal). Unlike the
Company's U.S. operations which supply products to customers in the
home repair and remodeling market through mass retailers, Ideal
primarily serves customers in the Canadian new construction market
through independent contractors. Accordingly, Ideal is reported as a
discontinued operation at March 31, 1994 and the consolidated
financial statements have been reclassified to report separately
Ideal's net assets and results of operations. Prior period
consolidated financial statements have been reclassified to conform to
the current period presentation.

F-7

<PAGE> 90
At the time the plan of disposition was adopted, the Company expected
that the disposition would be accomplished through a sale of the business
to a group which included members of Ideal's management. Such
transaction would have required the consent of Ideal's Canadian bank as
borrowings under its bank credit agreements were collateralized by all of
the assets and capital stock of Ideal. The bank reviewed the management
group's acquisition proposal, however the proposal was subsequently
rejected. On May 5, 1994, without advance notice, the bank filed an
involuntary bankruptcy petition against Ideal citing defaults under the
bank credit agreements. (Borrowings under these agreements are
non-recourse to Waxman Industries, Inc.) As a result of this action, the
Company's control and ownership of Ideal is likely to be lost prior to
June 30, 1994.

The estimated loss on disposal totals $38.2 million, without tax benefit,
and represents a complete write-off of the Company's investment in Ideal.
The loss includes the estimated loss on disposal, a provision for
anticipated operating losses until disposal and provisions for other
estimated costs to be incurred in connection with the disposal, as well
as a $6.4 million foreign currency exchange loss which results from the
elimination of the currency translation adjustments relating to Ideal.
In accordance with SFAS No. 109, "Accounting for Income Taxes", any tax
benefits relating to the loss on disposal have been reduced 100% by a
valuation allowance. The Company will continue to evaluate the valuation
allowance and to the extent it is determined that such allowance is no
longer required, the tax benefit of such loss on disposal may be
recognized in the future.

Net assets of the discontinued operation at March 31, 1994 consist of
current assets and plant, property and equipment, current liabilities and
bank borrowings after deducting an allowance for the estimated loss on
disposal.

Summary operating results of the discontinued operation for the periods
presented are as follows:

<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March 31 March 31
------------------------ -----------------------

1994 1993 1994 1993
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net sales $87,265 $118,455 $18,449 $31,371
Costs and expenses 90,261 115,960 22,597 31,793
------ ------- ------ ------
Income (loss) before
income taxes (2,996) 2,495 (4,148) (422)
Income taxes 253 1,195 102 (204)
------ ------- ------ ------
Net income (loss) $(3,249) $ 1,300 $(4,250) $ (218)
====== ======= ====== ======

</TABLE>

4. Earnings Per Share
------------------
Primary earnings per share have been computed based on the weighted
average number of shares and share equivalents outstanding, which
totaled 11,674 and 11,666 for the three and nine months ended March
31, 1994, respectively. The weighted average number of shares and
share equivalents outstanding totaled 11,662 for both the three and
nine months ended March 31, 1993. Share equivalents include the
Company's common stock purchase warrants. The conversion of the
Company's Convertible Subordinated

F-8

<PAGE> 91
Debentures due March 15, 2007 into shares of common stock was not
assumed in computing fully diluted earnings per share in either 1994 or
1993, as the effect would be antidilutive.

5. Income Taxes
------------

Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109).
The adoption of SFAS 109 had no effect on the Company's financial
position or results of operations. In accordance with the provisions
of SFAS 109, the Company is unable to tax benefit losses in the current
period.

The Company currently has $11.5 million of available domestic net
operating loss carryforwards which expire in 2008. In addition, as a
result of the anticipated disposition of Ideal, the Company currently
estimates that it will have available additional net operating loss
carry forwards of approximately $30 million.

SFAS 109 requires the recognition of income tax benefits for loss
carryforwards which have not previously been recorded. The tax
benefits recognized must be reduced by a valuation allowance in certain
circumstances. Upon adoption of SFAS 109, the benefit of the Company's
net operating loss carryforwards was reduced 100% by a valuation
allowance. The Company will continue to evaluate the valuation
allowance and to the extent that the Company is able to recognize tax
benefits in the future, such recognition will favorably affect future
results of operations.

6. Debt:
----
A. Long-Term Debt
--------------

Long-term debt at March 31, 1994 consisted of the following:

<TABLE>
<S> <C>
Domestic revolving credit agreements $30,794
Other notes payable 4,986
-------
Subtotal - long-term debt 35,780
Less: current portion (3,178)
-------
Long-term debt, net $32,602
-------
</TABLE>

The Company has a secured revolving credit facility with two banks
which provides for availability of up to $30 million and expires on
December 31, 1995. At June 30, 1993, a "cross-default" provision
contained in the credit agreement would have been triggered, and
borrowings thereunder would have been subject to acceleration if, due
to a covenant violation related to the Senior Secured Notes (defined
below), such notes were accelerated. As discussed in B. below, the
Company has received consents from the requisite number of holders of
the Senior Secured Notes to waive such covenant violation.

In December 1993, Barnett Inc. (Barnett), a wholly-owned subsidiary of
the Company, entered into a secured revolving credit facility with a
domestic bank. The credit facility provides for availability of up to
$5 million and expires on May 31, 1994. Borrowings under this
facility are secured by substantially all of Barnett's assets.
Interest on the unpaid principal is based on the bank's prime rate
plus 1.5% or LIBOR plus 3%.

F-9

<PAGE> 92
In May 1994, both the domestic revolving credit facility and the
Barnett revolving credit facility were terminated by the Company, and
borrowings thereunder were refinanced as part of the Company's debt
restructuring. See Note 9. Borrowings under the Barnett revolving
credit facility at March 31, 1994 are classified as long-term debt as
they were subsequently refinanced using proceeds from long-term debt
obligations.

B. Senior Secured Notes
--------------------

In September 1991, the Company completed a private placement of Senior
Secured Notes due September 1, 1998 (the Senior Secured Notes). As of
June 30, 1993, the Company was not in compliance with the operating
cash flow covenant contained in the Senior Secured Note indenture. As
a result of the covenant violation, the trustee or the holders of 25%
of the Senior Secured Notes had the right, at their discretion, to
declare the Company to be in default under the indenture and cause the
amounts due under the Senior Secured Notes to be subject to
acceleration. In addition, as a result of the Company's 1993
operating results as well as the unfavorable impact of the decline in
the Canadian dollar on cumulative currency translation adjustments,
the Company's consolidated stockholders' equity at June 30, 1993 and
September 30, 1993 was below the minimum net worth requirement under
the Senior Secured Note indenture. Under the terms of the indenture,
the Company would have been required to offer to purchase $5 million
of the Senior Secured Notes every six months.

During November 1993, the Company completed a solicitation of consents
from the holders of the Senior Secured Notes to waive noncompliance
with the operating cash flow covenant and amend certain provisions of
the Senior Secured Note indenture. Effectiveness of the waiver and
amendments required the consent of holders of at least 66-2/3% of the
outstanding principal amount of the securities. The effect of the
consent was to cure the noncompliance with the operating cash flow
covenant as well as amend the net worth and certain other financial
covenants to relieve the Company of its obligation to offer to
purchase $5 million of Senior Secured Notes on May 30, 1994 and
provide that future compliance will not be negatively impacted by the
Company's fiscal 1993 operating results or fluctuations in foreign
currency on cumulative translation adjustments.

During May 1994, the Company received requisite consents from the
holders of the Senior Secured Notes to, among other things, permit the
completion of the Company's debt restructuring (see Note 9) and
eliminate any prospective defaults resulting from the adverse results
and events relating to the Company's discontinued Canadian operations.
See Note 9.

C. Senior Subordinated Notes
--------------------------

In June 1989, the Company issued $100 million principal amount of
13-3/4% Senior Subordinated Notes (the Subordinated Notes) due June 1,
1999. As a result of the Company's 1993 operating results as well as
the unfavorable impact of the decline in the Canadian dollar on
cumulative currency translation adjustments, the Company's
consolidated stockholders' equity at June 30, 1993 and September 30,
1993 was below the $15 million minimum net worth requirement under the
Subordinated Note indenture. Under the terms of the Subordinated Note
indenture, the Company would have been required to offer to purchase
$10 million of the Subordinated Notes every six months.

F-10

<PAGE> 93
During November 1993, the Company completed a solicitation of
consents from the holders of the Subordinated Notes to waive the
Company's obligation to offer to purchase on December 31, 1993 $10
million principal amount of the Subordinated Notes as well as amend
certain provisions of the Subordinated Note indenture. Effectiveness
of the waiver and amendments required the consent of holders of at
least 66-2/3% of the outstanding principal amount of the Subordinated
Notes. The effect of the consent was to relieve the Company of its
obligation to offer to purchase $10 million Subordinated Notes on
December 31, 1993 as well as amend the minimum net worth covenant to
provide that future compliance will not be negatively impacted by the
Company's cumulative currency translation adjustments.

During May 1994, the Company refinanced $50 million of the
Subordinated Notes. In addition, it received requisite consents from
the holders of the Subordinated Notes to, among other things, permit
the completion of the Company's debt restructuring and eliminate any
prospective defaults which result from the adverse results and events
relating to the Company's discontinued Canadian operations See Note
9.

D. Convertible Subordinated Debentures
-----------------------------------

In March 1987, the Company issued 6-1/4% Convertible Subordinated
Debentures (the Debentures) due March 15, 2007 of which approximately
$2 million remained outstanding as of December 31, 1993. As a result
of the Company's 1993 operating results, as well as the unfavorable
impact of the decline in the Canadian dollar on cumulative currency
translation adjustments, the Company's consolidated stockholders'
equity was below the minimum net worth requirement under the Debenture
indenture at both June 30, 1993 and September 30, 1993. As a result,
the Company would have been required to make a purchase offer at
December 31, 1993 for substantially all of the Debentures currently
outstanding. However, in December 1993, the Company commenced and
successfully completed a solicitation of consents from the holders of
the Debentures to defer until April 30, 1994 the Company's obligation
to offer to purchase $1.9 million of the Debentures. In connection
with the solicitation, the interest rate on the Debentures was
adjusted to 9.5% and the conversion price was reduced from $9.58 to
$3.25 per share.

On April 28, 1994, the Company made an offer to purchase $1.9 million
of the Debentures. If the offer is accepted, such purchase is
expected to be consummated on June 15, 1994.

7. Supplemental Cash Flow Information
----------------------------------

Cash payments during the nine months ended March 31, 1994 and 1993
included income taxes of $ 401 and $ 635, and interest of $12,769 and
$ 12,281 respectively.

