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As filed with the Securities and Exchange Commission on September 20, 1994
Registration No. 33-54209
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SECURITIES AND EXCHANGE COMMISSION
__________
AMENDMENT NO. 2 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________
WAXMAN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
5074
(Primary Standard Industrial Classification Code Number)
34-0899894
(I.R.S. Employer Identification Number)
24460 Aurora Road
Bedford Heights, Ohio 44146
(216) 439-1830
(Address, including zip code, and telephone number,
including area code, of registrant's principal offices)
__________
ARMOND WAXMAN
24460 Aurora Road
Bedford Heights, Ohio 44146
(216) 439-1830
(Name, address, including zip code, and telephone number,
including area code, of agents for service)
__________
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 THE PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
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<TABLE>
WAXMAN INDUSTRIES, INC.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
<CAPTION>
FORM S-4 ITEM NUMBER AND HEADING PROSPECTUS CAPTION OR LOCATION
-------------------------------- ------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
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 Pages of Available Information; Inside Front Cover and
Prospectus Outside Back Cover Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Prospectus Summary; Selected Financial Data;
Charges, and Other Information Risk Factors; Consolidated Financial Statements
4. Terms of the Transaction Prospectus Summary; Use of Proceeds; The
Exchange Offer; Certain Federal Income Tax
Considerations; Description of Notes
5. Pro Forma Financial Information Not Applicable
6. Material Contacts with the Company Being Not Applicable
Acquired
7. Additional Information Required for Reoffering Not Applicable
Persons and Parties Deemed to be Underwriters
8. Interests of Named Experts and Counsel Legal Matters; Experts
9. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3 Registrants Not Applicable
11. Incorporation of Certain Information by Not Applicable
Reference
12. Information With Respect to S-2 or S-3 Not Applicable
Registrants
13. Incorporation of Certain Information by Not Applicable
Reference
14. Information With Respect to Registrants Other Outside Front Cover Page of Prospectus;
Than S-3 or S-2 Registrants Available Information; Prospectus Summary; Risk
Factors; Selected Financial Data; Management's
Discussion and Analysis of Financial Condition
and Results of Operations; Business; Management;
Principal Stockholders; Recent Securities
Offering and Related Matters; Consolidated
Financial Statements
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3 Companies Not Applicable
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<TABLE>
<S> <C> <C>
16. Information With Respect to S-2 or S-3 Not Applicable
Companies
17. Information With Respect to Companies Other Not Applicable
Than S-3 or S-2 Companies
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Not Applicable
Authorizations are to be Solicited
19. Information if Proxies, Consents or Management; Principal Stockholders
Authorizations are not to be Solicited, or in
an Exchange Offer
</TABLE>
ii
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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.
SUBJECT TO COMPLETION: PRELIMINARY PROSPECTUS DATED SEPTEMBER 20, 1994
PROSPECTUS
OFFER FOR ANY AND ALL OUTSTANDING
SERIES A 12 3/4% SENIOR SECURED DEFERRED COUPON NOTES DUE 2004
IN EXCHANGE FOR
SERIES B 12 3/4% SENIOR SECURED DEFERRED COUPON NOTES DUE 2004
OF
WAXMAN INDUSTRIES, INC.
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT,
NEW YORK CITY TIME, ON , 1994, UNLESS EXTENDED.
Waxman Industries, Inc., a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to issue an aggregate principal amount at
maturity of up to $92,797,000 of Series B 12 3/4% Senior Secured Deferred
Coupon Notes due 2004 (the "New Notes") of the Company in exchange for a like
principal amount at maturity of the issued and outstanding Series A 12 3/4%
Senior Secured Deferred Coupon Notes due 2004 (the "Old Notes" and, together
with the New Notes, the "Notes") of the Company from the holders (the
"Holders") thereof.
The Old Notes were originally issued by the Company in a private
placement to certain institutional investors. The Old Notes are eligible for
trading in the Private Offering, Resales and Trading through Automated Linkages
("Portal") market and are eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, as amended (the "Act"). After the Exchange Offer, the
Old Notes that remain outstanding will continue to be subject to the
restrictions on transfer contained in the legend thereon and may not be offered
or sold except pursuant to an exemption from, or in a transaction not subject
to the registration requirements of, the Act. The Common Stock, par value $.01
per share, of the Company ("Common Stock"), is traded on the New York Stock
Exchange, Inc. (the "NYSE") under the symbol "WAX." On September 12, 1994, the
last reported sales price per share of Common Stock, as reported by the NYSE,
was $1.88.
The terms of the New Notes are identical in all material respects
to the Old Notes, except for certain transfer restrictions and registration
rights relating to the Old Notes. The terms of the Notes are governed by the
Indenture, dated as of May 20, 1994, between the Company and The Huntington
National Bank, as Trustee (the "Trustee"), and all amendments and supplements
thereto (the "Indenture"). The Notes are secured by all of the capital stock
of Waxman USA Inc., a Delaware corporation and wholly owned subsidiary of the
Company ("Waxman USA"), and by all of the capital stock of the future direct
subsidiaries of the Company. See "Description of Notes -- Security."
Substantially all of the assets of Waxman USA are pledged to the lenders under
the Debt Financing (as defined below) and thus the pledge of the capital stock
of Waxman USA for the benefit of the holders of the Notes is structurally
subordinated to the rights of such lenders. The capital stock of Waxman USA is
privately held by the Company and constitutes substantially all of the
Company's assets. The Company is dependent on distributions from Waxman USA
(which is in turn dependent on distributions from its operating subsidiaries)
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 Subordination" and "-- Restrictions
Imposed by Terms of Indebtedness."
The indebtedness evidenced by the Notes will rank senior in right
of payment to all existing and future subordinated indebtedness of the Company,
and will rank pasi passu in right of payment with all other existing or future
unsubordinated indebtedness of the Company. 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.
See "Description of the Notes -- Ranking."
The New Notes and the Old Notes remaining after the Exchange
Offer mature on June 1, 2004. The New Notes will be issued at a discount to
their aggregate principal amount at maturity. Interest will not accrue on the
New Notes and the Old Notes remaining after the Exchange Offer prior to June 1,
1999. Thereafter, interest on the Notes will be payable semiannually at the
rate of 12 3/4% per annum until maturity. The Notes are redeemable at the
option of the Company at any time on or after June 1, 1999 at the redemption
prices set forth therein. See "Description of Notes -- Redemption."
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Upon a Public Equity Offering (as defined herein), up to $25.0
million principal amount at maturity of Notes may, until June 1, 1997, be
redeemed at the option of the Company at 112.75% of the Accreted Value (as
defined herein) thereof with the net proceeds of such Public Equity Offering;
provided, however, that not less than $65.0 million aggregate principal amount
at maturity of the Notes remains outstanding upon the completion of such
redemption. In the event of a Change of Control (as defined herein), the
Company will be obligated to make an offer to purchase all outstanding Notes at
a redemption price of 101% of the Accreted Value thereof, plus accrued and
unpaid interest, if any.
On May 20, 1994, the Company issued the Old Notes together with
warrants (the "Warrants") to purchase 2,950,000 shares of Common Stock in
exchange for $50,000,000 aggregate principal amount of the Company's then
outstanding 13 3/4% Senior Subordinated Notes due June 1, 1999 (the "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 Senior Subordinated Notes to certain waivers of and the adoption
of certain amendments to the indenture governing the Senior Subordinated Notes,
(ii) the establishment of a $55 million revolving credit facility, and a $15
million term loan, (iii) the solicitation of the consents of the holders of the
Senior Secured Notes (as hereinafter defined) to certain waivers of and the
adoption of certain amendments to the indenture governing the Senior Secured
Notes and (iv) the repayment of the borrowings under the Company's then
existing domestic revolving credit facilities. See "Recent Securities Offering
and Related Matters -- The Reorganization."
The offer and sale of the New Notes are being registered under
the Registration Statement of which this Prospectus forms a part in order to
satisfy certain obligations of the Company contained in the Registration Rights
Agreement, dated as of May 20, 1994, between the Company and the Trustee, on
behalf of the original purchasers of the Old Notes (the "Debt Registration
Rights Agreement"). Based on interpretations by the Staff of the Securities
and Exchange Commission (the "Commission") set forth in certain "no-action"
letters issued to third parties and unrelated to the Company and the Exchange
Offer, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Act),
without compliance with the registration and prospectus delivery provisions of
the Act, provided that such New Notes are acquired in the ordinary course of
such Holders' business and such Holders have no intention, nor any arrangement
with any person, to participate in the distribution of such New Notes. A
broker-dealer holding Old Notes may participate in the Exchange Offer provided
that it acquired the Old Notes for its own account as a result of market-making
or other trading activities. Each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Act. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
or other trading activities. For a period of 180 days after the Expiration
Date (as defined herein), the Company will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company will accept for exchange Old Notes validly tendered
prior to Midnight, New York City time, on , 1994, unless extended by the
Company in its sole discretion (the "Expiration Date"). Tenders of Old Notes
may be withdrawn at any time prior to the Expiration Date. The Exchange Offer
is subject to certain customary conditions. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer."
The Company will not receive any proceeds from the Exchange
Offer. Pursuant to the Debt Registration Rights Agreement, the Company will
pay all the expenses incident to the Exchange Offer. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. In the event the Company terminates
the Exchange Offer and does not accept for exchange any Old Notes, the Company
will promptly return the Old Notes to the Holders thereof. See "The Exchange
Offer."
___________________________
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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THE NOTES HAVE NOT BEEN AND WILL NOT BE QUALIFIED FOR SALE UNDER
THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA. THE
NOTES ARE NOT BEING OFFERED FOR SALE AND MAY NOT BE OFFERED OR SOLD, DIRECTLY
OR INDIRECTLY, IN CANADA, OR TO ANY RESIDENT THEREOF, IN VIOLATION OF THE
SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA.
THIS DOCUMENT MAY NOT BE PASSED ON IN THE UNITED KINGDOM TO ANY
PERSON UNLESS THAT PERSON IS OF A KIND DESCRIBED IN ARTICLE 9(3) OF THE
FINANCIAL SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER 1988
OR IS A PERSON TO WHOM THIS DOCUMENT MAY OTHERWISE LAWFULLY BE ISSUED OR PASSED
ON.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION
FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B WITH THE STATE OF NEW
HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS
LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY
OF STATE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND NOT
MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION
IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE
HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR
GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO
MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
___________________________
THE DATE OF THIS PROSPECTUS IS _____ __, 1994.
<PAGE> 7
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-4 (together
with all amendments thereto referred to herein as the "Registration Statement")
under the Act, with the Commission covering the securities being offered by
this Prospectus. This Prospectus does not contain all the information set
forth or incorporated by reference in the Registration Statement and the
exhibits and schedules relating thereto, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the securities offered by
this Prospectus, reference is made to the Registration Statement and the
exhibits and schedules thereto 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.
Statements contained in this Prospectus as to the contents of any contract or
other documents referred to are not necessarily complete, and are qualified in
all respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements and other
information with the Commission. The Registration Statement, as well as such
periodic reports, proxy statements and other information, can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549; Suite 1400, Northwest
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661; and 7 World
Trade Center, New York, New York 10048. Copies of such material can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company's
common stock is listed on the NYSE. Reports, proxy statements and other
information may also be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 1005.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
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PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Background of Exchange Offer;
Recent Securities Offering and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Consequences of Exchanging Old Notes
Pursuant to the Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x
Summary Description of the New Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xii
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consequences of Failure to Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Security for the Notes; Value of the Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 2
Reliance on Operations of Subsidiaries; Structural Subordination . . . . . . . . . . . . . . . . . 3
Restrictions Imposed by Terms of Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Control by Principal Stockholders; Certain Anti-Takeover Effects . . . . . . . . . . . . . . . . . 4
Deficiency of Earnings to Fixed Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Foreign Sourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Reliance on Key Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Lack of Public Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Original Issue Discount Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fiscal 1994 Versus Fiscal 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Fiscal 1993 Versus Fiscal 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Liquidity and Capital Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Discussion of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Fixed Charge Coverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Impact of New Accounting Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Barnett . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Consumer Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Other Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Import Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Environmental Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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<TABLE>
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Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 31
Stock Option and SAR Grants . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 33
Stock Option and SAR Exercises . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 34
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 35
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 35
RECENT SECURITIES OFFERING AND RELATED MATTERS . . . . . . . . . . . . . . . .. . . . . . . . . . . 36
THE EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 39
Purpose of Exchange Offer . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 39
Terms of the Exchange Offer; Period for Tendering Old Notes . . . . . .. . . . . . . . . . . 39
Procedures for Tendering Old Notes . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 40
Acceptance of Old Notes for Exchange; Delivery of New Notes . . . . . .. . . . . . . . . . . 42
Book-Entry Transfer . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 43
Guaranteed Delivery Procedures . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 43
Withdrawal Rights . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 43
Certain Conditions to the Exchange Offer . . . . . . . . . . . . . . . .. . . . . . . . . . . 44
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 45
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 46
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 46
Consequences of Failure to Exchange . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 47
DESCRIPTION OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 47
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 48
Maturity, Interest and Principal . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 48
Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 48
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 49
Ranking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 49
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 49
Provision of Financial Information . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 50
Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 51
Consolidation, Merger, Conveyance, Transfer or Lease . . . . . . . . . .. . . . . . . . . . . 58
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 59
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 61
Satisfaction and Discharge . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 61
Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 62
Regarding the Trustee . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 62
Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 62
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 72
Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 72
Holding and Disposition of Notes . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 72
Backup Withholding and Information Reporting . . . . . . . . . . . . . .. . . . . . . . . . . 74
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 75
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 75
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 76
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 76
</TABLE>
- iv -
<PAGE> 10
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 Inc. ("Barnett") and Waxman Consumer
Products Group Inc. ("Consumer Products"). The Company distributes plumbing,
electrical and hardware products, in both packaged and bulk form, to over
47,000 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 $215.1 million in
fiscal 1994.
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 1992
to fiscal 1994 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 $95.2 million in fiscal 1994.
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 $70.7 million in fiscal 1994 and have
remained generally consistent since fiscal 1992.
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 $47.7
million in fiscal 1994.
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:
- v -
<PAGE> 11
- Expansion of Barnett. Since its acquisition in 1984, Barnett's
revenues and operating income have grown at compound annual rates
of 11.7% and 13.2% 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 expects to fund
this expansion using cash flow from operations and/or available
borrowings under the Debt Financing. 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 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.
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 and
the consolidated financial statements and financial information contained
herein 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.
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 related 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
- vi -
<PAGE> 12
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 & 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 branch 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 Idea's bankruptcy.
The Company's principal executive offices are located at 24460 Aurora
Road, Bedford Heights, Ohio 44146, Telephone (216) 439-1830.
BACKGROUND OF EXCHANGE OFFER;
RECENT SECURITIES OFFERING AND RELATED MATTERS
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 "Old Notes") together with warrants (the "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 13 3/4% Senior Subordinated Notes due June 1, 1999 (the "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 Senior Subordinated Notes to certain waivers of and the adoption
of certain amendments to the indenture governing the Senior Subordinated Notes
(the "Senior Subordinated 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 Secured Notes to certain waivers of and the
adoption of certain amendments to the indenture governing the Senior Secured
Notes (the "12 1/4% Consent 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 existing working capital
credit facility and $1.2 million under the $5.0 million revolving credit
facility of Barnett (the "Barnett Financing")). See "Recent Securities
Offering and Related Matters -- The Reorganization."
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 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 (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 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 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
- vii -
<PAGE> 13
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)
--------------- ----------------------------
| |
--------------------------------------------------- |
| | | | |
- ------- --------- -------- ------------------ -----------
WAXMAN
BARNETT, CONSUMER WOC INC. TWI, INTERNATIONAL IDEAL
INC. PRODUCTS INC. PLUMBING
GROUP INC. GROUP,INC(1)
- ------- --------- -------- ------------------ ------------
|
----------------------------------------------------------
| |
- ----------------- -------------------
TWI INTERNATIONAL WESTERN AMERICAN
TAIWAN, INC. MANUFACTURING, INC.
- ----------------- -------------------
| |
- ----------------- -------------------
CWI INTERNATIONAL COHART DE
CHINA, LTD. MEXICO SA DE CV
- ----------------- -------------------
Each subsidiary depicted above is a wholly owned subsidiary, except for TWI
International Taiwan, Inc. and Cohart de Mexico SA de CV, which are 99% owned.
(1) Ideal Holding Group, Inc.'s sole asset, Ideal Plumbing Group, Inc., is
currently being liquidated pursuant to Canadian bankruptcy laws.
The Old Notes were issued pursuant to exemptions from, or transactions
not subject to, the registration requirements of the Act and applicable state
securities laws. The Company structured the offering of the Old Notes and
Warrants as a private placement in order to consummate such offering on a more
expeditious basis than would have been possible had the offering and sale been
registered under the Act. The original purchasers of the Old Notes, as a
condition to their purchase of the Old Notes and Warrants, required the Company
to enter into the Debt Registration Rights Agreement pursuant to which the
Company agreed, among other things, to promptly commence the Exchange Offer
following the offering of the Old Notes. The Company has prepared and filed
the Registration Statement of which this Prospectus forms a part with the
Commission pursuant to the Debt Registration Rights Agreement. The original
purchasers of the Warrants, as a condition to their purchase of the Warrants
and Old Notes, also required the Company to enter into a registration rights
agreement pursuant to which the Company agreed, among other things, to file
promptly a registration statement under the Act to permit such original
purchasers to offer and sell under the Act the Warrants and shares of Common
Stock issuable upon exercise of the Warrants. The Company has prepared and
filed a registration statement with the Commission pursuant to such
registration rights agreement. See "Recent Securities Offering and Related
Matters -- Registration Rights Agreements."
- viii -
<PAGE> 14
See "Recent Securities Offering and Related Matters" for a discussion of
the offering of Old Notes, the agreements referred to above and additional
related agreements. See "Description of Notes" for a discussion of the terms
of the Notes.
THE EXCHANGE OFFER
Securities Offered . . . . . . . Up to $92,797,000 principal
amount at maturity of Series B
12 3/4% Senior Secured Deferred
Coupon Notes (the "New Notes"
and, collectively with the Old
Notes, the "Notes"). The
terms of the New Notes and the
Old Notes are identical in all
material respects, except for
certain transfer restrictions
and registration rights
relating to the Old Notes.
The Exchange Offer . . . . . . . The New Notes are being
offered in exchange for a like
principal amount at maturity
of Old Notes. The issuance of
the New Notes is intended to
satisfy obligations of the
Company contained in the
Registration Rights Agreement,
dated as of May 20, 1994, by
and between the Company and the
Trustee, on behalf of the
original purchasers of the Old
Notes. For procedures for
tendering, see "The Exchange
Offer."
Tenders, Expiration Date;
Withdrawal . . . . . . . . . . The Exchange Offer will expire
at Midnight, New York City
time, on , 1994, or
such later date and time to
which it is extended (the
"Expiration Date"). The
tender of Old Notes pursuant
to the Exchange Offer may be
withdrawn at any time prior to
the Expiration Date. Any Old
Notes not accepted for
exchange for any reason will
be returned without expense to
the tendering holder thereof
as promptly as practicable
after the expiration or
termination of the Exchange
Offer.
Conditions of the
Exchange Offer . . . . . . . . The Exchange Offer is subject
to customary conditions, any
or all of which may be waived
by the Company in its sole
discretion. See "The Exchange
Offer -- Certain Conditions to
the Exchange Offer."
Interest on the
New Notes anD Old Notes . . . . Interest will not accrue on
the Notes prior to June 1,
1999. Thereafter, interest on
the Notes will be payable
semiannually at the rate of
12 3/4% per annum until
maturity. See "Description of
Notes -- Interest."
Acceptance of Old Notes and
Delivery of New Notes . . . . . The Company will accept for
exchange Old Notes which are
properly tendered in the
Exchange Offer prior to
Midnight, New York City time,
on the Expiration Date. The
New Notes issued pursuant to
the Exchange Offer will be
delivered promptly following
the Expiration Date. See "The
Exchange Offer -- Terms of the
Exchange Offer; Period for
Tendering Old Notes."
- ix -
<PAGE> 15
Federal Income Tax
Consequences . . . . . . . . . The exchange pursuant to the
Exchange Offer will not result
in any income, gain or loss to
the holders of the Notes (the
"Holders") or the Company for
federal income tax purposes.
See "Certain Federal Income
Tax Considerations."
Use of Proceeds . . . . . . . . There will be no proceeds to
the Company from the exchange
pursuant to the Exchange Offer.
Exchange Agent . . . . . . . . . The Huntington National Bank is
serving as Exchange Agent in
connection with the Exchange
Offer.
CONSEQUENCES OF EXCHANGING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER
Based on interpretations of the Staff of the Commission set forth in
certain "no-action" letters issued to third parties and unrelated to the
Company and the Exchange Offer, the Company believes that Holders of Old Notes
(other than any Holder who is an "affiliate" of the Company within the meaning
of Rule 405 under the Act) who exchange their Old Notes for New Notes pursuant
to the Exchange Offer may offer such New Notes for resale, resell such New
Notes, and otherwise transfer such New Notes without compliance with the
registration and prospectus delivery provisions of the Act; provided such New
Notes are acquired in the ordinary course of the Holder's business and such
Holder has no intention, nor any arrangement with any person, to participate in
a distribution of such New Notes. Based on the foregoing "no-action" letters,
the Company believes that a broker-dealer holding Old Notes may participate in
the Exchange Offer provided that it acquired the Old Notes for its own account
as a result of market-making or other trading activities. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." To comply with the securities laws of certain jurisdictions, it
may be necessary to qualify for sale or register the New Notes prior to
offering or selling such New Notes. The Company does not currently intend to
register or qualify the sale of the New Notes in any such jurisdiction. If a
Holder of Old Notes does not exchange such Old Notes for New Notes pursuant to
the Exchange Offer, such Old Notes will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the Old
Notes may not be offered or sold, unless registered under the Act, except
pursuant to an exemption from, or in a transaction not subject to, the Act, and
applicable state securities laws. See "The Exchange Offer -- Purpose of the
Exchange Offer and -- Consequences of Failure to Exchange."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all
material respects, except for certain transfer restrictions and registration
rights relating to the Old Notes. The terms of the Notes are governed by the
Indenture, dated as of May 20, 1994, between the Company and The Huntington
National Bank, as Trustee, and all amendments or supplements thereto (the
"Indenture").
Securities Offered . . . . . . . $92,797,000 aggregate
principal amount at maturity
(having an initial Accreted
Value of approximately $50
million) of Series B 12 3/4%
Senior Secured Deferred Coupon
Notes Due 2004.
Interest Payments . . . . . . . . Commencing June 1, 1999,
interest on the New Notes will
- x -
<PAGE> 16
accrue at the rate of 12 3/4%
per annum, payable semi-
annually, commencing December
1, 1999.
Maturity Date . . . . . . . . . . June 1, 2004.
Original Issue Discount . . . . . For federal income tax
purposes, the New Notes
will be treated as having been
issued with "original issue
discount" equal to the
difference between the issue
price of New Notes and the sum
of all cash payments (whether
denominated as principal or
interest) to be made thereon.
Each holder of a New Note
must include in gross income
for federal income tax
purposes a portion of such
original issue discount for
each day during each taxable
year in which a Note is held
even though interest does not
begin to accrue until June 1,
1999, and no cash interest
payments will be received
prior to December 1, 1999. See
"Certain Federal Income Tax
Consequences."
Optional Redemption . . . . . . . The New Notes will be
redeemable, in whole or in
part, at the option of the
Company on or after June 1,
1999, at the redemption prices
set forth herein, plus accrued
interest.
Optional Redemption Upon
a Public Equity Offering . . . Until June 1, 1997, upon a
Public Equity Offering up to
$25.0 million principal amount
at maturity of New Notes may
be redeemed at the option of
the Company at 112.75% of the
Accreted Value thereof with
the net proceeds of such
Public Equity Offering,
provided, however, that not
less than $65.0 million
aggregate principal amount at
maturity of the New Notes
remains outstanding upon the
completion of such redemption.
The Company has no present
intention of completing a
Public Equity Offering in the
near future.
Change of Control . . . . . . . . In the event of a Change of
Control, the Company is
obligated to make an offer to
purchase all outstanding New
Notes at 101% of the Accreted
Value thereof plus accrued and
unpaid interest, if any. A
Change of 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 Melvin and/or Armond
Waxman). A Change of Control
also includes a sale by the
Company of all or
substantially all of its
assets, which under applicable
governing law is construed to
mean the sale of assets
quantitatively vital to the
operation of the Company and
which is out of the ordinary
and substantially affects the
existence and purpose of the
Company.
Asset Sale Proceeds . . . . . . . The Company is obligated in
certain circumstances to make
an offer to purchase New Notes
at a redemption price of 100%
of the Accreted Value thereof
plus accrued and unpaid
interest, if any, with the net
cash proceeds of certain sales
or other dispositions of
assets.
- xi -
<PAGE> 17
Ranking . . . . . . . . . . . . . The New Notes will be senior
obligations of the company
ranking senior in right of
payment to the Company's
subordinated indebtedness,
including the Senior
Subordinated Notes and the
Convertible Debentures (as
defined herein), and
pari passu in right of payment
with all unsubordinated
indebtedness of the Company.
Security . . . . . . . . . . . . The New Notes will be secured
by a lien on and security
interest in all of the issued
and outstanding capital stock
of Waxman USA and all future
direct domestic subsidiaries
of the Company other than
those that relate to the
business conducted by Ideal
and 65% of the issued and
outstanding capital stock of
the current and future direct
foreign subsidiaries of the
Company (and the domestic
holding companies thereof)
other than those that relate
to the business conducted by
Ideal.
Certain Covenants . . . . . . . . The Indenture contains certain
covenants that, among other
things, limit the ability of
the Company and its
subsidiaries to incur
additional indebtedness,
transfer or sell assets, pay
dividends, make certain other
restricted payments and
investments, create liens or
enter into sale lease-back
transactions, transactions
with affiliates and mergers.
For more complete information regarding the Notes, see "Description of Notes."
RISK FACTORS
Holders of Old Notes should carefully consider the specific factors set
forth under "Risk Factors," as well as the other information and data included
in this Prospectus.
- xii -
<PAGE> 18
RISK FACTORS
Holders of Old Notes should consider carefully all of the information
set forth in this Prospectus and, in particular, should evaluate the following
risks before tendering their Old Notes in the Exchange Offer, although the risk
factors set forth below (other than the first risk factor) are generally
applicable to the Old Notes, as well as the New Notes.
Consequences of Failure to Exchange. Holders of Old Notes who do not
exchange their Old Notes for New Notes pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer of such Old Notes as set
forth in the legend thereon as a consequence of the issuance of the Old Notes
pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Act and applicable state securities laws. In
general, the Old Notes may not be offered or sold, unless registered under the
Act, except pursuant to an exemption from, or in a transaction not subject to,
the Act and applicable state securities laws. The Company does not currently
anticipate that it will register the offer and sale of the Old Notes under the
Act. Based on interpretations by the Staff of the Commission, set forth in
certain "no-action" letters issued to third parties and unrelated to the
Company and the Exchange Offer, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by Holders thereof (other than by any
such Holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Act) without compliance with the registration and prospectus
delivery provisions of the Act provided that such New Notes are acquired in the
ordinary course of such Holders' business and such Holders have no intention,
nor any arrangement with any person, to participate in the distribution of such
New Notes. Based on the foregoing "no-action" letters, the Company believes
that a broker-dealer holding Old Notes may participate in the Exchange Offer
provided that it acquired the Old Notes for its own account as a result of
market-making or other trading activities. Each broker-dealer that receives
New Notes for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Act. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
or other trading activities. For a period of 180 days after the Expiration
Date (as defined herein), the Company will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied with.
The Company does not currently intend to register or qualify the sale of the
New Notes in any such jurisdiction.
Leverage. The Company has a high degree of leverage. At June 30, 1994,
the outstanding consolidated indebtedness (excluding trade payables and accrued
liabilities) of the Company's continuing operations was $193.8 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 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 Senior Secured Notes and a single payment of $8.8 million on June 1,
1998 with respect to the Senior Subordinated Notes. In addition, the Debt
Financing matures on May 20, 1997, subject to extension in certain events. The
Company currently believes that it must obtain a significant infusion of
- 1 -
<PAGE> 19
funds, either through additional debt refinancing transactions or the
sale of equity and/or assets before any significant deleveraging can occur.
However, there can be no assurances as to the timing or likelihood of such
deleveraging.
To the Company's knowledge, neither its high degree of leverage nor the
bankruptcy of Ideal had 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 have had a material impact on the Company's
business.
Security for the Notes; Value of the Collateral. The Old Notes are, and
the New Notes will be, secured by a pledge of all of the outstanding shares of
capital stock of Waxman USA and the future direct domestic subsidiaries of the
Company and 65% of the capital stock of the future direct foreign subsidiaries
of the Company, and the domestic holding companies of such foreign
subsidiaries. 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 assurances 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 Barnett, Consumer Products and WOC (collectively, the "Operating
Companies") and 65% of the capital stock of the Company's foreign subsidiaries,
and the indenture governing the Senior Secured Notes (the "Senior Secured
Indenture") which are secured by all of the capital stock of the Operating
Companies. An Event of Default under the Domestic Credit Facility, the
Domestic Term Loan and Indenture governing the Senior Secured Notes includes
customary events of default, including the failure to pay principal, interest
or any 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. In addition, in order to
satisfy and/or eliminate the sinking fund payments required by the Senior
Secured Notes, and to reduce the Company's high degree of leverage, the Company
will have to obtain a significant infusion of funds, either through additional
debt refinancing transactions or the sale of equity and/or assets. It is
currently expected that the proceeds of such infusion of funds would be
utilized to repay, among other things, the Senior Secured Notes. To the extent
that the Company utilizes an additional debt financing to raise funds, such
debt financing may be undertaken at the Waxman USA level as part of, or as the
only element of, a capital restructuring. If such a Waxman USA debt financing
is undertaken and completed, the Company expects that the performance of Waxman
USA's obligations under the agreements governing such Waxman USA debt financing
(the "Waxman USA Debt Instruments") will be secured by a pledge of the capital
stock of the Operating Companies. The Company also expects that an Event of
Default under the Indenture which resulted in a foreclosure would likely
constitute a change of control or an Event of Default under the Waxman USA Debt
Instruments. Upon an Event of Default under the Domestic Credit Facility, the
Domestic Term Loan or the Waxman USA Debt Instruments or the Senior Secured
Indenture, as the case may be, (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, the Domestic Term Loan or the Senior Secured
Indenture or the Waxman USA
- 2 -
<PAGE> 20
Debt Instruments, as the case may be, 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, the Domestic Term Loan or the Senior
Secured Indenture or the Waxman USA Debt Instruments, as the case may be, 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.
If there were an event of default under the Senior Secured Indenture or
the Waxman USA Debt Instruments, as the case may be, and the holders of such
debt instruments were to foreclose upon the collateral, such foreclosure would
constitute an event of default permitting acceleration under the Domestic
Credit Facility and the Domestic Term Loan thereby permitting the holders of
such debt to enforce their security interest in substantially all the assets of
the Operating Companies. There can be no assurance that the assets of the
Operating Companies would be sufficient to repay in full borrowings under the
Domestic Credit Facility and the Domestic Term Loan if they became due, thereby
diminishing or eliminating the value of the shares of capital stock of the
Operating Companies securing the Senior Secured Indenture or the Waxman USA
Debt Instruments, as the case may be. In addition, any enforcement (including
foreclosure) of the security interests securing the Domestic Credit Facility
and the Domestic Term Loan or any other indebtedness of the Operating Companies
could have a material adverse effect on the ability of the holders of the
Senior Secured Indenture or the Waxman USA Debt Instruments, as the case may
be, to realize value through sales of the collateral pledged to secure such
indebtedness.
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 Senior Subordinated
Notes and 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, the holders of the Senior
Secured Notes or the Waxman USA Debt Instruments, as the case may be, and trade
creditors. Accordingly, in the event of a dissolution, bankruptcy or
reorganization of the Company, the holders of the Senior Subordinated Notes and
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. In
addition, the Debt Financing (which provides for maximum aggregate borrowings
of $70 million) and the Senior Secured Notes (which have a current outstanding
principal balance of $39.2 million) have similar change of control provisions
requiring the Company to repurchase or repay, as the case may be, the relevant
debt obligations, and thus upon a Change of Control, if offers under the change
of control provisions of such debt instruments were to be accepted, the
security for such debt obligations would be structurally senior to the security
pledged to secure the Notes. Nonetheless, the Company believes that the value
of the security collateralizing the Notes would still be sufficient to satisfy
the required offer to purchase. Waxman USA is guaranteeing the obligations of
the Company under the Senior Secured Notes and the capital stock of Barnett,
Consumer Products and WOC and 65% of the capital stock of TWI are being pledged
to the holders of Senior Secured Notes. Thus, in effect, the Notes are
structurally subordinated to the Senior Secured Notes. Although the Company
expects to repay or refinance the Senior Secured Notes
- 3 -
<PAGE> 21
with an infusion of funds which may include additional debt refinancing
transactions or the sale of equity and/or assets, there can be no assurance
that it will be able to obtain such infusion of funds.
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% (and 12.7%, assuming the exercise of all of the Warrants)
of the outstanding shares of the Company's common stock, par value $.01 per
share, and 82.7% 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 62.9% (and 57.6%, assuming the exercise of all of the
Warrants) 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, 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 of 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 1994, 1993 and 1992,
the Company's earnings (as defined in footnote 4 to Selected Financial Data)
were insufficient to cover its fixed charges by $3.1 million, $15.7 million and
$5.1 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 1994, products manufactured outside of the
United States accounted for approximately 27.2% 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 1994, Kmart and its
subsidiaries, Consumer Products' largest customer, accounted for approximately
13% of the Company's continuing operations' net sales. During the same period,
Consumer Products' ten largest customers accounted for approximately 25% of the
Company's continuing
- 4 -
<PAGE> 22
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.
Lack of Public Market. The New Notes are new securities for which there
currently is no market. Although Citicorp Securities, Inc. and Merrill Lynch
have informed the Company that they currently intend to make a market in the
New Notes, they are not obligated to do so, and any such market making may be
discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Company does not intend to apply for listing of the New Notes on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System.
Original Issue Discount Consequences. Each New Note will be issued at
an original issue discount and holders of New Notes will be required to
recognize the original issue discount as ordinary income in advance of the
receipt of the cash payments to which the income is attributable, regardless of
their method of accounting. The tax basis of each New Note in the hands of the
holder thereof will be increased by the amount of any original issue discount
on the New Note that is included in the Holder's gross income and decreased by
the amount of any payments received by the Holder. See "Certain Federal Income
Tax Consequences--Original Issue Discount."
Under the Indenture, in the event of an acceleration of the maturity of
Notes prior to June 1, 1999, Holders of Notes will be entitled to recover an
amount equal to the Accreted Amount of such Notes, which amount will be less
than the face amount of such Notes. See "Description of the Notes--Events of
Default."
If a bankruptcy case were commenced by or against the Company under the
Bankruptcy Code, the claim of a Holder of Notes with respect to the principal
amount thereof may be limited to an amount equal to the sum of (i) the issue
price of Notes and (ii) the portion of the original issue discount which is not
deemed to constitute "unmatured interest" for purposes of the Bankruptcy Code.
Accordingly, even assuming sufficient funds were available, the claims of
Holders of Notes may entitle them to less than the amount to which they would
otherwise have been entitled under the Indenture. In addition, there can be no
assurance that a bankruptcy court would compute the accrual of interest by the
same method as that used for the calculation of original issue discount under
federal income tax law and, accordingly, a Holder may be required to recognize
gain or loss in the event of a court ordered distribution.
- 5 -
<PAGE> 23
SELECTED FINANCIAL DATA
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
The selected historical financial data for the fiscal years 1990
through 1994 are derived from the Company's audited consolidated financial
statements. Effective March 31, 1994, the Company adopted a plan to dispose of
its Canadian subsidiary, Ideal. Accordingly, Ideal is reported as a
discontinued operation in the fiscal 1994 consolidated financial statements,
and the prior period consolidated financial statements have been reclassified
to conform to the current period presentation.
- 6 -
<PAGE> 24
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JUNE 30,
---------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Net sales $215,112 $204,778 $197,738 $186,327 $186,315
Cost of sales 140,011 137,244 127,115 121,397 120,976
-------- -------- -------- -------- --------
Gross profit 75,101 67,534 70,623 64,930 65,338
Operating expenses 56,888 56,081 51,824 50,263 49,452
Restructuring and other
nonrecurring charges - 6,762 3,900 - -
-------- -------- -------- -------- --------
Operating income 18,213 4,691 14,899 14,667 15,886
Interest expense, net 21,334 20,365 20,025 17,462 15,814
-------- -------- -------- -------- --------
Loss before income taxes
extraordinary charges and
cumulative effect of accounting
change (3,121) (15,674) (5,126) (2,795) 72
Provision (benefit) for income taxes 351 216 (768) (680) 27
-------- -------- -------- -------- --------
Income (loss) from continuing
operations before extraordinary
charges and cumulative effect of
accounting change (3,472) (15,890) (4,358) (2,115) 45
Discontinued operations - Ideal
Income (loss) from discontinued
operations, net of taxes (3,249) (11,240) 1,146 4,343 6,743
Loss on disposal, without
tax benefit (38,343) - - - -
-------- -------- -------- -------- --------
Income (loss) before extraordinary
charge and cumulative effect of
accounting change (45,064) (27,130) (3,212) 2,228 6,788
Extraordianry charges, early
repayment of debt (2) (6,824) - (1,186) - (320)
Cumulative effect of
accounting change (3) - (2,110) - - -
-------- -------- -------- -------- --------
Net income (loss) $(51,888) $(29,240) $ (4,398) $ 2,228 $ 6,468
======== ======== ======== ======== ========
Average number of shares outstanding 11,674 11,662 9,794 9,570 9,659
Primary earnings per share:
Income (loss) from continuing
operations before extraordinary
charges and cumulative effect
of accounting change $ (.30) $ (1.36) $ (.44) $ (.06) $ .01
Income (loss) from discontinued
operations (.28) (.97) .11 .29 .69
Loss on disposal (3.28) - - - -
Extraordinary charges (.58) - (.12) - (.03)
Cumulative effect of accounting
change - (.18) - - -
-------- -------- -------- -------- --------
Net income (loss) $ (4.44) $ (2.51) $ (.45) $ .23 $ .67
======== ======== ======== ======== ========
Fully diluted earnings per share:
Income (loss) from continuing
operations before extraordinary
charges and cumulative effect
of accounting change $ (.30) $ (1.36) $ (.44) $ (.06) $ .01
Income (loss) from discontinued
operations (.28) (.97) .11 .29 .65
Loss on disposal (3.28) - - - -
Extraordinary charges (.58) - (.12) - (.03)
Cumulative effect of accounting
change - (.18) - - -
-------- -------- -------- -------- --------
Net income (loss) $ (4.44) $ (2.51) $ (.45) $ .23 $ .63
======== ======== ======== ======== ========
Cash dividends per share:
Common stock $ - $ .08 $ .12 $ .12 $ .12
Class B common stock $ - .08 .12 .12 .11
Ratio of earnings to fixed charges (4) - - - - 1.2x
Balance Sheet Data (1):
Working capital $ 93,699 $117,730 $135,886 $133,654 $136,989
Total assets 183,043 198,525 237,481 236,437 249,892
Total long-term debt 189,674 161,910 148,894 156,431 176,523
Stockholders' equity (37,709) 7,496 40,827 38,066 39,242
<FN>
Refer to notes on following page.
</TABLE>
<PAGE> 25
WAXMAN INDUSTRIES
NOTES TO SELECTED 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) See Note 4 to the Notes to Consolidated Financial Statements for a
further discussion of the extraordinary charge for fiscal 1992 and
fiscal 1994. The fiscal 1990 extraordinary charge related to the
repurchase of the Company's Convertible Debentures.
(3) See Note 3 to the Notes to Consolidated Financial Statements.
(4) 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. Fiscal 1994 earnings were insufficient to
cover fixed charges by $3.1 million.
- 8 -
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITON AND 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 primarily through Barnett and Consumer Products.
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 served customers in the Canadian new construction
market through independent contractors. The decision to dispose of Ideal was
prompted by a number of factors which had adversely affected Ideal's results of
operations and resulted in severe liquidity problems which 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 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 totaled $38.3 million, without tax
benefits, and represents a complete write-off of the Company's investment in
Ideal. See Note 2 to Notes to Consolidated Financial Statements.
For financial reporting purposes, 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.
<PAGE> 27
RESULTS OF OPERATIONS
The following tables set forth certain items reflected in the
Company's Consolidated Statements of Income expressed as a percentage of net
sales:
<TABLE>
<CAPTION>
Years ended June 30,
--------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Gross profit 34.9 33.0 35.7
Operating expenses 26.4 27.4 26.2
Restructuring and other
nonrecurring charges - 3.3 2.0
Operating income 8.5 2.3 7.5
Interest expense, net 9.9 9.9 10.1
Loss from continuing operations
before income taxes, extraordinary charge
and cumulative effect of accounting
change (1.5) (7.7) (2.6)
Income (loss) from discontinued
operations, net of taxes (1.5) (5.5) 4.1
Loss on disposal, without tax benefit (17.8) - -
Loss before extraordinary charge
and cumulative effect of accounting
change (20.9) (13.2) (1.6)
Net loss (24.1) (14.3) (2.2)
</TABLE>
FISCAL 1994 VERSUS FISCAL 1993
Net sales
The Company's net sales from continuing operations for fiscal 1994
totaled $215.1 million compared with $204.8 million in fiscal 1993, an increase
of 5.0%. The Company' net sales were adversely affected by the sale of H.
Belanger Plumbing Accessories (Belanger) in October 1993. Belanger's net sales
for fiscal 1994 totaled $1.5 million compared with $6.3 million in fiscal 1993.
Net sales increased 7.6% after excluding the impact of Belanger. The net sales
increase is primarily the result of the continued growth of Barnett. Barnett's
net sales increased $12.3 million or 14.9%, from $82.9 million in fiscal 1993
to $95.2 million in fiscal 1994. Sales of new products accounted for $7.2
million of the increase. The remainder of Barnett's increase was 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 fiscal
1994, increasing the total number of warehouses to 28. Also contributing to
the overall increase in net sales from continuing operations was increased net
sales from Consumer Products. Consumer Products net sales increased $3.2
million or 4.8%, from $67.5 million in fiscal 1993 to $70.7 million in fiscal
1994. The increase in Consumer Products' net sales is primarily the result of
the sale of additional existing product lines to several of its existing
customers. Management believes that the change in the continuing operation's
net sales is primarily the result of changes in volume.
Gross profit
The Company's gross profit increased from 33.0% in fiscal 1993 to
34.9% in fiscal 1994. The increase in the Company's gross margin is primarily
a result of improved margins at Barnett. Barnett's gross margin has been
favorably impacted by increased sales of higher margin proprietary branded
products. Also contributing to the increase in gross margins were improved
gross margins at Consumer Products. Consumer Products' margin increased as a
result of proportionately higher sales of higher margin packaged products
during the latter part of fiscal 1994. Overall, the Company's gross margins
were favorably impacted by an increase in the percentage of products
purchased from foreign sources. Such products typically generate higher
gross margins than products purchased domestically. The sale of Belanger had
no significant effect on gross margin. Excluding the impact of Belanger,
gross margin would have been 32.9% in fiscal 1993 as compared to 34.9%
in fiscal 1994.
Operating expenses
The Company's operating expenses increased 1.4% for fiscal 1994 from
$56.1 million in fiscal 1993 to $56.9 in fiscal 1994. As discussed below,
prior year operating expenses included approximately $1.2 million of additional
amortization expense relating to an accounting change. Excluding the impact of
this additional amortization as well as the sale of Belanger, operating expenses
increased 6.9% from $52.7 million in fiscal 1993 to $56.4 million in fiscal
1994. This increase was due primarily to higher operating expenses at Barnett.
Barnett's operating expenses increased approximately $2.8 million. The
majority of the increase in Barnett's operating expenses related to increased
warehouse and selling and advertising costs. The increases in warehouse and
selling and advertising costs were $0.7 million and $1.1 million, respectively.
These increases primarily related to the opening of new mail order warehouses
and increased promotional activity during fiscal 1994. Consumer Products'
operating expenses increased approximately $0.5 million or 2.9% between years.
Restructuring and Other Non-Recurring Charges
<PAGE> 28
As discussed below, the Company recorded a $6.8 million restructuring
charge during fiscal 1993.
Operating Income
The Company's operating income totaled $18.2 million or 8.5% of net
sales in fiscal 1994 compared to $4.7 million or 2.3% of net sales in fiscal
1993. Fiscal 1993 operating income included a $6.8 million restructuring
charge as well as $1.2 million of additional amortization expense relating
to an accounting charge. The impact of the sale of Belanger on operating
income was not significant.
Interest Expense
The Company's interest expense totaled $21.3 million in fiscal 1994
compared to $20.4 in fiscal 1993. Average borrowings increased from $159.1
million in fiscal 1993 to $172.2 million in fiscal 1994. The increase in
average borrowings outstanding is due to increased working capital needs
relating to the growth of the Company's operations as well as the impact of
the additional debt incurred to fund repurchase premiums, fees and expenses
relating to the Company's recent debt restructuring. The weighted average
interest rate decreased from 12.9% in fiscal 1993 to 12.4% in fiscal 1994.
