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As filed with the Securities and Exchange Commission on November 14, 1995
Registration No. 33-44511
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SECURITIES AND EXCHANGE COMMISSION
---------------
AMENDMENT NO. 9 TO
REGISTRATION STATEMENT
ON FORM S-2
UNDER
THE SECURITIES ACT OF 1933
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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)
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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)
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Copies to:
SCOTT M. ZIMMERMAN, ESQ.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
(212) 758-9500
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: /x/
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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WAXMAN INDUSTRIES, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
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ITEM OF FORM S-2 PROSPECTUS CAPTION OR LOCATION
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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 Available Information; Inside Front Cover
Page of Prospectus and Outside Back Cover Pages of Prospectus
3. Summary Information, Risk Factors and Prospectus Summary; Incorporation of Certain
Ratio of Earnings to Fixed Charges Information by Reference; Risk Factors
4. Use of Proceeds Inside Front Cover Page of Prospectus; Prospectus
Summary; Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Security Holders; Plan of Distribution
8. Plan of Distribution and Underwriting Outside Front Cover Page of Prospectus; Plan of
Distribution
9. Description of Securities to be Registered Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of Notes; Description of
Warrants; Description of Capital Stock
10. Interests of Named Experts and Counsel Legal Matters
11. Information with Respect to the Registrant Outside Front Cover Page of Prospectus; Available
Information; Incorporation of Certain Information By
Reference; Prospectus Summary; Risk Factors
12. Incorporation of Certain Information by Available Information; Incorporation of Certain
Reference Information by Reference
13. Disclosure on Commission Position on Not Applicable
Indemnification of Securities Act
Liabilities
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SUBJECT TO COMPLETION, DATED NOVEMBER 14, 1995
PROSPECTUS
WAXMAN INDUSTRIES, INC.
$500,000 PRINCIPAL AMOUNT OF 12.25% FIXED RATE
SENIOR SECURED NOTES DUE SEPTEMBER 1, 1998
$7,500,000 PRINCIPAL AMOUNT OF FLOATING RATE
SENIOR SECURED NOTES DUE SEPTEMBER 1, 1998
867,000 COMMON STOCK PURCHASE WARRANTS
950,000 SHARES OF COMMON STOCK
This Prospectus relates to the offer and sale of (i) $500,000 principal
amount of 12.25% Fixed Rate Senior Secured Notes due September 1, 1998 (the
"Fixed Rate Notes") of Waxman Industries, Inc. (the "Company"), (ii) $7,500,000
principal amount of Floating Rate Senior Secured Notes due September 1, 1998
(the "Floating Rate Notes") of the Company, (iii) 867,000 Common Stock Purchase
Warrants (the "Warrants") and (iv) 1,000,000 shares of the Company's Common
Stock, $.01 par value per share (the "Common Stock") issuable upon exercise of
the Warrants and an additional 133,000 warrants sold as part of the 1991
Private Placement (as defined below and collectively as the "1991 Private
Placement Warrants"). The Fixed Rate Notes and Floating Rate Notes offered
hereby are sometimes collectively referred to as the "Notes." The Notes, the
Warrants and the shares of Common Stock offered hereby are sometimes
collectively referred to herein as the "Securities." The Securities will be
sold by the holders thereof (the "Selling Security Holders"). See "Selling
Security Holders."
The Notes and Warrants were originally issued by the Company on
September 17, 1991 in a private placement to certain institutional investors
(the "1991 Private Placement"). The original principal amount of the Fixed Rate
Notes was $42,500,000 and the original number of Warrants was 1,000,000. The
Company has subsequently repurchased $10,850,000 principal amount of the Fixed
Rate Notes. In addition, $31,150,000 principal amount of Fixed Rate Notes
and 126,000 1991 Private Placement Warrants have been traded publicly since
their registration in June 1992, and, therefore, the offer and sale of such
Fixed Rate Notes and Warrants, respectively, do not require registration
hereunder. Also, the Company is not registering hereunder $500,000 principal
amount of Fixed Rate Notes and 7,000 1991 Private Placement Warrants because
the holders thereof did not provide the Company with certain information which
was required to register the offer and sale thereof hereunder. There is
currently a limited public market for the Notes and the Warrants. The payment
of the Company's obligations under the Notes and the performance of the
Company's obligations under the Indenture (as defined below) are guaranteed
(the "Guarantee") by Waxman USA Inc., a wholly owned subsidiary of the Company
("Waxman USA"). The Notes and the Guarantee are secured by Waxman USA's pledge
of all of the capital stock of Barnett Inc. ("Barnett"), Waxman Consumer
Products Group Inc. ("Consumer Products") and WOC Inc. ("WOC"), each a direct
subsidiary of Waxman USA and an indirect subsidiary of the Company. There can
be no assurance that the value of the capital stock of Barnett, Consumer
Products and WOC will be sufficient to satisfy the outstanding principal and
accrued interest under the Notes in the event of a default under the Notes.
Substantially all of the assets of Barnett, Consumer Products and WOC are
pledged to the lenders under the Domestic Credit Facility (as hereinafter
defined) and the Domestic Term Loan (as hereinafter defined) (which together
provide for maximum aggregate borrowings of $70 million) and thus the pledge of
the capital stock of Barnett, Consumer Products and WOC for the benefit of the
holders of the Notes is structurally subordinated to the rights of such
lenders. The capital stock of Barnett, Consumer Products and WOC is privately
held by, and constitute substantially all of the assets of Waxman USA, which in
turn constitutes substantially all of the assets of the Company. The net worth
of each of Barnett, Consumer Products and WOC on June 30, 1995 were
approximately $37.0 million, approximately $26.7 million and approximately
$18.1 million, respectively. The Company is dependent on distributions from
Barnett, Consumer Products and WOC in order to meet its debt service
obligations, including its payment obligations with respect to the Notes. See
"Risk Factors -- Reliance on Operations of Subsidiaries; Structural
Subordination" and "-- Restrictions Imposed by Terms of Indebtedness."
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The Notes are redeemable at the option of the Company, in whole
or in part, at the redemption prices set forth therein, plus accrued
interest. Annual sinking fund payments on each of September 1, 1996 and
September 1, 1997 are calculated to retire 68% of the issue prior to
maturity. The Company may deliver previously redeemed Notes in lieu of
cash in making sinking fund payments. The Notes also provide for
partial special mandatory redemptions in certain situations set forth
therein. In the event of a Change in Control (as defined in the
Indenture), holders of the Notes will have the right to require the
Company to repurchase such holders' Notes at the purchase price set
forth therein, together with accrued interest, if any, to the date of
purchase. See "Recent Developments."
The indebtedness evidenced by the Notes ranks pari passu in right of
payment with all existing and future Senior Indebtedness (as defined in the
Indenture) and senior in right of payment to all existing and future
Subordinated Indebtedness (as defined in the Indenture). The indebtedness
evidenced by the Notes will not be subordinate in right of payment to any
existing or, without the consent of the holders of the Notes, future
indebtedness of the Company. The Fixed Rate Notes and Floating Rate Notes are
equal inter sese in right of payment under the Indenture.
The Warrants provide for the purchase of an aggregate of 867,000 shares
of Common Stock at an exercise price of $4.60 per share, subject to adjustment
in certain events described herein. The Company would receive all of the
proceeds from the exercise of the Warrants. The Warrants are exercisable
immediately and expire on September 1, 1996. The Company may offer to the
registered holder the option, in lieu of exercising the Warrants, of
surrendering the Warrants, in whole or in part, for a cash payment set forth
herein.
The Common Stock is traded on the New York Stock Exchange (the "NYSE")
(symbol: WAX). On October 5, 1995, the closing price per share of Common
Stock, as reported by the NYSE, was $1 3/8. The Common Stock is also traded on
the Chicago Stock Exchange. There is currently a limited public market for the
Notes and the Warrants.
The Securities are being offered for the accounts of the Selling
Security Holders. See "Selling Security Holders". The Company has agreed to pay
all of the expenses of this offering but will not receive any of the proceeds
from the sale of the Securities being offered hereby. The aggregate proceeds to
the Selling Security Holders from the sale of the Securities will be the
purchase price of the Securities sold, less the aggregate agents' commissions
and underwriters' discounts, if any, and other expenses of issuance and
distribution not borne by the Company. See "Plan of Distribution."
The Selling Security Holders directly, through agents designated from
time to time or through dealers or underwriters also to be designated, may sell
the Securities from time to time on terms to be determined at the time of sale.
To the extent required, the specific Securities to be sold, the names of the
Selling Security Holders, the purchase price, the public offering price, the
names of any such agents, dealers or underwriters and any applicable commissions
or discount with respect to a particular offer will be set forth in an
accompanying Prospectus supplement.
The Selling Security Holders and any broker-dealers, agents or
underwriters that participate with the Selling Security Holders in the
distribution of the Securities may be deemed to be "Underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Act"), and any
commissions received by them and any profit on the resale of the Securities
purchased by them may be deemed to be underwriting commissions or discounts
under the Act. See "Plan of Distribution" for indemnification arrangements.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS ________, 1995.
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AVAILABLE INFORMATION
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 reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy and information
statements, and other information filed by the Company with the Commission can
be inspected and copied at the public reference facilities maintained by the
Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the following Regional Offices of the Commission: New York Regional Office, 75
Park Place, New York, New York 10007; and Chicago Regional Office, 230 South
Dearborn Street, Room 3190, Chicago, Illinois 60604. Copies of such material can
also be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The
Company's Common Stock is listed on the NYSE. Reports, proxy and information
statements may also be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005.
This Prospectus does not contain all the information set forth in the
Registration Statement (the "Registration Statement") filed with the Commission.
For further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement and the exhibits
thereto, copies of which are on file at the offices of the Commission and may be
obtained upon payment of the fee prescribed by the Commission, or may be
examined without charge at the offices of the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
Company's Annual Report on Form 10-K for its fiscal year ended June 30, 1995
filed with the Commission (File No. 0-5888) pursuant to the 1934 Act, as
amended by an amendment on Form 10-K/A filed with the Commission on October 11,
1995 and further amended by an amendment on Form 10-K/A-1 filed with the
Commission on November 2, 1995 (the "1995 Annual Report") and the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 filed
with the Commission on November 14, 1995.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offering of the
Securities shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Any person receiving a copy of this Prospectus may obtain without
charge, upon request, a copy of any of the documents incorporated by reference
herein, except for the exhibits to such documents. Requests should be directed
to Waxman Industries, Inc. 24460 Aurora Road, Bedford Heights, Ohio 44146,
Telephone No. (216) 439-1830.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by referenced 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, and exclude the operations of Waxman Consumer
Products Group Inc. ("Consumer Products"). As a result of the Company's recent
determination to sell its Consumer Products business, Consumer Products is
reported as a discontinued operation and the consolidated financial statements
and financial information incorporated by reference herein have been
reclassified to report separately Consumer Products' net assets and results of
operations. See "Recent Developments."
THE COMPANY
The Company believes it is one of the leading suppliers of plumbing
products to the home repair and remodeling market in the United States. The
Company distributes plumbing, electrical and hardware products, to over 49,000
customers in the United States, including, plumbing and electrical repair and
remodeling contractors and independent retailers. The Company's consolidated net
sales were $156.0 million in fiscal 1995.
The Company conducts its business primarily through its wholly-owned
subsidiary, Barnett Inc. ("Barnett"). Barnett is a national mail order and
telemarketing business which markets an extensive line of over 9,200 plumbing,
electrical and hardware products to over 35,000 active customers. Through its
nationwide network of warehouses, Barnett provides its 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 foreign sources. Based on
management's experience and knowledge of the industry, the Company believes that
Barnett is the only national competitor in its business. Due to its size,
purchasing power and foreign sourcing capabilities, Barnett has a number of
distinct competitive advantages including (i) the ability to offer prices
generally lower than those of its regional competition, (ii) the ability to
offer higher margin private label products which offer customers a low cost
alternative to name-brand products, and (iii), in virtually all cases, 24-hour
order turnaround. Barnett's marketing strategy is comprised of frequent catalog
and promotional mailings, supported by a 24-hour telemarketing operation.
Barnett has averaged 15% net sales growth per annum during the period from
fiscal 1991 to fiscal 1995 through (i) the enhancement and expansion of its
telemarketing operation, (ii) increased market penetration with the expansion of
its warehouse network, (iii) the introduction of new product offerings and (iv)
the introduction of two additional catalogs, each targeted at a distinct
customer base. Barnett's net sales for fiscal 1995 were $109.1 million.
The Company also has several other smaller operations which are
conducted through its other subsidiaries, WOC Inc. ("WOC") and TWI,
International, Inc. ("TWI"). WOC includes four operations, the largest of which
are U.S. Lock ("U.S. Lock") --a distributor of a full line of security hardware
products, and LeRan Copper & Brass ("LeRan") --a supplier of copper tubing,
brass fittings and other related products. TWI includes the foreign sourcing
operations which support Barnett and WOC as well as Consumer Products. Net
sales from these other operations were $46.9 million in fiscal 1995.
RECENT DEVELOPMENTS
In June 1995, William R. Pray was promoted to President and Chief
Operating Officer of the Company. In his new positions, Mr. Pray assumed
overall responsibility for all of the Company's operations. In addition,
Mr. Pray was elected as a director of the Company, filling a newly created seat
which resulted from the expansion of Waxman Industries' Board of Directors from
five to six members. Mr. Pray has served as president of Barnett since 1987.
In August 1995, the Company announced that it has decided to sell its
Consumer Products business in order to enhance its capital structure and allow
the Company to focus on its growing Barnett telemarketing mail order
business. Consumer Products markets and distributes approximately 9,400
products to a wide variety of retailers, primarily Do-It-Yourself ("D-I-Y")
warehouse home centers, home improvement centers and mass merchandisers such as
Builders Square, Home Depot, Kmart, Sears and Wal-Mart. Consumer Products works
closely with its customers to develop innovative and comprehensive marketing and
merchandising programs designed to maximize profitability,
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efficiently manage shelf space, reduce inventory levels and maximize floor
stock turnover. Consumer Products' net sales were $72.0 million in fiscal 1995.
The Company anticipates that the proceeds from any such sale will be used, in
part, to retire the Notes thereby eliminating the mandatory sinking fund
requirements relating to the Notes which are scheduled to commence in September
1996. The Company retained Merrill Lynch & Co. as its financial advisor in
connection with the sale.
In furtherance of its decision to sell the Consumer Products business,
on August 28, 1995, the Company entered into a letter of intent which
contemplates the sale of the Consumer Products business, together with certain
supporting operations and certain home center accounts now serviced by Barnett,
to a group consisting of HIG Capital Management ("HIG") of Miami, Florida along
with certain members of Consumer Products' existing management team for an
aggregate cash purchase price of $50 million plus other consideration which
will give the Company approximately a 25% economic interest in Consumer
Products on a going forward basis. The Company expects that it will account for
any remaining interest under the cost method as the interest it will retain
will not allow it to exercise significant influence over Consumer Products in
the future. While the letter of intent has terminated pursuant to its terms,
the Company and HIG are currently negotiating the terms of a definitive
purchase agreement with resepect to the above-referenced transaction. The
Company intends to continue pursuing a sale of Consumer Products in the event
the transaction with HIG is not consummated. There can be no assurance that
the Company will be able to consummate the sale of Consumer Products prior to
September 1, 1996 or as to the terms and conditions of any such sale so
consummated. In connection with such sale, the Company intends to repay the
portion of its revolving credit facility and term loan which relates to
Consumer Products and refinance the remaining balances using proceeds from a
new secured credit facility, the terms of which are currently being negotiated.
Consumer Products is reported as a discontinued operation and the consolidated
financial statements and financial information incorporated by reference herein
have been reclassified to report separately Consumer Products' net assets and
results of operations. Prior period consolidated financial statements and
financial information have been reclassified to conform to the current period
presentation. During the fourth quarter of fiscal 1995, the Company recorded a
$11.0 million charge which represents the expected loss to be incurred upon
completion of the sale of the Consumer Products business. See "Incorporation of
Certain Information by Reference" and the 1995 Annual Report for additional
information regarding the business, financial condition and results of
operations of Consumer Products.
In August 1995, the Company named Andrea Luiga to the position of Vice
President - Finance and Chief Financial Officer. Ms. Luiga replaced Neal R.
Restivo, formerly Senior Vice President and Chief Financial Officer of the
Company who submitted his resignation effective September 30, 1995 to pursue
another opportunity. Ms. Luiga has been Vice President / Group Controller of
Barnett since 1991. Ms. Luiga joined Barnett in March 1988 as Controller.
As part of its efforts to decrease its leverage and increase its
financial flexibility, Waxman USA currently intends to offer to exchange for
$48.75 million principal amount of the Company's outstanding 13 3/4% Senior
Subordinated Notes due 1999 (the "Senior Subordinated Notes"), a like principal
amount of Waxman USA Senior Subordinated Notes due 2001 (the "Exchange
Securities') and in connection therewith to solicit consent to certain
amendments to the Indenture pursuant to which the Senior Subordinated Notes
were issued. Although the terms of the exchange offer have not been finalized,
the Company expects that the exchange offer, if consummated, will decrease the
Company's cash interest burden and will extend the maturity of the Senior
Subordinated Notes exchanged in the exchange offer. It is currently
contemplated that the the Exchange Securities will not be registered under the
Securities Act of 1933, as amended, and may not be offered or sold in the
United States absent registration or an applicable exemption from such
registration requirements. This Prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy.
