-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RZPwbJeZrqMj3M+cbZA67kZn1OMv+jNWnSRSf8sNu4qaoVjlS57cWOly6CI5I0KE Tu2r33GABbSO97xo+LX4hQ== 0000950136-96-000163.txt : 19960416 0000950136-96-000163.hdr.sgml : 19960416 ACCESSION NUMBER: 0000950136-96-000163 CONFORMED SUBMISSION TYPE: POS AM PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19960415 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAXMAN INDUSTRIES INC CENTRAL INDEX KEY: 0000105096 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-HARDWARE & PLUMBING & HEATING EQUIPMENT & SUPPLIES [5070] IRS NUMBER: 340899894 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: POS AM SEC ACT: 1933 Act SEC FILE NUMBER: 033-44511 FILM NUMBER: 96547290 BUSINESS ADDRESS: STREET 1: 24460 AURORA RD CITY: BEDFORD HEIGHTS STATE: OH ZIP: 44146 BUSINESS PHONE: 2164391830 MAIL ADDRESS: STREET 1: 24460 AURORA ROAD CITY: BEDFORD HEIGHTS STATE: OH ZIP: 44146 POS AM 1 POST-EFFECTIVE AMENDMENT Post-Effective Amendment No. 10/Res. No. 33-44511 As filed with the Securities and Exchange Commission on April 15, 1996 Registration No. 33-44511 SECURITIES AND EXCHANGE COMMISSION ---------- POST-EFFECTIVE AMENDMENT NO. 10 TO REGISTRATION STATEMENT ON FORM S-2 UNDER THE SECURITIES ACT OF 1933 ---------------- WAXMAN INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 5074 (Primary Standard Industrial Classification Code Number) 34-0899894 (I.R.S. Employer Identification Number) 24460 Aurora Road Bedford Heights, Ohio 44146 (216) 439-1830 (Address, including zip code, and telephone number, including area code, of registrant's principal offices) ---------- ARMOND WAXMAN 24460 Aurora Road Bedford Heights, Ohio 44146 (216) 439-1830 (Name, address, including zip code, and telephone number, including area code, of agents for service) ---------- Copies to: SCOTT M. ZIMMERMAN, ESQ. Shereff, Friedman, Hoffman & Goodman, LLP 919 Third Avenue New York, New York 10022 (212) 758-9500 ---------- APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon as practicable after this registration statement becomes effective. If 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. ---------- WAXMAN INDUSTRIES, INC. CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
ITEM OF FORM S-2 PROSPECTUS CAPTION OR LOCATION ---------------- ------------------------------ 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 and Outside Back Page of Prospectus Cover Pages of Prospectus 3. Summary Information, Risk Factors and Prospectus Summary; Incorporation of Certain Information Ratio of Earnings to Fixed Charges 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 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 Information Reference by Reference 13. Disclosure on Commission Position on Not Applicable Indemnification of Securities Act Liabilities
-i- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED APRIL 15, 1996 PROSPECTUS WAXMAN INDUSTRIES, INC. 867,000 COMMON STOCK PURCHASE WARRANTS 950,000 SHARES OF COMMON STOCK This Prospectus relates to the offer and sale of (i) 867,000 common stock purchase warrants (the "Warrants") of Waxman Industries, Inc. (the "Company") and (ii) 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 Common Stock purchase warrants sold as part of the 1991 Private Placement (as defined below and collectively referred to with the Warrants as the "1991 Private Placement Warrants"). 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 Warrants were originally issued by the Company on September 17, 1991 in a private placement of 12.25% Fixed Rate Senior Secured Notes due 1998 and Floating Rate Senior Secured Notes due 1998 of the Company (collectively, the "Notes") and the Warrants to certain institutional investors (the "1991 Private Placement"). In April 1996, the Company defeased the Notes. The original number of Warrants was 1,000,000. In addition, 126,000 1991 Private Placement Warrants have been traded publicly since their registration in June 1992, and, therefore, the offer and sale of such Warrants does not require registration hereunder. Also, the Company is not registering hereunder 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 Warrants. 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 April 12, 1996, the closing price per share of Common Stock, as reported by the NYSE, was $4.00. The Common Stock is also traded on the Chicago Stock Exchange. There is currently a limited public market for 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 "Securities 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 Securities 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 SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES HAVE NOT BEEN AND WILL NOT BE QUALIFIED FOR SALE UNDER THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA. THE SECURITIES ARE NOT BEING OFFERED FOR SALE AND MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN CANADA, OR TO ANY RESIDENT THEREOF, IN VIOLATION OF THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA. THIS DOCUMENT MAY NOT BE PASSED ON IN THE UNITED KINGDOM TO ANY PERSON UNLESS THAT PERSON IS OF A KIND DESCRIBED IN ARTICLE 9(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER 1988 OR IS A PERSON TO WHOM THIS DOCUMENT MAY OTHERWISE LAWFULLY BE ISSUED OR PASSED ON. NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. _____________________________ THE DATE OF THIS PROSPECTUS IS _______________, 1996. 2 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"), the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 filed with the Commission on November 13, 1995 (the "September 1995 10-Q") and the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1995 filed with the Commission on February 12, 1996 (the "December 1995 10-Q," and, together with the 1995 Annual Report and the September 1995 10-Q, the "Periodic Reports"). 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. 3 PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere or incorporated by reference 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 include the operations of Waxman Consumer Products Group Inc. ("Consumer Products"). As a result of the Company's prior 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. In connection with the recently completed initial public offering of Barnett Inc. ("Barnett"), formerly a wholly-owned indirect subsidiary of the Company, the Company currently has ceased its efforts to sell Consumer Products. Accordingly, unless the context otherwise indicates, the information contained in this Prospectus (other than the Periodic Reports) reflects Consumer Products as a continuing operation; provided, however, that the information contained in the Periodic Reports reflects Consumer Products as a discontinued operation. See "Recent Developments." THE COMPANY The Company believes it is one of the leading suppliers of plumbing products to the repair and remodeling market in the United States. The Company, through its subsidiaries, together with Barnett, distribute plumbing, electrical and hardware products to approximately 50,000 customers in the United States, including, plumbing and electrical repair and remodeling contractors and independent retailers. The Company's consolidated net sales were $232.3 million and $116.9 million in fiscal 1995 and the six months ended December 31, 1995, respectively. The business of the Company is conducted primarily through its indirect wholly-owned subsidiary Consumer Products and through Barnett, of which the Company indirectly owns approximately 45% of the outstanding common stock, and, through the ownership of certain convertible preferred stock, owns approximately a 54% economic interest. 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, mass merchandisers, hardware stores and lumberyards. Consumer Products' customers include large national retailers such as Kmart, Builders Square and Wal-Mart, as well as large regional D-I-Y retailers such as Fred Meyer Inc. According to rankings of the largest D-I-Y retailers published in National Home Center News, an industry trade publication, Consumer Products' customers include 15 of the 25 largest D-I-Y retailers in the United States. Consumer Products works closely with its customers to develop comprehensive marketing and merchandising programs designed to improve their profitability, efficiently manage shelf space, reduce inventory levels and maximize floor stock turnover. Management believes that Consumer Products is the only supplier to the D-I-Y market that carries a complete line of plumbing, electrical and floor protective hardware products, in both packaged and bulk form. Consumer Products' marketing strategy includes offering mass merchandisers and D-I-Y retailers a comprehensive merchandising program which includes design, layout and setup of selling areas. Sales and service personnel assist the retailer in determining the proper product mix in addition to designing department layouts to effectively display products and optimally utilize available floor and shelf space. Consumer Products supplies point-of-purchase displays for both bulk and packaged products, including color-coded product category signs and color-coordinated bin labels to help identify products, and backup tags to signify products that require reordering. Consumer Products also offers certain of its customers the option of private label programs for their 4 plumbing and floor care products. In-house design, assembly and packaging capabilities enable Consumer Products to react quickly and effectively to service its customers' changing needs. In addition, Consumer Products' products are packaged and designed for ease of use, with "how to" instructions included to simplify installation, even for the uninitiated D-I-Y consumer. Consumer Products' net sales for fiscal 1995 and the six months ended December 31, 1995 were $72.0 million and $32.3 million, respectively. Barnett is a leading direct marketer and distributor of an extensive line of plumbing, electrical and hardware products to over 40,000 active customers throughout the United States. Barnett offers approximately 8,200 name brand and private label products through its industry-recognized Barnett(R) catalogs and telesales operations. Barnett markets its products through three distinct, comprehensive catalogs that target professional contractors, independent hardware stores and maintenance managers. Barnett's staff of over 70 knowledgeable telesalespersons, customer service and technical support personnel work together to serve customers by assisting in product selection and offering technical advice. To provide rapid delivery and a strong local presence, Barnett has established a network of 28 distribution centers strategically located in 28 major metropolitan areas throughout the United States. Through these local distribution centers, approximately two-thirds of Barnett's orders are shipped directly to the customer, usually within 24 hours of an order. The remaining one-third of the orders are picked up by the customer at one of Barnett's local distribution centers. Barnett's strategy of being a low-cost, competitively priced supplier is facilitated by its volume of purchases and offshore sourcing of a significant portion of its private label products. Products are purchased from over 400 domestic and foreign suppliers. Barnett believes that its distinctive business model has enabled it to become a high-volume, cost-efficient direct marketer of competitively priced plumbing, electrical and hardware products. Barnett's approximately 500- page catalogs offer an extensive selection of products in an easy to use format enabling customers to consolidate purchases with a single vendor. Barnett provides an updated version of its catalogs to its customers on average four times a year. To attract new customers and offer special promotions to existing customers, Barnett supplements its catalogs with monthly promotional flyers. Barnett's experienced and knowledgeable inbound telesales staff, located at Barnett's centralized headquarters in Jacksonville, Florida, uses Barnett's proprietary information systems to take customer orders as well as offer technical advice. Barnett's highly trained outbound telesales staff maintains frequent customer contact, makes telesales presentations and encourages additional purchases. Targeted customer accounts are typically assigned an outbound telesalesperson in order to enhance customer relationships and improve customer satisfaction. Barnett's high in-stock position and extensive network of local distribution centers enable it to fulfill approximately 94% of the items included in each customer order and provide rapid delivery. Barnett's net sales were $109.1 million and $60.5 million in fiscal 1995 and the six months ended December 31, 1995, respectively. The Company has several smaller operations which are conducted through its other indirect wholly-owned 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. WOC's other operations also include its Madison Equipment division, a supplier of electrical products, and its Medal Distributing division, a supplier of hardware products. TWI includes foreign sourcing operations in Mexico, China and Taiwan which support Consumer Products, Barnett and WOC. Net sales from these smaller operations were $51.2 million and $24.1 million in fiscal 1995 and the six months ended December 31, 1995, respectively. RECENT DEVELOPMENTS On February 1, 1996, Barnett filed a registration statement with the Commission with respect to an initial public offering (the "Barnett Public Offering") of its common stock (the "Barnett Common Stock"). On March 28, 1996, the registration statement with respect to the Barnett Public Offering was declared effective and on 5 April 3, 1996, the Barnett Public Offering was consummated. In such offering, 7,207,200 shares, representing approximately 55.1% of the Barnett Common Stock, were sold in the aggregate by Barnett and Waxman USA Inc. ("Waxman USA"), a direct wholly-owned subsidiary of the Company, at an initial public offering price per share of $14.00, resulting in aggregate net proceeds of $93.4 million. As of April 10, 1996, Waxman USA beneficially owns approximately 49.9% of the Barnett Common Stock and, together with convertible non-voting preferred stock of Barnett owned by Waxman USA, owns approximately a 54% economic interest of the capital stock of Barnett. Of the $48.5 million of net proceeds received by Barnett in the Barnett Public Offering, Barnett used (i) approximately $23.0 million to repay all of the outstanding indebtedness borrowed by it under the secured credit facility (the "Operating Companies Revolving Credit Facility") among Citicorp USA, Inc., as agent, Barnett, Consumer Products and WOC, (ii) $22.0 million to pay a dividend evidenced by a note payable to Waxman USA and (iii) $3.5 million for working capital. The $44.9 million of net proceeds received by Waxman USA from the Barnett Public Offering, together with payment from Barnett of the $22.0 note payable described above, were, or will be, applied primarily to repay debt including (i) all of the $39.2 million principal amount of the Company's 12 1/4% Senior Secured Notes due 1998 and Floating Rate Senior Secured Notes due 1998 (collectively, the "Senior Secured Notes") plus accrued interest and redemption premium of approximately $1.2 million, thereby eliminating the mandatory sinking fund requirements relating to the Senior Secured Notes which were scheduled to commence in September 1996, (ii) all (approximately $0.2 million) of the indebtedness under the Company's 9% Convertible Subordinated Debentures due 2007 (the "Waxman Debentures") and (iii) approximately $5.0 million of the $10.0 million outstanding indebtedness and accrued interest under the secured term loan (the "Term Loan") among Citibank, N.A., as agent, Barnett, Consumer Products and WOC. The remaining net proceeds received by Waxman USA (approximately $21.3 million) are intended to be used to (i) reduce additional outstanding indebtedness borrowed by Consumer Products and WOC under the Operating Companies Revolving Credit Facility and/or (ii) retire the Company's 12 3/4 Senior Secured Deferred Coupon Notes due 2004 (the "Deferred Coupon Notes") and/or Exchange Notes (as defined below) and/or (iii) reinvest in Consumer Products' and/or WOC's businesses. The Company's business strategy is to reduce its leverage by the sale of selected assets and to refinance its remaining indebtedness whenever possible. See "Recent Developments." In addition, the Company believes that the Barnett Public Offering will be beneficial to the growth and earnings potential of Barnett. Also as part of the Company's efforts to decrease its leverage and increase its financial flexibility, concurrently with the consummation of the Barnett Public Offering, Waxman USA consummated an exchange offer (the "Exchange Offer") pursuant to which it exchanged $43,026,000 principal amount of the Company's outstanding 13 3/4% Senior Subordinated Notes due 1999 (the "Senior Subordinated Notes") for a like principal amount of Waxman USA 11 1/8% Senior Notes due 2001 (the "Exchange Notes") and in connection therewith solicited consent to certain amendments to the Indenture pursuant to which the Senior Subordinated Notes were issued. Generally, the amendments to the Senior Subordinated Note indenture eliminate virtually all of the restrictive covenants and events of defaults previously contained in such indenture. The Exchange Offer decreased the Company's cash interest burden and extended the maturity of the Senior Subordinated Notes exchanged in the Exchange Offer by several years. The Exchange Notes were not registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements. In August 1995, the Company announced that it had decided to sell its Consumer Products business and entered into a letter of intent, which subsequently expired, which contemplated 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 would have given the Company approximately a 25% economic interest in Consumer 6 Products on a going forward basis. Since the consummation of the Barnett Public Offering, the Company has ceased its efforts to sell Consumer Products and instead retains and continues to operate Consumer Products and will report its results as a continuing operation. However, as a result of the Company's prior determination to sell its Consumer Products business, for the fiscal year ended June 30, 1995 and the six month period ended December 31, 1995, Consumer Products is reported as a discontinued operation and the consolidated financial statements and financial information in its Periodic Reports incorporated by reference herein. In connection with the Barnett Public Offering, Waxman USA entered into an amendment and restatement of the Operating Companies Revolving Credit Facility and Term Loan (the "Restated Credit Agreement") to provide for, among other things, an approximately one year secured credit facility providing for revolving credit advances of up to $25.0 million and term loans of up to $5.0 million ("Restated Term Loans") and a release of Barnett from such lending arrangements. As a result of the limited duration of the Restated Credit Agreement, Waxman USA is currently negotiating with respect to a refinancing of such credit facility. Although the Company believes, based on discussions to date, that it will be able to refinance the Restated Credit Agreement before its expiration, there can be no assurance that it will be able to do so or as to the terms of any such refinancing it is able to obtain. Revolving credit advances under the Restated Credit Agreement will be subject to borrowing base formulas and will bear interest at (i) the per annum rate of 1.5% plus the highest of (a) the prime rate of Citibank, N.A. or (b) the federal funds rate plus 0.5% and a formula with respect to three month certificates of deposit of major United States money market banks or (ii) LIBOR plus 3.0%. The Revolving Credit Facility includes a letter of credit subfacility of $4.0 million. Restated Term Loans will bear interest at a rate per annum equal to 2.0% over the interest rate applicable to revolving credit advances under the Restated Credit Agreement. Borrowings under the Restated Credit Agreement will be secured by the accounts receivable, inventory, certain general intangibles and unencumbered fixed assets of Consumer Products and WOC (the "Borrowers") and 65% of the capital stock of one subsidiary of TWI and 100% of the capital stock of another such subsidiary. In addition, Restated Term Loans will also be secured by a pledge of 500,000 shares of Barnett Common Stock owned by Waxman USA. The Restated Credit Agreement will require the Borrowers to maintain cash collateral accounts into which all available funds are deposited and applied to service the facility on a daily basis. The Restated Credit Agreement will prevent dividends and distributions by the Borrowers except in certain limited instances including, so long as there is no Default or Event of Default, and Waxman USA is in compliance with certain financial covenants, the payment of interest on the Senior Subordinated Notes and Exchange Notes, and will contain customary negative, affirmative and financial covenants and conditions. The Restated Credit Agreement will contain only the events of default contained in the Operating Companies Revolving Credit Facility, which include the following: (i) any Borrower shall fail to make any payment of principal or interest or any other amount due under the agreements related to the Restated Credit Agreement or fail to perform any covenant (after the expiration of any applicable grace period) thereunder, or any representation or warranty made in connection therewith shall prove to have been incorrect in any material respect when made or deemed made; (ii) the Company or any of its subsidiaries shall fail to pay any indebtedness having a principal amount of $5,000,000 or more; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of (after the expiration of any applicable period of grace), the maturity of such indebtedness; or any such indebtedness shall become or be declared to be due and payable, or required to be repaid (other than by a regularly scheduled required prepayment), or the Company or any of its subsidiaries shall be required to repurchase or offer to repurchase such indebtedness, prior to the stated maturity thereof; (iii) certain events of bankruptcy with respect to the Company or any of its subsidiaries; (iv) there shall occur any Change of Control (as defined in the Restated Credit Agreement; and (v) there shall occur a Material Adverse Effect (as defined in the Restated Credit Agreement) or an event which would have a Material Adverse Effect (as defined in the Restated Credit Agreement). 7 The current corporate structure of the Company is as follows: - --------------------------------------------------------------- WAXMAN INDUSTRIES, INC. - ---------------------------------------------------------------- - ---------------------------------------------------------------- WAXMAN USA INC. - ---------------------------------------------------------------- - ------------------------------------------------------------------------- BARNETT WAXMAN WOC INC. TWI, INTERNATIONAL INC. INC.(1) CONSUMER AND SUBSIDIARIES PRODUCTS GROUP INC. - -------------------------------------------------------------------------- - ---------------------- (1) Waxman USA beneficially owns approximately 49.9% of the Barnett Common Stock and, together with non-voting preferred stock of Barnett owned by Waxman USA, approximately 54% of the capital stock of Barnett. 8 THE OFFERING SECURITIES OFFERED 867,000 Common Stock Purchase Warrants and 1,000,000 Shares of Common Stock (issuable upon exercise of the 1991 Private Placement Warrants). 867,000 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 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. 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. 9 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 Warrants are owned by a small number of investors and there is currently a limited public market for the Warrants. The Warrants will not be listed on any exchange and no assurance can be given that an active market will develop for the 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 Warrants may have difficulty liquidating their investment and the 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 Warrants will be able to sell the Warrants, if at all. The liquidity of and the market prices for the 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. LEVERAGE The Company has a high degree of leverage. At December 31, 1995, the outstanding consolidated indebtedness (excluding trade payables and accrued liabilities) of the Company was approximately $204.4 million. At December 31, 1995, after giving effect to the Exchange Offer and the Barnett Public Offering and the application of the net proceeds therefrom, the outstanding consolidated indebtedness (excluding trade payables and accrued liabilities) of the Company was approximately $120.0 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 Restated Credit Agreement, including any refinancing thereof, will be sufficient to fund working capital, capital expenditures and debt service requirements for the next 12 months, the Company's ability to satisfy its obligations will be dependent upon its future performance, which is subject to prevailing economic conditions and financial, business and other factors, including factors beyond the Company's control. In addition to the other matters set forth herein under "Risk Factors," the Company's future performance is subject to prevailing economic conditions and financial, business and other factors, many of which factors are beyond the Company's control. 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 further significant deleveraging can occur. In addition, the $5.7 million principal amount of Senior Subordinated Notes not tendered in the Exchange Offer mature in June 1999. Cash interest on the Company's Deferred Coupon Notes is payable semi-annually commencing December 1999. The Company's management's current projections indicate that there will not be sufficient cash flow from operations to make the June 1999 principal payment on the Senior Subordinated Notes or the December 1999 cash interest payment on the Deferred Coupon Notes. Accordingly, the Company's management currently intends to pursue a sale of assets or other capital raising transaction to satisfy such cash requirements. However, there can be no assurances that the Company will be able to consummate any such sale or capital raising transaction. There can also be no assurance that the Company will be able to refinance the Senior Subordinated Notes, the Deferred Coupon Notes or the Exchange Notes, respectively, at or prior to their respective maturities. In addition, the Company is a holding company with no operations of its own and, 10 therefore, its ability to pay cash interest on the Deferred Coupon Notes commencing in December 1999, and the debt service for Senior Subordinated Notes not tendered in the Exchange Offer will require an increase in the Company's cash flow from current levels or a substantial reduction in the Company's level of indebtedness or the completion of other capital raising transactions, including asset sales. There can be no assurance that such increase in cash flow or reduction in indebtedness or other capital raising transaction will occur. 