8. Sale of Businesses
------------------

At June 30, 1993, net assets held for sale in the accompanying
consolidated balance sheets related to the proposed disposal of three
operating entities in which the Company had entered into letters of
intent with prospective buyers.

F-11

<PAGE> 94
During October 1993, the Company completed the sale of one of its
Canadian operations, H. Belanger Plumbing Accessories, Ltd.
(Belanger). The Company sold all of the capital stock of Belanger in
exchange for approximately U.S. $3 million in cash and a U.S. $0.3
million promissory note. The promissory note, which matures on
October 14, 1996, provides for three equal consecutive annual
payments. Interest is payable annually at a rate of 7%. The loss on
the sale of Belanger was approximately $3 million.

The Company was unable to come to terms with the prospective
buyer of the other two entities. At the present time, the Company is
not engaged in any other negotiations with respect to the sale of
these entities. As such, the consummation of a sale of these
businesses is not expected to occur in the foreseeable future, if at
all. Accordingly, these businesses are no longer reflected as net
assets held for sale in the consolidated balance sheet at March 31,
1994. The Company evaluated the net realizable value of the carrying
value of the net assets previously held in accordance with its normal,
ongoing policy regarding impairment and concluded that no further
write-down of the net carrying value of these assets was required in
excess of the reserve previously established. The Company incurred
approximately $.2 million of fees and expenses relating to the
transaction which was applied against the reserve.

9. Subsequent Events - Debt Restructuring and Extraordinary Charge
---------------------------------------------------------------

A. Debt Restructuring
------------------

On May 20, 1994, the Company completed a restructuring of its debt
which included a refinancing of $50 million of its Subordinated Notes
as well as all borrowings under its existing domestic bank credit
facilities. As part of the restructuring, the Company exchanged $50
million of its Subordinated Notes for $50 million initial accreted
value of 12.75% Senior Secured Deferred Coupon Notes due 2004 (the
Deferred Coupon Notes) along with detachable warrants to purchase 2.95
million shares of the Company's common stock. The Deferred Coupon
Notes have no cash interest requirements until 1999. In addition, the
Operating Companies (as defined below) entered into a new $55 million,
four year, secured credit facility with an affiliate of Citibank,
N.A., as agent, which includes a $20 million letter of credit
subfacility. The domestic credit facility, which has an initial term
of three years will be extended for an additional year if the Senior
Secured Notes have been redeemed within 33 months after the initial
borrowing under the domestic credit facility. The domestic credit
facility will be subject to borrowing base formulas. Borrowings
under the domestic credit facility will bear interest at (i) the per
annum rate of 1.5% plus the highest of (a) the prime rate of Citibank,
N.A., (b) the federal funds rate plus 0.5% and (c) a formula with
respect to three month certificates of deposit of major United States
money market banks or (ii) LIBOR plus 3.0%. These rates will be
increased by 0.5% until such time as the domestic term loan, discussed
below, has been repaid in full. These rates will be decreased by 0.5%
if Waxman USA achieves certain performance criteria based on the ratio
of EBITDA to fixed charged. The facility will include a letter of
credit subfacility of $20 million. The domestic credit facility will
be secured by the accounts receivable, inventory, certain general
intangibles and unencumbered fixed assets of the Operating Companies
and 65% of the capital stock of one subsidiary of TWI. The Operating
Companies also entered into a $15.0 million three-year term loan with
Citibank, N.A., as agent. The domestic term loan will bear interest
at a rate per annum equal to 1.5% over the interest rate under the
domestic credit facility and will be secured by a junior lien on the
collateral under the domestic credit facility. A one-time fee of 1.0%
of the principal amount outstanding under the domestic term loan will
be payable if such loan is not repaid within 6 months after May 20,
1994. Principal payments on the domestic term loan of $1.0 million
each will be required quarterly commencing at the end of the third
quarter following May 20, 1994. The domestic term loan will be
required to be prepaid if Waxman USA completes a financing sufficient
to retire the Subordinated Notes, the Senior Secured Notes

F-12

<PAGE> 95
and the domestic term loan. The domestic term loan will contain
negative, affirmative and financial covenants, conditions and events
of default substantially the same as those under the domestic credit
facility. The initial borrowings under the revolving credit facility
(which totaled approximately $27.2 million) along with proceeds from
the domestic term loan were used to repay all borrowings under the
Company's existing domestic bank credit facilities as well as fees and
expenses associated with the restructuring.

B. Corporate Restructuring
-----------------------

The Company has restructured (the "Corporate Restructuring") its
domestic operations such that the Company will be a holding company
whose only material assets will be the capital stock of its
subsidiaries. As part of the Corporate Restructuring, the Company has
formed (a) Waxman USA Inc. ("Waxman USA"), as a holding company for
the subsidiaries that comprise and support the Company's domestic
operations, (b) Waxman Consumer Products Group Inc., a wholly owned
subsidiary of Waxman USA, to own and operate Waxman Industries'
Consumer Products Group Division, and (c) WOC Inc. ("WOC"), a wholly
owned subsidiary of Waxman USA, to own and operate Waxman USA's
domestic subsidiaries, other than Barnett and Consumer Products. On
May 20, 1994, the Company restructured its operation by (i)
contributing the capital stock of Barnett to Waxman USA, (ii)
contributing the assets and liabilities of the Consumer Products
Division to Consumer Products, (iii) contributing the assets and
liabilities of its Madison Equipment Division to WOC, (iv)
contributing the assets and liabilities of its Medal Distributing
Division to WOC, (v) merging U.S. Lock Corporation ("U.S. Lock") and
LeRan Copper & Brass, Inc. ("LeRan"), each a wholly owned subsidiary
of the Company, into WOC, (vi) contributing the capital stock of TWI,
International, Inc. ("TWI") to Waxman USA and (vii) contributing the
capital stock of Western American Manufacturing, Inc. ("WAMI") to TWI.
The Operating Companies consist of Barnett, Consumer Products and WOC.

C. Extraordinary Charge
--------------------

As a result of the refinancing of the $50 million of Subordinated
Notes as well as borrowings under the domestic bank credit facilities,
the Company incurred an extraordinary charge which totaled $6.6
million, without tax benefit, and included the fees paid upon the
exchange of the Subordinated Notes along with the accelerated
amortization of unamortized debt discount and issuance costs.
The fees paid included an exchange fee to the holders of the
Subordinated Notes as well as legal, accounting and printing expenses
directly relating the Exchange. The payment of these fees facilitated
the early retirement of the Subordinated Notes. The
Company has accrued for the extraordinary charge at March 31, 1994.
The $6.6 million extraordinary charge is included in accrued
liabilities in the accompanying balance sheet at March 31, 1994.

F-13

<PAGE> 96
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of Waxman Industries, Inc.:

We have audited the accompanying consolidated balance sheets of Waxman
Industries, Inc. (a Delaware corporation) and Subsidiaries (the Company) as of
June 30, 1993 and 1992, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended June 30, 1993. 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 financial position of Waxman Industries, Inc. and
Subsidiaries as of June 30, 1993 and 1992, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1993, in conformity with generally accepted accounting principles.

As explained in Note 3 to the consolidated financial statements, effective July
1, 1992, the Company changed its method of accounting for certain warehousing
and catalog costs.

Arthur Andersen & Co.

Cleveland, Ohio,
May 20, 1994.

F-14

<PAGE> 97
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1993 AND 1992

ASSETS

<CAPTION>
1993 1992
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash $ 406,000 $ 194,000
Accounts receivable, net 32,432,000 36,235,000
Inventories 69,728,000 80,326,000
Prepaid expenses 4,844,000 7,810,000
Net assets of discontinued operations 29,156,000 50,632,000
Net assets held for sale 10,266,000 --
------------ ------------

Total current assets 146,832,000 175,197,000
------------ ------------

PROPERTY AND EQUIPMENT:
Land 1,420,000 1,441,000
Buildings 11,172,000 10,808,000
Equipment 18,229,000 19,848,000
------------ ------------
30,821,000 32,097,000

Less accumulated depreciation and amortization (14,361,000) (13,321,000)
------------ ------------

Property and equipment, net 16,460,000 18,776,000
------------ ------------

COST OF BUSINESSES IN EXCESS OF
NET ASSETS ACQUIRED, NET 24,448,000 28,199,000

OTHER ASSETS 9,311,000 15,309,000
----------- ------------

$197,051,000 $237,481,000
============ ============

<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.

</TABLE>

WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1993 AND 1992

LIABILITIES AND STOCKHOLDERS' EQUITY

<CAPTION>
1993 1992
---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 2,493,000 $ 2,107,000
Accounts payable 18,604,000 28,912,000
Accrued liabilities 6,548,000 8,292,000
------------- ------------

Total current liabilities 27,645,000 39,311,000
------------- ------------

LONG-TERM DEBT, NET OF CURRENT PORTION 22,567,000 9,663,000

SENIOR SECURED NOTES 38,563,000 38,451,000

SUBORDINATED DEBT 100,780,000 100,780,000

NET LONG-TERM LIABILITIES OF
DISCONTINUED OPERATIONS -- 8,449,000

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value per share:
Authorized and unissued 2,000,000 shares -- --
Common stock, $.01 par value per share:
Authorized 22,000,000 shares;
Issued 9,424,000 in 1993 and 9,411,000 in 1992 94,000 94,000
Class B common stock, $.01 par value per share:
Authorized 6,000,000 shares;
Issued 2,238,000 in 1993 and 2,251,000 in 1992 23,000 23,000
Paid-in capital 18,467,000 18,467,000
Retained earnings (deficit) (6,437,000) 23,735,000
------------ ------------

12,147,000 42,319,000
Cumulative currency translation adjustments (4,651,000) (1,492,000)
------------ ------------

Total stockholders' equity 7,496,000 40,827,000
------------ ------------

$197,051,000 $237,481,000
============ ============

<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.