The decrease in the weighted average interest rate results from proportionally
higher borrowings under the Company's revolving credit facilities during fiscal
1994. Revolving credit facility borrowings bear lower interest rates than the
Company's other indebtedness. As a result of the debt restructuring, cash
interest expense will be reduced by approximately $6.9 million annually for
five years. The reduction in cash interest requirements will be offset in part
by the $11.0 million of additional indebtedness incurred as part of the
Reorganization. The Company's weighted average interest is expected to increase
by approximately 0.5% as a result of the completion of the Reorganization See
"Liquidity and Capital Resources".
Income Taxes
In accordance with the provisions of SFAS 109, the Company is unable to
benefit losses for tax purposes in fiscal 1994. The Company has $59.6
million of available domestic net operating loss carryforwards which expire
through 2009, the benefit of which has been reduced 100% by a valuation
allowance. This includes amounts relating to the disposition of Ideal. 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.
The provision for income taxes for both fiscal years 1993 and 1994
represent state and foreign taxes.
Loss from Continuing Operations
The Company's loss from continuing operations totaled $3.5 million in
fiscal 1994 compared to $15.9 million in fiscal 1993.
Discontinued Operations
The Company's net loss from discontinued operations totaled $3.2 in
fiscal 1994, compared to $11.2 million in fiscal 1993. The Company also
recognized a loss on the disposal of Ideal of approximately $38.3 million in
the 1994 third quarter.
Extraordinary Charge
The Company recognized $6.8 million of extraordinary charges, without
tax benefits, in fiscal 1994. Approximately, $6.6 million of the extraordinary
charges related to the refinancing of the $50 million of Subordinated Notes as
well as borrowings under the domestic bank credit facilities. This
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. The remainder of the extraordinary charges
resulted from the Company's repurchase of $1.9 million of its Convertible
Subordinated Debentures pursuant to a mandatory repurchase obligation. As a
result of the repurchase, the Company recorded an extraordinary charge of $.2
million which primarily represents the accelerated amortization of unamortized
debt discount and issuance costs.
As noted in "Liquidity and Capital Resources," commencing in September
1996, the Company is required to make certain substantial sinking fund payments
with respect to its Senior Secured Notes. In order to eliminate and/or satisfy
such sinking fund obligations, and to decrease the Company's high degree of
leverage, the Company will have to obtain a significant infusion of funds,
either through additional debt refinancing transactions or the sale of equity
and/or assets. Although the Company is currently exploring its various
alternatives, it has not yet committed to any specific course of action or
transaction. The Company expects that additional extraordinary charges will be
incurred if additional debt refinancing transactions occur. There can,
however, be no assurances with respect to the timing and magnitude of any such
extraordinary charges.
Net loss
The Company's net loss (including those relating to Ideal) for fiscal
1994 totaled $51.9 million compared with a net loss of $29.2 million in fiscal
1993. The fiscal 1993 net loss 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.
<PAGE> 29
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 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. Consumer Products' margins continued
to decline during the first part of fiscal 1994, however improved during the
latter part of that year.
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, was 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
In fiscal 1993, the Company recorded $6.8 million of restructuring and
other nonrecurring charges. In fiscal 1992, the Company recorded $3.9 million
of restructuring and other nonrecurring charges.
The fiscal 1993 restructuring charge consisted 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 entitles 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 included $1.6
million of costs incurred to consolidate administrative functions and transfer
two of Consumer Products' domestic packaging facilities to Mexico. These costs
principally consist of lease and severance termination costs of $0.5 million,
relocation costs, including payroll and freight costs of $0.5 million and a
write off of fixed assets of $0.1 million. The relocation to Mexico was done in
order to take advantage of that country's lower labor costs which are expected
to benefit the Company annually through increased margins. No additional cash
disbursements relating to the $1.6 million restructuring charge are expected.
The remaining $0.6 million related to the Company's decision not to proceed
with the securities offering of Barnett in fiscal 1993.
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.
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%. Fiscal year
1993 results were negatively impacted by the $6.8 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
<PAGE> 30
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 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.
<PAGE> 31
Net Income (Loss)
The Company's fiscal 1993 net loss totaled $29.2 million and included
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
was not able to benefit any of its fiscal 1993 losses for tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
On May 20, 1994, the Company completed a debt 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.
As part of the restructuring, the Company exchanged $50 million of its
Senior Subordinated Notes for $50 million initial accreted value of the 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. The reduction in cash interest requirements will be offset, in part,
by the $11.0 million of additional indebtedness incurred as part of the debt
restructuring. In addition, the $50 million of Senior Subordinated Notes
exchanged satisfy the Company's mandatory redemption requirements with respect
to such issue and, as a result, 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 is,
however, required to make two mandatory redemption payments of $17.0 million on
each of September 1, 1996 and September 1, 1997 with respect to the Senior
Secured Notes.
As part of the restructuring, 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 Senior Secured Notes have been repaid on or before March
1997. The Domestic Credit Facility is subject to borrowing base formulas. 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. At June 30, 1994, availability under the Domestic Credit Facility
totaled approximately $10 million.
As part of the restructuring, the Operating Companies also entered into
a $15.0 million three-year term loan with Citibank, N.A., as agent. 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 by November 20, 1994. Principal
payments of the Domestic Term Loan of $1.0 million each will be required
quarterly commencing in March 1995. The Domestic Term Loan will be required to
be prepaid if the Company completes a financing sufficient to retire the Senior
Secured 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 6 to Consolidated Financial Statements for a more complete
discussion of the new Domestic Credit Facility and Domestic Term Loan.
The Company does not have any commitments to make substantial capital
expenditures. However, the Company does expect to open up to four 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, of which approximately $0.1 million has
been incurred as of June 30, 1994.
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 $8.8 million relating to its 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) until September 1996. In order to eliminate and/or satisfy
such sinking fund obligations, and to decrease the Company's high degree of
leverage, the Company will have to obtain a significant infusion of funds,
either through additional debt refinancing transactions or the sale of equity
and/or assets. Although the Company is currently exploring its various
alternatives, it has not yet committed to any specific course of action or
transaction.
DISCUSSION OF CASH FLOWS
<PAGE> 32
The Company's continuing operations used $6.2 million of cash flow for
operations primarily as a result of the $10.1 million increase in inventories.
Inventory levels were up in response to the higher sales levels achieved during
fiscal 1994. In addition, the Company began building inventories during the
fourth quarter of fiscal 1994 relating to new business commitments which
Consumer Products obtained from several of its largest customers. The opening
orders of such additional business will be shipped primarily in the first
quarter of fiscal 1995. Cash flow used for investments totaled $1.6 million in
fiscal 1994. During October 1993, the Company generated approximately $3.0
million of cash from the sale of Belanger. The proceeds from the sale were
offset by $3.4 million of capital expenditures and a $1.3 million increase in
other assets. Cash flow provided by financing activities totaled $17.4 million.
Additional borrowings under the Company's revolving credit facilities along
with the proceeds from the Domestic Team Loan were offset, in part, by $1.8
million used to satisfy a mandatory repurchase requirement relating to the
Convertible Debentures and $13.9 million of repurchase premiums, fees and
expenses relating to the Reorganization.
FIXED CHARGE COVERAGE RATIO
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. Fiscal 1994 earnings were insufficient to cover fixed charges
by $3.1 million. 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.
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 fiscal 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 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
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.
<PAGE> 33
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
$215.1 million in fiscal 1994.
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 11.7% and 13.2%, 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 expects to fund this expansion
using cash flow from operations and/or available borrowings
under the Debt Financing. 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
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<PAGE> 34
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. 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 10,000 products to more than 33,000 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 1994, 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 $240. Barnett's net sales were approximately $95.2 million in
fiscal 1994.
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 10,000. During this period, the number
of active accounts serviced by Barnett increased from 6,000 to over 33,000.
Barnett has added nine warehouses during the last three full fiscal years
including two warehouses in fiscal 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 10,000 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 are centralized in Jacksonville,
Florida.
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<PAGE> 35
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.
Barnett mails its principal catalog, containing plumbing, electrical
and hardware products, to over 33,000 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 January 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 47 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
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<PAGE> 36
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, 1994, approximately
24% of Barnett's net sales were picked up by Barnett's customers.
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 10,000 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 1,400 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.
- 13 -
<PAGE> 37
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, 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 8% over the next three years as well as from the expected growth
of existing customers, several of which have announced expansion plans.
In fiscal 1994, Kmart and its subsidiaries accounted for approximately
13% 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 1994. Consumer Products' top ten customers accounted for
approximately 25% of the Company's continuing operations net sales in fiscal
1994.
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
$70.7 million in fiscal 1994.
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 24 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.
- 14 -
<PAGE> 38
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.
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.
- 15 -
<PAGE> 39
OTHER OPERATIONS
The Company has several other operations which are conducted through
WOC and TWI. These operations in the aggregate generated net sales of $47.7
million in fiscal 1994, which accounted for approximately 22.1% 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
LegendTM 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. 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, 1994, products purchased
overseas, primarily from Taiwan, accounted for approximately 27.2% 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
- 16 -
<PAGE> 40
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.
The following table sets forth the approximate percentage of net sales
from continuing operations attributable to the Company's principal product
groups:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Plumbing 72% 74% 73%
Electrical 11 10 9
Hardware 17 16 18
---- ---- ----
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.
- 17 -
<PAGE> 41
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.
EMPLOYEES
As of June 30, 1994, the Company's continuing operations employed
1,211 persons, 273 of whom were clerical and administrative personnel, 190 of
whom were sales service representatives and 748 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 June 30, 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 Medal Distributing Office and Warehouse 2/28/96
Sharon, PA
902 Avenue T 77,000 Consumer Products Office and Warehouse 5/31/00
Grand Prairie, TX
</TABLE>
- 18 -
<PAGE> 42
<TABLE>
<S> <C> <C> <C>
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>
(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 three additional
five-year terms.
(3) The Company has the option to renew the lease for a five-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 statements 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
- 19 -
<PAGE> 43
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.
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 and the consolidated financial statements and financial
information contained herein 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.
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 related 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 & 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 branch 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.
- 20 -
<PAGE> 44
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 60 Chairman of the Board and Co-Chief Executive
Officer
Armond Waxman 55 President, Co-Chief Executive Officer, Treasurer
and Director
John S. Peters 46 Senior Vice President, Operations
William R. Pray 47 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.
- 21 -
<PAGE> 45
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, 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 1994. In
addition to the foregoing compensation, in fiscal 1994, the Board of Directors
adopted the 1994 Non-Employee Directors Stock Option Plan pursuant to which
each current non-employee director of the Company was granted an option to
purchase an aggregate of 20,000 shares of the Company's Common Stock at a
price of $2.25 per share and each future non-employee director of the Company
would be granted, on the date such person becomes a non-employee director of
the Company, an option to purchase an aggregate of 20,000 shares of Common
Stock at an exercise price equal to the fair market value of the Common Stock
on the date of grant. The grant of such options is subject to stockholder
approval, which the Company intends to seek at its next annual meeting of
the Stockholders.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid for services
rendered during fiscal 1994 to the Co-Chief Executive Officers and the three
other most highly compensated executive officers of the Company in the fiscal
years indicated:
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<PAGE> 46
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
All Other
Awards Payouts Compensation
------ -------
Annual Compensation(1) Restricted LTIP
Year Salary($) Bonus($)(2) Stock($) Options(#) Payouts($) ($)(3)(4)(5)
---- --------- ----------- -------- ---------- ---------- ---------
Name and Principal
------------------
Position
--------
<S> <C> <C> <C> <C> <C> <C> <C>
Melvin Waxman 1994 325,000 100,000 __ 300,000(6) __ 45,604
Chairman of the Board 1993 365,000 100,000 __ 250,000(6) __ 65,293
and Co-Chief Executive 1992 400,000 125,000 __ __ __ __
Officer
Armond Waxman 1994 366,923 200,000 __ 300,000(6) __ 86,776
President and Co-Chief 1993 378,942 100,000 __ 250,000(6) __ 50,464
Executive Officer 1992 400,000 125,000 __ __ __ __
William R. Pray 1994 206,000 75,000 __ 67,500(7) __ __
Senior Vice President 1993 200,000 45,000 __ 25,000(7) __ 14,789
1992 173,000 50,000 __ 7,500(7) __ __
John S. Peters 1994 130,018 42,500 __ 52,500(7) __ 12,500
Senior Vice President 1993 132,644 25,000 __ 45,500(7) __ 14,137
-- Operations 1992 125,000 25,000 __ 7,500(7) __ __
Laurence S. Waxman 1994 151,826 65,000 __ 57,500(7) __ 11,589
Senior Vice President 1993 135,000 40,000 __ 50,000(7) __ 14,058
1992 136,923 40,000 __ 7,500(7) __ __
Jerome C. Jacques(8) 1994 260,769 __ __ __ __ 1,472
Senior Vice President -- 1993 192,067 45,000 __ 50,000 __ 16,175
Finance and Chief 1992 200,000 50,000 __ 12,500 __ __
Financial Officer
(1) Certain executive officers received compensation in fiscal 1992, 1993 and 1994 in the form of perquisites, the amount of
which does not exceed reporting thresholds.
(2) Messrs. Pray, Peters and Laurence Waxman 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 1992.
(4) For fiscal 1993, 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 Mr. Pray, $1,637 for Mr. Peters, $1,558 for Laurence Waxman 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, Peters and Laurence Waxman and $13,886 for Mr. Jacques.
(5) For fiscal 1994, amounts represent premiums on split-dollar life insurance policies.
(6) During May 1994, Messrs. Melvin and Armond Waxman agreed to relinquish all of their existing stock options in exchange
for the grant of a like number of new options. The grant of 100,000 of the new options is subject to stockholder approval
of an amendment to the 1992 Non-Qualified and Incentive Stock Option Plan to increase the number of shares subject
thereto, which the Company intends to seek at the next annual meeting of stockholders (the "1992 Plan Amendment").
(7) During May 1994, Messrs. Pray, Peters and Laurence Waxman agreed to relinquish all of their existing stock options in
exchange for the grant of a like number of new options.
(8) Includes certain amounts paid to Mr. Jacques in connection with the termination of his employment in November 1993.
</TABLE>
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
- 23 -
<PAGE> 47
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 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 $165,000 for the first year
of the employment agreement and provides that for each year thereafter the
minimum annual salary will be increased by eight percent of the prior year's
salary or any salary amount separately agreed to in writing by Mr. Pray,
Barnett and the Company. Mr. Pray is also eligible to receive additional
discretionary bonuses as may from time to time be determined in the sole
discretion of the Board of Directors of the Company. The employment agreement
also contains provisions which restrict Mr. Pray from competing with the
Company during the term of the agreement and for two years following the
termination thereof.
- 24 -
<PAGE> 48
STOCK OPTION AND SAR GRANTS
The following table sets forth the information noted for all grants of
stock options made by the Company during fiscal 1994 to each of the executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
OPTIONS/SAR(1) GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
OPTIONS GRANTED TO EXERCISE PRICE APPRECIATION FOR
GRANTED EMPLOYEES IN PRICE EXPIRATION OPTION TERM(2)
NAME (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- --- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Melvin Waxman 300,000(3) 24.0 2.25 May 2004 424,575 1,075,950
Armond Waxman 300,000(3) 24.0 2.25 May 2004 424,575 1,075,950
William R. Pray 67,500 5.4 2.25 May 2004 95,529 242,089
John S. Peters 52,500 4.2 2.25 May 2004 74,301 188,291
Laurence S. Waxman 57,500 4.6 2.25 May 2004 81,377 206,244
<FN>
(1) There were no SARs granted to any of the executive officers named in this table in fiscal 1994.
(2) The potential realizable values represent future opportunity and have not been reduced to present value in 1994 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) The grant of options exercisable to acquire 100,000 of the 300,000 shares of Common Stock subject to the options granted
to each of Messrs. Armond and Melvin Waxman is subject to the approval of the stockholders of the Company of the 1992 Plan
Amendment.
</TABLE>
- 25 -
<PAGE> 49
STOCK OPTION AND SAR EXERCISES
The following table sets forth the information noted for all exercises
of stock options and SARs during fiscal 1994 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 -- -- 0/300,000(1) --
Armond Waxman -- -- 0/300,000(1) --
William R. Pray -- -- 0/ 67,500 --
John S. Peters -- -- 0/ 52,500 --
Laurence S. Waxman -- -- 0/ 57,500 --
<FN>
(1) The grant of options exercisable to acquire 100,000 of the 300,000 shares of Common Stock subject to the options granted
to each of Messrs. Armond and Melvin Waxman is subject to the approval of the stockholders of the Company of the 1992 Plan
Amendment.
</TABLE>
- 26 -
<PAGE> 50
PRINCIPAL STOCKHOLDERS
CAPITAL STOCK
The following table sets forth, as of June 30, 1994 (except as noted in
footnote 4 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) 872,282 1,011,932 9.2% 45.5% 34.7%
Armond Waxman(2) 765,107 826,082 8.1 37.2 28.5
Samuel J. Krasney(3) 6,750 6,750 * * *
Judy Robins 66,750 78,750 * 3.5 2.7
Directors and officers
as a group (9
individuals) 1,755,714 1,978,766 18.5 89.0 67.9
Weiss, Peck & Greer(4) 1,182,500 -- 12.5 -- 3.7
One New York Plaza
New York, NY 10004
* less than 1%
(1) Includes 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.
(2) Includes 55,825 shares of Common Stock and 55,800 shares of the Class B Common Stock owned by members of Mr. Armond
Waxman's immediate family, as to which shares Mr. Waxman disclaims beneficial interest.
(3) Includes 4,500 shares of Common Stock and 4,500 shares of the Class B Common Stock owned by Mr. Krasney's wife, as to
which shares Mr. Krasney disclaims beneficial interest.
</TABLE>
- 27 -
<PAGE> 51
<TABLE>
<S> <C>
(4) 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.
</TABLE>
RECENT SECURITIES OFFERING AND RELATED MATTERS
The Reorganization
On May 20, 1994, as part of the Reorganization, the Company issued the
Old Notes together with the Warrants in exchange for $50,000,000 aggregate
principal amount of the Company's outstanding Senior Subordinated Notes
pursuant to the Private Exchange Offer. In addition to the Private Exchange
Offer, the components of the Reorganization included (i) the Senior
Subordinated Consent Solicitation, (ii) the Debt Financing, (iii) the 12 1/4%
Consent Solicitation and (iv) the repayment of the borrowings under the
Company's then existing domestic revolving credit facilities (including $27.7
under the Company's then existing working capital credit facility and $2.5
million under the $5.0 million revolving credit facility of Barnett (the
"Barnett Financing")). No component of the Reorganization is dependent on the
successful completion of the Exchange Offer.
In connection with the Reorganization, the Company completed the
Corporate Restructuring. 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 the Consumer Products
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 restructured its operations 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.
Registration Rights Agreements
Pursuant to the Debt Registration Rights Agreement, the Company has
agreed to use its best efforts to register the Exchange Offer under the Act,
and pursuant to a Registration Rights Agreement dated May 20, 1994, among the
Company and the Exchange Agent, on behalf of the original purchasers of the
Warrants (the "Equity Registration Rights Agreement"), the Company has agreed
to use its best
- 28 -
<PAGE> 52
efforts to register the offer and sale of the Warrants and shares of Common
Stock underlying the Warrants under the Act.
Pursuant to the Debt Registration Rights Agreement, the Company has
agreed to use its best efforts (i) to file, within 30 days of the issuance of
the Old Notes, a registration statement under the Act with respect to an
exchange offer whereby securities substantially identical to the Old Notes
would be offered for exchange with the Old Notes in order to permit the
original purchasers of the Old Notes to offer and sell the New Notes under the
Act and (ii) to cause such registration statement to become effective within
120 days of the date of issuance of the Old Notes. Upon the registration
statement being declared effective, the Company will offer the New Notes in
exchange for surrender of the Old Notes. The Company has agreed to keep the
Exchange Offer pursuant to the registration statement open for not less than 30
days (or longer if required by applicable law) after the date notice of such
offer is mailed to the holders of the Old Notes. In the event that the Company
or the holders of 25% in aggregate principal amount of the Old Notes reasonably
determine in good faith that because of any change in law or applicable
interpretations of the Staff of the Commission the Company is not permitted to
effect the Exchange Offer, or if for any other reason the Exchange Offer is not
consummated within 180 days of the date of the Debt Registration Rights
Agreement or if a holder of the Old Notes is not permitted, because of a change
in law or interpretations of the Staff of the Commission, to participate in the
Exchange Offer, the Company will, at its cost, (a) as promptly as practicable,
file a shelf registration statement covering resales of the Old Notes, (b) use
its best efforts to cause such shelf registration statement to be declared
effective under the Securities Act and (c) use its best efforts to keep
continuously effective such shelf registration statement until three years
after the issuance of the Old Notes or such shorter period ending when all of
the Old Notes eligible for sale thereunder have been sold thereunder. In the
event that the registration statement is not filed or effective by, or
continuously effective through, the dates referred to above or the Commission
shall have issued a stop order suspending the effectiveness of the registration
statement or any shelf registration statement with respect to the Old Notes at
a time when such registration statement or shelf registration statement, as the
case may be, is required to be kept effective by the Company or the prospectus
contained in any such registration statement or shelf registration statement,
as amended or supplemented, shall (x) not contain current information required
by the Securities Act and the rules and regulations promulgated thereunder or
(y) contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the Company has agreed to pay, or cause to be paid, as liquidated
damages and not as a penalty to each holder of Old Notes, an amount equal to
$0.05 per week per $1,000 of Accreted Value of Old Notes held by such holder,
for each week during the 90-day period beginning on the date referred to above
or the date of the order suspending effectiveness or the date on which the
prospectus shall not contain such current information or shall contain any such
untrue statement or omit to state any such material fact. Such liquidated
damages shall be increased by $0.05 per week per $1,000 of Accreted Value of
Old Notes at the beginning of each subsequent 90-day period up to a maximum
aggregate amount of $0.20 per week per $1,000 of Accreted Value of Old Notes.
The Company has agreed to pay all expenses incident to the Company's
performance of or compliance with the Debt Registration Rights Agreement,
including the reasonable fees and expenses of counsel to the original
purchasers of the Old Notes but excluding any underwriting fees, discounts or
commissions attributable to the sale of the Notes. Each of the Company and the
Trustee, on behalf of the original purchasers of the Old Notes, pursuant to the
Debt Registration Rights Agreement, have agreed to indemnify the other party,
its officers, directors and controlling persons in respect of certain
liabilities and expenses arising, under certain circumstances, out of any
registration of the Old Notes
- 29 -
<PAGE> 53
pursuant to the Debt Registration Rights Agreement. The Company has prepared
and filed the Registration Statement of which this Prospectus forms a part
pursuant to the Debt Registration Rights Agreement.
Pursuant to the Equity Registration Rights Agreement, the Company has
agreed to use its best efforts (i) to file, within 30 days of the issuance of
the Warrants, a registration statement (the "Equity Registration Statement")
under the Act to permit the original purchasers of the Warrants to offer and
sell under the Act the Warrants and shares of Common Stock underlying the
Warrants ("Warrant Shares"), (ii) to cause such Equity Registration Statement
to become effective within 120 days of the date of issuance of the Warrants and
(iii) to maintain such effectiveness for a period of three years or such
shorter period ending when all of the Warrants and Warrant Shares have been
sold pursuant to the Equity Registration Statement or the date three years
after all Warrants have been exercised. The period beginning on the date the
Equity Registration Statement is first declared effective by the Commission and
ending on the date which is three years after the expiration of the Warrants
or, if earlier, the date on which all Warrants and Warrant Shares have been
sold pursuant to the Equity Registration Statement or the date three years
after all Warrants have been exercised, is referred to herein as the
"Effectiveness Period." In the event that the Equity Registration Statement is
not filed or effective by, or continuously effective through, the dates
referred to above or prior to the end of the Effectiveness Period, the
Commission shall have issued a stop order suspending the effectiveness of the
Equity Registration Statement or the prospectus contained in the Equity
Registration Statement, as amended or supplemented, shall (x) not contain
current information required by the Securities Act and the rules and
regulations promulgated thereunder or (y) contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they are made, not misleading, the Company has agreed to pay, or
cause to be paid, as liquidated damages and not as a penalty, to each holder of
a Warrant or Warrant Share, an amount equal to $0.0025 per week per Warrant or
Warrant Share, as the case my be, for each week beginning on such date and
ending 90 days thereafter. Such liquidated damages shall be increased by
$0.0025 per week per Warrant or Warrant Share, as the case may be, at the
beginning of each subsequent 90-day period up to a maximum aggregate amount of
$0.01 per week per Warrant or Warrant Share, as the case may be. The Company
has agreed to pay all expenses incident to the Company's performance of or
compliance with the Equity Registration Rights Agreement, including the
reasonable fees and expenses of counsel to the original purchasers of the
Warrants but excluding any underwriting fees, discounts or commissions
attributable to the sale of the Warrants or Warrant Shares. Each of the
Company and the Warrant Agent, on behalf of the original purchasers of the
Warrants, pursuant to the Equity Registration Rights Agreement, have agreed to
indemnify the other party, its officers, directors and controlling persons in
respect of certain liabilities and expenses arising, under certain
circumstances, out of any registration of the Warrants and Warrant Shares
pursuant to the Equity Registration Rights Agreement. The Company has prepared
and filed the Equity Registration Statement with the Commission pursuant to the
Equity Registration Rights Agreement.
- 30 -
<PAGE> 54
THE EXCHANGE OFFER
PURPOSE OF EXCHANGE OFFER
The outstanding Old Notes in the aggregate principal amount at
maturity of $92,797,000 were originally issued on May 20, 1994. The offer and
sale of the Old Notes was not registered under the Act in reliance upon the
exemption therefrom provided by Section 4(2) of the Act. The Old Notes may not
be reoffered, resold, or transferred other than pursuant to an effective
registration statement filed pursuant to the Act or unless an exemption from
the registration requirements of the Act is available.
Pursuant to Rule 144 promulgated under Act, the Old Notes may
generally be resold, subject to certain conditions specified in the Rule, (a)
commencing two years after the date of original issuance, in an amount up to,
for any three-month period, the greater of 1% of the principal amount at
maturity of the Old Notes then outstanding or the average weekly trading volume
of the Old Notes during the four calendar weeks immediately preceding the
filing of the required notice of sale with the Commission, and (b) commencing
three years after the date of original issuance, in any amount and otherwise
without restriction by a Holder who is not, and has not been for the preceding
three months, an affiliate of the Company. Following the Exchange Offer, the
calculation of the amount of permissible sales under Rule 144 may depend on the
combined amount of outstanding Old Notes and New Notes, and the trading volume
of the Old Notes and the New Notes together. Additionally, under certain
circumstances, an exemption from the registration requirements of the Act may
be available for the resale of the Old Notes to "Qualified Institutional
Buyers" under Rule 144A promulgated thereunder. Certain other exemptions may
also be available under other provisions of the federal securities laws for the
resale of the Old Notes.
In connection with the original sale of the Old Notes, the Company
entered into the Debt Registration Rights Agreement, pursuant to which the
Company agreed to file with the Commission a registration statement covering
the exchange by the Company of the New Notes for the Old Notes in a transaction
designed to provide certain Holders of Old Notes with an opportunity to acquire
New Notes which, unlike the Old Notes, may be offered for resale, resold and
otherwise transferred without compliance with the registration and prospectus
delivery requirements of the Act. Holders who are unable or choose not to
exchange their Old Notes pursuant to this Exchange Offer will continue to hold
securities that are subject to restrictions on transfer pursuant to the Act.
The Company has no obligation to provide for the registration under the Act of
Old Notes outstanding after the expiration of the Exchange Offer. Such Holders
should consult their own legal counsel for advice as to any restrictions that
might apply to the resale of their Old Notes. The New Notes otherwise will be
identical in all material respects (including interest rate, maturity and
restrictive covenants) to the Old Notes for which they may be exchanged
pursuant to this Exchange Offer.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the Exchange Offer), the Company will accept for exchange Old Notes
which are properly tendered on or prior to the Expiration Date and not
withdrawn as permitted below. As used herein, the term "Expiration Date" means
Midnight, New York City time, on , 1994; provided, however, that if the
Company, in its sole discretion, has extended
- 31 -
<PAGE> 55
the period of time during which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended.
As of the date of this Prospectus, $92,797,000 aggregate principal
amount at maturity of Old Notes were outstanding. This Prospectus, together
with the Letter of Transmittal, is first being sent on or about September __,
1994, to all Holders of Old Notes known to the Company. The Company's
obligation to accept Old Notes for exchange pursuant to the Exchange Offer is
subject to certain conditions as set forth under "- - Certain Conditions to the
Exchange Offer" below.
The Company expressly reserves the right, at any time or from time to
time, to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the Holders thereof. During any such
extension, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will be returned without expense to
the tendering Holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Old Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified below under "-- Certain Conditions to the Exchange
Offer." The Company will give oral or written notice of any extension,
amendment, non-acceptance or termination to the Holders of the Old Notes as
promptly as practicable, such notice in the case of any extension to be issued
by means of a press release or other public announcement no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in the Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to
tender Old Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to The Huntington National
Bank (the "Exchange Agent") at one of the addresses set forth below under
"Exchange Agent" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the Holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
- 32 -
<PAGE> 56
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered Holder of the Old
Notes who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by a firm which
is a member of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. or by a commercial bank or
trust company having an office or correspondent in the United States
(collectively, "Eligible Institutions"). If Old Notes are registered in the
name of a person other than a signer of the Letter of Transmittal, the Old
Notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Company in its sole discretion, duly executed by the
registered Holder with the signature thereon guaranteed by an Eligible
Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as to
any particular Old Notes either before or after the Expiration Date (including
the right to waive the ineligibility of any Holder who seeks to tender Old
Notes in the Exchange Offer). The interpretation of the terms and conditions
of the Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur
any liability for failure to give such notification.
If the New Notes are to be issued, or untendered Old Notes are to be
reissued, to a person other than the Holder thereof, the Old Notes surrendered
for exchange must be properly endorsed or accompanied by appropriate bond
powers in satisfactory form as determined by the Exchange Agent in its sole
discretion. If Old Notes are registered in the name of the person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange
must be properly endorsed or accompanied by appropriate bond powers in
satisfactory form as determined by the Exchange Agent in its sole discretion,
duly executed by the registered Holder with the signature thereon guaranteed by
an Eligible Institution.
If the Letter of Transmittal or any Old Notes or powers of attorney
are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Exchange
Agent of their authority to so act must be submitted.
Tenders must be made in round number multiples of the principal amount
of $1,000. Subject to the foregoing, tendering Holders of Old Notes may tender
less than the aggregate principal amounts
- 33 -
<PAGE> 57
represented by the Old Notes deposited with the Company provided they
appropriately indicate this fact on the Letter of Transmittal accompanying the
tendered Old Notes. If less than all of the Old Notes evidenced by a submitted
certificate are to be tendered, a reissued certificate representing the
untendered Old Notes, together with a certificate representing the New Notes,
will be sent to such tendering Holder, unless otherwise provided in the
appropriate box on the Letter of Transmittal.
By tendering, each Holder will represent to the Company that, among
other things, the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, that neither the Holder nor
any such other person has an intention to, or an arrangement or understanding
with any person, to participate in the distribution of such New Notes and that
neither the Holder nor any such other person is an "affiliate," as defined
under Rule 405 of the Act, of the Company. A broker-dealer holding Old Notes
may participate in the Exchange Offer provided that it acquired the Old Notes
for its own account as a result of market-making or other trading activities.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning the Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will accept, promptly after the Expiration Date, all Old
Notes properly tendered and will issue the New Notes promptly after acceptance
of the Old Notes. See "-- Certain Conditions to the Exchange Offer" below.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted properly tendered Old Notes for exchange when, as and if the Company
has given oral or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the Holder of such Old Note
will receive a New Note having a principal amount at maturity equal to that of
the surrendered Old Note. Original Issue Discount on the New Notes will accrue
from May 20, 1994, the date of original issuance of the Old Notes. The New
Notes will not bear interest prior to June 1, 1999.
In all cases, issuance of New Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed Letter
of Transmittal and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer (including, without limitation, the determination that the
tendering Holder is an affiliate of the Company or is not acquiring the New
Notes in the ordinary course of business with no arrangement or understanding
with any person to participate in the distribution of the New Notes) or if Old
Notes are submitted for a greater principal amount than the Holder desires to
exchange, such unaccepted or non-exchanged Old Notes will be returned without
expense to the tendering Holder thereof (or, in the case of Old Notes tendered
by book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
below, such non-exchanged Old Notes will be credited to an account
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<PAGE> 58
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent, if requested by the Company, will make a request
to establish an account with respect to the Old Notes at the Book- Entry
Transfer Facility for purposes of the Exchange Offer within two business days
after the date of this Prospectus, and any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
delivery of Old Notes by causing the Book- Entry Transfer Facility to transfer
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Old Notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal or facsimile thereof, with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and received
by the Exchange Agent at one of the addresses set forth below under "Exchange
Agent" on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old
Notes and the Old Notes are not immediately available, or time will not permit
such Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible Institution a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the Holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must
be received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which
such Old Notes are
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<PAGE> 59
registered, if different from that of the withdrawing Holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates, the withdrawing Holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old
Notes have been tendered pursuant to the procedure for book-entry transfer
described above, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Old Notes and otherwise comply with the procedures of such facility.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer. Any Old Notes which have been tendered for exchange but which
are not exchanged for any reason will be returned to the Holder thereof without
cost to such Holder (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Old Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility for the Old Notes) as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Old Notes
may be retendered by following one of the procedures described under "--
Procedures for Tendering Old Notes" above at any time on or prior to the
Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer, if at any
time before the acceptance of such Old Notes for exchange or the exchange of
the New Notes for such Old Notes, any of the following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to
restrain or prohibit the making or consummation of the Exchange Offer
or any other transaction contemplated by the Exchange Offer, or
assessing or seeking any damages as a result thereof or in connection
therewith, or (ii) resulting in a material delay in the ability of the
Company to accept for exchange or exchange some or all of the Old
Notes pursuant to the Exchange Offer, or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or any
of the transactions contemplated by the Exchange Offer by any
government or governmental authority, domestic or foreign, or any
action shall have been taken, proposed or threatened, by any
government, governmental authority, agency or court, domestic or
foreign, that in the sole judgment of the Company might directly or
indirectly result in any of the consequences referred to in clauses
(i) or (ii) above or, in the sole judgment of the Company, might
result in the holders of New Notes having obligations with respect to
resales and transfers of New Notes which are greater than those
described in the interpretation of the Commission referred to on the
cover page of this Prospectus, or would otherwise make it inadvisable
to proceed with the Exchange Offer; or
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<PAGE> 60
(b) there shall have occurred (i) any general suspension of or
general limitation on prices for, or trading in, securities on any
national securities exchange or in the over-the-counter market, (ii)
any limitation by any governmental agency or authority which may
adversely affect the ability of the Company to complete the
transactions contemplated by the Exchange Offer, (iii) a declaration
of a banking moratorium or any suspension of payments in respect of
banks in the United States or any limitation by any governmental
agency or authority which adversely affects the extension of credit or
(iv) a commencement of war, armed hostilities or other similar
international calamity directly or indirectly involving the United
States, or, in the case of any of the foregoing existing at the time
of the commencement of the Exchange Offer, a material acceleration or
worsening thereof; or
(c) any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, properties,
assets, liabilities, financial condition, operations, results of
operations or prospects of the Company and its subsidiaries taken as a
whole that, in the sole judgment of the Company, is or may be adverse
to the Company, or the Company shall have become aware of facts that,
in the sole judgment of the Company, have or may have adverse
significance with respect to the value of the Old Notes or the New
Notes;
which, in the sole judgment of the Company in any case, and regardless of the
circumstances (including any action by the Company) giving rise to any such
condition, makes it inadvisable to proceed with the Exchange Offer and/or with
such acceptance for exchange or with such exchange.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise to
any such condition or may be waived by the Company in whole or in part at any
time and from time to time in its sole discretion. The failure by the Company
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect to
the Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA").
EXCHANGE AGENT
The Huntington National Bank has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this
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<PAGE> 61
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<CAPTION>
THE HUNTINGTON NATIONAL BANK
<S> <C> <C>
By Mail/Overnight Courier: By Facsimile Transmission: By Hand:
(216) 344-6584 In Cleveland, Ohio:
The Huntington National Bank Confirm by Telephone: The Huntington National Bank
917 Euclid Avenue (216) 344-6662 917 Euclid Avenue
Cleveland, Ohio 44115 Cleveland, Ohio 44115
Attention: Corporate Trust Attention: Corporate Trust
CM23 CM23
In New York, New York:
The Huntington National Bank
In care of The Bank of New York
Drop Window Services
101 Barclay Street
New York, New York 10286
</TABLE>
DELIVERY OF LETTERS OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer, and will not make any payment to brokers,
dealers, or others soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the
Exchange Offer will be paid by the Company and are estimated in the aggregate
to be $240,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Notes in the name of, or request that Old
Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
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<PAGE> 62
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Act and
applicable state securities laws. In general, the Old Notes may not be offered
or sold, unless registered under the Act, except pursuant to an exemption from,
or in a transaction not subject to, the Act and applicable state securities
laws. The Company has no obligation to, and does not currently anticipate that
it will, register the offer and sale of the Old Notes under the Act. Based on
interpretations by the Staff of the Commission, set forth in certain "no-
action" letters issued to third parties and unrelated to the Company and the
Exchange Offer, the Company believes that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by Holders thereof (other than any such Holder which is
an "affiliate" of the Company within the meaning of Rule 405 under the Act)
without compliance with the registration and prospectus delivery provisions of
the Act provided that such New Notes are acquired in the ordinary course of
such Holders' business and such Holders have no intention, nor any arrangement
with any person, to participate in the distribution of such New Notes. If any
Holder has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i)
could not rely on the applicable interpretations of the Staff of the Commission
enunciated in Exxon Capital Holdings Corporation (available April 13, 1989) or
similar letters and (ii) must comply with the registration and prospectus
delivery requirements of the Act in connection with any resale transaction. A
broker-dealer holding Old Notes may participate in the Exchange Offer provided
that it acquired the Old Notes for its own account as a result of market-making
or other trading activities. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus meeting the
requirements of the Act in connection with any resale of such New Notes since
such broker-dealer may be considered a statutory underwriter. Such prospectus
may be the prospectus relating to the Exchange Offer only if it contains a plan
of distribution with respect to such resale transactions (but need not name the
broker-dealer or disclose the amount of New Notes held by the broker-dealer).
See "Plan of Distribution." In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the New Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
an exemption from registration or qualification is available and is complied
with. The Company does not currently intend to register or qualify the sale of
the New Notes in any such jurisdictions.
DESCRIPTION OF THE NOTES
The Old Notes have been, and the New Notes will be, issued under the
indenture dated as of May 20, 1994 (the "Indenture") between the Company and
the Trustee. The following summary of certain provisions of the Indenture does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and to all of the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part of the
Indenture by reference to the Trust Indenture Act, as in effect on the date of
the Indenture. The definitions of certain capitalized terms used in the
following summary are set forth below under "Certain Definitions."
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<PAGE> 63
GENERAL
The New Notes will be issued only in registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000. Principal of,
premium, if any, and interest on the Notes will be payable, and the Notes will
be transferable, at the corporate trust office or agency of the Trustee in the
City of New York maintained for such purposes at the offices of its agent, Bank
of New York, 101 Barclay Street, New York, New York 10286. No service charge
will be made for any registration of transfer or exchange of the Notes, except
for any tax or other governmental charge that may be imposed in connection
therewith.
MATURITY, INTEREST AND PRINCIPAL
The New Notes will be issued at a discount to their aggregate
principal amount. Interest will not accrue on the Notes prior to June 1, 1999.
Thereafter interest on the Notes will accrue at the rate of 12 3/4% per annum
and will be payable in cash semi-annually on June 1 and December 1, commencing
on December 1, 1999 to holders of record on the immediately preceding May 15
and November 15. Interest on the Notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from June 1,
1999. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. Interest on overdue principal and (to the extent
permitted by law) on overdue installments of interest will accrue at the rate
of interest borne by the Notes.
REDEMPTION
Optional Redemption. The Notes will be redeemable, in whole or in
part, at the option of the Company, at any time on or after June 1, 1999, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest to the redemption date, if redeemed
during the 12-month period beginning on June 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999 106.375%
2000 104.250
2001 102.125
2002 and thereafter 100.000%
</TABLE>
In addition, at any time prior to June 1, 1997, the Company may use
all or any portion of the net cash proceeds of one or more Public Equity
Offerings to redeem Notes in an aggregate principal amount at maturity not to
exceed $25,000,000 at a redemption price equal to 112.75% of the Accreted
Value; provided that not less than $65,000,000 aggregate principal amount at
maturity of the Notes remains outstanding upon the completion of such
redemption. Any such redemption will be required to occur on or prior to 60
days after the receipt of the proceeds of any such Public Equity Offering.
Selection and Notice. In the event that less than all of the Notes
are to be redeemed at any time, selection of Notes for redemption will be made
by the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if
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<PAGE> 64
the Notes are not listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate,
provided, however, that no Notes of $1,000 or less shall be redeemed in part.
Notice of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part
only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Note. On and
after the redemption date, any interest will cease to accrue on Notes or
portions thereof called for redemption.
CHANGE OF CONTROL
In the event of a Change of Control (the date of such occurrence being
the "Change of Control Date"), the Company shall notify the holders in writing
of such occurrence and shall make an offer to purchase (the "Change of Control
Offer"), on a business day (the "Change of Control Purchase Date") not later
than 60 days following the Change of Control Date, all Notes then outstanding
at a purchase price equal to 101% of the Accreted Value thereof plus accrued
and unpaid interest, if any. Notice of a Change of Control Offer shall be
mailed by the Company to the holders not less than 25 days nor more than 45
days before the Change of Control Purchase Date. The Change of Control Offer
is required to remain open for at least 20 business days and until the close of
business on the business day next preceding the Change of Control Purchase
Date.
The Company will comply with any tender offer rules under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which may
then be applicable, including, but not limited to, Section 14(e) under the
Exchange Act and the rules thereunder, in connection with any Change of Control
Offer required to be made by the Company to repurchase the Notes as a result of
a Change of Control.
RANKING
The indebtedness of the Company evidenced by the Notes will rank
senior in right of payment to all subordinated indebtedness of the Company,
including the Senior Subordinated Notes and the Convertible Debentures, and
will rank pari passu in right of payment with all other existing or future
unsubordinated indebtedness of the Company.
SECURITY
The Company will pledge to the Trustee for the benefit of the holders
of the Notes the Capital Stock of all its current and future directly owned
domestic Subsidiaries, other than Ideal Holding Group or any other Subsidiary
that relates to the business conducted by Ideal and 65% of the Capital Stock of
all its future directly owned foreign Subsidiaries and the domestic holding
companies of such foreign Subsidiaries, other than any Subsidiary that relates
to the business conducted by Ideal. Such pledge will secure the payment and
performance when due of all of the obligations of the Company under the
Indenture and the Notes.
So long as no Event of Default shall have occurred and be continuing,
and subject to certain terms and conditions in the Indenture, the Company will
be entitled to receive all cash dividends,
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<PAGE> 65
interest and other payments made upon or with respect to the collateral pledged
by it and to exercise any voting and other consensual rights pertaining to the
collateral pledged by it. Upon the occurrence and during the continuance of an
Event of Default, (a) all rights of the Company to exercise such voting or
other consensual rights will cease, and all such rights will become vested in
the Trustee, which shall have the sole right to exercise such voting and other
consensual rights, and (b) all rights of the Company to receive all dividends
made upon or with respect to the pledged collateral will cease and such
dividends shall be paid to the Trustee.
Upon the occurrence and during the continuance of an Event of Default,
the Trustee shall foreclose upon the pledged collateral in accordance with
instructions received from holders of a majority of the aggregate principal
amount of outstanding Notes, or in the absence of such instructions, in such
manner as the Trustee deems appropriate, in each case, as provided in the
Indenture. All funds received by the Trustee upon any foreclosure shall be
distributed by the Trustee in accordance with the provisions of the Indenture.
Upon the full and final payment and performance of all obligations of the
Company under the Indenture and the Notes, the pledged collateral shall be
released. In addition, in the event that the Capital Stock of any Subsidiary
of the Company is sold and the Net Cash Proceeds from any such sale are applied
in accordance with the terms of the Indenture, any Lien in favor of the Trustee
on the assets sold shall be released; provided, that the Trustee shall have
received from the Company an Officers' Certificate that such Net Cash Proceeds
have been so applied.
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 approval 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."
PROVISION OF FINANCIAL INFORMATION
Pursuant to the Indenture, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will submit for filing with the Commission such annual reports,
quarterly reports and other documents and distribute or cause to be distributed
to holders of the Notes copies of such annual reports, quarterly reports and
other documents that the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were so subject. Such annual reports will contain consolidated
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<PAGE> 66
financial statements and notes thereto, together with an opinion thereon
expressed by an independent public accounting firm, and management's discussion
and analysis of financial condition and results of operations and such
quarterly reports will contain unaudited condensed consolidated financial
statements for the first three quarters of each fiscal year.