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. Restrictions Imposed by Terms of Indebtedness. The terms and conditions of the instruments evidencing the Restated Credit Agreement, as well as other indebtedness of the Company and Waxman USA 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 18.2% (and 14.0%, assuming the exercise of all of the Warrants) of the outstanding shares of the Company's common stock, par value $.01 per share, and 83% 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 63.4% (and 58.1%, 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, and for the six months ended December 31, 1995, the Company's earnings were insufficient to cover its fixed charges by $11.7 million, $3.1 million, $15.7 million and $3.8 million, respectively. The Company believes that the successful implementation of its business strategy described herein will enable it to reduce or eliminate the deficiency of earnings to fixed charges. However, there can be no assurances regarding when such deficiencies will be reduced or eliminated or that the deficiencies experienced in the past will not reoccur. Foreign Sourcing. In fiscal 1995 products manufactured outside of the United States accounted for approximately 27.8% of the total product purchases made by the Company. 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 11 produced), which could have an adverse effect on the Company's business. The occurrence of certain of these factors would delay or prevent the delivery of goods ordered by the Company's customers, and such delay or inability to meet delivery requirements would have an adverse effect on the Company's results of operations and could have an adverse effect on the Company's relationships with its customers. In addition, the loss of a foreign manufacturer could have a short-term adverse effect on the Company's business until alternative supply arrangements were secured. Reliance on Key Customers. During fiscal 1995 and the six months ended December 31, 1995, Kmart and its subsidiaries, Consumer Products' largest customer, accounted for approximately 13.5% and 12.5%, respectively, of the Company's total net sales and 43.6% and 43.6%, respectively, of Consumer Products' total net sales. During the same periods, the Company's ten largest customers accounted for approximately 24.1% and 23.9%, respectively, of the Company's total net sales. The loss of or a substantial decrease in the business of the Company's largest customers could have a material adverse effect on the Company's operations. In addition, certain articles in the financial press during the past year have questioned the financial condition of Kmart, Consumer Products' largest customer. In addition, Kmart has stated that it intends to sell its builders square business, which accounted for approximately 24.7% and 26.6%, respectively, of the Consumer Products' net sales in fiscal 1995 and the six months ended December 31, 1995, respectively. 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. As a result of the Barnett Public Offering, the Company and Waxman USA will rely primarily on Consumer Products for cash flow. Consumer Products' customers include D-I-Y warehouse home centers, home improvement centers, mass merchandisers, hardware stores and lumberyards. Consumer Products may be adversely effected by prolonged economic downturns or significant declines in consumer spending. There can be no assurance that any such prolonged economic downturn or significant decline in consumer spending will not have a material adverse impact on Consumer Products' business and its ability to generate cash flow. 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. ABSENCE OF PUBLIC MARKET; EFFECT OF MARKET PRICE OF BARNETT COMMON STOCK At present, the Warrants are owned by a small number of investors and there is no active trading market for the Warrants. If an active trading market does not develop, purchasers of the Warrants may have difficulty liquidating their investment and the 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 Warrants will be able to sell the Warrants, if at all. The liquidity of and the market prices for the Warrants and Common Stock 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 warrants and common stock generally. In addition, the market price of the Common stock may be effected by the market price of the Barnett Common Stock, which may be effected by the factors enumerated in the preceding sentence. 12 POSSIBLE FUTURE SALES OF SHARES BY THE SELLING SECURITY HOLDERS Subject to the restrictions described under "Risk Factors -- Shares Eligible for Future Sale" and applicable law, upon the effectiveness of the Registration Statement of which this Prospectus forms a part, the Selling Security Holders could cause the sale of any or all of the Warrants or underlying shares of Common Stock they own. The Selling Security Holders may determine to sell Warrants or the underlying shares of Common Stock from time to time for any reason. Although the Company can make no prediction as to the effect, if any, that sales of Warrants or shares of Common Stock owned by the Selling Security Holders would have on the market price of Common Stock prevailing from time to time, sales of substantial amounts of Warrants or Common Stock, or the availability of such warrants or shares of Common Stock for sale in the public market, could adversely affect prevailing market prices of the Common Stock. SHARES ELIGIBLE FOR FUTURE SALE As of February 7, 1996, there were 9,522,083 shares of Common Stock outstanding and 2,215,079 shares of Class B Common Stock outstanding (convertible into 2,215,079 shares of Common Stock). To the extent such shares are not held by "affiliates" or otherwise subject to restrictions on resale, including those imposed by Section 16(B) of the exchange act, the Warrants, and upon exercise of the Warrants, the shares of Common Stock which are issuable upon exercise of the Warrants and offered hereby are eligible for sale in the public market. Although the Company can make no prediction as to the effect, if any, that sales of the Warrants and shares of Common Stock referred to above would have on the market price of the Common Stock prevailing from time to time, sales of a substantial amount of Warrants or Common Stock, or the availability of such Warrants or shares of Common Stock for sale in the public market could adversely affect prevailing market prices of the Common Stock. 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. 13 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 February 7, 1996, no shares of Preferred Stock, 9,552,083 shares of Common Stock and 2,215,079 shares of Class B Common Stock were issued and outstanding. COMMON STOCK AND CLASS B COMMON STOCK Each share of Common Stock entitles the holder to one vote on all matters submitted to the stockholders, including the election of directors, and each share of Class B Common Stock entitles the holder to ten votes on all such matters. Except as set forth below, all actions submitted to a vote of stockholders are voted on by holders of Common Stock and Class B Common Stock voting together as a single class. The holders of Common Stock and Class B Common Stock vote separately as classes with respect to any amendments to the Company's Certificate of Incorporation that alter or change the powers, preferences or special rights of their respective classes of stock so as to affect them adversely, and with respect to such other matters as may require class votes under the Delaware General Corporation Law. Dividends on the Class B Common Stock may not exceed those on the Common Stock. Each share of Common Stock and Class B Common Stock is equal in respect of rights to dividends and other 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 14 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 February 7, 1996, Melvin Waxman and Armond Waxman beneficially owned an aggregate of approximately 83% of the outstanding Class B Common Stock and 63.4% of the aggregate outstanding voting power of the Company. The transfer agent and registrar for the Common Stock and Class B Common Stock is The Huntington Trust Company, N.A., Columbus, 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. 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 15 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 WARRANTS The sale of a Warrant by a holder other than to the Company will result in the recognition of a capital gain or loss, provided that the Warrant is a capital asset in the hands of the holder on the date of the sale. The amount of the gain or loss will be the difference between the amount paid by the holder for the Warrant and the sales price of the Warrant. The Company believes that the amount of the original issue price properly allocable to the purchase of a Warrant is $1.00. The tax consequences of a sale of a Warrant to the Company (other than upon the exercise of a Warrant) are uncertain. Under certain unusual circumstances, the Service may take the position that the proceeds of the sale would be ordinary income. As a general rule, no gain or loss will be recognized by a holder of a Warrant on the purchase of Common Stock for cash on the exercise of the Warrant. Gain may be recognized, however, to the extent a holder receives cash in lieu of fractional shares of Common Stock. The adjusted tax basis of a share of Common Stock received upon exercise of a Warrant will be equal to the sum of the Holder's adjusted tax basis in the exercised Warrant and the exercise price. The holding period for Common Stock received upon exercise of a Warrant will commence with the date of exercise of the Warrant. Each purchaser of Securities should consult his own tax advisor with respect to the tax consequences to him, including the tax consequences under state, local, foreign and other tax laws, of the ownership and disposition of the Securities. PLAN OF DISTRIBUTION Any or all of the Securities may be sold from time to time to purchasers directly by any of the Selling Security Holders. Alternatively, the Selling Security Holders may from time to time offer the 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 Securities 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 Securities 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 16 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 Securities Act. 17 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. NUMBER OF SELLING SECURITY HOLDER WARRANTS(1) - ----------------------- ----------- Elite & Co. 90,000 Harris Trust & Savings Bank 20,000 IDS Certificate Company 150,000 Morgan Guaranty Trust Co. of New York 7,500 President and Fellows of Harvard College 40,000 State Street Bank & Trust Co. 112,500 The Bank of New York 440,000 T. Rowe Price High Yield Fund, Inc. 7,000 ------- TOTAL 867,000 ======= (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. 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. 18 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. 19 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 Available Information ..................................................... 3 Incorporation of Certain Documents by Reference ........................... 3 Prospectus Summary ........................................................ 4 The Company ............................................................... 4 Recent Developments ....................................................... 5 Risk Factors .............................................................. 10 Use of Proceeds ........................................................... 13 Description of Warrants ................................................... 14 Description of Capital Stock .............................................. 14 Certain Federal Income Tax Consequences ................................... 15 Plan of Distribution ...................................................... 16 Selling Security Holders .................................................. 18 Legal Matters ............................................................. 19 Experts ................................................................... 19 WAXMAN INDUSTRIES, INC. 867,000 COMMON STOCK PURCHASE WARRANTS 1,000,000 SHARES OF COMMON STOCK ----------- PROSPECTUS ----------- _____________, 1996 20 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. 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* -------- * Estimated 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) 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). 4.2(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).
II-1
EXHIBIT NUMBER EXHIBIT DESCRIPTION - -------------- ------------------- 4.3(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). 4.4(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). 4.5(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). 4.6(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). 4.7 First Supplemental Indenture, dated January 19, 1996, by and between Waxman Industries, Inc. and The Huntington National Bank. 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 5.1 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) 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). 10.4(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). 10.5(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). 10.6(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).
II-2
EXHIBIT NUMBER EXHIBIT DESCRIPTION - -------------- ------------------- 10.7(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). 10.8(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). 10.9(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). 10.10 Intercorporate Agreement dated March 28, 1996 among Barnett Inc., Waxman Industries, Inc., Waxman USA Inc., Waxman Consumer Products Group Inc., WOC Inc. and TWI, International Inc. 10.11(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, incorporated herein by reference). 10.12(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, incorporated herein by reference). 10.13(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 10.11 to Waxman Industries, Inc.'s Amendment no. 4 on Form S-2 to Form S-1 filed October 10, 1995, Registration No. 33-54211, incorporated herein by reference). 10.14 Amended and Restated Credit Agreement dated as of April 3, 1996 among Waxman USA Inc., Waxman Consumer Products Group Inc., WOC Inc., the Lenders and Issuers party thereto and Citibank, N.A., as agent, and certain exhibits thereto. 10.15 Standstill Agreement dated March 28, 1996 between Waxman Industries, Inc. and Barnett Inc. 10.16 Indenture, dated as of April 3, 1996, by and between Waxman USA Inc. and the United States Trust Company of New York, as Trustee, with respect to the Senior Notes due 2001, including the form of Senior Notes. 10.17 Registration Rights Agreement, dated as of April 3, 1996, by and between Waxman USA Inc. and the United States Trust Company of New York. 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).
II-3
EXHIBIT NUMBER EXHIBIT DESCRIPTION - -------------- ------------------- 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, incorporated herein by reference). 13.2(1) Waxman Industries, Inc.'s Quarterly Report on Form 10-Q for its fiscal quarter-ended September 30, 1995 (File no. 33-5888, incorporated herein by reference). 13.3(1) Waxman Inddustries, Inc.'s Quarterly Report on Form 10-Q for its fiscal quarter ended December 31, 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(2) Consent of Shereff, Friedman, Hoffman & Goodman, LLP (contained in its opinion filed as Exhibit 5.2 to this Registration Statement). 24.1(1) Power of Attorney (included in Part II of 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).
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: (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. II-4 (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 precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-5 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 15th day of April, 1996. 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.
NAME TITLE DATE ---- ----- ---- * Co-Chairman of the Board, April 15, 1996 - ----------------------- Co-Chief Executive Officer Melvin Waxman and Director /s/ Armond Waxman Co-Chairman, Co-Chief Executive April 15, 1996 - ----------------------- Officer and Director Armond Waxman * Director April 15, 1996 - ----------------------- William R. Pray /s/ Michael J. Vantusko Vice President-Finance (Principal April 15, 1996 - ----------------------- Accounting Officer) and Assistant Michael J. Vantusko Secretary * Director April 15, 1996 - ----------------------- Samuel J. Krasney * Director April 15, 1996 - ----------------------- Irving Z. Friedman * Director April 15, 1996 - ----------------------- Judy Robins * By:/s/ Armond Waxman ----------------- Armond Waxman As Attorney-in-Fact
II-6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the individual whose signature appears below constitutes and appoints Armond Waxman, his attorney-in-fact and agent, with the power of substitution for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments), to this Registration Statement, and to file the same, with all exhibits thereto, and all documents in connection therewith with the Securities and Exchange Commission, and hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.
NAME TITLE DATE ---- ----- ---- /s/ Michael J. Vantusko Vice President - Finance (Principal April 15, 1996 - ------------------------ Accounting Officer) and Assistant Michael J. Vantusko Secretary
II-7
EXHIBIT INDEX EXHIBIT PAGE NUMBER DESCRIPTION OF EXHIBIT NUMBER - ------------------------------------------------------------------------------------- 4.1(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). 4.2(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). 4.3(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). 4.4(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). 4.5(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). 4.6(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). 4.7 First Supplemental Indenture, dated as of January 19, 1996, by and between Waxman Industries, Inc. and The Huntington National Bank. 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 5.1 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).
II-8
EXHIBIT PAGE NUMBER DESCRIPTION OF EXHIBIT NUMBER - ------------------------------------------------------------------------------------- 10.3(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). 10.4(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). 10.5(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). 10.6(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). 10.7(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). 10.8(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). 10.9(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). 10.10 Intercorporate Agreement dated March 28, 1996 among Barnett Inc., Waxman Industries, Inc., Waxman USA Inc., Waxman Consumer Products Group Inc., WOC Inc. and TWI, International Inc. 10.11(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, incorporated herein by reference). 10.12(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, incorporated herein by reference). 10.13(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 10.11 to Waxman Industries, Inc.'s Amendment No. 4 on Form S-2 to Form S-1 filed October 10, 1995, Registration No. 33-54211, incorporated herein by reference).
II-9
EXHIBIT PAGE NUMBER DESCRIPTION OF EXHIBIT NUMBER - ------------------------------------------------------------------------------------- 10.14 Amended and Restated Credit Agreement dated as of April 3, 1996 among Waxman USA Inc., Waxman Consumer Products Group Inc., WOC Inc., the Lenders and Issuers party thereto and Citibank, N.A., as agent, and certain exhibits thereto. 10.15 Standstill Agreement dated March 28, 1996 between Waxman Industries, Inc. and Barnett Inc. 10.16 Indenture, dated as of April 3, 1996, by and between Waxman USA Inc. and the United States Trust Company of New York, as Trustee, with respect to the Senior Notes due 2001, including the form of Senior Notes. 10.17 Registration Rights Agreement, dated as of April 3, 1996, by and between Waxman USA Inc. and the United States Trust Company of New York. 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. 0-5888 (incorporated herein by reference). 13.2(1) Waxman Industries, Inc.'s quarterly report on form 10-Q for its fiscal quarter-ended September 30, 1995 (file no. 33-5888, incorporated herein by reference). 13.3(1) Waxman Industries, Inc.'s quarterly report on form 10-q for its fiscal quarter ended december 31, 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). 24.1(1) Power of Attorney (included in Part II of 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).
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-10 EX-4.7 2 FIRST SUPPLEMENTAL INDENTURE FIRST SUPPLEMENTAL INDENTURE First Supplemental Indenture, dated as of January 19, 1996, to the Indenture dated as of May 20, 1994 (the "Indenture"), between Waxman Industries, Inc., a Delaware corporation (the "Company"), and the Huntington National Bank, as Trustee (the "Trustee"). R E C I T A L The Indenture provides that the Company and the Trustee may, without notice to or the consent of any Holder of the Company's 12-3/4% Senior Secured Deferred Coupon Notes due June 1, 2004 (the "Securities"), enter into a Supplemental Indenture for the purpose of curing any ambiguity, defect or inconsistency in the Indenture provided that such Supplemental Indenture does not adversely affect the rights of any Holder. NOW, THEREFORE, the parties agree as follows for their mutual benefit and for the equal and ratable benefit of the Holders of the Securities: 1. Capitalized terms not defined herein shall have the meaning given to them in the Indenture. 2. Section 5.01, Consolidation, Merger, Conveyance, Transfer or Lease is hereby amended by deleting the first paragraph thereof in its entirety and inserting the following paragraph in lieu thereof: "The Company shall not consolidate with or merge with or into any person or sell, assign, convey, lease, transfer or otherwise dispose of (or cause or permit any Subsidiary of the Company to sell, assign, convey, lease, transfer or otherwise dispose of) all or substantially all of the Company's and the Company's Subsidiaries' properties and assets (determined on a consolidated basis for the Company and the Company's Subsidiaries taken as a whole) to another person or persons, in a single transaction or through a series of related transactions unless:". 3. This First Supplemental Indenture is an indenture supplemental to and in implementation of the Indenture, and the Indenture and this First Supplemental Indenture shall henceforth be read together. 4. The Trustee accepts the trusts created by the Indenture, as supplemented by this First Supplemental Indenture, and agrees to perform the same upon the terms and conditions in the Indenture, as supplemented by this First Supplemental Indenture. 5. The Indenture as amended and supplemented by this First Supplemental Indenture is in all respects confirmed and preserved. 6. This First Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 7. The provisions of this First Supplemental Indenture will take effect immediately upon its execution and delivery by the Trustee. 8. This First Supplemental Indenture shall be governed by the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed as of the day and year first above written. WAXMAN INDUSTRIES, INC. By: /s/ Michael Vantusko _________________________ Name: Title: THE HUNTINGTON NATIONAL BANK, as Trustee By: /s/ Frank Lamb __________________________ Name: Title: EX-10.10 3 INTERCORPORATE AGREEMENT INTERCORPORATE AGREEMENT This Intercorporate Agreement ("Agreement"), dated as of March 28, 1996, by and among Waxman Industries, Inc., a Delaware corporation ("Waxman"), Waxman USA Inc., a Delaware corporation ("WUSA"), Waxman Consumer Products Group Inc., a Delaware corporation ("CPG"), WOC Inc., a Delaware corporation ("WOC"), TWI, International, Inc., a Delaware corporation ("TWI"), and Barnett Inc., a Delaware corporation ("Barnett"). WHEREAS, pursuant to an initial public offering (the "Public Offering"), Barnett and WUSA are offering for sale to the public an aggregate of up to approximately 50.1% (55.1% if the underwriters' overallotment option is exercised in full) of Barnett's common stock, $.01 par value per share (the "Common Stock"); WHEREAS, Waxman, prior to the Public Offering, owned 100% of the issued and outstanding shares of Common Stock; WHEREAS, after the Public Offering, Waxman and Barnett will be separate publicly held corporations and Waxman will continue to beneficially own approximately 49.9% (44.9% if the underwriters' over-allotment option is exercised in full) of the issued and outstanding Common Stock; WHEREAS, Waxman currently provides, and desires to continue to provide, certain general, administrative and financial services to Barnett and/or its future subsidiaries, if any (collectively, the "Barnett Group"), including, among other things, certain treasury and financial functions, tax services, and insurance and risk management services under an Intercorporate Agreement, dated as of May 20, 1994, by and among Waxman, WUSA, CPG, Barnett and WOC (the "Existing Intercorporate Agreement"); WHEREAS, Barnett currently provides certain services to WUSA, CPG, WOC and/or their other subsidiaries and their divisions (collectively, the "Waxman Group") under the Existing Intercorporate Agreement; WHEREAS, Barnett currently shares certain warehouse space with U.S. Lock, a division of WOC, and LeRan Copper and Brass, a division of U.S. Lock; WHEREAS, upon the Effective Date (as hereinafter defined), Barnett will no longer be an indirect wholly-owned subsidiary of Waxman and, pursuant to this Agreement, will cease to be a party to the Existing Intercorporate Agreement; and WHEREAS, to facilitate Waxman's and Barnett's separate ongoing businesses and to reduce unnecessary additional overhead and personnel costs, Waxman and Barnett desire to enter into this Agreement to set forth the terms upon which (x) Waxman will continue to provide services to the Barnett Group and (y) Barnett will continue to provide services to and share facilities with the Waxman Group. NOW THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the parties agree as follows: 1. Services. (a) Barnett hereby engages Waxman to provide, and Waxman agrees to provide, to the Barnett Group, such administrative services as Barnett may reasonably require with respect to (i) securing and monitoring the insurance needs of the Barnett Group and securing the appropriate insurance coverage therefor, (ii) the preparation and filing of federal and certain state and local tax returns, (iii) accounting, treasury and other financial services, including, without limitation, assistance with the preparation of all required filings under federal and state securities laws and any securities exchange or the National Association of Securities Dealers, Inc. (iv) assistance in financing matters and (v) relations with lending, banking and underwriting institutions and organizations and for shareholder, investor and public relations, as well as such other services as Barnett may reasonably request (collectively, the "Waxman Services"). The Waxman Services will be provided at such times and with respect to such matters within the above described categories as Barnett may reasonably request from time to time and will be of the same type and quality that Waxman has historically provided to itself or Barnett. Notwithstanding the foregoing, on or prior to May 15th of each fiscal year during the term of this Agreement, commencing with May 15, 1996, Barnett shall advise Waxman in writing of the scope and level of Waxman Services it reasonably expects to require to be provided to the Barnett Group during the ensuing fiscal year. The estimate of the scope and level of services shall not limit the services required to be provided hereunder, but is intended to be used for labor and capital planning purposes. The parties hereto agree that services to be provided by Waxman for the Barnett Group hereunder are to be performed by such persons as shall be designated by Waxman from time to time (all of such persons are hereafter collectively referred to as the "Waxman Providers"). The parties hereto further acknowledge that it is their mutual expectation that certain of the Waxman Providers shall continue to serve as, or be elected as, officers of Barnett or the other members of the Barnett Group, if any, and that the services rendered by such persons in such capacity from this date forward 2 shall be deemed to have been rendered pursuant to the terms of this Agreement, unless other arrangements have been agreed to among such Waxman Provider, Waxman and Barnett. The Waxman Providers shall devote to the providing of Waxman Services that amount of time which is reasonably necessary in order for Waxman to fulfill its obligations hereunder. In addition, to the extent that any employee of Barnett or any member of the Barnett Group participates in any employee benefit programs maintained by Waxman, Barnett shall determine, to the extent legally permissible, whether and to what extent such employees will participate in such programs. (b) Waxman hereby engages Barnett to provide, and Barnett agrees to provide, to the Waxman Group, such administrative services as Waxman may reasonably require with respect to (i) the utilization of Barnett's management information systems, (ii) the utilization of Barnett management's direct marketing expertise and (iii) the provision of financial accounting, order processing, billing and collection services, as well as such other services as Waxman may reasonably request (collectively, the "Barnett Services"). The Barnett Services will be provided at such times and with respect to such matters as Waxman may reasonably request from time to time and will be of the same type and quality that Barnett has historically provided to itself or the Waxman Group. The Barnett Providers shall devote to the providing of Barnett Services that amount of time which is reasonably necessary in order for Barnett to fulfill its obligations hereunder. Notwithstanding the foregoing, on or prior to May 15th of each fiscal year during the term of this Agreement, commencing with May 15, 1996, Barnett shall advise Waxman in writing of the scope and level of Barnett Services it reasonably expects to require to be provided to the Waxman Group during the ensuing fiscal year. The estimate of the scope and level of services shall not limit the services required to be provided hereunder, but is intended to be used for labor and capital planning purposes. The parties hereto agree that services to be provided by Barnett for the Waxman Group hereunder are to be performed by such persons as shall be designated by Barnett from time to time (all of such persons are hereafter collectively referred to as the "Barnett Providers"). The parties hereto further acknowledge that it is their mutual expectation that certain of the Barnett Providers shall continue to serve as, or be elected as, officers of Waxman or the other members of the Waxman Group, if any, and that the services rendered by such persons in such capacity from this date forward shall be deemed to have been rendered pursuant to the terms of this Agreement, unless other arrangements have been agreed to among such Barnett Provider, Waxman and Barnett. The Barnett Providers shall devote to the providing of Barnett Services that amount of time which is reasonably necessary in order for Barnett to fulfill its obligations hereunder. 