</TABLE>

WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 1993, 1992 AND 1991

<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net sales $ 204,778,000 $197,738,000 $186,327,000

Cost of sales 137,244,000 127,115,000 121,397,000
------------ ------------ ------------
Gross profit 67,534,000 70,623,000 64,930,000
Selling, general and administrative expenses 56,081,000 51,824,000 50,263,000
Restructuring and other nonrecurring charges 6,762,000 3,900,000 --
------------ ------------ ------------

Operating income 4,691,000 14,899,000 14,667,000
Interest expense (net of interest income
of $5,000, $978,000 and $1,335,000) 20,365,000 20,025,000 17,462,000
------------ ------------ ------------

Loss from continuing operations before
income taxes, extraordinary charge and
cumulative effect of accounting change (15,674,000) (5,126,000) (2,795,000)

Provision (benefit) for income taxes 216,000 (768,000) (680,000)
----------- ------------ -----------

Loss from continuing operations before
extraordinary charge and cumulative
effect of accounting change (15,890,000) (4,358,000) (2,115,000)

Income (loss) from discontinued
operations of Ideal, net of taxes (11,240,000) 1,146,000 4,343,000
----------- --------- ----------

Income (loss) before extraordinary charge and
cumulative effect of accounting change (27,130,000) (3,212,000) 2,228,000

Extraordinary charge, early retirement
of debt, net of tax benefit -- (1,186,000) --

Cumulative effect of change in accounting
for warehouse and catalog costs,
without tax benefit (2,110,000) -- --
----------- --------- ---------

Net income (loss) $(29,240,000) $(4,398,000) $2,228,000
=========== ========= =========

Primary and fully diluted earnings
(loss) per share:
From continuing operations (1.36) (.44) (.22)

Income (loss) from discontinued operations (.97) .11 .45

Extraordinary charge -- (.12) --

Cumulative effect of accounting change (.18) -- --
---------- --------- -------

Net income (loss) $ (2.51) $ (.45) $ .23
========== ========= =======

<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements

</TABLE>
F-17

<PAGE> 100
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1993, 1992 AND 1991

<CAPTION>
CUMULATIVE
CLASS B CURRENCY
COMMON COMMON PAID-IN RETAINED TRANSLATION
STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS
----- ----- ------- -------- -----------

<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1990 $ 76,000 $ 23,000 $ 9,590,000 $28,255,000 $ 1,298,000
Net income 2,228,000
Cash dividends:
-- $.12 per common share
and Class B share (1,149,000)
Common stock repurchase (4,000) (1,906,000)
Currency translation
adjustments (345,000)
--------- -------- ----------- ----------- -----------

BALANCE, JUNE 30, 1991 $ 72,000 $ 23,000 $ 7,684,000 $29,334,000 $ 953,000
Net loss (4,398,000)
Cash dividends:
-- $.12 per common share
and Class B share (1,201,000)
Issuance of common stock 22,000 9,763,000
Stock options exercised 20,000
Stock warrants issued 1,000,000
Currency translation
adjustments (2,445,000)
--------- -------- ----------- ----------- -----------

BALANCE, JUNE 30, 1992 $ 94,000 $ 23,000 $18,467,000 $23,735,000 $(1,492,000)
Net loss (29,240,000)
Cash dividends:
-- $.08 per common share
and Class B share (932,000)
Currency translation
adjustments (3,159,000)
--------- -------- ----------- ----------- -----------

BALANCE, JUNE 30, 1993 $ 94,000 $ 23,000 $18,467,000 $(6,437,000) $(4,651,000)
========= ======== =========== =========== ===========

<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

</TABLE>

F-18

<PAGE> 101
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1993, 1992 AND 1991

CASH FROM (USED FOR):
OPERATIONS:
Loss from continuing operations $(15,890,000) $ (4,358,000) $ (2,115,000)
Adjustments to reconcile loss
from continuing operations to
net cash used for continuing operations:
Restructuring costs 6,762,000 -- --
Loss on sale of investments -- 3,900,000 --
Depreciation and amortization 8,932,000 6,525,000 5,160,000
Changes in assets and liabilities:
Accounts receivable (1,666,000) (1,841,000) (1,651,000)
Inventories 82,000 (15,664,000) 5,305,000
Prepaid expenses 2,276,000 (2,285,000) (1,754,000)
Accounts payable (8,337,000) 11,050,000 (6,503,000)
Accrued liabilities (1,691,000) (878,000) (1,250,000)
---------- ---------- ----------
Net cash used for continuing
operations (9,532,000) (3,551,000) (2,808,000)

Earnings (loss) from
discontinued operations (11,240,000) 1,146,000 4,343,000
Other, net (3,159,000) (2,444,000) (346,000)
Change in net assets of
discontinued operations 13,027,000 6,646,000 21,885,000
---------- --------- ----------

Net cash provided by (used for)
operating activities (10,904,000) 1,797,000 23,074,000
----------- --------- ----------

INVESTMENTS:
Capital expenditures (1,336,000) (3,193,000) (1,110,000)
Change in other assets (1,826,000) (5,922,000) (1,886,000)
Proceeds from sale of investments -- 4,386,000 4,500,000
Business acquisitions -- -- (1,773,000)
----------- ----------- ----------

Net cash used for investments (3,162,000) (4,729,000) (269,000)
----------- ----------- ----------
FINANCING:
Net borrowings (repayments) under
credit agreements 15,770,000 6,393,000 (9,311,000)
Repayments of long-term debt (560,000) (508,000) (537,000)
Repayment of domestic term loan -- (60,000,000) --
Proceeds from issuance of debt, net -- 48,500,000 --
Repurchase of debt -- (12,878,000) --
Proceeds from issuance of stock -- 9,805,000 --
Dividends paid (932,000) (1,201,000) (1,149,000)
Common stock repurchase -- -- (1,910,000)
------------ ------------ ------------

Net cash provided by
(used for) financing 14,278,000 (9,889,000) (12,907,000)
------------ ------------ ------------

NET INCREASE (DECREASE) IN CASH 212,000 (12,821,000) 9,898,000
BALANCE, BEGINNING OF PERIOD 194,000 13,015,000 3,117,000
------------ ------------ ------------
BALANCE, END OF PERIOD $ 406,000 $ 194,000 $ 13,015,000
============ ============ ============

<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
F-19

<PAGE> 102
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1993, 1992 AND 1991

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

A. CONSOLIDATION AND BASIS OF PRESENTATION

The financial statements include the accounts of Waxman Industries,
Inc. and its wholly-owned subsidiaries (the Company). All significant
intercompany transactions and balances are eliminated in consolidation.
Certain 1992 and 1991 amounts have been reclassified to conform with the 1993
presentation.

The financial statements have been restated to reflect the
discontinued operations discussed in Note 12.

The Company operates in a single business segment - the distribution
of plumbing, electrical and hardware products. Substantially all of the
Company's business is conducted in the United States.

B. ACCOUNTS RECEIVABLE

Accounts receivable are presented net of allowances for doubtful
accounts of $1,124,000 and $1,112,000 at June 30, 1993 and 1992, respectively.
Bad debt expense totaled $695,000 in 1993, $562,000 in 1992 and $441,000 in
1991.

The Company sells plumbing, electrical and hardware products
throughout the United States to do-it-yourself retailers, mass merchandisers,
smaller independent retailers and plumbing, electrical repair and remodeling
contractors. The Company performs ongoing credit evaluations of its customers'
financial condition. In fiscal years 1993, 1992 and 1991, the Company's
largest customer accounted for approximately 12%, 11% and 8% of its net sales,
respectively. The Company's ten largest customers accounted for approximately
23% of net sales in 1993, 22% in 1992 and 21% in 1991 and approximately 26% and
22% of accounts receivable at June 30, 1993 and 1992, respectively.

C. INVENTORIES

At June 30, 1993 and 1992, inventories, consisting primarily of
finished goods, are carried at the lower of first-in, first-out (FIFO) cost or
market. The Company regularly evaluates its inventory carrying value, with
appropriate consideration given to any excess, slow-moving and/or nonsalable
inventories.

D. PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. For financial reporting
purposes, buildings and equipment are depreciated on a straight-line basis over
their estimated useful lives at annual depreciation rates ranging from 2 1/2%
to 30%. For income tax purposes, accelerated methods generally are used.
Depreciation expense totaled $2,690,000 in 1993, $2,665,000 in 1992 and
$2,524,000 in 1991.

E. COST OF BUSINESSES IN EXCESS OF NET ASSETS ACQUIRED

Cost of businesses in excess of the fair market value of net assets
acquired is being amortized primarily over 40 years, using the straight-line
method. Management has evaluated its accounting for goodwill, considering such
factors as historical profitability and current operating cash flows and
believes that the asset is realizable and the amortization period is
appropriate. Goodwill amortization expense totaled $725,000 in 1993, $756,000
in 1992 and $680,000 in 1991. The accumulated amortization of excess cost at
June 30, 1993 and 1992 was $3,572,000 and $3,255,000, respectively.

F. PER SHARE DATA

Primary earnings per share have been computed based on the weighted
average number of shares and share equivalents outstanding which totaled
11,662,000 in 1993,

F-20

<PAGE> 103
9,794,000 in 1992 and 9,570,000 in 1991. Share equivalents include the
Company's common stock purchase warrants (see Note 6). Fully diluted earnings
per share have been computed assuming the conversion of the 6 1/4% Convertible
Subordinated Debentures (the Debentures) into approximately 293,000 shares of
common stock in 1991 (after elimination of related interest expense, net of
income tax effect, which totaled $108,000 in 1991). The conversion of the
Debentures was not assumed in computing fully diluted earnings per share for
1993 and 1992 as the effect would be anti-dilutive.

G. FOREIGN CURRENCY TRANSLATION

All balance sheet accounts of foreign subsidiaries are translated at
the current exchange rate as of the end of the fiscal year. Income statement
items are translated at the average currency exchange rates during the year.
The resulting translation adjustment is recorded as a component of
stockholders' equity. Foreign currency transaction gains or losses are
included in the income statement as incurred and totaled $80,000 in 1993,
$73,000 in 1992 and $305,000 in 1991.

H. IMPACT OF NEW ACCOUNTING STANDARDS

In February 1992, the Financial Accounting Standards Board (the FASB)
issued SFAS No. 109, "Accounting for Income Taxes." The Company adopted SFAS
No. 109 during the first quarter of its fiscal year ending June 30, 1994. SFAS
No. 109 requires the Company to recognize income tax benefits for loss
carryforwards which have not previously been recorded. The tax benefits
recognized must be reduced by a valuation allowance in certain circumstances.
The Company did not recognize a benefit and such adoption did not have a
material impact on results of operations or financial position. However, to
the extent that the Company is able to recognize tax benefits in the future,
such recognition will favorably effect future results of operations. The FASB
has also issued SFAS No. 106, "Employers' Accounting for Postretirement
Benefits other than Pensions" and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The Company does not currently maintain any
postretirement or postemployment benefit plans or programs which would be
subject to such accounting standards.