CERTAIN COVENANTS
Set forth below are certain covenants which are contained in the
Indenture.
Limitation on Additional Indebtedness. The Indenture will provide
that the Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, issue,
guarantee or in any manner become liable for or with respect to the payment of,
any Attributable Indebtedness or Indebtedness (including any Acquired
Indebtedness) except for (each of which shall be given independent effect):
(a) Indebtedness of the Company under the Notes and the
Indenture;
(b) Indebtedness of Subsidiaries of Waxman USA outstanding
from time to time pursuant to the Domestic Credit Facility and/or any
other credit arrangement not to exceed at any one time an amount (the
"Permitted Amount") equal to, when added to the principal amount of
Indebtedness of Subsidiaries of Waxman USA outstanding pursuant to
clause (k) below, (A) the sum of 85% of the net book value of the
accounts receivable and 50% of the net book value of the inventory of
the Subsidiaries of Waxman USA, in each case calculated on a
consolidated basis in accordance with GAAP minus (B) the amount of
Indebtedness pursuant to the Domestic Credit Facility and/or such
other credit arrangement prepaid with the Net Cash Proceeds from an
Asset Sale pursuant to the provisions described below under
"Disposition of Proceeds of Asset Sales";
(c) Indebtedness of the Company and those Subsidiaries of the
Company which are in existence on the Issue Date, which Indebtedness
is outstanding on the Issue Date;
(d) Indebtedness of Waxman USA if, immediately after giving
pro forma effect to the incurrence thereof, the Consolidated Interest
Coverage Ratio of Waxman USA would be equal to or greater than 2.00:1
if such Indebtedness is incurred on or prior to June 1, 1996 or equal
to or greater than 2.25:1 if such Indebtedness is incurred thereafter;
(e) Indebtedness of the Company if, immediately after giving
pro forma effect to the incurrence thereof, the Consolidated Interest
Coverage Ratio of the Company would be equal to or greater than 2.00:1
if such Indebtedness is incurred on or prior to June 1, 1996 or equal
to or greater than 2.25:1 if such Indebtedness is incurred thereafter;
(f) Indebtedness of a Subsidiary of the Company (other than
Ideal Holding Group and its Subsidiaries) issued to and held by the
Company or a Wholly-Owned Subsidiary of the Company or Indebtedness of
the Company to a Wholly-Owned Subsidiary of the Company in respect of
intercompany advances or transactions;
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<PAGE> 67
(g) Indebtedness represented by Interest Rate Protection
Obligations and Currency Hedging Agreements of Ideal Holding Group and
Subsidiaries of Waxman USA or Ideal Holding Group with respect to
Indebtedness of Ideal Holding Group and Subsidiaries of Waxman USA or
Ideal Holding Group (which Indebtedness is otherwise permitted to be
incurred under this covenant) to the extent the notional principal
amount of such Interest Rate Protection Obligations or Currency
Hedging Agreements, as the case may be, does not exceed the principal
amount of the Indebtedness to which such Interest Rate Protection
Obligations or Currency Hedging Agreements, as the case may be,
relate;
(h) working capital Indebtedness of Ideal Holding Group or
its Subsidiaries outstanding from time to time pursuant to the
Canadian Credit Agreement not to exceed at any one time an amount
equal to the sum of 85% of the net book value of the accounts
receivable and 50% of the net book value of the inventory of Ideal, in
each case calculated on a consolidated basis in accordance with GAAP
minus the amount of Indebtedness pursuant to the Canadian Credit
Agreement prepaid with the Net Cash Proceeds from a Company Asset Sale
pursuant to the provisions described under "Disposition of Proceeds of
Asset Sales"; term loan Indebtedness of Ideal Holding Group or its
Subsidiaries outstanding pursuant to the Canadian Credit Agreement,
not to exceed Cdn.$24.5 million outstanding at any one time; and other
Permitted Ideal Indebtedness of Ideal Holding Group or its
Subsidiaries not to exceed $10,000,000 outstanding at any one time;
(i) Indebtedness of Subsidiaries of Waxman USA pursuant to
the Domestic Term Loan not to exceed $15,000,000 principal amount
outstanding at any one time;
(j) any replacements, renewals, refinancings and extensions
of Indebtedness incurred under clauses (a), (c), (d) and (e) above,
provided that (i) except with respect to Permitted Waxman USA
Indebtedness, any such replacement, renewal, refinancing and extension
(w) shall not provide for any mandatory redemption, amortization or
sinking fund requirement in an amount greater than or at a time prior
to the amounts and times specified in the Indebtedness being replaced,
renewed, refinanced or extended, and (x) shall be contractually
subordinated to the Notes at least to the extent, if at all, that the
Indebtedness being replaced, renewed, refinanced or extended is
subordinated to the Notes, (ii) except with respect to Permitted
Waxman USA Indebtedness, any such Indebtedness of any Person must be
replaced, renewed, refinanced or extended with Indebtedness incurred
by such Person or, except with respect to any such Indebtedness of
Ideal Holding Group or a Subsidiary of Ideal Holding Group, by the
Company and (iii) the principal amount of Indebtedness incurred
pursuant to this clause (j) (or, if such Indebtedness provides for an
amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the maturity thereof, the
original issue price of such Indebtedness) shall not exceed the sum of
the principal amount (or, with respect to Indebtedness which provides
for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof,
the accreted value thereof) of Indebtedness so replaced, renewed,
refinanced or extended, plus accrued interest, the amount of any
premium required to be paid in connection with such replacement,
renewal, refinancing or extension pursuant to the terms of such
Indebtedness or the amount of any premium reasonably determined by the
Company as necessary to accomplish such replacement, renewal,
refinancing or extension by means of a tender offer or privately
negotiated purchase and the amount of fees and expenses incurred in
connection therewith; and
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(k) in addition to the items referred to in clauses (a)
through (j) above, (x) Indebtedness and Attributable Indebtedness of
Waxman USA, the Company or Subsidiaries of Waxman USA in an aggregate
principal amount not to exceed $5,000,000 at any one time outstanding,
provided that Indebtedness of Subsidiaries of Waxman USA shall not
exceed at any one time, when added to the principal amount of
Indebtedness outstanding pursuant to the preceding clause (b), the
Permitted Amount and (y) additional Indebtedness and Attributable
Indebtedness of Waxman USA or the Company in an aggregate principal
amount not to exceed $10,000,000 at any one time outstanding.
Limitation on Investments, Loans and Advances. The Indenture will
provide that the Company shall not make and shall not permit any of its
Subsidiaries to make any direct or indirect advance, loan, or other extension
of credit to (including any guarantee of a loan or other extension of credit)
or investment in, capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others or otherwise), or purchase of Capital Stock, bonds,
notes, debentures or other similar instruments issued by, any other Person
(collectively, "Investments"), except: (i) Investments by the Company or a
Subsidiary of the Company in any Wholly-Owned Subsidiary of the Company other
than Ideal Holding Group or a Subsidiary of Ideal Holding Group (including any
such Investment pursuant to which a Person becomes a Wholly-Owned Subsidiary of
the Company); (ii) Investments in the Company or a Wholly-Owned Subsidiary of
the Company by any Subsidiary of the Company; (iii) Investments represented by
receivables created or acquired in the ordinary course of business or the
settlement of such receivables in the ordinary course of business; (iv)
Investments permitted to be made pursuant to the "Limitation on Restricted
Payments" covenant below; (v) Investments represented by advances to employees
of the Company or its Subsidiaries made in the ordinary course of business and
consistent with past business practices; and (vi) Permitted Investments.
Limitation on Restricted Payments. The Indenture will provide that
the Company shall not make, and shall not permit any of its Subsidiaries to
make, directly or indirectly, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment;
(b) at the time of and after giving effect to such Restricted
Payment, the Company could incur at least $1.00 of Indebtedness
pursuant to clause (e) of the "Limitation on Additional Indebtedness"
covenant above; and
(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date through and including the date of such Restricted
Payment does not exceed the sum of (1) 50% of the Company'
Consolidated Net Income (or in the event such Consolidated Net Income
shall be a deficit, minus 100% of such deficit) from and including
April 1, 1994 to and including the last day of the fiscal quarter
immediately preceding the date of such Restricted Payment (the "Base
Period"), (2) 100% of the aggregate Net Proceeds received by the
Company from the issue or sale, during the Base Period, of Capital
Stock (other than Disqualified Stock) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Stock) of the Company which has been so converted, exercised
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or exchanged, as the case may be and (3) in the case of the
disposition of any Investment (other than an Investment which is a
loan) made after the Issue Date or the repayment or disposition of any
loan made after the Issue Date (other than any such Investment or loan
made pursuant to clauses (i), (ii), (iii), (v) and (vi) of the
"Limitation on Investments, Loans and Advances" covenant above) an
amount equal to, with respect to any such Investment (other than an
Investment which is a loan) the lesser of the net cash proceeds
received on disposition with respect to such Investment or the initial
amount of such Investment, in either case, less the cost of
disposition of such Investment and with respect to any such loan, an
amount equal to any cash received on account of (x) the repayment of
principal on such loan or (y) the disposition of such loan, less the
cost of such disposition and not to exceed the principal amount of
such disposed of loan. For purposes of determining the amount
expended for Restricted Payments, cash distributed shall be valued at
the face amount thereof and property other than cash shall be valued
at its Fair Market Value.
The provisions of this covenant shall not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if such
payment would comply with the provisions of the Indenture at the date of the
declaration of such payment and, other than with respect to this "Limitation on
Restricted Payments" covenant, at the date of such payment, (ii) the retirement
of any shares of Capital Stock of the Company or subordinated Indebtedness of
the Company by conversion into, or by an exchange for, shares of Capital Stock
of the Company that are not Disqualified Stock or out of the Net Proceeds of
the substantially concurrent sale (other than to a Subsidiary of the Company)
of other shares of Capital Stock (other than Disqualified Stock) of the
Company, (iii) the redemption or retirement of subordinated Indebtedness of the
Company in exchange for, by conversion into, or out of the Net Proceeds of, a
substantially concurrent sale of subordinated Indebtedness of the Company(other
than to a Subsidiary of the Company) that (x) is contractually subordinated in
right of payment to the Notes at least to the same extent that the Indebtedness
being redeemed or retired is subordinated to the Notes and (y) is permitted to
be incurred in accordance with the covenant described under "Limitation on
Additional Indebtedness" above, (iv) the redemption, repurchase, retirement or
other acquisition of any Senior Subordinated Notes (A) on the Issue Date in
exchange for the Notes and (B) after the Issue Date, out of the proceeds of
Permitted Waxman USA Indebtedness at a purchase price not in excess of the
percentage of principal amount thereof set forth in the indenture related
thereto, plus accrued interest, if any, to the date of redemption and (v) the
purchase or redemption of the Convertible Debentures at a purchase price not in
excess of 101.875% of the principal amount thereof, plus accrued interest, if
any, to the date of redemption.
In determining the amount of Restricted Payments permissible under
clause (c) above, amounts expended pursuant to clauses (i) and (ii) above shall
be included as Restricted Payments.
Limitation on Liens. In addition to the restrictions described below
under "Impairment of Security Interest," the Indenture will provide that the
Company shall not, and shall not permit, cause or suffer any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind
upon any of its property or assets now owned or hereafter acquired by it,
unless the Notes are equally and ratably secured by such Lien simultaneously
with or prior to the creation, incurrence or assumption of such Lien, except
for:
(a) Liens existing as of the Issue Date;
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(b) Permitted Liens;
(c) Liens on the assets and property of the Company and
Waxman USA to secure the payment of all or a part of the purchase
price of assets or property acquired in the ordinary course of
business after the Issue Date, provided that (i) the aggregate
principal amount of Indebtedness secured by such Liens shall not
exceed the lesser of cost or Fair Market Value of the assets or
property so acquired and shall not, in any event, when added to the
amount of Capitalized Lease Obligations and Attributable Indebtedness
permitted to be secured by clause (f) below, exceed $5,000,000, and
(ii) such Liens shall not encumber any assets or property of the
Company or its Subsidiaries other than the assets or property so
acquired and shall attach to such assets or property within 60 days of
the acquisition of such assets or property;
(d) Liens on the assets of Subsidiaries of Waxman USA
securing Indebtedness of Subsidiaries of Waxman USA;
(e) Liens on the assets and Capital Stock of Ideal Holding
Group and its Subsidiaries securing Indebtedness under the Canadian
Credit Agreement;
(f) Liens on the assets and property of the Company and
Waxman USA to secure Capitalized Lease Obligations and Attributable
Indebtedness, provided (i) such Liens do not extend to or cover any
property or assets of the Company or its Subsidiaries other than the
property or assets subject to such Capitalized Lease Obligations and
Attributable Indebtedness, and (ii) the amount of Capitalized Lease
Obligations and Attributable Indebtedness secured by such Liens shall
not, when added to the principal amount of Indebtedness permitted to
be secured by clause (c) above, exceed $5,000,000;
(g) leases and subleases of real property which do not
interfere with the ordinary conduct of the business of the Company or
any of its Subsidiaries, and which are made on customary and usual
terms applicable to similar properties;
(h) Liens securing Indebtedness which is incurred to
refinance Indebtedness which has been secured by a Lien permitted
under the Indenture and is permitted to be refinanced under the
Indenture, provided that such Liens do not extend to or cover any
property or assets of the Company or any of its Subsidiaries not
securing the Indebtedness so refinanced;
(i) Liens on (x) the assets or property of a Subsidiary of
Waxman USA existing at the time such Subsidiary became a Subsidiary of
Waxman USA and not incurred as a result of (or in connection with or
anticipation of) such Subsidiary becoming a Subsidiary of Waxman USA,
provided that such Liens do not extend to or cover any property or
assets of the Company or any of its Subsidiaries (other than the
property or assets of the Subsidiary so acquired that are subject to
such Lien) and (y) assets existing at the time such assets were
acquired by the Company, Waxman USA or a Subsidiary of Waxman USA and
not incurred as a result of (or in connection with or anticipation of)
the acquisition of such assets, provided that such Liens do not extend
to or cover any property or assets of the Company or any of its
Subsidiaries (other than the assets so acquired); and
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(j) Liens on the Capital Stock of Subsidiaries of Waxman USA
to secure the Permitted Waxman USA Indebtedness and/or the Senior
Secured Notes.
Notwithstanding the foregoing, Liens shall be permitted by the
previous clauses (a) through (j) only to the extent that any Indebtedness
secured by such Liens is incurred pursuant to and in accordance with the
provisions of the Indenture.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Indenture will provide that the Company shall not, and shall
not permit any Subsidiary of the Company to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective or enter into any
agreement with any Person that would cause any consensual encumbrance or
restriction of any kind on the ability of any Subsidiary of the Company to (a)
pay dividends, in cash or otherwise, or make any other distributions on its
Capital Stock or any other interest or participation in, or measured by, its
profits owned by, or pay any Indebtedness owed to, the Company or a Subsidiary
of the Company, (b) make any loans or advances to the Company or any Subsidiary
of the Company or (c) transfer any of its properties or assets to the Company
or to any Subsidiary of the Company, except, in each case, for such
encumbrances or restrictions existing under or contemplated by or by reason of
(i) any restrictions existing under the Domestic Credit Facility, the Domestic
Term Loan, the Canadian Credit Agreement and the Senior Secured Indenture as in
effect on the Issue Date, (ii) any restrictions existing under the instruments
evidencing Permitted Waxman USA Indebtedness provided that any such
restrictions permit dividends or distributions up to the Company to satisfy
interest payments on the Notes so long as and to the extent that no default or
event of default occurs thereunder before or after the payment of any such
dividend or distribution, (iii) instruments evidencing indebtedness outstanding
on the Issue Date, (iv) any restrictions existing under any agreement that
refinances, replaces, amends or extends an agreement containing a restriction
permitted by clause (i), (ii) or (iii) above; provided that the terms and
conditions of any such restrictions are not materially less favorable to the
holders of the Notes than those under or pursuant to the agreement being
replaced, amended or extended or the agreement evidencing the Indebtedness
refinanced, and (v) customary non-assignment or sublease provisions of any
agreement of the Company or its Subsidiaries.
Disposition of Proceeds of Asset Sales. The Indenture will provide
that the Company shall not, and shall not permit any of its Subsidiaries to,
make any Asset Sale unless (i) such Asset Sale is for Fair Market Value and
(ii) the net proceeds therefrom consist of at least 75% cash or Cash
Equivalents (with Indebtedness of the Company or its Subsidiaries assumed by
the purchaser being counted as cash for such purposes if the Company and its
Subsidiaries are permanently released from all liability therefor).
The Company shall or shall cause its Subsidiaries to, within five days
of receipt of any Net Cash Proceeds received from an Asset Sale involving the
sale, transfer or other disposition of the Capital Stock of any Person which is
pledged or required to be pledged pursuant to the provisions of the Indenture
to the Trustee for the benefit of the holders of the Notes ("Pledged Collateral
Net Cash Proceeds"), to the extent such Pledged Collateral Net Cash Proceeds
are not to be used to redeem Notes pursuant to and in accordance with the
provisions set forth above in the second paragraph under "Redemption--Optional
Redemption," designate such Pledged Collateral Net Cash Proceeds as Excess
Proceeds subject to disposition as provided below.
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The Company shall or shall cause its Subsidiaries to, within 360 days
of receipt of any Net Cash Proceeds from an Asset Sale (other than any Pledged
Collateral Net Cash Proceeds which shall be disposed of as provided in the
previous paragraph), (x) with respect to any such Net Cash Proceeds from an
Asset Sale involving property or assets of Ideal Holding Group or a Subsidiary
of Ideal Holding Group or the Capital Stock of Ideal Holding Group or a
Subsidiary of Ideal Holding Group, apply such Net Cash Proceeds to reduce
amounts owing under the Canadian Credit Agreement and with respect to any other
Net Cash Proceeds, apply such Net Cash Proceeds to permanently prepay
Indebtedness of the Company which ranks pari passu with the Notes (including
any repurchase of Notes through open market purchases or otherwise) or
Indebtedness of a Subsidiary of the Company, other than Ideal Holding Group and
its Subsidiaries (including any repurchase of Permitted Waxman USA Indebtedness
through open market purchases or otherwise), (y) apply such Net Cash Proceeds
to acquire or construct assets in lines of business related to the Company and
its Subsidiaries' businesses as in existence on the Issue Date, provided that
only Net Cash Proceeds from an Asset Sale involving property or assets of Ideal
Holding Group or a Subsidiary of Ideal Holding Group may be applied to acquire
or construct assets of Ideal Holding Group or a Subsidiary of Ideal Holding
Group or (z) to the extent such Net Cash Proceeds are not applied as provided
in the previous clauses (x) and (y), designate such Net Cash Proceeds as
"Excess Proceeds" subject to disposition as provided below.
When the aggregate amount of unutilized Excess Proceeds equals or
exceeds $5.0 million, the Company shall make an offer to repurchase ("the Asset
Sale Offer") an aggregate principal amount of Notes equal to such Excess
Proceeds at a price in cash equal to 100% of the Accreted Value thereof, plus
accrued and unpaid interest, if any. Upon completion of such offer to
repurchase, the amount of Excess Proceeds shall be reset to zero and any
unutilized Excess Proceeds may be utilized by the Company for any purpose. If
the aggregate principal amount of Notes tendered exceeds the amount of Excess
Proceeds, the Notes tendered will be purchased on a pro rata basis.
The Company will comply with Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable, in the event that an Asset Sale occurs and the
Company is required to repurchase Notes as described above. The Company shall,
subject to the provisions described herein, be required to repurchase all Notes
validly tendered into any Asset Sale Offer and not withdrawn. Any Asset Sale
Offer is required to remain open for at least 20 business days.
Impairment of Security Interest. The Indenture will provide that the
Company shall not, and shall not permit any of its Subsidiaries to, take or
omit to take any action which action or omission might or would have the result
of affecting or impairing the security interest in favor of the Trustee, on
behalf of itself and the holders of the Notes, with respect to the collateral
required to be pledged under the Indenture, and the Company shall not create,
otherwise incur or suffer to exist, in favor of any Person (other than the
Trustee on behalf of itself and the holders of the Notes), any interest
whatsoever in such collateral.
Limitation on Transactions with Affiliates. The Indenture will
provide that the Company shall not, and shall not permit, cause, or suffer any
Subsidiary of the Company to, conduct any business or enter into any
transaction or series of transactions with or for the benefit of any of their
respective Affiliates (each an "Affiliate Transaction"), except in good faith
and on terms that are no less favorable to the Company or such Subsidiary, as
the case may be, than those that could have been obtained in a comparable
transaction on an arm's length basis from a Person not an Affiliate of the
Company or
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such Subsidiary. With respect to any Affiliate Transaction (and each series of
related Affiliate Transactions which are similar or part of a common plan)
involving aggregate payments or other market value in excess of $1,000,000, the
Company shall deliver an officer's certificate to the Trustee certifying that
such Affiliate Transaction (or series of related Affiliate Transactions)
complies with the foregoing provisions and that such Affiliate Transaction (or
series of Affiliate Transactions) was approved by a majority of the Independent
Directors of the Company and the Board of Directors of the Company as a whole.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (x) customary directors' fees and consulting fees, (y)
transactions with or among the Company and its Wholly-Owned Subsidiaries (other
than Ideal Holding Group and its Subsidiaries) or (z) loans or advances by the
Company to Ideal Holding Group, Inc. or its subsidiaries not to exceed Cdn.
$450,000 aggregate principal amount outstanding at any one time.
Limitation on Sale and Leaseback Transactions. The Indenture will
provide that the Company will not, and will not permit any of its Subsidiaries
to, enter into any arrangement with any Person providing for the leasing to the
Company or any such Subsidiary of any real or tangible personal property
(except for leases between or among the Company and any of its Subsidiaries)
which property or similar property has been or is to be sold or transferred by
the Company or such Subsidiary to such Person in contemplation of such leasing
(a "Sale/Leaseback Transaction"). The foregoing will not prohibit
Sale/Leaseback Transactions entered into by the Company, Waxman USA or
Subsidiaries of Waxman USA if (a) the Company, Waxman USA or such Subsidiary of
Waxman USA, as the case may be, would be entitled to incur Indebtedness in an
amount equal to the Attributable Indebtedness with respect to such arrangement
pursuant to the "Limitation on Additional Indebtedness" covenant, (b) the
Company, Waxman USA or such Subsidiary of Waxman USA, as the case may be, could
incur a Lien on the assets subject to such Sale/Leaseback Transaction pursuant
to the "Limitation on Liens" covenant if such Sale/Leaseback Transaction had
been a mortgage and (c) such net proceeds are deemed to be Net Cash Proceeds
for purposes of, and the Company, Waxman USA or such Subsidiary of Waxman USA,
as the case may be, otherwise complies with the provisions of, the "Disposition
of Proceeds of Asset Sales" covenant.
Limitation on Issuances and Sales of Preferred Stock by Subsidiaries.
The Indenture will provide that the Company (i) will not permit any of its
Subsidiaries to issue any Preferred Stock (other than to the Company or a
Wholly-Owned Subsidiary of the Company) and (ii) will not permit any Person
(other than the Company or a Wholly-Owned Subsidiary of the Company) to own any
Preferred Stock of any Subsidiary of the Company. Notwithstanding the
foregoing, Ideal Holding Group and its Subsidiaries may issue Preferred Stock
to Persons other than the Company or a Wholly-Owned Subsidiary of the Company
to the extent that Ideal Holding Group or such Subsidiary of Ideal Holding
Group, as the case may be, could incur Indebtedness in a principal amount equal
to the liquidation preference of such Preferred Stock pursuant to clause (h) of
"Limitation on Additional Indebtedness" above.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Indenture will provide that the Company shall not consolidate with
or merge with or into or sell, assign, convey, lease, transfer or otherwise
dispose of all or substantially all of its properties and assets to any Person
or Persons in a single transaction or through a series of related transactions
or permit any of its Subsidiaries to do any of the foregoing, unless: (a) the
Company shall be the continuing Person or the Person formed by or surviving
such consolidation or merger or the Person to
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which such sale, lease, conveyance, lease, transfer or other disposition is
made (the "surviving entity") shall be a corporation organized and validly
existing under the laws of the United States or any State thereof or the
District of Columbia; (b) the surviving entity shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee, in form and
substance reasonably satisfactory to the Trustee, all of the obligations of the
Company under the Notes and the Indenture; (c) immediately before and
immediately after giving effect to such transaction, or series of transactions
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), no Default or Event of Default shall have occurred and be
continuing; (d) the Company or the surviving entity (in the case of a merger or
consolidation involving the Company or any sale, assignment, conveyance, lease,
transfer or other disposition of all or substantially all of the Company's
properties and assets) shall immediately after giving effect to such
transaction or series of transactions (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions) have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction or series of transactions; (e)
immediately after giving effect to such transaction or series of transactions,
the Company or the surviving entity (in the case of a merger or consolidation
involving the Company or any sale, assignment, conveyance, lease, transfer or
other disposition of all or substantially all of the Company's properties and
assets) could incur $1.00 of Indebtedness pursuant to clause (e) of the
"Limitation on Additional Indebtedness" covenant described above; and (f) the
Company or the surviving entity shall have delivered to the Trustee an
Officer's Certificate stating that such consolidation, merger, sale,
assignment, conveyance, lease, or transfer or other disposition and, if a
supplemental indenture is required in connection with such transaction or
series of transactions, such supplemental indenture complies with this covenant
and that all conditions precedent in the Indenture relating to the transaction
or series of transactions have been satisfied.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(i) default in the payment of any interest on the Notes when
it becomes due and payable and continuance of any such default for a
period of 30 days; or
(ii) default in the payment of the principal of, or premium,
if any, on the Notes when due (including a default in payment upon an
offer to purchase required to be made by the Indenture); or
(iii) default in the performance, or breach, of any covenant
in the Indenture (other than defaults specified in clause (i) or (ii)
above), and continuance of such default or breach for a period of 30
days after written notice to the Company by the Trustee or to the
Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the outstanding Notes; or
(iv) failure by the Company or any Subsidiary (a) to make
any payment when due with respect to any other Indebtedness under one
or more classes or issues of Indebtedness which one or more classes or
issues of Indebtedness are in an aggregate principal amount of
$5,000,000 or more (other than any such failure to make a payment with
respect to the Canadian Credit Agreement or any Permitted Ideal
Indebtedness) or (b) to perform any term,
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covenant, condition, or provision of one or more classes or issues of
Indebtedness which one or more classes or issues of Indebtedness are
in an aggregate principal amount of $5,000,000 or more, which failure,
in the case of this clause (b), results in an acceleration of the
maturity thereof (other than any such failure which results in the
acceleration of the maturity of the Canadian Credit Agreement or any
Permitted Ideal Indebtedness); or
(v) one or more judgments, orders or decrees for the payment
of money in excess of $5,000,000, either individually or in an
aggregate amount, shall be entered against the Company or any of its
Subsidiaries (other than Ideal Holding Group and its Subsidiaries (but
only as long as the Canadian Credit Agreement and any Permitted Ideal
Indebtedness is non-recourse to, and credit support (other than
Permitted Credit Support) is not otherwise required to be provided by,
the Company or its Subsidiaries (other than Ideal Holding Group and
its Subsidiaries))) or any of their respective properties and shall
not be discharged and there shall have been a period of 60 days during
which a stay of enforcement of such judgment or order, by reason of
pending appeal or otherwise, shall not be in effect; or
(vi) certain events of bankruptcy or insolvency with respect
to the Company or any Material Subsidiary (other than Ideal Holding
Group and its Subsidiaries (but only as long as the Canadian Credit
Agreement and any Permitted Ideal Indebtedness is non-recourse to, and
credit support (other than Permitted Credit Support) is not otherwise
required to be provided by, the Company or its Subsidiaries (other
than Ideal Holding Group and its Subsidiaries))) shall have occurred;
or
(vii) the Indenture ceases to be in full force and effect or
ceases to give the Trustee, in any material respect, the Liens,
rights, powers and privileges purported to be created thereby.
If an Event of Default (other than an Event of Default specified in
clause (vi) above with respect to the Company) occurs and is continuing, then
the Trustee or the holders of at least 25% in aggregate principal amount of the
outstanding Notes may, by written notice, and the Trustee upon the request of
the holders of not less than 25% in aggregate principal amount of the
outstanding Notes shall, declare the Accreted Value plus accrued interest (if
any) on all Notes on the date of such declaration to be due and payable
immediately (the "Default Amount"). Upon any such declaration, the Default
Amount shall become due and payable immediately. If an Event of Default
specified in clause (vi) above with respect to the Company occurs and is
continuing, then the Default Amount shall ipso facto become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any holder.
After a declaration of acceleration, the holders of a majority in
aggregate principal amount of outstanding Notes may, by notice to the Trustee,
rescind such declaration of acceleration if all existing Events of Default have
been cured or waived, other than nonpayment of the Default Amount that has
become due solely as a result of such acceleration and if the rescission of
acceleration would not conflict with any judgment or decree. The holders of a
majority in aggregate principal amount of the outstanding Notes also have the
right to waive past defaults under the Indenture except a default in the
payment of the principal of, premium, if any, or interest on any Note, or in
respect of a covenant or a provision which cannot be modified or amended
without the consent of all holders.
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No holder of any of the Notes has any right to institute any
proceeding with respect to the Indenture or any remedy thereunder, unless the
holders of at least 25% in aggregate principal amount of the outstanding Notes
have made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding, the Trustee has failed to institute such proceeding
within 15 days after receipt of such notice and the Trustee has not within such
15-day period received directions inconsistent with such written request by
holders of a majority in aggregate principal amount of the outstanding Notes.
Such limitations do not apply, however, to a suit instituted by a holder of a
Note for the enforcement of the payment of the principal of, premium, if any,
or accrued interest on, such Note on or after the respective due dates
expressed in such Note.
During the existence of an Event of Default, the Trustee is required
to exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
is not under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders unless such holders
shall have offered to such Trustee reasonable indemnity. Subject to certain
provisions concerning the rights of the Trustee, the holders of a majority in
aggregate principal amount of the outstanding Notes have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee.
DEFEASANCE
The Company may at any time terminate all of its obligations with
respect to the Notes ("defeasance"), except for certain obligations, including
those regarding any trust established for a defeasance and obligations to
register the transfer or exchange of the Notes, to replace mutilated,
destroyed, lost or stolen Notes and to maintain agencies in respect of Notes.
The Company may at any time terminate its obligations under certain covenants
set forth in the Indenture, some of which are described under "Certain
Covenants" above, and any omission to comply with such obligations shall not
constitute a Default or an Event of Default with respect to the Notes issued
under the Indenture ("covenant defeasance"). In order to exercise either
defeasance or covenant defeasance, the Company must irrevocably deposit in
trust with the Trustee, for the benefit of the holders of the Notes, money or
U.S. government obligations, or a combination thereof, in such amounts as will
be sufficient to pay the principal of, and premium, if any, and accrued
interest on the Notes to redemption or maturity, as the case may be, and comply
with certain other conditions, including the delivery of opinions as to certain
tax and bankruptcy matters.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further
effect (except as to surviving rights or registration of transfer or exchange
of Notes) as to all outstanding Notes when either (a) all such Notes
theretofore authenticated and delivered (except lost, stolen or destroyed Notes
which have been replaced or paid and Notes for the payment of which money has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust)
have been delivered to the Trustee for cancellation and the Company has paid
all sums payable by it under the Indenture; or (b)(i) all such Notes not
theretofore delivered to the Trustee for cancellation have become due and
payable or have been called for redemption and the Company has
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irrevocably deposited or caused to be deposited with the Trustee as trust funds
in trust for the purpose an amount of money sufficient to pay and discharge the
entire indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal, premium, if any, and accrued interest to the date
of such deposit or redemption, as the case may be; (ii) the Company has paid
all sums payable by it under the Indenture; and (iii) the Company has delivered
irrevocable instructions to the Trustee to apply the deposited money toward the
payment of the Notes at maturity or the redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate and an Opinion
of Counsel stating that all conditions precedent to satisfaction and discharge
have been complied with.
AMENDMENTS AND WAIVERS
From time to time the Company, when authorized by resolution of its
Board of Directors, and the Trustee may, without the consent of the holders of
the Notes, amend, waive or supplement the Indenture or the Notes for certain
specified purposes, including, among other things, curing ambiguities, defects
or inconsistencies, maintaining the qualification of the Indenture under the
Trust Indenture Act, making any change that does not adversely affect the
rights of any holder or mortgaging, pledging, hypothecating or granting a
security interest in favor of the Trustee as additional security for the
payment and performance of the obligations under the Indenture, in any property
or assets, including any which is required to be mortgaged, pledged or
hypothecated, or in which a security interest is required to be granted, to the
Trustee. Other amendments and modifications of the Indenture or the Notes may
be made by the Company and the Trustee with the consent of the holders of not
less than a majority of the aggregate principal amount of the outstanding
Notes; provided, however, that no such modification or amendment may, without
the consent of the holder of each outstanding Note affected thereby, (i) reduce
the principal amount outstanding of, extend the fixed maturity of, or alter the
redemption provisions of, the Notes, (ii) change the currency in which any
Notes or any principal, premium or the accrued interest thereon is payable,
(iii) reduce the percentage in principal amount outstanding of Notes, holders
of which must consent to an amendment, supplement or waiver or consent to take
any action under the Indenture or the Notes, (iv) impair the right to institute
suit for the enforcement of any payment on or with respect to the Notes, (v)
waive a default in payment with respect to the Notes, (vi) reduce the rate or
extend the time for payment of interest on the Notes, (vii) affect the ranking
or security of the Notes, (viii) following the mailing of a Change of Control
Offer, modify the provisions of the Indenture with respect to such a Change of
Control Offer in a manner adverse to any holder or (ix) release any collateral,
except in compliance with the terms of the Indenture.
REGARDING THE TRUSTEE
The Huntington National Bank will serve as Trustee under the Indenture.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Accreted Value" means as of any date prior to June 1, 1999, an amount
per $1,000 principal amount of Notes that is equal to the sum of (a) the
initial offering price ($539.02 per $1,000 principal
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amount of Notes) of such Notes and (b) the portion of the excess of the
principal amount of such Notes over such initial offering price which shall
have been amortized through such date, such amount to be so amortized on a
daily basis and compounded semi-annually on each June 1 and December 1, at the
rate of 12 3/4% per annum from June 1, 1994 through the date of determination
computed on the basis of a 360-day year of twelve 30-day months and as of any
date on or after June 1, 1999, the principal amount of each Note.
"Acquired Indebtedness" means with respect to any Person, Indebtedness
of another Person existing at the time such other Person becomes a Subsidiary
of such Person or is merged with or into such Person or a Subsidiary of or
assumed in connection with an Asset Acquisition by such Person or a Subsidiary
of such Person, including, without limitation, Indebtedness incurred in
connection with, or in anticipation of, such other Person becoming a Subsidiary
of such Person, the acquisition of such other Person or the merger with or into
such other Person.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Acquisition" means (i) any capital contribution (by means of
transfer of cash or other property to others or payment for property or
services for the account or use of others, or otherwise) to, or purchase or
acquisition of Capital Stock in, any other Person by the Company or any of its
Subsidiaries, in either case pursuant to which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall be merged with or
into the Company or any of its Subsidiaries or (ii) any acquisition by the
Company or any of its Subsidiaries of the assets of any Person which constitute
substantially all of the assets of an operating unit or business of such
Person.
"Asset Sale" means with respect to any Person, any direct or indirect
sale, conveyance, transfer, lease or other disposition to any other Person
other than a Subsidiary of such Person (other than, with respect to any Asset
Sale by the Company, Ideal Holding Group or a Subsidiary of Ideal Holding
Group), in one transaction or a series of related transactions, of (i) any
Capital Stock of any Subsidiary of such Person (whether structured as a sale,
issuance or other disposition by such Person or a Subsidiary of such Person) or
(ii) any other property or asset of such Person or any Subsidiary of such
Person (other than cash or Cash Equivalents), in each case other than inventory
in the ordinary course of business and other than isolated transactions which
do not exceed $1,000,000 individually. With respect to the Company and its
Subsidiaries, the term "Asset Sale" shall not include (x) any disposition of
properties and assets of the Company or any Subsidiary that is governed under
and complies with the requirements set forth in "Consolidation, Merger,
Conveyance, Transfer or Lease" above, or (y) any sale by the Company of its
Capital Stock.
"Attributable Indebtedness" means, in respect of a Sale/Leaseback
Transaction, as at the time of determination, the present value (discounted at
the interest rate borne, or to be borne, as the case may be, by the Notes,
compounded annually) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
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"Board Resolution" means with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person,
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Canadian Credit Agreement" means the credit agreement, dated as of
April 20, 1989, between Ideal and Bank of Montreal providing for working
capital and other financing, as the same may at any time be amended, amended
and restated, supplemented or otherwise modified, including any refinancing,
refunding, replacement or extension thereof which provides for working capital
and other financing, whether by the same or any other lender or group of
lenders provided that the Indebtedness represented by such Credit Agreement or
any such amendment, amendment and restatement, supplement or other modification
is non-recourse to, and credit support (other than Permitted Credit Support) is
not otherwise required to be provided by, the Company or its Subsidiaries
(other than Ideal Holding Group and its Subsidiaries).
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of such Person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed) that is required to be
classified and accounted for as a capital lease obligation under GAAP, and, for
the purpose of the Indenture, the amount of such obligation at any date shall
be the capitalized amount thereof at such date, determined in accordance with
GAAP.
"Cash Equivalents" means, at any time (i) any evidence of Indebtedness
with a maturity of 180 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States of
America is pledged in support thereof); (ii) certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) commercial
paper with a maturity of 180 days or less issued by a corporation (except an
Affiliate of the Company) organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by Standard & Poor's
Corporation or at least P-1 by Moody's Investors Service, Inc.; and (iv)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the
date of acquisition; provided, however, that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency.
"Change of Control" means (i) the direct or indirect, sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Company to any Person or entity or group of Persons or entities acting in
concert as a partnership or other group (a "Group of Persons") other than
Permitted Holders, (ii) the merger or consolidation of the Company with or into
another corporation with the effect that the then existing shareholders of the
Company or their Affiliates, together with the Permitted
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Holders, hold less than 50% of the Voting Power of the surviving corporation of
such merger or the corporation resulting from such consolidation and do not
otherwise have the right or ability by contract or otherwise to elect a
majority of the Board of Directors of such surviving corporation, (iii) the
replacement of a majority of the Board of Directors of the Company from the
directors who constituted the Board of Directors on the Issue Date, and such
replacement shall not have been approved by a majority of the Board of
Directors of the Company then still in office who either were (x) members of
the Board of Directors on the Issue Date or (y) whose election as a member of
the Board of Directors was approved in the manner provided in this clause (iii)
or (iv) a Person or Group of Persons shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise, have
become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company representing 35% or more of the
Voting Power of the Company and, at such time Permitted Holders are not the
beneficial owners (as so defined) of a greater percentage of such Voting Power
and do not otherwise have the right or ability by contract or otherwise to
elect a majority of the Board of Directors of the Company.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period increased
(to the extent deducted in determining Consolidated Net Income) by the sum of
the following for such period: (i) all income taxes paid or accrued according
to GAAP for such period (other than income taxes attributable to extraordinary,
unusual or non-recurring gains); (ii) Consolidated Interest Expense; (iii)
depreciation; (iv) amortization including, without limitation, amortization of
capitalized debt issuance costs; and (v) any other non-cash charges (excluding
any non-cash charge to the extent that it requires an accrual of or a reserve
for cash disbursements for any future period).
"Consolidated Interest Coverage Ratio" means, with respect to any
Person, the ratio of (i) Consolidated Cash Flow of such Person for the four
full fiscal quarters for which financial statements are available that
immediately precede the date of the transaction or other circumstances giving
rise to the need to calculate the Consolidated Interest Coverage Ratio (the
"Transaction Date") to (ii) Consolidated Interest Expense of such Person and
the aggregate amount of dividends or other distributions declared or paid on
Capital Stock (other than Common Stock) of such Person and its Subsidiaries, in
each case for such four full fiscal quarter period. For purposes of this
definition, if the Transaction Date occurs prior to the date on which such
Person's consolidated financial statements for the four full fiscal quarters
subsequent to the Issue Date are first available, "Consolidated Cash Flow" and
the items referred to in the preceding clause (ii) shall be calculated on a pro
forma basis as if the Reorganization had taken place on the first day of such
four full fiscal quarter period for which financial statements are available
that immediately precede the Transaction Date. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
Cash Flow" and the items referred to in the preceding clause (ii) shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to (i) the incurrence or retirement of any Indebtedness of such
Person or any of its Subsidiaries at any time during the period (the "Reference
Period") (A) commencing on the first day of the four full fiscal quarter period
for which financial statements are available that precedes the Transaction Date
and (B) ending on and including the Transaction Date, including, without
limitation, the incurrence of the Indebtedness giving rise to the need to make
such calculation, as if such incurrence or retirement occurred on the first day
of the Reference Period; provided, that if such Person or any of its
Subsidiaries directly or indirectly guarantees Indebtedness of a third Person,
the above clause shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or Subsidiary had directly incurred such
guaranteed Indebtedness and (ii) any Asset Sales or Asset
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Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of such Person or any of its
Subsidiaries (including any Person who becomes a Subsidiary as a result of the
Asset Acquisition) incurring Acquired Indebtedness) occurring during the
Reference Period and any retirement of Indebtedness in connection with such
Asset Sales, as if such Asset Sale or Asset Acquisition and/or retirement
occurred on the first day of the Reference Period. Furthermore, in calculating
the denominator (but not the numerator) of this "Consolidated Interest Coverage
Ratio," (1) interest on Indebtedness determined on a fluctuating basis as of
the Transaction Date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness actually incurred on the Transaction Date may
optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate based upon a factor of a prime or similar rate shall be deemed to
have been in effect; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Rate Protection Obligations, shall
be deemed to have accrued at the rate per annum resulting after giving effect
to the operation of such agreements.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (a) the cash and non-cash interest
expense of such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP consistently applied (net of any
interest income), including, without limitation, (w) any amortization of debt
discount, (x) the net cost under Interest Rate Protection Obligations and
Currency Hedging Agreements insofar as they relate to interest, (y) the
interest portion of any deferred payment obligation and (z) all accrued
interest, and (b) the aggregate amount of the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the "other Person")
in which the Person in question or one of its Subsidiaries has a joint interest
with a third party (which interest does not cause the Net Income of such other
Person to be consolidated into the Net Income of the Person in question in
accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or the Subsidiary,
(b) the Net Income of any Subsidiary of the Person in question that is subject
to any restriction or limitation on the payment of dividends or the making of
other distributions shall be excluded to the extent of such restriction or
limitation, (c)(i) the Net Income (or loss) of any Person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition
and (ii) any net gain or loss resulting from an Asset Sale by the Person in
question or any of its Subsidiaries shall be excluded, and (d) extraordinary
gains and losses and any one-time increase or decrease to Net Income recorded
because of the adoption of new accounting policies, practices or standards
required or permitted by generally accepted accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person at any date
of determination, the consolidated equity represented by the shares of such
Person's Capital Stock (other than Disqualified Stock) at such date, as
determined on a consolidated basis in accordance with generally accepted
accounting principles.
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"Consumer Products" means Waxman Consumer Products Group Inc., a
Delaware corporation.
"Convertible Debentures" means the 9 1/2% Convertible Subordinated
Debentures of the Company.
"Currency Hedging Obligations" means with respect to any Person, the
obligations and/or rights of such Person under currency hedging arrangements
designed to protect such Person against currency fluctuations.
"Default Amount" shall have the meaning set forth under "Events of
Default."
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Notes.
"Domestic Credit Facility" means the credit agreement to be entered
into between Waxman USA, certain of the Subsidiaries of Waxman USA, the lenders
listed therein and Citicorp USA, Inc., as agent, providing for working capital
and other financing, as the same may at any time be amended, amended and
restated, supplemented or otherwise modified, including any refinancing,
refunding, replacement or extension thereof which provides for working capital
and other financings, whether by the same or any other lender or group of
lenders.
"Domestic Term Loan" means the term loan agreement to be entered into
between Waxman USA, certain of the Subsidiaries of Waxman USA and Citicorp USA
as the same may at any time be amended, amended and restated, supplemented or
otherwise modified, including any refinancing, refunding, replacement or
extension thereof whether by the same or any other lender or group of lenders
(including any Permitted Waxman USA Indebtedness).
"Fair Market Value" or "fair value" means, with respect to any asset
or property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. With
respect to any Person Fair Market Value shall be determined by the Board of
Directors of such Person (and with respect to the Company or a Subsidiary of
the Company, a majority of the Independent Directors of the Company) acting in
good faith and shall be evidenced by a Board Resolution delivered to the
Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination.
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"Ideal" means Ideal Plumbing Group Inc., a corporation organized and
existing under the laws of Quebec.
"Ideal Holding Group" means Ideal Holding Group, Inc., a Delaware
corporation.