3 (c) Neither Waxman nor Barnett shall take any action or enter into any agreement which would render it unable to fully perform its obligations under this Agreement. (d) In order to coordinate the provisions of the Barnett Services and the Waxman Services hereunder, the parties agree to aprise the respective Chief Financial Officer of each of Waxman and Barnett for all requests for and all fees, costs and expenses incurred with respect to the provision of services hereunder. 2. Fees. (a) As compensation for the Waxman Services rendered under this Agreement, Barnett will pay to Waxman quarterly in arrears, upon the receipt of an invoice therefor, the allocable cost of the compensation of the Waxman Providers (including all employee benefits and prerequisites of the Waxman Providers) while they are rendering the Waxman Services. Waxman shall also be reimbursed for actual out-of-pocket disbursements to third parties by Waxman required for the provision of the Waxman Services. Such fee shall be paid by Barnett to Waxman within 10 days after Waxman has provided an invoice to Barnett setting forth the total amount of the fee and the data supporting such calculation. Waxman shall render such invoice to Barnett within 15 days of the end of each fiscal quarter during the term hereof. To the extent that Barnett does not agree with Waxman's determination of Barnett's allocable costs of the compensation of the Waxman Providers, the respective Audit Committees of Waxman and Barnett shall resolve such dispute, and, if such committees are unable to resolve such dispute, they shall seek the assistance of Arthur Andersen LLP (or such other firm(s) of certified independent public accountants that may be regularly engaged by Waxman and Barnett) to resolve such dispute, and, if such accounting firm(s) is unable to resolve such dispute, they shall mutually select an independent arbitrator to resolve such dispute, whose determination shall be conclusive and binding. (b) As compensation for the Barnett Services rendered under this Agreement, Waxman will pay to Barnett, quarterly in arrears, upon the receipt of an invoice therefor, the allocable costs of the compensation of the Barnett Providers (including all employee benefits and perquisites of the Barnett Providers) while they are rendering the Barnett Services. Barnett shall also be reimbursed for all actual out-of-pocket disbursements to third parties by Barnett required for the provision of the Barnett Services. Such fee shall be paid by Waxman to Barnett within 10 days after Barnett has provided an invoice to Waxman setting forth the total amount of the fee and the data supporting such calculation. Barnett shall render such invoice to Waxman within 15 days of the end of each fiscal quarter during the term hereof. To the extent that Waxman does not agree with Barnett's determination of Waxman's allocable costs of the compensation of the Barnett 4 Providers, the respective Audit Committees of Waxman and Barnett shall resolve such dispute, and, if such committees are unable to resolve such dispute, they shall seek the assistance of Arthur Andersen LLP (or such other firm(s) of certified independent public accountants that may be regularly engaged by Waxman and Barnett) to resolve such dispute, and, if such accounting firm(s) is unable to resolve such dispute, they shall mutually select an independent arbitrator to resolve such dispute, whose determination shall be conclusive and binding. 3. Insurance. Except as otherwise agreed by the parties, all policies of liability, fire, workers' compensation, directors and officers, and other forms of insurance covering the Barnett Group's businesses, their properties and assets and their directors and officers that are part of Waxman's coverage will continue to be maintained by Waxman until Barnett obtains appropriate replacement coverage. Barnett will reimburse Waxman for the actual premium costs associated with providing such insurance coverage within 15 days after Waxman's receipt of invoices for such insurance coverage. Waxman agrees to consult with Barnett prior to incurring any obligations for insurance coverage on behalf of any member of the Barnett Group. Barnett agrees to continue be included in Waxman's insurance coverage to the extent that it is financially reasonable to do so. 4. Indemnification. (a) Barnett agrees to indemnify the Waxman Group and the Waxman Providers (individually, a "Waxman Indemnitee," and, collectively, the "Waxman Indemnitees"), if a Waxman Indemnitee is made, or threatened to be made, a party to any action, claim or proceeding, whether civil or criminal, including any action by or in the right of Barnett or any member of the Barnett Group, by reason of the provision of services by Waxman and/or the Waxman Providers to the Barnett Group or any member of the Barnett Group pursuant to the terms of this Agreement (other than any action by Barnett against Waxman by reason of a breach of this Agreement by Waxman) against judgments, fines, amounts paid in settlement and reasonable expenses, including reasonable attorneys' fees (collectively, "Losses"); provided, however, that the foregoing indemnity shall not apply to any Losses to the extent such Losses resulted primarily from the willful misconduct, bad faith or gross negligence of a Waxman Indemnitee. (b) Waxman agrees to indemnify the Barnett Group and the Barnett Providers (individually, a "Barnett Indemnitee," and, collectively, the "Barnett Indemnitees"), if a Barnett Indemnitee is made, or threatened to be made, a party to any action, claim or proceeding, whether civil or criminal, including any action by or in the right of Waxman or any member of the Waxman Group, by reason of the provision of services by Barnett and/or the Barnett Providers to the Waxman Group or any member of the Waxman Group pursuant to the terms of this Agreement (other than any action by 5 Waxman against Barnett by reason of a breach of this Agreement by Barnett) against Losses; provided, however, that the foregoing indemnity shall not apply to any Losses to the extent such Losses resulted primarily from the willful misconduct, bad faith or gross negligence of a Barnett Indemnitee. 5. Responsibility for Providing Compensation and Fringe Benefits to Service Providers. Barnett and Waxman, respectively, shall bear all of the costs and expenses of the personal compensation and fringe benefits and perquisites, including, without limitation, pension, life insurance, health insurance, hospitalization and other forms of insurance, of the Barnett Providers and the Waxman Providers, respectively, and such persons shall not, except as approved by Barnett and Waxman, be entitled to any compensation or benefit from Barnett or Waxman, as the case may be, for services performed for the Waxman Group or the Barnett Group, respectively, in any capacity, including, but not limited to, services as an officer of any member of the Barnett Group and any member of the Waxman Group, as the case may be. 6. Warehouse Facilities; Product Purchases. Certain members of the Waxman Group may occupy space leased by Barnett. With respect to any such occupancy, the duration of such occupancy arrangement and portion of the premises to be occupied shall be mutually agreed between the parties to such arrangement and the cost of such occupancy shall be equal to the rent paid by Barnett allocable to the space occupied by such member of the Waxman Group; provided, however, that if the specific space such member of the Waxman Group may occupy is not readily subject to physical apportionment, then the charges shall be based upon an agreed percentage of the net sales of such member of the Waxman Group allocable to such facility. Each of the Waxman Group and the Barnett Group may purchase products from each other at prices and upon terms and conditions as may be agreed among the parties from time to time. 7. Status as Independent Contractor. It is expressly understood between the parties hereto that Waxman, with respect to services provided by it to the Barnett Group hereunder, and Barnett, with respect to services provided by it to the Waxman Group hereunder, shall be independent contractors. It is also expressly agreed that each of Waxman and Barnett, as the case may be, shall be solely responsible for the withholding and payment of any and all taxes and other sums required to be withheld or paid by an employer pursuant to any and all state, federal or other laws in connection with the rendering of services hereunder. 8. Work Product; Confidentiality. (a) Waxman agrees, on behalf of itself, the other members of the Waxman Group and their employees, representatives and agents, including without 6 limitation the Waxman Providers, that all memoranda, notes, records or other documents made or compiled by Waxman, the other members of the Waxman Group and their employees, representatives and agents, including, without limitation, the Waxman Providers, in the fulfillment of Waxman's obligations under this Agreement or otherwise, or made available to any of them concerning any Barnett Information (as defined below) shall be Barnett's property and shall be delivered to Barnett on Barnett's request on the termination of this Agreement or at any other time. None of Waxman or any member of the Waxman Group, or their employees, representatives and agents shall, directly or indirectly, knowingly use, for themselves or others, or divulge to others, other than in the ordinary course and in furtherance of the Barnett Group's businesses, any secret or confidential information, non-public information, knowledge, or data of the Barnett Group (including, without limitation, names of customers of the Barnett Group (collectively, "Barnett Information")) obtained by any of them as a result of Waxman's performance of this Agreement, unless authorized by Barnett. The provisions of this Section do not extend to any portion of such Barnett Information which becomes generally available to the public other than as a result of a disclosure by the recipient or its representatives, subsidiaries or affiliates, and will not be deemed to restrict the recipient from complying with any order, request or decree of any court, government or other regulatory body to produce any such information, but upon receiving notice that any such order, request or decree is being sought, the recipient will promptly give the party furnishing such information notice thereof and agree to cooperate with the furnishing parties' efforts, if any, to contest the issuance of such order, request or decree. (b) Barnett agrees, on behalf of itself, the other members of the Barnett Group and their employees, representatives and agents, including without limitation the Barnett Providers, that all memoranda, notes, records or other documents made or compiled by Barnett, the other members of the Barnett Group, their employees, representatives and agents, including, without limitation, the Barnett Providers, in the fulfillment of Barnett's obligations under this Agreement or otherwise, made available to any of them concerning any Waxman Information (as defined below) shall be Waxman's property and shall be delivered to Waxman on the termination of this Agreement or at any other time on Waxman's request. None of Barnett, any other member of the Barnett Group or their employees, representatives and agents shall, directly or indirectly, knowingly use, for themselves or others, or divulge to others, other than in the ordinary course and in furtherance of the Waxman Group's businesses, any secret or confidential information, non-public information, knowledge, or data of the Waxman Group (including, without limitation, names of customers of the Waxman Group (collectively, "Waxman Information")) obtained by any of them as a result of Barnett's 7 performance of this Agreement, unless authorized by Waxman. The provisions of this Section do not extend to any portion of such Waxman Information which becomes generally available to the public other than as a result of a disclosure by the recipient or its representatives, subsidiaries or affiliates, and will not be deemed to restrict the recipient from complying with any order, request or decree of any court, government or other regulatory body to produce such information, but upon receiving notice that any such order, request or decree is being sought, the recipient will promptly give the party furnishing such information notice thereof and agree to cooperate with the furnishing parties' efforts, if any, to contest the issuance of such order, request or decree. 9. Term. Subject to the last sentence of this Section 9, this Agreement will become effective upon the consummation of the Public Offering (the "Effective Date") and may be terminated by Waxman upon 360 days prior written notice given as provided herein to the other parties hereto or by Barnett upon 360 days prior written notice given as provided herein to the other parties hereto. Notwithstanding the preceding sentence, the provision of Section 4 hereof shall survive until the second anniversary of the Effective Date. At the Effective Date, the Existing Intercorporate Agreement will cease to be binding upon Barnett and all one of its rights and obligations with respect to the subject matter thereof shall, on and after the Effective Date, be governed by this Agreement. 10. Notices. All notices and other communications under this Agreement must be in writing and will be deemed to have been duly given when delivered by hand, upon receipt of a telephonic facsimile transmission or sent by registered or certified mail, return receipt requested, postage prepaid and addressed as follows: To Waxman: Waxman Industries, Inc. 24460 Aurora Road Bedford Heights, Ohio 44146 Attention: Chief Executive Officer Telecopy No. (216) 439-8678 To Barnett: Barnett Inc. 3333 Lenox Avenue Jacksonville, Florida 32205 Attention: President Telecopy No. (909) 388-4566 To WUSA: Waxman USA Inc. c/o Waxman Industries, Inc. 24460 Aurora Road Bedford Heights, Ohio 44146 Attention: Chief Executive Officer 8 Telecopy No. (216) 439-8678 To CPG: Consumer Products Group Inc. 24455 Aurora Road Bedford Heights, Ohio 44146 Attention: President Telecopy No. (216) 439-1262 To WOC: WOC Inc. c/o Waxman Industries, Inc. 24460 Aurora Road Bedford Heights, Ohio 44146 Attention: Chief Executive Officer Telecopy No. (216) 439-8678 To TWI: TWI c/o Waxman Industries, Inc. 24460 Aurora Road Bedford Heights, Ohio 44146 Attention: Chief Executive Officer Telecopy No. (216) 439-8678 11. Complete Agreement. This Agreement, together with the Existing Intercorporate Agreement, constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all previous negotiations, commitments and writings with respect to such subject matter. 12. Amendments. This Agreement may not be modified or amended except by an agreement in writing signed by each of the parties hereto. 13. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of laws thereof. 14. Assignment. None of the parties hereto may assign any of its rights or benefits under this Agreement without the prior written consent of the other parties hereto, which consent will not be unreasonably withheld or delayed. This Agreement is binding on and will inure to the benefit of the parties and their respective successors and permitted assigns. 15. No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. 9 16. Captions. Captions and section headings are used for convenience of reference only and are not part of this Agreement and may not be used in construing it. 17. Enforceability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision or remedies otherwise available to any party hereto. 18. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together constitute one and the same instrument. 10 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written. WAXMAN INDUSTRIES, INC. By: /s/ Armond Waxman ------------------------------ Armond Waxman Co-Chief Executive Officer and Co-Chairman of the Board BARNETT INC. By: /s/ William R. Pray ------------------------------- William R. Pray President, Chief Executive Officer and Director WAXMAN USA INC. By: /s/ Michael Vantusko _______________________________ Michael Vantusko Vice President-Finance WAXMAN CONSUMER PRODUCTS GROUP INC. By: /s/ Michael Vantusko _______________________________ Michael Vantusko Treasurer WOC INC. By: /s/ Michael Vantusko _______________________________ Michael Vantusko Treasurer TWI, INTERNATIONAL, INC. By: /s/ Michael Vantusko _______________________________ Michael Vantusko Treasurer 11 EX-10.14 4 AMENDED AND RESTATED CREDIT AGREEMENT U.S. $30,000,000 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of May 20, 1994 Amended and Restated as of April 3, 1996 Among WAXMAN USA INC., as the Company and WAXMAN CONSUMER PRODUCTS GROUP INC. and WOC INC. as Borrowers and THE LENDERS AND ISSUERS PARTY HERETO and CITICORP USA, INC. as Agent AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 20, 1994, as amended and restated as of April 3, 1996, among WAXMAN USA INC. (the "Company"), WAXMAN CONSUMER PRODUCTS GROUP INC. and WOC INC. (the "Borrowers"), each a Delaware corporation, the financial institutions listed on the signature pages hereof listed under the caption of "Lender" (each individually a "Lender" and collectively the "Lenders"), the financial institutions listed on the signature pages under the caption of "Issuer" (each individually an "Issuer" and collectively the "Issuers") and CITICORP USA, INC. ("Citicorp"), as agent for the Lenders (in such capacity, the "Agent"). W I T N E S S E T H: WHEREAS, the Borrowers have requested that the Lenders make term loans in aggregate principal amount of $5,000,000 and revolving credit advances of up to $25,000,000 in aggregate principal amount outstanding at any one time for the purposes hereinafter specified; and WHEREAS, the Borrowers have requested that the Issuers provide the Borrowers with letters of credit and the Issuers are willing to issue letters of credit for such purpose upon the terms and subject to the conditions contained herein; and WHEREAS, the Lenders are willing to make funds available for such purposes upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms. As used in this Agreement, the following terms have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Accounts" has the meaning specified in the Section 9-106 of the UCC. 1 "Adjusted Net Worth" of any Person means, at any date, the Net Worth of such Person at such date, excluding, however, from the determination of the Total Assets of such Person at such date, (i) all goodwill, organizational expenses, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles, (ii) all unamortized debt discount and expense, (iii) all reserves carried and not deducted from assets, (iv) treasury stock and capital stock, obligations or other securities of, or capital contributions to, or investments in, any Subsidiary of such Person, (v) securities which are not readily marketable, (vi) cash held in a sinking or other analogous fund established for the purpose of redemption, retirement, defeasance or prepayment of any Stock or Indebtedness, to the extent that such Stock or Indebtedness is not reflected on the balance sheet of such Person, (vii) any write-up in the book value of any asset resulting from a revaluation thereof, and (viii) any items not included in clauses (i) through (vii) above which are treated as intangibles in conformity with GAAP. "Affiliate" means, as to any Person, any Subsidiary of such Person and any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person and includes each executive officer or director or general partner of such Person, and each Person who is the beneficial owner of 5% or more of any class of voting Stock of such Person. For the purposes of this definition, "control" means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" means this Credit Agreement, together with all Exhibits and Schedules hereto, as the same may be amended, supplemented or otherwise modified from time to time. "Applicable Base Rate Margin" means, for Revolving Credit Loans, the Applicable Revolver Base Rate Margin, and for Term Loans, the Applicable Term Base Rate Margin. "Applicable Eurodollar Margin" means, for Revolving Credit Loans, the Applicable Revolver Eurodollar Margin, and for Term Loans, the Applicable Term Eurodollar Margin. 2 "Applicable Revolver Base Rate Margin" means one and one-half percent (1.50%). "Applicable Revolver Eurodollar Rate Margin" means three percent (3%). "Applicable Term Base Rate Margin" means three and one-half percent (3 1/2%). "Applicable Term Eurodollar Rate Margin" means five percent (5%). "Applicable Lending Office" means, with respect to each Lender, its Domestic Lending Office in the case of a Base Rate Loan and its Eurodollar Lending Office in the case of a Eurodollar Rate Loan. "Asset Sale" means any sale or other disposition, or series of sales or other dispositions (including, without limitation, by merger or consolidation, and whether by operation of law or otherwise), made on or after the Closing Date by any Borrower or any of its Subsidiaries to any Person of (i) all or substantially all of the outstanding Stock of any of its Subsidiaries, (ii) all or substantially all of its assets or the assets of any division of any Borrower or any of its Subsidiaries, or (iii) any other asset or assets which, when taken together with all sales or other dispositions of assets not covered by the foregoing clauses (i) and (ii) yield proceeds or involve assets having a Fair Market Value in excess of $1,000,000 in any twelve-month period; provided, however, that any sale permitted pursuant to clauses (i), (ii) or (iii) of Section 7.5(c) shall not constitute an Asset Sale for purposes of this Agreement. "Asset Sale Proceeds" means payments in Dollars or freely convertible into Dollars received by any Borrower or any of its Subsidiaries (including, without limitation, any cash payments received by way of deferred payment of principal pursuant to a note or receivable or otherwise, but only as and when received) from any Asset Sale (the "Payments") in each case net of the amount of (i) brokerage commissions and other reasonable fees and expenses (includ- ing fees and expenses of counsel and investment bankers) payable other than to an Affiliate of such Borrower in connection with such Asset Sale, (ii) provisions for all taxes payable within one year as a result of such Asset Sale, (iii) payments made to retire Indebtedness secured by 3 the assets subject to such Asset Sale to the extent required pursuant to the terms of the Indebtedness, (iv) appropriate amounts to be provided by such Borrower or any of its Subsidiaries as a reserve, in accordance with GAAP, against liabilities associated with such Asset Sale and retained by such Borrower or any of its Subsidiaries after such Asset Sale; provided, however, that the amount of any such reserve at such time that such amount is no longer required to be provided as is not applied to the liability for which such reserve was established shall be deemed Asset Sale Proceeds, (v) any amount required to be paid to any Person (other than such Borrower and any of its Subsidiaries) owning a bene- ficial interest in the property or assets sold; provided, further, that such Payments shall not be deemed to be Asset Sale Proceeds until one year after such Asset Sale and only to the extent that the Borrowers have not used such Payments to acquire or construct assets in lines of business related to the Borrowers' lines of business on the Closing Date. For the purposes of this definition, Asset Sale Proceeds shall be deemed to include, without limitation, any award of compensation for any asset or property or group thereof taken by condemnation or eminent domain and insurance proceeds for the loss of or damage to any asset or property if such award or proceeds equals or exceeds $1,000,000 (in the aggregate) and within one year after the receipt thereof replacement or repair of such asset or property has not commenced, except that in the event that at any time such replacement or repair is abandoned or is otherwise discon- tinued or is not diligently pursued, the remaining award or proceeds, as the case may be, shall constitute Asset Sale Proceeds at such time. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit G. "Available Credit" means, at any time and for any Borrower, an amount equal to the lower of (a) the then effective Revolving Credit Commitments of the Lenders minus the aggregate outstanding principal amount of the Revolving Credit Loans to all Borrowers at such time and the Letter of Credit Obligations of all Borrowers at such time and (b) the Borrowing Base of such Borrower at such time minus the aggregate amount of outstanding principal amount of the Revolving Credit Loans advanced to such Borrower at such time and the Letter of Credit Obligations of such Borrower at such time. 4 "Barnett" means Barnett Inc., a Delaware corporation. "Barnett Pledge Agreement" means the Pledge Agreement, in substantially the form of Exhibit E hereto, given by the Company to the Agent. "Base Rate" means, for any period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall be equal at all times to the highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; (b) the sum (adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i) 1/2 of one per- cent per annum, plus (ii) the rate per annum obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for Citibank in respect of liabilities consisting of or including (among other liabilities) three-month U.S. dollar nonpersonal time deposits in the United States, plus (iii) the average during such three-week period of the maximum annual assessment rates payable to the Federal Deposit Insurance Corporation (or any successor) by banks which are members of the Bank Insurance Fund for insuring U.S. dollar deposits in the United States; and 5 (c) the sum (adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent) of (i) 1/2 of one percent per annum plus (ii) the Federal Funds Rate. "Base Rate Loan" means any outstanding principal amount of the Loans of any Lender that bears interest with reference to the Base Rate. "Borrowing" means a borrowing consisting of Loans by the Lenders. "Borrowing Base" means, at any time for any Borrower, the sum of 85% of the Eligible Receivables of such Borrower at such time plus (a) in the case of Waxman Consumer Products Group Inc., the sum of the product of the advance rate set forth in the table below based on the class of Inventory and the amount of Eligible Inventory in such class of Waxman Consumer Products Group Inc. at such time, Inventory Class Advance Rate --------------- ------------ Plumbcraft 60% Bulk Plumbing 50% Bulk Electrical 50% Floor Care 30% KF Packaged Plumbing 30% Packaged Electrical 20% Raw Materials 50% Packaging Materials 0% Buy-backs 15% In-Transit Inventory 35% (b) in the case of WOC Inc., the sum of the product of the advance rate set forth in the table below based on the division owning such Inventory 6 and the amount of Eligible Inventory owned by such division of WOC Inc. at such time, Division Advance Rate -------- ------------ U.S. Lock 35% LeRan Copper & Brass 45% Medal Distributing 45% Madison Equipment 45% in each case, less such other reserves as the Agent reasonably deems appropriate (including, without limitation, a reserve, as the Agent reasonably determines for Inventory held at leased locations where the landlord thereof has not executed a landlord consent in form and substance reasonably satisfactory to the Agent) less, for either or both of the two Borrowers as the Company may elect on each Borrowing Base Certificate, the Borrowing Base Reserve. "Borrowing Base Certificate" means a certificate of the Borrowers substantially in the form of Exhibit I or such other form acceptable to the Agent. "Borrowing Base Reserve" means the sum of (a) for the period from the Closing Date to the three month anniversary of the Closing Date, $2.5 million, for the period from the three month anniversary of the Closing Date to the six month anniversary of the Closing Date, $3.25 million, for the period from the six month anniversary of the Closing Date to the nine month anniversary of the Closing Date, $4.0 million, and $4.75 million thereafter, and (b) an amount equal to the sum of (i) if the Fair Market Value of the Term Collateral is less than $7.5 million, 50% of the difference between $7.5 million and (A) the greater of (1) $5 million and (2) the Fair Market Value of the Term Collateral, and (ii) if the Fair Market Value of the Term Collateral is less than $5 million, 100% of the difference between $5 million and the Fair Market Value of the Term Collateral provided, however, that in no event shall the Borrowing Base Reserve exceed $5,000,000. The Borrowing Base Reserve shall be calculated as of the date on which the Borrowing Base is calculated. "Business Day" means a day of the year on which banks are not required or authorized to close in New York City and, if the applicable Business Day relates to a Eurodollar Rate Loan, a day on which dealings are also carried on in the London interbank market. 7 "Capital Expenditures" means, for any Person for any period, the aggregate of (i) all expenditures by such Person and its consolidated Subsidiaries, except interest capitalized during construction, during such period for property, plant or equipment, including, without limitation, renewals, improvements, replacements and capitalized repairs, that would be reflected as additions to property, plant or equipment on a consolidated balance sheet of such Person and its Subsidiaries prepared in conformity with GAAP and (ii) without duplication, the principal amount of all Indebtedness incurred or assumed to finance any such addi- tions to property, plant and equipment. For the purpose of this definition, the purchase price of equipment which is acquired simultaneously with the trade-in of existing equipment owned by such Person or any of its Subsidiaries or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment being traded in at such time or the amount of such proceeds, as the case may be. "Capitalized Lease" means, as to any Person, any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in conformity with GAAP. "Cash Collateral Accounts" had the meaning set forth in Section 2.17. "Capitalized Lease Obligations" means, as to any Person, the capitalized amount of all obligations of such Person or any of its Subsidiaries under Capitalized Leases, as determined on a consolidated basis in conformity with GAAP. "Cash Equivalents" means (i) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States government or any agency or instrumentality thereof, (ii) certificates of deposit, eurodollar time deposits, overnight bank deposits and bankers' acceptances of any Lender having maturities of one year or less from the date of acquisition, (iii) commercial paper of an issuer rated at least "A-1" by Standard & Poor's Corporation or "P-1" by Moody's Investors Service, Inc., or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments; and (iii) repurchase agreements and reverse 8 repurchase agreements relating to marketable direct obliga- tions issued or unconditionally guaranteed by the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; provided, however, that the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency. "Cash Interest Expense" means, for any Person for any period, the Net Interest Expense of such Person for such period, plus (a) interest expense capitalized during construction for such period to the extent deducted in the determination of such Net Interest Expense, less (b) Non-Cash Interest Expense of such Person for such period; provided that "Cash Interest Expense" for each Borrower for any period shall include, without duplication, any payments made by such Borrower pursuant to Section 7.4(a)(ii)(A) hereof. "Change of Control" means the occurrence of one or more of the following events: (i) the direct or indirect, sale, lease, exchange or other transfer of all or substantially all of the assets of Holdings to any Person or entity or group of Persons or entities acting in concert as a partnership or other group (a "Group of Persons") other than Permitted Holders, (ii) the merger or consolidation of Holdings with or into another corporation with the effect that the then existing shareholders of Holdings or their Affiliates, together with the Permitted Holders, hold less than 50% of the Voting Stock of the surviving corporation of such merger or the corporation resulting from such consolidation and do not otherwise have the right or ability by contract or otherwise to elect a majority of the Board of Directors of such surviving corporation, (iii) the replacement of a majority of the Board of Directors of Holdings from the directors who constituted the Board of Directors on the Closing Date, and such replacement shall not have been approved by a majority of the members of the Board of Directors of Holdings then still in office either (x) who were members of the Board of Directors on the Closing Date or (y) whose election as a member of the Board of Directors was approved in the manner provided in this clause (iii), (iv) a Person or Group of Persons shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become the 10 beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of Holdings representing 35% or more of the Voting Stock of Holdings and, at such time Permitted Holders are not the beneficial owners (as so defined) of a greater percentage of such Voting Stock and do not otherwise have the right or ability by contract or otherwise to elect a majority of the Board of Directors of Holdings, (v) Holdings shall fail to own all of the issued and outstanding Stock of the Company (other than those options in respect of the Stock of the Company issued by the Company to employees or directors of Holdings or any of its Subsidiaries in an aggregate amount not to exceed 10% of the total outstanding Stock of the Company, such options not to be exercisable until an initial public offering of the Company's Common Stock); (vi) the Company shall fail to own all of the issued and outstanding Stock of each of the Borrowers or TWI (other than options to purchase Stock of such Borrower or TWI, as the case may be, issued to employees or directors of Holdings or any of its Subsidiaries, by such Borrower or TWI, as the case may be, in an aggregate amount not to exceed 10% of the outstanding Stock of such Borrower or TWI, as the case may be, which options may not be exercised until an initial public offering of common stock of such Borrower or TWI, as the case may be); or (vii) a change of control shall occur under any Indenture. "Citibank" means Citibank, N.A. "Closing Date" means the first date on which any Loan is made or any Letter of Credit is issued or assumed hereunder. "Code" means the Internal Revenue Code of 1986 (or any successor legislation thereto), as amended from time to time. "Collateral" means all property and interests in property and proceeds thereof now owned or hereafter acquired by any Loan Party in or upon which a Lien is granted under any of the Collateral Documents. "Collateral Documents" means the Security Agree- ments, the Intellectual Property Security Agreements, the Pledge Agreements and any other document executed and delivered by a Loan Party granting a Lien on any of its property to secure payment of the Obligations. 10 "Collateral Documents Amendment" means an amendment, in substantially the form of Exhibit D hereto, to the Security Agreements, the Pledge Agreements and the Intellectual Property Security Agreements. "Commitment" means, as to each Lender, such Lenders Revolving Credit Commitment or Term Loan Commitment. "Commitment Fee" has the meaning specified in Section 2.3(a). "Contaminant" means any substance regulated or forming the basis of liability under any Environmental Law, including, without limitation, any waste, pollutant, hazard- ous substance, toxic substance, hazardous waste, special waste, petroleum or petroleum-derived substance or waste, or any constituent of any such substance or waste. "Contingent Obligation" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Indebtedness or Contractual Obligation of another Person, if the purpose or intent of such Person in incurring the Contingent Obligation is to provide assurance to the obligee of such Indebtedness or Contractual Obligation that such Indebted- ness or Contractual Obligation will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Indebtedness or Contractual Obligation will be protected (in whole or in part) against loss in respect thereof. Contingent Obligations of a Person include, without limitation (without duplication) (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of an obligation of another Person, and (b) any liability of such Person for an obligation of another Person through any agreement (contingent or other- wise) (i) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of a loan, advance, stock purchase, capital contribu- tion or otherwise), (ii) to maintain the solvency or any balance sheet item, level of income or financial condition of another Person, (iii) to make take-or-pay or similar payments, if required, regardless of non-performance by any other party or parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase or sell services, primarily for the purpose of enabling the 11 debtor to make payment of such obligation or to assure the holder of such obligation against loss, or (v) to supply funds to or in any other manner invest in such other Person (including, without limitation, to pay for property or services irrespective of whether such property is received or such services are rendered), if in the case of any agreement described under subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported. "Contractual Obligation" of any Person means any obligation, agreement, undertaking or similar provision of any security issued by such Person or of any agreement, undertaking, contract, lease, indenture, mortgage, deed of trust or other instrument to which such Person is a party or by which it or any of its property is bound or to which any of its properties is subject, excluding a Loan Document but including without limitation the requirements to make contributions to or pay benefits under any Employee Benefit Plan. "Debentures" means (i) prior to the consummation of the Proposed Restructuring, the Deferred Coupon Notes, the Existing 12-1/4% Senior Secured Notes, the Existing Floating Rate Senior Secured Notes, the Existing Senior Subordinated Notes and the Existing Convertible Debentures and (ii) after the consummation of the Proposed Restructuring, the Exchange Notes, the Existing Senior Subordinated Notes, the Deferred Coupon Notes and, until defeased pursuant to the Proposed Restructuring, the Existing Convertible Debentures. "Default" means any event which with the passing of time or the giving of notice or both would become an Event of Default. "Deferred Coupon Notes" means the 12 3/4% Senior Secured Deferred Coupon Notes due 2004 of Holdings, issued pursuant to the Indenture, dated as of May 20, 1994 between Holdings and Huntington National Bank, as trustee. "Disclosure Document" means the Offer to Exchange and Consent Solicitation relating to the Existing Senior Subordinated Notes, dated February 27, 1996, as it may be amended, supplemented or modified from time to time. 12 "DOL" means the United States Department of Labor, or any successor thereto. "Dollars" and the sign "$" each mean the lawful money of the United States of America. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule II or such other office of such Lender as such Lender may from time to time specify to the Borrowers and the Agent. "EBITDA" means, for any Person for any period, the Net Income (Loss) of such Person for such period taken as a single accounting period, plus (a) the sum of the following amounts of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss) (without duplication): (i) depreciation expense, (ii) amortization expense, (iii) Net Interest Expense, (iv) income tax expense, (v) extraordinary losses (and other losses on Asset Sales not otherwise included in extraordinary losses determined on a consolidated basis in conformity with GAAP) and (vi) non-recurring non-cash write- offs to the extent that such write-offs do not require any present or future cash expenditures; less (b) the sum of the following amounts of such Person and its Subsidiaries determined on a consolidated basis in conformity with GAAP to the extent included in the determination of such Net Income (Loss) (without duplication): (i) extraordinary gains (and in the case of any Borrower, other gains on Asset Sales not otherwise included in extraordinary gains determined on a consolidated basis in conformity with GAAP), (ii) the Net Income (Loss) of any other Person that is accounted for by the equity method of accounting except to the extent of the amount of dividends or distributions paid to such Person, and (iii) the Net Income (Loss) of any other Person acquired by such Person or a Subsidiary of such Person in a transaction accounted for as a pooling of interests for any period prior to the date of such acquisition. "Eligible Assignee" means (i) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the OECD, or a political subdivision of any such country, and having 13 total assets in excess of $5,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD or the Cayman Islands; (iii) the central bank of any country which is a member of the OECD; (iv) any corporation organized under the laws of the United States, or any State thereof, and having total assets in excess of $3,000,000,000; (v) an insurance company organized under the laws of the United States, or any State thereof, and having total assets in excess of $5,000,000,000; (vi) any Lender; and (vii) any Affiliate of any of the above to the extent such Affiliate is consented to by the Agent and the Borrowers which consent shall not be unreasonably withheld. "Eligible Inventory" means, with respect to any Borrower, such of the Inventory of such Borrower valued at the lower of market or cost on a first in first out basis, which constitutes Collateral in which the Agent has a fully perfected first priority security interest and which the Agent deems eligible in its reasonable judgment, less such reserves as the Agent deems appropriate in its reasonable judgment, including, without limitation, without duplica- tion, (i) a reserve for in-transit goods, (ii) a reserve for the difference between Inventory on the general ledger and Inventory in which such Borrower has physical possession, but only to the extent the higher Inventory value is being reported on the Borrowing Base Certificate of such Borrower delivered to the Agent, (iii) a reserve for consignment shipments from, or purchase money security interests granted to, General Electric Corporation to the extent such shipments are reflected in a filed UCC statement, (iv) a reserve for profits from sales by such Borrower's Affiliates to such Borrower, (v) a reserve for packaging and display Inventory, and (vi) a reserve for Inventory held by stocking sales representatives (unless an agreement in form and substance satisfactory to the Agent with such stocking sales representative has been executed and delivered to the Agent); provided, however, that an item of Inventory shall in no event be Eligible Inventory if such Inventory is defective. "Eligible Receivables" means, with respect to any Borrower, the gross outstanding balance of all Accounts of such Borrower, less (i) all finance charges, late fees and other fees which are unearned, sales, excise or similar taxes, and credits or allowances granted, of those Accounts of such Borrower and (ii) such reserves as the Agent deems 14 appropriate in its reasonable judgment, including without limitation, a reserve equal to the accrued liabilities in respect of cooperative advertising, a reserve equal to the accrued liabilities in connection with the buy-back of inventory or the amount of the estimated credits required to be issued by such Borrower in connection with inventory committed to be bought back by such Borrower (as agreed to by the Agent and such Borrower) and a reserve equal to 50% of the charge-backs in connection with the sale of Inventory, in each case, arising out of sales of merchandise, goods or services in the ordinary course of business, made by such Borrower to a Person which is not an Affiliate of such Borrower, which are not in dispute, and which constitute Collateral in which the Agent has a fully perfected first priority security interest, and, if the account debtor is a Governmental Authority, such Borrower has assigned its rights to payment of such account to the Agent pursuant to the Assignment of Claims Act of 1940, as amended, in the case of a federal Governmental Authority, and pursuant to applicable state law, if any, in the case of any other Governmental Authority, and such assignment has been accepted and acknowledged by the appropriate government officers; provided, however, that an Account shall in no event be an Eligible Receivable if: (a) such Account is more than (i) (A) for Accounts with terms of 60 days or less, 60 days past due, according to the original terms of sale or (B) for Accounts with terms of more than 60 days but less than 150 days, 30 days past due according to the original terms of sale but in no case may such Accounts set forth in clause (B) constitute more than 15% of the total Eligible Accounts of Waxman Consumer Products Group Inc. or more than 10% of the total Eligible Accounts of WOC Inc., or (ii) 180 days past the original invoice date thereof; or (b) any warranty contained in this Agreement or any other Loan Document with respect either to Accounts or Eligible Receivables in general or to such specific Account is not true and correct with respect to such Account; or (c) the account debtor on such Account has dis- puted liability or made any claim with respect to any other Account due from such account debtor to such Borrower or any of its Subsidiaries; provided that, at the Agent's reasonable discretion, such Account may be deemed eligible solely to the extent such Account exceeds such liability of claim; or 15 (d) the account debtor on such Account has filed a petition for bankruptcy or any other relief under the Bankruptcy Code or any other law relating to bankruptcy, insolvency, reorganization or relief of debtors; made an assignment for the benefit of creditors; had filed against it any petition or other application for relief under the Bankruptcy Code or any such other law; has failed, suspended business operations, become insolvent, called a meeting of its creditors for the purpose of obtaining any financial concession or accommodation, or had or suffered a receiver or a trustee to be appointed for all or a significant portion of its assets or affairs; or (e) the account debtor on such Account or any of its Affiliates is also a supplier to or creditor of such Borrower or any of its Subsidiaries (other than freight carriers), provided that the amount of such Account that shall not be deemed ineligible solely as a result of this clause (e) shall be the excess of the amount of such Account over 115% of the amount owed to any such supplier or creditor; or (f) the account debtor on such Account or any of its Affiliates is also a freight carrier for such Borrower supplying goods to such Borrower; or (g) the sale represented by such Account is to an account debtor outside the continental United States, unless the sale is on letter of credit or acceptance terms accept- able to the Agent, in its sole judgment exercised reason- ably; or (h) the sale to such account debtor on such Account is on a bill-and-hold, guaranteed sale, sale-and-return, sale-on-approval or consignment basis; or (i) such Account is subject to a Lien in favor of any Person other than the Agent for the benefit of the Secured Parties; or (j) such Account is subject to any deduction, offset, counterclaim, return privilege (without consent of such Borrower) or other condition, provided that if such deduction, offset or counterclaim is known, then the Agent may, in its reasonable discretion, deem such Account eligible to the extent such Account exceeds such known deduction, offset or counterclaim; or 16 (k) the account debtor on such Account is located in New Jersey or Minnesota, unless such Borrower (i) has received a certificate of authority to do business and is in good standing in such state or (ii) has filed a Notice of Business Activities Report with the appropriate office or agency of such state for the current year; or (l) the Agent reasonably deems such Account ineligible; or (m) 50% or more of the outstanding Accounts of the account debtor on such Accounts that constituted Eligible Receivables at the time they arose have become, or have been reasonably determined by the Agent, in accordance with the provisions hereof, to be, ineligible; or (n) the sale represented by such Account is denominated in other than United States dollars; or (o) such Account is not evidenced by an invoice or other writing in form acceptable to the Agent, in its sole discretion; or (p) such Borrower or any of its Subsidiaries, in order to be entitled to collect such Account, is required to perform any additional service for, or perform or incur any additional obligation to, the Person to whom or to which it was made. "Environmental Laws" means all foreign, federal, state and local laws, statutes, ordinances and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to time, and any judicial or administrative interpretation thereof, including, without limitation, any judicial or administrative order, consent decree or judgment relating to the regulation and protection of human health, safety, the environment or natural resources (including, without limitation, ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegeta- tion). "Environmental Liabilities and Costs" means, as to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, conse- quential damages, treble damages, costs and expenses (including, without limitation, all fees, disbursements and 17 expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of any claim or demand by any other Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, including, without limitation, any thereof arising under any Environmental Law, Permit, order or agreement with any Governmental Authority or other Person, and which relate to any environmental, health or safety condition, or a Release or threatened Release, and result from the past, present or future operations of, or ownership of property by, such Person or any of its Subsidiaries. "Environmental Lien" means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs. "ERISA" means the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time and any applicable regulations promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with any Loan Party or any of its Subsidiaries and which, together with any Loan Party or any of its Subsidiaries, are treated as a single employer within the meaning of Section 414 (b), (c), (m) or (o) of the Code. "ERISA Event" means (i) a Reportable Event with respect to a Title IV Plan or a Multiemployer Plan; (ii) the withdrawal of any Loan Party, any of its Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (iii) the complete or partial withdrawal of any Loan Party, any of its Subsidiaries or any ERISA Affiliate from any Multiemployer Plan; (iv) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amend- ment as a termination under Section 4041 of ERISA; (v) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (vi) the failure to make any required contribution to a Qualified Plan; or (vii) any other event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or the imposition of any liability under Title IV of ERISA, other 18 than for PBGC premiums due but not delinquent under Section 4007 of ERISA. "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule II (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrowers and the Agent. "Eurodollar Rate" means, for any Interest Period, an interest rate per annum equal to the rate per annum obtained by dividing (a) the rate of interest determined by the Agent to be the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of Citibank in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to the Eurodollar Rate Loan of Citibank during such Interest Period and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period. "Eurodollar Rate Loan" means any outstanding principal amount of the Loans of any Lender to a Borrower that, for an Interest Period, bears interest at a rate determined with reference to the Eurodollar Rate. Eurodollar Rate Loans made on the same date with the same Interest Period to different Borrowers shall be deemed to be separate Eurodollar Rate Loans and must each meet the criteria set forth herein. "Eurodollar Rate Reserve Percentage" for any Interest Period means the reserve percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve 19 requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities which includes deposits by reference to which the Eurodollar Rate is determined) having a term equal to such Interest Period. "Event of Default" has the meaning specified in Section 8.1. "Exchange Notes" means the 11-1/8% Senior Notes due 2001 of the Company issued pursuant to the Indenture, dated as of April 3, 1996, by and between the Company and United States Trust Company of New York, as trustee, as amended, modified or supplemented from time to time in accordance with the provisions of this Agreement. "Exchange Offer and Consent Solicitation" means the Offer to Exchange and Consent Solicitation in respect of the Existing Senior Subordinated Notes dated February 27, 1996, as it may be amended, modified or supplemented relating to (i) the Company's offer to exchange for $48,750,000 aggregate principal amount of its Existing Senior Subordinated Notes its Exchange Notes and (ii) consents to certain provisions of the indenture relating to the Existing Senior Subordinated Notes, each as more particularly described in the Disclosure Document. "Existing Convertible Debentures" means the 9 1/2% Convertible Debentures due 2007 of Holdings issued pursuant to the Indenture, dated as of March 15, 1987 by and between Holdings and The Huntington National Bank, as trustee, as amended or supplemented through the date hereof. "Existing Floating Rate Senior Secured Notes" means the Floating Rate Senior Secured Notes due 1998 of Holdings issued pursuant to the Indenture, dated as of September 1, 1991, by and between Holdings and United States Trust Company of New York, as trustee, as amended or supplemented through the date hereof. "Existing 12 1/4% Senior Secured Notes" means the 12 1/4% Fixed Rate Senior Secured Notes due 1998 of Holdings issued pursuant to the Indenture, dated as of September 1, 1991, by and between Holdings and United States Trust Company of New York, as trustee. 