THE 1994 REORGANIZATION AND RESTRUCTURING
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 million
(the "Deferred Coupon Notes") together with warrants (the "Exchange Warrants")
to purchase 2.9 million shares of Common Stock in exchange for $50 million
aggregate principal amount of the Company's outstanding Senior Subordinated
Notes pursuant to a private exchange offer (the "Private Exchange Offer") which
was a part of a series of interrelated transactions (the "Reorganization"). In
addition to the Private Exchange Offer, the components of the Reorganization
included (i) the solicitation of the consents of the holders of the Notes to
certain waivers (the "Waiver") of and the adoption of certain amendments (the
"Amendment") to the Indenture (the "Consent Solicitation"), (ii) the
establishment of a $55 million revolving credit facility (the "Domestic Credit
Facility") and a $15 million term loan (the "Domestic Term Loan"; and together
with the Domestic Credit Facility, the "Debt Financing"), (iii) the solicitation
of the consents of the holders of the Senior Subordinated Notes to certain
waivers of and the adoption of certain amendments to the indenture governing the
Senior Subordinated Notes (the "Subordinated Note Solicitation") and (iv) the
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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")).
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, 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 Consumer Products Group Division, and (c) WOC, a wholly
owned subsidiary of Waxman USA, to own and operate Waxman USA's domestic
subsidiaries, other than Barnett and Consumer Products. On May 20, 1994, the
Company 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 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 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.
---------------------------------------
|
|
|
------------------------------------------------------
| | | |
------------- ---------- -------- -----------------------
BARNETT INC. WAXMAN WOC INC. TWI, INTERNATIONAL INC.
CONSUMER
PRODUCTS
GROUP INC.
------------- ---------- -------- -----------------------
|
------------
| |
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TWI, WESTERN AMERICAN
INTERNATIONAL MANUFACTURING,
TAIWAN, INC. INC.
------------- ----------------
| |
------------- ----------------
CWI COHART DE MEXICO
INTERNATIONAL SA DE CV
CHINA, LTD.
------------- ----------------
- ----------------------
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.
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THE OFFERING
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SECURITIES OFFERED $500,000 principal amount of 12.25% Fixed Rate Senior Secured Notes due September 1, 1998.
$7,500,000 principal amount of Floating Rate Senior Secured Notes due
September 1, 1998.
867,000 Common Stock Purchase Warrants
1,000,000 Shares of Common Stock (issuable upon exercise of the 1991 Private Placement Warrants)
Fixed Rate Notes:
Interest Payment Dates March 1 and September 1
Interest Rate 12.25%
Optional Redemption Redeemable at the option of the Company, in whole or in part, at the
redemption prices set forth herein, together with accrued interest.
Mandatory Redemption Annual sinking fund payments of $14,450,000 on each of September 1, 1996
and September 1, 1997. The Company may deliver Fixed Rate Notes which
have previously been redeemed in lieu of cash in making sinking fund
payments. The Fixed Rate Notes also provide for partial special mandatory
redemptions in certain situations.
Repurchase at Option
of Noteholder In the event of a Change in Control (as defined in the Indenture), holders of
the Fixed Rate Notes will have the right to require the Company to repurchase
such holders' Fixed Rate Notes at 102% of the principal amount thereof,
together with accrued interest, if any, to the date of purchase.
Floating Rate Notes:
Interest Payment Dates March 1, June 1, September 1 and December 1
Interest Rate Floating rate based on LIBOR for any quarterly period plus 300 basis points.
Optional Redemption Redeemable at the option of the Company,
in whole or in part, at the redemption
prices set forth herein, together with
accrued interest.
Mandatory Redemption Annual sinking fund payments of $2,550,000 on each of September 1, 1996 and September 1,
1997. The Company may deliver Floating Rate Notes which have previously been redeemed in
lieu of cash in making sinking fund payments. The Floating Rate Notes also provide for
partial special mandatory redemptions in certain situations. See "Recent Developments."
Repurchase at Option
of Noteholder In the event of a Change in Control (as defined in the Indenture), holders of the Floating
Rate Notes will have the right to require the Company to repurchase such holders' Floating
Rate Notes at 102% of the principal amount thereof, together with accrued interest, if
any, to the date of purchase. A Change in Control includes a management buyout or similar
transaction by the Company's management and/or directors and their respective affiliates
(but does not include any such transaction by the member of the Waxman Family Group (as
defined in the Indenture)).
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Warrants: 950,000 Common Stock Purchase Warrants, each representing the right to
purchase a share of Common Stock at an exercise price of $4.60 per share.
The Warrants provide for adjustments to the exercise price in certain events,
including, but not limited to, the declaration of dividends or making
of a distribution on the outstanding shares of the Company's Common
Stock or the subdivision or reclassification of the outstanding shares
of the Company's Common Stock into a greater or smaller number of
shares. The Warrants are exercisable immediately and expire on
September 1, 1996. The Company may offer to the registered holder the
option, in lieu of exercising the Warrants, of surrendering the
Warrants, in whole or in part, for a cash payment equal to the product
of (i) the Closing Price (as defined in the Warrant Agreement) for a
share of Common Stock on the last business day prior to the date of
surrender of the warrant certificate less the exercise price, and (ii)
the number of shares of Common Stock to which the holder is entitled
pursuant to the Warrants surrendered therefor.
RANKING The Notes are pari passu in right of payment with all Senior Indebtedness (as
defined in the Indenture) and senior in right of payment to all Subordinated
Indebtedness (as defined in the Indenture). The Fixed Rate Notes and Floating
Rate Notes are equal inter sese in right of payment.
SECURITY The Notes are secured by the pledge by the Company of all of the
capital stock of Barnett Inc., Waxman Consumer Products Group Inc. and WOC
Inc., (the "Operating Companies") each an
indirect subsidiary of the Company.
GUARANTEE The payment of the Company's obligations under the Notes and the
performance of the Company's obligations under the Indenture are
guaranteed by Waxman USA.
</TABLE>
RISK FACTORS
Prospective purchasers of the Securities should consider carefully the
specific factors set forth under "Risk Factors," as well as the other
information and data included in this Prospectus
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<PAGE> 11
RISK FACTORS
Prospective purchasers of the Securities should consider carefully all
of the information set forth in this Prospectus and, in particular, should
evaluate the following risks before purchasing the Securities offered hereby.
Absence of Public Market. At present, the Notes and Warrants are owned
by a small number of investors and there is currently a limited public market
for the Notes and Warrants. The Notes and Warrants will not be listed on any
exchange and no assurance can be given that an active market will develop for
the Notes and Warrants or, if such an active market develops, as to the
liquidity of such market.
If an active trading market does not develop, purchasers of the Notes
and Warrants may have difficulty liquidating their investment and the Notes and
Warrants may not be readily accepted as collateral for loans. Accordingly, no
assurances can be given as to the price at which holders of the Notes and
Warrants will be able to sell the Notes and Warrants, if at all, and it is
possible that the Notes and Warrants will trade at a price below their face
value.
The liquidity of and the market prices for the Notes and Warrants can
be expected to vary with changes in market and economic conditions, the
financial condition and prospects of the Company and other factors that
generally influence the market prices of securities, including fluctuations in
the market for similar securities. Fluctuations in the high yield market may
significantly affect the liquidity and market price of the Notes independent of
the financial performance of and prospects for the Company.
Leverage. The Company has a high degree of leverage. At June 30, 1995,
the outstanding consolidated indebtedness (excluding trade payables and accrued
liabilities) of the Company's continuing operations approximately was $201
million. This high degree of leverage may have important consequences,
including the following: (i) the ability of the Company to obtain additional
financing in the future for working capital, capital expenditures, debt service
requirements or other purposes may be impaired; (ii) a substantial portion of
the Company's cash flow from operations will be required to satisfy debt
service obligations; (iii) the Company may be more highly leveraged than
companies with which it competes, which may place it at a competitive
disadvantage; and (iv) the Company's high degree of leverage may make it more
vulnerable in the event of a downturn in its business and may limit its ability
to capitalize on business opportunities. Although the Company believes that its
operating cash flow as well as amounts available under the Domestic Credit
Facility (as defined herein) will be sufficient to fund working capital,
capital expenditures and debt service requirements until September 1, 1996, the
date upon which the first $17 million sinking fund payment is due under the
Company's Senior Secured Notes, 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 has been required to make quarterly principal payments of $1.0 million
under its Domestic Term Loan. In addition, the Company is required to make
mandatory sinking fund payments of $17.0 million on each of September 1, 1996
and September 1, 1997 with respect to the Notes and a single payment of $8.8
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 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. See "Recent Developments" and the 1995 Annual
Report for a discussion of the Company's plan to sell Consumer Products and the
Company's intention to use the net proceeds therefrom, together with borrowings
under a new credit facility, to retire its $39.2 million of Notes, thereby
eliminating the mandatory sinking fund requirements relating to the Notes as
referred to above, and to repay a portion of its revolving credit facility and
Domestic Term Loan. In addition, cash interest on the Company's Deferred Coupon
Notes is payable semi-annually commencing December 1999. There can be no
assurance that the Company will be able to pay cash interest on the Deferred
Coupon Notes commencing in December 1999 or that the Company will be able to
refinance the Deferred Coupon Notes at or prior to their maturity.
To the Company's knowledge, its high degree of leverage has not
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 Notes are secured
by a pledge of all of the outstanding shares of capital stock of the Operating
Companies. Since none of such subsidiaries has publicly traded securities, the
value of their capital stock will not be readily ascertainable and will depend
upon the market value of the assets and business of such subsidiaries. There can
be no 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
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<PAGE> 12
case, even though the debtor is in default under the applicable debt
instruments, without bankruptcy court approval. Moreover, in general, the
Bankruptcy Code prohibits the bankruptcy court from giving such permission if
the secured creditor is given "adequate protection." The meaning of the term
"adequate protection" may vary according to circumstances, but it is intended in
general to protect the value of the secured creditor's interest in the
collateral and may include cash payments or the granting of additional security,
if and at such times as the court in its discretion determines, for any
diminution in the value of the collateral as a result of the stay of disposition
during the pendency of the bankruptcy case. In view of the lack of a precise
definition of the term "adequate protection" and the broad discretionary powers
of a bankruptcy court, it is impossible to predict how long payments under the
Notes could be delayed following commencement of a bankruptcy case, whether or
when the Trustee could dispose of the pledged collateral or whether or to what
extent holders of the Notes would be compensated for any delay in payment or
loss of value of the pledged collateral through the requirement of "adequate
protection."
If there was an Event of Default (as defined herein) under the
Indenture which resulted in a foreclosure upon the collateral, such foreclosure
would constitute an event of default under the Domestic Credit Facility and the
Domestic Term Loan, which are secured by a pledge of substantially all of the
assets of the Operating Companies and 65% of the capital stock of the Company's
foreign subsidiaries. An Event of Default under the Domestic Credit Facility and
the Domestic Term Loan 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. Upon an Event of Default under the Domestic Credit Facility or the
Domestic Term Loan (which Event of Default could also result in an event of
default under the Indenture), the holders of such debt would be permitted to
accelerate such debt and to enforce their security interest in substantially all
of the assets 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 or the Domestic Term Loan if they
became due, thereby diminishing or eliminating the value of the shares of
capital stock securing the Notes. In addition, any enforcement (including
foreclosure) of the security interests securing the Domestic Credit Facility or
the Domestic Term Loan or any other indebtedness of 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.
In addition, in order to satisfy and/or eliminate the sinking fund
payments required by the 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 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. See "Recent Developments" and the 1995
Annual Report for a discussion of the Company's plan to sell Consumer Products.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS -- EMPHASIS OF MATTER PARAGRAPH
As noted in the report of the Company's independent public accountants
on the Company's audited financial statements incorporated by reference herein,
the Company is required to make mandatory sinking fund payments of $17.0
million on each of September 1, 1996 and 1997 with respect to its Senior
Secured Notes (which are guaranteed by Waxman USA Inc. and secured by a pledge
of the capital stock of the Operating Companies) and management's current
projections indicate that there will not be sufficient cash flow from
operations to fund that obligation. If the Company is not able, prior to
September 1, 1996, to enter into a new credit facility and sell Consumer
Products for sufficient net cash proceeds together with borrowings under a new
credit facility, to retire the Senior Secured Notes and to pay all amounts
owing under its Domestic Term Loan, the Company will have to obtain a
significant infusion of funds either through an additional debt financing
transaction or the sale of equity and/or assets prior to September 1, 1996.
There can be no assurance any such transaction or sale will be able to be
consummated prior to September 1, 1996 or as to the terms and conditions of any
such transaction or sale which may be so consummated. If the Company is not
otherwise able to make the September 1, 1996 sinking fund payment, there would
be an event of default under the indenture under which the Senior Secured Notes
were issued, which event of default could result in the holders of the Senior
Secured Notes foreclosing upon the collateral securing the Senior Secured
Notes. Such an event of default would also cause an event of default under all
of the Company's other outstanding indebtedness as well as under its Domestic
Term Loan.
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<PAGE> 13
Reliance on Operations of Subsidiaries; Structural Subordination. The
Company is a holding company whose only material assets are the capital stock of
its subsidiaries, including, indirectly, all of its operating subsidiaries. The
Company conducts no business other than the provision of management services to
its subsidiaries, and is dependent on distributions from its domestic
subsidiaries in order to meet its debt service obligations including its payment
obligations with respect to the Senior Subordinated Notes and the Notes. The
Company has no other sources of funds for repayment of its debt obligations and
operating expenses. There can be no assurance that distributions from its
subsidiaries will be adequate to fund the required payments under the Company's
debt obligations. In addition, certain of the instruments evidencing the Debt
Financing, the Company's other debt obligations and applicable state laws impose
significant restrictions on the payment of dividends and the making of loans by
the Company's subsidiaries to the Company (other than certain permitted
exceptions, including payments made pursuant to an intercorporate agreement and
a tax sharing agreement). If an initial public offering of the capital stock of
any of the Company's subsidiaries is consummated, the ability of such
subsidiaries to pay dividends would be diminished to the extent of any such
capital stock sold to the public and the ability of the Company's subsidiaries
to make loans to the Company would be limited to the extent that such
transactions would have to be fair to the holders of such capital stock.
The Company derives substantially all of its operating income from
wholly-owned subsidiaries. As a result of this holding company structure, the
creditors of the Company, including the holders of the Notes, are structurally
subordinated to all creditors of such subsidiaries with respect to the assets
and capital stock of such subsidiaries, including the lenders pursuant to the
Debt Financing and trade creditors. Accordingly, in the event of a dissolution,
bankruptcy or reorganization of the Company, the holders of the Notes will not
be entitled to receive amounts from the Company's subsidiaries until after
payment in full of all creditors of the subsidiaries of the Company. All of the
Debt Financing is at the subsidiary level. In addition, the Debt Financing
(which provides for maximum aggregate borrowings of $70 million) has 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.
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 16.3% (and 14.8%, assuming the exercise of all of the
Warrants) of the outstanding shares of the Company's common stock, par value
$.01 per share, and 80.3% of the outstanding shares of the Company's Class B
common stock are held by Melvin and Armond Waxman, brothers and respectively,
the Co-Chairmen of the Board and Co-Chief Executive Officers of the Company (the
"Principal Stockholders"). These holdings represent 61.1% (and 59.3%,
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 1995, 1994
and 1993, the Company's earnings were insufficient to cover its fixed charges
by $8.5 million, $4.0 million and $14.5 million, respectively. The Company's
business strategy, described herein and in the 1995 Annual Report, is designed
to capitalize on the growth prospects for Barnett 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.
11
<PAGE> 14
Foreign Sourcing. In fiscal 1995 products manufactured outside of the
United States accounted for approximately 19.8% 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. For fiscal 1995, Consumer Products' largest
customer, Kmart, accounted for approximately 13.5% of the Company's total net
sales (including the net sales of its discontinued operations) and 43.6% of the
discontinued operations total net sales. During the same period, Consumer
Products' ten largest customers accounted for approximately 23.5% of the
Company's total net sales (including the net sales of its discontinued
operations) and 75.8% of discontinued operations total net sales. The loss of,
or a substantial decrease in, the business of one or more of Consumer
Products' largest customers could have a material adverse effect on the
Company's continuing and discontinued operations and may have an adverse effect
on the Company's ability to sell its Consumer Products business. In addition,
in recent weeks certain articles in the financial press have questioned the
financial condition of Kmart, Consumer Product's largest customer. Continued
speculation as to the financial condition of Kmart may have an adverse effect
on the Company's ability to sell its Consumer Products business. Furthermore,
Kmart has stated that it intends to sell its Builders Square business, which
accounted for approximately 24.7% of Consumer Products' net sales in fiscal
1995. There can be no assurance that any purchaser of Builders Square will
continue to do business with the Company or to the extent it does continue to
do business with the Company, as to the amount, terms or conditions of any
sales by such purchaser.
See "Recent Developments" and the 1995 Annual Report for information
regarding the Company's decision to sell Consumer Products.
Proceeds of the Offering. The Company will not receive any of the
proceeds of this offering. All of the proceeds of this offering will be received
by the Selling Security Holders.
USE OF PROCEEDS
The Company will receive none of the proceeds from the sale of the
Securities by the Selling Security Holders.
If all of the 867,000 Warrants offered hereby, as well as the
remaining 133,000 1991 Private Placement Warrants, are exercised at the
exercise price of $4.60 per share, the Company would receive $4,600,000, which
would be added to the Company's working capital and used for general corporate
purposes.