"Indebtedness" means, with respect to any Person, without duplication,
(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 or letter of credit (including purchase money
obligations but excluding undrawn documentary letters of credit for trade
payables arising in the ordinary course of business) or (C) for the payment of
money relating to a Capitalized Lease Obligation or other obligation relating
to the deferred purchase price of property (other than trade payables or
accrued liabilities arising in the ordinary course of business); (ii) any
liability of others of the kind described in the preceding clause (i) which the
Person has guaranteed 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 (the amount of such
obligation being deemed to be the lesser of the fair value of such property or
asset or the amount of the obligation so secured); and (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).
"Independent Director" means any director that (i) is not and has not
been an officer or employee of the Company or any of its Affiliates, (ii) does
not have any relationship that, in the opinion of the Board of Directors of the
Company (exclusive of any such Independent Director), would interfere with
his/her exercise of independent judgment in carrying out the responsibilities
of director and (iii) with respect to any transaction or series of related
transactions, does not have any material direct or indirect financial interest
in or with respect to such transaction or series of related transactions.
"Interest Rate Protection Obligations" means the obligations and/or
rights of any Person pursuant to any arrangement with any other Person,
designed to protect such Person against fluctuations in interest rates,
whereby, directly or indirectly, such Person is entitled to receive from time
to time periodic payments calculated by applying either a floating or a fixed
rate of interest on a stated notional amount in exchange for periodic payments
made by such Person calculated by applying a fixed or a floating rate of
interest on the same notional amount and shall include without limitation,
interest rate swaps, caps, floors, collars and similar agreements.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, claim, hypothecation, assignment for security, deposit
arrangement or preference or other security agreement of any kind or nature
whatsoever. For purposes of the Indenture, a Person shall be deemed to own
subject to a Lien any property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Material Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which would be a "significant subsidiary" pursuant to
Article 1-02 of Regulation S-X.
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"Net Cash Proceeds" means, with respect to any Asset Sale the proceeds
thereof in the form of cash or Cash Equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents net of (i) brokerage commissions and other reasonable fees and
expenses (including fees and expenses of counsel and investment bankers)
related to such Asset Sale; (ii) provisions for all taxes payable within one
year as a result of such Asset Sale; (iii) payments made to retire Indebtedness
secured by the assets subject to such Asset Sale to the extent required
pursuant to the terms of such Indebtedness; (iv) appropriate amounts to be
provided by the Company or any Subsidiary of the Company, as the case may be,
as a reserve, in accordance with GAAP, against any liabilities associated with
such Asset Sale and retained by the Company or any of its Subsidiaries, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, provided, however, that the amount of any such reserve at such
time that such amount is no longer required to be provided as a reserve in
accordance with GAAP and is not applied to the liability for which such reserve
was established shall be deemed Net Cash Proceeds; and (v) any amount required
to be paid to any Person owning a beneficial interest in the property or assets
sold in an amount proportionate to such beneficial interest.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
the Company, the aggregate net cash proceeds received by the Company after
payment of expenses, commissions and the like incurred in connection therewith,
(b) in the case of the issuance of any Indebtedness by the Company, the
aggregate net cash proceeds received by the Company, after payment of expenses,
commissions and the like incurred in connection therewith or (c) in the case of
any exchange, exercise, conversion or surrender of outstanding securities of
any kind of the Company for or into shares of Capital Stock of the Company
which is not Disqualified Stock, the net cash proceeds received by the Company
upon such exchange, exercise, conversion or surrender (plus, with respect to
the issuance of any such securities after the Issue Date, the net cash proceeds
received by such Person upon the issuance of such securities), less any and all
payments made to the holders, e.g., on account of fractional shares, and less
all expenses, commissions and the like incurred by the Company in connection
therewith).
"Permitted Credit Support" means (x) any pledge of the Capital Stock
of Ideal Holding Group or a Subsidiary of Ideal Holding Group or (y) loans or
advances by the Company to Ideal Holding Group or its Subsidiaries not to
exceed Cdn.$450,000 aggregate principal amount outstanding at any one time.
"Permitted Holders" means Armond Waxman, Melvin Waxman, trusts for the
benefit of any of Armond Waxman, Melvin Waxman or members of their families,
the heirs of or administrators or executors for the respective estates of,
Armond Waxman or Melvin Waxman or any Person, entity or group of Persons
controlled by any of the foregoing.
"Permitted Ideal Indebtedness" means indebtedness which is
non-recourse to and for which credit support (other than Permitted Credit
Support) is not otherwise provided by the Company or its Subsidiaries (other
than Ideal Holding Group or any of its Subsidiaries).
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"Permitted Investments" means (i) obligations of the United States
government due within one year; (ii) certificates of deposit or Eurodollar
deposits due within one year with a commercial bank having capital funds of at
least $500,000,000 or more; (iii) commercial paper rated at least A-1 by
Standard & Poor's Corporation or at least P-1 by Moody's Investors Service,
Inc.; (iv) debt of any state or political subdivision that is rated among the
two highest rating categories obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc. and is due within one year; (v)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the
date of acquisition; provided, however, that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency; (vi) Investments represented by Interest Rate
Protection Obligations and Currency Hedging Agreements; and (vii) Investments
by the Company in Ideal Holding Group or a Subsidiary of Ideal Holding Group
not to exceed an aggregate of Cdn. $450,000 outstanding at any one time.
"Permitted Liens" means, with respect to any Person, any Lien arising
by reason of (a) any judgment, decree or order of any court, so long as such
Lien is being contested in good faith and is adequately bonded, and any
appropriate legal proceedings which may have been duly initiated for the review
of such judgment, decree or order shall not have been finally terminated or the
period within which such proceedings may be initiated shall not have expired;
(b) taxes, assessments, governmental charges or claims not yet delinquent or
which are being contested in good faith; (c) security for payment of workers'
compensation or other insurance or social security legislation; (d) security
for the performance of tenders, contracts (other than contracts for the payment
of money) or leases (excluding any Capitalized Lease Obligations); (e) deposits
to secure public or statutory obligations, or in lieu of surety, performance or
appeal bonds, entered into in the ordinary course of business; (f) Liens
arising by operation of law in favor of carriers, warehousemen, landlords,
mechanics, materialmen, laborers, employees or suppliers, incurred in the
ordinary course of business for sums which are not yet delinquent or are being
contested in good faith by negotiations or by appropriate proceedings which
suspend the collection thereof; (g) easements, rights-of-way, zoning and
similar covenants and restrictions and other similar encumbrances or title
defects which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property subject
thereto or materially interfere with the ordinary conduct of the business of
the Company or any of its Subsidiaries and (h) Liens arising in the ordinary
course of business in favor of custom and revenue authorities to secure payment
of custom duties.
"Permitted Waxman USA Indebtedness" means Indebtedness of Waxman USA
the proceeds of which are used to refinance Senior Secured Notes, Senior
Subordinated Notes or the Domestic Term Loan (including the payment of any
related fees and expenses and the amount of accrued interest on such
Indebtedness refinanced and the amount of any premium required to be paid in
connection with the refinancing of such Indebtedness).
"Person" means any individual, corporation, partnership, joint stock
company, trust, unincorporated organization or government or agency or
political subdivision thereof.
"Public Equity Offering" means the offer and sale to the public of
shares of any class of the Capital Stock (other than Disqualified Stock) of the
Company or any Subsidiary of the Company
- 62 -
<PAGE> 86
pursuant to a registration statement declared effective by the Commission after
the Issue Date (or with respect to the Capital Stock (other than Disqualified
Stock) of Ideal Holding Group or a Subsidiary of Ideal Holding Group, pursuant
to a prospectus or other comparable document declared effective or otherwise
approved by comparable Canadian provincial security authorities after the Issue
Date) and pursuant to which the Company or such Subsidiary, as the case may be,
receives net cash proceeds of not less than $15,000,000.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution on Capital Stock of the
Company or any Subsidiary of the Company or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any Subsidiary of the Company (other than (x) dividends or distributions
payable solely in Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Disqualified
Stock), and (y) in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly-Owned Subsidiary of the
Company), (ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its Subsidiaries, (iii) the
making of any principal payment on, or the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, of any
Indebtedness of the Company which is subordinated in right of payment to the
Notes (other than Indebtedness of the Company acquired in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) and (iv) the
making of any Investment other than pursuant to clause (i), (ii), (iii), (v) or
(vi) of the "Limitation on Investments, Loans and Advances" covenant above.
"Senior Secured Notes" means the Company's 12 1/4% Fixed Rate Senior
Secured Notes due September 1, 1998 and Floating Rate Senior Secured Notes due
September 1, 1998.
"Senior Subordinated Notes" means the 13 3/4% Senior Subordinated
Notes due June 1, 1999 of the Company.
"Subsidiary" means with respect to any Person (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by one or more Subsidiaries of such Person or by such Person
and one or more Subsidiaries of such Person or (ii) any other Person (other
than a corporation) in which such Person, one or more Subsidiaries of such
Person or such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination thereof, has at least a majority
ownership interest.
"Voting Power" means with respect to any Person, the power under
ordinary circumstances, pursuant to the ownership of shares of any class or
classes of Capital Stock, to elect at least a majority of the board of
directors, managers or trustee of such Person (irrespective of whether or not,
at the time, stock of any other class or classes shall have, or might have,
voting power by reason of the happening of any contingency).
"Waxman USA" means Waxman USA Inc., a Delaware corporation.
- 63 -
<PAGE> 87
"Wholly-Owned Subsidiary" means with respect to any Person any
Subsidiary of such Person, 100% of the Capital Stock of which (other than
shares of Capital Stock representing any director's qualifying shares or
investments by foreign nationals mandated by applicable law) is owned by such
Person, by a Wholly-Owned Subsidiary of such Person or by such Person and one
or more Wholly-Owned Subsidiaries of such Person.
"WOC" means WOC Inc., a Delaware corporation.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain income tax consequences is based
on laws, regulations (including Treasury Regulations published in the Federal
Register on February 2, 1994 interpreting the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), that govern the inclusion of
original issue discount ("OID") in income), rulings and decisions now in
effect, all of which are subject to change, possibly on a retroactive basis.
The discussion does not cover all aspects of federal taxation that may be
relevant to, or the actual tax effect that any of the matters described herein
will have on, particular Holders, and does not address state, local, foreign or
other tax laws. Certain Holders (including insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign corporations,
nonresident aliens, taxpayers subject to the alternative minimum tax and
persons in special situations such as those that hold the Old Notes or New
Notes as part of a straddle) may be subject to special rules not discussed
below. The description assumes that Holders of the New Notes will hold the New
Notes as "capital assets" (generally, property held for investment purposes)
within the meaning of Section 1221 of the Code. EACH HOLDER SHOULD CONSULT ITS
OWN TAX ADVISOR IN DETERMINING THE FEDERAL, STATE, LOCAL AND ANY OTHER TAX
CONSEQUENCES TO THE PARTICULAR HOLDER OF THE EXCHANGE OF OLD NOTES FOR NEW
NOTES AND THE OWNERSHIP AND DISPOSITION OF THE NEW NOTES.
EXCHANGE OF NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an exchange or other taxable event for federal income
tax purposes because, under regulations proposed by the United States Treasury,
the New Notes should not be considered to differ materially in kind or extent
from the Old Notes. Rather, the New Notes received by a Holder should be
treated as a continuation of the Old Notes in the hands of such Holder. As a
result, there should be no federal income tax consequences to Holders who
exchange Old Notes for New Notes pursuant to the Exchange Offer and any such
Holder should have the same adjusted basis and holding period in the New Notes
as it had in the Old Notes immediately before the exchange.
HOLDING AND DISPOSITION OF NOTES
Original Issue Discount
The Old Notes were issued on May 20, 1994 and have OID for U.S.
federal income tax purposes. Because the New Notes will be treated as a
continuation of the Old Notes, which were issued with OID, the New Notes will
have OID for U.S. federal income tax purposes, and Holders of the New Notes
will be required to recognize such OID as ordinary income in advance of the
receipt of the cash payments to which such income is attributable.
- 64 -
<PAGE> 88
The total amount of OID with respect to a New Note will be equal to
the excess of the "stated redemption price at maturity" of such Note over its
"issue price." The "stated redemption price at maturity" of a New Note will be
equal to the sum of all payments required to be made thereunder. The Old Notes
and Warrants were issued in units consisting of $1,000 principal amount of Old
Notes and 59 Warrants. Although not free from doubt, it appears likely that
the Old Notes (and accordingly, the New Notes) will be treated as publicly
traded. As a result, the issue price of a unit will be the fair market value
of the unit on the first date that a substantial amount of the units were
issued. The "issue price" and initial tax basis of the New Notes will be equal
to the portion of the issue price of the unit allocated to the Old Note. The
issue price of each unit was allocated between the Warrants and the Old Notes.
The amounts so allocated represent the Company's belief as to the relative fair
market value of the Old Notes and the Warrants on the date such allocation was
made ($512.07 per $1,000 principal amount at maturity of the Old Notes and
$0.8475 per Warrant). This allocation generally is binding on Holders of the
Old Notes and/or the New Notes, although the Internal Revenue Service may take
the position that these amounts do not accurately reflect the fair market
values of the Old Notes and Warrants. In such case, the total amount of OID on
the New Notes may be greater or less than the amount of OID thereon based on
the Company's allocation.
Each Holder of a New Note will be required to include in gross income
for any taxable year the sum of the daily portions of OID attributable to each
day during the taxable year on which such Holder holds the New Note, including
the purchase date and excluding the disposition date. A daily portion is
determined by allocating to each day a ratable portion of the OID allocable to
the accrual period in which such day is included. The amount of OID allocable
to each full accrual period is the product of the adjusted issue price of the
New Note at the beginning of such accrual period and the yield to maturity of
the New Note (as determined by semi-annual compounding). The adjusted issue
price of a New Note at the beginning of an accrual period is equal to the issue
price of the New Note, increased by any OID accrued in prior accrual periods
and decreased by any cash payment received with respect to the New Note on or
before the first day of the accrual period.
A subsequent purchaser of a New Note also will be required to include
annual accruals of OID in gross income for federal income tax purposes in
accordance with the rules described above, but the amount of the OID or
ordinary income required to be reported may vary depending upon the amount paid
for the debt instrument by the subsequent purchaser. See "Market Discount" and
"Acquisition Premium" below.
Disposition of New Notes. A Holder's tax basis in a New Note will be
increased by the amount of OID that is includible in such Holder's income. If
a New Note is redeemed, sold or otherwise disposed of, a Holder thereof
generally will recognize gain or loss equal to the difference between the
amount realized on the redemption, sale or other disposition of such New Note
and such Holder's adjusted basis in the New Note. Subject to the market
discount rules discussed below, such gain or loss will be capital gain or loss
and will be long-term capital gain or loss if, on the date of the sale, the
Holder has a holding period for the New Notes (which would include the holding
period of the Old Notes) of more than one year.
Market Discount. Under the market discount rules of the Code, an
exchanging Holder (other than a Holder who made the election described below)
who purchased an Old Note with "market discount" (generally defined as the
amount by which the adjusted issue price of the Old Note on the Holder's date
of purchase exceeds the Holder's purchase price) will be required to treat any
gain
- 65 -
<PAGE> 89
recognized on the redemption, sale or other disposition of the New Note
received in the exchange as ordinary income to the extent of the market
discount that accrued during the holding period of such New Note (which would
include the holding period of the Old Note). Further, the Code requires that
partial principal payments on a market discount bond be included in gross
income to the extent that such payments do not exceed the accrued market
discount on such bond. A Holder who has elected under applicable Code
provisions to include market discount in income annually as such discount
accrues will not, however, be required to treat any gain recognized as ordinary
income under these rules. Holders should consult their tax advisors as to the
portion of any gain that would be taxable as ordinary income under these
provisions. Subsequent holders who acquire New Notes at a market discount also
will be subject to these rules.
Acquisition Premium. An exchanging Holder who acquired an Old Note
(or a subsequent Holder of a New Note who acquires such New Note) at a cost in
excess of its adjusted issue price (i.e., its original issue price increased by
the portion of OID previously includable in the gross income of all prior
holders, determined without regard to any reduction of OID attributable to any
acquisition premium paid by prior holders, and decreased by all payments
previously made thereon) immediately after such acquisition, but less than or
equal to its stated redemption price at maturity, will be considered to have
purchased such Note at an "acquisition premium." Under the acquisition premium
rules contained in the Code, such Holder generally would be entitled to a
reduction in the amount of interest otherwise includable in income with respect
to such Note.
High Yield Discount Obligations
The deduction by the Company of OID with respect to the New Notes will
be limited by Section 163(e)(5) of the Code if the New Notes are "high yield
discount obligation," as defined in Section 163(i) of the Code. The New Notes
will be characterized as high yield discount obligations if the yield to
maturity on the New Notes equals or exceeds the sum of the AFR (a rate
published by the IRS each month for application during the following calendar
month) in effect at the time of issuance of the Old Notes, plus five percentage
points. For debt instruments issued in May 1994, the AFR was equal to 7.04%.
If the New Notes are characterized as high yield discount obligations, then (i)
if the yield to maturity of the New Notes exceeds the sum of the AFR plus six
percentage points, the product of the total original issue discount under the
New Notes and the ratio of (x) the excess of the yield to maturity of the New
Notes over the sum of the AFR plus six percentage points to (y) the yield to
maturity of the New Notes will not be deductible by Waxman and generally will
be treated as a dividend distribution solely for purposes of the dividends
received deduction pursuant to Section 243 of the Code with respect to holders
that are United States corporations and (ii) the remainder of the original
issue discount on the New Notes will not be deductible by the Company until
paid.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of principal (including amounts in respect of
OID), premium, and any accrued interest with respect to a New Note, and the
proceeds of a sale of a New Note within the United States will be subject to
information reporting, and possibly to "backup withholding" at a rate of 31% if
the Holder fails to provide its taxpayer identification number on Service Form
W-9, or otherwise fails to establish an exemption from backup withholding.
- 66 -
<PAGE> 90
Each New Note will contain a legend stating that it has Original Issue
Discount and setting forth the issue date, the issue price, the amount of
Original Issue Discount and the yield to maturity thereon. The Company will
report annually to the Service and to each Holder (other than Holders not
subject to the information reporting requirements), the amount of Original
Issue Discount accrued with respect to such New Note and any interest paid with
respect to the Old Notes.
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange pursuant to
the Exchange Offer.
PLAN OF DISTRIBUTION
A broker-dealer holding Old Notes may participate in the Exchange
Offer provided that it acquired the Old Notes for its own account as a result
of market-making or other trading activities. Each broker-dealer that receives
New Notes for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. For a period
of 180 days after the Expiration Date, the Company will make this Prospectus,
as amended or supplemented, available to any broker-dealer for use in
connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes
by broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of
the Act and any profit on any such resale of New Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Act.
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<PAGE> 91
LEGAL MATTERS
The legality of the securities covered by this Prospectus has been
passed upon by Shereff, Friedman, Hoffman & Goodman, New York, New York,
counsel to the Company.
EXPERTS
The audited consolidated financial statements of the Company as of
June 30, 1993 and 1994 and for each of the three years in the period ended June
30, 1994 appearing in this Prospectus and elsewhere in this Registration
Statement have been audited by Arthur Andersen LLP, 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.
- 68 -
<PAGE> 92
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, 1994 and 1993, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended June 30, 1994. 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, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1994, 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 LLP
Cleveland, Ohio,
August 23, 1994.
F-1
<PAGE> 93
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND 1993
(In Thousands)
ASSETS
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,026 $ 406
Accounts receivable, net 37,216 36,272
Inventories 80,969 72,942
Prepaid expenses 4,987 4,987
Net assets (liabilities) of
discontinued operations (421) 29,156
Net assets held for sale - 3,086
-------- --------
Total current assets 124,777 146,849
-------- --------
PROPERTY AND EQUIPMENT:
Land 1,461 1,420
Buildings 12,421 11,213
Equipment 20,655 18,824
-------- --------
34,537 31,457
Less accumulated depreciation and
amortization (17,163) (14,784)
-------- --------
Property and equipment, net 17,374 16,673
-------- --------
COST OF BUSINESSES IN EXCESS OF
NET ASSETS ACQUIRED, NET 24,774 25,498
OTHER ASSETS 16,118 9,505
-------- --------
$183,043 $198,525
======== ========
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
</TABLE>
F-2
<PAGE> 94
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND 1993
(In Thousands Except Per Share Data)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 4,144 $ 2,493
Accounts payable 20,427 19,934
Accrued liabilities 6,507 6,692
-------- --------
Total current liabilities 31,078 29,119
-------- --------
LONG-TERM DEBT, NET OF CURRENT PORTION 54,063 22,567
SENIOR SECURED NOTES 38,675 38,563
SENIOR SECURED DEFERRED COUPON NOTES 48,031 -
SUBORDINATED DEBT 48,905 100,780
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value per share:
Authorized and unissued 2,000 shares - -
Common stock, $.01 par value per share:
Authorized 22,000 shares;
Issued 9,490 in 1994 and 9,424 in 1993 95 94
Class B common stock, $.01 par value per share:
Authorized 6,000 shares;
Issued 2,222 in 1994 and 2,238 in 1993 23 23
Paid-in capital 21,098 18,467
Retained deficit (58,325) (6,437)
-------- --------
(37,109) 12,147
Cumulative currency translation adjustments (600) (4,651)
-------- --------
Total stockholders' equity (37,709) 7,496
-------- --------
$183,043 $198,525
======== ========
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these balance sheets.
</TABLE>
F-3
<PAGE> 95
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net sales $215,112 $204,778 $197,738
Cost of sales 140,011 137,244 127,115
-------- -------- --------
Gross Profit 75,101 67,534 70,623
Selling, general and administrative expenses 56,888 56,081 51,824
Restructuring and other non-recurring charges - 6,762 3,900
-------- -------- --------
Operating income 18,213 4,691 14,899
Interest expense (net of interest income
of $14, $5 and $978) 21,334 20,365 20,025
-------- -------- --------
Loss from continuing operations before
income taxes, extraordinary charge and
cumulative effect of accounting change (3,121) (15,674) (5,126)
Provision (benefit) for income taxes 351 216 (768)
-------- -------- --------
Loss from continuing operations before
extraordinary charge and cumulative
effect of accounting change (3,472) (15,890) (4,358)
Discontinued operations - Ideal
Income (loss) from discontinued
operations, net of taxes (3,249) (11,240) 1,146
Loss on disposal, without tax benefit (38,343) - -
-------- -------- --------
Loss before extraordinary charge and
cumulative effect of accounting change (45,064) (27,130) (3,212)
Extraordinary charge, early retirement
of debt (net of tax benefit in 1992) (6,824) - (1,186)
Cumulative effect of change in accounting
for warehouse and catalog costs,
without tax benefit - (2,110) -
-------- -------- --------
Net loss $(51,888) $(29,240) $ (4,398)
======== ======== ========
Primary and fully diluted earnings
(loss) per share:
From continuing operations $ (.30) $ (1.36) $ (.44)
Discontinued operations:
Income (loss) from discontinued operations (.28) (.97) .11
Loss on disposal (3.28) - -
Extraordinary charge (.58) - (.12)
Cumulative effect of accounting change - (.18) -
-------- -------- --------
Net loss per share $ (4.44) $ (2.51) $ (.45)
======== ======== ========
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
F-4
<PAGE> 96
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
CUMULATIVE
CLASS B RETAINED CURRENCY
COMMON COMMON PAID-IN EARNINGS TRANSLATION
STOCK STOCK CAPITAL (DEFICIT) ADJUSTMENTS
----- ----- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1991 $ 72 $ 23 $ 7,684 $ 29,334 $ 953
Net loss (4,398)
Cash dividends:
-- $.12 per common share
and Class B share (1,201)
Issuance of common stock 22 9,763
Stock options exercised 20
Stock warrants issued 1,000
Currency translation
adjustments (2,445)
----- ----- ------- -------- -------
BALANCE, JUNE 30, 1992 $ 94 $ 23 $18,467 $23,735 $(1,492)
Net loss (29,240)
Cash dividends:
-- $.08 per common share
and Class B share (932)
Currency translation
adjustments (3,159)
----- ----- ------- -------- -------
BALANCE, JUNE 30, 1993 $ 94 $ 23 $18,467 $(6,437) $(4,651)
Net loss (51,888)
Currency translation
adjustments (2,368)
Elimination of currency translation
adjustment relating to discontinued
operation (Ideal) 6,419
Contribution to Profit
Sharing Plan 1 131
Stock warrants issued 2,500
----- ----- ------- -------- -------
BALANCE, JUNE 30, 1994 $ 95 $ 23 $21,098 $(58,325) $ (600)
===== ===== ======= ======== =======
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements
</TABLE>
F-5
<PAGE> 97
<TABLE>
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS)
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
CASH FROM (USED FOR):
OPERATIONS:
Loss from continuing operations $ (3,472) $ (15,890) $ (4,358)
Adjustments to reconcile loss
from continuing operations to
net cash used for continuing
operations:
Non-cash interest 531 - -
Restructuring costs - 6,762 -
Loss on sale of investments - - 3,900
Depreciation and amortization 7,478 8,932 6,525
Changes in assets and liabilities:
Accounts receivable (944) (1,666) (1,841)
Inventory (10,109) 82 (15,664)
Prepaid expenses - 2,276 (2,285)
Accounts payable 493 (8,337) 11,050
Accrued liabilities (185) (1,691) (878)
------- ------- -------
Net cash used for continuing
operations (6,208) (9,532) (3,551)
Earnings (loss) from
discontinued operations (41,592) (11,240) 1,146
Other, net 4,054 (3,159) (2,444)
Change in net assets of
discontinued operations 29,577 13,027 6,646
------- ------- -------
Net cash provided by (used for)
operations (14,169) (10,904) 1,797
------- ------- -------
INVESTMENTS:
Proceeds from sale of business 3,006 - -
Capital expenditures, net (3,437) (1,336) (3,193)
Change in other assets (1,298) (1,826) (5,922)
Proceeds from sale of investments - - 4,386
Contribution of stock to
profit sharing plan 132 - -
------- ------- -------
Net cash used for investments (1,597) (3,162) (4,729)
------- ------- -------
FINANCING:
Net borrowings under
credit agreements 18,589 15,770 6,393
Repayments of long-term debt (442) (560) (508)
Borrowings (repayment) of domestic
term loan 15,000 - (60,000)
Proceeds from issuance of debt, net - - 48,500
Repurchase of debt (1,875) - (12,878)
Debt restructuring (13,886) - -
Proceeds from issuance of stock - - 9,805
Dividends paid - (932) (1,201)
------- ------ ------
Net cash provided by
(used for) financing 17,386 14,278 (9,889)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 1,620 212 (12,821)
BALANCE, BEGINNING OF PERIOD 406 194 13,015
------- ------- -------
BALANCE, END OF PERIOD $ 2,026 $ 406 $ 194
======= ======= =======
<FN>
The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
F-6
<PAGE> 98
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN THOUSANDS)
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 fiscal 1993 and 1992 amounts have been reclassified to conform with
the fiscal 1994 presentation, including a restatement to reflect the
discontinued operations discussed in Note 2.
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.
During fiscal 1994, the Company restructured (the "Corporate
Restructuring") its domestic operations such that the Company is now 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 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 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 Inc. ("Barnett") and Consumer Products. On
May 20, 1994, the Company completed the Corporate Restructuring 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. This restructuring
was accounted for based upon each entities' historical carrying amounts with no
impact on the accompanying consolidated financial statements.
B. Restricted Cash Balances
In accordance with the terms of its Domestic Credit Facility (See
Note 6), all of the Operating Companies' available cash is pledged to the
lenders and is required to be used to pay down borrowings under the facility.
C. Accounts Receivable
Accounts receivable are presented net of allowances for doubtful accounts of
$1,353 and $1,352 at June 30, 1994 and 1993, respectively. Bad debt expense
totaled $617 in fiscal 1994, $695 in fiscal 1993 and $562 in fiscal 1992.
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 1994, 1993 and 1992, the Company's
largest customer accounted for approximately 13%, 12% and 11% of its net sales,
respectively. The Company's ten largest customers accounted for approximately
25% of net sales in fiscal 1994, 23% in fiscal 1993 and 22% in fiscal 1992 and
approximately 28% and 26% of accounts receivable at June 30, 1994 and 1993,
respectively.
D. Inventories
At June 30, 1994 and 1993, 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.
F-7
<PAGE> 99
E. 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 $2,738 in fiscal 1994, $2,690 in fiscal 1993 and
$2,665 in fiscal 1992.
F. 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 $724 in fiscal 1994, $725
in fiscal 1993 and $756 in fiscal 1992. The accumulated amortization of
goodwill at June 30, 1994 and 1993 was $4,469 and $3,745, respectively.
G. Per Share Data
Primary earnings per share have been computed based on the weighted
average number of shares and share equivalents outstanding which totaled 11,674
in fiscal 1994, 11,662 in fiscal 1993 and 9,794 in fiscal 1992. Share
equivalents include the Company's common stock purchase warrants (see Notes 7
and 8). The conversion of the 9-1/2% Convertible Subordinated Debentures was
not assumed in computing fully diluted earnings per share for fiscal 1994,
fiscal 1993 and fiscal 1992 as the effect would be anti-dilutive.
H. Foreign Currency Translation
All balance sheet accounts of foreign subsidiaries are translated at
the 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 such net gains totaled $17 in fiscal 1994,
$80 in fiscal 1993 and $73 in fiscal 1992.
I. Impact of New Accounting Standards
The Company adopted SFAS No. 109 during 1994 (see Note 5). 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.
J. Debt
The Company made interest payments of $20,523 in fiscal 1994, $19,540
in fiscal 1993 and $18,858 in fiscal 1992. Accrued liabilities in the
accompanying consolidated balance sheets include accrued interest of $2,101 and
$2,609 at June 30, 1994 and 1993, respectively. Other assets in the
accompanying consolidated balance sheets include deferred financing costs of
$10,284 and $3,935 at June 30, 1994 and 1993, 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 determine
the fair value of the Company's Senior Secured Notes, Deferred Coupon Notes,
Convertible Debentures and Senior Subordinated Notes because of the inability
to determine fair value without incurring excessive costs.
F-8
<PAGE> 100
2. 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 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.). 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. The
Canadian court appointed a trustee to liquidate the assets of Ideal. The
Company has been advised that Ideal is no longer operating and the liquidation
process is continuing at the present time. The Company has no liability to the
creditors of Ideal as a result of Ideal's bankruptcy.
The estimated loss on disposal, which was recorded by the Company in
its consolidated financial statements as of March 31, 1994, totaled $38.3
million, without tax benefit, and represents a complete write-off of the
Company's investment in Ideal. The loss included 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 will be recognized in the
future.
Net assets of the discontinued operation at June 30, 1993 consisted of
working capital of $29,879, net plant, property and equipment of $15,171, other
assets of $40,561 and bank debt of $56,455 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>
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Net sales $87,265 $153,875 $181,305
Costs and expenses 90,262 164,684 178,540
------- ------- -------
Income (loss) before
income taxes (2,997) (10,809) 2,765
Income taxes 252 431 1,619
------- -------- --------
Net income (loss) $ (3,249) $(11,240) $ 1,146
======== ======== ========
</TABLE>
3. CHANGE IN ACCOUNTING:
During fiscal 1993, the Company accelerated its amortization of
certain warehouse start-up costs and catalog costs. This change 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-9
<PAGE> 101
The cumulative effect of this change on prior years totaled $2,110 or
$.18 per share, and is reported separately in the fiscal 1993 consolidated
income statement, without tax benefit. The additional effect of the change in
fiscal 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.
The following pro forma information reflects the Company's results for
fiscal 1992 as if the change had been retroactively applied:
<TABLE>
<CAPTION>
1992
----
<S> <C>
Loss from continuing operations
before extraordinary charge $(4,461)
Net loss (4,532)
Earnings (loss) per share:
Loss from continuing operations
before extraordinary charge $ (.45)
Net loss (.46)
</TABLE>
4. RESTRUCTURING, NONRECURRING AND EXTRAORDINARY CHARGES:
A. Extraordinary Charges
During fiscal 1994, the Company recognized a $6.6 million
extraordinary charge, without tax benefit, as a result of the refinancing of
$50 million of Senior Subordinated Notes as well as borrowings under the
domestic bank credit facilities. The extraordinary charge included the fees
paid upon the refinancing of the Senior Subordinated Notes along with the
accelerated amortization of unamortized debt discount and issuance costs.
Also during fiscal 1994, the Company purchased $1.9 million of its
Convertible Debentures pursuant to a mandatory repurchase obligation. As a
result of the repurchase, the Company recorded an extraordinary charge of $.2
million, without tax benefit, which primarily represents the accelerated
amortization of unamortized debt discount and issuance costs.
During fiscal 1992, the Company repurchased certain debt securities in
open market purchases. As a result, the Company incurred an extraordinary
charge which totaled $1,186 (net of applicable income tax benefit of $611) and
included the market premium paid along with the accelerated amortization of
unamortized debt discount and issuance costs.
B. Restructuring and Non-Recurring Charges
During fiscal 1993, as a result of certain actions taken as part of
its strategy to refocus and build its existing core businesses in the U.S.,
the Company recorded a $6,762 restructuring charge. The provision for
restructuring charge included an estimate of the loss to be incurred upon the
sale of three businesses, including anticipated operating results through the
projected disposal dates, and the write-off of intangible assets. Below is a
summary of the components comprising the restructuring charges as of
June 30, 1993:
<TABLE>
<CAPTION>
<S> <C>
Estimated loss on disposal of businesses $4,600
Relocation and consolidation costs 1,544
Other 618
------
$6,762
======
</TABLE>
The disposal of businesses included three operating entities for 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 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. Net assets held
for sale at June 30, 1993, included in the accompanying consolidated balance
sheets is comprised primarily of working capital items and fixed assets of
Belanger, net of the reserve for the estimated loss on disposal.
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
F-10
<PAGE> 102
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. As a result, the individual assets and
liabilities of these businesses have been reclassified on the accompanying
consolidated balance sheets. The Company evaluated the net realizable value of
the carrying value of the assets previously held for sale in accordance with
its normal ongoing policy regarding impairment and concluded that no further
writedown of the net carrying values of these assets was required in excess of
the reserve previously established. Therefore, the reversal of the accrued loss
on disposal includes $1.4 million for the writedown of assets to net realizable
value and $.2 million for fees and expenses associated with the transaction.
During fiscal 1992, the Company recorded a $3.9 million nonrecurring
charge which represents a capital loss realized upon the sale of the Company's
portfolio of debt securities.
5. INCOME TAXES:
The Company adopted SFAS NO. 109 during the first quarter of fiscal
1994. SFAS 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.
Upon the adoption of SFAS 109, the benefit of the Company's net operating loss
carryforwards was reduced 100% by a valuation allowance. The benefit of the
fiscal 1994 net operating loss has also been reduced 100% by a valuation
allowance. The adoption of SFAS 109 in fiscal 1994 had no material impact on
the accompanying consolidated financial statements. 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 components of income (loss) from continuing operations before
income taxes, extraordinary charges and cumulative effect of change in
accounting are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Domestic $ (4,127) $(13,442) $(6,179)
Foreign 1,006 (2,232) 1,053
------- ------- -------
Total $ (3,121) $(15,674) $(5,126)
======== ======== =======
</TABLE>
<TABLE>
The components of the provision (benefit) for income taxes are:
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Currently payable:
Federal $ -- $ -- $(2,404)
Foreign and other 351 216 572
---- ---- -------
Total current 351 216 (1,832)
Deferred: Federal -- -- 1,064
---- ---- -------
Total provision
(benefit) $351 $216 $ (768)
==== ==== =======
</TABLE>
<TABLE>
Deferred income taxes relate to the following:
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Depreciation $ - $ -- $ 68
Inventory valuation - -- (84)
Bad debt expense - -- 425
Deferred costs - -- 800
Other, net - -- (145)
---- ---- -----
Total $ - $ -- $1,064
==== ==== ======
</TABLE>
F-11
<PAGE> 103
The following table reconciles the U.S. statutory rate to the
Company's effective tax rate:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
U.S. statutory rate 34.0% 34.0% 34.0%
Domestic losses not benefited (41.8) (24.4) --
Capital losses not benefited -- (10.0) (18.1)
State taxes, net (4.2) (0.8) (2.3)
Goodwill amortization (7.1) (1.6) (4.5)
Effect of prior year purchase accounting adjustments -- -- 2.7
Foreign tax items 6.2 -- --
Other, net 1.7 1.4 3.2
------- ---- -----
Effective tax rate (11.2)% (1.4)% 15.0%
======= ==== =====
</TABLE>
At June 30, 1994, the Company had $59,598 of available domestic net
operating loss carryforwards for income tax purposes which expire through 2009.
For financial reporting purposes, the benefit of these net operating
loss carryforwards has been reduced 100% by a valuation allowance in
accordance with the provisions of SFAS No. 109.
At June 30, 1994, the Company had recorded deferred tax liabilities of
$3,218 and deferred tax assets (excluding the net operating loss carryforwards
discussed above) of $2,663. For financial reporting purposes, previously
recorded deferred income tax liabilities were reduced in fiscal 1993 by the tax
benefit of the fiscal 1992 net operating loss which could not be carried back
to prior years. In fiscal 1992 and fiscal 1993, the Company was able to
carryback domestic net operating losses to prior years which resulted in
refunds of previously paid taxes. Refunds received totaled $2,462 in fiscal
1993 and $435 in fiscal 1994.
The Company made income tax payments of $556 in fiscal 1994, $926 in
fiscal 1993 and $1,358 in fiscal 1992.
6. LONG TERM DEBT:
Long term debt at June 30, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
$55 million secured credit facility $ 39,378 $ -
Term loan 15,000 -
$30 million secured revolving credit
facility - 20,400
Other notes payable, maturing at
various dates through 2007, and
bearing interest at rates varying
from 7.35% to 10.00% 3,829 4,660
-------- --------
58,207 25,060
Less: current portion 4,144 2,493
-------- --------
Long-term debt net of current
portion $ 54,063 $ 22,567
======== ========
</TABLE>
On May 20, 1994, the Operating Companies 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 secured credit
facility, which has an initial term of three years, will be extended for an
additional year if the Senior Secured Notes have been repaid on or before March
1997. The secured credit facility is subject to borrowing base formulas.
Interest is based, at the Company's option, on either (i) the prime rate of
Citibank, N.A. plus 1.5%, or (ii) LIBOR plus 3.0%. These rates will be
increased by 0.5% until such time as the term loan, discussed below, has been
repaid in full. The weighted average interest rate on borrowings outstanding
under the credit facility was 8.5% during fiscal 1994. The Company is required
to pay a commitment fee of 0.5% per annum on the unused commitment. The secured
credit facility is secured by the accounts receivable, inventory, certain
general intangibles and
F-12
<PAGE> 104
unencumbered fixed assets of the Operating Companies and 65% of the capital
stock of one subsidiary of TWI. The agreement requires that Waxman USA
maintain certain leverage, fixed charge coverage, net worth, capital
expenditures and EBITDA to total cash interest ratios. All financial covenants
are based solely on the results of operations of Waxman USA. The Company was
in compliance with all covenants at June 30, 1994.
The Operating Companies also entered into a $15.0 million three-year
term loan with Citibank, N.A., as agent. The term loan bears interest at a
rate per annum equal to 1.5% over the interest rate under the secured credit
facility and is secured by a junior lien on the collateral under the secured
credit facility. A one-time fee of 1.0% of the principal amount outstanding
under the term loan will be payable if the loan is not repaid by November 20,
1994. Principal payments on the domestic term loan of $1.0 million each will
be required quarterly commencing in March 1995. The term loan's financial
covenants are identical to the covenants contained in the secured credit
facility and are based solely on the results of operations of Waxman USA.
The initial borrowings under the secured credit facility along with
proceeds from the 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 issuance of the Company's Deferred Coupon Notes (See Note
8). The $55 million secured credit facility, the $15 million term loan and the
issuance of the Deferred Coupon Notes were part of a financial restructuring
(the Restructuring).
In May 1994, the $30 million secured domestic revolving credit
facility was terminated by the Company, and borrowings thereunder were
refinanced using proceeds as discussed above. The weighted average interest
rate on borrowings outstanding under the $30 million secured domestic revolving
credit facility was 6.2% during fiscal 1994.
7. SENIOR SECURED NOTES
In September 1991, the Company completed a private placement of $50
million of 7-year Senior Secured Notes (the Senior Secured Notes), including
detachable warrants to purchase 1 million shares of the Company's common stock
(the Warrants). At the time of issuance, the Senior Secured Notes included
$42.5 million of 12.25% fixed rate notes and $7.5 million of floating rate
notes with interest at 300 basis points over the 90 day LIBOR rate. The Senior
Secured 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. Mandatory redemption payments
of $14.45 million for the fixed rate notes, and $2.55 million for the floating
rate notes are due on September 1, 1996 and September 1, 1997 and are
calculated to retire 68% of the principal amount of the Senior Secured Notes
prior to maturity. The Senior Secured Notes, which are secured by a pledge of
all of the outstanding stock of the Company's wholly-owned subsidiaries,
Barnett, Consumer Products and WOC, 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 Secured Notes is being amortized as interest
expense over the life of the Senior Secured Notes.
During June 1992, the Company repurchased $10,850 principal amount of
the fixed rate notes in open market purchases.
The Senior Secured Note indenture contains various covenants, including
dividend restrictions and minimum operating cash flow requirements. 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 1994 was
approximately 1.2 to 1.0). For purposes of calculating this ratio, operating
cash flow is calculated based on the results of continuing operations only and
interest expense excludes any non-cash interest relating to the Company's
Deferred Coupon Notes.
During November 1993 and May 1994, the Company completed solicitations
of consents from the holders of the Senior Secured Notes which, among other
things, amended the net worth and certain other financial covenants and
permitted the completion of the Company's Restructuring and eliminated any
prospective defaults resulting from the adverse results and events relating to
the Company's discontinued Canadian operations.
F-13
<PAGE> 105
8. SENIOR SECURED DEFERRED COUPON NOTES
On May 20, 1994, the Company exchanged $50 million of its Senior
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. Thereafter interest on the Deferred Coupon Notes will accrue at a rate of
12.75% and will be payable in cash semi-annually on June 1 and December 1. The
Deferred Coupon Notes are redeemable, in whole or in part, at the option of the
Company, after June 1, 1999 at 106.375% of accreted value, which decreases
annually to 100% at the maturity date. The Deferred Coupon Notes are secured
by a pledge of the capital stock of Waxman USA. Substantially all of the
assets of Waxman USA are pledged under the Restructuring. The Deferred Coupon
Notes rank senior in right of payment to all existing and future subordinated
indebtedness of the Company and rank pari passu in right of payment with all
other existing or future unsubordinated indebtedness of the Company. The
Deferred Coupon Notes contain certain covenants which, among other things, limit
additional indebtedness, the payment of dividends and any restricted payments.
The warrants are exercisable through June 1, 2004, at a price of $2.45
per share. A portion of the initial accreted value of the Deferred Coupon
Notes was allocated to the warrants and as a result paid in capital increased
by $2.5 million and the related $2.5 million reduction in the recorded initial
accreted value of the Deferred Coupon Notes is being amortized as interest
expense over the life of the Deferred Coupon Notes.
9. SENIOR SUBORDINATED NOTES
In June 1989, the Company issued $100 million principal amount of
13.75% Senior Subordinated Notes (Senior Subordinated Notes) due June 1, 1999.
The Senior 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 Senior Subordinated Notes at established redemption prices. The Senior
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 Convertible
Debentures. Under the terms of the Senior Subordinated Note indenture, the
Company may not incur additional indebtedness which is subordinate to senior
debt and senior to the Senior Subordinated Notes. Additionally, the indenture
agreement contains various other covenants, including dividend restrictions and
minimum net worth requirements.
As discussed in Note 8, during fiscal 1994, the Company exchanged $50
million principal amount of the Senior Subordinated Notes for a like amount of
Deferred Coupon Notes. The $50 million of Senior Subordinated Notes exchanged
satisfy the Company's mandatory redemption requirements with respect to such
issue and, as a result, 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.
During fiscal 1992, the Company repurchased $1,250 principal amount
of the Senior Subordinated Notes in an open market purchase.
During November 1993 and May 1994, the Company completed a solicitation
of consents from the holders of the Senior Subordinated Notes which, among
other things, amended the net worth and certain other financial covenants and
permitted the completion of the Company's Restructuring and eliminated any
prospective defaults resulting from the adverse results and events relating to
the Company's discontinued Canadian operations.
10. CONVERTIBLE SUBORDINATED DEBENTURES
In March 1987, the Company issued $25 million principal amount of
Convertible Subordinated Debentures (the Convertible Debentures) due March 15,
2007. The Convertible 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 $3.25 per share.
During fiscal 1990, the Company called $12.5 million principal amount
of the Convertible Debentures for redemption and subsequently $6.5 million
principal amount was converted into 683 shares of common stock and the
remaining $6.0 million principal amount was redeemed at the call price of 105%.
F-14
<PAGE> 106
During fiscal years 1990 and 1992, the Company also purchased $9.7
million and $.8 million, respectively, of the principal amount of the
Convertible Debentures in open market purchases at prices which approximated
the par value of the Convertible Debentures.
In June 1994, the Company purchased $1.9 million of the Convertible
Subordinated Debentures pursuant to a mandatory repurchase obligation.