20 "Existing Senior Subordinated Notes" means the 13 3/4% Senior Subordinated Notes due 1999 of Holdings issued pursuant to the Indenture, dated as of June 1, 1989, by and between Holdings and AmeriTrust Company National Association (now known as Society National Bank), as trustee, as amended or supplemented through the date hereof. "Fair Market Value" means (i) with respect to any asset (other than a marketable security) at any date, the value of the consideration obtainable in a sale of such asset at such date assuming a sale by a willing seller to a willing purchaser dealing at arm's length and arranged in an orderly manner over a reasonable period of time having regard to the nature and characteristics of such asset or, if such asset shall have been the subject of a relatively contemporaneous appraisal by an independent third party appraiser, the basic assumptions underlying which have not materially changed since its date, as set forth in such appraisal, and (ii) with respect to any marketable security at any date, the closing sale price of such security on the business day (on which any national securities exchange is open for the normal transaction of business) next preceding such date, as appearing in any published list of any national securities exchange or in the National Market List of the National Association of Securities Dealers, Inc. or, if there is no such closing sale price of such security, the final price for the purchase of such security at face value quoted on such business day by a financial institution of recognized standing which regularly deals in securities of such type. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fiscal Quarter" means each of the three month periods ending on March 31, June 30, September 30 and December 31. 21 "Fiscal Year" means the twelve month period ending on June 30. "Fixed Charges" means, for any Person for any period, the sum of (without duplication) (i) the Cash Interest Expense of such Person and each of its Subsidiaries for such period, (ii) the principal amount of Indebtedness for borrowed money of such Person and each of its Subsidi- aries determined on a consolidated basis in conformity with GAAP having a scheduled due date during such period, (iii) all amounts having a scheduled due date during such period payable by such Person and each of its Subsidiaries determined on a consolidated basis in conformity with GAAP, on Capitalized Lease Obligations and (iv) any dividends or distributions made during such period pursuant to Section 7.4(a)(iii); provided that "Fixed Charges" for the Company for any period shall include, without duplication, the Cash Interest Expense of Holdings with respect to the Debentures for such period and the principal amount of the Debentures of Holdings having a scheduled due date during such period. "GAAP" means generally accepted accounting prin- ciples in the United States of America as in effect from time to time set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination except that, for purposes of Article V, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the audited financial statements referred to in Section 4.5. "Governmental Authority" means any nation or gov- ernment, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Holdings" means Waxman Industries, Inc., a Delaware corporation. 22 "Ideal Subsidiaries" means Ideal Holding Group, Inc. and its Subsidiaries. "Improvements" has the meaning specified in Section 4.22(d). "Indebtedness" of any Person means, without dupli- cation, (i) all indebtedness of such Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or not matured) or for the deferred purchase price of property or services, (ii) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (iii) all indebt- edness of such Person created or arising under any condi- tional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (iv) all Capitalized Lease Obligations of such Person, (v) all Contingent Obligations of such Person, (vi) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any Stock or Stock Equivalents of such Person, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, and (vii) all Indebtedness of the types referred to in clause (i), (ii), (iii), (iv), (v) or (vi) above secured by (or for which the holder of such Indebted- ness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and general intangibles) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness to the extent of the lesser of the amount of the Indebtedness so secured or the fair value of the property so secured, (viii) in the case of any Borrower, the Obligations and (ix) all liabili- ties of such Person that would be shown on a balance sheet of such Person prepared in conformity with GAAP. "Indemnitees" has the meaning specified in Section 10.4. "Indentures" means the indentures relating to each of the Debentures. "Intellectual Property Security Agreement" means the Intellectual Security Agreement, dated May 20, 1994 made 23 by each of the Borrowers and Barnett, as amended by the Collateral Documents Amendment, as such agreement may be amended, supplemented or otherwise modified from time to time. "Intercompany Note" means any intercompany note, substantially in the form of Exhibit K to the Original Credit Agreement, made by any Borrower to any other Borrower or by any Borrower to the Company or Holdings. "Intercorporate Agreements" mean the Intercorpo- rate Agreement among Holdings, the Company, the Borrowers and Barnett dated on or about the Original Closing Date and the Intercorporate Agreement among Holdings, the Company, the Borrowers and Barnett dated on or about the Closing Date. "Interest Period" means, (a) initially, the period commencing on the date such Eurodollar Rate Loan is made or on the date of conversion of a Base Rate Loan to such Eurodollar Rate Loan and ending one, two, three or six months thereafter, as selected by the Borrowers in the Notice of Borrowing or Notice of Conversion or Continuation given to the Agent pursuant to Section 2.2 or 2.7, and (b) thereafter, if such Loan is continued, in whole or in part, as a Eurodollar Rate Loan pursuant to Section 2.7, a period commencing on the last day of the immediately pre- ceding Interest Period therefor and ending one, two, three or six months thereafter, as selected by the Borrowers in the Notice of Conversion or Continuation given to the Agent pursuant to Section 2.7; provided, however, that all of the foregoing provisions relating to Interest Periods in respect of Eurodollar Rate Loans are subject to the following: (i) if any Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless the result of such extension would be to extend such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (ii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; 24 (iii) the Borrowers may not select any Interest Period which ends after the Termination Date; (iv) the Borrowers may not select any Interest Period in respect of Loans having an aggregate principal amount of less than $3,500,000; and (v) there shall be outstanding at any one time no more than seven Interest Periods in the aggregate. "Inventory" has the meaning specified in Section 9-109(4) of the UCC. "Investments" has the meaning specified in Section 7.6. "IRS" means the Internal Revenue Service, or any successor thereto. "Islip IRB" means the Lease Agreement, dated as of December 1, 1986, between the Town of Islip Industrial Development Authority and Holdings, as amended, supplemented or modified from time to time and each of the agreements, documents and instruments executed in connection therewith. "Issuer" and "Issuers" have the meanings set forth in the introductory paragraph. "L/C Cash Collateral Account" has the meaning set forth in Section 8.3. "Leases" means, with respect to any Borrowers or any of their Subsidiaries, all of those leasehold estates in real property owned by such Borrower or such Subsidiary, as lessee, as such may be amended, supplemented or otherwise modified from time to time to the extent permitted by this Agreement. "Letter of Credit" means any letter of credit issued for the account of any Borrower by an Issuer pursuant to Section 2.16. "Letter of Credit Fee Percentage" means two and three-quarters percent (2.75%). 25 "Letter of Credit Obligations" means, at any time with respect to any Borrower, all liabilities at such time of such Borrower to all Issuers with respect to Letters of Credit, whether or not any such liability is contingent, and includes the sum of (i) the Reimbursement Obligations of such Borrower at such time and (ii) the Letter of Credit Undrawn Amounts of such Borrower at such time. "Letter of Credit Reimbursement Agreement" has the meaning specified in Section 2.16(c). "Letter of Credit Request" has the meaning speci- fied in Section 2.16(d). "Letter of Credit Undrawn Amounts" means, at any time with respect to any Borrower, the aggregate undrawn face amount of all Letters of Credit for the account of such Borrower outstanding at such time. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever intended to assure payment of any Indebtedness or other obligation, including, without limitation, any conditional sale or other title retention agreement, the interest of a lessor under a Capitalized Lease Obligation, any financing lease having substantially the same economic effect as any of the fore- going, and the filing, under the Uniform Commercial Code or comparable law of any jurisdiction, of any financing state- ment naming the owner of the asset to which such Lien relates as debtor. "Loan" means a Revolving Credit Loan, a Term Loan or any loan made by any Lender or Issuer to the Borrower pursuant to Section 2.16 or 2.18 (including, without limitation, a Swing Advance). "Loan Documents" means, collectively, this Agreement, the Notes, the Collateral Documents and each certificate, agreement or document executed by any Loan Party. "Loan Party" means each Borrower and each Subsidiary or Affiliate which executes a Loan Document. 26 "Majority Lenders" means, at any time, Lenders holding at least 51% of the then aggregate unpaid principal amount of the Loans or, if no Loans are then outstanding, Lenders having at least 51% of the Commitments (determined assuming that a Settlement Date pursuant to Section 2.18(c), and all of the transactions contemplated thereby, have occurred). "Material Adverse Change" and "Material Adverse Effect" mean a material adverse change in or effect on, as the case may be, any of (i) the condition (financial or otherwise), business, performance, prospects, operations or properties of any Loan Party or any Loan Party and its Subsidiaries taken as one enterprise, (ii) the legality, validity or enforceability of any Loan Document, (iii) the perfection or priority of the Liens granted pursuant to the Collateral Documents, (iv) the ability of any Borrower to repay the Obligations or of any Loan Party to perform its obligations under any Loan Document, or (v) the rights and remedies of the Lenders, the Issuers or the Agent under the Loan Documents. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, and to which any Loan Party, any of its Subsidiaries or any ERISA Affiliate is making, is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "Net Income (Loss)" means, for any Person for any period, the aggregate of net income (or loss) of such Person and its Subsidiaries for such period, determined on a consolidated basis in conformity with GAAP. "Net Interest Expense" means, for any Person for any period, gross interest expense of such Person and its Subsidiaries for such period determined on a consolidated basis in conformity with GAAP, less the following for such Person and its Subsidiaries determined on a consolidated basis in conformity with GAAP: (a) the sum of (i) interest capitalized during construction for such period, (ii) inter- est income for such period, and (iii) gains for such period on interest rate contracts (to the extent not included in interest income above and to the extent not deducted in the calculation of such gross interest expense) and (iv) to the extent included in such gross interest expense, consent fees paid in connection with the Exchange Offer and Consent Solicitation, plus the following for such Person and its 27 Subsidiaries determined on a consolidated basis in conformity with GAAP: (b) the sum of (i) losses for such period on interest rate contracts (to the extent not included in such gross interest expense), and (ii) the amortization of upfront costs or fees for such period associated with Interest Rate Contracts (to the extent not included in gross interest expense). "Net Worth" of any Person means, at any date, the excess of the Total Assets of such Person at such date over the Total Liabilities of such Person at such date. "Non-Cash Interest Expense" means, for any Person for any period, the sum of the following amounts to the extent included in Net Interest Expense of such Person for such period: (i) the amount of amortized debt discount, (ii) charges relating to write-ups or write-downs in the book or carrying value of existing Indebtedness and (iii) amortization of deferred financing costs. "Notes" means, collectively, the Revolving Credit Notes and the Term Notes. "Notice of Borrowing" has the meaning specified in Section 2.2(a). "Obligations" means the Loans, the Letter of Credit Obligations and all other advances, debts, liabili- ties, obligations, covenants and duties owing by the Borrowers to the Agent, any Lender, any Affiliate of any of them or any Indemnitee, of every type and description, present or future, whether or not evidenced by any note, guaranty or other instrument, arising under this Agreement or under any other Loan Document, whether or not for the payment of money, whether arising by reason of an extension of credit, opening or amendment of a Letter of Credit or payment of any draft drawn thereunder, loan, guaranty, indemnification, foreign exchange transaction or in any other manner, whether direct or indirect (including, without limitation, those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term "Obligations" in- cludes, without limitation, all interest, charges, expenses, fees, attorneys' fees and disbursements and any other sum chargeable to the Borrowers under this Agreement or any other Loan Document and all obligations of the Borrowers to cash collateralize Letter of Credit Obligations. 28 "Operating Plan" means those financial plans dated April 1, 1996 covering the Fiscal Years ending in 1996 through 1998, inclusive, delivered to the Lenders by the Borrowers. "Original Closing Date" means the Closing Date (as defined in the Original Credit Agreement). "Original Credit Agreement" means the Credit Agreement, dated as of May 20, 1994, among the Company, the Borrowers, Barnett, the lenders parties thereto and Citicorp North America Inc., as Agent. "Other Taxes" has the meaning specified in Section 2.14(b). "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Pension Plan" means an employee pension benefit plan, as defined in Section 3(2) of ERISA (other than a Multiemployer Plan), which is not an individual account plan, as defined in Section 3(34) of ERISA, and which any Loan Party, any of its Subsidiaries or, if a Title IV Plan, any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "Permit" means any permit, approval, authoriza- tion, license, variance or permission required from a Governmental Authority under an applicable Requirement of Law. "Permitted Holders" means Armond Waxman, Melvin Waxman, trusts for the benefit of any of Armond Waxman, Melvin Waxman or members of their families, the heirs or administrators or executors for the respective estates of Armond Waxman or Melvin Waxman or any Person, entity or group of Persons controlled by any of the foregoing. "Person" means an individual, partnership, corpor- ation (including, without limitation, a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a Governmental Authority. "Plan" means an employee benefit plan, as defined in Section 3(3) of ERISA, which any Loan Party, any of its Subsidiaries or any ERISA Affiliate maintains, contributes 29 to or has an obligation to contribute to on behalf of participants who are or were employed by any Loan Party or any of its Subsidiaries. "Pledge Agreement" means (i) the pledge agreement executed by TWI pledging 100% of the outstanding Stock of each of its direct domestic Subsidiaries and 65% of the outstanding Stock of each of its direct foreign Subsidiaries, dated the Original Closing Date, and (ii) the Barnett Pledge Agreement, dated the Closing Date, as each such pledge agreement may be amended, supplemented or otherwise modified from time to time. "Proposed Restructuring" means (A) the redemption, repayment or defeasance of (i) all of the Existing 12 1/4% Senior Secured Notes and the Existing Floating Rate Senior Secured Notes outstanding, and (ii) the obligations of Barnett under the Existing Credit Agreement outstanding, (B) the consummation of the transactions contemplated by the Exchange Offer and Consent Solicitation, (C) the public offering of the Stock of Barnett, and (D) the refinancing of a portion of the Loans made pursuant to the Term Loan Credit Agreement with the proceeds of the Term Loans, as such transactions may be consummated pursuant to Section 10.16. "Public Filings" means the Report on Form 10-K of Holdings for the year ended June 30, 1995, and the quarterly Reports on Form 10-Q of Holdings for the fiscal quarters ended September 30, 1995 and December 31, 1995, in each case as amended through the date hereof. "Qualified Plan" means an employee pension benefit plan, as defined in Section 3(2) of ERISA, which is intended to be tax-qualified under Section 401(a) of the Code, and which any Loan Party, any of its Subsidiaries or any ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "Ratable Portion" or "ratably" means, with respect to any Lender, the quotient obtained by dividing the Commitment of such Lender by the Commitments of all Lenders provided that, (i) payments of principal of the Loans and interest on the Loans shall be made pro rata in accordance with the respective unpaid principal amounts of the Loans held by the Lenders and (ii) payments of interest on the Loans shall be made pro rata in accordance with the respective amounts of unpaid interest on the Loans in 30 respect of which such interest is being paid owed to all the Lenders. "Real Estate" means all of those plots, pieces or parcels of land now owned or hereafter acquired by any Borrower or any of its Subsidiaries (the "Land"), including, without limitation, those listed on Schedule 4.22(a) and described in the Mortgages, together with the right, title and interest of such Borrower or such Subsidiary, if any, in and to the streets, the land lying in the bed of any streets, roads or avenues, opened or proposed, in front of, adjoining or abutting the Land to the center line thereof, the air space and development rights pertaining to the Land and the right to use such air space and development rights, all rights of way, privileges, liberties, tenements, hereditaments and appurtenances belonging or in any way appertaining thereto, all fixtures, all easements now or hereafter benefiting the Land and all royalties and rights appertaining to the use and enjoyment of the Land, includ- ing, without limitation, all alley, vault, drainage, mineral, water, oil and gas rights, together with all of the buildings and other improvements now or hereafter erected on the Land, and any fixtures appurtenant thereto. "Refinancing" means (i) the repayment of the In- debtedness of Holdings owed pursuant to the Existing Waxman Industries Credit Agreement assumed by one or more Borrowers and the collateralization of the letters of credit there- under and (ii) the repayment of the Indebtedness of Barnett owed pursuant to the Existing Barnett Facility and the assumption hereunder of the letters of credit issued there- under by Citibank, as disclosed in the Disclosure Document. "Register" has the meaning specified in Section 10.7. "Reimbursement Obligations" means all matured reimbursement or repayment obligations of any Borrower to any Issuer with respect to Letters of Credit pursuant to Letter of Credit Reimbursement Agreements. "Related Documents" means (a) the Indenture relating to the Exchange Notes, and (b) the amendment to the Indenture relating to the Existing Senior Subordinated Notes. 31 "Release" means, as to any Person, any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration, in each case of any Contaminant, into the indoor or outdoor environment or into or out of any property owned by such Person, including, without limitation, the movement of Contaminants through or in the air, soil, surface water, ground water or property which forms the basis of Environmental Costs and Liabilities. "Remedial Action" means all actions required to (i) clean up, remove, treat or in any other way address Contaminants in the indoor or outdoor environment, (ii) prevent the Release or threat of Release or minimize the further Release of Contaminants so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, or (iii) perform pre-remedial studies and investigations and post-remedial monitoring and care. "Reorganization" shall mean the following transactions: (i) the Exchange Offer and Consent Solicitation and the 12 1/4% Consent Solicitation, (ii) the Corporate Restructuring, (iii) the execution of this Credit Agreement and the Term Loan Agreement, and (iv) the Refinancing, as described in the Disclosure Document. "Reportable Event" means any of the events described in Sections 4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA. "Requirement of Law" means, as to any Person, the certificate of incorporation and by-laws or other organiza- tional or governing documents of such Person, and all federal, state and local laws, rules and regulations, including, without limitation, federal, state or local securities, antitrust and licensing laws, any federal, state or local laws or regulations concerning physicians, nurses and psychologists, all food, health and safety laws, and all applicable trade laws and requirements, including, without limitation, all disclosure requirements of Environmental Laws, ERISA and all orders, judgments, decrees or other determinations of any Governmental Authority or arbitrator, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. 32 "Responsible Officer" means, with respect to any Person, any of the principal executive officers (including treasurer) or any other officer or employee of such Person selected by such Person as a Responsible Officer hereunder and notification of whose selection is made in writing to the Agent. "Retiree Welfare Plan" means any Welfare Plan providing for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant's termination of employment, other than continuation coverage provided pursuant to Section 4980B of the Code and at the sole expense of the participant or the beneficiary of the participant. "Revolving Credit Borrowing" means a Borrowing consisting of Revolving Credit Loans made by the Lenders ratably according to their respective Commitments. "Revolving Credit Collateral" means any Collateral other than the Term Collateral. "Revolving Credit Commitment" means, as to each Lender, the commitment of such Lender to make Revolving Credit Loans to the Borrowers pursuant to Section 2.1 (a) in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender's name on Schedule I under the caption "Revolving Credit Commitment," as such amount may be reduced or modified pursuant to this Agreement. "Revolving Credit Loan" means a Loan made by a Lender to any Borrower pursuant to Section 2.1(a) or Section 2.18. "Revolving Credit Note" means a promissory note of the Borrowers payable to the order of any Lender in a prin- cipal amount equal to the amount of such Lender's Revolving Credit Commitment as originally in effect, in substantially the form of Exhibit A-1, evidencing the aggregate Indebted- ness of the Borrowers to such Lender resulting from the Revolving Credit Loans made by such Lender. "Secured Parties" means the Lenders, Issuers and the Agent. 