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<PAGE> 15
DESCRIPTION OF NOTES
The Notes were issued under an Indenture dated as of September 1, 1991
(the "Indenture") between the Company and United States Trust Company of New
York, as trustee (the "Trustee") and amended pursuant to the First Supplemental
Indenture dated as of November 15, 1993, the Second Supplemental Indenture dated
as of March 25, 1994 and the Third Supplemental Indenture dated as of May 20,
1994. Holders of the Notes (the "Noteholders") are referred to the Indenture, as
amended, and the Trust Indenture Act of 1939, as amended (the "1939 Act"), for a
statement of the terms of the Notes. The following summary of the provisions of
the Notes is qualified in its entirety by reference to the Indenture, as
amended, which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The provisions of the Fixed Rate Notes and
Floating Rate Notes are identical unless otherwise noted. The term "Company" as
used in this section means Waxman Industries, Inc., excluding its subsidiaries.
Capitalized terms not otherwise defined herein have the meanings assigned to
them in the Indenture.
GENERAL
Principal (and premium, if any) and interest on the Notes will be
payable, and the Notes may be presented for transfer and exchange or payment, at
an office or agency maintained by the Company or by home office payment directly
to the Noteholders if the Company has so agreed with such Noteholders. No
service charge will be charged for any registration of transfer or exchange of
Notes; however, the Company may require payment of a sum sufficient to cover any
transfer taxes or similar governmental charges payable in connection therewith.
The Company will pay interest on the Fixed Rate Notes on March 1 and September 1
of each year (beginning March 1, 1992) at the rate of 12.25% per annum to the
persons who are registered Noteholders at the close of business on February 15
or August 15, as the case may be, immediately preceding the respective interest
payment date. The Company will pay interest on the Floating Rate Notes on March
1, June 1, September 1 and December 1 of each year (beginning December 1, 1991)
at the rate per annum equal to LIBOR (as defined therein) for such quarterly
period plus 300 basis points (one basis point equaling .01%) to the persons who
are registered Noteholders at the close of business on February 15, May 15,
August 15 and November 15, as the case may be, immediately preceding the
respective interest payment date. The Notes are in registered form without
coupons in denominations of $1,000 and in integral multiples of $1,000.
Initially, the Trustee will act as Paying Agent and Registrar. United
States Trust Company of New York is also acting as Warrant Agent under the
Warrant Agreement and as Agent under the Pledge Agreement. The Company may
change the Paying Agent and Registrar by notifying the Trustee. The Company may
also change the Warrant Agent and the Agent by notice.
SECURITY
Pursuant to the terms of the Guarantee, the payment of the Company's
obligations under the Notes and the performance of the Company's obligations
under the Indenture are guaranteed by Waxman USA. Separate Financial Statements
of Waxman USA are not included herein, as the aggregate assets and earnings of
Waxman USA are substantially equivalent to the assets and earnings of the
Company. Pursuant to the terms of the Pledge Agreement, as amended on May 20,
1994 (the "Pledge Agreement"), the Notes (and the Guarantee) are secured by the
Company's pledge of all of its right, title and interest in and to all of the
capital stock of Barnett, Consumer Products and WOC now or hereafter owned by
the Company. All presently outstanding capital stock of Barnett, Consumer
Products and WOC is currently being held by United States Trust Company of New
York (the "Agent") pursuant to the Pledge Agreement. The Pledge Agreement
provides that upon the occurrence of an Event of Default that is not cured
within the applicable time period, the Agent shall have the rights and remedies
of a secured party under the Uniform Commercial Code and shall have full power
and authority to sell or otherwise dispose of the Pledged Stock and, after
giving written notice of such Event of Default to the Company, vote the Pledged
Stock in accordance with the instructions of the Security Holders. In addition,
the Pledge Agreement provides that (i) if there exists no Event of Default, the
Company shall be entitled to exercise all voting rights and power; (ii) upon the
dissolution, winding up, liquidation or reorganization of Barnett, Consumer
Products and WOC, any sum to be paid or any property to be distributed with
respect to the Pledged Stock shall be paid to the Agent; and (iii) if there
shall exist an Event of Default, the Agent shall be entitled to receive and
retain any and all dividends declared upon any of the Pledged Stock. As required
by the Indenture, the Company has provided the Trustee with a certificate of an
independent appraiser that, in such appraiser's opinion, the fair value to the
Company, as of June 11, 1992, of the Pledged Stock (which at the time consisted
of only the capital stock of Barnett) was $70 million. However, there can be no
assurance that the value of the Pledged Stock, or the net proceeds of any sale
or other disposition of the Pledged Stock (after deducting all reasonable costs
and expenses of collection, custody, sale or other disposition), will be
sufficient to satisfy the outstanding principal and accrued interest on the
Notes upon the occurrence of an Event of Default. In the event
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<PAGE> 16
of such a shortfall in net proceeds, the Holders of the Notes will be unsecured
creditors of the Company with respect to amounts under the Notes which remain
unpaid.
CERTAIN DEFINITIONS
"Change in Control" means the acquisition by any person or two or more
persons acting together as a partnership, limited partnership, syndicate or
other group for such acquisition purposes (other than the Waxman Family Group)
of the power to direct or cause the direction of the management and policies of
the Company (or of the properties and assets substantially as an entirety of the
Company), directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Company Borrowing Base" means, as of any date, an amount equal to (i)
85% of the face amount of all accounts receivable owned by the Company or its
domestic Subsidiaries (other than Barnett), as of such date that are not more
than 90 days past due plus (ii) 50% of the book value (calculated on a FIFO
basis) of all inventory owned by the Company or its domestic Subsidiaries (other
than Barnett) as of such date, all calculated on a consolidated basis and in
accordance with GAAP.
"Consolidated Net Income" for any period means the aggregate of the net
income (or loss) of the Company and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP applied on a consistent
basis; provided, however, that (a) the net income of any person in which the
Company or any of its Subsidiaries has a joint interest with a third party
(which interest does not constitute a majority interest in such person) shall be
included only to the extent of the amount of dividends or distributions paid to
the Company or any Subsidiary; (b) the net income of any Subsidiary of the
Company that is subject to any restriction or limitation on the declaration or
payment of dividends or other distributions shall be excluded to the extent of
such restriction or limitation; (c) the net income (or loss) of any person
acquired in a pooling of interests transaction for any fiscal period ending
prior to the date of such acquisition shall be excluded; (d) if the aggregate of
all sales or other dispositions of capital assets other than in the ordinary
course of business by the Company and any of its Subsidiaries during the period
results in a net gain, such net gain shall be excluded and if such aggregate
amount results in a net loss, such net loss shall be deducted; (e) the net gain
or net loss resulting from any change in accounting shall be excluded; and (f)
any extraordinary items shall be excluded.
"Consolidated Operating Cash Flow" means Consolidated Net Income before
interest, taxes, depreciation and amortization of intangibles.
"Consolidated Operating Cash Flow Coverage Ratio" means, for any period
and with respect to any Person, the ratio of (i) Consolidated Operating Cash
Flow to (ii) net interest expense and preferred stock dividend expense, if any,
of the Company and its Subsidiaries for such period, in each case on a
consolidated basis, determined in accordance with GAAP. Notwithstanding the
foregoing, the calculation of the Company's Consolidated Operating Cash Flow
Coverage Ratio for all purposes of the Indenture (including for purposes of
Sections 5.10(b) and 5.12) shall exclude (i) the effect of any item of income,
gain, loss or charge or any other effect of or related to Ideal Holding Group,
Inc., a wholly owned subsidiary of the Company, and any subsidiary thereof (the
"Ideal Group") on the Company's Consolidated Operating Cash Flow, consolidated
net interest expense and consolidated preferred stock dividend expense and (ii)
from consolidated net interest expense any charges relating to non-cash interest
on the 12 3/4% Senior Secured Deferred Coupon Notes of the Company Due 2004
offered pursuant to the Company's Offer to Exchange and Consent Solicitation
dated April 21, 1994 (the "Offer to Exchange") and/or amortization of the
warrants to purchase common stock of the Company offered pursuant to the Offer
to Exchange from and after June 30, 1994.
"Consolidated Operating Income" means Consolidated Net Income before
interest, taxes and amortization of intangibles.
"Consolidated Tangible Assets" means the total amount of consolidated
assets of the Company (less applicable reserves and other properly deductible
items) after deducting therefrom (i) goodwill, trade names, trademarks, patents,
unamortized debt discount and expense, and other like intangibles; and (ii)
investments of the Company (that are not Qualified Investments) in excess of 10%
of Consolidated Tangible Assets (computed before reducing Consolidated Tangible
Assets by such excess non-Qualified Investments).
"Consolidated Tangible Net Worth" means the Consolidated Tangible
Assets of the Company less the consolidated total liabilities of the Company.
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<PAGE> 17
"Corporate Restructuring" means (i) the formation by the Company of (a)
Waxman USA, as a holding company for the subsidiaries that comprise and support
the Company's domestic operations, (b) Consumer Products, a wholly owned
subsidiary of Waxman USA, to own and operate the Company's Consumer Products
Group Division (the "Consumer Products Division"), and (c) WOC, a wholly owned
subsidiary of Waxman USA, to own and operate the Company's domestic operations,
other than those of Barnett and Consumer Products, (ii) the contribution of the
capital stock of Barnett from the Company to Waxman USA, (iii) the contribution
of the assets and liabilities of the Consumer Products Division from the Company
to Consumer Products, (iv) the contribution of the assets and liabilities of the
Company's Madison Equipment Division from the Company to WOC, (v) the
contribution of the assets and liabilities of the Company's Medal Distributing
Division from the Company to WOC, (vi) the merger of U.S. Lock Corporation
("U.S. Lock") and LeRan Copper & Brass, Inc. ("LeRan"), each a wholly owned
subsidiary of the Company, into WOC, (vii) the contribution of the capital stock
of TWI, International, Inc. ("TWI") from the Company to Waxman USA and (viii)
the contribution of the capital stock of Western American Manufacturing, Inc.
("WAMI") from the Company to TWI.
"Guarantee" shall mean the Guarantee dated as of May 20, 1994, whereby
Waxman USA is guaranteeing the payment of the Company's obligations under the
Notes and the performance of the Company's obligations under this Indenture.
"Indebtedness" means, with respect to any person, (i) any liability,
contingent or otherwise, of such person (A) for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such person or only
to a portion thereof), (B) evidenced by a note, debenture or similar instrument
(including a purchase money obligation) given in connection with the acquisition
of any property or assets, including securities, (C) for any letter of credit or
performance bond in favor of such person, or (D) for the payment of money
relating to a Capitalized Lease Obligation; (ii) any liability of others of the
kind described in the preceding clause (i), which the person has guaranteed,
directly or indirectly, or which is otherwise its legal liability; (iii) any
obligation secured by a Lien to which the property or assets of such person are
subject, whether or not the obligations secured thereby shall have been assumed
by or shall otherwise be such person's legal liability; (iv) any and all
deferrals, renewals, extensions and refundings of, or amendments, modifications
or supplements to, any liability of the kind described in any of the preceding
clauses (i), (ii) or (iii); and (v) any unfunded pension liabilities reflected
or required to be reflected on such person's balance sheet.
"Material Acquisition" means any merger, consolidation, acquisition or
lease of assets, acquisition of securities or other business combination or
acquisition, or any two of such transactions that are part of a common plan to
acquire a business or group of related businesses in each case, if the assets
and/or securities thus acquired in the aggregate would constitute a significant
subsidiary, as defined under Regulation S-X of the Securities Act.
"Net Worth" of any person as of any date shall mean the stockholders'
equity of such person and its consolidated subsidiaries determined as of the end
of the immediately preceding fiscal quarter, excluding, in the case of the
Company (i) cumulative currency translation adjustments as of the date of
determination, (ii) the effect of any item of income, gain, loss or charge or
any other effect of or related to the Ideal Group and (iii) charges relating to
non-cash interest on the 12 3/4% Senior Secured Deferred Coupon Notes Due 2004
of the Company offered pursuant to the Offer to Exchange and/or amortization of
the warrants to purchase common stock of the Company offered pursuant to the
Offer to Exchange from and after June 30, 1994, each determined in accordance
with GAAP.
"Qualified Investments" means (a) Investments by the Company or any
Subsidiary in (i) commercial paper rated P-1 or A-1, certificates of deposit of
banks with capital and surplus aggregating at least $100,000,000 and having P-1
or A-1 commercial paper ratings, and direct obligations of the United States
Government or agencies thereof having a maturity of less than one year; (ii)
loans or advances in the usual or ordinary course of business other than to
Subsidiaries or Affiliates (except as required by the Company's cash management
policies in the usual and ordinary course of business or as permitted by (iv) or
(v) below); (iii) the Company's existing Investments and renewals thereof, so
long as principal amounts are not increased, weighted average life is not
decreased, nor priority ranking increased; (iv) equity Investments by the
Company in or loans or advances by the Company to a Subsidiary (other than Ideal
or Belanger), so long as such loans and advances do not exceed $5,000,000 in the
aggregate; and (v) loans or advances by the Company to or equity Investments by
the Company in Ideal or Belanger, so long as such loans, advances and
Investments do not exceed $10,000,000 in the aggregate but in any event not in
excess of Cdn. $450,000 in the aggregate following May 20, 1994; and (b)
purchases and acquisitions of plant, property and equipment that is a part of,
or is used in connection with the ordinary course of business of the Company.
15
<PAGE> 18
"Senior Indebtedness" means (i) the Notes and all Indebtedness and
other monetary obligations under the Notes, (ii) Indebtedness or amounts owed to
banks and other financial institutions and (iii) any Indebtedness permitted by
the Indenture which is not Subordinated Indebtedness.
"Subordinated Indebtedness" means the principal of and interest on any
Indebtedness of the Company (whether outstanding on the date of the Indenture or
thereafter created, incurred, assumed or guaranteed) which, pursuant to the
terms of the instrument creating or evidencing the same, is subordinated in
right of payment to the Notes.
"Waxman Family Group" means Melvin Waxman, Armond Waxman, Judy Robins,
Louise Brody, Eva Waxman and each of their respective spouses, children and
other members of their immediate family (including grandchildren), and any trust
of which any of them are the beneficiaries or over which they exercise voting
control.
OPTIONAL REDEMPTION
The Fixed Rate Notes may be redeemed at any time prior to maturity at
the option of the Company in whole or in part, upon 45 days' notice mailed to
the Noteholders' registered address at the following prices (expressed as a
percentage of the principal amount), if redeemed during the twelve months
commencing September 1 of the year indicated below, in each case together with
interest accrued to the redemption date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1993 107.35%
1994 104.90
1995 102.45
1996 and thereafter 100.00
</TABLE>
The Floating Rate Notes may be redeemed in whole or in part, on any
Interest Payment Date at a redemption price equal to 103% of the principal
amount thereof, if redeemed prior to September 1, 1996 or 100% of the principal
thereof, if redeemed on or after September 1, 1996 plus interest accrued to the
redemption date. A Notice of Redemption is to be mailed at least 15 days but not
more than 60 days before the redemption date to each Noteholder at its
registered address.
If less than all of the Notes are called for redemption, the Trustee
shall select the Notes to be redeemed by such method as the Trustee considers
fair and appropriate.
MANDATORY REDEMPTION
The Indenture requires the Company to redeem Fixed Rate Notes in the
aggregate principal amount of $14,450,000, and Floating Rate Notes in the
aggregate principal amount of $2,550,000, annually on each of September 1, 1996
and September 1, 1997 (at a redemption price of 100% of their principal amount
plus accrued interest to the redemption date), calculated to retire 68% of the
issue prior to maturity. A Notice of Redemption is to be mailed at least 15 days
but not more than 60 days before the redemption date to each Noteholder at its
registered address. The Company may, at its option, receive credit against
mandatory redemption payments for the principal amount of the Notes that the
Company has previously redeemed pursuant to the optional redemption provisions
described above.
The Indenture further provides that the Company will make Special
Mandatory Redemption Offers upon the occurrence of the following specified
events:
(a) Maintenance of Net Worth. In the event that the Company's Net Worth
at the end of any two (2) consecutive fiscal quarters declines below
the Minimum Net Worth, the Company shall, on the last day of the second
following fiscal quarter, make an offer in accordance with Section 4.04
hereof (a "Special Mandatory Redemption Offer"), to the Holders to
redeem, regardless of whether on such day the Company's Net Worth is
above or below the Minimum Net Worth, (A) $5,000,000 aggregate
principal amount of the Securities, or (B) such lower amount still
outstanding, at a Redemption Price of 102% of the principal amount
thereof plus accrued and unpaid interest to the Special Mandatory
Redemption Date, and shall continue to make like Special Mandatory
Redemption Offers semiannually thereafter until such time as all
outstanding Securities have been redeemed; provided, however, that if
the Company's Net Worth is equal to or above the Minimum Net Worth as
at the last day of any fiscal quarter subsequent to the end of such two
(2) fiscal quarters, the Company's obligation to make Special Mandatory
Redemption Offers on dates after such quarter end shall terminate; and
provided, further, that if the Company's
16
<PAGE> 19
Net Worth shall thereafter be less than the Minimum Net Worth as at the
last day of any two (2) consecutive subsequent fiscal quarters, the
Company's semiannual Special Mandatory Redemption Offers shall again
commence on the last day of the second following fiscal quarter. For
the purposes of this section, "Minimum Net Worth" shall equal the
Company's Net Worth at June 30, 1994 minus $5,000,000. In each case,
the Minimum Net Worth required to be maintained by the Company will be
calculated by reducing such number by (i) any extraordinary charges
attributable to the repayment of Indebtedness subsequent to June 30,
1993 (ii), any loss incurred subsequent to June 30, 1993 in connection
with the sale by the Company of any Capital Stock of any Subsidiary or
any sale of substantially all of the assets of any Subsidiary or
division of the Company and (iii) any costs, including consent fees,
incurred in connection with the consent solicitation described in the
Company's Consent Solicitation Statement dated November 3, 1993, as
supplemented from time to time, relating to the Senior Subordinated
Notes, and the related and concurrent solicitation of consents from
Holders of the Securities. The Company's obligation to make any Special
Mandatory Redemption Offer pursuant to this section shall be in
addition to, and not in lieu of, any obligation to make a Special
Mandatory Redemption Offer as a result of the events described in
paragraphs (b) and (c) below.