11. STOCKHOLDERS' EQUITY:
In March 1994, the Company contributed 50 shares of its common stock
to the profit sharing retirement plan in lieu of a cash contribution. The
total fair market value of the common stock at the date of contribution was
approximately $132.
In May 1992, the Company completed a public offering of 2,199 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.
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 ($600) and ($4,651) at June 30, 1994 and 1993, respectively. A
foreign currency exchange loss of $6.4 million, which resulted from the
elimination of the currency translation adjustments relating to Ideal, was
realized as part of the loss on disposal of Ideal. See Note 2.
12. 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 then 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. During fiscal 1994, the Board of Directors of the Company
approved an amendment to the 1992 Stock Option Plan which would increase the
number of shares subject to the 1992 Stock Option Plan to 1.5 million shares.
Such amendment is subject to stockholder approval, which the Company intends to
seek at its next annual meeting of stockholders. 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 1994, options exercisable to purchase an aggregate of
1,250 shares were issued under the 1992 Stock Option Plan at exercise prices of
$2.25 to $3.88 per share, and options exercisable to purchase 1,046 shares with
exercise prices of $2.38 to $5.00 per share were cancelled. At June 30, 1994,
options for 1,194 shares were outstanding, of which none were exercisable. Of
the options granted in fiscal 1994, options to purchase an aggregate of 200
shares are subject to stockholder approval to the amendment to the 1992 Stock
Option Plan. At June 30, 1993, there were options for 990 shares outstanding
under the 1992 Stock Option Plan.
Also during fiscal 1994, options for 271 shares under the 1982 Plan
with exercise prices of $4.75 to $6.00 per share were cancelled. At June 30,
1994, there were no options outstanding under the 1982 Plan. At June 30, 1993,
there were options for 271 shares outstanding under the 1982 Plan.
Other Stock Options
In fiscal 1994, the Board of Directors of the Company adopted the 1994
Non-Employee Directors Stock Option Plan pursuant to which each current
non-employee director of the Company was granted on option to purchase an
aggregate of 20 shares of the Company's Common Stock at an exercise price of
$2.25 per share and each future non-employee director of the Company would be
granted, on the date such person becomes a non-employee director of the
Company, an option to purchase an aggregate of 20 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on the date
of grant. The grant of such options is subject to stockholder approval, which
the Company intends to seek at its next annual meeting of stockholders. In
addition, during fiscal 1994 the Company granted a consultant to the Company an
option to purchase an aggregate of 10 shares of Common Stock at an exercise
price of $2.25 per share. At June 30, 1994, options to purchase a total of 70
shares were outstanding under the non-qualified options, of which none were
exercisable. During fiscal 1994, options to purchase 170 shares with exercise
prices of $4.25 to $6.00 per share were cancelled.
F-15
<PAGE> 107
13. 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: $3,856 in 1995, $3,254
in 1996, $3,016 in 1997, $2,361 in 1998, $1,850 in 1999 and $2,595 after 1999,
with a cumulative total of $16,932.
Total rent expense charged to operations was $3,951 in 1994, $3,758 in
1993 and $3,398 in 1992.
14. 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 in fiscal 1993 and $123 in
fiscal 1992.
15. 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-16
<PAGE> 108
<TABLE>
SUPPLEMENTARY FINANCIAL INFORMATION
Quarterly Results of Operations:
The following is a summary of the unaudited quarterly results of operations for
the fiscal years ended June 30, 1994 and 1993 (in thousands, except per share amounts):
<CAPTION>
AUDITED
FISCAL 1994 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
- ----------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Net sales $54,701 $53,233 $52,311 $54,867 $215,112
Gross profit 18,750 18,764 18,551 19,036 75,101
Operating income 4,759 5,124 4,413 3,917 18,213
Loss from continuing operations
before extraordinary charge (357) (42) (941) (2,132) (3,472)
Income (loss) from discontinued
operations 886 115 (4,250) - (3,249)
Loss on disposal (38,343) (38,343)
Extraordinary charge - - (6,625) (199) (6,824)
Net income (loss) 529 74 (50,159) (2,331) (51,888)
Primary and fully diluted
earnings per share:
Loss from continuing
operations before cumulative
effect of accounting change (.03) (.01) (.08) (.18) (.30)
Income (loss) from discontinued
operations .07 .02 (.36) - (.28)
Loss on disposal - - (3.28) - (3.28)
Extraordinary charge - - (.57) (.02) (.58)
Net income (loss) (.04) .01 (4.29) (.20) (4.44)
AUDITED
FISCAL 1993 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
- ----------- -------- -------- -------- -------- -----
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)
Cumulative effect of accounting change (.18) -- -- -- (.18)
Net income (loss) (.14) .02 (.08) (2.30) (2.51)
</TABLE>
F-17
<PAGE> 109
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation of Waxman Industries, Inc. 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 Waxman Industries,
shall be indemnified and held harmless by Waxman Industries 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
Waxman Industries 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 Waxman Industries 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. Waxman Industries maintains directors' and
officers' liability insurance covering certain liabilities incurred by the
directors and officers of Waxman Industries in connection with the performance
of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
(A) EXHIBITS
<S> <C>
3.1** Certificate of Incorporation of Waxman Industries, Inc.
(Exhibit 3(a) to Waxman Industries, Inc.'s Form S-8 filed
December 4, 1989, File No. 0-5888, incorporated herein by
reference).
3.2** By-laws of Waxman Industries, Inc. (Exhibit 3.2 to Waxman
Industries, Inc.'s 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 of May 20, 1994, by and between Waxman
Industries, Inc. and The Huntington National Bank, as Trustee,
with respect to the Senior Secured Deferred Coupon Notes,
including the form of Senior Secured Deferred Coupon Notes.
4.2*** Warrant Agreement, dated as of May 20, 1994, by and between
Waxman Industries, Inc. and The Huntington National Bank, as
Warrant Agent.
4.3*** Warrant Certificate.
5.1 Opinion of Shereff, Friedman, Hoffman & Goodman regarding
legality.
8.1 Form of Opinion of Shereff, Friedman, Hoffman & Goodman as to tax
matters.
10.1** Lease between Waxman Industries, Inc. as Lessee and Aurora
Investment Co. as Lessor dated June 30, 1992 (Exhibit 10.1 to
Waxman Industries, Inc.'s 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 Waxman
Industries, Inc.'s Profit Incentive Plan (Exhibit 10(c)-1 to
Waxman Industries, Inc.'s Annual Report on Form
</TABLE>
II-1
<PAGE> 110
<TABLE>
<S> <C>
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 Barnett Inc. and
William R. Pray (Exhibit 10.4 to Waxman Industries, Inc.'s 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 Waxman Industries, Inc.
and its Directors (Exhibit 10.5 to Waxman Industries, Inc.'s
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 Waxman
Industries, Inc. and John S. Peters (Exhibit 10.6 to Waxman
Industries, Inc.'s Annual Report on Form 10-K for the year ended
June 30, 1992, File No. 0-5888, incorporated herein by
reference).
10.6*** Tax Sharing Agreement dated May 20, 1994 among Waxman Industries,
Inc., Waxman USA, Barnett Inc., Waxman Consumer Products Group
Inc., WOC Inc. and Western American Manufacturing, Inc.
10.7*** Intercorporate Agreement dated May 20, 1994 among Waxman
Industries, Inc., Waxman USA, Barnett Inc., Waxman Consumer
Products Group Inc., WOC Inc. and Western American Manufacturing,
Inc.
10.8*** 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.
10.9*** 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.
12.1*** Statement re: computation of ratios.
21.1*** List of Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Shereff, Friedman, Hoffman & Goodman (contained in its
opinions filed as Exhibits 5.1 and 8.1 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 The
Huntington National Bank, as Deferred Coupon Note Trustee.
99 (a) Form of Letter of Transmittal with respect to the Exchange Offer
(b) Form of Notice of Guaranteed Delivery
(c) Substitute Form W-9 and Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9
<FN>
__________________
* To be filed by amendment.
</TABLE>
II-2
<PAGE> 111
** Incorporated herein by reference as indicated.
*** Filed as exhibits to the Company's Registration Statement on
Form S-4 filed with the Securities and Exchange Commission on
June 20, 1994.
(B) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) 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
persons of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE> 112
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-4 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 20th day of
September, 1994.
WAXMAN INDUSTRIES, INC.
By:/s/Neal R. Restivo
-------------------
Neal R. Restivo,
Vice President and
Chief Financial Officer
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>
* Chairman of the Board, September 20, 1994
- ---------------------------------- Co-Chief Executive Officer
Melvin Waxman and Director
* President, Co-Chief Executive September 20, 1994
- ----------------------------------- Officer, Treasurer and Director
Armond Waxman
/s/ Neal R. Restivo Vice President and Chief Financial September 20, 1994
- ----------------------------------- Officer (prinicipal Financial and
Neal R. Restivo accounting officer)
* Director September 20, 1994
- ------------------------------------
Samuel J. Krasney
* Director September 20, 1994
- ------------------------------------
Irving Z. Friedman
* Director September 20, 1994
- ------------------------------------
Judy Robins
*By:/s/ Neal R. Restivo
--------------------------------
Neal R. Restivo
AS ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE> 113
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit Number Exhibit Description Sequential Page Number
-------------- ------------------------------------------ ----------------------
<S> <C> <C>
3.1** Certificate of Incorporation of Waxman
Industries, Inc. (Exhibit 3(a) to Waxman
Industries, Inc.'s Form S-8 filed
December 4, 1989, File No. 0-5888,
incorporated herein by reference).
3.2** By-laws of Waxman Industries, Inc.
(Exhibit 3.2 to Waxman Industries, Inc.'s
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 of May 20, 1994, by
and between Waxman Industries, Inc. and
The Huntington National Bank, as Trustee,
with respect to the Senior Secured
Deferred Coupon Notes, including the form
of Senior Secured Deferred Coupon Notes.
4.2*** Warrant Agreement, dated as of May 20,
1994, by and between Waxman Industries,
Inc. and The Huntington National Bank, as
Warrant Agent.
4.3*** Warrant Certificate.
5.1 Opinion of Shereff, Friedman, Hoffman &
Goodman regarding legality.
8.1 Form of Opinion of Shereff, Friedman,
Hoffman & Goodman as to tax matters.
10.1** Lease between Waxman Industries, Inc. as
Lessee and Aurora Investment Co. as
Lessor dated June 30, 1992 (Exhibit 10.1
to Waxman Industries, Inc.'s 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 Waxman Industries,
</TABLE>
II-5
<PAGE> 114
<TABLE>
Exhibit number Exhibit Description Sequential Page Number
-------------- ------------------------------------------ ----------------------
<S> <C> <C>
Inc.'s Profit Incentive Plan
(Exhibit 10(c)-1 to Waxman
Industries, Inc.'s 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 Barnett Inc. and William R. Pray
(Exhibit 10.4 to Waxman Industries, Inc.'s
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
Waxman Industries, Inc. and its Directors
(Exhibit 10.5 to Waxman Industries, Inc.'s
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 Waxman Industries, Inc. and John
S. Peters (Exhibit 10.6 to Waxman
Industries, Inc.'s Annual Report on Form
10-K for the year ended June 30, 1992,
File No. 0-5888, incorporated herein by
reference).
10.6*** Tax Sharing Agreement dated May 20, 1994
among Waxman Industries, Waxman USA,
Barnett Inc. , Waxman Consumer Products
Group Inc., WOC Inc. and Western American
Manufacturing, Inc.
10.7*** Intercorporate Agreement dated May 20,
1994 among Waxman Industries, Waxman USA,
Barnett Inc., Waxman Consumer Products
Group Inc., WOC Inc. and Western American
Manufacturing, Inc.
10.8*** Credit Agreement dated as of May 20, 1994
among Waxman USA, Inc., Barnett Inc.,
Waxman Consumer
</TABLE>
II-6
<PAGE> 115
<TABLE>
Exhibit Number Exhibit Description Sequential Page Number
-------------- --------------------------------------- ----------------------
<S> <C> <C>
Products Group Inc. and WOC
Inc., the Lenders and Issuers party
thereto and Citicorp USA, Inc., as Agent,
and certain exhibits thereto.
10.9*** 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.
12.1*** Statement re: computation of ratios.
21.1*** List of Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Shereff, Friedman, Hoffman &
Goodman (contained in its opinions filed
as Exhibits 5.1 and 8.1 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 The Huntington National
Bank, as Deferred Coupon Note Trustee.
99 (a) Form of Letter of Transmittal with
respect to the Exchange Offer
(b) Form of Notice of Guaranteed Delivery
(c) Substitute Form W-9 and Guidelines for
Certification of Taxpayer Identification
Number on Substitute Form W-9
<FN>
_________________
* To be filed by amendment.
** Incorporated herein by reference as indicated.
*** Filed as exhibits to the Company's Registration Statement on Form S-4
filed with the Securities and Exchange Commission on June 20, 1994.
</TABLE>
II-7
<PAGE> 1
Exhibit 5.1
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN
919 THIRD AVENUE O NEW YORK, N.Y. 10022-9998
(212) 758-9500
CABLE: SHERFRIED TELEX:237328
WRITER'S DIRECT DIAL:
TELECOPIER:(212) 758-9526
September 20, 1994
Waxman Industries, Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
Gentlemen:
Waxman Industries, Inc., a Delaware corporation (the "Company"), is
transmitting for filing with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (the "Registration
Statement"), relating to the offer and sale by the Company of up to $92,797,000
aggregate principal amount at maturity of its Series B 12 3/4% Senior Secured
Deferred Coupon Notes due 2004 (the "Notes"). This opinion is an exhibit to
the Registration Statement.
We have from time to time acted as special securities counsel to the
Company in connection with certain corporate and securities matters, and in
such capacity we have participated in various corporate and other proceedings
taken by or on behalf of the Company in connection with the proposed offer and
sale of the Notes by the Company, as contemplated by the Registration
Statement. We have examined copies (in each case signed, certified or
otherwise proven to our satisfaction to be genuine) of the Company's
Certificate of Incorporation and all amendments thereto, its By-Laws as
presently in effect, minutes and other instruments evidencing actions taken by
its directors and stockholders, the Registration Statement and exhibits
thereto, the indenture governing the Notes (the "Indenture"), the Notes and
such other documents and instruments relating to the Company and the proposed
offering as we have deemed necessary under the circumstances. Insofar as this
opinion relates to securities to be issued in the future, we have assumed that
all applicable laws, rules and regulations in effect at the time of such
issuance are the same as such laws, rules and regulations in effect as of the
date hereof.
<PAGE> 2
We note that we are members of the Bar of the State of New York and insofar
as this opinion may involve the laws of the State of Delaware, our opinion is
based solely upon our reading of the Delaware General Corporation Law as
reported in the Prentice-Hall Corporation Law Service, provided, however, that
our opinion as to the due incorporation, valid existence and good standing of
the Company is based solely upon a Certificate of Good Standing obtained from
the Secretary of State of the State of Delaware. Whether or not expressly
stated in the opinion below, the conclusions set forth below are expressed with
respect to the laws of the State of New York, the Delaware General Corporation
Law (subject to the immediately preceding sentence) and the federal laws of the
United States of America, and we express no opinion as to the applicability or
effect of the laws of any other jurisdiction upon the conclusions set forth
below. We do not find it necessary for purposes of this opinion, and,
accordingly, we do not purport to cover herein, the application of the
securities or "blue sky" laws of any state, including the States of Delaware or
New York, to the offer and/or sale of the Notes.
Based on the foregoing, it is our opinion that:
1. The Company has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware.
2. The Indenture has been duly executed and delivered by the Company and
constitutes, and the Notes, when executed and delivered in accordance with the
Indenture will constitute, the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law and except that rights of
indemnity or contribution or both may be limited by applicable securities laws
or the public policy underlying such laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and as an exhibit to any application under the
securities or other laws of any state of the United States or any foreign
jurisdiction which relates to the offering which is the subject of this
opinion, and to the references to this firm appearing under the heading "Legal
Matters" in the Prospectus which is contained in the Registration Statement.
This opinion is as of the date hereof, is limited to the law in effect as of
the date hereof, and we undertake no obligation to advise you of any change,
whether legal or factual, in any matter set forth herein. This opinion is
furnished to you in connection with the filing
- 2 -
<PAGE> 3
of the Registration Statement, and is not to be used, circulated, quoted or
otherwise relied upon for any other purposes, except as expressly provided in
the preceding paragraph.
Very truly yours,
/s/SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN
- 3 -
SMZ:AJL:ATB:et
<PAGE> 1
EXHIBIT 8.1
[Letterhead of Shereff, Friedman, Hoffman & Goodman]
September 20, 1994
Board of Directors
Waxman Industries, Inc.
24460 Aurora Road
Bedford Heights, Ohio 44146
Gentlemen:
We have acted as counsel for Waxman Industries, Inc., a Delaware corporation
(the "Company"), in connection with the filing by the Company of a Registration
Statement on Form S-4, pursuant to the Securities Act of 1933 (the
"Registration Statement"), with respect to $92,800,000 aggregate principal
amount at maturity of the Company's Series B 12 3/4% Senior Secured Deferred
Coupon Notes due June 1, 2004 (the "Notes"). This opinion is an exhibit to the
Registration Statement.
You have requested our opinion with respect to certain tax disclosure in
connection with the Company's filing of the Registration Statement. In this
connection, we have examined and relied upon originals or copies, certified or
otherwise identified to our satisfaction as being true copies of all such
records of the Company, all such agreements, certificates of officers of the
Company and others, and such other documents, certificates and corporate or
other records as we have deemed necessary as a basis for the opinion expressed
in this letter, including, without limitation, the Indenture, the Registration
Statement, the related prospectus which forms a part of the Registration
Statement (the "Prospectus"), the Company's Offer to Exchange and Consent
Solicitation dated April 21, 1994, as supplemented on May 6, 1994 and May 13,
1994 and the Company's Certificate of Incorporation and By-laws.
We note that we are members of the Bar of the State of New York and are not
members of the Bar of, or authorized to practice law in, any other
jurisdiction. We express no opinion as to the laws of any jurisdiction other
than the laws of the State of New York and the federal laws of the United
States. To the extent that any opinion expressed herein involves the law of
the State of Delaware, such opinion should be understood to be based solely
upon our review of the published statutes of such state and, where applicable,
published cases of the courts and rules or regulations of regulatory bodies of
such state.
<PAGE> 2
We have reviewed the relevant federal and state statutes and regulations and
judicial and administrative opinions, and, subject to the limitations set forth
above, we are of the opinion that the discussion in the Prospectus under the
heading "Certain Federal Income Tax Consequences" sets forth the material
federal income tax consequences expected to result from the acquisition,
ownership and disposition of the Notes by individuals and corporations, other
than those individuals and corporations excepted in the discussion.
The opinion set forth herein is expressed as of the date hereof. We
disclaim any undertaking to advise you of any changes which may hereafter be
brought to our attention. Except as otherwise required by law, this letter is
not to be referred to, used or quoted (with or without specific reference to
our firm) in any documents, reports, or financial statements or otherwise,
without our prior written consent. Notwithstanding the preceding sentence, we
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement, and to the references to this firm in the Prospectus.
Very truly yours,
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN
/s/SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN
JHN:SMZ:SDB:
- 2 -
<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. 33-54209).
ARTHUR ANDERSEN LLP
Cleveland, Ohio
September 20, 1994
<PAGE> 1
EXHIBIT 25.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Securities Act of 1933 File No: _____________
(If application to determine eligibility of trustee for delayed
offering pursuant to Section 305(b)(2))
GENERAL INSTRUCTIONS
A. RULE AS TO THE USE OF FORM T-1.
Form T-1 shall be used for statements of eliglbility of corporations
designated to act as trustees under trust indentures to be qualitied pursuant
to Sections 305 or 307 of the Trust Indenture Act of 1939. Form T-1 also shall
be used for statements of eligibility of foreign trustees under trust
indentures to be qualified pursuant to Sections 305 or 307, where a prior order
has been issued pursuant to Section 310(a)(1) or 304(d), or the Commission has
promulgated a rule under such sections permitting the trustee to act as a sole
trustee under the indenture to be qualified. Finally, Form T-1 shall be used
for applications to determine the eligibility of a trustee pursuant to Sec-
tion 305(b)(2) of the Act.
B. OBLIGATIONS DEEMED TO BE IN DEFAULT.
Item 13 requires disclosure of defaults of the obligor on securities issued
under indentures under which the applicant is trustee.
If the obligor is not in default, the applicant is required to provide
responses to Items 1, 2, and 16 of Form T-1. In addition, Item 15 would be
applicable to foreign trustees. If the obligor is in default, the applicant
must respond to all of the items in the Form T-1.
An obligor shall be deemed to be in default upon the occurrence of acts
or conditions as defined in the indenture, but exclusive of any period of grace
or requirement of notice.
C. APPLICATION OF GENERAL RULES AND REGULATIONS.
The General Rules and Regulations under the Trust Indenture Act of 1939
are applicable to statements of eligibility on this form. Attention is
particularly directed to Rules 0-1 and 0-2 as to the meaning of terms used in
the rules and regulations. Attention is also directed to Rule 5a-3 regarding
the filing of statements of eligibility and qualification and to Rule 7a-16
regarding the inclusion of items, the differentiation between items and
answers, and the omission of instructions.
D. SCOPE OF ITEMS AND INSTRUCTIONS.
The items and instructions require information only as to the trustee,
unless the context clearly shows otherwise.
E. CALCULATION OF PERCENTAGES OF SECURITIES.
The percentages of securities required by this form are to be calculated in
accordance with the provisions of Rule 10b-1.
F. ITEMS RELATING TO UNDERWRITERS.
Wherever any item of the form requires information with respect to an
underwriter for the obligor, the information is to be given as to every person
who, within one year prior to the date of filing the statement of eligibility
and qualification, acted as an underwriter of any security of the obligor
outstanding on the date of filing the statement and as to every proposed
principal underwriter of the securities proposed to be offered. The term
"principal underwriter" means an underwriter in privity of contract with the
issuer of the securities as to which he is an underwriter.
<PAGE> 2
G. COORDINATION WITH DELAYED OFFERING REGISTRATION STATEMENT
When the Form T-1 is used for applications to determine the eligibility
of a trustee pursuant to Section 305(b)(2), the following provisions shall
apply:
1. The file number under the Securities Act of 1933 for the delayed
offering registration statements to which the application applies shall be
placed in the upper right hand corner of the cover page of the Form T-1.
2. The description of the indenture securities included under "Title of
Securities" should specify whether the application relates to a single
tranche or to all of the securities registered pursuant to the delayed
offering registration statement.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) / /
The Huntington National Bank
- -----------------------------------------------------------------------
(Exact name of trustee as specified in its charter)
31-0966785
- -------------------------------------------------------------------------
(Jurisdiction of incorporation or (I.R.S Employer Identification
organization if not a U.S. national Number)
bank)
41 South High Street, Columbus, Ohio 43215
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ralph K. Frasier, General Counsel, The Huntington National Bank, 41 S. High
- ---------------------------------------------------------------------------
Street, HC3412 (Name, address and telephone number of agent for service)
Columbus, OH 43215
Waxman Industries, Inc.
- ---------------------------------------------------------------------------
(Exact name of obligor as specified in its charter)
Delaware 34-0899894
- ---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
24460 Aurora Road, Bedford Heights, OH 44146
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Waxman Industries, Inc. 12 3/4% Senior Secured Deferred Coupon Note
- ---------------------------------------------------------------------------
due 2004, Series B (Title of the indenture securities)
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee -- See Item 1
attached
(a) Name and address of each examining or supervising authority to which
it is subject.
(b) Whether it is authorized to exercise corporate bust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. The Obligor is not an affiliate of
The Trustee. If the obligor is an affiliate of the bustee, describe each
such affiliation.
Instructions.
1. The term "affiliate" is defined in Rule 0-2 of the General Rules and
Regulations under the Act. Attention is also directed to Rule 7a-26.
2. Include the name of each such affiliate and the names of all
intermediary affiliates, if any. Indicate the respective percentage of
voting securities or other bases of control giving rise to the
affiliation.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities
of the trustee:
As of ______________________________ (Insert date within 31 days).
2
<PAGE> 3
- -----------------------------------------------------------------------------
Col. A Col. B.
Title of Class Amount Outstanding
- -----------------------------------------------------------------------------
Instruction. The term "voting security" is defined in Section 303(16) of the
Act.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any
other securities. of the obligor are outstanding, furnish the foliowing
information:
(a) Title of the securities outstanding under each such other indenture.
(b) A brief statement of the facts relied upon as a basis for the claim
that no conflicting interest within the meaning of Section
310(b)(1) of the Act arises as a result of the trusteeship under any
such other indenture, including a statement as to how the indenture
securities will rank as compared with the securities issued
under such other indenture.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR
OR UNDERWRITERS.
If the trustee or any of the directors or executive officers of the trustee
is a director, officer, partner, employee, appointee, or representative of
the obligor or of any underwriter for the obligor, identify each such person
having any such connection and state the nature of each such connection.
Instructions.
1. Notwithstanding General Instruction F, the term "underwriter" as used in
this item does not refer to any person who is not currently engaged in
the business of underwriting.
2. The terms "employee," "appointee," and "representative," as used in this
item, do not include connections in the capacity of transfer agent,
registrar, custodian, paying agent, fiscal agent, esrow agent,
or depositary, or in any other similar capacity or connections in the
capacity of trustee, whether under an indenture or otherwise.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner, and
executive officer of the obligor:
As of___________________________ (Insert date within 31 days).
Instructions.
1. Names of persons who do not own beneficially any of the securities
specified may be omitted.
2. No information need be given in any case where the amount of voting
securities of the trustee, owned beneficially by the obligor
and its directors, partners, and executive officers, taken as a group,
does not exceed 1 percent of the outstanding voting securities
of the trustee.
- -----------------------------------------------------------------------------
Col. A Col. B. Col. C Col. D
Percentage of Voting
Amount Owned Securities Represented by
Name of Owner Title of Class Beneficially Amount Given in Col. C
- -----------------------------------------------------------------------------
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor
and each director, partner, and executive officer of each such underwriter:
As of_________________________________ (Insert date within 31 days).
Instructions.
1. Instruction 1 to Item 6 shall be applicable to this item.
2. The name of each director, partner, or executive officer required to be
given in Column A shall be set forth under the name of the
underwriter of which he is a director, partner, or executive officer.
3. No information need be given in any case where the amount of voting
securities of the trustee owned beneficially by an underwriter
and its directors, partners, and executive officers, taken as a group,
does not exceed 1 percent of the outstanding voting securities of the
trustee.
- -----------------------------------------------------------------------------
Col. A Col. B. Col. C Col. D
Percentage of Voting
Amount Owned Securities Represented by
Name of Owner Title of Class Beneficially Amount Given in Col. C
- -----------------------------------------------------------------------------
3
<PAGE> 4
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in
default by the trustee:
As of______________________________ (Insert date within 31 days).
Instructions.
1. As used in this item, the term "securities" includes only such securities
as are generally known as corporate securities, but shall not
include any note or other evidence of indebtedness issued to evidence an
obligation to repay monies lent to a person by one or more
banks, trust companies, or banking firms, or any certificate of interest
or participation in any such note or evidence of indebtedness.
2. For the purposes of this item the trustee shall not be deemed the owner or
holder of (a) any security which it holds as collateral
security (as trustee or otherwise) for an obligation which is not in
default, or (b) any security which it holds as collateral security
under the indenture to be qualified, irrespective of any default
thereunder, or (c) any security which it holds as agent for collection,
or as custodian, escrow agent or depositary, or in any similar
representative capacity.
3. No information need be furnished under this item as to holdings by the
trustee of securities already issued under the indenture to be
qualified or securities issued under any other indenture under which the
trustee is also trustee.
4. No information need be given with respect to any class of securities
where ihe amount of securities of the class which the trustee
owns beneficially or holds as collateral security for obligations in
default does not exceed 1 percent of the outstanding securities of
the class.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Col. A Col. B. Col. C Col. D
Amount Owned Percentage of Class
Whether the Securities Beneficially or Held as Represented by
are Voting or Collateral Security for Amount Given
Title of Class Nonvoting Securities Obligations in Default in Col. C
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor,
furnish the following information as to each class of securities of
such underwriter any of which are so owned or held by the trustee:
As of______________________________ (Insert date within 31 days).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Col. A Col. B. Col. C Col. D
Amount Owned
Beneficially or Held as
Collateral Security for Percentage of Class
Title of Issuer Obligations in Default Represented by Amount
and Title of Class Amount Outstanding by Trustee Given in Col. C
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
Instruction. Instructions 1, 2, and 4 to Item 8 shall be applicable to this
item.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF
CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the
knowledge of the trustee (1) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to the
voting securities of such person:
As of_________________________ (Insert date within 31 days).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Col. A Col. B. Col. C Col. D
Amount Owned
Beneficially or Held as
Collateral Security for Percentage of Class
Title of Issuer Obligations in Default Represented by Amount
and Title of Class Amount Outstanding by Trustee Given in Col. C
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
Instruction. Instructions 1, 2, and 4 to Item 8 shall be applicable to
this item.
4
<PAGE> 5
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the
knowledge of the trustee, owns 50 percent or more of the voting securities of
the obligor, furnish the following information as to each
class of securities of such person any of which are so owned or held by the
trustee.
As of_________________________ (Insert date within 31 days).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Col. A Col. B. Col. C Col. D
Amount Owned
Beneficially or Held as
Collateral Security for Percentage of Class
Title of Issuer Obligations in Default Represented by Amount
and Title of Class Amount Outstanding by Trustee Given in Col. C
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
Instruction. Instructions 1, 2 and 4 to Item 8 shall be applicable to this
item.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
As of___________________________________ (Insert date within 31 days).
- -----------------------------------------------------------------------------
Col. A Col. B Col. C
Nature of Indebtedness Amount Outstanding Date Due
- -----------------------------------------------------------------------------
Instructions.
1. No information need be provided as to: (a) the ownership of securities
issued under any indenture or any security or securities having a
maturity of more than one year at the time of acquisition by the
indenture trustee; (b) disbursements made in the ordinary
course of business in the capacity of trustee of an indenture, transfer
agent, registrar, custodian, paying agent, fiscal agent or
depositary, or other similar capacity; (c) indebtedness created as a
result of services rendered or premises rented; or indebtedness
created as a result of gcods or securities sold in a cash transaction;
(d) the ownership of stock or of other securities of a corporation
organized under Section 25(a) of the Federal Reserve Act, as amended,
which is directly or indirectly a creditor of an obligor upon
the indenture securities; or (e) the ownership of any drafts, bills of
exchange, acceptances, or obligations which fall within the classification
of self-liquidating paper.
2. Information should be given as to the general type of indebtedness, such
as lines of credit, commercial paper, long-term notes, mortgages, etc.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
(b) If the trustee is a trustee under another indenture under which
any other securities, or certificates of interest or participation
in any other securities, of the obligor are outstanding, or is trustee
for more than one outstanding series of securities under the in-
denture, state whether there has been a default under any such
indenture or series, identify the indenture or series affected, and
explain the nature of any such default.
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Instructions.
1. The term "affiliate" as defined in Rule 0-2 of the General Rules and
Regulations under the Act. Attention is directed to Rule 7a-26.
2. Include the name of each such affiliate and the names of all
intermediate affiliates, if any. Indicate the respective percentage of
voting securities or other bases of control giving rise to the
affiliation.
ITEM 15. FOREIGN TRUSTEE.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be
qualified under the Act.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as a part of this statement of eligibility.
5
<PAGE> 6
Instructions. Subject to Rule 7a-29 permitting incorporation of exhibits by
reference, the following exhibits are to be filed as a part of the statement of
eligibility of the trustee. Such exhibits shall be appropriately lettered or
numbered for convenient reference. Exhibits incorporated by reference may be
referred to by the designation given in the previous filing. Where exhibits are
incorporated by reference, the reference shall be made in the list of
exhibits called for under Item 16. If the certificate of authority to commence
business (Exhibit 2) and/or the certificate to exercise corporate trust powers
(Exhibit 3) is contained in another exhibit, a statement to that effect shall
be made, identifying the exhibit in which such certificates are included. If an
applicable exhibit is not in English, a translation in English shall also be
filed. In response to Exhibit 7, foreign trustees shall provide financial
information sufficient to provide the information required by Section
310(a)(2) of the Act.
1. A copy of the articles of association of the trustee as now in effect.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
3. A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2) above.
4. A copy of the existing bylaws of the trustee, or instruments corresponding
thereto.
5. A copy of each indenture referred to in Item 4, if the obligor is in
default.
6. The consents of United States institutional trustees required by Section
321(b) of the Act.
7. A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority.
8. A copy of any order pursuant to which the foreign trustee is authorized to
act as sole trustee under indentures qualified or to be qualified under the
Act.
9. Foreign trustees are required to furnish a consent to service of process
(see Rule 10a-4 under the Act).
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee The Huntington Nataional Bank, a National Association [state form
of organization] organized and existing under the laws of the U.S.,
has duly caused this statement of eligibility to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of Cleveland,
and State [or other jurisdiction] of Ohio, on the 14th day of
September, 94.
(Year)
Huntington National Bank
--------------------------------
(Trustee)
By: /s/ F. G. Lamb
-----------------------------
F. G. LAMB (Name and Titie)
Trust Officer
Instruction. The name of each person signing the statement of eligibility
shall be typed or printed beneath the signature.
6
<PAGE> 7
ITEM 1
(a) Office of the Controller of Currency
Central District
One Financial Plaza
440 South LaSalle Suite 2700
Chicago, Illinois 60605
Federal Deposit Insurance Corporation
Chicago Region
30 South Wacker Drive
Chicago, Illinois 606505
(b) Yes, The Huntington National Bank is authorized to exercise corporate
trust powers.
<PAGE> 8
ITEM 16
EXHIBIT 1
Charter No. 7745
ARTICLES OF ASSOCIATION
OF
THE HUNTINGTON NATIONAL BANK
FIRST. The title of this Association shall be The
Huntington National Bank.
SECOND. The main office of the Association shall be
in the City of Columbus, County of Franklin, State of Ohio.
The general business of the Association shall be conducted
at its main office and its branches.
THIRD. The Board of Directors of this Association
shall consist of not less than five nor more than
twenty-five shareholders, the exact number of directors
within such minimum and maximum limits to be fixed and
determined from time to time by resolution of a majority of
the full Board of Directors then in office or by resolution
of the shareholders at any annual or special meeting
thereof. Unless otherwise provided by the laws of the
United States, any vacancy in the Board of Directors for any
reason, including an increase in the number thereof, may be
filled by an action of a majority of the Board of Directors
then in office. Each director, during the term of his
directorship, shall own shares of this Association, or of
another corporation who's shares are acceptable under law as
director's qualifying shares, the aggregate par value of
which is at least $1,000.
FOURTH. The annual meeting of the shareholders for
the election of directors and the transaction of whatever
other business may be brought before said meeting shall be
held at the main office or such other place as the Board of
Directors may designate on the day of each year specified
therefor in the Bylaws, but if no election is held on that
day, it may be held according to such lawful regulations as
may be prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of
this Association shall be 4,000,000 shares of common stock
of the par value of Ten Dollars ($10.00) each; but said
capital stock may be increased or decreased from time to
time, in accordance with the provisions of the laws of the
United States.
No holder of shares of the capital stock of any class
of this Association shall have any preemptive or
preferential right of subscription to any shares of any
class of stock of this Association, whether now or hereafter
authorized, or to any obligations convertible into stock of
<PAGE> 9
this Association issued or sold, nor any right of
subscription to any thereof other than such, if any, as the
Board of Directors, in its discretion, may from time to time
determine and at such price as the Board of Directors may
from time to time fix.
This Association, at any time and from time to time,
may authorize and issue debt obligations, whether or not
subordinated, without the approval of the shareholders.
SIXTH. The Board of Directors shall appoint one of
its members President of this Association, who shall be
Chairman of the Board, unless the Board appoints another
director to be the Chairman. The Board of Directors may
appoint one or more directors to be Vice Chairmen of the
Board. The Board of Directors shall have the power to
appoint one or more Vice Presidents, and to appoint a
Cashier and such other officers and employees as may be
required to transact the business of this Association.
The Board of Directors shall have the power to define
the duties of the officers and employees of the Association;
to fix the salaries to be paid to them; to dismiss them in
accordance with the Bylaws; to require bonds from them and
to fix the penalty thereof; to regulate the manner in which
any increase of the capital of this Association shall be
made; to manage and administer the business and affairs of
this Association; to make all Bylaws that it may be lawful
for them to make; and generally to do and perform all acts
that it may be legal for a Board of Directors to do and
perform.
SEVENTH. The Board of Directors shall have the power
to change the location of the main office to any other place
within the limits of the City of Columbus, Ohio, without the
approval of the shareholders but subject to the approval of
the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches
of this Association to any other location, without the
approval of the shareholders but subject to the approval of
the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association
shall continue until terminated in accordance with the laws
of the United States.
NINTH. The Board of Directors of this Association,
or any three or more shareholders owning, in the aggregate,
not less than 25 percent of the stock of this Association,
may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States,
a notice of the time, place, and purpose of every annual,
and every special meeting of the shareholders shall be given
by first-class mail, postage prepaid, mailed at least ten
days prior to the day of such meeting to each shareholder of
<PAGE> 10
record at his address as shown upon the books of this
Association.
TENTH. This Association shall indemnify (a) its
directors to the full extent provided by the general laws of
the State of Maryland now or hereafter in force, including
the advance of expenses under the procedures provided by
such laws; (b) its officers to the same extent it shall
indemnify its directors; and (c) its officers who are not
directors to such further extent as shall be authorized by
the Board of Directors and be consistent with law. The
foregoing shall not limit the authority of the Association
to indemnify other employees, members of committees and
agents consistent with law.
This Association may, upon the affirmative vote of a
majority of its Board of Directors, purchase insurance for
the purpose of indemnifying its directors, members of
committees, officers, agents and other employees to the
extent that such indemnification is allowed by law;
provided, however, that neither indemnification nor
insurance coverage therefor shall be extended to a formal
order assessing civil money penalties against an Association
director or employee pursuant to the provisions of Title 12
United States Code, including, but not limited to, Sections
93(b), 504, 1818(i) or 1972(2)(F).
ELEVENTH. These Articles of Association may be
amended at any regular or special meeting of the
shareholders by the affirmative vote of the holders of a
majority of the shares of common stock of this Asociation,
unless the vote of the holders of a greater amount of the
shares of common stock is required by law, and in that case
by the vote of the holders of such greater amount.
TWELFTH. Wherever in these Articles of Association
the context requires, references to the masculine shall be
deemed to include the feminine and references to the
singular shall be deemed to include the plural.
<PAGE> 11
ITEM 16
EXHIBIT 2
COMPTROLLER OF THE CURRENCY
TREASURY DEPARTMENT OF THE UNITED STATES
WASHINGTON, D.C.,
Whereas, satisfactory evidence has been presented to the Comptroller
of the Currency that "THE HUNTINGTON NATIONAL BANK", located in COLUMBUS,
State of OHIO, has complied with all provisions of the statutes of the
United States required to be complied with before being authorized to
commence the business of banking as a National Banking Association;
Now, therefore, I hereby certify that the above-named association
is authorized to commence the business of banking as a National Banking
Association.
In testimony whereof, witness my signature and
seal of office this 28TH day of DECEMBER, 1979.
/s/ John G. Helmann
Charter No. 7745. ---------------------------
John G. Helmann
<PAGE> 12
ITEM 16
EXHIBIT 3
COMPTROLLER OF THE CURRENCY
TREASURY DEPARTMENT OF THE UNITED STATES
WASHINGTON, D.C.
WHEREAS, THE HUNTINGTON NATIONAL BANK, LOCATED IN COLUMBUS,
STATE OF OHIO, BEING A NATIONAL BANKING ASSOCIATION, ORGANIZED UNDER THE
STATUTES OF THE UNITED STATES, HAS MADE APPLICATION FOR AUTHORITY TO ACT
AS FIDUCIARY
AND WHEREAS, APPLICABLE PROVISIONS OF THE STATUTES OF THE UNITED
STATES AUTHORIZE THE GRANT OF SUCH AUTHORITY;
NOW THEREFORE, I HEREBY CERTIFY THAT THE NECESSARY APPROVAL HAS
BEEN GIVEN AND THAT THE SAID ASSOCIATION IS AUTHORIZED, EFFECTIVE AS OF
THE CLOSE OF BUSINESS DECEMBER 31, 1979, TO ACT IN ALL FIDUCIARY CAPACITIES
PERMITTED BY SUCH STATUTES.
IN TESTIMONY WHEREOF, WITNESS MY
SIGNATURE AND SEAL OF OFFICE THIS
THIRTY-FIRST DAY OF DECEMBER, 1979.
/s/ John G. Helmann
----------------------------------
(Signed) John G. Helmann
COMPTROLLER OF THE CURRENCY
<PAGE> 13
TO WHOM IT MAY CONCERN:
This is to certify that The Huntington National Bank, Columbus, Ohio,
organized under the laws of the United States of America, has complied
with the laws relating to trust companies under Chapter 1109 of the Ohio
Revised Code and is qualified to exercise trust powers in Ohio. Witness
my hand and official seal at the city of Columbus, this 16th day of
April, 1981.
/s/ Frederick E. Mills
-------------------------------
Frederick E. Mills
Superintendent of Banks
<PAGE> 14
ITEM 16
EXHIBIT 4
BYLAWS
OF
THE HUNTINGTON NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.1. ANNUAL MEETING. The regular annual
meeting of the shareholders of the Association for the election
of directors and for the transaction of such other business as
may properly come before it shall be held at the principal office
of the Association in Columbus, Ohio, or at such other place as
the Board of Directors (referred to in these Bylaws as
"Directors") may designate, between the hours of 10:00 A.M. and
5:00 P.M., on the third Wednesday in April, at such specific hour
as the Directors may designate. Notice of such meeting shall be
mailed, first class mail, postage prepaid, at least ten (10) days
before the date thereof, addressed to each shareholder at his
address appearing on the books of the Association. If, for any
reason, directors are not elected at this meeting, the meeting
may be adjourned to a later date for such purpose or, if this is
not done, the Directors shall order an election to be held on
some subsequent day as soon thereafter as practicable, according
to the provisions of law; and notice thereof, shall be given in
the manner herein provided for the annual meeting.
<PAGE> 15
Section 1.2. SPECIAL MEETINGS. Except as otherwise
specifically provided by statute, special meetings of the
shareholders may be called for any purpose at any time by the
Directors or by any shareholder or shareholders owning, in the
aggregate, not less than twenty-five percent (25%) of the
outstanding shares of stock of the Association. Every such
special meeting, unless otherwise provided by law or unless such
notice is waived as provided by these Bylaws, shall be called by
mailing, first class mail, postage prepaid, not less than ten
(10) days before the date fixed for such meeting, to each
shareholder at his address appearing on the books of the
Association, notice stating the time, place, and purpose of the
meeting.
Section 1.3. RECORD DATE FOR SHAREHOLDERS' MEETINGS.
Shareholders entitled to notice of the annual meeting or any
special meeting shall be the shareholders shown by the records of
the Association to be shareholders on such record date as may be
fixed in advance by the Directors, which date shall not be more
than twenty (20) days and not less than ten (10) days before the
date set for such shareholders' meeting.
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Section 1.4. NOMINATIONS FOR ELECTION TO THE BOARD OF
DIRECTORS. Nominations may be made by the Directors, Executive
Committee of the Board of Directors or by any holder of any
outstanding class of capital stock of the Association entitled to
vote for the election of directors, provided that, except as
hereinafter provided, no person who shall have attained the age
of 65 years prior to the date set for the election and who has
been employed on a full-time basis by the Association, Huntington
Bancshares Incorporated or any affiliate of Huntington Bancshares
Incorporated nor any other person who shall have attained the age
of 70 years prior to the date set for the election, shall be
nominated by the Directors. The age limitations set forth herein
for former full-time employees shall not be applicable to former
Chief Executive Officers of this Association, its predecessor The
Huntington National Bank of Columbus or Huntington Bancshares
Incorporated. Such Chief Executive Officers shall, instead, be
subject to the general age limitations set forth for non-former
employee directors. Nominations, other than those made by or on
behalf of the existing management of the Association, shall be
made in writing and shall be delivered or mailed to the President
of the Association and to the Comptroller of the Currency,
Washington, D.C., not less than 14 days nor more than 50 days
prior to any meeting of shareholders called for the election of
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directors, provided however, that if less than 21 days' notice of
the meeting is given to shareholders, such nomination shall be
mailed or delivered to the President of the Association and to
the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice
of meeting was mailed. Such notification shall contain the
following information to the extent known to the notifying
shareholder: (a) the name and address of each proposed nominee;
(b) the principal occupation of each proposed nominee; (c) the
total number of shares of capital stock of the Association that
will be voted for each proposed nominee; (d) the name and
residence address of the notifying shareholder; and (e) the
number of shares of capital stock of the Association owned by the
notifying shareholder. Nominations not made in accordance
herewith may, in his discretion, be disregarded by the Chairman
of the meeting, and upon his instructions, the vote tellers may
disregard all votes cast for each such nominee.
Section 1.5. PROXIES. Shareholders may vote at any
meeting of the shareholders by proxies duly authorized in
writing, but no officer or employee of the Association shall act
as proxy. Proxies need not be witnessed or acknowledged and
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shall be valid only for one meeting, to be specified therein, and
any adjournments of such meeting.