2. RESULTS OF OPERATIONS:

As a result of the 1993 operating results, the Company was not in
compliance as of June 30, 1993, with certain financial covenants contained in
its domestic bank credit agreements and in the indentures governing its Senior
Subordinated Notes and Senior Secured Notes. In addition, the Company's
consolidated net worth decreased to a level that is expected to obligate the
Company to offer to repurchase a portion of its Senior Subordinated Notes
commencing December 31, 1993 and its Senior Secured Notes commencing May 30,
1994. On October 1, 1993, the Company entered into an amendment to its
domestic bank credit agreement which waived all covenant violations as of June
30, 1993, and amended certain of the financial covenants to provide that future
compliance will not be negatively impacted by the Company's fiscal 1993
operating results. During November, 1993, the Company obtained consents from
the holders of its Senior Subordinated Notes and Senior Secured Notes which
cured the financial covenant violations and relieved the Company of its
repurchase obligations with respect to such indebtedness. Each of these
situations is discussed in more detail in Notes 6 and 12.
Reference should be made to Note 12 which discusses the subsequent
disposition of the Canadian subsidiary, debt restructuring, corporate
restructuring and the sale of a business.

3. CHANGE IN ACCOUNTING:

During 1993, the Company accelerated its amortization of certain
warehouse start-up costs and catalog costs. This change was made during the
fourth quarter and was applied retroactively to July 1, 1992. The Company had
historically amortized such costs over a period not to exceed five years which,
in management's opinion, represented the period over which economic benefits
were received. The acceleration of amortization was made to conform with
prevailing industry practice. By accelerating amortization, certain costs
associated with the opening of new warehouse operations are amortized over a
period of twelve months commencing the month in which the warehouse opens.
Costs associated with the development and introduction of new catalogs are
amortized over the life of the catalog, not to exceed a period of one year.

F-21

<PAGE> 104
The cumulative effect of this change on prior years totaled
$2,110,000, or $.18 per share, and is reported separately in the 1993
consolidated income statement, without tax benefit. The effect of the change
in 1993 was to increase both the loss from continuing operations before
extraordinary charge and cumulative effect of accounting change and the net
loss by $1,191,000. This is primarily the result of the introduction of a new
catalog and, in management's opinion, is not necessarily indicative of the
expected impact of accelerated amortization on future years.

The following pro forma information reflects the Company's results for
fiscal years 1992 and 1991 as if the change had been retroactively applied:

<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Income (loss) from continuing operations
before extraordinary charge $(4,461,000) $ (2,249,000)
Net income (loss) (4,532,000) 2,125,000
Earnings (loss) per share:
Loss from continuing operations
before extraordinary charge $ (.45) $ (.24)
Net income (loss) (.46) .22
</TABLE>

4. RESTRUCTURING, NONRECURRING AND EXTRAORDINARY CHARGES:

During the fourth quarter of 1993, as a result of certain actions
taken as part of its strategy to refocus and build on its existing core
businesses in the U.S. the Company recorded an $6,762,000 restructuring charge.
The provision for restructuring charge consists of an estimate of the loss to
be incurred upon the sale of certain businesses, including anticipated
operating results through the projected disposal dates, and the write-off of
intangible assets. Below is a summary of components comprising the
restructuring charges as of June 30, 1993:

<TABLE>
<S> <C>
Estimated loss on disposal of businesses $4,600,000
Relocation and consolidation costs 1,544,000
Other 618,000
---------
$6,762,000
=========

</TABLE>
The disposal of businesses includes three operating entities in which
the Company has entered into letters of intent with prospective buyers. The
components of net assets held for sale included in the accompanying
consolidated balance sheets is comprised primarily of working capital items and
fixed assets, net of the reserve for the estimated loss on the disposals. All
amounts are included at net realizable value. (See Note 12).

During the fourth quarter of 1992, the Company recorded a $3,900,000
nonrecurring charge which represents a capital loss realized upon the sale of
the Company's portfolio of debt securities.

During 1992, the Company repurchased certain debt securities in open
market purchases (see Note 6). As a result, the Company incurred an
extraordinary charge which totaled $1,186,000 (net of applicable income tax
benefit of $611,000) and included the market premium paid along with the
accelerated amortization of unamortized debt discount and issuance costs.

F-22

<PAGE> 105
5. INCOME TAXES:

The components of income (loss) from continuing operations before
income taxes, extraordinary charges and cumulative effect of change in
accounting are as follows (in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Domestic $(13,442) $(6,179) $(3,581)
Foreign (2,232) 1,053 786
------- ------- ------
Total $(15,674) $(5,126) $ (2,795)
======== ======= ========
</TABLE>

The components of the provision (benefit) for income taxes are (in
thousands):

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Currently payable:
Federal $ -- $(2,404) $ (1,138)
Foreign and other 216 572 404
---- ------ -----
Total current 216 (1,832) (734)
---- ------ ------
Deferred: Federal -- 1,064 54
---- ------ ------
Total provision $216 $ (768) $ (680)
==== ====== ======

</TABLE>
Deferred income taxes relate to the following (in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Depreciation $-- $ 68 $ 45
Inventory valuation -- (84) (279)
Bad debt expense -- 425 (86)
Deferred costs -- 800 240
Other, net -- (145) 134
--- ----- ------
Total $-- $1,064 $ 54
=== ====== ======

</TABLE>
The following table reconciles the U.S. statutory rate to the
Company's effective tax rate:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
U.S. statutory rate 34.0% 34.0% 34.0%
Domestic losses not benefited (24.4) -- --
Capital losses not benefited (10.0) (18.1) --
State taxes, net (0.8) (2.3) (3.0)
Goodwill amortization (1.6) (4.5) (4.3)
Effect of prior year purchase
accounting adjustments -- 2.7 --
Other, net 1.4 3.2 (2.4)
---- ----- -----
Effective tax rate (1.4)% 15.0% 24.3%
==== ===== =====
</TABLE>

In 1992, the Company was able to carryback domestic net operating
losses to prior years which resulted in refunds of previously paid taxes. Such
refunds totaled $2,462,000 and were received in 1993. Tax benefits for 1992
domestic net operating losses which could not be carried back to prior years
were recognized by reducing previously recorded deferred income taxes. At June
30, 1993, the Company had $11,547,000 of available domestic net operating loss
carryforwards for financial reporting and income tax purposes which expire in
2008.

The Company made income tax payments of $926,000 in 1993, $1,358,000
in 1992 and $1,599,000 in 1991.
F-23

<PAGE> 106
6. DEBT:

Total debt at June 30, 1993 and 1992 consisted of the following (in
thousands):

<TABLE>
<CAPTION>
JUNE 30, 1993
-------------
<S> <C>
Domestic revolving credit agreement $ 20,400
Other notes payable, maturing at various dates through 2000 and
bearing interest at rates varying from 5.25% to 11.75% 4,660
--------
Subtotal -- Long-term debt 25,060
Less: current portion (2,493)
--------
Long-term debt, net 22,567

Senior Secured Notes 38,563
Senior Subordinated Notes 98,750
Convertible Subordinated Debentures 2,030
--------
Total long-term debt, net of current portion $161,910
========

</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1992
-------------
<S> <C>
Domestic revolving credit agreement $ 5,000
Other notes payable, maturing at various dates through 2000 and
bearing interest at rates varying from 5.25% to 11.75% 6,770
--------
Subtotal -- Long-term debt 11,770
Less: current-portion (2,107)
-------
Long-term debt, net 9,663

Senior Secured Notes 38,451
Senior Subordinated Notes 98,750
Convertible Subordinated Debentures 2,030
--------
Total long-term debt, net of current portion $148,894
========
</TABLE>

A. BANK DEBT

In September 1991, the Company entered into a secured revolving credit
facility with a domestic bank. The credit facility, which was amended and
restated effective April 1, 1993, provides for availability up to $30 million
and expires on December 31, 1995. Borrowings under this agreement are secured
by the inventories and accounts receivable of Waxman Industries, Inc. and
certain of its domestic subsidiaries. Interest is based, at the Company's
option, on either the bank's reference rate plus 1.5% or LIBOR plus 2.5%. The
weighted average interest rate on borrowings outstanding under the credit
facility was 6.34% during 1993. The Company is required to pay a commitment
fee of 1/2% per annum on the unused commitment. The agreement also requires
the Company to, among other things, maintain certain net worth and working
capital levels and debt service ratios.

As a result of the 1993 operating results, the Company was not in
compliance with several financial covenants contained in this agreement as of
June 30, 1993. On October 1, 1993, the Company entered into an amendment to
this agreement which waived all covenant violations as of June 30, 1993 and
amended certain of the financial covenants to provide that future compliance
will not be negatively impacted by the Company's fiscal 1993 operating results.
Under the agreement, as amended, interest is based, at the Company's option, on
either the bank's reference rate plus 1.5% or LIBOR plus 3.0%.

In May 1994, the domestic revolving credit facility was terminated by
the Company, and borrowings thereunder were refinanced as part of the Company's
debt restructuring. See Note 12.

B. SENIOR SECURED NOTES

In September 1991, the Company completed a private placement of $50
million of 7-year Senior Secured Notes (the Senior Notes), including detachable
warrants to purchase 1 million shares of the Company's common stock (the
Warrants). At the time of issuance, the Senior Notes included $42.5 million of
12.25% fixed rate notes and
F-24

<PAGE> 107
$7.5 million of floating rate notes with interest at 300 basis points over the
90 day LIBOR rate. The Senior Notes are redeemable in whole or in part, at the
option of the Company, after September 1, 1993 at a price of 107.35% for the
fixed rate notes and 103% for the floating rate notes. The redemption prices
decrease annually to 100% of the principal amounts at September 1, 1996.
Annual mandatory redemption payments of $14.45 million for the fixed rate
notes, and $2.55 million for the floating rate notes commence on September 1,
1996 and are calculated to retire 68% of the principal amount of the Senior
Notes prior to maturity. The Senior Notes, which are secured by a pledge of
all of the outstanding stock of the Company's wholly-owned subsidiary, Barnett
Inc., are senior in right of payment to all subordinated indebtedness and pari
passu with all other senior indebtedness of the Company.

The Warrants are exercisable through September 1, 1996, at a price of
$4.60 per share. A portion of the proceeds of the private placement was
allocated to the Warrants and, as a result, paid-in capital increased by $1
million in fiscal year 1992. The related $1 million reduction in the recorded
principal amount of the Senior Notes is being amortized as interest expense
over the life of the Senior Notes.

During June 1992, the Company repurchased $10,850,000 principal amount
of the fixed rate notes in open market purchases.

The Senior Note indenture contains various covenants, including
dividend restrictions and minimum operating cash flow requirements. As a
result of its 1993 operating results, the Company was not in compliance with
the operating cash flow covenant contained in the Senior Note Indenture as of
June 30, 1993. The operating cash flow covenant requires a minimum ratio of
operating cash flow to interest expense of 1.1 to 1.0 (the Company's actual
ratio for fiscal 1993 was approximately 0.4 to 1.0). Under the terms of the
indenture, the trustee or the holders of 25% of the Senior Notes may, at their
discretion, declare the Company to be in default under the indenture as a
result of the noncompliance and, after applicable grace periods, cause the
amounts due under the Senior Notes to be subject to acceleration.