(b) Disposition of Assets and Subsidiary Stock. The Company will not,
and will not permit any Subsidiary to, sell, lease, transfer, or
otherwise dispose of any part of its properties or assets, other than
the sale, lease, transfer or other disposition of inventory or
equipment in the ordinary course of business and excluding transactions
between Subsidiaries or between the Company and Subsidiaries permitted
under certain sections of the Indenture, nor will the Company sell or
allow to be sold any Capital Stock of any Subsidiary:
(i) unless (A) the consideration received is equal to or greater than
the fair market value of the assets or Capital Stock sold, (B) at least
85% of the consideration is in cash or cash equivalents, (C) (1) the
Company uses the full amount of the Net Proceeds from any such sale,
lease, transfer or disposition up to an aggregate of $75,000,000 to
make a Special Mandatory Redemption Offer to redeem an equal principal
amount of the Notes at a Redemption Price of 102% of the principal
amount thereof plus accrued and unpaid interest to the Special
Mandatory Redemption Date or (2) the Company reinvests such Net
Proceeds within 12 months in the Company's consolidated business, other
than in the manufacture or distribution of product lines (x) which are
not similar or complementary to product lines presently manufactured or
distributed by the Company or its Subsidiaries and (y) which would not
be distributed or marketed to the same types of customers as presently
served by the Company or its Subsidiaries; and (D) the Company uses the
full amount of total aggregate Net Proceeds from such sale, lease,
transfer or disposition in excess of an aggregate of $75,000,000 to
make a Special Mandatory Redemption Offer to redeem an equal principal
amount of the Notes at a Redemption Price of 102% of the principal
amount thereof plus accrued and unpaid interest to the Special
Mandatory Redemption Date; provided, that the Company shall use Net
Proceeds from any such sale, lease, transfer or disposition to which
the provisions of paragraph (c) below apply (a "Barnett Transaction")
only in accordance with such paragraph (c).
(ii) if the Net Proceeds from any such sale, lease, transfer or other
disposition, together with the sum of all Net Proceeds from similar
transactions completed during the four full fiscal quarters ending
immediately prior to such transaction, are greater than 15% of the
Company's Consolidated Tangible Assets as of the end of the most recent
fiscal quarter, or if the operating income for the four full fiscal
quarters attributable to such assets or Capital Stock is greater than
15% of the Company's Consolidated Operating Income for the four full
fiscal quarters ending immediately prior to such transaction, and, in
either case, the Company does not make a Special Mandatory Redemption
Offer to redeem an equal amount of the Notes at a Redemption Price of
102% of the principal amount thereof plus accrued and unpaid interest
to the Special Mandatory Redemption Date. The Company may use Net
Proceeds from transactions to which this paragraph applies to redeem
Subordinated Indebtedness to the extent such Net Proceeds are not used
to redeem Notes pursuant to clauses (i) and (ii) after a Special
Mandatory Redemption Offer has been made by the Company and not
accepted by Security Holders.
Notwithstanding the foregoing, the Company and its Subsidiaries may (a)
sell, lease, transfer or otherwise dispose of assets or Capital Stock of
Subsidiaries in a transaction outside the ordinary course of business (other
than a Barnett Transaction), provided that (i) the consideration received is
equal to or greater than the fair market value of the assets or Capital Stock
sold, (ii) at least 85% of the consideration is in cash or cash equivalents and
(iii) the Net Proceeds from all such transactions, after giving effect to the
contemplated transaction, completed during the 12 months prior to such
transaction do not exceed $3,000,000 in the aggregate and (b) effect the
Corporate Restructuring without being required to make a Special Mandatory
Offer.
(c) Sale of Company's Interest in Barnett. In the event of a sale by
Barnett of shares of its Capital Stock, such that after such sale the
Company owns less than 50% of the outstanding Capital Stock of Barnett,
counting as
17
<PAGE> 20
exercised or converted all warrants, options and convertible securities
held by persons other than the Company, the Company shall make a
Special Mandatory Redemption Offer to redeem 100% of the Notes at a
Redemption Price of 102% of the principal amount thereof plus accrued
and unpaid interest to the Special Mandatory Redemption Date. In the
event of a sale by Barnett of shares of its Capital Stock whereby the
Company maintains a 50% or greater interest in Barnett:
(i) and the valuation of Barnett immediately prior to the consummation
of the sale is greater than or equal to $70,000,000, as determined by
the transaction price, then Barnett may use the Net Proceeds from the
offering for any purpose permitted under the Indenture except for
Investments in the manufacture or distribution of product lines (x)
which are not similar or complementary to produce lines presently
manufactured or distributed by the Company or its Subsidiaries and (y)
which would not be distributed or marketed to the same types of
customers as presently served by the Company or its Subsidiaries, with
no obligation to offer to redeem the Notes; or
(ii) and the valuation of Barnett immediately prior to the consummation
of the sale is less than $70,000,000, as determined by the transaction
price, then the Company must make a Special Mandatory Redemption Offer
to redeem, at a Redemption Price of 102% of the principal amount
thereof plus accrued and unpaid interest to the Special Mandatory
Redemption Date, the amount of Notes necessary to reduce the ratio of
the outstanding principal amount of the Notes to the value of the
Company's remaining interest in Barnett to 1:1.4, as determined by the
transaction price;
provided, however, that if Barnett distributes, dividends, loans, advances or
otherwise transfers to the Company or any Subsidiaries or Affiliates of the
Company (other than Barnett or any Subsidiary of Barnett) any Net Proceeds from
such sale of Capital Stock of Barnett, the Company shall use such Net Proceeds
in accordance with the provisions of paragraph (b) above, as if it received such
Net Proceeds from a transaction to which the provisions of paragraph (b) above
apply.
In the event of a sale by the Company of 50% or more of the Company's
shares of Capital Stock of Barnett, the Company shall make a Special
Mandatory Redemption Offer to redeem 100% of the Notes at a Redemption
Price of 102% of the principal amount thereof plus accrued and unpaid
interest to the Special Mandatory Redemption Date.
In the event of a sale by the Company of less than 50% of the Company's
shares of Capital Stock of Barnett, the Company shall make a Special
Mandatory Redemption Offer to redeem, at a Redemption Price of 102% of
the principal amount thereof plus accrued and unpaid interest to the
Special Mandatory Redemption Date, the amount of Notes necessary to
reduce the ratio of the outstanding principal amount of Notes to the
value of the Company's remaining shares of Capital Stock of Barnett to
1:1.4, as determined by the transaction price.
SPECIAL PAYMENT
The Indenture provides that unless on or prior to December 31, 1994,
the Company shall have satisfied and discharged its obligations under the
Indenture, then on December 31, 1994, the Company shall irrevocably deposit with
the Trustee for the ratable benefit of the holders of the Notes an amount in
cash equal to 1.0% of the aggregate principal amount of Notes outstanding on
such date
REPURCHASE AT OPTION OF NOTEHOLDER
In the event of a Change in Control, holders of the Notes will have the
right to require the Company to repurchase such holders' Notes at a price of
102% of the principal amount thereof plus accrued interest, if any, to the date
of purchase. Upon the occurrence of such event, the Company will make an offer
to repurchase all of the Notes, which offer will comply with all applicable
tender offer rules, including, but not limited to, Section 14(e) of the Exchange
Act and Rule 14e-1 thereunder.
This provision of the Indenture is intended to protect the holders of
the Notes against a diminution in the value of the Notes in the event of certain
extraordinary corporate transactions such as a recapitalization, leveraged
buyout or similar transaction. In the event of such a transaction which
constitutes a Change in Control, holders will have the option of continuing to
hold the Notes or liquidating their investment by requiring the Company to
repurchase the Notes. However, the provision will have no effect in the event of
an extraordinary transaction which results in the Waxman Family Group retaining
control of the Company and thus does not constitute a Change in Control.
RANKING
18
<PAGE> 21
The Notes are pari passu in right of payment with all Senior
Indebtedness and senior in right of payment to all Subordinated Indebtedness.
The Fixed Rate Notes and Floating Rate Notes are equal inter sese in right of
payment. The Indenture contains certain restrictions on the ability of the
Company and its Subsidiaries to incur additional Indebtedness, including Senior
Indebtedness. See "Certain Covenants - Limitation on Incurrence of Indebtedness
by the Company" and "- Limitation on Indebtedness and Convertible Preferred
Stock of Subsidiaries."
A significant portion of the Company's operations is conducted through
Subsidiaries. The rights of the Company and its creditors, including the holders
of the Notes, to participate in the assets of any Subsidiary upon any
liquidation or reorganization of such Subsidiary or otherwise will be subject to
the prior claims of creditors of such Subsidiary, except to the extent that the
Company may itself be a creditor with recognized claims against the Subsidiary.
The ability of the Company to pay principal and interest on the Notes may be
dependent upon the payment to it of dividends, interest or other charges by the
Subsidiaries.
CERTAIN COVENANTS
Limitation on Dividends, Acquisitions of Capital Stock and Investments in
Subsidiaries
The Indenture provides that the Company shall not, and shall not permit
any Subsidiary to, directly or indirectly, (i) declare or pay any dividends on
or make any distributions, in cash or otherwise, in respect of its Capital Stock
to holders of Capital Stock of the Company or, except for payment to the
Company, to holders of Capital Stock of any Subsidiary of the Company, or (ii)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company or any Subsidiary (other than Qualified Investments), or (iii) make
any payments or contributions to, guaranties of any Indebtedness of or
Investments in, any Subsidiary or any Affiliate of the Company or of any
Subsidiary (other than Qualified Investments) or (iv) make any other Investments
other than Qualified Investments (any such transaction described in (i), (ii),
(iii) or (iv) being hereinafter referred to as a "Restricted Payment") if, at
the time of such Restricted Payment, or after giving effect thereto: (A) an
Event of Default shall have occurred and be continuing; or (B) the aggregate
amount expended subsequent to the date of the original issuance of the Notes for
all such Restricted Payments (the amount of any Restricted Payment, if other
than cash, to be the fair market value of such payment) exceeds the sum of (x)
the sum of (i) 50% of the Company's cumulative Consolidated Net Income earned
subsequent to June 30, 1991 in any fiscal quarter at the end of which the ratio
of the Company's Total Consolidated Indebtedness to Net Worth is equal to or
greater than 2.0 to 1 and (ii) 30% of the Company's cumulative Consolidated Net
Income earned subsequent to June 30, 1991 in any fiscal quarter at the end of
which the Company's Total Consolidated Indebtedness to Net Worth is less than
2.0 to 1; (y) the Net Proceeds of the issuance or sale after the initial
issuance of the Notes of Capital Stock of the Company, net of amounts used for
the redemption of Notes; and (z) the net cash proceeds of the issuance or sale
after the initial issuance of the Notes of any Indebtedness of the Company which
has been converted pursuant to its terms into shares of Capital Stock of the
Company; provided, however, that clause (B) shall not prevent (I) the payment of
any dividend within 90 days after the date of declaration thereof if, at the
date of declaration and, after giving effect to any such dividend payments, the
Company is in compliance with the provisions of this section, (II) the
retirement of any shares of the Company's Capital Stock by exchange for or out
of the proceeds of a substantially concurrent sale (other than to a Subsidiary)
of other shares of the Company's Capital Stock, (III) the payment of any
dividend or distribution payable in Capital Stock of the Company, or (IV) the
payment of cash dividends on the Company's Common Stock and Class B Common Stock
with respect to each of the four fiscal quarters subsequent to the original
issuance of the Notes at a rate per share not in excess of $0.12 per annum (as
adjusted for stock splits, dividends, subdivisions or combinations); and
provided, further, however, that the Company may not pay dividends on the
Company's Common Stock and Class B Common Stock with respect to any fiscal
quarter at a rate per share in excess of $0.12 per annum (as adjusted for stock
splits, dividends, subdivisions or combinations) unless the ratio of the
Company's Total Consolidated Indebtedness to Net Worth at the end of such fiscal
quarter is less than 2.0 to 1, after giving effect to the Restricted Payment as
if it had occurred in such fiscal quarter. The Indenture provides that the
Company will not, and will not permit any Subsidiary to, directly or indirectly,
make or acquire any Investment, or purchase or otherwise acquire any plant,
property or equipment, other than Qualified Investments, except as permitted by
this covenant.
Notwithstanding the foregoing, the Indenture shall not prohibit the
Company from permitting (i) Barnett, Consumer Products and WOC (collectively,
the "Operating Companies") to declare or pay dividends on or make distributions,
in cash or otherwise, in each case without duplication, to Waxman USA and Waxman
USA to declare or pay dividends on or make distributions, in cash or otherwise,
in amounts required by the Company to pay, and the Company may pay, interest on
the Notes and on the Company's 13 3/4% Senior Subordinated Notes dues June 1,
1999, (ii) Waxman USA, Barnett, Consumer Products, WOC, TWI and WAMI to make
cash payments to the Company pursuant to (x) that certain Intercorporate
Agreement dated as of the date hereof among the Company, Waxman USA, Consumer
Products, Barnett and WOC (the "Intercorporate Agreement") and, (y) so long as
such Subsidiary of the Company is included in the
19
<PAGE> 22
Company's consolidated federal income tax return, that certain Tax Sharing
Agreement dated as of the date hereof among the Company, Waxman USA, Consumer
Products, Barnett, WOC, TWI and WAMI (the "Tax Sharing Agreement), and (iii)
Waxman USA to guarantee the obligations of the Company under the Notes and this
Indenture pursuant to the Guarantee. Any amounts expended pursuant to the
preceding sentence shall not be Restricted Payments for purposes of this
Indenture.
Limitation on Incurrence of Indebtedness by the Company
The Indenture provides that the Company will not create, incur,
guarantee or assume any Indebtedness, in addition to Indebtedness evidenced by
the Notes, except for:
(a) Indebtedness of the Company pursuant to the 12 3/4% Senior Secured
Deferred Coupon Notes Due 2004 offered pursuant to the Offer to Exchange and
additional Indebtedness in an amount up to $5,000,000, the proceeds of which are
applied for working capital purposes, provided that no such working capital
Indebtedness may be incurred if, after giving effect thereto, the total
Indebtedness incurred and outstanding under this subsection would exceed the
Company Borrowing Base; and provided, further, that no such Indebtedness may be
created, incurred, assumed or suffered to exist if all or any portion of the
proceeds therefrom are (or are to be) applied in connection with the manufacture
or distribution of, or entry into any line of business (through merger,
consolidation, acquisition, purchase of all or substantially all of the assets
of any person or business or otherwise) relating to, product lines (i) which are
not similar or complementary to product lines presently manufactured or
distributed by the Company or its Subsidiaries and (ii) which would not be
distributed or marketed to the same types of customers as presently served by
the Company or its Subsidiaries;
(b) other Indebtedness if, after giving effect thereto and the
application of the proceeds thereof, the Company's Consolidated
Operating Cash Flow Ratio is greater than and the ratio of the
Company's Total Consolidated Indebtedness to Total Capitalization is
less than, the following:
<TABLE>
<CAPTION>
FOR THE TOTAL CONSOLIDATED
FISCAL YEAR ENDING CONSOLIDATED OPERATING INDEBTEDNESS TO
JUNE 30, CASH FLOW RATIO TOTAL CAPITALIZATION
-------- --------------- --------------------
<S> <C> <C>
1994 1.8 to 1 79%
1995 1.9 to 1 77%
Thereafter 2.0 to 1 75%
</TABLE>
Notwithstanding anything to the contrary contained in paragraphs (a) or
(b) above, the Company (excluding Subsidiaries) may not have
outstanding Senior Indebtedness in an aggregate amount in excess of
$100,000,000 at any one time.
(c) Indebtedness incurred solely for the purpose of renewing,
extending or refunding Indebtedness that was incurred in compliance
with the provisions of paragraph (a) or (b) of this covenant or was
existing as of the date of the initial issuance of the Notes; provided
that the principal amount of any Indebtedness incurred pursuant to this
paragraph (c) shall not exceed the principal amount, and the weighted
average life of any Indebtedness incurred pursuant to this paragraph
(c) shall not be less than the weighted average life, of the
Indebtedness being renewed, extended or refunded, and if the
Indebtedness to be renewed, extended or refunded was incurred pursuant
to paragraph (b) above, the priority of payment of the Indebtedness
pursuant to this paragraph (c) relative to the Notes is the same as or
subordinate to that of the Indebtedness being renewed, extended or
refunded.