33 "Security Agreement" means an agreement, in sub- stantially the form of Exhibit E to the Original Credit Agreement, as amended by the Collateral Agreement Amendment, executed by each of the Borrowers, as such agreement may be amended, supplemented or modified from time to time. "Solvent" means, with respect to any Person, that the value of the assets of such Person (both at fair value and present fair saleable value) is, on the date of determi- nation, greater than the total amount of liabilities (including, without limitation, contingent and unliquidated liabilities) of such Person as of such date and that, as of such date, such Person is able to pay all liabilities of such Person as such liabilities mature and does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Stock" means shares of capital stock, beneficial or partnership interests, participations or other equiva- lents (regardless of how designated) of or in a corporation or equivalent entity, whether voting or non-voting, and includes, without limitation, common stock and preferred stock. "Stock Equivalents" means all securities converti- ble into or exchangeable for Stock and all warrants, options or other rights to purchase or subscribe for any stock, whether or not presently convertible, exchangeable or exercisable. "Subsidiary" means, with respect to any Person, any corporation, partnership or other business entity of which an aggregate of 50% or more of the outstanding Stock having ordinary voting power to elect a majority of the board of directors, managers, trustees or other controlling persons, is, at the time, directly or indirectly, owned or controlled by such Person and/or one or more Subsidiaries of such Person (irrespective of whether, at the time, Stock of any other class or classes of such entity shall have or might have voting power by reason of the happening of any contingency). "Swing Advance" has the meaning set forth in Section 2.18. 34 "Swing Advance Available Credit" means the Swing Advance Bank's Ratable Portion of the Available Credit. "Swing Advance Bank" means Citicorp, or such other Lender who shall also be the Agent or who, with the agreement of the Agent, shall agree to act hereunder as Swing Advance Bank. "Tax Affiliate" means, as to any Person, (i) any Subsidiary of such Person, and (ii) any Affiliate of such Person with which such Person files or is eligible to file consolidated, combined or unitary tax returns. "Tax Return" has the meaning specified in Section 4.3. "Taxes" has the meaning specified in Section 2.14(a). "Tax Sharing Agreement" means the tax sharing agreement, dated on or about the Original Closing Date by and among Holdings and its domestic Subsidiaries. "Term Borrowing" means a Borrowing consisting of Term Loans made by the Lenders ratably according to their respective Term Commitments. "Term Collateral" means the collateral described in the Barnett Pledge Agreement. "Term Loan" means a Loan made by a Lender to any Borrower pursuant to Section 2.1(b). "Term Loan Commitment" means, as to each Lender, the commitment of such Lender to make Term Loans to the Borrowers pursuant to Section 2.1(b) in the aggregate principal amount outstanding not to exceed the amount set forth opposite such Lender's name on Schedule I under the caption "Commitment". "Term Loan Credit Agreement" means the Credit Agreement, dated as of May 20, 1994, by and among the financial institutions party thereto and Citibank, N.A., as agent. 35 "Term Note" means a promissory note of the Borrowers payable to the order of any Lender in a principal amount equal to the amount of such Lender's Term Loan Commitment, in substantially the form of Exhibit A-2, evidencing the aggregate Indebtedness of the Borrowers to such Lender resulting from the Term Loans made by such Lender. "Termination Date" means the earliest of (i) April 15, 1996, unless the Closing Date occurs prior thereto, (ii) the 364th day after the Closing Date and (iii) the date of termination in whole of the Commitments pursuant to Section 2.4 or 8.2. "Title IV Plan" means a Pension Plan which is covered by Title IV of ERISA. "Total Assets" of any Person means, at any date, the total assets of such Person and its Subsidiaries at such date determined on a consolidated basis in conformity with GAAP. "Total Liabilities" of any Person means, at any date, all obligations which in conformity with GAAP would be included in determining total liabilities as shown on the liabilities side of a consolidated balance sheet of such Person and its Subsidiaries at such date. "Trademark License Agreement" means the Trademark License Agreement by and among Holdings, the Company and the Borrowers dated on or about the Original Closing Date. "TWI" mean TWI, International, Inc., a Delaware corporation. "Unfunded Pension Liability" means the aggregate amount, if any, of the sum of (i) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions in effect under such Title IV Plan, and (ii) for a period of five years following a transaction reasonably likely to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be 36 avoided by any Loan Party, any of its Subsidiaries or any ERISA Affiliate as a result of such transaction. "Voting Stock" means, with reference to the Company, Stock of any class or classes if the holders of such Stock are ordinarily, in the absence of contingencies, entitled to vote for the election of the directors (or Persons performing similar functions) of the Company, even though the right so to vote has been suspended by the happening of such a contingency. "Welfare Plan" means an employee welfare plan, as defined in Section 3(1) of ERISA, to which any Loan Party or any of its Subsidiaries maintains, contributes to or has an obligation to contribute to, on behalf of any participants (or their beneficiaries) who are or were employed by any of them. "Withdrawal Liability" means, as to any Loan Party at any time, the aggregate amount of the liabilities of any Loan Party, any of its Subsidiaries or any ERISA Affiliate pursuant to Section 4201 of ERISA, and any increase in contributions required to be made pursuant to Section 4243 of ERISA, with respect to all Multiemployer Plans. 1.2. Computation of Time Periods. In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding" and the word "through" means "to and including". 1.3. Accounting Terms. All accounting terms not specifically defined herein shall be construed in conformity with GAAP and all accounting determinations required to be made pursuant hereto shall, unless expressly otherwise provided herein, be made in conformity with GAAP. 1.4. Certain Terms. (a) The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole, and not to any particular Article, Section, subsection or clause in this Agreement. References herein to an Exhibit, Schedule, Article, Section, subsection or clause refer to the appropriate Exhibit or Schedule to, or Article, Section, subsection or clause in this Agreement. 37 (b) The terms "Lender," "Issuer" and "Agent" include their respective successors and the terms "Lender" and "Issuer" include each assignee of such Lender or such Issuer who becomes a party hereto pursuant to Section 10.7. (c) Upon the appointment of any successor Agent pursuant to Section 9.6, references to Citicorp in Section 9.3 and in the definition of Eurodollar Rate shall be deemed to refer to the successor then acting as the Agent. ARTICLE II AMOUNTS AND TERMS OF THE LOANS 2.1. The Loans. (a) Revolving Credit Loans. On the terms and subject to the conditions contained in this Agreement, each Lender severally agrees to make revolving credit loans (each a "Revolving Credit Loan") to one or more of the Borrowers from time to time on any Business Day during the period from the date hereof until the Termination Date in an aggregate amount not to exceed at any time outstanding such Lender's Revolving Credit Commitment; provided, however, that at no time shall any Lender be obligated to make a Revolving Credit Loan to any Borrower in excess of such Lender's Ratable Portion of the Available Credit with respect to such Borrower and provided, further, however, that at no time shall any Lender be obligated to make a Revolving Credit Loan to any Borrower the result of which is that the aggregate amount of all Loans and Letter of Credit Obligations owed by all Borrowers is greater than the sum of (i) the aggregate amount of the Borrowing Bases of all of the Borrowers (calculated only with respect to Eligible Accounts) and (ii) $25,000,000. Within the limits of each Lender's Revolving Commitment, amounts prepaid pursuant to Section 2.6(b) or 2.17(e) may be reborrowed under this Section 2.1. The Revolving Credit Loans of each Lender shall be evidenced by the Revolving Credit Note to the order of such Lender. (b) On the terms and subject to the conditions contained in this Agreement, each Lender severally agrees to make a Loan (each a "Term Loan") to the Borrowers on the Closing Date, in an aggregate amount not to exceed the amount set opposite such Lender's name on Schedule II hereto as its Term Loan Commitment (such Lender's "Term Loan Commitment"). Amounts prepaid pursuant to Section 2.6 may not be reborrowed under this Section 2.1(b). The Term Loans 38 of each Lender shall be evidenced by the Term Note to the order of such Lender. 2.2. Making the Loans. (a) Each Borrowing shall be made on notice, given by the Borrower so requesting the Borrowing to the Agent not later than 12:00 (noon) (New York City time) on the Business Day of the proposed Borrowing (or, in the case of a Borrowing consisting of Eurodollar Rate Loans, three Business Days prior to such proposed Borrowing). Each such notice (a "Notice of Borrowing") shall be in substantially the form of Exhibit B, specifying therein (i) the name of such Borrower, (ii) the date of such proposed Borrowing, (iii) the aggregate amount of such proposed Borrowing, (iv) the amount thereof, if any, requested to be Eurodollar Rate Loans, and (v) the initial Interest Period or Periods for any such Eurodollar Rate Loans. The Loans shall be made as Base Rate Loans unless (subject to Section 2.11) the Notice of Borrowing specifies that all or a pro rata portion thereof shall be Eurodollar Rate Loans; provided, however, that the aggregate of the Eurodollar Rate Loans for each Interest Period must be in an amount of not less than $3,500,000 or an integral multiple of $500,000 in excess thereof. (b) The Agent shall give to each Lender prompt notice of the Agent's receipt of a Notice of Borrowing and, if Eurodollar Rate Loans are properly requested in such Notice of Borrowing, the applicable interest rate under Section 2.8(b). Each Lender shall, before 3:00 P.M. (New York City time) on the date of the proposed Borrowing, make available for the account of its Applicable Lending Office to the Agent at its address referred to in Section 10.2, in immediately available funds, such Lender's Ratable Portion of such proposed Borrowing. After the Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to such Borrower at the Agent's aforesaid address. (c) Each Borrowing shall be in an aggregate amount of not less than $50,000. (d) Each Notice of Borrowing shall be irrevocable and binding on the Borrower so making the request. In the case of any proposed Borrowing which the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Loans, the Borrowers shall jointly and severally indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or 39 before the date specified in such Notice of Borrowing for such proposed Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including, without limitation, loss of anticipated profits), cost or expense incurred by reason of the liqui- dation or reemployment of deposits or other funds acquired by such Lender to fund any Eurodollar Rate Loan to be made by such Lender as part of such proposed Borrowing when such Eurodollar Rate Loan, as a result of such failure, is not made on such date. (e) Unless the Agent shall have received notice from a Lender prior to the time of any proposed Borrowing that such Lender will not make available to the Agent such Lender's Ratable Portion of such Borrowing, the Agent may assume that such Lender has made such Ratable Portion available to the Agent on the date of such Borrowing in accordance with this Section 2.2 and the Agent may, in reliance upon such assumption, make available to the Borrower requesting the Borrowing on such date a correspond- ing amount. If and to the extent that such Lender shall not have so made such Ratable Portion available to the Agent, such Lender and such Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Agent, at (i) in the case of such Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. If such Borrower shall repay to the Agent such corresponding amount, such payment shall not relieve such Lender of any obligation it may have to such Borrower hereunder. (f) The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing. 40 2.3. Fees. (a) The Borrowers jointly and severally agree to pay to each Lender a commitment fee (the "Commitment Fee") on the average daily amount of the excess of such Lender's Revolving Credit Commitment over such Lender's Revolving Credit Loans and Letter of Credit Obligations owed to it from the date hereof until the Termination Date at the rate of 0.5 of 1% per annum, payable monthly (i) on the first day of each month during the term of such Lender's Revolving Credit Commitment, (ii) on the date of any reduction in whole of the Revolving Credit Commitments pursuant to Section 2.4 and (iii) on the Termination Date. (b) The Borrowers have agreed to pay additional fees, the amount and dates of payment of which are embodied in a separate agreement between the Company and Citibank. 2.4. Reduction and Termination of the Revolving Credit Commitments. (a) The Borrowers may, upon at least three Business Days' prior notice to the Agent, terminate in whole or reduce ratably in part the unused portions of the respective Revolving Credit Commitments of the Lenders; provided, however, that each partial reduction shall be in the aggregate amount of not less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof. (b) Subsequent to any prepayments of the Term Loans pursuant to Section 2.6(c)(iii), the then current Revolving Credit Commitments shall be reduced on each date on which any Borrower receives payment from any of the following (and the Revolving Credit Commitment of each Lender shall be reduced by its Ratable Portion of such amount): (i) upon receipt by such Borrower or its Subsidiaries of Asset Sale Proceeds in an amount equal to 75% of such Asset Sale Proceeds, or (ii) upon receipt of any reversion from a defined benefit plan, in an amount equal to the amount of such reversion so received. For purposes of this subsection (ii), reversion is defined as the amount of surplus assets which, upon the termination of any defined benefit plan, revert to the Borrowers or any of their Subsidiaries (net of any taxes, after taking into account any available tax credits or deductions, and excise taxes or penalties thereon). 41 2.5. Repayment. The Borrowers jointly and severally agree to repay the entire unpaid principal amount of the Loans on the Termination Date. 2.6. Prepayments. (a) The Borrowers shall have no right to prepay the principal amount of any Loan other than as provided in this Section 2.6 and Section 2.17(e). (b) Any Borrower may, upon at least three Busi- ness Days' prior notice to the Agent, stating the proposed date and aggregate principal amount of the prepayment, prepay the outstanding principal amount of the Term Loans or Revolving Credit Loans made to it in whole or ratably in part. If such Borrower is making payment in whole, such payment shall be paid together with accrued interest to the date of such prepayment on the principal amount prepaid. Upon the giving of such notice of prepayment, the principal amount of the Loans specified to be prepaid shall become due and payable on the date specified for such prepayment. (c) (i) If at any time the aggregate principal amount of Revolving Credit Loans outstanding at such time exceeds the Revolving Credit Commitments at such time, the Borrowers jointly and severally agree to forthwith prepay the Revolving Credit Loans then outstanding in an amount equal to such excess. (ii) If at any time the sum of the aggregate principal amount of Revolving Credit Loans and Letter of Credit Obligations outstanding to any Borrower at such time exceeds the Borrowing Base of such Borrower at such time, such Borrower shall forthwith prepay the Revolving Credit Loans then outstanding in an amount equal to such excess, and if no Revolving Credit Loans made to it are then outstanding, such Borrower shall forthwith cash collateralize such excess by paying to the Agent immediately available funds in the amount of such excess for deposit in the L/C Cash Collateral Account referred to in Section 8.3, which funds shall be maintained in the L/C Cash Collateral Account in accordance with the provisions of Section 8.3 as long as and to the extent that the Letter of Credit Obliga- tions of such Borrower exceed the Borrowing Base of such Borrower. 42 (iii) If at any time any Borrower receives proceeds of the types referred to in Section 2.4(b), such Borrower shall prepay the Term Loan made to it upon receipt of such proceeds in the amount of such proceeds, together with interest on the amount prepaid to the date of prepayment. 2.7. Conversion/Continuation Option. The Borrowers may elect (i) at any time to convert Base Rate Loans or any portion thereof to Eurodollar Rate Loans or (ii) at the end of any Interest Period with respect thereto, to convert Eurodollar Rate Loans or any portion thereof into Base Rate Loans or to continue such Eurodollar Rate Loans or any portion thereof for an additional Interest Period; provided, however, that the aggregate of the Eurodollar Loans for each Interest Period therefor must be in the amount of $3,500,000 or an integral multiple of $500,000 in excess thereof. Each conversion or continuation shall be allocated among the Loans of all Lenders in accordance with their Ratable Portion. Each such election shall be in substantially the form of Exhibit C hereto (a "Notice of Conversion or Continuation") and shall be made by giving the Agent at least three Business Days' prior written notice thereof specifying (A) the amount and type of conversion or continuation, (B) in the case of a conversion to or a continuation of Eurodollar Rate Loans, the Interest Period therefor, and (C) in the case of a conversion, the date of conversion (which date shall be a Business Day and, if a conversion from Eurodollar Rate Loans, shall also be the last day of the Interest Period therefor). The Agent shall promptly notify each Lender of its receipt of a Notice of Conversion or Continuation and of the contents thereof. Notwithstanding the foregoing, no conversion in whole or in part of Base Rate Loans to Eurodollar Rate Loans, and no continuation in whole or in part of Eurodollar Rate Loans upon the expiration of any Interest Period therefor, shall be permitted at any time at which a Default or an Event of Default shall have occurred and be continuing. If, within the time period required under the terms of this Section 2.7, the Agent does not receive a Notice of Conversion or Continuation from the Borrowers containing a permitted election to continue any Eurodollar Rate Loans for an additional Interest Period or to convert any such Loans, then, upon the expiration of the Interest Period therefor, such Loans will be automatically converted to Base Rate Loans. Each Notice of Conversion or Continuation shall be irrevocable. 43 2.8. Interest. The Borrowers jointly and severally agree to pay interest on the unpaid principal amount of each Loan from the date thereof until the principal amount thereof shall be paid in full, at the following rates per annum: (a) For Base Rate Loans, at a rate per annum equal at all times to the Base Rate in effect from time to time plus the Applicable Base Rate Margin, payable monthly on the first day of each month and on the Termination Date; provided, however, that during the continuance of an Event of Default, all Base Rate Loans shall bear interest, payable on demand, at a rate per annum equal at all times to 2% per annum above the sum of the Applicable Base Rate Margin and the Base Rate in effect from time to time. (b) For Eurodollar Rate Loans, at a rate per annum equal at all times during the applicable Interest Period for each Eurodollar Rate Loan to the sum of the Eurodollar Rate for such Interest Period plus the Applicable Eurodollar Rate Margin in effect on the first day of such Interest Period, payable monthly and on the Termination Date; provided, however, that during the continuance of an Event of Default, all Eurodollar Rate Loans shall bear interest, payable on demand, at a rate per annum equal at all times to 2% above the sum of the Eurodollar Rate and the Applicable Eurodollar Rate Margin per annum in effect from time to time. 2.9. Interest Rate Determination and Protection. (a) The Eurodollar Rate for each Interest Period for Eurodollar Rate Loans shall be determined by the Agent two Business Days before the first day of such Interest Period in the case of Eurodollar Rate Loans. (b) The Agent shall give prompt notice to the Borrowers and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.9(a). (c) If, with respect to Eurodollar Rate Loans, the Majority Lenders notify the Agent that the Eurodollar Rate for any Interest Period therefor will not adequately reflect the cost to such Majority Lenders of making such Loans or funding or maintaining their respective Eurodollar Rate Loans for such Interest Period, the Agent shall forthwith so notify the Borrowers and the Lenders, whereupon 44 (i) each Eurodollar Rate Loan will automatically, on the last day of the then existing Interest Period therefor, convert into a Base Rate Loan; and (ii) the obligations of the Lenders to make Eurodollar Rate Loans or to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended until the Agent shall notify the Borrowers that such Lenders have determined that the circumstances causing such suspension no longer exist. 2.10. Increased Costs. If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation (other than any change by way of imposition or increase of reserve requirements included in determining the Eurodollar Rate Reserve Percentage) or (ii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Eurodollar Rate Loans, then the Borrowers jointly and severally agree to, from time to time, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrowers and the Agent by such Lender, shall be conclusive and binding for all pur- poses, absent manifest error. If the Borrowers so notify the Agent within five Business Days after any Lender noti- fies the Borrowers of any increased cost pursuant to the foregoing provisions of this Section 2.10, the Borrowers may either (A) prepay in full all Eurodollar Rate Loans of such Lender then outstanding in accordance with Section 2.6(b) and, additionally, reimburse such Lender for such increased cost in accordance with this Section 2.10 or (B) convert all Eurodollar Rate Loans of all Lenders then outstanding into Base Rate Loans, in accordance with Section 2.7 and, addi- tionally, reimburse such Lender for such increased cost in accordance with this Section 2.10. 2.11. Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender or its Eurodollar Lending Office to make 45 Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate Loans, then, on notice thereof and demand therefor by such Lender to the Borrowers through the Agent, (i) the obligation of such Lender to make or to continue Eurodollar Rate Loans and to convert Base Rate Loans into Eurodollar Rate Loans shall terminate and (ii) the Borrowers jointly and severally agree to forthwith prepay in full all Eurodollar Rate Loans of such Lender then outstanding, together with interest accrued thereon, unless the Borrowers, within five Business Days of such notice and demand, convert all Eurodollar Rate Loans of all Lenders then outstanding into Base Rate Loans. 2.12 Capital Adequacy. If (i) the introduction of or any change in or in the interpretation of any law or regulation, (ii) compliance with any law or regulation, or (iii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by any Lender or any corporation controlling any Lender and such Lender reasonably determines that such amount is based upon the existence of such Lender's Commitments, Loans and commitments in respect of Letters of Credit and its other commitments and loans of such type, including, without limitation, its other commitments in respect of letters of credit (or similar contingent obligations) then, upon demand by such Lender (with a copy of such demand to the Agent), the Borrowers jointly and severally agree to pay to the Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's Commitments, Loans and agreements herein with respect to Letters of Credit. A certificate as to such amounts submitted to the Borrowers and the Agent by such Lender shall be conclusive and binding for all purposes absent manifest error. 