As a result of the Company's 1993 operating results as well as the
unfavorable impact of the decline in the Canadian dollar on cumulative currency
translation adjustment, the Company's consolidated stockholders' equity at June
30, 1993 was below the minimum net worth requirement under the Senior Note
indenture. Minimum net worth of $35 million, adjusted for cumulative earnings
as defined in the indenture, is required to be maintained (the Company's actual
consolidated net worth at June 30, 1993 was $7.5 million). Under the terms of
the Senior Note indenture, the Company would be required to offer to purchase
$5 million of the Senior Notes at a price of 102% every six months if the
Company's net worth falls below the minimum net worth requirement for two
consecutive quarters. Such offers to purchase must continue until the
Company's net worth exceeds the minimum net worth requirement. The Company's
net worth continued to be below the minimum requirement at September 30, 1993,
which obligated the Company to offer to purchase $5.0 million of the Senior
Notes at May 30, 1994.

During November 1993, the Company completed a solicitation of consents
from the holders of the Senior Secured Notes to waive noncompliance with the
operating cash flow covenant and amend certain provisions of the Senior Secured
Note indenture. Effectiveness of the waiver and amendments required the
consent of holders of at least 66-2/3% of the outstanding principal amount of
the securities. The effect of the consent was to cure the noncompliance with
the operating cash flow covenant as well as amend the net worth and certain
other financial covenants to relieve the Company of its obligation to offer to
purchase $5 million of Senior Secured Notes on May 30, 1994 and provide that
future compliance will not be negatively impacted by the Company's fiscal 1993
operating results or fluctuations in foreign currency on cumulative translation
adjustments.

During May 1994, the Company received requisite consents from the
holders of the Senior Secured Notes to, among other things, permit the
completion of the Company's debt restructuring and eliminate any prospective
defaults resulting from the adverse results and events relating to the
Company's discontinued Canadian operations. See Note 12.

F-25
<PAGE> 108
C. SENIOR SUBORDINATED NOTES

In June 1989, the Company issued $100 million principal amount of 13
3/4% Senior Subordinated Notes (Subordinated Notes) due June 1, 1999. The
Subordinated Notes are redeemable in whole or in part, at the option of the
Company, after June 1, 1994 at a price of 105.156% which decreases annually to
100% of the principal amount at the maturity date. Annual mandatory redemption
payments of $20 million commencing June 1, 1996 are calculated to retire 60% of
the issue prior to maturity. In case of a change in control, the noteholders
have the right to require the Company to repurchase the Notes at established
redemption prices. The Subordinated Notes, which are unsecured, are
subordinate in right of payment to all senior debt and are senior in right of
payment to the Company's 6 1/4% Convertible Subordinated Debentures. Under the
terms of the indenture, the Company may not incur additional indebtedness which
is subordinate to senior debt and senior to the Subordinated Notes.
Additionally, the indenture agreement contains various other covenants,
including dividend restrictions and minimum net worth requirements.

During 1992, the Company repurchased $1,250,000 principal amount of
the Notes in an open market purchase.

As a result of the Company's 1993 operating results as well as the
unfavorable impact of the decline in the Canadian dollar on cumulative currency
translation adjustment, the Company's consolidated stockholders' equity at June
30, 1993 was below the $15 million minimum net worth requirement under the Note
indenture. Under the terms of the Note indenture, the Company is required to
offer to purchase $10 million of the Notes at a price of 100% every six months
if the Company's net worth falls below the minimum net worth requirement for
two consecutive quarters. Such offers to purchase must continue until the
Company's net worth exceeds the minimum net worth requirement. The Company may
credit against its purchase obligation the principal amount of any notes
previously acquired by the Company. The Company's net worth continued to be
below the minimum requirement at September 30, 1993, which obligated the
Company to offer to purchase $8.8 million of Notes at December 31, 1993 and
$10.0 million of Notes at June 30, 1994.

During November 1993, the Company completed a solicitation of consents
from the holders of the Subordinated Notes to waive the Company's obligation to
offer to purchase on December 31, 1993 $10 million principal amount of the
Subordinated Notes as well as amend certain provisions of the Subordinated
Notes indenture. Effectiveness of the waiver and amendments required the
consent of holders of at least 66-2/3% of the outstanding principal amount of
the Subordinated Notes. The effect of the consent was to relieve the Company
of its Obligation to offer to purchase $10 million Subordinated Notes on
December 31, 1993 as well as amend the minimum net worth covenant to provide
that future compliance will not be negatively impacted by the Company's
cumulative currency translation adjustments.

During May 1994, the Company refinanced $50 million of the
Subordinated Notes. In addition, it received requisite consents from the
holders of the Subordinated Notes to, among other things, permit the completion
of the Company's debt restructuring and eliminate any prospective defaults
which result from the adverse results and events relating to the Company's
discontinued Canadian operations. See Note 12.

D. CONVERTIBLE SUBORDINATED DEBENTURES

In March 1987, the Company issued $25 million principal amount of 6
1/4% Convertible Subordinated Debentures (the Debentures) due March 15, 2007.
The Debentures, which are unsecured, may be converted at any time prior to
maturity, unless previously redeemed, into shares of the Company's common stock
at a conversion price of $9.58 per share. The indenture agreement contains
various covenants, including dividend restrictions and minimum net worth
requirements.

During fiscal 1990, the Company called $12.5 million principal amount
of the Debentures for redemption and subsequently $6.5 million principal amount
was converted into 683,000 shares of common stock and the remaining $6.0
million principal amount was redeemed at the call price of 105%.
F-26
<PAGE> 109
During fiscal years 1990 and 1992, the Company also purchased $9.7
million and $.8 million, respectively, of the principal amount of the
Debentures in open market purchases at prices which approximated the par value
of the Debentures.

As a result of the Company's 1993 operating results, as well as the
unfavorable impact of the decline in the Canadian dollar on cumulative currency
translation adjustment, the Company's consolidated stockholders' equity at June
30, 1993 was $7.5 million, below the $8.0 million minimum net worth requirement
under the Debenture indenture. Under the terms of the Debenture indenture, if
the Company's net worth falls below the minimum net worth requirement for two
consecutive quarters, the Company is required to make a purchase offer for the
Debentures. The Company's consolidated stockholders' equity continued to be
below the minimum net worth requirement as of September 30, 1993, which
obligated the Company to make a purchase offer at December 31, 1993 for
substantially all of the $2.0 million principal amount of Debentures currently
outstanding. However, in December 1993, the Company commenced and successfully
completed a solicitation of consents from the holders of the Debentures to
defer until April 30, 1994 the Company's obligation to offer to purchase $1.9
million of the Debentures. In connection with the solicitation, the interest
rate on the Debentures was adjusted to 9.5% and the conversion price was
reduced from $9.58 to $3.25 per share.

E. MISCELLANEOUS

The Company made interest payments of $19,540,000 in 1993, $18,858,000
in 1992 and $18,622,000 in 1991. Accrued liabilities in the accompanying
consolidated balance sheets include accrued interest of $2,609,000 and
$2,600,000 at June 30, 1993 and 1992, respectively.

No quoted market prices are available for any of the Company's debt as
the debt is not actively traded. Management, however, believes the carrying
values of its bank loans approximate their fair values as they bear interest
based upon the banks' prime lending rates. It was not practical to estimate
the fair value of the Company's Senior Secured Notes and subordinated debt
because of the inability to estimate fair value without incurring excessive
costs.

7. STOCKHOLDERS' EQUITY:

In May 1992, the Company completed a public offering of 2,199,000
shares of common stock at a price of $5.00 per share. The net proceeds from
the offering, after deducting all associated costs, were $9,785,000.

During fiscal 1991, the Company purchased approximately 452,000 shares
of its common stock at an aggregate cost of approximately $1,910,000 through
open market purchases. There were no common stock repurchases in 1993 or 1992.

Each share of common stock entitles the holder to one vote, while each
share of Class B common stock entitles the holder to ten votes. Cash dividends
on the Class B common stock may not exceed those on the common stock. Due to
restricted transferability there is no trading market for the Class B common
stock. However, the Class B common stock may be converted, at the
stockholder's option, into common stock on a share-for-share basis at any time
without cost to the stockholder.

Stockholders' equity includes cumulative currency translation
adjustments of ($4,651,000) and ($1,492,000) at June 30, 1993 and 1992,
respectively.

F-27

<PAGE> 110
8. STOCK OPTIONS:

STOCK OPTION PLAN

Effective July 1, 1992, the Company's stockholders approved the 1992
Non-Qualified and Incentive Stock Option Plan (the 1992 Stock Option Plan)
which replaced the existing stock option plan (the 1982 Plan) which terminated
by its terms on April 30, 1992. The 1992 Stock Option Plan authorized the
issuance of an aggregate of 1.1 million shares of common stock as incentive
stock options to officers and key employees of the Company or its subsidiaries.
Under the terms of the 1992 Stock Option Plan, all options granted are at an
option price not less than the market value at the date of grant and may be
exercised for a period not exceeding 10 years from the date of grant.

During fiscal year 1993, options were issued under the 1992 Stock
Option Plan for 1,045,000 shares at option prices ranging from $4.25 to $5.00
per share, and options for 55,000 shares with an exercise price of $5.00 per
share were cancelled. At June 30, 1993, options for 990,000 shares were
outstanding, of which none were exercisable.

At June 30, 1992, there were options for 773,500 shares outstanding
under the 1982 Plan. During fiscal year 1993, options for 462,750 shares with
exercise prices of $4.75 to $7.29 per share were cancelled. At June 30, 1993,
options for 270,750 shares remained outstanding at option prices of $4.75 to
$6.00 per share, of which 153,710 options were exercisable.

OTHER STOCK OPTIONS

The Company has granted non-qualified stock options not under the Plan
to its Co-Chief Executive Officers, outside directors and to a consultant. At
June 30, 1993, a total of 170,000 shares, with exercise prices ranging from
$4.25 to $6.00, were outstanding under the non-qualified options, 88,000 of
which were exercisable. At June 30, 1992, options for 140,000 shares were
outstanding. During fiscal year 1993, options for 30,000 shares with an
exercise price of $4.25 per share were issued and no options were cancelled.

9. LEASE COMMITMENTS:

The Company leases certain of its warehouse and office facilities and
equipment under operating lease agreements which expire at various dates
through 2003.