Limitation on Indebtedness and Preferred Stock of Subsidiaries
The Indenture provides that:
(a) The Company shall not permit any Subsidiary to issue any
preferred stock or to create, incur, guarantee or assume Indebtedness
except for the following: (i) Indebtedness owed to the Company; (ii)
Subsidiary Indebtedness existing at the date of the initial issuance of
the Notes; (iii) Indebtedness that is non-recourse to the Company
outstanding at the time a Subsidiary becomes a Subsidiary; (iv)
Indebtedness of the Operating Companies in an amount up to $70,000,000,
the proceeds of which are used for general corporate purposes (the
"Permitted Operating Companies Indebtedness"); (v) Indebtedness of
Waxman USA incurred to refinance Indebtedness of the Company and any
fees, expenses and premiums incurred in connection with such
refinancing (the "Permitted Waxman USA Indebtedness"); (vi)
Indebtedness of Waxman USA incurred pursuant to the Guarantee; and
(vii)
20
<PAGE> 23
extensions, renewals and refundings of (ii), (iii), (iv), (v) and (vi),
so long as principal amounts are not increased, and, in the case of
clauses (ii) and (iii) above, the weighted average life of any such
Indebtedness is not decreased and the extended, renewed or refunded
Indebtedness does not have a more senior priority ranking."
(b) Notwithstanding anything to the contrary in this covenant,
the Company may permit Ideal or Belanger to create, incur, guarantee or
assume any Indebtedness, in an amount up to Canadian $35,000,000 if,
after giving effect thereto and the application of the proceeds
thereof, the Company's Consolidated Operating Cash Flow Ratio is
greater than and the ratio of the Ideal's Total Consolidated
Indebtedness to Total Capitalization is less than the following:
<TABLE>
<CAPTION>
FOR THE TOTAL CONSOLIDATED
FISCAL YEAR ENDING CONSOLIDATED OPERATING INDEBTEDNESS TO
JUNE 30, CASH FLOW RATIO TOTAL CAPITALIZATION
-------- --------------- --------------------
<S> <C> <C>
1994 1.7 to 1 81%
1995 1.8 to 1 79%
Thereafter 1.9 to 1 77%
</TABLE>
provided, however, that in no event may the aggregate outstanding
amount of Indebtedness of Ideal and Belanger exceed Canadian
$95,000,000.
Maintenance of Consolidated Operating Cash Flow Coverage Ratio
The Indenture provides that the Company's Consolidated Operating Cash
Flow Coverage Ratio for (i) the full fiscal quarter ending on September 30,
1993, (ii) the two full consecutive fiscal quarters ending on December 31, 1993,
(iii) the three full consecutive fiscal quarters ending on March 31, 1994 and
(iv) the four full consecutive fiscal quarters ending on June 30, 1994 or on the
last day of any fiscal quarter thereafter shall not be less than 1.1 to 1.
Limitation on Subsidiary Payment Restrictions
The Indenture provides that the Company will not, and will not permit
any Subsidiary to, create or otherwise cause or suffer to exist or become
effective any consensual restriction or encumbrance on the ability of any
Subsidiary (a) to pay dividends or make any other distributions on such
Subsidiary's Capital Stock to, or pay any Indebtedness owing to, or repurchase
or redeem any of such Subsidiary's Capital Stock from, the Company or any other
Subsidiary, (b) to make any loans or advances to the Company or any other
Subsidiary, or (c) to transfer any of its property or assets to the Company or
any other Subsidiary, except for (i) the restrictions contained herein and in
the Ideal Credit Agreement, (ii) the restrictions contained in any agreement or
instrument relating to Indebtedness incurred by Ideal in accordance with Section
5.11(b) or Indebtedness in existence on the date of the initial issuance of the
Notes, provided that the terms and conditions of such agreement or instrument
relating to the limitations referred to in (a), (b) and (c) above are no more
restrictive on any Subsidiary than the terms and conditions of the Ideal Credit
Agreement, and (iii) restrictions, agreed to by Waxman USA or the Operating
Companies, in any agreement or instrument relating to Permitted Waxman USA
Indebtedness and Permitted Operating Companies Indebtedness, respectively;
provided, however, that such restrictions do not materially impair the ability
of Waxman USA or the Operating Companies to declare and pay dividends or make
distributions of up to 100% of their respective net income to permit the Company
to meet its debt service obligations on the Securities in the absence of a
default under any such agreement or instrument and provided, further, that such
restrictions do not materially impair the ability of Waxman USA or the Operating
Companies to make cash payments to the Company, in addition to such dividends
and distributions, in the absence of a default under any such agreement or
instrument, pursuant to (i) the Intercorporate Agreement and, (ii) so long as
such Subsidiary is included in the Company's consolidated federal income tax
returns, the Tax Sharing Agreement.
Subordinated Debt Repurchases
The Indenture provides that the Company may not purchase, redeem or
otherwise acquire or retire (other than pursuant to mandatory redemptions or at
maturity) any Subordinated Indebtedness if the total of such purchases exceeds
the sum of (i) the sum of (x) 75% of the sum of Consolidated Net Income plus
increases in deferred taxes and less decreases in deferred taxes, plus
depreciation and amortization of intangibles, less capital expenditures, less
(y) 100% of the sum of cash dividends or distributions on the Company's Capital
Stock, amounts paid to make Mandatory Redemptions of the Notes, repurchases of
Capital Stock or any investments (other than Qualified Investments), in each
case subsequent
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to June 30, 1991; (ii) the net proceeds of the issuance or sale after the
initial issuance of the Notes of Capital Stock or Subordinated Indebtedness of
the Company, net of any amounts used for the repurchase of Notes; (iii) the net
proceeds of the issuance or sale after the date of the initial issuance of the
Notes of any Indebtedness of the Company which has been converted into shares of
Capital Stock of the Company; and (iv) $3,000,000.
Notwithstanding the foregoing, the Company may purchase, redeem or
otherwise acquire or retire any Subordinated Debt using Net Proceeds from sales
of the Company's assets not used to redeem the Notes after a Special Mandatory
Redemption Offer has been made to the Security Holders. Notwithstanding anything
to the contrary herein, the provisions of this section shall not be violated by
the purchase, redemption or other acquisition or retirement by the Company of
any or all of its (i) outstanding 13 3/4% Senior Subordinated Notes due June 1,
1999 pursuant to the Offer to Exchange and (ii) outstanding 9 1/2% Convertible
Subordinated Debentures due March 15, 2007.
Restriction on Liens
The Indenture provides that so long as any of the Notes shall be
outstanding, the Company will not create, grant or suffer to exist, directly or
indirectly, a Lien upon any property of any character owned by the Company or
any Subsidiary, whether now owned or hereafter acquired, except (i) Liens
existing at the date of the initial issuance of the Securities, Liens granted by
the Operating Companies on their respective assets to secure Permitted Operating
Companies Indebtedness, Liens granted by Waxman USA on the Capital Stock of its
Subsidiaries to secure the Guarantee and/or Permitted Waxman USA Indebtedness
and Liens granted by the Company on the Capital Stock of its Subsidiaries (other
than the Ideal Group) to secure its 12 3/4% Senior Secured Deferred Coupon Notes
Due 2004 offered pursuant to the Offer to Exchange; (ii) Liens to secure
Indebtedness permitted under the Indenture, provided that the aggregate amount
of all assets subject to such liens at any time does not exceed 15% of
Consolidated Tangible Assets; (iii) renewal of Liens permitted under (i) and
(ii); and (iv) Customary Permitted Liens.
Limitations on Material Acquisitions
The Indenture provides that the Company will not, and will not permit
any Subsidiary to, make a Material Acquisition unless (a) no Default or Event of
Default exists at the time of or after giving effect to such Material
Acquisition; (b) after giving effect to such Material Acquisition (on a pro
forma basis, as if such Material Acquisition and any related financing
transaction had occurred at the beginning of the four-quarter period immediately
preceding such Material Acquisition), the Company would be permitted to incur
$1.00 of additional Indebtedness pursuant to the Limitation on Incurrence of
Indebtedness covenant discussed above; (c) the Company has a Consolidated
Tangible Net Worth after giving effect to such Material Acquisition not less
than the Company's Consolidated Tangible Net Worth prior to such Material
Acquisition, as reduced by any goodwill acquired in or resulting from such
Material Acquisition up to $10,000,000; and (d) the business or property which
is the subject of such Material Acquisition is in a line of business relating to
product lines (i) which are similar or complementary to product lines presently
manufactured or distributed by the Company or its Subsidiaries and (ii) which
would be distributed or marketed to the same types of customers as presently
served by the Company or its Subsidiaries.
Mergers, Consolidations and Sales of Assets
The Indenture provides that the Company may not consolidate with or
merge with or into any other corporation, or permit any other entity to merge
with or into the Company or any Subsidiary, or transfer or lease in a single
transaction or through a series of transactions all or substantially all of its
properties and assets as an entirety or substantially as an entirety to any
person or group of affiliated persons, unless (1) either the Company shall be
the continuing person, or the resulting or surviving person (if other than the
Company) expressly assumes all the obligations of the Company under the Notes
and the Indenture; (2) such person formed by such consolidation or surviving
such merger or to which the properties and assets of the Company as an entirety
or substantially as an entirety are transferred shall have a Consolidated
Tangible Net Worth (immediately after and giving effect to such transaction),
equal to or greater than that of the Company (immediately preceding such
transaction); (3) immediately before and immediately after giving effect to such
transaction, no Event of Default and no Default shall have occurred and be
continuing; (4) the person formed by such consolidation or surviving such merger
or to which the properties and assets of the Company as an entirety or
substantially as an entirety are transferred (immediately after giving effect to
such transaction) is able to incur additional Indebtedness of at least $1.00
under the Limitation on Incurrence of Indebtedness covenant discussed above; and
(5) certain other conditions are satisfied. Notwithstanding the foregoing, the
Company and its Subsidiaries shall be permitted to effect the Corporate
Restructuring.
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<PAGE> 25
DEFAULTS AND REMEDIES
The Indenture provides that an Event of Default occurs if (i) the
Company defaults in the payment of the principal of or premium, if any, on the
Notes whether due upon maturity, redemption or otherwise; (ii) the Company
defaults for 15 days in payment of interest on the Notes; (iii) the Company
fails to comply with any of its other agreements in the Indenture, the Notes or
certain related agreements for the period and after the notice specified below;
(iv) the Company or any Subsidiary defaults in (A) the payment of interest on
other indebtedness or the performance of any other agreement, term or condition
contained in any agreement under which other indebtedness is created or secured,
if the effect of such default is to cause in excess of $5,000,000 in aggregate
principal amount of such indebtedness to become due prior to its stated maturity
or (B) the payment of principal of other indebtedness, if the effect of such
default is to permit the holders of such indebtedness to cause in excess of
$5,000,000 in aggregate principal amount of such indebtedness to become due
prior to its stated maturity; (v) any executive officer of the Company fails,
after such executive officer becomes aware that an Event of Default has
occurred, to promptly notify the Security Holders of such Event of Default and
provide a written statement to the Security Holders setting forth the details of
the Event of Default and any action with respect thereto taken or contemplated
to be taken by the Company; (vi) the security interest of the Security Holders
is not perfected, enforceable or valid; (vii) the Company or any Material
Subsidiary becomes insolvent, fails to pay its debts generally as they become
due, commences a voluntary case under any applicable bankruptcy law, consents to
a judgment in an involuntary case under any applicable bankruptcy law, consents
to the appointment of a custodian of its property or makes a general assignment
for the benefit of its creditors; (viii) a court enters a judgment in respect of
the Company or any Material Subsidiary in an involuntary bankruptcy case and
such judgment remains unstayed for a period of 60 consecutive days or any
bankruptcy proceeding is commenced against the Company or any Material
Subsidiary and is not dismissed within 30 days; (ix) final judgments involving
aggregate uninsured liability exceeding $2,500,000 are rendered against the
Company or any Subsidiary and remain undischarged for a period of 60 days; or
(x) the Trustee receives notice from the Company or holders of at least 25% in
principal amount of the outstanding Notes of the occurrence of a material
default under, or a material breach of, the agreements (other than the
Indenture) relating to the issuance of the Notes. For purposes of this section,
the terms "Subsidiary" and "Material Subsidiary" shall not include any members
of the Ideal Group and in no event shall any event of default exist as a result
of any action or inaction of or relating to any member of the Ideal Group or of
the Company with respect to the Ideal Group or any member thereof.
A default under clause (iii) above is not an Event of Default unless
the Company does not cure the default within 30 days after it receives notice of
the default from the Trustee or the holders of at least 25% in principal amount
of the outstanding Notes, other than defaults under the provisions relating to
Restricted Payments and the incurrence of Indebtedness, with respect to which
the Company has ten days after notice to cure a default, and other than the
failure by the Company to effect a Special Mandatory Redemption Offer or the
repurchase offer required upon a Change of Control, either of which will
constitute an Event of Default without notice or the passage of time.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a Default which is continuing and which is known to the Trustee,
give the holders of Notes notice of all uncured defaults known to it; provided
that, except in the case of default in the payment of principal, premium, if
any, or interest on the Notes, including payment upon mandatory redemption, the
Trustee shall be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the interest of the
Security Holders.
In case an Event of Default (other than an Event of Default resulting
from bankruptcy, insolvency or reorganization) shall have occurred and be
continuing, the Trustee or the holders of at least 25% in principal amount of
the Notes outstanding by notice in writing, may declare to be due and payable
immediately the principal of, premium, if any, and accrued interest on the
Notes. In case an Event of Default resulting from certain events of bankruptcy,
insolvency or reorganization shall occur, such amount with respect to all the
Notes shall be due immediately and payable without any declaration or any act on
the part of the Trustee or the holders of the Notes. Such declaration may be
annulled and past defaults may be waived (except, unless theretofore cured, a
default in payment of principal, premium, if any, or interest) by the holders of
66 2/3% in principal amount of the Notes outstanding upon conditions provided in
the Indenture. Except to enforce the right to receive payment of principal or
interest when due, no holder of a Note may institute any proceeding with respect
to the Indenture or for any remedy thereunder unless such holder has previously
given to the Trustee written notice of a continuing Event of Default and unless
the holders of at least 25% in principal amount of the Notes outstanding have
made a written request to the Trustee to institute proceedings in respect of
such Event of Default, have offered the Trustee reasonable indemnity against
loss, liability and expense to be thereby incurred and the Trustee has failed so
to act for 60 days after receipt of the same and no inconsistent direction has
been given to the Trustee from the holders of a majority in principal amount of
the Notes outstanding during such 60 day period.
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<PAGE> 26
The Indenture requires the Company to file annually with the Trustee a
statement regarding compliance by the Company with certain covenants in the
Indenture, specifying any defaults of which the signers may have knowledge.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the holders of at least 66 2/3% in
principal amount of the Notes outstanding, and any past default or
non-compliance with any provisions may be waived with the consent of the holders
of a majority in principal amount of the Notes. Without the consent of
Noteholders, the Company may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency or to evidence the succession of
another corporation or to provide for uncertificated Notes in addition to or in
place of certificated Notes or to make any change that does not adversely affect
the rights of any Noteholder. However, without the consent of the holders of the
Notes, the Company may not amend or supplement the Indenture or the Notes, nor
shall a waiver be effective, to, among other things, extend the maturity, reduce
the rate or extend the time of payment of interest, modify the terms or manner
of payment of the principal, premium, if any, or interest on the Notes in any
other way, change redemption provisions in a manner adverse to the holders or
reduce the percentage of holders necessary to amend or supplement the Indenture.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company entered into a registration rights agreement with the
initial purchases of the Notes, dated September 17, 1991 (the "Registration
Rights Agreement") pursuant to which the Company agreed, for the benefit of the
holders of the Notes, to use its best efforts to, and at its cost, (i) on or
before December 16, 1991, file a registration statement (the "Shelf Registration
Statement") with the Commission with respect to a registered shelf offering of
the Notes, (ii) on or before March 16, 1992, cause the Shelf Registration
Statement to be declared effective under the Securities Act and (iii) keep the
Shelf Registration Statement continuously effective for a period (the "Target
Effective Period") of at least 24 months.
The Registration Rights Agreement provides that if the Shelf
Registration Statement is not filed on or before December 16, 1991 or declared
effective on or before March 16, 1992, the Company shall pay liquidated damages
to each holder of "restricted" Notes in an amount equal to $.10 per $1,000
outstanding principal amount of such Notes per week for the first thirteen weeks
immediately following such date. The weekly liquidated damages shall increase to
an amount equal to $.15 per $1,000 outstanding principal amount of such Notes
for the first week following each of such 13-week periods and for each week
thereafter so long as the Shelf Registration is not filed or declared effective,
as the case may be. If at any time within the Target Effective Period such Shelf
Registration Statement shall no longer be effective (an "Ineffective Date"), the
Company shall pay liquidated damages equal to $.05 per $1,000 outstanding
principal amount of such Notes per week to each holder of such Notes beginning
with the week including the Ineffective Date. The weekly liquidated damages
shall increase by an amount equal to $.05 per $1,000 outstanding principal
amount of such Notes on the last day of each 13-week period thereafter for so
long as the Shelf Registration Statement is not declared effective. Liquidated
damages shall be deemed to commence to accrue on the day on which the event
triggering such liquidated damages occurs. The liquidated damages to be paid to
holders of "restricted" Notes pursuant to the Registration Rights Agreement
shall cease to accrue, (i) with respect to the liquidated damages for failure to
file on or prior to December 16, 1991, on the day such Shelf Registration
Statement is filed, (ii) with respect to the liquidated damages for failure to
be declared effective on or prior to the March 16, 1992, on the day such Shelf
Registration Statement is declared effective, or (iii) with respect to the
liquidated damages for the suspension of effectiveness of such Shelf
Registration Statement, on the day of reinstatement of effectiveness of such
Shelf Registration Statement.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, reference to all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
SATISFACTION AND DISCHARGE OF INDENTURE
The Company may terminate its obligations, with certain exceptions,
under the Notes and the Indenture if all Notes previously authenticated and
delivered (other than destroyed, lost or stolen Notes which have been replaced
or paid) have been delivered to the Trustee for cancellation and the Company has
paid all sums payable by it under the Indenture or if (i) the Company
irrevocably deposits in trust with the Trustee money or United States Government
Obligations sufficient to pay principal of and interest on the Notes in cash to
maturity or redemption, as the case may be, and to pay all other sums payable to
the Trustee under the Indenture and, (ii) no Default or Event of Default shall
have occurred or be continuing, (iii) such deposit will not result in a breach
of, or constitute a default under the Indenture or any other
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<PAGE> 27
instrument to which the Company is a party or by which it or its property is
bound, (iv) the Company delivers to the Trustee an opinion of independent
counsel to the effect that the Holders of the Notes will not recognize income,
gain or loss for federal income tax purposes and that the Holders will have no
federal income tax consequences as a result of such deposit, and (v) certain
other conditions are satisfied.