Section 1.6. QUORUM. At every meeting of
shareholders, each shareholder shall be entitled to cast one vote
either in person or by proxy for each share of stock held by him
as shown by the records of the Association on the record date
fixed by the Directors pursuant to Section 1.3 hereof upon any
matter coming before the meeting except as otherwise expressly
provided by these Bylaws. A majority of the outstanding shares
of stock, represented in person or by proxy, shall constitute a
quorum at any meeting of shareholders unless otherwise provided
by law; but less than a quorum may adjourn a meeting from time to
time, and the meeting may be held, as adjourned, without further
notice. A majority of the votes cast shall decide every question
or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
Section 1.7. WAIVER OF NOTICE. Any shareholder may,
in writing, waive notice of any regular or special meeting at any
time before or after the holding thereof.
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ARTICLE II
DIRECTORS
Section 2.1. AUTHORITY OF DIRECTORS. The Directors
shall have power to manage and administer the business and
affairs of the Association. Except as expressly limited by law,
all corporate powers of the Association shall be vested in and
may be exercised by the Directors, but the Directors may delegate
powers as provided in these Bylaws.
Section 2.2. NUMBER. The Directors shall consist of
not less than five (5) nor more than twenty-five (25) persons,
the exact number within such minimum and maximum limits to be
fixed and determined from time to time by resolution of a
majority of the Directors then in office or by resolution of the
shareholders at any meeting thereof, provided, however, that a
majority of the Directors may not increase the number of
directors to a number which (d) exceeds by more than two (2) the
number of directors last elected by the shareholders where such
number was fifteen (15) or less, and (b) to a number which
exceeds by more than four (4) the number of directors last
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elected by shareholders where such number was sixteen (16) or
more, but in no event shall the number of directors exceed
twenty-five (25).
Section 2.3. REGULAR MEETINGS. Except as otherwise
provided in these Bylaws, regular meetings of the Directors shall
be held without a formal legal notice and at such times and
places as the Directors shall determine by resolution.
Section 2.4 SPECIAL MEETINGS. Except as otherwise
provided in these Bylaws, special meetings of the Directors may
be called by the Chairman of the Board of Directors (referred to
in these Bylaws as the "Chairman"), a Vice Chairman of the Board
of Directors (referred to in these Bylaws as a "Vice Chariman"),
or the President, upon not less than one (1) hour's notice and at
the request of three or more directors, upon not less than two
(2) days' notice. Each director shall be given notice stating
the time, place and purpose of a special meeting. Notice may be
given in writing, in person, by telephone or telegraph.
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Directors may participate in such special meetings
through use of conference telephone or similar communication
equipment, so long as all members participating in such meetings
can hear one another.
Section 2.5. ORGANIZATION MEETING. If possible, the
Directors shall meet on the same day of and after the annual
meeting of shareholders at which they are elected for the purpose
of organizing and for the purpose of electing officers of the
Association for the succeeding year, but in any event, the
Directors shall be organized and officers elected no later than
the next regular meeting of Directors or within thirty (30) days
of the date of the annual meeting whichever occurs first. If at
the time fixed for such meeting, there shall not be a quorum
present, the directors present may adjourn the meeting, from time
time, until a quorum is obtained.
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<PAGE> 22
Section 2.6. QUORUM. At any meeting of the Directors,
a majority of the directors then in office shall constitute a
quorum. L ss than a quorum may adjourn any meeting from time to
time, and the meeting may be held as adjourned without further
notice. In the event of the death or disability of Directors by
reason of war or other catastrophe, reducing the total Directors
to less than that required for a quorum, a majority of the
remaining directors shall constitute a quorum.
Section 2.7. WAIVER OF NOTICE. Any director may, in
writing, waive notice of any regular or special meeting at any
time before or after the holding thereof. The presence of a
director at a regular or special meeting shall constitute on his
part a waiver of the notice for such meeting.
Section 2.8. VACANCIES. When any vacancy occurs among
the Directors, the remaining Directors may appoint a director to
fill such vacancy at any regular meeting of the Directors or at
any special meeting called for that purpose. If such a vacancy
is to be filled at a regular or special meeting of Directors, not
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less than five (5) days' notice of such meeting shall be given in
writing, in person, by telephone or telegraph to each director of
the Association. Such notice shall include a statement that such
action is to be taken at the regular or special meeting. Any
directorships not filled by the shareholders shall be treated as
vacancies to be filled by and in the discretion of the Directors.
Section 2.9. TERM. A director elected at the annual
meeting of shareholders shall hold office until the next annual
meeting of shareholders or until his successor has been elected
and qualified. A director elected to fill a vacancy shall hold
office until the next annual meeting of shareholders or until his
successor is elected and qualified, provided, however, that,
unless otherwise provided by law, any director may be removed
from office by a majority vote of the outstanding shares of stock
entitled to be voted at any special meeting of shareholders
called for that purpose.
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<PAGE> 24
Section 2.10. COMPENSATION. The Directors shall have
authority to vote themselves reasonable compensation for their
services as Directors. Reasonable compensation shall also be
allowable to Directors and members of committees authorized by
Directors for attendance at meetings of Directors or of any
committee. The Directors may provide for their own
indemnification and reimbursement of others, by the Association
for liability and expenses actually incurred in connection with
any action, suit or proceeding, civil or criminal, to which they
shall be made a party by reason of having acted for the
Association, subject to the limitations set forth in Article
Tenth of the Articles of Association, and the Directors may
authorize the purchase of insurance to provide therefor.
Section 2.11. DECLARATION OF DIVIDENDS. The Directors
may, in their discretion, from time to time declare dividends as
permitted by law. Such dividends may be payable in money, stock
of the Association or in other assets of the Association. The
Directors may fix a date not exceeding thirty (30) days preceding
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<PAGE> 25
the date fixed for the payment of any dividend as the record date
for the determination of shareholders entitled to receive payment
of any dividend, provided the record date shall be not less than
seven (7) days after the date on which the dividend is declared;
and only shareholders of record on the date so fixed shall be
entitled to receive such dividend notwithstanding any transfer of
shares on the books of the Association after any record date so
fixed.
Section 2.12. POWER OF DIRECTORS TO APPOINT
COMMITTEES. The Directors having the power to manage and
administer the business and affairs of the Association from time
to time may delegate these powers to committees which, except as
otherwise provided in these Bylaws, may, but need not
necessarily, include directors. By the appointment of such
committees, the Directors do not thereby relieve themselves of
their responsibility of directing the business and affairs of the
Association. The committees so appointed, including committees
of the Trust Department, shall be annually appointed by the
Directors at their organization meeting unless they shall
specifically determine not to appoint such committees.
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The Directors shall appoint a Chairman of each committee
and such Chairman or any member of the committee designated by
him shall preside at the meetings of the committee. In the event
of the death, prolonged absence or the inability of the Chairman
of any committee to act, the Executive Committee may appoint an
Acting Chairman of such committee who shall assume the duties and
have the powers of the Chairman of such committee until the
Chairman returns to service or the Directors elect a new
Chairman. Alternate members may be appointed to each committee
and such alternate members may act at any meeting of a committee
at which a regular committee member or members shall be absent.
Unless otherwise stated in these Bylaws, each committee shall
meet upon the call of its Chairman or upon the call of any two of
its members. A majority of the members of any committee shall
constitute a quorum and each committee may elect its own
Secretary who need not be from among its own members. Minutes of
all meetings of committees shall be kept and shall be presented
to regular meetings of the Directors.
Members of all committees may participate in meetings of
their respective committees through use of conference telephone
or similar communications equipment, so long as all members
participating in such meetings can hear one another.
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Each committee shall keep minutes of its meetings, and
such minutes shall be submitted at the next regular meeting of
Directors, and any action taken by the Directors with respect
thereto shall be entered into the minutes of the Directors.
ARTICLE III
COMMITTEES
(Exclusive of Trust Department)
Section 3.1. EXECUTIVE COMMITTEE. The members of the
Executive Committee shall be directors and shall include the
Chief Executive Officer, and no less than three (3) other
directors of the Association who are not officers.
Except as otherwise provided in these Bylaws, the
Executive Committee may exercise all of the powers of Directors
during intervals between meetings thereof, including the power to
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authorize the execution of contracts, deeds, leases, and other
agreements respecting real or personal property. It may fill
vacancies occurring in any committee appointed by the Directors
between regular meetings of the Directors. It may fill vacancies
occurring in any offices between meetings of Directors and, when
deemed necessary, may create new offices and elect persons to
fill such offices. It shall have general supervision over all
expenditures of the Association and shall consider and act upon
any matter submitted to it by the Directors or by the Chairman of
such Committee and shall advise the Directors in regard to the
policies of the Association and the conduct of its affairs. The
Executive Committee shall not, however, exercise the power of
Directors to declare dividends.
Section 3.2. OPERATING COMMITTEES. There shall be one
or more Operating Committees each of which shall include at least
two (2) members who are directors, and at least two members who
are not officers, and such additional members as the Directors
may from time to time determine.
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In the event that more than one Operating Committee shall
be established, the Chief Executive Officer shall specify their
respective responsibilities and such Committee shall be known as
Regional Operating Committees. Any Operating Committee or
Regional Operating Committee shall have the authority to
establish, through committees or otherwise, the organization and
structure within the Association for the making of loans and
establishing of lines of credit and the Committee shall review
periodically the overall functioning of such organization and
structure. It shall have the general authority to appoint other
committees which need not necessarily include members of the
Operating Committee. Any Operating Committee or Regional
Operating Committee shall have general supervision and control of
all such committees appointed by it pursuant to the authority
granted above.
Section 3.3. AUDIT COMMITTEE. There shall be an Audit
Committee composed of not less than three (3) Directors or other
persons, none of whom shall be active officers of the Association
or members of the Trust Committee. In the absence of any
appointment to the contrary, the chairman, members and alternates
from time to time serving on the Audit Committee of the Board of
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Directors of Huntington Bancshares Incorporated, shall be deemed
to be the chairman, members and alternates, respectively of the
Audit Committee of this Association.
It shall be the duty of the Audit Committee to make an
examination at least once during each calendar year and within 15
months of the last such examination into the affairs of the
Association or cause suitable examinations to be made by auditors
responsible only to the Directors and to report the result of
such examination to the Directors at the next regular meeting
thereafter. Such report shall state whether the Association is
in a sound condition and whether adequate internal controls and
procedures are being maintained. Such report shall also
recommend to the Directors such changes in the manner of
conducting the affairs of the Association as shall be deemed
advisable.
It shall also be the duty of the Audit Committee to
conduct or cause to be conducted periodic audits of the Trust
Department, or to adopt an adequate continuous audit system.
Section 3.4. COMPENSATION COMMITTEE. There shall be a
Compensation Committee composed of not less than three (3)
Directors or other persons, none of whom shall be active
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officers. In the absence of any appointment to the contrary, the
chairman, members and alternates from time to time serving on the
Compensation Committee of the Board of Directors of Huntington
Bancshares Incorporated, shall be deemed to be the chairman,
members and alternates, respectively, of the Compensation
Committee of this Association.
It shall be the duty of the Compensation Committee to act
upon matters of compensation in accordance with Section 4.3 of
ARTICLE IV of these Bylaws.
Section 3.5 OTHER COMMITTEES. The Directors may
appoint such other committees from time to time as they may deem
proper for the management of the business and affairs of the
Association, and the Directors may delegate to the Executive
Committee or to the Chairman of the Executive Committee the
appointment of other committees which they may deem necessary for
the direction of the business and affairs of the Association.
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ARTICLE IV
OFFICERS
Section 4.1. OFFICERS. The officers of this
Association shall be a Chairman, President, one or more Vice
Presidents, a Cashier, one or more Assistant Cashiers and such
other officers as may be designated as such from time to time by
the Directors. The Directors may also elect one or more Vice
Chairmen and one or more Regional Presidents and if so elected,
they shall be officers of the Association. The Chairman, a Vice
Chairman, or the President shall be designated by the Directors
as Chief Executive Officer of the Association.
The duties, powers and authority of officers shall be
such as usually pertain to their respective offices, unless
otherwise prescribed in these Bylaws or by the Directors.
If the Directors shall elect a Chairman, he shall preside
at all meetings of the shareholders and Directors and, in the
Chairman's absence, the President shall preside at such meetings;
and in the President's absence, a Vice Chairman shall preside,
and in the absence of any of the foregoing any Vice President who
is also a director may preside.
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The Directors may elect a Secretary and may elect one cr
more Assistant Secretaries, who need not be directors, and they
shall hold office at the pleasure of the Directors.
Section 4.2. TENURE OF OFFICE. The Chairman,
President, and any Vice Chairman shall hold office during the
year for which the Directors electing them were elected and until
their successors, respectively, shall be elected, unless such
officers shall resign, become disqualified, or be removed.
Either the President or the Chairman or a Vice Chairman may be
removed from office for cause by two-thirds (2/3) vote of the
total number of directors then in office. Any vacancy occurring
in the office of President shall be filled for the unexpired term
by the Directors. Any vacancy occurring in the office of the
Chairman or Vice Chairman may be filled for the unexpired term by
the Directors.
The Vice Presidents, Cashier and subordinate officers
shall hold their offices or positions, respectively, during the
pleasure of the Directors.
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The Directors may appoint or discharge agents and
employees, define their duties and conditions of employment and,
from time to time, fix their compensation; or may delegate such
authority to any committees or officers of the Association.
Section 4.3. COMPENSATION. The compensation of the
Chairman, President and any Vice Chairman shall be fixed by the
Directors upon recommendation of the Compensation Committee.
The compensation of all other officers and all employees
shall be fixed by the Chief Executive Officer or by such other
officers as may be designated by him.
Section 4.4. BOND. All officers and employees shall
be bonded in favor of the Association in an amount deemed
sufficient from time to time by the Directors against losses
arising from their unfaithful performance of duties.
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ARTICLE V
TRUST DEPARTMENT
Section 5.1. SEPARATE DEPARTMENT. There shall be a
separate and independent department of the Association,
designated the Trust Department, which shall perform the
fiduciary responsibilities of the Association.
Section 5.2. MANAGEMENT. Subject to the provisions of
this ARTICLE V, the management and immediate supervision of the
Trust Department shall be in charge of the officer or officers
appointed by the Directors. Such officer or officers may be
known as Trust Officers or Assistant Trust Officers. Their
duties shall be the operation of the Trust Department and such
other duties as may be described in these Bylaws or assigned to
them by the Directors.
Section 5.3. TRUST COMMITTEE. There shall be a Trust
Committee, at least three (3) of whose members shall be persons
who are not active officers of the Association. The members of
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The Trust Committee shall be designated by the Directors.
Minutes of all meetings of the Trust Committee shall be kept and
shall be presented to the regular meetings of the Directors.
The Trust Committee shall have control and supervision of
all activities of the Trust Department, the investment of trust
funds, the disposition of trust investments, the operations of
the Trust Department, the determination of its policies, and
shall do such other acts as may be required for compliance with
Part 9 of the Regulations of the Comptroller of the Currency.
The Trust Committee may delegate its authority to such
other committees as it may establish, or to the officers of the
Association.
Section 5.4. ACCEPTANCE AND CLOSING OF TRUSTS. The
acceptance, closing and relinquishment of all trusts shall be
approved by the Trust Committee or any Trust Officer and the
Chairman, a Vice Chairman, the President or an Executive Vice
President of the Association and recorded in the minutes of the
Trust Committee. Documents and instruments in connection with
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acceptance and termination of trusts may be executed by any Trust
Officer, Assistant Trust Officer or other officer designated by
the Trust Committee.
Section 5.5. TRUST DEPARTMENT FILES. There shall be
maintained in the Trust Department files containing all fiduciary
records necessary to assure that its fiduciary responsibilities
have been properly undertaken and discharged.
Section 5.6. TRUST INVESTMENTS. Funds held in a
fiduciary capacity shall be invested in accordance with the
instrument establishing the fiduciary relationship and local law.
Where such instrument does not specify the character and class of
investments to be made and does not vest in the bank a discretion
in the matter, funds held pursuant to such instrument shall be
invested in investments in which corporate fiduciaries may invest
under local law.
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ARTICLE VI
STOCK AND STOCK CERTIFICATES
Section 6.1. CERTIFICATES. The shares of stock of the
Association shall be represented by certificates signed by the
Chairman, a Vice Chairman, the President or a Vice President and
the Cashier, an Assistant Cashier, the Secretary or an Assistant
Secretary, manually or by facsimile and shall bear the seal of
the Association or a printed or engraved facsimile of the seal,
shall be in such form as the Directors may prescribe, and shall
be issued for one or more full shares only.
Section 6.2. TRANSFER. Shares of stock shall be
transferable only on the books of the Association by the holder
or by an attorney or legal representative thereof duly authorized
by a power of attorney filed with the Association and upon
surrender of the stock certificate or certificates for such
shares properly endorsed.
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Section 6.3. ADDRESS OF SHAREHOLDERS. Every
shareholder shall keep the Association advised of his mailing
address. The Association may rely upon its shareholder records
as to the mailing address of any shareholder unless and until
otherwise advised in writing.
Section 6.4. LOST CERTIFICATES. The holder of any
shares of stock of this Association, the certificate or
certificates for which shall have been lost or destroyed, shall
immediately notify the Association of such fact. A new
certificate or certificates may be issued upon satisfactory proof
of the loss or destruction of the old certificate, and the
Association may require a bond which shall be in such sum,
contain such terms and provisions, and have such surety or
sureties as the Association may require.
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ARTICLE VII
SEAL
Section 7.1. FORM. The seal of the Bank shall consist
of the words "The Huntington National Bank, Columbus, Ohio" in
concentric circles with the word "Seal" appearing in the inner
circle, and shall be in the form impressed hereon.
Section 7.2. USE OF SEAL. The seal may be affixed to
any document by the Secretary, any Assistant Secretary, the
Cashier, any Assistant Cashier or other person specifically
authorized by the Directors, the Executive Committee, the
Chairman, a Vice Chairman or the President.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. FISCAL YEAR. The Fiscal Year of the
Association shall be the calendar year.
Section 8.2. EXECUTION OF INSTRUMENTS. All agreements
contracts, indentures, mortgages, deeds, conveyances, leases,
assignments, notes, transfers, certificates, declarations,
receipts, discharges, releases, satisfactions, settlements,
petitions, schedules, accounts, affidavits, bonds, undertakings,
proxies and other instruments or documents may be signed,
executed, acknowledged, verified, delivered or accepted in behalf
of the Association by the Chairman, a Vice Chairman, or the
President, or any Vice President, or the Secretary, or any
Assistant Secretary, or the Cashier, and, if in connection with
the exercise of fiduciary powers of the Association, by any of
said officers or by any Trust Officer, Assistant Trust Officer,
Assistant Vice President or any other officer employed in the
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Trust Department. Any such instruments may also be executed,
acknowledged, verified, delivered or accepted in behalf of the
Association in such other manner and by such other officers and
employees as the Directors may from time to time direct. The
provisions of this Section 8.2. are supplementary to any other
provision of these Bylaws.
Section 8.3. RECORDS. The Articles of Association,
the Bylaws and the proceedings of all meetings of the
shareholders, the Directors, and standing committees of
Directors, shall be recorded in appropriate minute books provided
for the purpose. The minutes of each meeting shall be signed by
the Secretary, Assistant Secretary, Cashier or other Officer
appointed to act as Secretary of the meeting.
Section 8.4. RULES OF CONSTRUCTION. Wherever in these
Bylaws the context requires, references to the masculine shall be
deemed to include the feminine and references to the singular
shall be deemed to include the plural.
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Section 8.5. ELECTION OF DIRECTORS OF THE FEDERAL RESERVE BANK
OF CLEVELAND. The Chairman, Vice Chairman, President or other
Executive Officers of the Association as designated by the
Directors pursuant to Regulation "O" of the Board of Governors of
the Federal Reserve system are authorized to nominate on behalf
of the Association one candidate for Director of Class A and one
candidate for Director of Class B of the Federal Reserve Bank of
Cleveland, Cleveland, Ohio. The Chairman, Vice Chairman,
President or other Executive Officers of the Association are
authorized to cast the vote of the Association in the elections
of Class A and Class B Directors of the Federal Reserve Bank of
Cleveland, Cleveland, Ohio. This authority may be exercised
repeatedly and from time to time.
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ARTICLE IX
BYLAWS
Section 9.1. INSPECTION. A copy of these Bylaws, with
all amendments thereto, shall at all times be kept in a
convenient place at the Main Office of the Association, and shall
be open for inspection to all shareholders, during banking hours.
Section 9.2. AMENDMENTS. These Bylaws may be amended,
altered or repealed by a vote of a majority of the outstanding
shares of stock of the Association or by a majority vote of the
Directors, then in office. If such amendment, alteration or
repeal is made by the Directors it may be made at a regular or
special meeting of Directors held upon not less than five (5)
day's notice. Such notice to Directors may be given in writing,
in person, by telephone or telegraph. Notice to either
shareholders or Directors of a meeting to amend, alter or repeal
these Bylaws shall state that such action is to be taken.
-31-
<PAGE> 45
ITEM 16
EXHIBIT 5
None. Obligor is not in default.
<PAGE> 46
ITEM 16
EXHIBIT 6
To: U.S. Securities and Exchange Commission
In connection with the attached Form T-1 filing and pursuant to Section
321(b) of the Trust Indenture Act of 1939 (the "Act"), The Huntington
National Bank does hereby consent that all reports of examinations by
Federal, State, Territorial, and District authorities may be furnished
by such authorities to the U.S. Securities and Exchange Commission. Such
reports may be furnished confidentially to the Attorney General of the
United States when deemed necessary by the Commission, or requested by him,
for the purpose of enabling him to peform his duties under the Act.
THE HUNTINGTON NATIONAL BANK
By: /s/ F. G. Lamb
----------------------------------
F.G. Lamb
Trust Officer
<PAGE> 47
Item 16
EXHIBIT 7 Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires July 31, 1994
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL
_______________________________________________________________________________
Please refer to page i, [1]
Table of Contents, for
the required disclosure
of estimated burden.
_______________________________________________________________________________
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES - FFIEC 031
(940630)
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1994 --------
This report is required by law: 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National
banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
_______________________________________________________________________________
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Robert A. Kuehl, SVP/HNB Controller
------------------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and belief.
_____________________________________________________
Signature of Officer Authorized to Sign Report
July 26, 1994
_____________________________________________________
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in some
cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
_____________________________________________________
Director (Trustee)
_____________________________________________________
Director (Trustee)
_____________________________________________________
Director (Trustee)
_______________________________________________________________________________
For Banks Submitting Hard Copy Report Forms:
State Member Banks: Return the original and one copy to the appropriate Federal
Reserve District Bank.
State Nonmember Banks: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2139
Espey Court, Crofton, MD 21114.
National Banks: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2139
Espey Court, Crofton, MD 21114.
_______________________________________________________________________________
FDIC Certificate Number 0 6 5 6 0
---------
_ _ _ _
| |
CALL NO. 188 31 06-30-94
CERT: 06560 00077 STBK 39-1610
THE HUNTINGTON NATIONAL BANK
P.O. BOX 1558
|COLUMBUS, OH 43216 |
|_ _ _ _|
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE> 48
FFIEC 031
Page i
[ 2 ]
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SIGNATURE PAGE COVER
<S> <C>
REPORT OF INCOME
Schedule RI--Income Statement . . . . . . . . . . . . . . . . . . RI-1, 2, 3
Schedule RI-A--Changes in Equity Capital. . . . . . . . . . . . . RI-3
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . RI-4, 5
Schedule RI-C--Applicable Income Taxes by
Taxing Authority . . . . . . . . . . . . . . . . . . . . . . . RI-5
Schedule RI-D--Income from
International Operations . . . . . . . . . . . . . . . . . . . RI-6
Schedule RI-E--Explanations . . . . . . . . . . . . . . . . . . . RI-7, 8
REPORT OF CONDITION
Schedule RC--Balance Sheet . . . . . . . . . . . . . . . . . . . RC-1, 2
Schedule RC-A--Cash and Balances Due
From Depository Institutions . . . . . . . . . . . . . . . . . RC-3
Schedule RC-B--Securities . . . . . . . . . . . . . . . . . . . . RC-4, 5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases . . . . . . . . . . . . . . . . . . RC-6, 7
Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only) . . . . . . . . . . . . . . . . . . . . . . RC-7a, 7b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks). . . . . . . . . . . . RC-8
Schedule RC-E--Deposit Liabilities . . . . . . . . . . . . . . . RC-9, 10
Schedule RC-F--Other Assets . . . . . . . . . . . . . . . . . . . RC-11
Schedule RC-G--Other Liabilities. . . . . . . . . . . . . . . . . RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices . . . . . . . . . . . . . . . . . . . . . . . RC-12
Schedule RC-I--Selected Assets and Liabilities
of IBFs . . . . . . . . . . . . . . . . . . . . . . . . . . . RC-13
Schedule RC-K--Quarterly Averages . . . . . . . . . . . . . . . . RC-13
Schedule RC-L--Off-Balance Sheet Items . . . . . . . . . . . . . RC-14, 15
Schedule RC-M--Memoranda . . . . . . . . . . . . . . . . . . . . RC-16, 17
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets . . . . . . . . . . . . . . . . . . . RC-18, 19
Schedule RC-O--Other Data for Deposit
Insurance Assessments . . . . . . . . . . . . . . . . . . . . RC-20, 21
Schedule RC-R--Risk-Based Capital . . . . . . . . . . . . . . . . RC-22, 23
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of
Condition and Income . . . . . . . . . . . . . . . . . . . . . RC-24
Special Report (to be completed by all banks)
Schedule RC-J--Repricing Opportunities (sent only to
and to be completed only by savings banks)
</TABLE>
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
30.7 hours per respondent and is estimated to vary from 15 to 200 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the required
form, and completing the information collection, but exclude the time for
compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, national and state nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE> 49
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RI-1
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
CONSOLIDATED REPORT OF INCOME
FOR THE PERIOD JANUARY 1, 1994-JUNE 30, 1994
All Report of Income schedules are to be reported on a calendar year-to-date basis in thousands of dollars.
SCHEDULE RI -- INCOME STATEMENT
<CAPTION>
I480
----
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate . . . . . . . . . . . . . . . . . . . . . 4011 112,591 1.a.(1)(a)
(b) Loans to depository institutions . . . . . . . . . . . . . . . . . . . 4019 996 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers. . 4024 1,992 1.a.(1)(c)
(d) Commercial and industrial loans. . . . . . . . . . . . . . . . . . . . 4012 92,451 1.a.(1)(d)
(e) Acceptances of other banks . . . . . . . . . . . . . . . . . . . . . . 4026 0 1.a.(1)(e)
(f) Loans to individuals for household, family, and other
personal expenditures:
(1) Credit cards and related plans. . . . . . . . . . . . . . . . . . 4054 21,370 1.a.(1)(f)(1)
(2) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4055 89,095 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions . . . . . . . . 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and
political subdivisions in the U.S.:
(1) Taxable obligations . . . . . . . . . . . . . . . . . . . . . . . 4503 26 1.a.(1)(h)(1)
(2) Tax-exempt obligations. . . . . . . . . . . . . . . . . . . . . . 4504 734 1.a.(1)(h)(2)
(i) All other loans in domestic offices. . . . . . . . . . . . . . . . . . 4058 1,395 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs . . . . . . . 4059 0 1.a.(2)
b. Income from lease financing receivables:
(1) Taxable leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4505 14,622 1.b.(1)
(2) Tax-exempt leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4307 0 1.b.(2)
c. Interest income on balances due from depository institutions:(1)
(1) In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4105 0 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs . . . . . . . 4106 1 1.c.(2)
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S. Government agency and
corporation obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 4027 49,133 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities . . . . . . . . . . . . . . . . . . . . . . . . . . 4506 0 1.d.(2)(a)
(b) Tax-exempt securities. . . . . . . . . . . . . . . . . . . . . . . . . 4507 2,914 1.d.(2)(b)
(3) Other domestic debt securities. . . . . . . . . . . . . . . . . . . . . . . 3657 2,847 1.d.(3)
(4) Foreign debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . 3658 70 1.d.(4)
(5) Equity securities (including investments in mutual funds) . . . . . . . . . 3659 245 1.d.(5)
e. Interest income from assets held in trading accounts . . . . . . . . . . . . . . 4069 98 1.e.
---------------------
<FN>
- ----------
(1) Includes interest income on time certificates of deposit not held in trading accounts.
</TABLE>
3
<PAGE> 50
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RI-2
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RI -- CONTINUED
<CAPTION>
Dollar Amounts in Thousands Year-to-date
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Interest income (continued) RIAD Bil Mil Thou
f. Interest income on federal funds sold and securities
purchased under agreements to resell in domestic offices
of the bank and of its Edge and Agreement subsidiaries,
and in IBFs . . . . . . . . . . . . . . . . . . . . . . . . . . 4020 5,565 1.f.
g. total interest income (sum of items 1.a through 1.f) . . . . . 4107 396,145 1.g.
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and
telephone and preauthorized transfer accounts) . . . . 4508 7,625 2.a.(1)(a)
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAs) . . . . . . . 4509 9,384 2.a.(1)(b)(1)
(2) Other savings deposits . . . . . . . . . . . . . . 4511 12,088 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more . 4174 3,519 2.a.(1)(b)(3)
(4) All other time deposits . . . . . . . . . . . . . . 4512 35,042 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and
Agreement subsidiaries, and IBFS . . . . . . . . . . . . . 4172 6,724 2.a.(2)
b. Expense of federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs . . . . . . 4180 14,467 2.b.
c. Interest on demand notes issued to the U.S. Treasury and on
other borrowed money . . . . . . . . . . . . . . . . . . . . . 4185 29,273 2.c.
d. Interest on mortgage indebtedness and obligations under
capitalized leases . . . . . . . . . . . . . . . . . . . . . . 4072 119 2.d.
e. Interest on subordinated notes and debentures . . . . . . . . . 4200 6,381 2.e.
f. Total interest expense (sum of items 2.a through 2.e) . . . . . 4073 124,622 2.f.
3. Net interest income (item 1.g minus 2.f) . . . . . . . . . . . . . RIAD 4074 271,523 3.
4. Provisions:
a. Provision for loan and lease losses . . . . . . . . . . . . . . RIAD 4230 8,889 4.a.
b. Provision for allocated transfer risk . . . . . . . . . . . . . RIAD 4243 0 4.b.
5. Noninterest income:
a. Income from fiduciary activities . . . . . . . . . . . . . . . 4070 0 5.a.
b. Service charges on deposit accounts in domestic offices . . . . 4080 28,701 5.b.
c. Trading gains (losses) and fees from foreign exchange
transactions . . . . . . . . . . . . . . . . . . . . . . . . . 4075 266 5.c.
d. Other foreign transaction gains (losses) . . . . . . . . . . . 4076 0 5.d.
e. Gains (losses) and fees from assets held in trading accounts . 4077 673 5.e.
f. Other noninterest income:
(1) Other fee income . . . . . . . . . . . . . . . . . . . . . 5407 36,958 5.f.(1)
(2) All other noninterest income* . . . . . . . . . . . . . . . 5408 20,522 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) . . . . RIAD 4079 87,120 5.g.
6. a. Realized gains (losses) on held-to-maturity securities . . . . RIAD 3521 36 6.a.
b. Realized gains (losses) on available-for-sale securities . . . RIAD 3196 383 6.b.
7. Noninterest expense:
a. Salaries and employee benefits . . . . . . . . . . . . . . . . 4135 81,624 7.a.
b. Expenses of promises and fixed assets (net of rental income)
(excluding salaries and employee benefits and mortgage
interest) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4217 19,032 7.b.
c. Other noninterest expense* . . . . . . . . . . . . . . . . . . 4092 106,112 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) . . . RIAD 4093 206,768 7.d.
8. Income (loss) before income taxes and extraordinary items and
other adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a,
6.b, and 7.d) . . . . . . . . . . . . . . . . . . . . . . . . . . . RIAD 4301 143,405 8.
9. Applicable income taxes (on item 8) . . . . . . . . . . . . . . . . RIAD 4302 48,114 9.
10. Income (loss) before extraordinary items and other adjustments
(item 8 minus 9) . . . . . . . . . . . . . . . . . . . . . . . . . RIAD 4300 95,291 10.
<FN>
- ----------
* Describe on Schedule RI-E--Explanations.
</TABLE>
4
<PAGE> 51
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RI-3
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RI -- CONTINUED
<CAPTION>
Year-to-date
------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11. Extraordinary items and other adjustments:
a. Extraordinary items and other adjustments,
gross of income taxes* . . . . . . . . . . . . . . . . . . . . 4310 0 11.a.
b. Applicable income taxes (on item 11.a)* . . . . . . . . . . . 4315 0 11.b.
c. Extraordinary items and other adjustments, net of income taxes ------------------
(item 11.a minus 11.b) . . . . . . . . . . . . . . . . . . . . RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c) . . . . . . . . . . RIAD 4340 95,291 12.
-------------------------------------------------
Memoranda
<CAPTION>
Year-to-date
------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after
August 7, 1986, that is not deductible for federal income tax purposes . . . . . . . . . . . 4513 0 M.1.
2. Fee income from the sale and servicing of mutual funds and annuities in domestic offices
(included in Schedule RI, item 5.g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8431 2,435 M.2.
3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above . . 4309 0 M.3.
4. To be completed only by banks with $1 billion or more in total assets:
Taxable equivalent adjustment to "Income (loss) before income taxes and extraordinary
items and other adjustments" (item 8 above) . . . . . . . . . . . . . . . . . . . . . . . . 1244 1,985 M.4.
5. Number of full-time equivalent employees on payroll at end of current period (round to Number
nearest whole number). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4150 4,127 M.5.
--------------------
SCHEDULE RI-A-- CHANGES IN EQUITY CAPITAL
Indicate decreases and losses in parentheses.
<CAPTION>
I483
----
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1993, Reports of Condition
and Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3215 820,623 1.
2. Equity capital adjustments from amended Reports of Income, net* . . . . . . . . . . . . . . . . 3216 658 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) . . . . . . . . . . . . . 3217 821,281 3.
4. Net income (loss) (must equal Schedule RI, item 12) . . . . . . . . . . . . . . . . . . . . . . 4340 95,291 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net . . . . . . . . . . . . . . 4346 0 5.
6. Changes incident to business combinations, net . . . . . . . . . . . . . . . . . . . . . . . . 4356 0 6.
7. LESS: Cash dividends declared on preferred stock . . . . . . . . . . . . . . . . . . . . . . . 4470 0 7.
8. LESS: Cash dividends declared on common stock . . . . . . . . . . . . . . . . . . . . . . . . . 4460 49,530 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions
for this schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4411 0 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities . . . . . . . 8433 (8,271) 11.
12. Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . 4414 0 12.
13. Other transaction with parent holding company* (not included in items 5, 7, or 8 above) . . . . 4415 0 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC,
item 28) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3210 858,771 14.
--------------------
<FN>
- ----------
*Description on Schedule RI-E--Explanations.
</TABLE>
5
<PAGE> 52
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RI-4
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RI-B -- CHARGE-OFFS AND RECOVERIES AND CHANGES
IN ALLOWANCE FOR LOAN AND LEASE LOSSES
PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<CAPTION> 1486
--------------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
--------------------------------------------
calendar year-to-date
--------------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . 4651 5,073 4661 108 1.a.
b. To non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks:
a. To U.S. banks and other U.S. depository institutions . . . . . . 4653 0 4663 0 2.a.
b. To foreign banks . . . . . . . . . . . . . . . . . . . . . . . . 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers 4655 0 4665 0 3.
4. Commercial and industrial loans:
a. To U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . 4645 2,018 4617 2,383 4.a.
b. To non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal
expenditures:
a. Credit cards and related plans . . . . . . . . . . . . . . . . . 4656 3,563 4666 1,193 5.a.
b. Other (includes single payment, installment, and all
student loans) . . . . . . . . . . . . . . . . . . . . . . . . . 4657 5,196 4667 2,721 5.b.
6. Loans to foreign governments and official institutions . . . . . . 4643 0 4627 0 6.
7. All other loans . . . . . . . . . . . . . . . . . . . . . . . . . . 4644 0 4628 0 7.
8. Lease financing receivables:
a. Of U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . 4658 300 4668 147 8.a.
b. Of non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8) . . . . . . . . . . . . . . . . . 4635 16,150 4605 6,552 9.
--------------------------------------------
<CAPTION>
--------------------------------------------
Cumulative Cumulative
Charge-offs Recoveries
Jan. 1, 1986 Jan. 1, 1986
through through
Memoranda Dollar Amounts in Thousands Dec. 31, 1989 Report Date
- --------------------------------------------------------------------------------------------------------------------
To be completed by national banks only. RIAD Bil Mil Thou RIAD Bil Mil Thou
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Charge-offs and recoveries of Special-Category Loans, as defined
for this Call Report by the Comptroller of the Currency . . . . . . 4784 908 M.1.
--------------------------------------------
--------------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
-------------------------------------------
calendar year-to-date
Memorandum items 2 and 3 are to be completed by all banks. --------------------------------------------
RIAD Bil Mil Thou RIAD Bil Mil Thou
-----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RI-B, part I, items 4 and 7, above . . . . . . . . . . . . 5409 0 5410 0 M.2.
3. Loans secured by real estate in domestic offices (included in
Schedule RI-B, part I, item 1, above):
a. Construction and land development . . . . . . . . . . . . . . . 3582 3,705 3583 0 M.3.a.
b. Secured by farmland . . . . . . . . . . . . . . . . . . . . . . 3584 0 3585 0 M.3.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential
properties and extended under lines of credit . . . . . . . 5411 195 5412 43 M.3.c.(1)
(2) All other loans secured by 1-4 family residential properties 5413 140 5414 1 M.3.c.(2)
d. Secured by multifamily (5 or more) residential properties . . . 3588 993 3589 56 M.3.d.
e. Secured by nonfarm nonresidential properties . . . . . . . . . . 3590 40 3591 8 M.3.e.
</TABLE>
6
<PAGE> 53
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RI-5
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RI-B -- CONTINUED
PART II. CHANGES IN ALLOWANCE FOR LOAN AND
LEASE LOSSES AND IN ALLOCATED
TRANSFER RISK RESERVE
<CAPTION>
--------------------------------------------
(Column A) (Column B)
Allowance for Allocated
Loan and Lease Transfer Risk
Losses Reserve
--------------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Balance originally reported in the December 31, 1993, Reports of
Condition and Income . . . . . . . . . . . . . . . . . . . . . . . 3124 162,397 3131 0 1.
2. Recoveries (column A must equal part I, item 9, column B above) . . 4605 6,552 3132 0 2.
3. LESS: Charge-offs (column A must equal part I, item 9,
column A above) . . . . . . . . . . . . . . . . . . . . . . . . . . 4635 16,150 3133 0 3.
4. Provision (column A must equal Schedule RI, item 4.a; column B must
equal Schedule RI, item 4.b) . . . . . . . . . . . . . . . . . . . 4230 8,889 4243 0 4.
5. Adjustments* (see instructions for this schedule) . . . . . . . . . 4815 0 3134 0 5.
6. Balance end of current period (sum of items 1 through 5) (column A must
equal Schedule RC, item 4.b; column B must equal Schedule RC,
item 4.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3123 161,688 3128 0 6.
--------------------------------------------
<FN>
- ----------
*Description on Schedule RI-E--Explanations.
SCHEDULE RI-C -- APPLICABLE INCOME TAXES BY TAXING AUTHORITY
Schedule RI-C is to be reported with the December Report of Income.
1489
------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4780 N/A 1.
2. State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4790 N/A 2.
3. Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4795 N/A 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) . . . 4770 N/A 4.
---------------------
5. Deferred portion of item 4 . . . . . . . . . . . . . . . . . . . . RIAD 4772 N/A 5.
------------------------------------------
</TABLE>
7
<PAGE> 54
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RI-6
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RI-D -- INCOME FROM INTERNATIONAL OPERATIONS
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs where international operations
account for more than 10 percent of total revenues, total assets, or net income.
PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
<CAPTION>
1492
----
Year-to-date
------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries,
and IBFs:
a. Interest income booked. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4837 N/A 1.a.
b. Interest expense booked . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs
(item 1.a minus 1.b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4839 N/A 1.c.
2. Adjustments for booking location of international operations:
a. Net interest income attributable to international operations booked at domestic offices. . . . 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign offices. . . . . . . . 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) . . . . . . . . . . . . . . . . . . . . . 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations:
a. Noninterest income attributable to international operations. . . . . . . . . . . . . . . . . . 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations. . . . . . . . . 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations . . . . . . . . . . . . . . 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a
minus 3.b and 3.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before capital allocation
adjustment (sum of items 1.c, 2.c, and 3.d). . . . . . . . . . . . . . . . . . . . . . . . . . . . 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect
the effects of equity capital on onverall bank funding costs . . . . . . . . . . . . . . . . . . . 4845 N/A 5.
6. Estimated pretax income attributable to international operations after capital allocation
adjustment (sum of items 4 and 5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4846 N/A 6.
7. Income taxes attribuatble to income from international operations as estimated in item 6 . . . . . 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7) . . . . . . . . . . 4341 N/A 8.
-----------------
<CAPTION>
Memoranda
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Intracompany interest income included in item 1.a above. . . . . . . . . . . . . . . . . . . . . . 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above . . . . . . . . . . . . . . . . . . . . . 4848 N/A M.2.
PART II. SUPPLEMENTARY DETAILS ON INCOME FROM INTERNATIONAL OPERATIONS REQUIRED BY THE DEPARTMENTS OF COMMERCE AND TREASURY
FOR PURPOSES OF THE U.S. INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS
<CAPTION>
Year-to-date
------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income booked at IBFs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4849 N/A 1.
2. Interest expense booked at IBFs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4850 N/A 2.
3. Noninterest income attributable to international operations booked at domestic offices
(excluding IBFs):
a. Gains (losses) and extraordinary items . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5491 N/A 3.a.
b. Fes and other noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations booked at domestic
offices (excluding IBFs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at domestic offices
(excluding IBFs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48553 N/A 5.
</TABLE>
8
<PAGE> 55
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RI-7
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RI-E -- EXPLANATIONS
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
<CAPTION>
1495
----
Year-to-date
------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2))
Report amounts that exceed 10% of Schedule RI, item 5.f.(2):
a. Net gains on other real estate owned . . . . . . . . . . . . . . . . . . . . . . 5415 0 1.a.
b. Net gains on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 5416 0 1.b.
c. Net gains on sales of premises and fixed assets . . . . . . . . . . . . . . . . . 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed 10% of
Schedule RI, item 5.f.(2):
---------
d. TEXT 4461 Misc. Mortgage Banking Income 4461 14,050 1.d.
---------------------------------------------------------------------------------
e. TEXT 4462 4462 1.e.
---------------------------------------------------------------------------------
f. TEXT 4463 4463 1.f.
---------------------------------------------------------------------------------
2. Other noninterest expense (from Schedule RI, item 7.c):
a. Amortization expense of intangible assets . . . . . . . . . . . . . . . . . . . . 4531 4,682 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net losses on other real estate owned . . . . . . . . . . . . . . . . . . . . . . 5418 0 2.b.
c. Net losses on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . 5419 0 2.c.
d. Net losses on sales of premises and fixed assets . . . . . . . . . . . . . . . . 5420 0 2.d.
Itemize and describe the three largest other amounts that exceed 10% of
Schedule RI, item 7.c:
---------
e. TEXT 4464 Interco Operation Fee 4464 32,321 2.e.
---------------------------------------------------------------------------------
f. TEXT 4467 4467 2.f.
---------------------------------------------------------------------------------
g. TEXT 4468 4468 2.g.
---------------------------------------------------------------------------------
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and
applicable income tax effect (from Schedule RI, item 11.b) (itemize and describe
all extraordinary items and other adjustments)
---------
a.(1) TEXT 4469 4469 3.a.(1)
-----------------------------------------------------------------------------
(2) Applicable income tax effect RIAD 4486 3.a.(2)
---------------------
b.(1) TEXT 4487 4487 3.b.(1)
-----------------------------------------------------------------------------
(2) Applicable income tax effect RIAD 4488 3.b.(2)
---------------------
c.(1) TEXT 4489 4489 3.c.(1)
-----------------------------------------------------------------------------
(2) Applicable income tax effect RIAD 4491 3.c.(2)
---------------------
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A,
item 2) (itemize and describe all adjustments):
---------
a. TEXT 4492 First Trust Equity Adjustment 4492 658 4.a.
---------------------------------------------------------------------------------
b. TEXT 4493 4493 4.b.
---------------------------------------------------------------------------------
5. Cumulative effect of changes in accounting principles from prior years (from
Schedule RI-A, item 9) (itemize and describe all changes in accounting prinicples):
---------
a. TEXT 4494 4494 5.a.
---------------------------------------------------------------------------------
b. TEXT 4495 4495 5.b.
---------------------------------------------------------------------------------
6. Corrections of material accounting errors from prior years (from Schedule RI-A,
item 10) (itemize and describe all corrections):
---------
a. TEXT 4496 4496 6.a.
---------------------------------------------------------------------------------
b. TEXT 4497 4497 6.b.