Future minimum rental payments are as follows: $3,458,000 in 1994,
$3,055,000 in 1995, $2,665,000 in 1996, $2,342,000 in 1997, $1,880,000 in 1998
and $3,789,000 after 1998, with a cumulative total of $17,189,000.

Total rent expense charged to operations was $3,758,000 in 1993,
$3,398,000 in 1992 and $2,909,000 in 1991.

10. PROFIT SHARING PLAN:

The Company has a trusteed profit sharing retirement plan for
employees of certain of its divisions and subsidiaries. In fiscal 1989, the
plan was amended to qualify under Section 401(K) of the Internal Revenue Code.
Company contributions are determined by the Board of Directors. The charges to
operations for Company contributions totaled $132,000 in 1993, $123,000 in 1992
and $108,000 in 1991.

11. CONTINGENCIES:

The Company is subject to various legal proceedings and claims that
arise in the ordinary course of business. In the opinion of management, the
amount of any ultimate liability with respect to these actions will not
materially affect the Company's financial statements.
F-28

<PAGE> 111
SUBSEQUENT EVENTS - DISCONTINUED OPERATIONS, DEBT RESTRUCTURING AND
SALE OF A BUSINESS

A. DISCONTINUED OPERATIONS - IDEAL

Effective March 31, 1994, the Company adopted a plan to dispose of its
Canadian subsidiary, Ideal Plumbing Group, Inc. (Ideal). Unlike the Company's
U.S. operations which supply products to customers in the home repair and
remodeling market through mass retailers, Ideal primarily serves customers in
the Canadian new construction market through independent contractors.
Accordingly, Ideal is reported as a discontinued operation and the consolidated
financial statements have been reclassified to report separately Ideal's net
assets and results of operations.

At the time the plan of disposition was adopted, the Company expected
that the disposition would be accomplished through a sale of the business to a
group which included members of Ideal's management. Such transaction would
have required the consent of Ideal's Canadian bank as borrowings under its bank
credit agreements were collateralized by all of the assets and capital stock of
Ideal. The bank reviewed the management group's acquisition proposal, however
the proposal was subsequently rejected. On May 5, 1994, without advance
notice, the bank filed an involuntary bankruptcy petition against Ideal citing
defaults under the bank credit agreements. (Borrowings under these agreements
are non-recourse to Waxman Industries, Inc.) As a result of this action, the
Company's control and ownership of Ideal is likely to cease prior to June 30,
1994.

The estimated loss on disposal, which was recorded by the Company in
its consolidated financial statements as of March 31, 1994, totals $38.2
million, without tax benefit, and represents a complete write-off of the
Company's investment in Ideal. The loss includes the estimated loss on
disposal, a provision for anticipated operating losses until disposal and
provisions for other estimated costs to be incurred in connection with the
disposal, as well as a $6.4 million foreign currency exchange loss which
results from the elimination of the currency translation adjustments relating
to Ideal. In accordance with SFAS No. 109, "Accounting for Income Taxes", any
tax benefits relating to the loss on disposal have been reduced 100% by a
valuation allowance. The Company will continue to evaluate the valuation
allowance and to the extent it is determined that such allowance is no longer
required, the tax benefit of such loss on disposal may be recognized in the
future.

Net assets of the discontinued operation at June 30, 1993 consisted of
working capital of $29,878,000, net plant, property and equipment of
$15,171,000, other assets of $40,561,000 and bank debt of $56,455,000 without
any allowance for the estimated loss on disposal.

Summary operating results of the discontinued operation for the periods
presented are as follows:

<TABLE>
<CAPTION>
1993 1992 1991
------- ------- --------
<S> <C> <C> <C>
Net sales $153,875 $181,305 $197,968
Costs and expenses 164,684 178,540 191,551
------- ------- -------
Income (loss) before
income taxes (10,809) 2,765 6,417
Income taxes 431 1,619 2,074
------- ------- -------
Net income (loss) $(11,240) $ 1,146 $ 4,343
------- ======= =======

</TABLE>
F-29

<PAGE> 112
B. DEBT RESTRUCTURING

On May 20, 1994, the Company completed a restructuring of its debt
which included a refinancing of $50 million of its Subordinated Notes as well
as all borrowings under its existing domestic bank credit facilities. As part
of the restructuring, the Company exchanged $50 million of its Subordinated
Notes for $50 million initial accreted value of 12.75% Senior Secured Deferred
Coupon Notes due 2004 (the Deferred Coupon Notes) along with detachable
warrants to purchase 2.95 million shares of the Company's common stock. The
Deferred Coupon Notes have no cash interest requirements until 1999. In
addition, the Operating Companies (as defined below) entered into a new $55
million secured credit facility with an affiliate of Citibank, N.A., as agent,
which includes a $20 million letter of credit subfacility. The domestic credit
facility, which has an initial term of three years, will be extended for an
additional year if the Senior Secured Notes have been redeemed within 33 months
after the initial borrowing under the domestic credit facility. The domestic
credit facility will be subject to borrowing base formulas. Borrowings under
the domestic credit facility will bear interest at (i) the per annum rate of
1.5% plus the highest of (a) the prime rate of Citibank, N.A., (b) the federal
funds rate plus 0.5% and (c) a formula with respect to three month certificates
of deposit of major United States money market banks or (ii) LIBOR plus 3.0%.
These rates will be increased by 0.5% until such time as the domestic term
loan, discussed below, has been repaid in full. These rates will be reduced by
0.5% if Waxman USA (as defined below) achieves certain performance criteria
based on the ratio of EBITDA to fixed charges. The domestic credit facility
will be secured by the accounts receivable, inventory, certain general
intangibles and unencumbered fixed assets of the Operating Companies and 65% of
the capital stock of one subsidiary of TWI. The Operating Companies also
entered into a $15.0 million three-year term loan with Citibank, N.A., as
agent. The domestic term loan will bear interest at a rate per annum equal to
1.5% over the interest rate under the domestic credit facility and will be
secured by a junior lien on the collateral under the domestic credit facility.
A one-time fee of 1.0% of the principal amount outstanding under the domestic
term loan will be payable if such loan is not repaid within 6 months after May
20, 1994. Principal payments on the domestic term loan of $1.0 million each
will be required quarterly commencing at the end of the third quarter following
May 20, 1994. The domestic term loan will be required to be prepaid if Waxman
USA completes a financing sufficient to retire the Subordinated Notes, the
Senior Secured Notes and the domestic term loan. The initial borrowings under
the revolving credit facility (which totaled approximately $27.2 million) along
with proceeds from the domestic term loan were used to repay all borrowings
under the Company's existing domestic bank credit facilities as well as fees
and expenses associated with the restructuring.

C. CORPORATE RESTRUCTURING

The Company has restructured (the "Corporate Restructuring") its
domestic operations such that the Company will be a holding company whose only
material assets will be the capital stock of its subsidiaries. As part of the
Corporate Restructuring, the Company has formed (a) Waxman USA, Inc. ("Waxman
USA"), as a holding company for the subsidiaries that comprise and support the
Company's domestic operations, (b) Waxman Consumer Products Group Inc.(Consumer
Products), a wholly owned subsidiary of Waxman USA, to own and operate Waxman
Industries' Consumer Products Group Division, and (c) WOC Inc. ("WOC"), a
wholly owned subsidiary of Waxman USA, to own and operate Waxman USA's domestic
subsidiaries, other than Barnett and Consumer Products. On May 20, 1994, the
Company restructured its operation by (i) contributing the capital stock of
Barnett to Waxman USA, (ii) contributing the assets and liabilities of the
Consumer Products Group Division to Consumer Products, (iii) contributing the
assets and liabilities of its Madison Equipment Division to WOC, (iv)
contributing the assets and liabilities of its Medal Distributing Division to
WOC, (v) merging U.S. Lock Corporation ("U.S. Lock") and LeRan Copper & Brass,
Inc. ("LeRan"), each a wholly owned subsidiary of the Company, into WOC, (vi)
contributing the capital stock of TWI, International, Inc. ("TWI") to Waxman
USA and (vii) contributing the capital stock of Western American Manufacturing,
Inc. ("WAMI") to TWI. The Operating Companies consist of Barnett, Consumer
Products and WOC.

F-30

<PAGE> 113
D. SALE OF A BUSINESS

At June 30, 1993, net assets held for sale in the accompanying
consolidated balance sheets related to the proposed disposal of three operating
entities in which the Company had entered into letters of intent with
prospective buyers.

During October 1993, the Company completed the sale of one of its
Canadian operations, H. Belanger Plumbing Accessories, Ltd. (Belanger). The
Company sold all of the capital stock of Belanger in exchange for approximately
U.S. $3 million in cash and a U.S. $0.3 million promissory note. The
promissory note, which matures on October 14, 1996, provides for three equal
consecutive annual payments. Interest is payable annually at a rate of 7%.
The loss on the sale of Belanger was approximately $3 million.

<TABLE>
<S> <C>
Accounts receivable, net $3,840,000
Inventory 3,214,000
Prepaids 143,000
Property and equipment, net 214,000
Cost of business in excess of
net assets acquired, net 1,050,000
Other assets 195,000
Accounts payable (1,331,000)
Accrued liabilities (144,000)
----------

$7,181,000
==========
</TABLE>

F-31

<PAGE> 114

<TABLE>
SUPPLEMENTARY FINANCIAL INFORMATION

QUARTERLY RESULTS OF OPERATIONS:

The following is a summary of the unaudited quarterly results of
operations for the years ended June 30, 1993 and 1992 (in thousands, except per
share amounts):

<CAPTION>
FISCAL 1993 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
- ----------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Net sales $54,405 $50,969 $48,583 $ 50,821 $204,778
Gross profit 18,197 16,952 16,773 15,612 67,534
Operating income (loss) 4,303 3,985 3,905 (7,502) 4,691
Loss from continuing operations
before cumulative effect of
accounting change (363) (547) (710) (14,270) (15,890)
Income (loss) from discontinued
operations 785 733 (218) (12,540) (11,240)
Cumulative effect of accounting
change (2,110) -- -- -- (2,110)
Net income (loss) (1,688) 186 (928) (26,810) (29,240)
Primary and fully diluted
earnings per share:
Loss from continuing
operations before cumulative
effect of accounting change (.03) (.05) (.06) (1.22) (1.36)
Income (loss) from discontinued
operations .07 .07 (.02) (1.08) (.97)
Net income (loss) (.14) .02 (.08) (2.30) (2.51)
As Previously Reported (1):
Net Income 422
Earnings per share .04

</TABLE>

<TABLE>
<CAPTION>
FISCAL 1992 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
- ----------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Net sales $48,669 $47,269 $47,628 $54,172 $197,738
Gross profit 16,980 16,585 17,179 19,879 70,623
Operating income 3,789 4,289 5,374 1,447 14,899
Income (loss) from continuing
operations before
extraordinary charge (356) (335) 165 (3,832) (4,358)
Income (loss) from discontinued
operations 980 805 96 (735) 1,146
Net income (loss) 625 470 261 (5,754) (4,398)
Primary and fully diluted
earnings per share:
Income (loss) from continuing
operations before extraordinary
charge (.04) (.03) .02 (.36) (.44)
Income (loss) from discontinued
operations .11 .08 .01 (.07) .11
Net income (loss) .07 .05 .03 (.54) (.45)

<FN>
(1) First quarter results of fiscal 1993 have been restated for the
cumulative effect of the accounting change for warehouse and catalog
costs. The effect of the change on 1993 operating income has been
included in results for the fourth quarter.
</TABLE>

F-32

<PAGE> 115
<TABLE>
<S> <C>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE HEREIN, IN CONNECTION WITH THIS OFFER
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY OF THESE SECURITIES IN ANY WAXMAN INDUSTRIES, INC.
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT
ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.