REPORTS TO NOTEHOLDERS
So long as any of the Notes remain outstanding, the Company shall cause
annual reports on Form 10-K and quarterly reports on Form 10-Q containing
financial statements and other information concerning the business and affairs
of the Company to be mailed to the Noteholders.
THE TRUSTEE
The Trustee is permitted to engage in other transactions with the
Company; provided, however, that if the Trustee acquires certain conflicting
interests specified in the 1939 Act, it must eliminate such conflicts or resign.
Presently, United States Trust Company of New York also serves as Agent under
the Pledge Agreement and as Warrant Agent under the Warrant Agreement.
The holders of a majority in principal amount of Notes then outstanding
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, provided that
such direction would not conflict with any rule of law or with the terms of the
Indenture and would not be unduly prejudicial to the rights of another
Noteholder or that may subject the Trustee to personal liability. The Indenture
provides that, in case an Event of Default shall occur (and not be cured), the
Trustee will be required to use the same degree of care and skill in the
exercise of its powers as a prudent person would use in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
of the Noteholders, unless it shall have received security and indemnity
satisfactory to it.
DESCRIPTION OF WARRANTS
The 1991 Private Placement Warrants, which are governed by the terms
and conditions of the Warrant Agreement, are immediately exercisable into
1,000,000 shares of Common Stock at an exercise price of $4.60 per share. The
exercise price of the 1991 Private Placement Warrants and the number of shares
of Common Stock issuable upon exercise of the 1991 Private Placement Warrants
are subject to adjustment upon the occurrence of certain events including but
not limited to, the declaration of dividends or making of a distribution on the
outstanding shares of the Company's Common Stock in shares of its Common Stock
or the subdivision or reclassification of the outstanding shares of the
Company's Common Stock into a greater or smaller number of shares. The 1991
Private Placement Warrants expire on September 1, 1996. The Company may offer
to the registered holder the option, in lieu of exercising the 1991 Private
Placement Warrants, of surrendering the 1991 Private Placement Warrants, in
whole or in part, for a cash payment equal to the product of (i) the Closing
Price (as defined in the Warrant Agreement) for a share of Common Stock on the
last business day prior to the date of surrender of the warrant certificate
less the exercise price, and (ii) the number of shares of Common Stock to which
the holder is entitled pursuant to the 1991 Private Placement Warrants
surrendered therefor.
As long as any 1991 Private Placement Warrant remains outstanding, the
Company is not permitted to (i) issue any shares of its Class B Common Stock or
options, rights, warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of its Class B Common Stock; (ii)
authorize, issue, grant or sell incentive stock options, non-qualified stock
options or any other option to subscribe for or purchase shares of Common Stock
if the aggregate number of shares of Common Stock which may be purchased under
all such options exceeds 2,400,000; and (iii) authorize or grant incentive
stock options, non-qualified stock options or any other option to subscribe for
or purchase any shares of any class of common stock of the Company other than
the Common Stock.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 2,000,000
shares of Preferred Stock, $.01 par value, 22,000,000 shares of Common Stock,
$.01 par value, and 6,000,000 shares of Class B Common Stock, $.01 par value. As
of September 30, 1995, no shares of Preferred Stock, 9,497,083 shares of Common
Stock and 2,215,079 shares of Class B Common Stock were issued and outstanding.
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COMMON STOCK AND CLASS B COMMON STOCK
Each share of Common Stock entitles the holder to one vote on all
matters submitted to the stockholders, including the election of directors, and
each share of Class B Common Stock entitles the holder to ten votes on all such
matters. Except as set forth below, all actions submitted to a vote of
stockholders are voted on by holders of Common Stock and Class B Common Stock
voting together as a single class. The holders of Common Stock and Class B
Common Stock vote separately as classes with respect to any amendments to the
Company's Certificate of Incorporation that alter or change the powers,
preferences or special rights of their respective classes of stock so as to
affect them adversely, and with respect to such other matters as may require
class votes under the Delaware General Corporation Law.
Dividends on the Class B Common Stock may not exceed those on the
Common Stock. Each share of Common Stock and Class B Common Stock is equal in
respect of rights to dividends and other distributions in stock or property of
the Company (including distributions upon liquidation of the Company), except
that in the case of dividends or other distributions payable on the Common Stock
and the Class B Common Stock in shares of such stock, including distributions
pursuant to split-ups or divisions of the Common Stock or the Class B Common
Stock, only Common Stock will be distributed with respect to Common Stock and
only Class B Common Stock will be distributed with respect to Class B Common
Stock. In no event will either the Common Stock or the Class B Common Stock be
split, divided or combined unless the other is split, divided or combined
equally.
The Class B Common Stock is not transferable by a holder except to or
among such holder's spouse, certain of such holder's relatives and certain
trusts established for their benefit. The Class B Common Stock is convertible
into Common Stock on a share-for-share basis at any time.
If the number of outstanding shares of Class B Common Stock at any time
falls below 250,000 (as adjusted for any stock splits, combinations, stock
dividends or further issuances of Class B Common Stock), the outstanding shares
of Class B Common Stock will automatically be converted into shares of Common
Stock.
The Class B Common Stock may tend to have an anti-takeover effect.
Since voting control of the Company is vested primarily in the holders of the
Class B Common Stock, the issuance of the Class B Common Stock could render more
difficult, or discourage, a hostile merger proposal, a tender offer or a proxy
contest, even if such actions were favored by a majority of the holders of
Common Stock. As of June 30, 1995, Melvin Waxman and Armond Waxman
beneficially owned an aggregate of approximately 80.3% of the outstanding
Class B Common Stock and 61.1% of the aggregate outstanding voting power of
the Company.
The transfer agent and registrar for the Common Stock and Class B
Common Stock is National City Bank, Cleveland, Ohio.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
series, and the Board of Directors is authorized to fix the dividend rights and
terms, any conversion rights, any voting rights, any redemption rights and terms
(including sinking fund provisions), the rights in the event of liquidation and
any other rights, preferences, privileges and restrictions of any series of
Preferred Stock, as well as the number of shares constituting such series and
the designation thereof. The Preferred Stock, if issued, will rank senior to the
Company Common Stock as to dividends and as to liquidation preference. Holders
of Preferred Stock will have no preemptive rights. The issuance of shares of
Preferred Stock could have an anti-takeover effect under certain circumstances.
The issuance of shares of Preferred Stock could enable the Board of Directors to
render more difficult or discourage an attempt to obtain control of the Company
by means of a merger, tender offer or other business combination transaction
directed at the Company by, among other things, placing shares of Preferred
Stock with investors who might align themselves with the Board of Directors,
issuing new shares to dilute stock ownership of a person or entity seeking
control of the Company or creating a class or series of Preferred Stock with
voting rights. The issuance of shares of the Preferred Stock as an anti-takeover
device might preclude stockholders from taking advantage of a situation which
they believed could be favorable to their interests. No shares of Preferred
Stock are outstanding, and the Company has no present plans to issue any shares
of Preferred Stock.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion sets forth the material Federal income tax
consequences associated with the acquisition, ownership and disposition of the
Securities by prospective purchasers. This summary does not discuss all aspects
of Federal income taxation that may be relevant to a particular holder of
Securities in light of his personal investment circumstances or to certain types
of holders of Securities subject to special treatment under the Federal income
tax laws (for example, life insurance companies, tax-exempt organizations and
foreign corporations and individuals who are not citizens or residents of the
United States) and does not discuss any aspects of state, local or foreign
taxation. The discussion is addressed primarily to purchasers who will hold the
Securities as "capital assets" (generally, property held for investment) within
the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended
(the "Code"). Moreover, substantial uncertainties, resulting from the lack of
definitive judicial or administrative authority and interpretation, apply to
various tax aspects of the acquisition, ownership and disposition of the
Securities. As to such issues, the discussion sets forth the positions that the
Company believes to be correct and currently intends to take. No assurance,
however, can be given that the Service will not take contrary or differing
positions. No ruling from the Internal Revenue Service (the "Service") has been
or will be requested in any tax matters concerning the offering. Prospective
purchasers are urged to consult their own tax advisors as to the precise
Federal, state, local and other tax consequences of acquiring, owning and
disposing of the Securities.
THE NOTES
Stated Interest on the Notes
In addition to the accrual of interest income under the original issue
discount rules discussed below, a holder of a Note will be required to report as
income for Federal income tax purposes the stated interest on such Note in
accordance with the holder's method of tax accounting.
Original Issue Discount
In 1986, the Service issued proposed regulations (with certain
amendments made in 1989 and 1991) governing the inclusion in income of original
issue discount ("OID") by holders of debt instruments (the "1986 Proposed
Regulations"). The 1986 Proposed Regulations were to become effective for debt
instruments issued after July 1, 1982. On December 22, 1992, the Service
withdrew the 1986 Proposed Regulations and issued a new set of proposed
regulations governing the inclusion in income of original issue discount by
holders of debt instruments. With certain changes, these proposed regulations
were adopted and published in the Federal Register on February 2, 1994, and
substantially revised the 1986 Proposed Regulations (the "1994 Regulations").
(Together, the 1986 Proposed Regulations and the 1994 Regulations will be
referred to as the "OID Regulations.") The 1994 Regulations are only effective
for debt instruments issued on or after April 14, 1994, and, by their terms, are
not applicable to the Notes. In Treasury decision Section 517 relating to the
1994 Regulations, the Service has stated that taxpayers may rely upon the 1986
Proposed Regulations as "substantial authority" under Section 6662 of the
Internal Revenue Code (relating to certain penalties for the understatement of
taxes) for debt instruments issued prior to their withdrawal. Thus, the Company
and the holders of the Securities may rely on the 1986 Proposed Regulations as
"substantial authority" with respect to the Notes and the Warrants, which were
issued on September 17, 1991, to avoid certain penalties, if necessary. However,
to the extent that the 1986 Proposed Regulations conflict with the 1994
Regulations, the Service may apply the rules contained in the 1994 Regulations
for purposes of determining a taxpayer's substantive tax liability.
In certain instances, the OID Regulations are potentially inconsistent
or are susceptible to varying interpretations. No assurance can be given that
the Service will agree with the positions the Company may take with respect to
the OID Regulations. Purchasers are urged to consult their own tax advisors
regarding the application of the OID Regulations to an investment in the Notes.
The amount of OID, if any, on a debt instrument is the difference
between its "issue price" and its "stated redemption price at maturity,"
subject, generally, to a statutory de minimis exception. The portion of original
issue discount, if any, accrued (and to be included in income) with respect to a
debt instrument with a maturity of more than one year will generally be
determined for each accrual period under the constant yield method by
multiplying the adjusted issue price of the debt instrument at the beginning of
the accrual period by its yield to maturity (determined on the basis of
semi-annual compounding), and subtracting from that product the amount of any
interest payments made during that accrual period which are based on a single
fixed rate and are payable unconditionally in cash or in property (other than
debt instruments of the issuer) at intervals of one year or less during the
entire term of the debt instrument ("Qualified Stated Interest"). The resulting
amount is allocated ratably to each day in the accrual period, and the amount
includible
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in a holder's income (whether on the cash or accrual method of accounting) with
respect to the debt instrument is the sum of the resulting daily portions of OID
for each day of the taxable year on which the holder held the debt instrument.
The adjusted issue price of a debt instrument at the beginning of any accrual is
equal to its original issue price increased by all previously accrued original
issue discount and reduced by the amount of all previous payments made on such
debt instrument other than payments of Qualified Stated Interest. Generally, the
tax basis of a debt instrument in the hands of the holder will be increased by
the amount of OID, if any, that is included in the holder's income pursuant to
these rules and will be decreased by the amount of any payment received by the
holder other than payments of Qualified Stated Interest.
The 1986 Proposed Regulations provide that if a debt instrument is
issued as part of an investment unit, which includes a property right such as a
Warrant, and neither the property right nor the debt instrument is publicly
traded within ten (10) days after issuance (as was the case with respect to the
Notes and the Warrants), the original issue price of the debt instrument is the
present value of all payments under such debt instrument, discounted at a rate
based on yields of comparable debt instruments. The remaining original issue
price of the investment unit is allocated to the property right. Based upon this
rule, the Company has calculated the original issue price of each Note to be
$980.00 and each Warrant to be $1.00. The 1994 Regulations provide that the
issue price of an investment unit is to be allocated between the components of
the unit based on their relative fair market values but do not provide any
specific guidance on how the allocation is to be made. The Company intends to
rely on the guidance provided by the 1986 Proposed Regulations. There can,
however, be no assurance that the Service will agree with such allocation and
will not be successful in asserting a different allocation of the issue price of
the investment unit.
The 1994 Regulations contain certain aggregation rules that could be
interpreted to require that, for purposes of calculating and amortizing any OID,
the Fixed Rate Notes and the Floating Rate Notes be treated together as a single
debt instrument with a single issue price, maturity date, yield to maturity and
stated redemption price at maturity. If these aggregation rules were to apply,
the Fixed Rate Notes and the Floating Rate Notes, in the aggregate, could be
treated as a single "installment obligation." This treatment could result in a
distortion of the amount of OID otherwise includible in income by holders. The
Company believes that the aggregation rules are inapplicable to the Fixed Rate
Notes and the Floating Rate Notes and intends to adopt the position that the
Fixed Rate Notes and the Floating Rate Notes are not subject to such rules for
purposes of computing OID.
The Company will furnish annually to record holders of the Notes and to
the Service information with respect to OID, if any, accruing during the
calendar year (as well as interest paid during that year). Because this
information will be based upon the adjusted issue price of the Notes, subsequent
holders who purchase the Notes for an amount in excess of the adjusted issue
price will be required to determine for themselves the amount of OID, if any,
they are required to report. Moreover, as stated above, the Service may not
agree with the original issue price allocated by the Company to the Notes.
As a result of each issue of the Notes being offered together with
Warrants, both issues of the Notes were issued with OID. As discussed above, the
total amount of original issue discount with respect to each of such Notes is
the excess of its stated redemption price at maturity over its issue price. The
Company believes the amount of original issue discount per each $1,000 Note is
$20.00. Consequently, a holder of either the Fixed Rate Notes or the Floating
Rate Notes will be required to include in his gross income in advance of the
receipt of cash representing that income the sum of the daily portions of OID on
his Notes for each day during each taxable year or portion thereof on which he
holds such Notes. These amounts are in addition to the actual interest payments
on the Notes.
Holders of the Notes should be aware that there are the above-described
and other possible interpretations of the OID Regulations which could result in
differences in the amount or timing of OID on Notes and that such alternative
interpretations may also be reasonable. Moreover, there can be no assurance that
the Service will not interpret the OID Regulations in a manner contrary to the
positions described above.
Acquisition Premium
Purchasers of a Note who purchase such debt instrument at an
acquisition premium will be entitled to a reduction in the daily portion of OID
they are required to include in income. A debt instrument is purchased at an
acquisition premium if it is not purchased at a "premium" (as defined in the
"Bond Premium" below) and immediately after its purchase (including a purchase
at original issuance) its adjusted basis exceeds its adjusted issue price. The
amount of such reduction will be equal to the daily portion of OID (as otherwise
determined to be includible) multiplied by a fraction the numerator of which is
the amount of such excess and the denominator of which is the total OID
remaining to be accrued on such debt instrument subsequent to the date of
purchase. Alternatively, a purchaser of a Note who purchases such debt
28
<PAGE> 31
instrument after its original issuance at an acquisition premium may elect to
compute all interest under the Note as OID by treating the purchase as a
purchase at original issuance in the manner described under "Original Issue
Discount" above.
Bond Premium
If the tax basis of the Note in the hands of a purchaser exceeds the
sum of all amounts payable on the Note after the purchase date (other than
Qualified Stated Interest), then such holder may be allowed to deduct the excess
of his basis over the amount payable at maturity as amortizable bond premium
over the term of such Note. The amount of bond premium which may be deducted
annually will be computed on the basis of the purchaser's yield to maturity,
determined by using his basis in the Notes and compounding at the close of each
accrual period. To amortize bond premium, the purchaser must make an election
that applies to all debt instruments held or subsequently acquired by him. A
purchaser who elects to amortize bond premium must reduce his tax basis in the
Notes by an amount equal to the amortized premium.