---------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 56
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RI-8
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RI-E -- CONTINUED
<CAPTION>
Year-to-date
------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13)
(itemize and describe all such transactions):
a. TEXT 4498 4498 7.a.
-------------------------------------------------------------------------------------------
b. TEXT 4499 4499 7.b.
-------------------------------------------------------------------------------------------
8. Adjustments to allowance for laon and lease losses (from Schedule RI-B, part II, item 5)
(itemize and describe all adjustments):
a. TEXT 4521 4521 8.a.
-------------------------------------------------------------------------------------------
b. TEXT 4522 4522 8.b.
-------------------------------------------------------------------------------------------
9. Other explanations (the space below is provided for the bank to briefly describe, 1498 1499
at its option, any other significant items affecting the Report of Income): ------------------
No comment / / (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
SUBSEQUENT TO THE HUNTINGTON NATIONAL BANK FILING ITS DECEMBER 31, 1993 CALL REPORT, ERNST & YOUNG, HUNTINGTON BANCSHARES
INCORPORATED'S INDEPENDENT AUDITORS, COMPLETED ITS AUDIT OF FIRST TRUST SAVINGS BANK (FIRST TRUST). IT WAS DETERMINED THAT $658,000
OF GOODWILL RELATED TO THE ''PURCHASE'' OF FIRST TRUST HAD NO ON-GOING VALUE AND THEREFORE, SHOULD BE WRITTEN OFF. ACCORDINGLY,
GOODWILL AND EQUITY OF THE HUNTINGTON NATIONAL BANK WERE SIMILARLY ADJUSTED.
</TABLE>
10
<PAGE> 57
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-1
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1994
All schedules are to be reported in thousands of dollars. Unless otherwise indicated,
report the amount outstanding as of the last business day of the quarter.
SCHEDULE RC -- BALANCE SHEET
<CAPTION>
C400
----
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . . . . . . . . 0081 483,826 1.a.
b. Interest-bearing balances(2). . . . . . . . . . . . . . . . . . . . . . . . . . 0071 250 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A). . . . . . . . . . . 1754 145,630 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D). . . . . . . . . . 1773 1,235,520 2.b.
3. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0276 374,580 3.a.
b. Securities purchased under agreements to resell . . . . . . . . . . . . . . . . 0277 102,750 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income
(from Schedule RC-C). . . . . . . . . . . . . . . . RCFD 2122 8,059,761 4.a.
b. LESS: Allowance for loan and lease losses . . . . . RCFD 3123 161,688 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income,
allowance, and reserve (item 4.a minus
4.b and 4.c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2125 7,898,073 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 3545 1,839 5.
6. Premises and fixed assets (including capitalized leases). . . . . . . . . . . . . . 2145 187,741 6.
7. Other real estate owned (from Schedule RC-M). . . . . . . . . . . . . . . . . . . . 2150 54,034 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding. . . . . . . . . . . . 2155 63,082 9.
10. Intangible assets (from Schedule RC-M). . . . . . . . . . . . . . . . . . . . . . . 2143 57,536 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . . . . . . . . 2160 268,967 11.
12. Total assets (sum of items 1 through 11). . . . . . . . . . . . . . . . . . . . . . 2170 10,873,828 12.
--------------------
<FN>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
</TABLE>
11
<PAGE> 58
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-2
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 06560
SCHEDULE RC -- CONTINUED
<CAPTION>
----------------------
Dollar Amounts in Thousands Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. DEPOSITS:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I). . RCON 2200 6,735,038 13.a.
---------------------
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . . RCON 6631 1,367,379 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . . RCON 6636 5,367,659 13.a.(2)
---------------------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E,
part II) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFN 2200 492,612 13.b.
---------------------
(1) Noninterest-bearing. . . . . . . . . . . . . . . . . . . RCFN 6631 0 13.b.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . . RCFN 6636 492,612 13.b.(2)
---------------------
14. Federal funds purchased and securities sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 0278 245,737 14.a.
b. Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . RCFD 0279 522,937 14.b.
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . RCON 2840 0 15.a.
b. Trading liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3548 12 15.b.
16. Other borrowed money:
a. With original maturity of one year or less . . . . . . . . . . . . . . . . . . . . . RCFD 2332 1,254,175 16.a.
b. With original maturity of more than one year . . . . . . . . . . . . . . . . . . . . RCFD 2333 290,187 16.b.
17. Mortgage indebtedness and obligations under capitalized leases. . . . . . . . . . . . . RCFD 2910 1,938 17.
18. Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . RCFD 2920 63,082 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3200 249,119 19.
20. Other liabilities (from Schedule RC-G). . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2930 160,220 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . . . . . . . . . . . . RCFD 2948 10,015,057 21.
22. Limited-life preferred stock and related surplus . . . . . . . . . . . . . . . . . . . RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . RCFD 3838 0 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 40,000 24.
25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . RCFD 3839 155,571 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . RCFD 3632 671,471 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities . . . . . . . RCFD 8434 (8,271) 26.b.
27. Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . . RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) . . . . . . . . . . . . . . . . . . . RCFD 3210 858,771 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21,
22, and 28) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3300 10,873,828 29.
----------------------
Memorandum Number
To be reported only with the March Report of Condition. ----------------------
1. Indicate in the box at the right the number of the statement below that best describes
the most comprehensive level of auditing work performed for the bank by independent
external auditors as of any date during 1993 . . . . . . . . . . . . . . . . . . . . . . RCFD 6724 N/A M.1.
----------------------
<FN>
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards
by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank
separately)
3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
____________
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
12
</TABLE>
<PAGE> 59
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-3
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-A -- CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
Exclude assets held in trading accounts.
<CAPTION>
C405
------------------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
---------------------- ----------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency
and coin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0022 402,782 1.
a. Cash items in process of collection and unposted debits. . . . . 0020 293,297 1.a.
b. Currency and coin. . . . . . . . . . . . . . . . . . . . . . . . 0080 109,485 1.b.
2. Balances due from depository institutions in the U.S.. . . . . . . . 0082 17,859 2.
a. U.S. branches and agencies of foreign banks (including
their IBFs) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0083 0 2.a.
b. Other commercial banks in the U.S. and other depository
institutions in the U.S. (including their IBFs) . . . . . . . . . 0085 17,859 2.b.
3. Balances due from banks in foreign countries and foreign central
banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0070 1,978 3.
a. Foreign branches of other U.S. banks . . . . . . . . . . . . . . 0073 0 3.a.
b. Other banks in foreign countries and foreign central banks . . . 0074 1,978 3.b.
4. Balances due from Federal Reserve Banks. . . . . . . . . . . . . . . 0090 61,457 0090 61,457 4.
5. Total (sum of items 1 through 4) (total of column A must equal
Schedule RC, sum of items 1.a and 1.b) . . . . . . . . . . . . . . . 0010 484,076 0010 484,076 5.
--------------------- ----------------------
Memoranda Dollar Amounts in Thousands RCON Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item 2,
column B above). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0050 17,609 M.1.
----------------------
</TABLE>
13
<PAGE> 60
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-4
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-B -- SECURITIES
<CAPTION>
Exclude assets held in trading accounts. C410
--------------------------------------- --------------------------------------
Held-to-maturity Available-for-sale
--------------------------------------- --------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
------------------ ------------------ ------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. U.S. Treasury securities . . 0211 0 0213 0 1286 728,755 1287 719,680 1.
2. U.S. Government agency and
corporation obligations
(exclude mortgage-backed
securities):
a. Issued by U.S. Government
agencies(2) . . . . . . . 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. Government-
agencies(3) . . . . . . . 1294 0 1295 0 1297 336,817 1298 337,131 2.b.
3. Securities issued by states
and political subdivisions
in the U.S.:
a. General obligations . . . 1676 43,779 1677 44,890 1678 0 1679 0 3.a.
b. Revenue obligations . . . 1681 21,769 1686 22,274 1690 0 1691 0 3.b.
c. Industrial development
and similar obligations 1694 0 1695 0 1696 0 1697 0 3.c.
4. Mortgage-backed securities
(MBS):
a. Pass-through securities:
(1) Guaranteed by GNMA . . 1698 0 1699 0 1701 11,314 1702 11,079 4.a.(1)
(2) Issued by FINA and
FNLMC . . . . . . . . 1703 9,124 1705 9,314 1706 0 1707 0 4.a.(2)
(3) Privately-issued . . . 1709 0 1710 0 1711 0 1713 0 4.a.(3)
b. CMOs and REMICs:
(1) Issued by FNMA and
FHLMC . . . . . . . . 1714 68,458 1715 68,227 1716 53,470 1717 49,991 4.b.(1)
(2) Privately-issued and
collateralized by MBS
issued or guaranteed
by FNMA, FHLMC, or
GNMA . . . . . . . . . 1718 0 1719 0 1731 0 1732 0 4.b.(2)
(3) All other privately-
issued . . . . . . . . 1733 0 1734 0 1735 0 1736 0 4.b.(3)
5. Other debt securities:
a. Other domestic debt
securities . . . . . . . 1737 0 1738 0 1739 108,867 1741 108,618 5.a.
b. Foreign debt securities 1742 2,500 1743 2,500 1744 0 1746 0 5.b.
<FN>
- ---------
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.c., column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administrative obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than pass-through securities, CMOs, and REMICs) (issued by the Farm Credit System, the Federal Home
Loan Bank System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing
Corporation, Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority.
</TABLE>
14
<PAGE> 61
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-5
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-B -- CONTINUED
<CAPTION>
--------------------------------------- --------------------------------------
Held-to-maturity Available-for-sale
--------------------------------------- --------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
------------------ ------------------ ------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6. Equity Securities:
a. Investments in mutual
funds . . . . . . . . . . 1747 3,132 1748 3,132 6.a.
b. Other equity securities
with readily determinable
fair values . . . . . . . 1749 12 1751 12 6.b.
c. All other equity
securities(1) . . . . . . 1752 5,877 1753 5,877 6.c.
7. Total (sum of item 1
through 6) (total of
column A must equal
Schedule RC, item 2.a)
(total of column D must
equal Schedule RC,
item 2,b) . . . . . . . . . 1754 145,630 1771 147,205 1772 1,248,244 1773 1,235,520 7.
</TABLE>
<TABLE>
<CAPTION>
Memoranda C412
Dollar Amounts in Thousands RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Pledged securities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0416 1,078,921 M.1.
2. Maturity and repricing date for debt securities(2)(3) (excluding those in
nonaccrual status):
a. Fixed rate debt securities with a remaining maturity of:
(1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0343 13,251 M.2.a.(1)
(2) Over three months through 12 months . . . . . . . . . . . . . . . . . . . . . . . . 0344 349,353 M.2.a.(2)
(3) Over one year through five years . . . . . . . . . . . . . . . . . . . . . . . . . . 0345 733,097 M.2.a.(3)
(4) Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0346 219,550 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through 2.a.(4) 0347 1,315,251 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of:
(1) Quarterly or more frequently . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4544 54,378 M.2.b.(1)
(2) Annually or more frequency, but less frequently than quarterly . . . . . . . . . . . 4545 2,500 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually . . . . . . . 4551 0 M.2.b.(3)
(4) Less frequently than every five years . . . . . . . . . . . . . . . . . . . . . . . 4552 0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1)
through 2.b.(4)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4553 56,878 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total
debt securities from Schedule RC-8, sum of items 1 through 5, columns A and D, minus
nonaccrual debt securities included in Schedule RC-N, item 9, column C) . . . . . . . . 0393 1,372,129 M.2.c.
3. Not applicable
4. Held-to-maturity debt securities restructured and in compliance with modified terms
(included in Schedule RC-8, items 3 through 5, column A, above) . . . . . . . . . . . . . . 5365 0 M.4.
5. Not applicable
6. Floating rate debt securities with a remaining maturity of one year or less(2) (included
in Memorandum item 2.b.(5) above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5519 500 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale
or trading securities during the calendar year-to-date . . . . . . . . . . . . . . . . . . 1778 0 M.7.
<FN>
- --------
(1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D.
(2) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that must complete supplemental Schedule RC-J.
</TABLE>
15
<PAGE> 62
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-6
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-C -- LOANS AND LEASE FINANCING RECEIVABLES
PART I. LOANS AND LEASES
Do not deduct the allowance for loan and lease losses from amounts
reported in this schedule. Report total loans and leases, net of unearned
income. Exclude assets held in trading accounts.
<CAPTION> C415
--------------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
--------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate . . . . . . . . . . . . . . . . . . . 1410 2,756,556
a. Construction and land development. . . . . . . . . . . . . . . . 1415 164,246 1.a.
b. Secured by farmland (including farm residential and other
improvements) . . . . . . . . . . . . . . . . . . . . . . . . . 1420 15,512 1.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential
properties and extended under lines of credit . . . . . . . 1797 587,485 1.c.(1)
(2) All other loans secured by 1-4 family residential properties:
(a) Secured by first liens . . . . . . . . . . . . . . . . . 5367 592,092 1.c.(2)(a)
(b) Secured by junior liens . . . . . . . . . . . . . . . . 5368 254,231 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties . . . 1460 112,019 1.d.
e. Secured by nonfarm nonresidential properties . . . . . . . . . . 1480 1,030,971 1.e.
2. Loans to depository institutions:
a. To commercial bands in the U.S. . . . . . . . . . . . . . . . . 1505 79,225 2.a.
(1) To U.S. branches and agencies of foreign banks . . . . . . . 1506 0 2.a.(1)
(2) To other commercial banks in the U.S. . . . . . . . . . . . 1507 79,225 2.a.(2)
b. To other depository institutions in the U.S. . . . . . . . . . . 1517 0 1517 0 2.b.
c. To banks in foreign countries . . . . . . . . . . . . . . . . . 1510 0 2.c.
(1) To foreign branches of other U.S. banks . . . . . . . . . . 1513 0 2.c.(1)
(2) to other banks in foreign coutries . . . . . . . . . . . . . 1516 0 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers 1590 62,797 1590 62,797 3.
4. Commercial and industrial loans:
a. To U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . 1763 1,986,719 1763 1,986,719 4.a.
b. To non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . 1764 0 1764 0 4.b.
5. Acceptances of other banks:
a. Of U.S. banks . . . . . . . . . . . . . . . . . . . . . . . . . 1756 177 1756 177 5.a.
b. Of foreign banks . . . . . . . . . . . . . . . . . . . . . . . . 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal
expenditures (i.e., consumer loans) (includes purchased paper) 1975 2,668,902 6.
a. Credit cards and related plans (includes check credit and other
revolving credit plans) . . . . . . . . . . . . . . . . . . . . 2008 302,738 6.a.
b. Other (includes single payment, installment, and all
student loans) . . . . . . . . . . . . . . . . . . . . . . . . . 2011 2,366,164 6.b.
7. Loans to foreign governments and official institutions (including
foreign central banks) . . . . . . . . . . . . . . . . . . . . . . 2081 0 2081 0 7.
8. Obligations (other than securities and leases) of states and
political subdivisions in the U.S. (includes nonrated industrial
development obligations) . . . . . . . . . . . . . . . . . . . . . 2107 19,495 2107 19,495 8.
9. Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1563 78,423 9.
a. Loans for purchasing or carrying securities (secured and
unsecured) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1545 2,133 9.a.
b. All other loans (exclude consumer loans) . . . . . . . . . . . . 1564 72,290 9.b.
10. Lease financing receivables (net of unearned income) . . . . . . . 1565 407,467 9.b.
a. Of U.S. addresses (domicile) . . . . . . . . . . . . . . . . . . 2182 407,467 10.a.
b. Of non-U.S. addresses (domicile) . . . . . . . . . . . . . . . . 2183 0 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above . . 2123 0 2123 0 11.
12. Total loans and leases, net of unearned income (sum of items 1
through 10 minus item 11) (total of column A must equal
Schedule RC, item 4.a) . . . . . . . . . . . . . . . . . . . . . . 2122 8,059,761 2122 8,059,761 12.
</TABLE>
16
<PAGE> 63
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-7
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-C -- CONTINUED
PART I. CONTINUED
<CAPTION>
(Column A) (Column B)
Consolidated Domestic
Memoranda Bank Offices
---------------------------- ------------------------------
Dollar Amounts in Thousands RFCD Bil Mil Thou RCON Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above . . 1496 0 1496 0 M.1.
2. Loans and leases restructured and in compliance with modified
terms (included in Schedule RC-C, part I, above):
a. Loans secured by real estate: -------------------------------
(1) To U.S. addresses (domicile) . . . . . . . . . . . . . 1687 49 M.2.a.(1)
(2) To non-U.S. addresses (domicile) . . . . . . . . . . . 1689 0 M.2.a.(2)
b. Loans to finance agricultural production and
other loans to farmers . . . . . . . . . . . . . . . . . . 1613 0 M.2.b
c. Commercial and industrial loans:
(1) To U.S. addresses (domicile) . . . . . . . . . . . . . 1758 4,948 M.2.c.(1)
(2) To non-U.S. addresses (domicile) . . . . . . . . . . . 1759 0 M.2.c.(2)
d. All other loans (exclude loans to individuals for
household, family, and other personal expenditures) . . . 1615 0 M.2.d.
e. Lease financing receivables:
(1) To U.S. addresses (domicile) . . . . . . . . . . . . . 1789 0 M.2.e.(1)
(2) To non-U.S. addresses (domicile) . . . . . . . . . . . 1790 0 M.2.e.(2)
f. Total (sum of memorandum items 2.a thrugh 2.e) . . . . . . 1616 4,997 M.2.f
3. Maturity and repricing date for loans and leases(1)
(excluding those in nonaccrual status):
a. Fixed rate loans and leases with a remaining maturity of:
(1) Three months or less . . . . . . . . . . . . . . . . . 0348 951,703 M.3.a.(1)
(2) Over three months through 12 months . . . . . . . . . 0349 955,793 M.3.a.(2)
(3) Over one year thourgh five years . . . . . . . . . . . 0356 2,202,752 M.3.a.(3)
(4) Over five years . . . . . . . . . . . . . . . . . . . 0357 105,010 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of
Memorandum items 3.a.(1) through 3.a.(4)) . . . . . . 0358 4,215,258 M.3.a.(5)
b. Floating rate loans with repricing frequency of:
(1) Quarterly or more frequently . . . . . . . . . . . . . 4554 3,074,085 M.3.b.(1)
(2) Annually or more frequently, but less frequently
than quarterly . . . . . . . . . . . . . . . . . . . . 4555 341,501 M.3.b.(2)
(3) Every five years or more frequently, but less
frequently than annually . . . . . . . . . . . . . . . 4561 352,752 M.3.b.(3)
(4) Less frequently than every five years . . . . . . . . 4564 31,953 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum
items 3.b.(1) through 3.b.(4)) . . . . . . . . . . . . 4567 3,800,291 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5)
and 3.b.(5)) (must equal sum of total loans and leases,
net, from Schedule RC-C, part I, item 12, plus unearned
income from Schedule RC-C, part I, item 11, minus total
nonaccrual loans and leases from Schedule RC-N, sum of
items 1 through 8, column C) . . . . . . . . . . . . . . . 1479 8,015,549 M.3.c.
4. Loans to finance commerail real estate, construction,
and land development activities (not secured by real
estate) included in Schedule RC-C, part I, items 4 and 9,
column A, page RC-6(2) . . . . . . . . . . . . . . . . . . . 2746 0 M.4.
5. Loans and leases held for sale (included
in Schedule RC-C, part I, above) . . . . . . . . . . . . . . 5369 250,518 M.5
6. Adjustable rate close-end loans secured by ------------------------------
first liens on 1-4 family residential RFCD Bil Mil Thou
properties (included in Schedule RC-C, part I, ------------------------------
item 1.c.(2)(a), column 8, page RC-6 . . . . . . . . . . . . 5370 108,641 M.6.
--------------------------------------------------------------
<FN>
- ----------
(1) Memorandum item 3 is not applicable to savings banks that must complete supplemental Schedule Rc-J.
(2) Exclude loans secured by real estate that are included in Schedule RC-C, pat I, item 1, column A.
</TABLE>
17
<PAGE> 64
<TABLE>
<S> <C> <C>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-7a
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-C--Continued
PART II. Loans to Small Business and Small Farms
Scheduled RC-C, Part II is to be reported only with the June Report of Condition.
Report the number and amount currently outstanding as of June 30 of business loans with "original amounts" of $1,000,000 or less and
farm loans with "original amounts" of $500,000 or less. The following guidelines should be used to determine the "original amount"
of a loan; (1) For loans drawn down under lines of credit loan commitments, the "original amount" of the loan is the size of the
line of credit or loan commitment when the line of credit or loan commitment was most recently approved, extended, or renewed prior
to the report date. However, if the amount currently outstanding as of the report date exceeds this size, the "original amount" is
the amount currently outstanding on the report date. (2) For loan participations and syndications, the "original amount" of the loan
participation or syndication is the entire amount of the credit originated by the lead lender. (3) For all other loans, the
"original amount" is the total amount of the loan at origination or the amount currently outstanding as of the report date,
whichever is larger.
Loans to Small Businesses
1. Indicate in the appropriate box at the right whether all or substantially
all of the bank's "Loans secured by nonfarm nonresidential properties" in C418
domestic offices reported in Schedule RC-C, part I, item 1.e, column B, and all -----
or substantially all of the bank's "Commercial and industrial loans to YES NO
U.S. addresses" in domestic offices reported in Schedule RC-C, part I, ---------------
item 4.a, column B, have original amounts of $100,000 or less (see instructions)....................... 6999 X 1.
--------------------
</TABLE>
If YES, complete items 2.a and 2.b below, skip items 3 and 4, and go to item 5.
If NO, skip items 2.a and 2.b, complete items 3 and 4 below, and go to item 5.
<TABLE>
<CAPTION>
<S> <C>
2. Report the total number of loans currently outstanding for each of the following Number of Loans
following Schedule RC-C, part I, loan categories: -------------------
RCON
----
a: "Loans secured by nonfarm nonresidential properties" in domestic offices
reported in Schedule RC-C, part I, item 1.e, column B ........................... 5562 N/A 2.a
b: "Commercial and industrial loans to U.S. addresses" in domestic offices
reported in Schedule RC-C, part I, item 4.a, column B ........................... 5563 N/A 2.b
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(Column A) (Column B)
Amount
Currently
Number of Loans Outstanding
-------------------------------------------------
Dollars Amounts in Thousands RCON RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------------
3. Number and amount currently outstanding of "Loans secured by nonfarm
nonresidential properties" in domestic offices reported in Schedule RC-C,
part I, item 1.e, column B (sum of items 3.a through 3.c must be less than
or equal to Schedule RC-C, part I, item 1.e, column B):
a. With original amounts of $100,000 or less .................................... 5564 1,437 5565 61,089 3.a.
b. With original amounts of more than $100,000 through $250,000 ................. 5566 1,038 5567 133,067 3.b.
c. With original amounts of more than $250,000 through $1,000,000 ............... 5568 760 5569 292,033 3.c.
4. Number and amount currently outstanding of "Commercial and industrial loans
to U.S. addressess" in domestic offices reported in Schedule RC-C, part I,
item 4.a, column B (sum of items 4.a through 4.c must be less than or equal to
Schedule RC-C, part I, item 4.a, column B):
a. With original amounts of $100,000 or less .................................... 5570 3,764 5571 109,932 4.a.
b. With original amounts of more than $100,000 through $250,000 ................. 5572 1,057 5573 121,833 4.b.
c. With original amounts of more than $250,000 through $1,000,000 ............... 5574 985 5575 339,359 4.c.
</TABLE>
17a
<PAGE> 65
<TABLE>
<S> <C> <C>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-7b
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-C--Continued
PART II. Continued
Agricultural Loans to Small Farms
5. Indicate in the appropriate box at the right whether all or substantially
all of the bank's "Loans secured by farmland (including farm, residential and
other improvements)" in domestic offices reported in Schedule RC-C, part I,
item 1.b, column B, and all or substantially all of the bank's "Loans to
finance agricultural production and other loans to farmers" in domestic
offices reported in Schedule RC-C, part I, item 3, column B YES NO
have original amounts of $100,000 or less (see instructions) ....................................... 6860 X 5.
--------------------
</TABLE>
If YES, complete items 6.a and 6.b below and do not complete items 7 and 8.
If NO, skip items 6.a and 6.b, complete items 7 and 8 below.
<TABLE>
<CAPTION>
<S> <C>
6. Report the total number of loans currently outstanding for each of the following Number of Loans
following Schedule RC-C, part I, loan categories: -------------------
RCON
a: "Loans secured by farmland (including farm residenteal and other improvements)" -----
in domestic offices reported in Schedule RC-C, part I, item 1.b, column B ...... 5576 N/A 6.a
b: "Loans to finance agricultural production and other loans to farmers" in
domestic offices reported in Schedule RC-C, part I, item 3, column B ........... 5577 N/A 6.b
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
(Column A) (Column B)
Amount
Currently
Number of Loans Outstanding
-------------------------------------------------
Dollars Amounts in Thousands RCON RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------------
7. Number and amount currently outstanding of "Loans secured by farmland
(including farm residential and other improvements)" in domestic offices
reported in Schedule RC-C, part I, item 1.b, column B (sum of items 7.a
through 7.c must be less than or equal to Schedule RC-C, part I,
item 1.b, column B):
a. With original amounts of $100,000 or less .................................... 5578 125 5579 5,419 7.a.
b. With original amounts of more than $100,000 through $250,000 ................. 5580 45 5581 5,606 7.b.
c. With original amounts of more than $250,000 through $500,000 ................. 5582 11 5583 2,959 7.c.
8. Number and amount currently outstanding of "Loans to finance agricultural
production and other loans to farmers" in domestic offices reported in
Schedule RC-C, part I, item 3, column B (sum of items 8.a through 8.c must be
less than or equal to Schedule RC-C, part I, item 3, column B):
a. With original amounts of $100,000 or less .................................... 5584 1,337 5585 32,902 8.a.
b. With original amounts of more than $100,000 through $250,000 ................. 5586 157 5587 18,745 8.b.
c. With original amounts of more than $250,000 through $1,000,000 ............... 5588 35 5589 9,380 8.c.
</TABLE>
17b
<PAGE> 66
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-8
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
<CAPTION>
SCHEDULE RC-D -- TRADING ASSETS AND LIABILITIES
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of interest rate, foreign exchange rate, and other commodity and equity contracts (as reported in Schedule RC-L, items 11,
12, and 13).
C420
----
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
1. U.S. Treasury securities in domestic offices .................... RCON 3531 0 1.
2. U.S. Government agency and corporation obligations in domestic
offices (exclude mortgage-backed securities) .................... RCON 3532 0 2.
3. Securities issued by states and political subdivisions in the
U.S. in domestic offices ........................................ RCON 3533 0 3.
4. Mortgage-backed securities in domestic offices:
a. pass-through securities issued or guaranteed by FHLMC, or GNMA RCON 3534 0 4.a.
b. CMOs and REMICs issued by FHMA or FHLMC ...................... RCON 3535 0 4.b.
c. All other .................................................... RCON 3536 0 4.c.
5. Other debt securities in domestic offices ....................... RCON 3537 0 5.
6. Certificates of deposit in domestic offices ..................... RCON 3538 0 6.
7. Commercial paper in domestic offices ............................ RCON 3539 0 7.
8. Bankers acceptances in domestic offices ......................... RCON 3540 1,839 8.
9. Other trading assets in domestic offices ........................ RCON 3541 0 9.
10. Trading assets in foreign offices .............................. RCON 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and
other commodity and equity contracts:
a. In domestic offices ......................................... RCON 3543 0 11.a.
b. In foreign offices .......................................... RCON 3544 0 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal
Schedule RC, item 5) ........................................... RCON 3545 1,839 12.
--------------------------------
Bil Mil Thou
LIABILITIES --------------------------------
13. Liability for short positions .................................. RCON 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate,
and other commodity and equity contracts ....................... RCON 3547 12 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal
Schedule RC, item 15.b) ........................................ RCON 3548 12 15.
--------------------------------
</TABLE>
18
<PAGE> 67
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-9
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-E -- DEPOSIT LIABILITIES
PART I. DEPOSITS IN DOMESTIC OFFICES
<CAPTION> C425
Nontransaction
Transaction Accounts Accounts
------------------------------------------------------------------
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits column A) (including MMDAs)
------------------ ------------------ ------------------
Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
Deposits of:
1. Individuals, partnerships, and corporations . . . . 2201 2,108,005 2240 1,257,839 2346 4,445,285 1.
2. U.S. Government . . . . . . . . . . . . . . . . . . 2202 7,767 2280 7,767 2520 0 2.
3. States and political subdivdisions in the U.S. . . 2203 53,685 2290 53,685 2530 72,208 3.
4. Commercial banks in the U.S. . . . . . . . . . . . 2206 8,354 2310 8,354 4.
a. U.S. branches and agencies of foreign banks . . 2347 0 4.a.
b. Other commercial banks in the U.S. . . . . . . 2348 0 4.b.
5. Other depository institutions in the U.S. . . . . 2207 0 2312 0 2349 0 5.
6. Banks in foreign countries . . . . . . . . . . . . 2213 1,426 2320 1,426 6.
a. Foreign branches of other U.S. banks . . . . . . 2367 0 6.a.
b. Other banks in foreign countries . . . . . . . . 2373 0 6.b.
7. Foreign governments and official institutions
(including foreign central banks) . . . . . . . . . 2216 0 2300 0 2377 0 7.
8. Certified and official checks . . . . . . . . . . 2330 38,308 2330 38,308 8.
9. Total (sum of item 1 through 8) (sum of columns A
and C must equal Schedule RC, item 13.a) . . . . . 2215 2,217,545 2210 1,367,379 2385 4,517,493 9.
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, Column A and C):
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts . . . . . . . . . . . . . 6835 447,226 M.1.a.
b. Total brokered deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2365 9,000 M.1.b.
c. Fully insured brokered deposits (included in Memorndum item 1.b above):
(1) issued in denominations of less than $100,000 . . . . . . . . . . . . . . . . . . . . . . 2343 0 M.1.c.(1)
(2) issued either in denominations of $100,000 or in denominations greater than $100,000
and participated out by the broker in shares of $100,000 or less . . . . . . . . . . . . 2344 9,000 M.1.c.(2)
d. Total deposits denominated in foreign currencies . . . . . . . . . . . . . . . . . . . . . . . 3776 0 M.1.d.
e. Preferred deposists (uninsured deposits of states and political subdivisions in the U.S.
reported in item 3 above which are secured or collateralized as required under state law) . . 5590 125,893 M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must
equal item 9, column C above):
a. Savings deposits:
(1) Money market deposit accounts (MMDAs) . . . . . . . . . . . . . . . . . . . . . . . . . . 6810 792,307 M.2.a.(1)
(2) Other savings deposists (excludes MMDAs) . . . . . . . . . . . . . . . . . . . . . . . . 0352 1,509,126 M.2.a.(2)
b. Total time deposits of less than $100,000 . . . . . . . . . . . . . . . . . . . . . . . . . . 6648 1,999,224 M.2.b.
c. Time certificates of deposit of $100,000 or more . . . . . . . . . . . . . . . . . . . . . . 6645 216,836 M.2.c.
d. Open-account time deposits of $100,000 or more . . . . . . . . . . . . . . . . . . . . . . . 6646 0 M.2.d.
3. All NOW accounts (included in column A above) . . . . . . . . . . . . . . . . . . . . . . . . . 2398 804,771 M.3.
</TABLE>
19
<PAGE> 68
<TABLE>
<CAPTION>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-10
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-E--CONTINUED
PART I. CONTINUED
Memoranda (continued)
Deposit Totals for FDIC Insurance Assesments(1)
Dollar Amounts in Thousands RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4. Total deposits in domestic offices (sum of item 9, column A and item 9, column C)
(must equal Schedule RC, item 13.a)................................................. 2200 6,735,038 M.4.
a. Total demand deposits (must equal item 9, column B)............................. 2210 1,367,379 M.4.a.
b. Total time and savings deposits(2) (must equal item 9, column A plus item 9,
column C minus item 9, column B)................................................ 2350 5,367,659 M.4.b.
- ----------------
<FN>
(1) An amended Certificate Statement should be submitted to the FDIC if the deposit totals reported in this item are
amended after the semiannual Certificate Statement originally covering this report date has been filed with the FDIC.
(2) For FDIC insurance assessment purposes, "total time and savings deposits" consists or nontransactions accounts and
all transaction accounts other than demand deposits.
</TABLE>
<TABLE>
<Captioned>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5. Time deposits of less than $100,000 and open-account time deposits of $100,000 or more
(included in Memorandum items 2.b and 2.d above) with remaining maturity of repricing
frequency of:(1)
a. Three months or less........................................................... 0359 502,782 M.5.a.
b. Over three months through 12 months (but not over 12 months)................... 3644 678,799 M.5.b.
6. Maturity and repricing data for time certificates of deposit of $100,000 or more:(1)
a. Fixed rate time certificates of deposit of $100,000 or more with remaining
maturity of:
(1) Three months or less....................................................... 2761 146,359 M.6.a.(1)
(2) Over three months through 12 months........................................ 2762 51,525 M.6.a.(2)
(3) Over one year through five years........................................... 2763 18,952 M.6.a.(3)
(4) Over five years............................................................ 2765 0 M.6.a.(4)
(5) Total fixed rate time certificates of deposit of $100,000 or more (sum of
Memorandum items 6.a.(1) through 6.a.(4)).................................. 2767 216,836 M.6.a.(5)
b. Floating rate time certificates of deposit of $100,000 or more with a repricing
frequency of:
(1) Quarterly or more frequently............................................... 4568 0 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly............ 4569 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually..... 4571 0 M.6.b.(3)
(4) Less frequently than every five years...................................... 4572 0 M.6.b.(4)
(5) Total floating rate time certificates of deposit of $100,000 or more (sum of
Memorandum items 6.b.(1) through 6.b.(4)).................................. 4573 0 M.6.b.(5)
c. Total time certificates of deposit of $100,000 or more (sum of Memorandum items
6.a.(5) and 6.b.(5)) (must equal Memorandum item 2.c. above)................... 6645 216,836 M.6.c
- ---------------
<FN>
(1) Memorandum items 5 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
</TABLE>
20
<PAGE> 69
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-11
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-E--CONTINUED
PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND
AGREEMENT SUBSIDIARIES AND IBFS)
<CAPTION>
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Deposits of:
1. Individuals, partnerships, and corporations................... 2621 183,792 1.
2. U.S. banks (including IBFs and foreign branches of U.S.
banks)........................................................ 2623 208,820 2.
3. Foreign banks (including U.S. branches and
agencies of foreign banks, including their IBFs).............. 2625 0 3.
4. Foreign governments and official institutions
(including foreign central banks)............................. 2650 0 4.
5. Certified and official checks................................. 2330 0 5.
6. All other deposits............................................ 2668 100,000 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC,
item 13.b).................................................... 2200 492,612 7.
</TABLE>
<TABLE>
SCHEDULE RC-F--OTHER ASSETS
<CAPTION>
C430
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Income earned, not collected on loans......................... RCFD 2164 45,254 1.
2. Net deferred tax assets(1).................................... RCFD 2148 65,202 2.
3. Excess residential mortgage servicing fees receivable......... RCFD 5371 15,718 3.
4. Other (itemize amounts that exceed 25% of this item).......... RCFD 2168 141,793 4.
a. TEXT 3549 RCFD 3549 4.a.
b. TEXT 3550 RCFD 3550 4.b.
c. TEXT 3551 RCFD 3551 4.c.
5. Total (sum of items 1 through 4) (must equal
Schedule RC, item 11)......................................... RCFD 2160 268,967 5.
</TABLE>
<TABLE>
MEMORANDUM
<CAPTION> C430
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Deferred tax assets disallowed for regulatory
capital purposes.............................................. RCFD 5610 M.1.
</TABLE>
<TABLE>
SCHEDULE RC-G--OTHER LIABILITIES
<CAPTION>
C435
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. a. Interest accrued and unpaid on deposits in
domestic offices(2)........................................... RCOM 3645 20,732 1.a.
b. Other expenses accrued and unpaid (includes accrued income
taxes payable)................................................ RCFD 3646 93,731 1.b.
2. Net deferred tax liabilities(1)............................... RCFD 3049 0 2.
3. Minority interest in consolidated subsidiaries................ RCFD 3000 (539) 3.
4. Other (itemize amounts that exceed 25% of this item).......... RCFD 2938 46,296 4.
a. TEXT 3552 Deferred gains - swap derivatives RCFD 3552 22,995 4.a.
b. TEXT 3553 RCFD 3553 4.b.
c. TEXT 3554 RCFD 3554 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC,
item 20)...................................................... RCFD 2930 160,220 5.
<FN>
- ----------
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
</TABLE>
21
<PAGE> 70
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-12
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES
<CAPTION>
C440
----
Domestic Offices
----------------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Customers' liability to this bank on acceptances
outstanding.................................................. 2155 63,082 1.
2. Bank's liability on acceptances executed and outstanding..... 2920 63,082 2.
3. Federal funds sold and securities purchased under
agreements to resell......................................... 1350 477,330 3.
4. Federal funds purchased and securities sold under
agreements to repurchase..................................... 2800 768,674 4.
5. Other borrowed money......................................... 2850 1,544,362 5.
EITHER
6. Net due from own foreign offices, Edge and Agreement
subsidiaries, and IBFs....................................... 2163 N/A 6.
OR
7. Net due to own foreign offices, Edge and Agreement
subsidiaries, and IBFs....................................... 2941 493,873 7.
8. Total assets (excludes net due from foreign offices, Edge
and Agreement subsidiaries, and IBFs)........................ 2192 10,873,828 8.
9. Total liabilities (excludes net due to foreign offices, Edge
and Agreement subsidiaries, and IBFs)........................ 3129 9,521,184 9.
</TABLE>
<TABLE>
Items 10-17 include held-to-maturity and available-for-sale securities in domestic offices.
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10. U.S. Treasury securities..................................... 1779 719,680 10.
11. U.S. Government agency and corporation obligations
(exclude mortgage-backed securities)......................... 1785 337,131 11.
12. Securities issued by states and political subdivisions
in the U.S. ................................................. 1786 65,548 12.
13. Mortgage-backed securities:
a. Pass-through securities:
(1) Issued or guaranteed by FNMA, FHLNC, or GNMA.......... 1787 20,203 13.a.(1)
(2) Privately-issued...................................... 1869 0 13.a.(2)
b. CMOs and REMICs:
(1) Issued by FNMA and FHLMC.............................. 1877 118,449 13.b.(1)
(2) Privately-issued...................................... 2253 0 13.b.(2)
14. Other domestic debt securities............................... 3159 108,618 14.
15. Foreign debt securities...................................... 3160 2,500 15.
16. Equity securities:
a. Investments in mutual funds............................... 3161 3,132 16.a.
b. Other equity securities with readily determinable
fair values............................................... 3162 12 16.b.
c. All other equity securities............................... 3169 5,877 16.c.
17. Total held-to-maturity and available-for-sale securities
(sum of items 10 through 16)................................. 3170 1,381,150 17.
</TABLE>
<TABLE>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EITHER
1. Net due from the IBF of the domestic offices of the
reporting bank............................................... 3051 N/A M.1.
OR
2. Net due to the IBF of the domestic offices of the
reporting bank............................................... 3059 N/A M.2.
</TABLE>
22
<PAGE> 71
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-13
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-I -- SELECTED ASSETS AND LIABILITIES OF IBFs
<CAPTION>
To be completed only by banks with IBfs and other ''foreign'' offices.
C445
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12) . . . . . . . . 2133 N/A 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, item 12,
column A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2076 N/A 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4, column A) 2077 N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21) . . . . . . . . . . . . . . . . . . 2898 N/A 4.
5. IBF deposit liabilities due to banks, including other IBfs (component of Schedule RC-E,
part II, items 2 and 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2379 N/A 5.
6. Other IBf deposit liabilities (component of Schedule RC-E, part II, items 1, 4, 5, and 6) . . 2381 N/A 6.
</TABLE>
<TABLE>
SCHEDULE RC-K -- QUARTERLY AVERAGES (1)
<CAPTION>
C455
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest-bearing balances due from depository institutions . . . . . . . . . . . . . . . RCFD 3381 250 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2) . . . RCFD 3382 1,327,001 2.
3. Securities issued by states and political subdivisions in the U.S.(2) . . . . . . . . . . RCFD 3383 72,765 3.
4. a. Other debt securities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3647 121,507 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve stock) RCFD 3648 9,021 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs . . . . . . . RCFD 3365 372,129 5.
6. Loans:
a. Loans in domestic offices:
(1) Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3360 7,614,167 6.a.(1)
(2) Loans secured by real estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3385 2,798,582 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers . . . . . . . . RCON 3386 57,512 6.a.(3)
(4) Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3387 2,029,438 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures . . . . RCON 3388 2,596,454 6.a.(5)
(6) Obligations (other than securities and leases) of states and political subdivisions
in the U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3389 22,800 6.a.(6)
b. Total loans in foreign offices, Edge and Agreement subdivisions, and IBFs . . . . . . . RCFM 3360 0 6.b.
7. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3401 3,171 7.
8. Lease financing receivables (net of unearned income) . . . . . . . . . . . . . . . . . . . RCFD 3484 398,308 8.
9. Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3368 10,843,891 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts,
and telephone and preauthorized transfer accounts) (exclude demand deposits) . . . . . . . RCON 3485 881,224 10.
11. Nontransaction accounts in domestic offices:
a. Money market deposit accounts (MMDAs) . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3486 811,280 11.a.
b. Other savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3487 1,574,636 11.b.
c. Time certificates of deposit of $100,000 or more . . . . . . . . . . . . . . . . . . . RCON 3345 212,788 11.c.
d. All other time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3469 1,950,088 11.d.
12. interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs RCFM 3404 392,504 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs . . . . . . . RCFD 3353 796,513 13.
14. Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3355 1,579,189 14.
<FN>
- --------
(1) For all items, banks have the option of reporting either (1) an average of daily figures for the quarter, or (2) an average
of weekly figures (i.e., the Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized cost.
(3) Quarterly averages for all equity securities should be based on historical cost.
</TABLE>
23
<PAGE> 72
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-14
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-L -- OFF-BALANCE SHEET ITEMS
<CAPTION>
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk.
C460
Dollar Amounts in Thousands RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Unused commitments:
a. Revolving open-end lines secured by 1-4 family residential properties, e.g., home equity
lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3814 684,181 1.a
b. Credit card lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3815 1,197,252 1.b.
c. Commercial real estate, construction, and land development:
(1) Commitments to fund loans secured by real estate . . . . . . . . . . . . . . . . . . . 3816 43,120 1.c.(1)
(2) Commitments to fund loans not secured by real estate . . . . . . . . . . . . . . . . . 6550 0 1.c.(2)
d. Securities underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3817 0 1.d.
e. Other unused commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3818 1,898,796 1.e.
2. Financial standby letters of credit and foreign office guarantees . . . . . . . . . . . . . . 3819 341,053 2.
a. Amount of financial standby leters of credit conveyed to others RCFD 3820 39,334 2.a.
3. Performance standby letters of credit and foreign office guarantees . . . . . . . . . . . . . 3821 20,984 3.
a. Amount of performance standby letters of credit conveyed to others RCFD 3822 3,915 3.a.
4. Commercial and similar letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 3411 150,357 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by the
reporting bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting
(nonaccepting) bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3429 0 6.
7. Securities borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is idemnified against
loss by the reporting bank) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3433 0 8.
9. Mortgages transferred (i.e., sold or swapped) with recourse that have been treated as sold for
Call Report purposes:
a. FNMA and FHLMC residential mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report date . . . . . 3650 25,535 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date . . . . . . . . . 3651 25,535 9.a.(2)
b. Private (nongovernment-issued or guaranteed) residential mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report date . . . . . 3652 0 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date . . . . . . . . . 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools:
(1) Outstanding principal balance of mortgages transferred as of the report date . . . . . 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date . . . . . . . . . 3655 0 9.c.(2)
10. When-issued securities:
a. Gross commitments to purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3434 0 10.a
b. Gross commitments to sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3435 0 10.b.
11. Interest rate contracts (exclude when-issued securities):
a. Notional value of interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . 3450 8,051,761 11.a
b. Future and forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3823 1,098,068 11.b
c. Option contracts (e.g., options on Treasuries):
(1) Written option contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3824 361,300 11.c.(1)
(2) Purchased option contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3825 797,800 11.c.(2)
12. Foreign excxhange rate contracts:
a. Notional value of exchange swaps (e.g., cross-currency swaps) . . . . . . . . . . . . . . . 3826 0 12.a.
b. Commitments to purchase foreign currencies and U.S. dollar exchange (spot, forward,
and future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3415 8,111 12.b.
c. Option contracts (e.g., options on foreign currency:
(1) Written option contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3827 0 12.c.(1)
(2) Purchased option contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3828 0 12.c.(2)
</TABLE>
24
<PAGE> 73
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-15
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-L--Continued
<CAPTION>
C461
----
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
13. Contracts on other commodities and equities:
a. National value of other swaps (e.g., oil swaps)................................ 3829 0 13.a.
b. Futures and forward contracts (e.g., stock index and commodity--precious metals,
wheat, cotton, livestock--contracts)........................................... 3830 0 13.b.
c. Option contracts (e.g., options on commodities, individual stocks and stock
indexes):
(1) Written option contracts................................................... 3831 0 13.c.(1)
(2) Purchased option contracts................................................. 3832 0 13.c.(2)
14. All other off-balance sheet liabilities (itemize and describe each component of this
item over 25% of Schedule RC, item 28, "Total equity capital")..................... 3430 0 14.
a. TEXT 3555 _______________________________________________RCFD 3555 14.a.
b. TEXT 3556 _______________________________________________RCFD 3556 14.b.
c. TEXT 3557 _______________________________________________RCFD 3557 14.c.
d. TEXT 3558 _______________________________________________RCFD 3558 14.d.