$12,500,000 12.25% FIXED RATE SENIOR
SECURED NOTES DUE SEPTEMBER 1, 1998

TABLE OF CONTENTS
$7,500,000 FLOATING RATE SENIOR SECURED
Available Information . . . . . . . . . . . . . . . . . . . . . . . . 4 NOTES DUE SEPTEMBER 1, 1998
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . 5
Summary Financial Data . . . . . . . . . . . . . . . . . . . . . . . 10
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 960,000 COMMON STOCK PURCHASE WARRANTS
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The 1991 Refinancing . . . . . . . . . . . . . . . . . . . . . . . . 18
The 1994 Reorganization . . . . . . . . . . . . . . . . . . . . . . . 18 960,000 SHARES OF COMMON STOCK
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Price Range of Common Stock . . . . . . . . . . . . . . . . . . . . . 21
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 _____________
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . 22
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . 26 PROSPECTUS
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . 54 _____________
Description of Notes . . . . . . . . . . . . . . . . . . . . . . . . 56
Description of Warrants . . . . . . . . . . . . . . . . . . . . . . . 72
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . 72
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . 74
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . 77
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . 79
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 , 1994
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Index to Financial Statements . . . . . . . . . . . . . . . . . . . F-1
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-2
</TABLE>

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<PAGE> 116
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following expenses incurred in connection with this Registration
Statement will be paid by the Company. The Selling Security Holders will not
bear any of such expenses.

Filing Fee -- Securities and Exchange Commission $ 17,063
Accounting Fees and Expenses 25,000
Legal Fees and Expenses 95,000
Printing Fees and Expenses 10,000
Miscellaneous Expenses 25,000
--------
Total $172,063
========

ITEM 15 INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Certificate of Incorporation of the Company provides that each
person who is a party to or involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she was a director or officer of the Company, shall be indemnified and held
harmless by the Company to the fullest extent authorized by the Delaware
General Corporation Law against all expense, liability and loss reasonably
incurred by such person in connection therewith. The Certificate of
Incorporation provides that the right to indemnification contained therein is a
contract right and includes the right to be paid by the Company the expenses
incurred in defending any such proceeding in advance of its final disposition;
PROVIDED, HOWEVER, that if the Delaware General Corporation Law requires, the
payment of such expenses incurred in advance of the final disposition of a
proceeding shall be made only upon delivery to the Company of an undertaking to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified. The Company maintains
directors' and officers' liability insurance covering certain liabilities
incurred by the directors and officers of the Company in connection with the
performance of their duties.

ITEM 16 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

EXHIBIT NUMBER
- --------------

3.1* Certificate of Incorporation of the Company dated October 27, 1989
(Exhibit 3(a) to the Company's Form 8-B filed December 4, 1989, File
No. 0-5888, incorporated herein by reference).

3.2* By-laws of the Company (Exhibit 3.2 to Annual Report on Form 10-K for
the year ended June 30, 1990, File No. 0-5888, incorporated herein by
reference).

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<PAGE> 117
4.1* Indenture dated as of June 1, 1989 (the "Ameritrust Indenture")
between the Company and Ameritrust Company National Association
(Exhibit 4.1 to Annual Report on Form 10-K for the year ended June 30,
1989, File No. 0-5888, incorporated herein by reference).

4.2* First Supplemental Indenture to the Ameritrust Indenture dated
November 29, 1989 (Exhibit 4.2 to Annual Report on Form 10-K for the
year ended June 30, 1990, File No. 0-5888, incorporated herein by
reference).

4.3** Second Supplemental Indenture to the Ameritrust Indenture dated
November 23, 1993.

4.4** Third Supplemental Indenture to the Ameritrust Indenture dated May 20,
1994.

4.5* Form of the Company's 13-3/4% Senior Subordinated Note due June 1,
1999 (Exhibit 4.2 to Annual Report on Form 10-K for the year ended
June 30, 1989, File No. 0-5888, incorporated herein by reference).

4.6* Securities Purchase Agreement for Notes and Warrants dated as of
September 17, 1991, among the Company and each of the Purchasers
referred to therein (Exhibit 4.4 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0- 5888, incorporated herein by
reference).

4.7* Indenture dated as of September 1, 1991, (the "U.S. Trust Indenture")
between the Company and United States Trust Company of New York
(Exhibit 4.5 to Annual Report on Form 10-K for the year ended June 30,
1991, File No. 0-5888, incorporated herein by reference).

4.8** First Supplemental Indenture to the U.S. Trust Indenture dated
November 15, 1993.

4.9** Second Supplemental Indenture to the U.S. Trust Indenture dated March
25, 1993.

4.10** Third Supplemental Indenture to the U.S. Trust Indenture dated May 20,
1994.

4.11* Form of the Company's Floating Rate Senior Secured Notes due September
1, 1998 (Exhibit 4.6 to Annual Report on Form 10-K for the year ended
June 30, 1991, File No. 0-5888, incorporated herein by reference).

4.12* Form of the Company's 12.25% Fixed Rate Senior Secured Notes due
September 1, 1998 (Exhibit 4.7 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).

4.13* Warrant Agreement dated as of September 17, 1991, between the Company
and United States Trust Company of New York (Exhibit 4.8 to Annual
Report on Form 10-K for the year ended June 30, 1991, File No. 0-5888,
incorporated herein by reference).

4.14* Form of the Company's Common Stock Purchase Warrant Certificate
(Exhibit 4.9 to Annual Report on Form 10-K for the year ended June 30,
1991, File No. 0-5888, incorporated herein by reference).

4.15* Registration Rights Agreement for Senior Notes, Warrants and Warrant
Shares dated as of September 17, 1991, among the Company and each of
the Purchasers signatory thereto (Exhibit

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<PAGE> 118
4.10 to Annual Report on Form 10-K for the year ended June 30, 1991,
File No. 0-5888, incorporated herein by reference).

4.16* Pledge Agreement dated as of September 17, 1991, among the Company,
United States Trust Company of New York and each of the Purchasers
signatory thereto (Exhibit 4.11 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).

4.17* Operating Credit Agreement dated as of April 20, 1989 between Bank of
Montreal and Waxman Acquisition, Inc. (Exhibit 10.9 to Annual Report
on Form 10-K for the year ended June 30, 1989, File No. 0-5888,
incorporated herein by reference).

4.18* Amending Agreement of Operating Credit Agreement dated as of July 1,
1990 between Bank of Montreal and Ideal Plumbing Group Inc. (Exhibit
4.10 to Annual Report on Form 10-K for the year ended June 30, 1990,
File No. 0-5888, incorporated herein by reference).

4.19* Amended and Restated Operating Credit Agreement dated as of July 22,
1991 between Bank of Montreal and Ideal Plumbing Group Inc. (Exhibit
4.5 to Annual Report on Form 10-K for the year ended June 30, 1991,
File No. 0-5888, incorporated herein by reference).

4.20* Amended and Restated Credit Agreement dated as of April 1, 1993
between Waxman Industries, Inc. and the Banks Named Therein and
National City Bank as Agent. (Exhibit 4.15 to Annual Report on Form
10-K for the year ended June 30, 1993, File No. 0-5888, incorporated
herein by reference).

4.21* Amendment dated as of October 1, 1993 to Amended and Restated Credit
Agreement dated as of April 1, 1993 between Waxman Industries, Inc.
and the Banks Named Therein and National City Bank as Agent. (Exhibit
4.16 to Annual Report on Form 10- K for the year ended June 30, 1993,
File No. 0-5888, incorporated herein by reference).

4.22* Indenture, dated as of May 20, 1994, by and between Waxman Industries,
Inc. and the Huntington National Bank, as Trustee, with respect to the
Deferred Coupon Notes (Exhibit 4.1 to Waxman Industries, Inc.'s Form
S-4 filed June 20, 1994, Registration No. 33-54209, incorporated
herein by reference).

4.23* Credit Agreement dated as of May 20, 1994 among Waxman USA, Inc.,
Barnett, Inc., Waxman Consumer Products Group Inc. and WOC Inc., the
Lenders and Issuers party thereto and Citicorp USA, Inc., as Agent,
and certain exhibits thereto (Exhibit 10.8 to Waxman Industries,
Inc.'s Form S-4 filed June 20, 1994, Registration No. 33-54209,
incorporated herein by reference).

4.24* Term Loan Credit Agreement dated as of May 20, 1994 among Waxman USA,
Inc., Barnett Inc., Waxman Consumer Products Group Inc. and WOC Inc.,
the Lenders and Issuers party thereto and Citibank, N.A., as Agent
(Exhibit 10.9 to Waxman Industries, Inc.'s Form S-4 filed June 20,
1994, Registration No. 33-54209, incorporated herein by reference).

5.1** Opinion of Benesch, Friedlander, Coplan & Aronoff regarding legality.

5.2*** Opinion of Shereff, Friedman, Hoffman & Goodman regarding legality.

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<PAGE> 119
8.1** Opinion of Benesch, Friedlander, Coplan & Aronoff as to tax matters.

10.1* Lease between the Company as Lessee and Aurora Investment Co. as
Lessor dated June 30, 1992 (Exhibit 10.1 to Annual Report on Form 10-K
for the year ended June 30, 1992, File No. 0-5888, incorporated herein
by reference).

10.2* Policy Statement (revised as of June 1, 1980) regarding the Company's
Profit Incentive Plan (Exhibit 10(c)-1 to Annual Report on Form 10-K
for the year ended June 30, 1984, File No. 0-5888, incorporated herein
by reference).