Market Discount on Resale
Purchasers of a Note should be aware that the resale of Notes may be
affected by the market discount provisions of the Code. Those rules generally
provide that, if a holder of a debt instrument purchases it at a market discount
and thereafter recognizes gain upon a disposition of the debt instrument
(including a gift), the lesser of such gain (or appreciation, in the case of a
gift) or the portion of the market discount that accrued while the debt
instrument was held by such holder will be treated as ordinary interest income
at the time of the disposition. The market discount rules also provide that a
holder who acquires a debt instrument at a market discount may be required to
defer a portion of any interest expense that may otherwise be deductible on any
indebtedness incurred or maintained to purchase or carry such debt instrument
until the holder disposes of the debt instrument in a taxable transaction. Debt
instruments, like the Notes, which bear OID are considered to have been
purchased at a market discount if, subsequent to their original issuance, they
are purchased at a price below their issue price increased by the original issue
discount includible in the income of all prior holders (and, probably, although
the Code and the 1994 Regulations do not expressly so provide, reduced by all
payments other than Qualified Stated Interest). Neither the rule treating
accrued market discount as ordinary income on disposition nor the rule deferring
interest deductions applies if the holder elects to include the accrued market
discount in income currently.
The Notes provide for mandatory redemption in accordance with certain
provisions and also for optional redemption by the Company, in whole or in part,
prior to maturity. If Notes were redeemed in part, a holder of market discount
Notes would be required to include in gross income (as ordinary income) the
portion of the principal payment attributable to accrued market discount on the
Notes.
Sale, Exchange or Redemption of Notes
In general, the sale, exchange or redemption of the Notes will result
in gain or loss equal to the difference between the amount realized and the
holder's adjusted tax basis in the Note immediately before the transaction.
Subject to the special rules under the Code relating to "market discount," any
such gain or loss on the sale, exchange or redemption will be capital gain or
loss.
THE WARRANTS
The sale of a Warrant by a holder other than to the Company will result
in the recognition of a capital gain or loss, provided that the Warrant is a
capital asset in the hands of the holder on the date of the sale. The amount of
the gain or loss will be the difference between the amount paid by the holder
for the Warrant and the sales price of the Warrant. The Company believes that
the amount of the original issue price properly allocable to the purchase of a
Warrant is $1.00. The tax consequences of a sale of a Warrant to the Company
(other than upon the exercise of a Warrant) are uncertain. Under certain unusual
circumstances, the Service may take the position that the proceeds of the sale
would be ordinary income.
As a general rule, no gain or loss will be recognized by a holder of a
Warrant on the purchase of Common Stock for cash on the exercise of the Warrant.
Gain may be recognized, however, to the extent a holder receives cash in lieu of
fractional shares of Common Stock. The adjusted tax basis of a share of Common
Stock received upon exercise of a Warrant will be equal to the sum of the
Holder's adjusted tax basis in the exercised Warrant and the exercise price. The
holding period for Common Stock received upon exercise of a Warrant will
commence with the date of exercise of the Warrant.
29
<PAGE> 32
Each purchaser of Securities should consult his own tax advisor with
respect to the tax consequences to him, including the tax consequences under
state, local, foreign and other tax laws, of the ownership and disposition of
the Securities.
PLAN OF DISTRIBUTION
Any or all of the Securities may be sold from time to time to
purchasers directly by any of the Selling Security Holders. Alternatively, the
Selling Security Holders may from time to time offer the Securities through
underwriters, dealers or agents who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Security
Holders and/or the purchasers of Securities for whom they may act as agents. The
Selling Security Holders and any such underwriters, dealers or agents that
participate in the distribution of Securities may be deemed to be underwriters
under the Act, and any profit on the sale of the Securities by them and any
discounts, commissions or concessions received by them may be deemed to be
underwriting discounts and commissions under the Act. The Securities may be sold
from time to time in one or more transactions at a fixed offering price, which
may be changed, or at varying prices determined at the time of sale or at
negotiated prices.
At the time a particular offer of Securities is made, to the extent
required, a supplement to this Prospectus will be distributed (and a
post-effective amendment to the Registration Statement of which this Prospectus
is a part will be filed) which will identify and set forth the aggregate amount
of Securities being offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, the purchase price paid by any
underwriter for Securities purchased from the Selling Security Holders, any
discounts, commissions and other items constituting compensation from the
Selling Security Holders and/or the Company and any discounts, commissions or
concessions allowed or reallowed or paid to dealers, including the proposed
selling price to the public. In addition, an underwritten offering will require
clearance by the National Association of Securities Dealers, Inc. of the
underwriter's compensation arrangements. The Company will not receive any of the
proceeds from the sale by the Selling Security Holders of the Securities offered
hereby. All of the filing fees and other expenses of this Registration Statement
will be borne in full by the Company.
The Company entered into a registration rights agreement with the
original purchasers of the Securities to register their Securities under
applicable Federal and state securities laws at certain times. The Company will
pay substantially all of the expenses incident to the offering and sale of the
Securities to the public, other than commissions, concessions and discounts of
underwriters, dealers or agents. The registration rights agreement provides for
cross-indemnification of the Selling Security Holders and the Company, to the
extent permitted by law, for losses, claims, damages, liabilities and expenses
arising, under certain circumstances, out of any registration of the Securities.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Securities may not simultaneously engage
in market making activities with respect to the Securities for a period of nine
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, the Selling Security Holders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-2, 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of the Securities by the
Selling Security Holders.
In order to comply with certain states' securities laws, if applicable,
the Securities will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Securities may not be sold
unless the Securities have been registered or qualified for sale in such state,
or unless an exemption from registration or qualification is available and is
obtained.
The Securities originally issued by the Company in the private
placement contained legends as to their restricted transferability. Upon the
effectiveness of the Registration Statement of which this Prospectus forms a
part, these legends will no longer be necessary. Upon the transfer by the
Selling Security Holders of any of the Securities, new certificates representing
such Securities will be issued to the transferee, free of any such legends.
In addition to sales pursuant to the Registration Statement of which
this Prospectus forms a part, the Securities may be sold in accordance with Rule
144 under the Act.
30
<PAGE> 33
SELLING SECURITY HOLDERS
[TO BE UPDATED]
The following table provides certain information with respect to the
Securities beneficially owned by each Selling Security Holder. The Securities
offered by this Prospectus may be offered from time to time in whole or in part
by the persons named below or by their transferees, as to whom applicable
information will be set forth in a prospectus supplement to the extent required.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF PRINCIPAL AMOUNT
FIXED RATE OF FLOATING RATE NUMBER OF
SELLING SECURITY HOLDER NOTES(1) NOTES(1) WARRANTS(1)
----------------------- ---------- ---------------- -----------
<S> <C> <C> <C>
Elite & Co. --- --- 90,000
[Harris Trust & Savings Bank] --- --- 20,000
IDS Certificate Company --- $ 7,500,000 150,000
[Morgan Guaranty Trust Co. of New York] --- --- 7,500
President and Fellows of Harvard College 500,000 --- 40,000
[State Street Bank & Trust Co.] --- --- 112,500
[The Bank of New York] --- --- 440,000
[T. Rowe Price Associates], Inc. --- --- 7,000
------------- ------------ ------------
TOTAL $ 500,000 $ 7,500,000 867,000
============= ============ ============
<FN>
(1) Each Selling Security Holder is registering the offer and sale entire
amount of Securities set forth opposite its name above. Because the
Selling Security Holders may offer all or some part of the Securities
which they hold pursuant to this Prospectus and because this offering
is not being underwritten on a firm commitment basis, no estimate can
be given as to the amount of Securities to be offered for sale by the
Selling Security Holders nor the amount of Securities that will be
held by the Selling Security Holders upon termination of this
offering. See "Plan of Distribution". To the extent required, the
specific amount of Securities to be sold by a Selling Security Holder
in connection with a particular offer will be set forth in an
accompanying Prospectus Supplement.
</TABLE>
31
<PAGE> 34
LEGAL MATTERS
The legality of the Securities offered hereby has been passed upon for
the Company by Shereff, Friedman, Hoffman & Goodman, LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of June 30,
1994 and June 30, 1995 for each of the three years in the period ended June 30,
1995 appearing in the Company's Annual Report and incorporated by reference in
this Prospectus and elsewhere in this Registration Statement have been audited
by Arthur Andersen LLP, independent 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 the method of accounting for certain warehousing and catalog costs as
discussed in Note 4 to the consolidated financial statements.
32
<PAGE> 35
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE HEREIN, IN CONNECTION WITH THIS OFFER AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY OF THESE SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE DELIVERY
OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . 3
Incorporation of Certain Documents by Reference . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Description of Notes . . . . . . . . . . . . . . . . . . . . . . . . 13
Description of Warrants . . . . . . . . . . . . . . . . . . . . . . 25
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . 25
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . 27
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . 30
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . 31
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
WAXMAN INDUSTRIES, INC.
$500,000 12.25% FIXED RATE SENIOR SECURED NOTES DUE SEPTEMBER 1, 1998
$7,500,000 FLOATING RATE SENIOR SECURED NOTES DUE SEPTEMBER 1, 1998
867,000 COMMON STOCK PURCHASE WARRANTS
1,000,000 SHARES OF COMMON STOCK
-----------
PROSPECTUS
-----------
___________, 1995
33
<PAGE> 36
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses incurred in connection with this Registration
Statement will be paid by the Company. The Selling Security Holders will not
bear any of such expenses.
<TABLE>
<S> <C>
Filing Fee -- Securities and Exchange Commission $ N/A
Accounting Fees and Expenses 5,000*
Legal Fees and Expenses 15,000*
Printing Fees and Expenses 2,500*
Miscellaneous Expenses 2,500*
-------
Total $25,000*
=======
<FN>
* Estimated
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of the Company provides that each
person who is a party to or involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she was a director or officer of the Company, shall be indemnified and held
harmless by the Company to the fullest extent authorized by the Delaware General
Corporation Law against all expense, liability and loss reasonably incurred by
such person in connection therewith. The Certificate of Incorporation provides
that the right to indemnification contained therein is a contract right and
includes the right to be paid by the Company the expenses incurred in defending
any such proceeding in advance of its final disposition; provided, however, that
if the Delaware General Corporation Law requires, the payment of such expenses
incurred in advance of the final disposition of a proceeding shall be made only
upon delivery to the Company of an undertaking to repay all amounts so advanced
if it shall ultimately be determined that such director or officer is not
entitled to be indemnified. The Company maintains directors' and officers'
liability insurance covering certain liabilities incurred by the directors and
officers of the Company in connection with the performance of their duties.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- -------------- -------------------
4.1(1) Indenture dated as of June 1, 1989 (the "Ameritrust Indenture") between
the Company and Ameritrust Company National Association (Exhibit 4.1 to
Annual Report on Form 10-K for the year ended June 30, 1989, File No.
0-5888, incorporated herein by reference).
II-1
<PAGE> 37
4.2(1) First Supplemental Indenture to the Ameritrust Indenture dated November
29, 1989 (Exhibit 4.2 to Annual Report on Form 10-K for the year ended
June 30, 1990, File No. 0-5888, incorporated herein by reference).
4.3(1) Second Supplemental Indenture to the Ameritrust Indenture dated
November 23, 1993.
4.4(1) Third Supplemental Indenture to the Ameritrust Indenture dated May 20,
1994.
4.5(1) Form of the Company's 13-3/4% Senior Subordinated Note due June 1, 1999
(Exhibit 4.2 to Annual Report on Form 10-K for the year ended June 30,
1989, File No. 0-5888, incorporated herein by reference).
4.6(1) Securities Purchase Agreement for Notes and Warrants dated as of
September 17, 1991, among the Company and each of the Purchasers
referred to therein (Exhibit 4.4 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).
4.7(1) Indenture dated as of September 1, 1991, (the "U.S. Trust Indenture")
between the Company and United States Trust Company of New York
(Exhibit 4.5 to Annual Report on Form 10-K for the year ended June 30,
1991, File No. 0-5888, incorporated herein by reference).
4.8(1) First Supplemental Indenture to the U.S. Trust Indenture dated
November 15, 1993.
4.9(1) Second Supplemental Indenture to the U.S. Trust Indenture dated March
25, 1993.
4.10(1) Third Supplemental Indenture to the U.S. Trust Indenture dated May 20,
1994.
4.11(1) Form of the Company's Floating Rate Senior Secured Notes due September
1, 1998 (Exhibit 4.6 to Annual Report on Form 10-K for the year ended
June 30, 1991, File No. 0-5888, incorporated herein by reference).
4.12(1) Form of the Company's 12.25% Fixed Rate Senior Secured Notes due
September 1, 1998 (Exhibit 4.7 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).
4.13(1) Warrant Agreement dated as of September 17, 1991, between the Company
and United States Trust Company of New York (Exhibit 4.8 to Annual
Report on Form 10-K for the year ended June 30, 1991, File No. 0-5888,
incorporated herein by reference).
4.14(1) Form of the Company's Common Stock Purchase Warrant Certificate
(Exhibit 4.9 to Annual Report on Form 10-K for the year ended June 30,
1991, File No. 0-5888, incorporated herein by reference).
4.15(1) Registration Rights Agreement for Senior Notes, Warrants and Warrant
Shares dated as of September 17, 1991, among the Company and each of
the Purchasers signatory thereto (Exhibit 4.10 to Annual Report on Form
10-K for the year ended June 30, 1991, File No. 0-5888, incorporated
herein by reference).
II-2
<PAGE> 38
4.16(1) Pledge Agreement dated as of September 17, 1991, among the Company,
United States Trust Company of New York and each of the Purchasers
signatory thereto (Exhibit 4.11 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).
4.17(1) Operating Credit Agreement dated as of April 20, 1989 between Bank of
Montreal and Waxman Acquisition, Inc. (Exhibit 10.9 to Annual Report
on Form 10-K for the year ended June 30, 1989, File No. 0-5888,
incorporated herein by reference).
4.18(1) Amending Agreement of Operating Credit Agreement dated as of July 1,
1990 between Bank of Montreal and Ideal Plumbing Group Inc. (Exhibit
4.10 to Annual Report on Form 10-K for the year ended June 30, 1990,
File No. 0-5888, incorporated herein by reference).
4.19(1) Amended and Restated Operating Credit Agreement dated as of July 22,
1991 between Bank of Montreal and Ideal Plumbing Group Inc. (Exhibit
4.5 to Annual Report on Form 10-K for the year ended June 30, 1991,
File No. 0-5888, incorporated herein by reference).
4.20(1) Amended and Restated Credit Agreement dated as of April 1, 1993
between Waxman Industries, Inc. and the Banks Named Therein and
National City Bank as Agent. (Exhibit 4.15 to Annual Report on Form
10-K for the year ended June 30, 1993, File No. 0-5888, incorporated
herein by reference).
4.21(1) Amendment dated as of October 1, 1993 to Amended and Restated Credit
Agreement dated as of April 1, 1993 between Waxman Industries, Inc.
and the Banks Named Therein and National City Bank as Agent. (Exhibit
4.16 to Annual Report on Form 10-K for the year ended June 30, 1993,
File No. 0-5888, incorporated herein by reference).
4.22(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
Deferred Coupon Notes (Exhibit 4.1 to Waxman Industries, Inc.'s Form
S-4 filed June 20, 1994, Registration No. 33-54209, incorporated
herein by reference).
4.23(1) Credit Agreement dated as of May 20, 1994 among Waxman USA, Inc.,
Barnett, Inc., Waxman Consumer Products Group Inc. and WOC Inc., the
Lenders and Issuers party thereto and Citicorp USA, Inc., as Agent,
and certain exhibits thereto (Exhibit 10.8 to Waxman Industries,
Inc.'s Form S-4 filed June 20, 1994, Registration No. 33-54209,
incorporated herein by reference).
4.24(1) Term Loan Credit Agreement dated as of May 20, 1994 among Waxman USA,
Inc., Barnett Inc., Waxman Consumer Products Group Inc. and WOC Inc.,
the Lenders and Issuers party thereto and Citibank, N.A., as Agent
(Exhibit 10.9 to Waxman Industries, Inc.'s Form S-4 filed June 20,
1994, Registration No. 33-54209, incorporated herein by reference).
4.25(1) Amendment No. 2 to the Term Loan Agreement and Amendment No. 1 to the
Revolving Credit Agreement among Waxman USA, Inc., Barnett Inc.,
Waxman Consumer Products Group Inc. and WOC Inc., the Lenders and
Issuers party thereto and Citibank, N.A., as Agent. (Exhibit 4.25
to Waxman Industries, Inc.'s Amendment No. 6 to Form S-2 filed
October 10, 1995, Registration No. 33-44511, incorporated herein by
reference).
5.1(1) Opinion of Benesch, Friedlander, Coplan & Aronoff regarding legality.
II-3
<PAGE> 39
5.2(1) Opinion of Shereff, Friedman, Hoffman & Goodman, LLP regarding
legality (filed as Exhibit 5.2 to this Registration Statement).
8.1(1) Opinion of Benesch, Friedlander, Coplan & Aronoff as to tax matters.
10.1(1) Lease between the Company as Lessee and Aurora Investment Co. as
Lessor dated June 30, 1992 (Exhibit 10.1 to Annual Report on Form 10-K
for the year ended June 30, 1992, File No. 0-5888, incorporated herein
by reference).
10.2(1) Policy Statement (revised as of June 1, 1980) regarding the
Company's Profit Incentive Plan (Exhibit 10(c)-1 to Annual Report
on Form 10-K for the year ended June 30, 1984, File No. 0-5888,
incorporated herein by reference).