15. All other off-balance sheet assets (itemize and describe each component of this item
over 25% of Schedule RC, item 28, "Total equity capital").......................... 5591 0 15.
a. TEXT 5592 _______________________________________________RCFD 5592 15.a.
b. TEXT 5593 _______________________________________________RCFD 5593 15.b.
c. TEXT 5594 _______________________________________________RCFD 5594 15.c.
d. TEXT 5595 _______________________________________________RCFD 5595 15.d.
</TABLE>
<TABLE>
Memoranda
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Not applicable
2. Not applicable
3. Unused commitments with an original maturity exceeding one year that are reported in
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of
commitments that are fee paid or otherwise legally binding)........................ 3833 333,822 M.3.
a. Participations in commitments with an original maturity exceeding one year
conveyed to others...................................... RCFD 3834 112,478 M.3.a.
4. To be completed only by banks with $1 billion or more in total assets:
Standby letters of credit and foreign office guarantees (both financial and
performance) issued to non-U.S. addresses (domicile) included in Schedule RC-L,
items 2 and 3, above.............................................................. 3377 60 M.4.
5. To be completed for the September report only:
Installment loans to individuals for household, family, and other personal expenditures
that have been securitized and sold without recourse (with servicing retained), amounts
outstanding by type of loan:
a. Loans to purchase private passenger automobiles............................... 2741 N/A M.5.a.
b. Credit cards and related plans................................................ 2742 N/A M.5.b.
c. All other consumer installment credit (including mobile home loans)........... 2743 N/A M.5.d.
</TABLE>
25
<PAGE> 74
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-16
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-M -- MEMORANDA
<CAPTION>
C465 <-
----
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers,
directors, principal shareholders, and their related interests as of
the report date:
a. Aggregate amount of all extensions of credit to all executive
officers, directors, principal shareholders, and their related
interests.......................................................... 6164 97,823 1.a.
b. Number of executive officers, directors, and principal shareholders
to whom the amount of all extensions of credit by the reporting bank
(including extensions of credit to related interests) equals or exceeds
the lesser of $500,000 or 5 percent of total capital Number
as defined for this purpose in agency regulations. RCFD 6165 12 1.b.
2. Federal funds sold and securities purchased under agreements to resell
with U.S. branches and agencies of foreign banks(1) (included in
Schedule RC, items 3.a and 3.b)....................................... 3405 0 2.
3. Not applicable.
4. Outstanding principal balance of 1-4 family residential mortgage loans
serviced for others (include both retained servicing and purchased
servicing):
a. Mortgages serviced under a GNMA contract........................... 5500 562,206 4.a.
b. Mortgages serviced under a FHLMC contract:
(1) Serviced with recourse to servicer............................. 5501 13,513 4.b.(1)
(2) Serviced without recourse to servicer.......................... 5502 1,503,926 4.b.(2)
c. Mortgages serviced under a FNMA contract:
(1) Serviced under a regular option contract....................... 5503 15,312 4.c.(1)
(2) Serviced under a special option contract....................... 5504 3,524,432 4.c.(2)
d. Mortgages serviced under other servicing contracts................. 5505 1,072,504 4.d.
5. To be completed only by banks with $1 billion or more in total assets:
Customers' liability to this bank on acceptances outstanding (sum of items
5.a and 5.b must equal Schedule RC, item 9):
a. U.S. addressees (domicile)......................................... 2103 63,082 5.a.
b. Non-U.S. addressees (domicile)..................................... 2104 0 5.b.
6. Intangible assets:
a. Mortgage servicing rights.......................................... 3164 34,550 6.a.
b. Other identifiable intangible assets:
(1) Purchased credit card relationships............................ 5506 3,590 6.b.(1)
(2) All other identifiable intangible assets....................... 5507 3,239 6.b.(2)
c. Goodwill........................................................... 3163 16,157 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC,
item 10)........................................................... 2143 57,536 6.d.
e. Intangible assets that have been grandfathered for regulatory
capital purposes................................................... 6442 0 6.e.
</TABLE>
<TABLE>
<CAPTION>
YES NO
---------------------------
<S> <C> <C> <C> <C> <C> <C>
7. Does your bank have any mandatory convertible debt that is part
of your Tier 2 capital?............................................... 6167 X 7.
If yes, complete items 7.a through 7.e: RCFD Bil Mil Thou
---------------------------
a. Total equity contract notes, gross................................... 3290 N/A 7.a.
b. Common or perpetual preferred stock dedicated to redeem the above
notes................................................................ 3291 N/A 7.b.
c. Total equity commitment notes, gross................................. 3293 N/A 7.c.
d. Common or perpetual preferred stock dedicated to redeem the above
notes................................................................ 3294 N/A 7.d.
e. Total (item 7.a minus 7.b plus 7.c minus 7.d)........................ 3295 N/A 7.e.
<FN>
- ----------
(1) Do NOT report federal funds sold and securities purchased under agreements to resell with other
commercial banks in the U.S. in this item.
</TABLE>
26
<PAGE> 75
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-17
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-M -- CONTINUED
<CAPTION>
Dollar Amounts in Thousands Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8. a. Other real estate owned:
(1) Direct and indirect investments in real estate ventures........ RCFD 5372 0 8.a.(1)
(2) All other real estate owned:
(a) Construction and land development in domestic offices...... RCON 5508 25,004 8.a.(2)(a)
(b) Farmland in domestic offices............................... RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices...... RCON 5510 2,477 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in
domestic offices........................................... RCON 5511 8,704 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices...... RCON 5512 17,849 8.a.(2)(e)
(f) In foreign offices......................................... RCFD 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule
RC, item 7).................................................... RCFD 2150 54,034 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies:
(1) Direct and indirect investments in real estate ventures........ RCFD 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and
associated companies........................................... RCFD 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal schedule RC,
item 8)........................................................ RCFD 2130 0 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated
companies.......................................................... RCFD 5376 0 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in
Schedule RC, item 23, "Perpetual preferred stock and related
surplus".............................................................. RCFD 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the quarter
(include proprietary, private label, and third party mutual funds):
a. Money market funds................................................. RCON 6441 62,206 10.a.
b. Equity securities funds............................................ RCON 8427 6,228 10.b.
c. Debt securities funds.............................................. RCON 8428 6,042 10.c.
d. Other mutual funds................................................. RCON 8429 6,950 10.d.
e. Annuities.......................................................... RCON 8430 5,465 10.e.
</TABLE>
<TABLE>
<CAPTION>
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Interbank holdings of capital instruments (to be completed for
the December report only):
a. Reciprocal holdings of banking organizations' capital
instruments........................................................ 3836 N/A M.1.a.
b. Nonreciprocal holdings of banking organizations' capital
instruments........................................................ 3837 N/A M.1.b.
</TABLE>
27
<PAGE> 76
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-18
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-N -- PAST DUE AND NONACCRUAL LOANS, LEASES, AND OTHER ASSETS
The FFIEC regards the information reported in all
of Memorandum item 1, in items 1 through 10,
column A, and in Memorandum items 2 through 4,
column A, as confidential.
<CAPTION> C470<-
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
------------------ ------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addressees (domicile) . . . . . . . . . . 1246 14,519 1247 25,432 1.a.
b. To non-U.S. addressees (domicile) . . . . . . . . 1249 0 1250 0 1.b.
2. Loans to depository institutions and acceptances
of other banks:
a. To U.S. banks and other U.S. depository
institutions . . . . . . . . . . . . . . . . . . 5378 0 5379 0 2.a.
b. To foreign banks . . . . . . . . . . . . . . . . 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and
other loans to farmers . . . . . . . . . . . . . . . 1597 5 1583 358 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile) . . . . . . . . . . 1252 2,676 1253 18,413 4.a.
b. To non-U.S. addressees (domicile) . . . . . . . . 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and
other personal expenditures:
a. Credit cards and related plans . . . . . . . . . 5384 973 5385 0 5.a.
b. Other (includes single payment, installment,
and all student loans) . . . . . . . . . . . . . 5387 1,507 5388 9 5.b.
6. Loans to foreign governments and official
institutions . . . . . . . . . . . . . . . . . . . . 5390 0 5391 0 6.
7. All other loans . . . . . . . . . . . . . . . . . . 5460 0 5461 0 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile) . . . . . . . . . 1258 103 1259 0 8.a.
b. Of non-U.S. addressees (domicile) . . . . . . . . 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude other
real estate owned and other repossessed assets) . . 3506 0 3507 0 9.
=================================================================================================================================
</TABLE>
Amounts reported in items 1 through 8 above include guaranteed and
unguaranteed portions of past due and nonaccrual loans and leases.
Report in item 10 below certain guaranteed loans and leases that have already
been included in the amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10. Loans and leases reported in items 1
through 8 above which are wholly or partially
guaranteed by the U.S. Government . . . . . . . . . 5613 4,687 5614 465 10.
a. Guaranteed portion of loans and leases
included in item 10 above . . . . . . . . . . . 5616 4,660 5617 331 10.a.
</TABLE>
28
<PAGE> 77
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-19
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-N -- CONTINUED
<CAPTION> C473
---------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
Memoranda accruing accruing
--------------------- --------------------- ---------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Restructured loans and leases included in
Schedule RC-N, items 1 through 8, above ........ 1659 0 1661 0 M.1.
2. Loans to finance commercial real estate,
construction, and land development activities
(not secured by real estate) included in Schedule
RC-N, items 4 and 7, above ..................... 6559 0 6560 0 M.2.
3. Loans secured by real estate in domestic offices RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
(included in Schedule RC-N, item 1, above):
a. Construction and land development ........... 2769 388 3492 18,182 M.3.a.
b. Secured by farmland ......................... 3494 0 3495 0 M.3.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4
family residential properties and extended
under lines of credit ................... 5399 929 5400 0 M.3.c.(1)
(2) All other loans secured by 1-4 family
residential properties .................. 5402 10,141 5403 4,427 M.3.c.(2)
d. Secured by multifamily (5 or more)
residential properties ...................... 3500 0 3501 0 M.3.d.
e. Secured by nonfarm nonresidential properties. 3503 3,061 3504 2,823 M.3.e.
---------------------------------------------------------------------
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
--------------------- ---------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou
---------------------------------------------
4. Interest rate, foreign exchange rate,
and other commodity and equity contracts:
a. Book value of amounts carried as assets ..... 3528 0 M.4.a.
b. Replacement cost of contracts with a
positive replacement cost .................. 3530 0 M.4.b.
----------------------------------------------
</TABLE>
29
<PAGE> 78
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-20
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
<CAPTION>
SCHEDULE RC-O -- OTHER DATA FOR DEPOSIT INSURANCE ASSESSMENTS
An amended Certified Statement should be submitted to the FDIC if the amounts reported in items 1 through 10 of this schedule are
amended after the semiannual Certified Statement originally covering this report date has been filed with the FDIC.
C475
----
Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Unposted debits (see instructions):
a. Actual amount of all unposted debits ................................................. 0030 0 1.a.
OR
b. Separate amount of unposted debits:
(1) Actual amount of unposted debits to demand deposits .............................. 0031 N/A 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) ................. 0032 N/A 1.b.(2)
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits ................................................ 3510 10,882 2.a.
OR
b. Separate amount of unposted credits:
(1) Actual amount of unposted credits to demand deposits ............................. 3512 N/A 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) ................ 3514 N/A 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total
deposits in domestic offices) ........................................................... 3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in
Puerto Rico and U.S. territories and possessions (not included in total deposits):
a. Demand deposits of consolidated subsidiaries ......................................... 2211 5,488 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries ............................ 2351 0 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries ................. 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions:
a. Demand deposits in insured branches (included in Schedule RC-E, Part II) ............. 2229 0 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, (Part II). 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches (included in
Schedule RC-G, item 1.b) .............................................................. 5515 0 5.c.
Item 6 is not applicable to state nonmember banks that have not been authorized by the
Federal Reserve to act as pass-through correspondents.
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on
behalf of its respondent depository institutions that are also reflected as deposit
liabilities of the reporting bank:
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I,
Memorandum item 4.a) ................................................................. 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I,
Memorandum item 4.b) ................................................................. 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1)
a. Unamortized premiums ................................................................. 5516 2,265 7.a.
b. Unamortized discounts ................................................................ 5517 0 7.b.
- ---------------------------------------------------------------------------------------------------------------------------
8. To be completed by banks with "Oakar deposits."
Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of
the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s)). 5518 496,123 8.
- ---------------------------------------------------------------------------------------------------------------------------
9. Deposits in lifeline accounts ........................................................... 5596 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total
deposits in domestic offices) ........................................................... 8432 0 10.
<FN>
- ----------
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction accounts and all transaction
accounts other than demand deposits.
</TABLE>
30
<PAGE> 79
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-21
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: |0|6|5|6|0|
-----------
SCHEDULE RC-O--CONTINUED
<CAPTION>
Memoranda (to be completed each quarter except as noted)
Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum
items 1.a.(1) and 1.b.(1) must equal Schedule RC, item 13.a):
a. Deposit accounts of $100,000 or less:
(1) Amount of deposit accounts of $100,000 or less ....................... 2702 5,056,755 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number
completed for the June report only) ..................... RCON 3779 926,469 M.1.a.(2)
b. Deposit accounts of more than $100,000: M.1.b.(2)
(1) Amount of deposit accounts of more than $100,000 ........ Number 2710 1,678,283 M.1.b.(2)
(2) Number of deposit accounts of more than $100,000 ........ RCON 2722 5,503
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying
the number of deposit accounts of more than $100,000 reported in Memorandum
item 1.b.(2) above by $100,000 and subtracting the result from the amount of
deposit accounts of more than $100,000 reported in Memorandum 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method
or procedure for determining a better estimate of uninsured deposits than the YES NO
estimate described above ................................................. 6861 X M.2.a.
b. If the box marked YES has been checked, report the estimate of uninsured RCON Bil Mil Thou
deposits determined by using your bank's method or procedure ............. 5597 N/A M.2.b.
________________________________________________________________________________________________________________________________
Person to whom questions about the Reports of Condition and Income should be directed: C477 <-
David E. Stumbaugh, Corporate Accountant 1 (614) 480-4847
- -------------------------------------------------------------------------- --------------------------------------
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
31
<PAGE> 80
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-22
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-R--RISK-BASED CAPITAL
<CAPTION>
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1993, must complete items 2 through 9 and Memorandum item 1. Banks with assets of less than $1 billion must
complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
1. Test for determining the extent to which schedule RC-R must be completed. To be completed
only by banks with total assets of less than $1 billion. Indicate in the appropriate C480 <-
box at the right whether the bank has total capital greater than or equal to eight percent YES NO
of adjusted total assets ...................................................... RCFD 6056 1.
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government
agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan
and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked
NO has been checked, the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight
percent or that the bank is not in compliance with the risk-based capital guidelines.
(Columm A) (Column B)
Subordinated Debt (1) Other
and Intermediate Limited-
Term Preferred Life Capital
Items 2 and 3 are to be completed by all banks. Stock Instruments
------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2. Subordinated debt(1) and other limited-life capital
instruments (original weighted average maturity of
at least five years) with a remaining maturity of:
a. One year or less ..................................... 3780 0 3786 0 2.a.
b. Over one year through two years ...................... 3781 0 3787 0 2.b.
c. Over two years through three years ................... 3782 0 3788 0 2.c.
d. Over three years through four years .................. 3783 0 3789 0 2.d.
e. Over four years through five years ................... 3784 0 3790 0 2.e.
f. Over five years ...................................... 3785 249,119 3791 0 2.f.
3. Total qualifying capital (i.e., Tier 1 and Tier 2 capital) allowable under the risk-based RCFD Bil Mil Thou
capital guidelines ...................................................................... 3792 1,213,734 3.
(Column A) (Column B)
Items 4-9 and Memorandum item 1 are to be completed Assets Credit Equiv-
by banks that answered NO to item 1 above and Recorded alent Amount
by banks with total assets of $1 billion or more. on the of Off-Balance
Balance Sheet Sheet Items(2)
RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet
items assigned to the Zero percent risk category:
a. Assets recorded on the balance sheet:
(1) Securities issued by, other claims on, and claims
unconditionally guaranteed by, the U.S. Government
and its agencies and other OECD central
governments ...................................... 3794 743,946 4.a.(1)
(2) All other ........................................ 3795 183,969 4.a.(2)
b. Credit equivalent amount of off-balance sheet items .. 3796 0 4.b.
<FN>
- ----------------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.e, "Total."
(2) Do not report in column B the risk-weighted amount of assets reported in column A.
</TABLE>
32
<PAGE> 81
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-23
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
SCHEDULE RC-R--CONTINUED
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded lent Amount
on the of Off-Balance
Balance Sheet Sheet Items (1)
----------------- -----------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items
assigned to the 20 percent risk category:
a. Assets recorded on the balance sheet:
(1) Claims conditionally guaranteed by the U.S. Government and its
agencies and other OECD central government.......................... 3,798 44,397 5.a.(1)
(2) Claims collaterized by securities issued by the U.S. Govern-
ment and its agencies and other OECD central governments; by
securities issued by U.S. government-sponsored agencies; and
by cash on deposit.................................................. 3,799 4,694 5.a.(2)
(3) All other........................................................... 3,800 1,383,353 5.a.(3)
b. Credit equivalent amount of off-balance sheet items....................... 3,801 47,880 5.b.
6. Assets and credit eqivalent amounts of off-balance sheet items
assigned to the 50 percent risk category:
a. Assets recorded on the balance sheet...................................... 3,802 707,039 6.a.
b. Credit equivalent amount of off-balance sheet items....................... 3,803 41,768 6.b.
7. Assets and equivalent amounts of off-balance sheet items
assigned to the 100 percent risk category:
a. Assets recorded on the balance sheet...................................... 3,804 7,978,842 7.a.
b. Credit equivalent amount of off-balance sheet items....................... 3,805 1,050,527 7.b.
8. On-balance sheet asset values excluded from the calculation of the
risk-based capital ratio (2)................................................. 3,806 (12,724) 8.
9. Total assets recorded on the balance sheet (sum of
items 4.a., 5.a., 6.a., 7.a., and 8, column A) (must equal Schedule RC,
item 12 plus items 4.b. and 4.c)............................................. 3,807 11,035,516 9.
</TABLE>
<TABLE>
Memorandum
<CAPTION>
(Column A) (Column B)
Notional Replacement
Principal Cost
Value (Market Value)
----------------- -----------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Notional principal value and replacement cost of interest rate and
foreign exchange rate contracts (in column B, report only those
contracts with a positive replacement cost):
a. Interest rate contracts (exclude future contracts)....................... 3,808 40,671 M.1.a
(1) With a remaining maturity of one year or less....................... 3,809 1,966,768 M.1.a.(1)
(2) With a reamining maturity of over one year.......................... 3,810 4,672,161 M.1.a.(2)
b. Foreign exchange rate contracts (exclude contracts with an original
maturity of 14 days or less and future contracts)....................... 3,811 0 M.1.b.
(1) With a remaining maturity of one year or less....................... 3,812 8,111 M.1.b.(1)
(2) With a remaining maturity of over one year.......................... 3,813 0 M.1.b.(2)
- ---------------
(1) Do not report in column B the risk-weighted amount of assets reported in column A.
(2) Until a final rule on the regulatory capital treatment of the net unrealized holding gains (losses) on available-for-sale
securites that is applicable to the reporting bank has taken effect, a bank that has adopted FASB Statement No. 115 should
include the difference between the fair value and the amortized cost of its available-for-sale securities in item 8 and report
the amortized cost of these securities in items 4 through 7 above. Item 8 also includes on-balance sheet asset values (or
portions thereof) of off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g.
future contracts) not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables as well as
any portion of the allowance for loan and lease losses in excess of the amount that may be included in Tier 2 capital.
</TABLE>
33
<PAGE> 82
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610 FFIEC 031
Address: P.O. Box 1558 Page RC-24
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS
REPORTED IN THE REPORTS OF CONDITION AND INCOME
at close of business on June 30, 1994
<S> <C> <C>
The Huntington National Bank Columbus , Ohio
- ---------------------------------------------------- -------------------------------------- -------------------------------
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief narrative statement on the amounts reported in the Reports of
Condition and Income. This optional statement will be made available to the public, along with the publicly available data in the
Reports of Condition and Income, in response to any request for individual bank report data. However, the information reported in
column A and in all of Memorandum item 1 of Schedule RC-N is regarded as confidential and will not be released to the public. BANKS
CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF
INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR ANY OTHER INFORMATION
THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a
statment may check the "No comment" box below and should make no entries of any kind in the space provided for the narrative
statement; i.e., DO NOT enter in this space such phrases as "No statement," "Not applicable," "N/A," "No comment," and "None."
The optional statement must be entered on this sheet. The statement should not exceed 100 words. Further, regardless of the number
of words, the statement must not exceed 750 characters, including punctuation, indentation, and standard spacing between words and
sentences. If any submission should exceed 750 characters, as defined, it will be truncated at 750 characters with no notice to the
submitting bank and the truncated statement will appear as the bank's statement both on agency computerized records and in
computer-file releases to the public.
All information furnished by the bank in the narrative statement must be accurate and not misleading. Appropriate efforts shall be
taken by the submitting bank to ensure the statement's accuracy. The statement must be signed, in the space provided below, by a
senior officer of the bank who thereby attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for the data reported in the Reports of Condition and
Income, the existing narrative statement will be deleted from the files, and from disclosure; the bank, at its option, may replace
it with a statement, under signature, appropriate to the amended data.
The optional narrative statement will appear in agency records and in release to the public exactly as submitted (or amended as
described in the preceding paragraph) by the management of the bank (except for the truncation of statements exceeding the
750-character limit described above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED
THE ACCURACY OF THE INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE OF THE OPTIONAL
STATEMENT SUBMITTED BY THE MANAGEMENT OF THE REPORTING BANK.
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
No comment /X/ (RCOM 6979) C471 C472
-----------------------------
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
--------------------------------------------- -----------------------
Signature of Executive Officer of Bank Date of Signature
</TABLE>
34
<PAGE> 83
<TABLE>
Legal Title of Bank: The Huntington National Bank Call Date: 6/30/94 ST-BK: 39-1610
Address: P.O. Box 1558
City, State Zip: Columbus, OH 43216
FDIC Certificate No.: 0 6 5 6 0
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BANK OMB No. for OCC: 1557-0081
OMB No. For FDIC: 3064-0052
OMB No. For Federal Reserve: 7100-0036
Expiration Date: 2/28/95
PLACE LABEL HERE SPECIAL REPORT
(Dollar Amounts in Thousands)
---------------------------------------------------------------------
CLOSE OF BUSINESS FDIC CERTIFICATE NUMBER
DATE C-700
6/30/94 0 6 5 6 0
- -----------------------------------------------------------------------------------------------------------------------------------
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- -----------------------------------------------------------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of the Report of Condition.
With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of credit to their
executive officers made since the date of the previous Report of Condition. Data regarding individual loans or other extensions of
credit are not required. If no such loans or other extensions of credit were made during the period, insert "none" against subitem
(a). (Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.) See Sections 215.2 and 215.3
of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation 0) for the definitions of "executive officer" and
"extension of credit," respectively. Exclude loans and other extensions of credit to directors and principal shareholders who are
not executive officers.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
a. Number of loans made to executive officers since the previous Call Report date................... RCFD 3561 0 a.
b. Total dollar amount of above loans (in thousands of dollars)..................................... RCFD 3562 0 b.
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75).................................... RCFD 7701 0.00 % to RCFD 7702 0.00 % c.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year)
- -----------------------------------------------------------------------------------------------------------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER (TEXT 8904)
David E. Stumbaugh, Corporate Accountant 1 (614) 480-4847
- -----------------------------------------------------------------------------------------------------------------------------------
FDIC 8040/53 (12-92)
</TABLE>
35
<PAGE> 84
ITEM 16
EXHIBIT 8
None. Trustee is not a foreign trustee.
<PAGE> 85
ITEM 16
EXHIBIT 9
None. Trustee is not a foreign trustee.
<PAGE> 1
EXHIBIT 99(a)
LETTER OF TRANSMITTAL
WAXMAN INDUSTRIES, INC.
OFFER FOR ANY AND ALL OUTSTANDING
SERIES A 12 3/4% SENIOR SECURED DEFERRED COUPON NOTES DUE 2004
IN EXCHANGE FOR
SERIES B 12 3/4% SENIOR SECURED DEFERRED COUPON NOTES DUE 2004
PURSUANT TO THE PROSPECTUS, DATED , 1994.
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON , 1994,
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE.
<TABLE>
<S> <C> <C>
BY MAIL/OVERNIGHT DELIVERY: FACSIMILE TRANSMISSION NUMBER: BY HAND:
The Huntington National Bank (216) 344-6584 IN CLEVELAND, OHIO:
917 Evelid Avenue The Huntington National Bank
Cleveland, Ohio 44115 CONFIRM BY TELEPHONE: 917 Evelid Avenue
Attn: Corporate Trust CM 23 (216) 344-6662 Cleveland, Ohio 44115
Attn: Corporate Trust CM23
FOR INFORMATION CALL:
(216) 344-6662 IN NEW YORK, NEW YORK:
In care of The Bank of New York
Drop Window Services
101 Barclay Street
New York, New York 10286
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that it has received and reviewed the
Prospectus, dated , 1994 (the "Prospectus"), of Waxman Industries, Inc., a
Delaware corporation (the "Company"), and this Letter of Transmittal (the
"Letter"), which together constitute the Company's offer to issue an aggregate
principal amount at maturity of up to $92,797,000 of Series B 12 3/4% Senior
Secured Deferred Coupon Notes Due 2004 (the "New Notes") of the Company in
exchange for a like principal amount at maturity of the issued and outstanding
Series A 12 3/4% Senior Secured Deferred Coupon Notes Due 2004 (the "Old
Notes"; and, together with the New Notes, the "Notes") of the Company from the
holders ("Holders") thereof (the "Exchange Offer").
For each Old Note accepted for exchange, the Holder of such Old Note
will receive a New Note having a principal amount at maturity equal to that of
the surrendered Old Note. The terms of the New Notes are identical in all
material respects to the Old Notes, except for certain transfer restrictions
and registration rights relating to the Old Notes. The New Notes, and the Old
Notes remaining after the
<PAGE> 2
Exchange Offer mature on June 1, 2004. The New Notes will be issued at a
discount to their aggregate principal amount at maturity. Interest will not
accrue on the Notes prior to June 1, 1999. Thereafter, interest on the Notes
will be payable semiannually at the rate of 12 3/4% per annum until maturity.
The Notes will be redeemable at the option of the Company at any time after
June 1, 1999 at the redemption prices set forth therein. Original Issue
Discount (as defined in the Prospectus) on the New Notes will accrue from May
20, 1994, the date of original issuance of the Old Notes. See "Description of
Notes" section of the Prospectus.
The Company reserves the right, at any time or from time to time, to
extend the Exchange Offer at its discretion, in which event the term
"Expiration Date" shall mean the latest time and date to which the Exchange
Offer is extended. The Company shall notify the holders of the Old Notes of
any extension by means of a press release or other public announcement prior to
9:00 A.M., New York City time, on the next business day after the previously
scheduled Expiration Date.
This Letter is to be completed by a Holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for
Old Notes, if available, is to be make by book-entry transfer to the account
maintained by the Exchange Agent at the Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer -- Book-Entry Transfer" section of the Prospectus. Holders of
Old Notes whose certificates are not immediately available, or who are unable
to deliver their certificates or confirmation of the book-entry tender of their
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility
(a "Book-Entry Confirmation") and all other documents required by this Letter
to the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus.
See Instruction 1. Delivery of documents to the Book-Entry Transfer Facility
does not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed
this Letter to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
<PAGE> 3
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount at
maturity of Old Notes should be listed on a separate signed schedule affixed
hereto.
<TABLE>
<S> <C> <C> <C>
_________________________________________________________________________________________________
_________________________________________________________________________________________________
DESCRIPTION OF OLD NOTES 1 2 3
_________________________________________________________________________________________________
Aggregate
Principal Principal
Amount at Amount at
Name(s) and Address(es) of Registered Holder(s) Certificate Maturity of Maturity
(Please fill in, if blank) Number(s)* Old Notes(s) Tendered**
__________________________________________________________________________________________________
_______________________________________
_______________________________________
_______________________________________
Total
___________________________________________________________________________________________________
<FN>
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the
Old Notes represented by the Old Notes indicated in column 2. See Instruction 2.
____________________________________________________________________________________________________
</TABLE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _________________________________________
Account Number _____________ Transaction Code Number _________________
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)________________________________________
Window Ticket Number (if any) _________________________________________
Date of Execution of Notice of Guaranteed Delivery ____________________
Name of Institution which guaranteed delivery _________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number _________________ Transaction Code Number ___________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ____________________________________________________________________
Address: _________________________________________________________________
_________________________________________________________________
- 3 -
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to the Company the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Old Notes as are being tendered
hereby.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim when the same are accepted by the Company.
The undersigned hereby further represents that any New Notes acquired in
exchange for Old Notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such New Notes, whether or not such
person is the undersigned, that neither the holder of such Old Notes nor any
such other person has an intention, or an arrangement or understanding with any
person, to participate in the distribution of such New Notes and that neither
the holder of such Old Notes nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act"), of the Company.
The undersigned also acknowledges as follows: This Exchange Offer is
being made in reliance on interpretations by the Staff of the Securities and
Exchange Commission (the "SEC") set forth in certain "no-action" letters issued
to third parties and unrelated to the Company and the Exchange Offer, and based
on such interpretations, the Company believes that the New Notes issued in
exchange for the Old Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no intention, nor any arrangement with any persons, to participate
in the distribution of such New Notes. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of New Notes. If the undersigned has
any arrangement or understanding with respect to the distribution of the New
Notes to be acquired pursuant to the Exchange Offer, the undersigned (i) could
not rely on applicable interpretations of the Staff of the SEC enunciated in
Exxon Capital Holdings Corporation (available April 13, 1989) or similar
letters and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
If the undersigned is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
may be considered a statutory underwriter and that it must deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. The above-referenced prospectus may be the
prospectus relating to Exchange Offer ONLY IF it contains a plan of
distribution with respect to such resale transactions (but need not name the
undersigned or disclose the amount of New Notes held by the undersigned).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old
- 4 -
<PAGE> 5
Notes tendered hereby. All authority conferred or agreed to be conferred in
this Letter and every obligation of the undersigned hereunder shall be binding
upon the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
This tender may be withdrawn only in accordance with the procedures set forth
in "The Exchange Offer -- Withdrawal Rights" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special
Issuance Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box
entitled "Special Delivery Instructions" below, please send the New Notes (and,
if applicable, substitute certificates representing Old Notes for any Old Notes
not exchanged) to the undersigned at the address shown above in the box
entitled "Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX ABOVE.
- 5 -
<PAGE> 6
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if certificates To be completed ONLY if certificates
for Old Notes not exchanged and/or New Notes for Old Notes not exchanged and/or New Notes are
are to be issued in the name of and sent to to be sent to someone other than the person or
someone other than the person or persons whose persons whose signature(s) appear(s) on this
signature(s) appear(s) on this Letter above, or Letter above or to such person or persons at an
if Old Notes delivered by book-entry transfer address other than shown in the box entitled
which are not accepted for exchange are to be "Description of Old Notes" on this Letter above.
returned by credit to an account maintained at
the Book-Entry Transfer Facility other than the
account indicated above.
Issue: New Notes and/or Old Notes to:
Issue: New Notes and/or Old Notes to:
Name(s) . . . . . . . . . . . . . . . . . . . .
(Please Type or Print) Name(s) . . . . . . . . . . . . . . . . . . . . .
(Please Type or Print)
. . . . . . . . . . . . . . . . . . . . . . . .
(Please Type or Print)
. . . . . . . . . . . . . . . . . . . . . . . . .
Address . . . . . . . . . . . . . . . . . . . . (Please Type or Print)
. . . . . . . . . . . . . . . . . . . . . . . .
(Zip Code)
Address . . . . . . . . . . . . . . . . . . . . .
(Complete Substitute Form W-9)
Credit unexchanged Old Notes delivered by book- . . . . . . . . . . . . . . . . . . . . . . . . .
entry transfer to the Book-Entry Transfer (Zip Code)
Facility account set forth below.
-----
---------------------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
</TABLE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES
FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR
THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR
TO MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY
BOX ABOVE.
- 6 -
<PAGE> 7
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9)
Dated: . . . . . . . . . . . . . . . . . . . . . . . . . . . , 199_
x . . . . . . . . . . . . . . . . . . . . . . . . . . . ., 199_
x . . . . . . . . . . . . . . . . . . . . . . . . . . . ., 199_
Signature(s) by Owner Date
Area Code and Telephone Number . . . . . . . . . . . . . . . . . . .
If a holder is tendering any Old Notes, this Letter must be
signed by the registered holder(s) as the name(s) appear(s) on the
certificate(s) for the Old Notes or by any person(s) authorized to
become registered holder(s) by endorsements and documents transmitted
herewith. If signature is by a trustee, executor, administrator,
guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See
Instruction 3.
Name(s): . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Please Type or Print)
Capacity: . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address: . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Including Zip Code)
SIGNATURE GUARANTEE
(if required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution: . . . . . . . . . . . . . . . . . . . .
(Authorized Signature)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Title)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Name and Firm)
Date: . . . . . . . . . . . . . . . . . . . . . . . . . , 199_
-7-
<PAGE> 8
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer for any and all
outstanding Series A 12 3/4% Senior Secured Deferred Coupon Notes Due 2004
in Exchange for the Series B 12 3/4% Senior Secured Deferred Coupon Notes
Due 2004 of Waxman Industries, Inc.
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This letter is to be completed by noteholders either if certificates
are to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange Offer
- -- Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below.
Noteholders whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through
an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent
must receive from such Eligible Institution a properly completed and duly
executed Letter (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that within five
New York Stock Exchange ("NYSE") trading days after the date of execution of
the Notice of Guaranteed Delivery, the certificates for all physically tendered
Old Notes, or a Book-Entry Confirmation, and any other documents required by
the Letter will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or Book-Entry Confirmation, as the case may be, and
all other documents required by this Letter, are received by the Exchange Agent
within five NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other
required documents is at the election and risk of the tendering holders, but
the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. If Old Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to Midnight, New York City time, on the
Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate
are to be tendered, the tendering holder(s) should fill in the aggregate
principal amount at maturity of Old Notes to be tendered in the box above
entitled "Description of Old Notes -- Principal Amount at Maturity Tendered."
A reissued certificate representing the balance of nontendered Old Notes will
be sent to such tendering holder, unless otherwise provided in the appropriate
box on this Letter, promptly after the Expiration
- 8 -
<PAGE> 9
Date. All of the Old Notes delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
3. SIGNATURES OF THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the
Old Notes specified herein and tendered hereby, no endorsements of certificates
or separate bond powers are required. If, however, the New Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates transmitted hereby
or separate bond powers are required. Signatures on such certificate(s) must
be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder
of holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND
POWERS REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM WHICH IS A
MEMBER OF A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST
COMPANY HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE
INSTITUTION, PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF
OLD NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY
PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A
SECURITY POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES TENDERED) WHO HAS NOT
COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER, OR (II) FOR THE ACCOUNT OF AN ELIGIBLE
INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box
the name and address to which New Notes issued pursuant to the Exchange Offer
and/or substitute certificates evidencing Old Notes not exchanged are to be
issued or sent, if different from the name or address of the person
- 9 -
<PAGE> 10
signing this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Noteholders tendering Old Notes by book-entry transfer may request
that Old Notes not exchanged be credited to such account maintained at the
Book-Entry Transfer Facility as such noteholder may designate hereon. If no
such instructions are given, such Old Notes not exchange will be returned to
the name or address of the person signing this Letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder
whose Old Notes are accepted for exchange must provide the Company (as payor)
with such holder's correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9 below, which in the case of a tendering holder who is an individual,
is his or her social security number. If the Company is not provided with the
current TIN or an adequate basis for an exemption, such tendering holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
delivery to such tendering holder of New Notes may be subject to backup
withholding in an amount equal to 31% of all reportable payments made after the
exchange. If withholding results in an overpayment of taxes, a refund may be
obtained.
Exempt holders of Old Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. See the enclosed Guidelines of Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines")
for additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth
below, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN) and that (i) the holder is exempt from backup withholding, or
(ii) the holder has not been notified by the Internal Revenue Service that such
holder is subject to backup withholding as a result of a failure to report all
interest or dividends or (iii) the Internal Revenue Service has notified the
holder that such holder is no longer subject to backup withholding. If the
tendering holder of Old Notes is a nonresident alien or foreign entity not
subject to backup withholding, such holder must give the Company a completed
Form W-8, Certificate of Foreign Status. These forms may be obtained from the
Exchange Agent. If the Old Notes are in more than one name or are not in the
name of the actual owner, such holder should consult the W-9 Guidelines for
information on which TIN to report. If such holder does not have a TIN, such
holder should consult the W-9 Guidelines for instructions on applying for a
TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for"
in lieu of its TIN. Note: Checking this box and writing "applied for" on the
form means that such holder has already applied for a TIN or that such holder
intends to apply for one in the near future. If such holder does not provide
its TIN to the Company within 60 days, backup withholding will begin and
continue until such holder furnishes its TIN to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Old Notes to it or its order pursuant to the Exchange Offer. If
however, New Notes and/or substitute Old Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Notes tendered hereby, or if
tendered Old Notes are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason
other than the transfer of Old Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
- 10 -
<PAGE> 11
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any
or all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter,
shall waive any right to receive notice of the acceptance of their Old Notes
for exchange.
Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Old Notes nor shall any of them incur any liability for failure to
give any such notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
- 11 -
<PAGE> 1
EXHIBIT 99(B)
NOTICE OF GUARANTEED DELIVERY
WAXMAN INDUSTRIES, INC.
OFFER FOR ANY AND ALL OUTSTANDING
SERIES A 12 3/4% SENIOR SECURED DEFERRED COUPON NOTES DUE 2004
IN EXCHANGE FOR
SERIES B 12 3/4% SENIOR SECURED DEFERRED COUPON NOTES DUE 2004
PURSUANT TO THE PROSPECTUS, DATED , 1994.
As set forth in the Prospectus dated , 1994 (as the same may be
amended from time to time, the "Prospectus") of Waxman Industries, Inc. (the
"Company") under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures," and in the accompanying Letter of Transmittal (the "Letter of
Transmittal") and Instruction 1 thereto, this form or one substantially
equivalent hereto must be used to accept the Company's offer (the "Offer") to
issue an aggregate principal amount at maturity of up to $92,797,000 of Series
B 12 3/4% Senior Secured Deferred Coupon Notes Due 2004 (the "New Notes") of
the Company in exchange for a like principal amount at maturity of the issued
and outstanding Series A 12 3/4% Senior Secured Deferred Coupon Notes Due 2004
(the "Old Notes") of the Company from the holders ("Holders") thereof if (i)
certificates representing the Old Notes to be exchanged are not immediately
available or (ii) the procedures for book-entry transfer cannot be completed
prior to the Expiration Date (as defined below). This form may be delivered by
an Eligible Institution by mail or hand delivery or transmitted, via facsimile,
to the Exchange Agent as set forth below. All capitalized terms used herein
but not defined herein shall have the meanings ascribed to them in the
Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON , 1994,
UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: THE HUNTINGTON NATIONAL BANK
<TABLE>
<S> <C> <C>
BY MAIL/OVERNIGHT DELIVERY: FACSIMILE TRANSMISSION NUMBER: BY HAND:
The Huntington National Bank (216) 344-6584 IN CLEVELAND, OHIO:
917 Evelid Avenue The Huntington National Bank
Cleveland, Ohio 44115 CONFIRM BY TELEPHONE: 917 Evelid Avenue
Attn: Corporate Trust CM 23 (216) 344-6662 Cleveland, Ohio 44115
Attn: Corporate Trust CM23
FOR INFORMATION CALL:
(216) 344-6662 IN NEW YORK, NEW YORK:
In care of The Bank of New York
Drop Window Services
101 Barclay Street
New York, New York 10286
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal,
receipt of which is hereby acknowledged, the principal amount of Old Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures."
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed
Delivery shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Signatures of Registered Holder(s) or Authorized Date: . . . . . . . . . . . . . . . . . . . . . .
Signatory: . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . Address: . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Name(s) of Registered Holder(s): . . . . . . . . . . Area Code and Telephone No.: . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . If Notes will be delivered by book-entry
transfer, check trust company below:
. . . . . . . . . . . . . . . . . . . . . . . . . . . [ ] The Depository Trust Company
Principal Amount of Notes Tendered: . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 3
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security
position listing as the owner of Old Notes, or by person(s) authorized to
become Holder(s) by endorsements and documents transmitted with this Notice
of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in
a fiduciary or representative capacity, such person must provide the
following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capacity: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address(es): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Do not send Old Notes with this form. Old Notes should be sent to the
Exchange Agent together with a properly completed and duly executed Letter of
Transmittal.
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or a correspondent in the United
States, hereby guarantees that, within five New York Stock Exchange trading
days from the date of this Notice of Guaranteed Delivery, a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof),
together with certificates representing the Old Notes tendered hereby in
proper form for transfer (or confirmation of the book-entry transfer of such
Old Notes into the Exchange Agent's account at a Book-Entry Transfer
Facility, pursuant to the procedure for book-entry transfer set forth in the
Prospectus under the caption "The Exchange Offer -- Procedures for Tendering
Old Notes and --Book-Entry Transfer"), and required documents will be
deposited by the undersigned with the Exchange Agent.
<TABLE>
<S> <C> <C>
Name of Firm: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Authorized Signature
Address: . . . . . . . . . . . . . . . . . . . . . Name: . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . Title: . . . . . . . . . . . . . . . . . . . . . .
Area Code and Telephone No. . . . . . . . . . . . . Date: . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND VALIDLY
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE> 1
<TABLE>
EXHIBIT 99.C
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT
RIGHT AND CERTIFY BY SIGNING AND DATE BELOW ___________________________________
Social Security Number
SUBSTITUTE
FORM W-9 or___________________________________
Department of the Treasury Employer Identification Number
PART 2--Check the box if you are NOT subject to backup withholding under the
provisions of Section 3406(a)(1)(C) of the Internal Revenue Code because (1) you have
not been notified that you are subject to backup withholding as a result of failure to
report all interest or dividends or (2) the IRS has notified you that you are no
longer subject to backup withholding. / /
Payer's Request for Taxpayer
Identification Number (TIN)
CERTIFICATION -- UNDER THE PENALTIES OF PERJURY,
I CERTIFY THAT THE INFORMATION PROVIDED ON THIS Part 3 --
FORM IS TRUE, CORRECT AND COMPLETE.
Awaiting TIN / /
SIGNATURE__________________________ DATE_______________, 1994
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING OF 31% OF ALL REPORTABLE PAYMENTS MADE TO YOU PURSUANT
TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty (60) days, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a number.
________________________________ DATE:__________________________________,1994
Signature
<PAGE> 2
<TABLE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYOR --
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the Payor.
<S> <C> <C> <C>
- ----------------------------------------------------------- -----------------------------------------------------------
GIVE THE GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF-- NUMBER OF--
- ----------------------------------------------------------- -----------------------------------------------------------
1. An individual's account The individual 8. Sole proprietorship account The Owner(4)
2. Two or more individuals The actual owner 9. A valid trust, estate, Legal entity (Do not
(joint account) of the account or, or pension trust furnish the
if combined funds, identifying number
any one of the of the personal
individuals(1) representative or
trustee unless the
3. Husband and wife The actual owner legal entity itself
(joint account) of the account or, is not designated in
if joint funds, the account
either person(1) title.)(5)
4. Custodian account of a minor The minor(2) 10. Corporate account The Corporation
(Uniform Gift to Minors Act)
11. Religious, charitable, or The organization
educational organization account
5. Adult and minor The adult or,
(joint account) if the minor is the 12. Partnership account held in the The partnership
only contributor, name of the business
the minor(1)
13. Association, club or other The organization
6. Account in the name of The ward, minor, tax-exempt organization
guardian or committee for or incompetent
a designated ward, minor, person(3) 14. A broker or registered nominee The broker or
or incompetent person nominee
7. a. The usual revocable savings The grantor- 15. Account with the Department The public entity
trust account (grantor is trustee(1) of Agriculture in the name of a
also trustee) public entity (such as a State or
local governmental school district
b. So-called trust account that The actual owner(1) or prison) that receives
is not a legal or valid trust agricultural program payments
under State law
- ----------------------------------------------------------- -----------------------------------------------------------
<FN>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
</TABLE>
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE> 3
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to Partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the account received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
<PAGE> 4
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