10.3* Employment Contract dated June 18, 1990 between the Company and
William R. Pray (Exhibit 10.4 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).

10.4* Form of Stock Option Agreement between the Company and its Directors
(Exhibit 10.5 to Annual Report on Form 10-K for the year ended June
30, 1991, File No. 0-5888, incorporated herein by reference).

10.5* Employment Contract dated January 1, 1992 between the Company and
Jerome C. Jacques (Exhibit 10.5 to Annual Report on Form 10-K for the
year ended June 30, 1992, File No. 0-5888, incorporated herein by
reference).

10.6* Employment Contract dated January 1, 1992 between the Company and John
S. Peters (Exhibit 10.6 to Annual Report on Form 10-K for the year
ended June 30, 1992, File No. 0-5888, incorporated herein by
reference).

10.7* 1992 Non-Qualified and Incentive Stock Option Plan of Waxman
Industries, Inc., adopted as of July 1, 1992. (Exhibit 10.7 to Annual
Report on Form 10-K for the year ended June 30, 1993, File No. 0-5888,
incorporated herein by reference).

10.8* Employee Stock Purchase Plan of Waxman Industries, Inc., adopted on
September 1, 1992. (Exhibit 10.8 to Annual Report on Form 10-K for the
year ended June 30, 1993, File No. 0-5888, incorporated herein by
reference).

10.9* Tax Sharing Agreement dated May 20, 1994 among Waxman Industries,
Inc., Waxman USA Inc., Barnett Inc., Waxman Consumer Products Inc.,
WOC Inc. and Western American Manufacturing Inc. (Exhibit 10.6 to
Waxman Industries, Inc.'s Form S-4 filed June 20, 1994, Registration
No. 33-54209, incorporated herein by reference).

10.10* Intercorporate Agreement dated May 20, 1994 among Waxman Industries,
Inc., Waxman USA Inc., Barnett Inc., Waxman Consumer Products Inc.,
WOC Inc. and Western American Manufacturing Inc. (Exhibit 10.7 to
Waxman Industries, Inc.'s Form S-4 filed June 20, 1994, Registration
No. 33-54209, incorporated herein by reference).

12.1** Statement re: computation of ratios.

21.1** List of Subsidiaries

23.1 Consent of Arthur Andersen & Co.

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<PAGE> 120
23.2** Consent of Benesch, Friedlander, Coplan & Aronoff (contained in its
opinion filed as Exhibit 5.1 to this Registration Statement).

23.3** Consent of Benesch, Friedlander, Coplan & Aronoff (contained in its
opinion filed as Exhibit 8.1 to this Registration Statement).

23.4*** Consent of Shereff, Friedman, Hoffman & Goodman (contained in its
opinion filed as Exhibit 5.2 to this Registration Statement)

24.1** Power of Attorney (included in Part II of Registration Statement).

25.1** Statement of eligibility and qualification on Form T-1 of United
States Trust Company of New York, as trustee (bound separately).

99.1* Form 11-K Annual Report for the Amended and Restated Profit Sharing
Retirement Plan of the Company for the year ended June 30, 1993,
File No. 0-5888, incorporated herein by reference.

Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, the Company
has not filed certain instruments with respect to long-term debt because the
total amount of securities authorized thereunder does not exceed ten percent of
the total assets of the Company and its subsidiaries on a consolidated basis.
The Company hereby agrees to furnish copies of such agreements to the
Commission upon request.

* Incorporated herein by reference as indicated.
** Previously filed.
*** To be filed by amendment.

(b) Financial Statement Schedules.

All schedules have been omitted because the required
information is not present or not present in amounts
sufficient to require submission of the schedule, or because
the information required is included in the consolidated
financial statements including notes thereto.

ITEM 17 UNDERTAKINGS.

A. The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;

(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;

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<PAGE> 121
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.

(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.

B. 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.

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<PAGE> 122
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Waxman
Industries, Inc. 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 Cleveland, State of Ohio on the 19th day of
August, 1994.

WAXMAN INDUSTRIES, INC.

By:/s/ Armond Waxman
----------------------------
Armond Waxman, President,
Co-Chief Executive Officer,
Treasurer and Director

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

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C> <C>
/s/ * Chairman of the Board, August 19, 1994
- ----------------------
Melvin Waxman Co-Chief Executive Officer
and Director

/s/ Armond Waxman President, Co-Chief Executive August 19, 1994
- ----------------------
Armond Waxman Officer, Treasurer and Director

/s/ * Vice President and Chief Financial August 19, 1994
- ----------------------
Neal R. Restivo Officer (principal financial and
accounting officer)

/s/ * Director August 19, 1994
- ----------------------
Samuel J. Krasney

/s/ * Director August 19, 1994
- ----------------------
Irving Z. Friedman

/s/ * Director August 19, 1994
- ----------------------
Judy Robins

*By:/s/ Armond Waxman August 19, 1994
------------------
Armond Waxman
</TABLE>

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<PAGE> 123
EXHIBIT INDEX

EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- -----------------------------------------------------------------------------

3.1* Certificate of Incorporation of the Company dated October 27, 1989
(Exhibit 3(a) to the Company's Form 8-B filed December 4, 1989, File
No. 0-5888, incorporated herein by reference).

3.2* By-laws of the Company (Exhibit 3.2 to Annual Report on Form 10-K for
the year ended June 30, 1990, File No. 0-5888, incorporated herein by
reference).

4.1* Indenture dated as June 1, 1989 (the "Ameritrust Indenture") between
the Company and Ameritrust Company National Association (Exhibit 4.1
to Annual Report on Form 10-K for the year ended June 30, 1989, File
No. 0-5888, incorporated herein by reference).

4.3** Second Supplemental Indenture to the Ameritrust Indenture dated
November 23, 1993.

4.4** Third Supplemental Indenture to the Ameritrust Indenture dated May 20,
1994.

4.7* Indenture dated as of September 1, 1991, ("U.S. Trust Indenture")
between the Company and United States Trust Company of New York
(Exhibit 4.5 to Annual Report on Form 10-K for the year ended June 30,
1991, File No. 0-5888, incorporated herein by reference).

4.8** First Supplemental Indenture to the U.S. Trust Indenture dated
November 15, 1993.

4.9** Second Supplemental Indenture to the U.S. Trust Indenture dated March
25, 1993.

4.10** Third Supplemental Indenture to the U.S. Trust Indenture dated May 20,
1994.

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4.13* Warrant Agreement dated as of September 17, 1991, between the Company
and United States Trust Company of New York (Exhibit 4.8 to Annual
Report on Form 10-K for the year ended June 30, 1991, File No. 0-5888,
incorporated herein by reference).

4.14* Form of the Company's Common Stock Purchase Warrant Certificate
(Exhibit 4.9 to Annual Report on Form 10-K for the year ended June 30,
1991, File No. 0-5888, incorporated herein by reference).

4.15* Registration Rights Agreement for Senior Notes, Warrants and Warrant
Shares dated as of September 17, 1991, among the Company and each of
the Purchasers signatory thereto (Exhibit 4.10 to Annual Report on
Form 10-K for the year ended June 30, 1991, File No. 0-5888,
incorporated herein by reference).

4.19* Amended and Restated Operating Credit Agreement dated as of July 22,
1991 between Bank of Montreal and Ideal Plumbing Group Inc. (Exhibit
4.15 to Annual Report on Form 10-K for the year ended June 30, 1991,
File No. 0-5888, incorporated herein by reference).

4.21* Amendment dated as of October 1, 1993 to Amended and Restated Credit
Agreement dated as of April 1, 1993 between Waxman Industries, Inc.
and the Banks Named Therein and National City Bank as Agent. (Exhibit
4.16 to Annual Report on Form 10-K for the year ended June 30, 1993,
File No. 0-5888, incorporated herein by reference).

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4.24* Term Loan Credit Agreement dated as of May 20, 1994 among Waxman USA,
Inc., Barnett Inc., Waxman Consumer Products Group Inc. and WOC Inc.,
the Lenders and Issuers party thereto and Citibank, N.A., as Agent
(Exhibit 10.9 to Waxman Industries, Inc.'s Form S-4 filed June 20,
1994, Registration No. 33-54209, incorporated herein by reference).

5.1** Opinion of Benesch, Friedlander, Coplan & Aronoff regarding legality.

5.2*** Opinion of Shereff, Friedman, Hoffman & Goodman regarding legality.

8.1** Opinion of Benesch, Friedlander, Coplan & Aronoff as to tax matters.

10.1* Lease between the Company as Lessee and Aurora Investment Co. as
Lessor dated June 30, 1992. (Exhibit 10.1 to Annual Report on Form
10-K for the year ended June 30, 1992, File No. 0-5888, incorporated
herein by reference).

10.10* Intercorporate Agreement dated May 20, 1994 among Waxman Industries,
Inc., Waxman USA Inc., Barnett Inc., Waxman Consumer Products Inc.,
WOC Inc. and Western

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<PAGE> 126
American Manufacturing Inc. (Exhibit 10.7 to Waxman Industries, Inc.'s
Form S-4 filed June 20, 1994, Registration No. 33- 54209, incorporated
herein by reference).

12.1** Statement re: computation of ratios.

21.1** List of Subsidiaries

23.1 Consent of Arthur Andersen & Co.

23.2** Consent of Benesch, Friedlander, Coplan & Aronoff (contained in its
opinion filed as Exhibit 5.1 to this Registration Statement).

23.3** Consent of Benesch, Friedlander, Coplan & Aronoff (contained in its
opinion filed as Exhibit 8.1 to this Registration Statement).

23.4*** Consent of Shereff, Friedman, Hoffman & Goodman (contained in its
opinion filed as Exhibit 5.2 to this Registration Statement).

24.1** Power of Attorney (included in Part II of Registration Statement).

25.1** Statement of eligibility and qualification on Form T-1 of United
States Trust Company of New York, as trustee (bound separately).

99.1* Form 11-K Annual Report for the amended and Restated Profit Sharing
Retirement Plan of the Company for the year ended June 30, 1993, File
No. 0-5888 (incorporated herein by reference).

Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulations S-K, the
Company has not filed certain instruments with respect to long-term debt
because the total amount of securities authorized thereunder does not exceed
ten percent of the total assets of the Company and its subsidiaries on a
consolidated basis. The Company hereby agrees to furnish copies of such
agreements to the Commission upon request.

* Incorporated herein by reference as indicated.
** Previously filed.
*** To be filed by amendment.

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<PAGE> 1

Exhibit 23.1

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
Registration Statement (File No. 33-44511).

Cleveland, Ohio
August 18, 1994