10.3(1) Employment Contract dated June 18, 1990 between the Company and
William R. Pray (Exhibit 10.4 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).
10.4(1) Form of Stock Option Agreement between the Company and its
Directors (Exhibit 10.5 to Annual Report on Form 10-K for the year
ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).
10.5(1) Employment Contract dated January 1, 1992 between the Company and
Jerome C. Jacques (Exhibit 10.5 to Annual Report on Form 10-K for
the year ended June 30, 1992, File No. 0-5888, incorporated herein
by reference).
10.6(1) Employment Contract dated January 1, 1992 between the Company and
John S. Peters (Exhibit 10.6 to Annual Report on Form 10-K for the
year ended June 30, 1992, File No. 0-5888, incorporated herein by
reference).
10.7(1) 1992 Non-Qualified and Incentive Stock Option Plan of Waxman
Industries, Inc., adopted as of July 1, 1992. (Exhibit 10.7 to
Annual Report on Form 10-K for the year ended June 30, 1993, File
No. 0-5888, incorporated herein by reference).
10.8(1) Employee Stock Purchase Plan of Waxman Industries, Inc., adopted
on September 1, 1992. (Exhibit 10.8 to Annual Report on Form 10-K
for the year ended June 30, 1993, File No. 0-5888, incorporated
herein by reference).
10.9(1) Employment Agreement dated November 1, 1994 between Waxman Consumer
Products Group Inc. and Laurence Waxman (Exhibit 10.9 to Waxman
Industries, Inc.'s Amendment No. 6 to Form S-2 filed October
10, 1995, Registration No. 33-44511, incorporated herein by
reference).
10.10(1) Tax Sharing Agreement dated May 20, 1994 among Waxman Industries,
Inc., Waxman USA Inc., Barnett Inc., Waxman Consumer Products
Inc., WOC Inc. and Western American Manufacturing Inc. (Exhibit
10.6 to Waxman Industries, Inc.'s Form S-4 filed June 20, 1994,
Registration No. 33-54209, incorporated herein by reference).
10.11(1) Intercorporate Agreement dated May 20, 1994 among Waxman
Industries, Inc., Waxman USA Inc., Barnett Inc., Waxman Consumer
Products Inc., WOC Inc. and Western American Manufacturing Inc.
(Exhibit 10.7 to Waxman Industries, Inc.'s Form S-4 filed
June 20, 1994, Registration No. 33-54209, incorporated herein by
reference).
II-4
<PAGE> 40
12.1(1) Statement re: computation of ratios (Exhibit 12.1 to Waxman
Industries, Inc.'s Form S-1, filed July 18, 1995, incorporated herein
by reference).
13.1(1) Waxman Industries, Inc.'s Annual Report on Form 10-K for its fiscal
year ended June 30, 1995, File No. 33-5888 (Exhibit 13.1 to Waxman
Industries, Inc.'s Amendment No. 6 on Form S-2 filed October 10, 1995,
Registration No. 33-44511, incorporated herein by reference).
13.2 Waxman Industries, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, File No. 33-5888.
23.1 Consent of Arthur Andersen LLP.
23.2(1) Consent of Benesch, Friedlander, Coplan & Aronoff (contained in its
opinion filed as Exhibit 5.1 to this Registration Statement).
23.3(1) Consent of Benesch, Friedlander, Coplan & Aronoff (contained in its
opinion filed as Exhibit 8.1 to this Registration Statement).
23.4(1) Consent of Shereff, Friedman, Hoffman & Goodman, LLP (contained in
its opinion filed as Exhibit 5.2 to this Registration Statement).
25.1(1) Statement of eligibility and qualification on Form T-1 of United
States Trust Company of New York, as trustee (bound separately).
99.1(1) Form 11-K Annual Report for the Amended and Restated Profit Sharing
Retirement Plan of the Company for the year ended June 30, 1993, File
No. 0-5888, incorporated herein by reference.
Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, the Company
has not filed certain instruments with respect to long-term debt because the
total amount of securities authorized thereunder does not exceed ten percent of
the total assets of the Company and its subsidiaries on a consolidated basis.
The Company hereby agrees to furnish copies of such agreements to the
Commission upon request.
(1) Incorporated herein by reference as indicated.
(b) Financial Statement Schedules.
All schedules have been omitted because the required information
is not present or not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
consolidated financial statements including notes thereto.
ITEM 17 UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
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<PAGE> 41
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
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<PAGE> 42
precedent, Submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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<PAGE> 43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Waxman
Industries, Inc. certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Cleveland, State of Ohio on the 14th day of
November, 1995.
WAXMAN INDUSTRIES, INC.
By: /s/ Armond Waxman
---------------------------------------
Armond Waxman, Co-Chairman of the Board
and Co-Chief Executive 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>
/s/ * Co-Chairman of the Board, November 14, 1995
- ---------------------------- Co-Chief Executive Officer
Melvin Waxman and Director
/s/ Armond Waxman Co-Chairman of the Board, November 14, 1995
- ---------------------------- Co-Chief Executive Officer,
Armond Waxman Treasurer and Director
/s/ * President, Chief Operating November 14, 1995
- ---------------------------- Officer and Director
William R. Pray
/s/ * Vice President-Finance, November 14, 1995
- ---------------------------- Chief Financial Officer
Andrea Luiga (Principal Accounting Officer)
/s/ * Director November 14, 1995
- ----------------------------
Samuel J. Krasney
/s/ * Director November 14, 1995
- ----------------------------
Irving Z. Friedman
/s/ * Director November 14, 1995
- ----------------------------
Judy Robins
*By:/s/ Armond Waxman November 14, 1995
------------------------
Armond Waxman
As Attorney-in-Fact
</TABLE>
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<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- --------------------------------------------------------------------------------------------
<S> <C>
4.1(1) Indenture dated as June 1, 1989 (the "Ameritrust Indenture") between
the Company and Ameritrust Company National Association (Exhibit 4.1 to
Annual Report on Form 10-K for the year ended June 30, 1989, File No.
0-5888, incorporated herein by reference).
4.2(1) First Supplemental Indenture to the Ameritrust Indenture dated November
29, 1989 (Exhibit 4.2 to Annual Report on Form 10-K for the year ended
June 30, 1990, File No. 0-5888, incorporated herein by reference).
4.3(1) Second Supplemental Indenture to the Ameritrust Indenture dated
November 23, 1993.
4.4(1) Third Supplemental Indenture to the Ameritrust Indenture dated May 20,
1994.
4.5(1) Form of the Company's 13-3/4% Senior Subordinated Note due June 1, 1999
(Exhibit 4.2 to Annual Report on Form 10-K for the year ended June 30,
1989, File No. 0-5888, incorporated herein by reference).
4.6(1) Securities Purchase Agreement for Notes and Warrants dated as of
September 17, 1991, among the Company and each of the Purchasers
referred to therein (Exhibit 4.4 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).
4.7(1) Indenture dated as of September 1, 1991, ("U.S. Trust Indenture")
between the Company and United States Trust Company of New York
(Exhibit 4.5 to Annual Report on Form 10-K for the year ended June 30,
1991, File No. 0-5888, incorporated herein by reference).
4.8(1) First Supplemental Indenture to the U.S. Trust Indenture dated
November 15, 1993.
4.9(1) Second Supplemental Indenture to the U.S. Trust Indenture dated March
25, 1993.
4.10(1) Third Supplemental Indenture to the U.S. Trust Indenture dated May 20,
1994.
4.11(1) Form of the Company's Floating Rate Senior Secured Notes due September
1, 1998 (Exhibit 4.6 to Annual Report on Form 10-K for the year ended
June 30, 1991, File No. 0-5888, incorporated herein by reference).
4.12(1) Form of the Company's 12.25% Fixed Rate Senior Secured Notes due
September 1, 1998 (Exhibit 4.7 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).
4.13(1) Warrant Agreement dated as of September 17, 1991, between the Company
and United States Trust Company of New York (Exhibit 4.8 to Annual
Report on Form 10-K for the year ended June 30, 1991, File No. 0-5888,
incorporated herein by reference).
</TABLE>
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<PAGE> 45
<TABLE>
<S> <C>
4.14(1) Form of the Company's Common Stock Purchase Warrant Certificate
(Exhibit 4.9 to Annual Report on Form 10-K for the year ended June 30,
1991, File No. 0-5888, incorporated herein by reference).
4.15(1) Registration Rights Agreement for Senior Notes, Warrants and Warrant
Shares dated as of September 17, 1991, among the Company and each of
the Purchasers signatory thereto (Exhibit 4.10 to Annual Report on Form
10-K for the year ended June 30, 1991, File No. 0-5888, incorporated
herein by reference).
4.16(1) Pledge Agreement dated as of September 17, 1991, among the Company,
United States Trust Company of New York and each of the Purchasers
signatory thereto (Exhibit 4.11 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).
4.17(1) Operating Credit Agreement dated as of April 20, 1989 between Bank of
Montreal and Waxman Acquisition, Inc. (Exhibit 10.9 to Annual Report
on Form 10-K for the year ended June 30, 1989, File No. 0-5888,
incorporated herein by reference).
4.18(1) Amending Agreement of Operating Credit Agreement dated as of July 1,
1990 between Bank of Montreal and Ideal Plumbing Group Inc. (Exhibit
4.10 to Annual Report on Form 10-K for the year ended June 30, 1990,
File No. 0-5888, incorporated herein by reference).
4.19(1) Amended and Restated Operating Credit Agreement dated as of July 22,
1991 between Bank of Montreal and Ideal Plumbing Group Inc. (Exhibit
4.15 to Annual Report on Form 10-K for the year ended June 30, 1991,
File No. 0-5888, incorporated herein by reference).
4.20(1) Amended and Restated Credit Agreement dated as of April 1, 1993
between Waxman Industries, Inc. and the Banks Named Therein and
National City Bank as Agent. (Exhibit 4.15 to Annual Report on Form
10-K for the year ended June 30, 1993, File No. 0-5888, incorporated
herein by reference).
4.21(1) Amendment dated as of October 1, 1993 to Amended and Restated Credit
Agreement dated as of April 1, 1993 between Waxman Industries, Inc.
and the Banks Named Therein and National City Bank as Agent. (Exhibit
4.16 to Annual Report on Form 10-K for the year ended June 30, 1993,
File No. 0-5888, incorporated herein by reference).
4.22(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
Deferred Coupon Notes (Exhibit 4.1 to Waxman Industries, Inc.'s Form
S-4 filed June 20, 1994, Registration No. 33-54209, incorporated
herein by reference).
4.23(1) Credit Agreement dated as of May 20, 1994 among Waxman USA, Inc.,
Barnett, Inc., Waxman Consumer Products Group Inc. and WOC Inc., the
Lenders and Issuers party thereto and Citicorp USA, Inc., as Agent,
and certain exhibits thereto (Exhibit 10.8 to Waxman Industries,
Inc.'s Form S-4 filed June 20, 1994, Registration No. 33-54209,
incorporated herein by reference).
4.24(1) 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
</TABLE>
II-10
<PAGE> 46
<TABLE>
<S> <C>
and Issuers party thereto and Citibank, N.A., as Agent (Exhibit 10.9
to Waxman Industries, Inc.'s Form S-4 filed June 20, 1994,
Registration No. 33-54209, incorporated herein by reference).
4.25(1) Amendment No. 2 to the Term Loan Agreement and Amendment
No. 1 to the Revolving Credit Agreement among Waxman USA, Inc.,
Barnett Inc., Waxman Consumer Products Group Inc. and WOC Inc., the
Lenders and Issuers party thereto and Citibank, N.A., as Agent
(Exhibit 4.25 to Waxman Industries, Inc.'s Amendment No. 6 to Form
S-2 filed October 10, 1995, Registration No. 33-44511, incorporated
herein by reference).
5.1(1) Opinion of Benesch, Friedlander, Coplan & Aronoff regarding legality.
5.2(1) Opinion of Shereff, Friedman, Hoffman & Goodman, LLP regarding
legality (filed as Exhibit 5.2 to this Registration Statement).
8.1(1) Opinion of Benesch, Friedlander, Coplan & Aronoff as to tax matters.
10.1(1) Lease between the Company as Lessee and Aurora Investment Co. as
Lessor dated June 30, 1992. (Exhibit 10.1 to Annual Report on Form
10-K for the year ended June 30, 1992, File No. 0-5888, incorporated
herein by reference).
10.2(1) Policy Statement (revised as of June 1, 1980) regarding the Company's
Profit Incentive Plan (Exhibit 10(c)-1 to Annual Report on Form 10-K
for the year ended June 30, 1984, File No. 0-5888, incorporated herein
by reference).
10.3(1) Employment Contract dated June 18, 1990 between the Company and
William R. Pray (Exhibit 10.4 to Annual Report on Form 10-K for the
year ended June 30, 1991, File No. 0-5888, incorporated herein by
reference).
10.4(1) Form of Stock Option Agreement between the Company and its Directors
(Exhibit 10.5 to Annual Report on Form 10-K for the year ended June
30, 1991, File No. 0-5888, incorporated herein by reference).
10.5(1) Employment Contract dated January 1, 1992 between the Company and
Jerome C. Jacques (Exhibit 10.5 to Annual Report on Form 10-K for the
year ended June 30, 1992, File No. 0-5888, incorporated herein by
reference).
10.6(1) Employment Contract dated January 1, 1992 between the Company and John
S. Peters (Exhibit 10.6 to Annual Report on Form 10-K for the year
ended June 30, 1992, File No. 0-5888, incorporated herein by
reference).
10.7(1) 1992 Non-Qualified and Incentive Stock Option Plan of Waxman
Industries, Inc., adopted as of July 1, 1992. (Exhibit 10.7 to Annual
Report on Form 10-K for the year ended June 30, 1993, File No. 0-5888,
incorporated herein by reference).
10.8(1) Employee Stock Purchase Plan of Waxman Industries, Inc., adopted on
September 1, 1992. (Exhibit 10.8 to Annual Report on Form 10-K for the
year ended June 30, 1993, File No. 0-5888, incorporated herein by
reference).
10.9(1) Employment Agreement dated November 1, 1994 between Waxman Consumer
Products Group, Inc. and Laurence Waxman (Exhibit 10.9 to Waxman
Industries, Inc.'s Amendment No. 6 to Form S-2 filed October 10, 1995,
Registration No. 33-44511, incorporated herein by reference).
</TABLE>
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<PAGE> 47
<TABLE>
<S> <C>
10.10(1) Tax Sharing Agreement dated May 20, 1994 among Waxman Industries,
Inc., Waxman USA Inc., Barnett Inc., Waxman Consumer Products Inc.,
WOC Inc. and Western American Manufacturing Inc. (Exhibit 10.6 to
Waxman Industries, Inc.'s Form S-4 filed June 20, 1994, Registration
No. 33-54209, incorporated herein by reference).
10.11(1) Intercorporate Agreement dated May 20, 1994 among Waxman Industries,
Inc., Waxman USA Inc., Barnett Inc., Waxman Consumer Products Inc.,
WOC Inc. and Western American Manufacturing Inc. (Exhibit 10.7 to
Waxman Industries, Inc.'s Form S-4 filed June 20, 1994, Registration
No. 33-54209, incorporated herein by reference).
12.1(1) Statement re: computation of ratios (Exhibit 12.1 to Waxman
Industries, Inc.'s Form S-1, filed July 18, 1995, incorporated herein
by reference).
13.1(1) Form 10-K Annual Report of the Company for the year ended June 30,
1995, File no. 33-5888 (Exhibit 13.1 to Waxman Industries, Inc's
Amendment No. 6 on Form S-2 filed October 10, 1995, Registration
No. 33-44511, incorporated herein by reference).
13.2 Waxman Industries, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, File No. 33-5888.
23.1 Consent of Arthur Andersen LLP.
23.2(1) Consent of Benesch, Friedlander, Coplan & Aronoff (contained in its
opinion filed as Exhibit 5.1 to this Registration Statement).
23.3(1) Consent of Benesch, Friedlander, Coplan & Aronoff (contained in its
opinion filed as Exhibit 8.1 to this Registration Statement).
23.4(1) Consent of Shereff, Friedman, Hoffman & Goodman, LLP (contained in its
opinion filed as Exhibit 5.2 to this Registration Statement).
25.1(1) Statement of eligibility and qualification on Form T-1 of United
States Trust Company of New York, as trustee (bound separately).
99.1(1) Form 11-K Annual Report for the amended and Restated Profit Sharing
Retirement Plan of the Company for the year ended June 30, 1993, File
No. 0-5888 (incorporated herein by reference).
</TABLE>
Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulations S-K, the Company
has not filed certain instruments with respect to long-term debt because the
total amount of securities authorized thereunder does not exceed ten percent of
the total assets of the Company and its subsidiaries on a consolidated basis.
The Company hereby agrees to furnish copies of such agreements to the Commission
upon request.
(1) Incorporated herein by reference as indicated.
II-12
<PAGE> 1
Exhibit 23.1
------------
ARTHUR
ANDERSEN
ARTHUR ANDERSEN & CO. SC
________________________
Arthur Andersen LLP
________________________
1717 East Ninth Street
Cleveland, OH 44114
216 781 2140
Exhibit 23.1
------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated September 26, 1995
included in Waxman Industries, Inc's Form 10-K for the year ended June 30, 1995
and to all references to our Firm included in this Registration Statement (File
No. 33-44511).
/s/ Arthur Andersen LLP
Cleveland, Ohio,
November 14, 1995.