2.13. Payments and Computations. (a) The Borrowers shall make each payment hereunder and under the Notes not later than 12:00 noon (New York City time) on the day when due, in Dollars, to the Agent at its address referred to in Section 10.2 in immediately available funds without set-off or counterclaim. The Agent will promptly thereafter cause to be distributed immediately available funds relating to the payment of principal or interest or 46 fees (other than amounts payable pursuant to Section 2.10, 2.11, 2.12, 2.14, 2.16 or 2.17) to the Lenders, in accordance with their respective Ratable Portions, for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Payment received by the Agent after 12:00 noon (New York City time) shall be deemed to be received on the next Business Day. (b) Each Borrower hereby authorizes each of the Agent, each Lender and Issuer, if and to the extent payment owed to the Agent, such Lender or such Issuer is not made when due hereunder or under any Loan held by the Agent, such Lender and Issuer, to charge from time to time against any or all of the Borrowers' accounts (other than accounts used exclusively for payroll) with the Agent, such Lender or such Issuer any amount so due. In addition, each Borrower hereby authorizes the Swing Bank, if and to the extent payment owed to the Agent, any Lender or any Issuer is not made when due hereunder or under any Loan held by the Agent, such Lender and Issuer, to make a Swing Loan to such Borrower in the amount of such payment owed to be paid to the Agent to be used to pay such amount. The Agent, Lenders and Issuers each agree promptly to notify the Borrowers after any such application made by the Agent, such Lender or such Issuer (as the case may be); provided, however, that the failure to give such notice shall not affect the validity of the application. (c) All computations of interest and of fees shall be made by the Agent on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest and fees are payable. Each determination by the Agent of an interest calculation hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fee, as the case may be; provided, however, that if such extension would cause payment of interest on or principal of any Eurodollar Rate Loan to be made in the next 47 calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Agent shall have received notice from the Borrowers prior to the date on which any payment is due hereunder to the Lenders that the Borrowers will not make such payment in full, the Agent may assume that the Borrowers have made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrowers shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate. (f) If any Lender (a "Non-Funding Lender") has (x) failed to make a Revolving Credit Loan required to be made by it hereunder, and the Agent has determined that such Lender is not likely to make such Revolving Credit Loan or (y) given notice to the Borrowers or the Agent that it will not make, or that it has disaffirmed or repudiated any obligation to make, Revolving Credit Loans, in each case by reason of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 or otherwise, any payment made on account of the principal of the Revolving Credit Loans outstanding shall be made as follows: (i) in the case of any such payment made on any date when and to the extent that, in the determination of the Agent, any Borrower would be able, under the terms and conditions hereof, to reborrow the amount of such payment under the Commitments and to satisfy any applicable conditions precedent set forth in Section 6.2 to such reborrowing, such payment shall be made on account of the outstanding Revolving Credit Loans held by the Lenders other than the Non-Funding Lender pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans of such Lenders; 48 (ii) otherwise, such payment shall be made on account of the outstanding Revolving Credit Loans held by the Lenders pro rata according to the respective outstanding principal amounts of such Revolving Credit Loans; and (iii) any payment made on account of interest on the Revolving Credit Loans shall be made pro rata according to the respective amounts of accrued and unpaid interest due and payable on the Revolving Credit Loans with respect to which such payment is being made. 2.14. Taxes. (a) Any and all payments by any Borrower under each Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Agent (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including, without limitation, deductions applicable to additional sums payable under this Section 2.14) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (iv) such Borrower shall deliver to the Agent evidence of such payment to the relevant taxation or other authority. (b) In addition, each Borrower jointly and severally agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any political subdivision thereof or any applicable foreign 49 jurisdiction which arise from any payment made under any Loan Document or from the execution, delivery or registration of, or otherwise with respect to, any Loan Document (collectively, "Other Taxes"). (c) Each Borrower jointly and severally agrees to indemnify each Lender and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.14) paid by such Lender or the Agent (as the case may be) and any liability (including, without limitation, for penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender or the Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes or Other Taxes, the Borrowers will furnish to the Agent, at its address referred to in Section 10.2, the original or a certified copy of a receipt evidencing payment thereof. (e) Without prejudice to the survival of any other agreement of any Borrower hereunder, the agreements and obligations of each Borrower contained in this Section 2.14 shall survive the payment in full of the Obligations. 2.15. Sharing of Payments, Etc. (a) If any Lender (other than the Swing Advance Bank) shall obtain any payment (whether voluntary, involuntary, through the exer- cise of any right of set off or otherwise) on account of Loans made by it (other than pursuant to Section 2.10, 2.11, 2.12 or 2.14), and there is any Swing Advance outstanding in respect of which the Swing Advance Bank has not received payment in full from the Lenders pursuant to Section 2.18(c) or (d) or there is any Letter of Credit Reimbursement Obligation outstanding in respect of which the relevant Issuer has not received payment in full from the Lenders pursuant to Section 2.16(h), such Lender (a "Purchasing Lender") shall purchase a participation in all such Swing Advances and Reimbursement Obligations (pro rata as between each, if both are then outstanding) in an amount equal to the lesser of such payment and the amount of such Swing Advances and Reimbursement Obligations for which the Swing Advance Bank and the relevant Issuer, as the case may be, has not so received payment in full. If, after giving 50 effect to the foregoing, any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Loans made by it (other than pursuant to Sections 2.10, 2.11, 2.12 or 2.14) in excess of its Ratable Portion of payments on account of the Loans obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in their Loans as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them. (b) If all or any portion of any payment received by a Purchasing Lender is thereafter recovered from such purchasing Lender, such purchase from each selling Lender described in paragraph (a) above (a "Selling Lender") shall be rescinded and such Selling Lender shall repay to the Purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Selling Lender's ratable share (according to the proportion of (i) the amount of such Selling Lender's required repayment to (ii) the total amount so recovered from the Purchasing Lender) of any interest or other amount paid or payable by the Purchasing Lender in respect of the total amount so recovered. The Borrowers agree that any Purchasing Lender purchasing a participation from another Selling Lender pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including, without limitation, the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrowers in the amount of such participation. 2.16. Letter of Credit Facility. (a) On the terms and subject to the conditions contained in this Agreement, each Issuer agrees to issue one or more Letters of Credit at the request of any Borrower for the account of such Borrower from time to time during the period commencing on the Closing Date and ending on the Termination Date; provided, however, that no Issuer shall be under any obliga- tion to issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain such Issuer from issu- ing such Letter of Credit or any Requirement of Law applicable to such Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such 51 Issuer shall prohibit, or request that such Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuer with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Issuer is not otherwise compensated) not in effect on the date hereof or result in any unreimbursed loss, cost or expense which was not applicable, in effect or known to such Issuer as of the date hereof and which such Issuer in good faith deems material to it; (ii) such Issuer shall have received written notice from the Agent, any Lender or any Borrower, on or prior to the Business Day prior to the requested date of issuance of such Letter of Credit, that one or more of the applicable conditions contained in Article III is not then satisfied; (iii) after giving effect to the issuance of such Letter of Credit, the Letter of Credit Obligations exceed $20,000,000; (iv) the amount of the Letter of Credit requested exceeds such Borrower's Available Credit; (v) fees due in connection with a requested issuance have not been paid; or (vi) after giving effect to the issuance of such Letter of Credit, the aggregate amount of all Loans and Letter of Credit Obligations owed by all Borrowers is greater than the sum of (A) the aggregate amount of the Borrowing Bases of all of the Borrowers (calculated only with respect to Eligible Accounts) and (B) $25,000,000. None of the Lenders (other than the Issuers) shall have any obligation to issue any Letter of Credit. (b) In no event shall: (i) the expiration date of any Letter of Credit fall after the Termination Date, unless the Agent shall otherwise consent; or 52 (ii) any Issuer issue any Letter of Credit for the purpose of supporting the issuance of any letter of credit by any other Person (other than those to be issued on the Closing Date or as otherwise permitted by the Agent). (c) Prior to the issuance of each Letter of Credit, and as a condition of such issuance and of the participation of each Revolving Credit Lender (other than the Issuer thereof) in the Letter of Credit Obligations arising with respect thereto, the Borrowers shall have delivered to the Issuer thereof a letter of credit reimbursement agreement, in a form satisfactory to the Issuer (a "Letter of Credit Reimbursement Agreement"), signed by such Borrower, and such other documents or items as may be required pursuant to the terms thereof. In the event of any conflict between the terms of any Letter of Credit Reimbursement Agreement and this Agreement, the terms of this Agreement shall govern. (d) In connection with the issuance of each Letter of Credit, such Borrower shall give the Issuer thereof and the Agent at least three Business Days' prior written notice or such other notice acceptable to the Issuer thereof (a "Letter of Credit Request"), in substantially the form of Exhibit H, of the requested issuance of such Letter of Credit. Such notice shall be irrevocable and shall specify the stated amount of the Letter of Credit requested, which stated amount shall not be less than $2,500, the date of issuance of such requested Letter of Credit (which day shall be a Business Day), the date on which such Letter of Credit is to expire (which date shall be a Business Day), and the Person for whose benefit the requested Letter of Credit is to be issued. Such notice, to be effective, must be received by such Issuer and the Agent not later than 12:00 noon (New York City time) on the last Business Day on which notice can be given under the immediately preceding sentence. (e) Subject to the terms and conditions of this Section 2.16 and provided that the applicable conditions set forth in Article III are satisfied, such Issuer shall, on the requested date, issue a Letter of Credit on behalf of the Borrower in accordance with the Issuer's usual and customary business practices. On the date of the proposed issuance of the Letter of Credit, the Agent shall confirm to the Issuer of the requested Letter of Credit that the applicable conditions in Article III are satisfied. 53 (f) Immediately upon the issuance by an Issuer of a Letter of Credit in accordance with the terms and conditions of this Agreement, such Issuer shall be deemed to have sold and transferred to each Revolving Credit Lender, and each Revolving Credit Lender shall be deemed irrevocably and unconditionally to have purchased and received from such Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Revolving Credit Lender's Ratable Portion, in such Letter of Credit and the obligations of the Borrowers with respect thereto (including, without limitation, all Letter of Credit Obligations with respect thereto) and any security therefor and guaranty (if any) pertaining thereto. (g) In determining whether to pay under any Letter of Credit, no Issuer shall have any obligation relative to the Lenders other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by any Issuer under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not put such Issuer under any resulting liability to any Lender. (h) In the event that any Issuer makes any payment under any Letter of Credit and the Borrowers shall not have repaid such amount to such Issuer pursuant to Section 2.16(l), such Issuer shall promptly notify the Agent, which shall promptly notify each Revolving Credit Lender of such failure, and each Revolving Credit Lender shall promptly and unconditionally pay to the Agent for the account of such Issuer the amount of such Revolving Credit Lender's Ratable Portion of such payment in Dollars and in immediately available funds and the Agent shall make such payment to the Issuer. If the Agent so notifies such Revolving Credit Lender prior to 12:00 noon (New York City time) on any Business Day, such Revolving Credit Lender shall make available to the Agent for the account of such Issuer its Ratable Portion of the amount of such payment on such Business Day in immediately available funds. If and to the extent such Revolving Credit Lender shall not have so made such Revolving Credit Lender's Ratable Portion of the amount of such payment available to the Agent for the account of such Issuer, such Revolving Credit Lender agrees to pay to the Agent for the account of such Issuer forthwith 54 on demand such amount together with interest thereon, for each day from such date until the date such amount is repaid to the Agent for the account of such Issuer, at the Federal Funds Rate. The failure of any Revolving Credit Lender to make available to the Agent for the account of such Issuer its Ratable Portion of any such payment shall not relieve any other Revolving Credit Lender of its obligation hereunder to make available to the Agent for the account of such Issuer its Ratable Portion of any payment on the date such payment is to be made, but no Revolving Credit Lender shall be responsible for the failure of any other Revolving Credit Lender to make available to the Agent for the account of any Issuer such other Revolving Credit Lender's Ratable Portion of any such payment. (i) Whenever any Issuer receives a payment of a Reimbursement Obligation as to which the Agent has received for the account of such Issuer any payment from a Revolving Credit Lender pursuant to Section 2.15 or 2.16(h), the Issuer shall pay to the Agent and the Agent shall promptly pay to each Revolving Credit Lender, in immediately available funds, an amount equal to such Revolving Credit Lender's pro rata share of such payment based on the respective amounts the Revolving Credit Lenders have paid in respect of such Reimbursement Obligation. (j) Upon the request of any Revolving Credit Lender, each Issuer shall furnish to such Revolving Credit Lender copies of any Letter of Credit Reimbursement Agreement to which such Issuer is a party and such other documentation as may reasonably be requested by such Revolving Credit Lender. (k) The obligations of the Revolving Credit Lenders to make payments to the Agent for the account of each Issuer with respect to Letters of Credit shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances (except as expressly provided in Section 2.16(g)), including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the Collateral Documents; 55 (ii) the existence of any claim, set-off, defense or other right which the Borrowers may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Agent, any Issuer, any Revolving Credit Lender or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transaction (including, without limitation, any underlying transaction between the Borrowers and the beneficiary named in any Letter of Credit); (iii) any draft, certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Collateral Documents; or (v) the occurrence of any Default or Event of Default. (l) The Borrower for whose account the Letter of Credit was issued agrees to pay to each Issuer the amount of all Reimbursement Obligations owing to such Issuer under any Letter of Credit immediately when due, irrespective of any claim, set-off, defense or other right which such Borrower may have at any time against such Issuer or any other Person. Such Borrower agrees to reimburse each Issuer for all amounts which such Issuer pays under such Letter of Credit no later than the time specified in such Letter of Credit Reimbursement Agreement. If such Borrower does not pay (either from the proceeds of a Borrowing or otherwise) any such Reimbursement Obligation when due, such Reimburse- ment Obligation shall immediately constitute, without necessity of further act or evidence, a loan to such Borrower made by the relevant Issuer except to the extent the Agent has received payment from Revolving Credit Lenders for the account of such Issuer pursuant to Section 2.16(h). Upon the making of such payment, such Revolving Credit Lender shall be deemed to have made a Revolving Credit Loan to such Borrower in the amount of such payment. The loan by such Issuer shall be payable on demand with interest thereon computed from the date on which such Reimbursement 56 Obligation arose to the date of repayment in full of such loan, at the rate of interest applicable to Revolving Credit Loans bearing interest at a rate based on the Base Rate during such period (including the Applicable Base Rate Margin thereon). If any payment made by or on behalf of such Borrower and received by an Issuer with respect to any Letter of Credit is rescinded or must otherwise be returned by such Issuer for any reason and if such Issuer has made payment to the Agent on account thereof pursuant to Section 2.16(i), each Revolving Credit Lender shall, upon notice by such Issuer, forthwith pay over to such Issuer an amount equal to such Revolving Credit Lender's Ratable Portion of the amount which must be so returned by such Issuer based on the respective amounts paid in respect thereof to the Revolving Credit Lenders pursuant to Section 2.16(i). (m) The Borrowers agree to pay the following amounts with respect to Letters of Credit issued hereunder: (i) to the Agent for the ratable benefit of the Revolving Credit Lenders, with respect to each Letter of Credit, a fee equal to the Letter of Credit Fee Percentage of the maximum amount available from time to time to be drawn under such Letter of Credit, payable monthly in arrears on the first day of each month; provided that during the continuance of an Event of Default, such fee shall be increased by 2.00% per annum and shall be payable on demand; (ii) to the Agent for the benefit of the Issuer, with respect to each Letter of Credit, a fee equal to .25% per annum of the maximum amount available from time to time to be drawn under such Letter of Credit, payable monthly in arrears on the first day of each month; and (iii) to each Issuer, with respect to the issuance, amendment or transfer of each Letter of Credit and each drawing made thereunder, documentary and processing charges in accordance with such Issuer's standard schedule for such charges in effect at the time of issuance, amendment, transfer or drawing, as the case may be. 57 2.17. Cash Collateral Account. (a) Each Borrower has established a Cash Collateral Account with Citibank in New York, New York (collectively, the "Cash Collateral Accounts"). (b) As collateral security for the Obligations, each Borrower hereby transfers, assigns and pledges to the Agent and grants to the Agent a Lien on and security interest in, for the benefit of the Secured Parties on a first priority basis, all of the right, title and interest of such Borrower in its Cash Collateral Account and all cash, deposits, Cash Equivalents and other instruments held in such Cash Collateral Account as security for the Obligations. The Agent shall possess sole dominion and control over each Cash Collateral Account. As long as any of the Obligations remain unpaid or any of the Commitments are outstanding, neither the Borrowers nor any Person or entity claiming by, through or under the Borrowers shall have any control over the use of, or any right to effect a withdrawal from, any of the Cash Collateral Accounts. All amounts in the Cash Collateral Accounts shall be applied to the Obligations by the Agent as specified in Section 2.17(e). (c) Each Borrower shall instruct its account debtors to mail their remittances to one or more lockboxes or cause such amounts to be deposited into blocked accounts approved by the Agent from time to time and each Borrower agrees to take all steps necessary or desirable to cause such Borrower's account debtors to mail their remittances to such lockbox for processing for deposit in such Borrower's Cash Collateral Account. (d) Each Borrower shall cause to be deposited in its Cash Collateral Account all immediately available funds payable to it other than through the lockbox. To the extent that any Borrower maintains a deposit account (other than in connection with any lockbox), such Borrower shall, or shall cause, all immediately available funds in such account to be wired to its Cash Collateral Account on a regular basis and in no event less frequently than as reasonably requested by Agent. (e) Each Borrower agrees that all immediately available funds in its Cash Collateral Account shall be applied first to accrued and unpaid interest on the Loans to the extent due and payable, next to the outstanding principal amount of the Swing Loans then outstanding and, if 58 no Swing Loans are outstanding, to the Revolving Credit Loans then outstanding and finally to any other Obligations then due and payable. If there are no Loans outstanding and no other Obligations then due and payable, then all such immediately available funds in such Cash Collateral Account shall be retained therein to cash collateralize the Letter of Credit Obligations owed, directly or indirectly, by such Borrower then outstanding except that (i) if there is no Default or Event of Default then continuing, the excess of the sum of such funds in the Cash Collateral Account plus the Borrowing Base of such Borrower over the Letter of Credit Obligations of such Borrower then outstanding shall be released to such Borrower and (ii) as long as a Default or an Event of Default is continuing, no funds shall be released to the Borrowers as long as any of the Obligations remain unpaid. If (A) the only Loans outstanding are Eurodollar Rate Loans, (B) there are no Letter of Credit Obligations immediately due and payable, (C) the application of such immediately available funds will cause the Borrowers to incur an obligation under Section 10.4 and (D) there is no Default or Event of Default then continuing, then all such immediately available funds in the Cash Collateral Account shall be retained therein until one of the conditions set forth in clauses (A) through (D) are no longer met, in which case such immediately available funds shall be applied in accordance with the first sentence of Section 2.17(e). 2.18. Swing Advances. (a) The Swing Advance Bank, in its sole discretion, on the terms and subject to the conditions contained in this Agreement, may make advances (each a "Swing Advance") to each Borrower from time to time on any Business Day during the period from the date hereof until the day preceding the Termination Date in an aggregate amount not to exceed at any time outstanding the lesser of (i) the Available Credit for such Borrower, and (ii) the difference between the Swing Advance Bank's Commitment and the aggregate outstanding principal amount of the Swing Advances and the Revolving Credit Loans made by it and its Ratable Portion of all Letter of Credit Obligations then outstanding. The Swing Advance Bank shall be entitled to rely on the most recent Borrowing Base Certificate delivered to the Agent. Within the limits set forth above, Swing Advances repaid may be reborrowed under this Section 2.18. 59 (b) Each Swing Advance shall be made upon such notice as the Swing Loan Bank and the Borrowers shall agree. Upon fulfillment of the applicable conditions set forth in Article III, the Swing Advance Bank will make each Swing Advance available to the Borrowers at the Agent's address referred to in Section 10.2. Unless the Borrowers advise the Swing Advance Bank to the contrary, the Swing Advance Bank may make a Swing Advance to pay any of the Obligations that are due and payable without notice or further request from the Borrowers. All Swing Advances shall be made as Base Rate Loans. (c) The Agent shall notify each Revolving Credit Lender no less frequently than weekly, as determined by the Agent, of the amount of the Swing Advances outstanding as of 3:00 P.M. (New York City time) as of such date (the "Computation Date") and each Revolving Credit Lender's Ratable Portion thereof. Each Lender shall before 12:00 noon (New York City time) on the next Business Day (the "Settlement Date") make available to the Agent, in immediately available funds, the amount of its Ratable Portion of the principal amount of all such Swing Advances. Upon such payment by a Revolving Credit Lender, such Revolving Credit Lender shall be deemed to have made a Revolving Credit Loan to the relevant Borrower in the amount of such payment. The Agent shall use such funds to repay the Swing Advance to the Swing Advance Bank. To the extent that any Revolving Credit Lender fails to make such payment to the Swing Advance Bank, the relevant Borrower shall repay such Swing Advance on demand and in any event on the Termination Date. (d) During the continuance of a Default under Section 8.1(e), each Revolving Credit Lender shall acquire, without recourse or warranty, an undivided participation in each Swing Advance otherwise required to be repaid by such Revolving Credit Lender pursuant to the preceding paragraph, which participation shall be in a principal amount equal to such Revolving Credit Lender's Ratable Portion of such Swing Advance, by paying to the Swing Advance Bank on the date on which such Revolving Credit Lender would otherwise have been required to make a payment in respect of such Swing Advance pursuant to the preceding paragraph, in immediately available funds, an amount equal to such Revolving Credit Lender's Ratable Portion of such Swing Advance. If such amount is not in fact made available to the Swing Advance Bank on the date when the Swing Advance would otherwise be required to be made pursuant to the preceding paragraph, the 60 Swing Advance Bank shall be entitled to recover such amount on demand from that Revolving Credit Lender together with interest accrued from such date at the Federal Funds Rate for three Business Days and thereafter at the rate of interest then applicable to the Revolving Credit Loans. From and after the date on which any Revolving Credit Lender purchases an undivided participation interest in a Swing Advance pursuant to this paragraph (d), the Swing Advance Bank shall promptly distribute to such Revolving Credit Lender such Revolving Credit Lender's Ratable Portion of all payments of principal and of interest on such Swing Advance, other than those received from a Revolving Credit Lender pursuant to Section 2.16 or this or the preceding paragraph (c). If any payment made by or on behalf of any Borrower and received by the Swing Advance Bank with respect to any Swing Advance is rescinded or must otherwise be returned by the Swing Advance Bank for any reason and the Swing Advance Bank has made a payment to the Agent, on account thereof, each Revolving Credit Lender shall, upon notice to the Swing Advance Bank, forthwith pay over to the Swing Advance Bank an amount equal to such Revolving Credit Lender's pro rata share of the payment so rescinded or returned based on the respective amounts paid in respect thereof to the Revolving Credit Lenders pursuant to the preceding paragraph (c). 2.19. Payment on Account of Collateral. (a) Any cash held by the Agent as Collateral and all cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of the Revolving Credit Collateral (after exercise by the Agent of its remedies under the Collateral Documents) shall be applied by the Agent: First, to the payment of the costs and expenses of such sale, including, without limitation, reasonable ex- penses of the Agent and its agents including the fees and expenses of its counsel, and all expenses, liabilities and advances made or incurred by the Agent in connection there- with; Next, to the Swing Loan Bank for the payment in full of the accrued and unpaid interest on the Swing Loans and then to the principal amount of the Swing Loans; Next, to the Revolving Credit Lenders, pro rata, for the payment in full of accrued and unpaid interest on the Revolving Credit Loans and then to the principal amount of the Revolving Credit Loans; 61 Next, to the Agent to cash collateralize any Letter of Credit Obligations in accordance with Section 8.3; Next, to the Term Lenders, pro rata, for the payment in full of accrued and unpaid interest on the Term Loans and then to the principal amount of the Term Loans; Next, to pay any other Obligations then due and owing; and Finally, after payment in full of all of the Obligations, to the payment to the relevant Borrower or to whomsoever may be lawfully entitled to receive the same as a court of competent jurisdiction may direct. (b) All cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of the Term Collateral (after exercise by the Agent of its remedies under the Barnett Pledge Agreement) shall be applied by the Agent: First, to the payment of the costs and expenses of such sale, including, without limitation, reasonable ex- penses of the Agent and its agents including the fees and expenses of its counsel, and all expenses, liabilities and advances made or incurred by the Agent in connection there- with; Next, to the Term Lenders, pro rata, for the payment in full of accrued and unpaid interest on the Term Loans and then to the principal amount of Term Loans; and Finally, after payment in full of all of the Obligations, to the payment to the relevant Borrower or to whomsoever may be lawfully entitled to receive the same as a court of competent jurisdiction may direct. ARTICLE III CONDITIONS OF LENDING 3.1. Conditions Precedent to Initial Loans and Letters of Credit. The obligation of each Lender to make its initial Loan and of each Issuer to issue its initial Letter of Credit is subject to satisfaction of the conditions precedent that the Agent shall have received, on 62 the Closing Date, the following, each dated the Closing Date unless otherwise indicated, in form and substance satisfactory to the Agent and (except for the Notes) in sufficient copies for each Lender: (a) The Notes to the order of the Lenders, respectively. (b) Certified copies of (i) the resolutions of the Board of Directors of each Loan Party approving each Loan Document to which it is a party, and (ii) all documents evidencing other necessary corporate action and required governmental and third party approvals, licenses and consents with respect to each Loan Document and the transactions contemplated thereby. (c) A copy of the articles or certificate of incorporation of each Loan Party and of each of its Subsidiaries which is not a Loan Party certified as of a recent date by the Secretary of State of the state of incorporation of such Loan Party or Subsidiary, together with certificates of such official attesting to the good standing of each such Loan Party and Subsidiary, and a copy of the certificate of incorporation and the By-Laws of each Loan Party and of each of its Subsidiaries certified as of the Closing Date by the Secretary or an Assistant Secretary of each such Loan Party or Subsidiary. (d) A certificate of the Secretary or an Assistant Secretary of each Loan Party certifying the names and true signatures of each officer of such Loan Party who has been authorized to execute and deliver any Loan Document or other document required hereunder to be executed and delivered by or on behalf of such Loan Party. (e) A copy of each Related Document, certified as being complete and correct by a Responsible Officer of a Borrower. (f) The Collateral Documents Amendment, duly executed by each of the Borrowers and Barnett. (g) A letter of credit in the amount of $2,384,923.50, issued by First Union and naming the Agent as beneficiary, in form and substance satisfactory to the Agent. 63 (h) The following letters addressed to the Agent on behalf of the Lenders and the Issuers: (i) a letter from Holdings stating that the Agent and the Lenders may have access to the books and records of the Borrowers as set forth in the Credit Agreement and the Loan Documents and (ii) a letter from Aurora Investment Co., the landlord at the Bedford Heights, Ohio warehouse stating that upon the occurrence and during the continuance of an Event of Default, the Agent and the Lenders may use such warehouse to hold and sell the Collateral and otherwise exercise its remedies under the Collateral Documents for a rental payment equal to the lower of the rent due and payable under the Lease covering such warehouse and the fair market value rent for such warehouse as agreed to by the Agent and such landlord. (i) A favorable opinion of Shereff, Friedman, Hoffman & Goodman, LLP, counsel to the Loan Parties, in substantially the form of Exhibit F, and as to such other matters as any Lender through the Agent may reasonably request. (j) A Borrowing Base Certificate, executed by a Responsible Officer of each Borrower, satisfactory to the Agent. (k) A certificate of the treasurer or chief financial officer of the Borrowers (attached to which shall be pro forma balance sheets of each Borrower as of March 31, 1996), stating that each Borrower is Solvent after giving effect to the initial Loans, the application of the proceeds thereof in accordance with Section 6.10 and the payment of all estimated legal, accounting and other fees related hereto and thereto. (l) A certificate, signed by a Responsible Officer of each Borrower, stating that each of the conditions specified in Sections 3.2(b) and (g), and 3.3(a) has been satisfied. (m) [Reserved] (n) A copy of a letter from the Borrowers' inde- pendent public accountants regarding (i) the Lenders' reli- ance upon such accountant's professional services and on the reports and other financial information delivered by such accountants in connection with the extension of credit from 64 time to time under this Agreement and in connection with the preparation, review, execution, delivery, amendment, modifi- cation, administration, collection and/or enforcement of this Agreement or any of the other Loan Documents and (ii) such other matters as shall be reasonably requested by the Lenders, in form and substance satisfactory to the Agent. (o) [Reserved] (p) The Barnett Pledge Agreement, duly executed by the Company, together with: (i) certificates representing the Pledged Shares (as defined in such Pledge Agreement) and undated stock powers for such certificates executed in blank; and (ii) evidence that all action necessary or, in the opinion of the Agent, desirable to perfect and protect the Lien created by such Pledge Agreement have been taken. (q) Such additional documents, information and materials as any Lender, through the Agent, may reasonably request. 3.2. Additional Conditions Precedent to Initial Loans and Letters of Credit. The obligation of each Lender to make its initial Loan and of each Issuer to issue its initial Letter of Credit is subject to the further conditions precedent that: (a) Each of the Related Documents shall be in form and substance satisfactory to the Lenders. (b) On the Closing Date, the following statements shall be true: (i) There has been no change since December 31, 1995 in the corporate, capital or legal structure of Holdings, the Company or any Borrower or any of their respective Subsidiaries except as set forth in the Disclosure Document and the Public Filings without the consent of the Lenders and the Agent; 65 (ii) All necessary governmental and third party approvals required to be obtained by any Loan Party in connection with the transactions contemplated hereby and its obtaining the Loans and Letters of Credit have been obtained; (iii) There exists no claim, action, suit, investigation or proceeding (including, without limi- tation, shareholder or derivative litigation) pending or, to the knowledge of Holdings, the Company or any Borrower, threatened in any court or before any arbitrator or Governmental Authority which relates to the financing hereunder, the Exchange Offer and Consent Solicitation or which, if adversely determined, would have a Material Adverse Effect; (iv) The Company shall have exchanged for at least $32,467,500 of Existing Senior Subordinated Notes its Exchange Notes, and the consents required under the Exchange Offer and Consent Solicitation shall have been obtained; (v) The Company shall have received not less than $28,000,000 in proceeds from the issuance of Common Stock of Barnett, and shall have used such proceeds to repay all borrowings of Barnett under the Original Credit Agreement and the Term Loan Credit Agreement not otherwise refinanced hereunder; (vi) All of the obligations (as defined in the Term Loan Credit Agreement) shall have been paid in full; and (vii) There shall exist no default (or event which would constitute a default with the giving of notice or lapse of time) under any existing debt instrument of Holdings, the Company, any Borrower or any of its Subsidiaries (other than those defaults previously disclosed to the Lenders and set forth on Schedule 4.2). (c) All costs and accrued and unpaid fees and expenses (including, without limitation, legal fees and existing expenses) required to be paid to the Lenders on or before the Closing Date, including, without limitation, those referred to in Sections 2.4, 2.16 and 10.4, to the extent then due and payable, shall have been paid. 66 (d) No Lender in its sole judgment exercised reasonably shall have determined (i) that there has been any Material Adverse Change since December 31, 1995 except as set forth in the Disclosure Document and the Public Filings, or (ii) that there has occurred any adverse change which such Lender deems material, in its sole judgment, exercised reasonably, in the financial markets generally, since the date hereof. (e) No Lender, in its sole judgment, exercised reasonably, shall have determined that there is any claim, action, suit, investigation, litigation or proceeding (including, without limitation, shareholder or derivative litigation) pending or threatened in any court or before any arbitrator or Governmental Authority which, if adversely determined, would have a Material Adverse Effect. (f) Each Lender shall be satisfied, in its sole judgment, exercised reasonably, that the corporate, capital, legal and management structure of Holdings, the Company, each Borrower and its Subsidiaries, and that the nature and status of all Contractual Obligations, securities, labor, tax, ERISA, employee benefit, environmental, health and safety matters, in each case, involving or affecting Holdings, the Company, each Borrower or any of its Subsidiaries is not different from that described in the Disclosure Document or the Public Filings. (g) After giving effect to the transactions contemplated to occur on the Closing Date and after giving effect to the payment of all of the fees incurred in connection therewith owing to the Lenders and the underwriters (other than legal and other similar fees), the excess of the lesser of (I) the Commitments hereunder and (II) the sum of the Borrowing Bases of all of the Borrowers over the Loans and Letters of Credit Obligations to be incurred hereunder on the Closing Date shall be no less than $5,000,000. (h) The Intercorporate Agreement, the Tax Sharing Agreement and the Trademark License Agreement shall be in form and substance satisfactory to the Lenders. 67 3.3. Conditions Precedent to Each Loan and Letter of Credit. The obligation of each Lender to make any Loan (including the Loan being made by such Lender on the Closing Date) and of each Issuer to issue any Letter of Credit shall be subject to the further conditions precedent that: (a) The following statements shall be true on the date of such Loan or issuance, before and after giving effect thereto and to the application of the proceeds therefrom and to such issuance (and the acceptance by the relevant Borrower of the proceeds of such Loan or such Letter of Credit shall constitute a representation and warranty by the Borrowers that on the date of such Loan or issuance such statements are true): (i) The representations and warranties contained in Article IV and of each Loan Party in the other Loan Documents are correct on and as of such date as though made on and as of such date; and (ii) No Default or Event of Default exists or will result from any Loan being made or Letter of Credit being issued on such date. (b) The making of the Loans or the issuance of such Letter of Credit on such date does not violate any Requirement of Law and is not enjoined, temporarily, preliminarily or permanently. (c) The Agent shall have received such additional documents, information and materials as any Lender or Issuer, through the Agent, may reasonably request. ARTICLE IV REPRESENTATIONS AND WARRANTIES To induce the Lenders and the Agent to enter into this Agreement, the Company and each Borrower represents and warrants to the Lenders and the Agent that: 4.1. Corporate Existence; Compliance with Law. Each Loan Party and each of its Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incor- poration; (ii) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction 68 where such qualification is necessary, except for failures which could not in the aggregate have a reasonable likeli- hood of having a Material Adverse Effect; (iii) has all requisite corporate power and authority and the legal right to own, pledge, mortgage and operate its properties, to lease the property it operates under lease and to conduct its business as now or currently proposed to be conducted; (iv) is in compliance with its certificate of incorporation and by-laws; (v) is in compliance with all other applicable Requirements of Law except for such non-compliances which could not in the aggregate have a reasonable likelihood of having a Material Adverse Effect; and (vi) has all necessary licenses, permits, consents or approvals from or by, has made all necessary filings with, and has given all necessary notices to, each Governmental Authority having jurisdiction, to the extent required for such ownership, operation and conduct, except for licenses, permits, consents or approvals which can be obtained by the taking of ministerial action to secure the grant or transfer thereof or failures which could not in the aggregate have a reasonable likelihood of having a Material Adverse Effect. 4.2. Corporate Power; Authorization; Enforceable Obligations. (a) The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party and the consummation of the transactions related to the financing contemplated hereby: (i) are within such Loan Party's corporate powers; (ii) have been duly authorized by all necessary corporate action, including, without limitation, the consent of stockholders where required; (iii) do not and will not (A) contravene any Loan Party's or any of its Subsidiaries' respective certificate of incorporation or by-laws or other comparable governing documents, (B) violate any other applicable Requirement of Law (including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System), or any order or decree of any Governmental Authority or arbitrator, (C) except as set forth on Schedule 4.2, conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any Contractual Obligation of any Loan Party or any of its Subsidiaries which provides for 69 payments of more than $1,000,000 in any one year of any Loan Party or any of its Subsidiaries other than those which, in the aggregate,have no reasonable likelihood of having a Material Adverse Effect, or (D) result in the creation or imposition of any Lien upon any of the property of any Loan Party or any of its Subsidiaries, other than those in favor of the Agent pursuant to the Collateral Documents; and (iv) do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person, other than (A) those which have been obtained or made and copies of which have been or will be delivered to the Agent pursuant to Section 3.1, and each of which on the Closing Date will be in full force and effect and (B) those which if not obtained in the aggregate have no reasonable likelihood of having a Material Adverse Effect. (b) This Agreement has been, and each of the other Loan Documents will have been upon delivery thereof pursuant to Section 3.1, duly executed and delivered by each Loan Party thereto. This Agreement is, and the other Loan Documents will be, when delivered hereunder, the legal, valid and binding obligation of each Loan Party thereto, enforceable against it in accordance with its terms, except that enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, mora- torium and similar laws affecting the enforcement of creditor's rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether such enforceability is considered in a proceeding in equity or at law). (c) The execution, delivery and performance by each Loan Party of the Related Documents to which it is a party and the consummation of the transactions contemplated thereby, including, without limitation, the issuance of the Debentures: (i) are within such Loan Party's respective corporate powers; (ii) have been duly authorized by all necessary corporate action, including, without limitation, the consent of stockholders where required; 70 (iii) do not and will not (A) contravene or violate any Loan Party's or any of its Subsidiaries' respective certificate of incorporation or by-laws or other comparable governing documents, (B) violate any other Requirement of Law, or any order or decree of any Governmental Authority or arbitrator, (C) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any Contractual Obligation of any Loan Party or any of its Subsidiaries, except such as in the aggregate have no reasonable likelihood of having a Material Adverse Effect or (D) result in the creation or imposition of any Lien upon any of the property of any Loan Party or any of its Subsidiaries; and (iv) do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person, other than (A) those which will have been obtained at the Closing Date, each of which will be in full force and effect on the Closing Date, and (B) those which in the aggregate, if not obtained, would have no reasonable likelihood of having a Material Adverse Effect. (d) Each of the Related Documents has been or at the Closing Date will have been duly executed and delivered by each Loan Party party thereto and at the Closing Date will be the legal, valid and binding obligation of each Loan Party party thereto, enforceable against it in accordance with its terms, except that enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting the enforcement of creditor's rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.3. Taxes. All federal, state, local and foreign tax returns, reports and statements (collectively, the "Tax Returns") required to be filed by each Loan Party or any of its Tax Affiliates have been filed with the appropriate governmental agencies in all jurisdictions in which such Tax Returns, are required to be filed, except for inadvertent omissions which could not in the aggregate have 71 any Material Adverse Effect. All such Tax Returns are correct in all material respects, and all taxes, charges and other impositions shown thereon to be due and payable have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof, except where contested in good faith and by appropriate proceedings if (i) adequate reserves therefor have been established on the books of such Loan Party or such Subsidiary in conformity with GAAP and (ii) all such non-payments could not in the aggregate have any reasonable likelihood of having a Material Adverse Effect. Proper and accurate amounts have been withheld by each Loan Party and each of its respective Tax Affiliates from their respective employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authorities. Except as set forth on Schedule 4.3, none of the Loan Parties or any of their Tax Affiliates has (i) executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any charges; (ii) agreed or been requested to make any adjust- ment under Section 481(a) of the Code by reason of a change in accounting method or otherwise; or (iii) any obligation under any written tax sharing agreement, other than the Tax Sharing Agreement. 4.4. Full Disclosure. (a) The written state- ments prepared or furnished by or on behalf of any Loan Party or any of its Affiliates (other than the Ideal Subsidiaries) in connection with the Loan Documents, the Related Documents and the consummation of the transactions contemplated thereby, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein or therein not misleading. All facts known to any Loan Party which are material to an understanding of the financial condition, business, properties or prospects of the Loan Parties and their Subsidiaries taken as one enter- prise have been disclosed to the Lenders. Each Lender hereby acknowledges that it has received a copy of the Disclosure Document and the Public Filings. 72 (b) The pro forma consolidated statements of financial condition and pro forma consolidated statements of operations of the Company and its Subsidiaries contained in the Disclosure Document are the unaudited consolidated financial statements of the Company and its Subsidiaries, as of the dates and for the periods specified therein, adjusted to give effect to certain events and assumptions as set forth therein. (c) The Company has delivered to each Lender a true, complete and correct copy of the Disclosure Document. The Disclosure Document complies as to form in all material respects with all applicable requirements of all applicable state and Federal securities laws. 4.5. Financial Matters. (a) The consolidated balance sheet of Holdings and its Subsidiaries as at June 30, 1995, and the related consolidated statements of income, retained earnings and cash flows of Holdings and its Subsidiaries for the fiscal year then ended, certified by Arthur Andersen & Co., and the consolidated balance sheets of Holdings and its Subsidiaries as at December 31, 1995, and the related consolidated statements of income, retained earnings and cash flows of Holdings and its Subsidiaries for the six months then ended, certified by the chief financial officer of Holdings, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheets as at December 31, 1995, and said statements of income, retained earnings and cash flows for the six months then ended, to year-end audit adjustments, the consolidated financial condition of Holdings and its Subsidiaries as at such dates and the consolidated results of the operations of Holdings and its Subsidiaries for the period ended on such dates, all in conformity with GAAP. (b) Since December 31, 1995, there has been no Material Adverse Change and there have been no events or developments that could in the aggregate reasonably be expected to have a Material Adverse Effect, other than as set forth in the Disclosure Document and the Public Filings. (c) None of Holdings nor any of its Subsidiaries had at June 30, 1995 any material obligation, contingent liability or liability for taxes, long-term leases or unusual forward or long-term commitment which is not reflected in the balance sheet at such date referred to in subsection (a) above or in the notes thereto. 73 (d) The unaudited pro forma consolidated balance sheets of each Borrower and its consolidated Subsidiaries (the "Pro Forma Balance Sheet"), copies of which have been delivered to each Lender, have been prepared as of December 31, 1995, reflect as of such date, on a pro forma basis, the consolidated financial condition of each Borrower and its Subsidiaries, and the Operating Plan was reasonably based on the information available to Holdings, the Company and each Borrower at the time so furnished and on the Closing Date. (e) Each Borrower is, and on a consolidated basis the Company and its Subsidiaries are, Solvent. 4.6. Litigation. There are no pending or, to the knowledge of the Company or any Borrower, threatened actions, investigations or proceedings affecting the Company or any of its Subsidiaries before any court, Governmental Authority or arbitrator, other than those that in the aggregate, if adversely determined, could not be reasonably expected to have a Material Adverse Effect. None of the sale of any Debentures or the performance of any action by any Loan Party required or contemplated by any of the Loan Documents or the Related Documents is restrained or enjoined (either temporarily, preliminarily or permanently), and no material adverse condition has been imposed by any Governmental Authority or arbitrator upon any of the foregoing transactions. 4.7. Margin Regulations. No Borrower is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Borrowing will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. 4.8. Ownership of Borrower; Subsidiaries. (a) The authorized capital stock of the Company consists of 9,000 shares of common stock, $0.01 par value per share, of which 102 shares are issued and outstanding and 1,000 shares of Preferred Stock, $0.10 par value per share, of which no shares are issued and outstanding. All of the outstanding capital stock of the Company has been validly issued, is fully paid and non-assessable and is owned beneficially and of record by Holdings. No authorized but unissued shares, no treasury shares and, to the best knowledge of the Company or any Borrower, no other outstanding shares of capital 74 stock of the Company are subject to any option, warrant, right of conversion or purchase or any similar right. There are no agreements or understandings with respect to the voting, sale or transfer of any shares of capital stock of the Company, or to the best knowledge of the Company or any Borrower, any agreement restricting the transfer or hypothecation of any such shares, other than in respect of the pledges thereof and covenants pursuant to the Related Documents or pursuant to the Indenture relating to the Existing 12 1/4% Senior Secured Notes, the Existing Floating Rate Senior Secured Notes and the Deferred Coupon Notes (or, after the Proposed Restructuring, pursuant to the Indenture relating to the Exchange Notes). (b) Set forth on Schedule 4.8 hereto is a complete and accurate list showing all Subsidiaries of the Company and, as to each such Subsidiary, the jurisdiction of its incorporation, the number of shares of each class of Stock authorized, the number outstanding on the date hereof and the percentage of the outstanding shares of each such class owned (directly or indirectly) by the Company. No Stock of any Subsidiary of the Company is subject to any outstanding option, warrant, right of conversion or purchase or any similar right. All of the outstanding capital Stock of each such Subsidiary has been validly issued, is fully paid and non-assessable and is owned by the Company, free and clear of all Liens. Neither the Company nor any such Subsidiary is a party to, or has knowledge of, any agreement restricting the transfer or hypothecation of any shares of Stock of any such Subsidiary, other than the Loan Documents and the Related Documents. The Company does not own or hold, directly or indirectly, any capital stock or equity security of, or any equity interest in, any Person other than such Subsidiaries and the Investments permitted by Section 7.6. 4.9. ERISA. (a) Schedule 4.9 lists all Plans maintained or contributed to by any Loan Party or any of its Subsidiaries and all Qualified Plans maintained or contributed to by any ERISA Affiliate and separately identi- fies all Title IV Plans, all Multiemployer Plans, all Qualified Plans, all unfunded Pension Plans, all multiple employer plans subject to Section 4064 of ERISA and all Retiree Welfare Plans. 75 (b) Each Qualified Plan has been determined by the IRS to qualify under Section 401 of the Code, and the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the Code, and to the best knowledge of any Loan Party nothing has occurred which would cause the loss of such qualification or tax-exempt status. (c) Each Plan, Qualified Plan and Pension Plan is in compliance in all material respects with its terms and with applicable provisions of ERISA and the Code, including, without limitation, the filing of reports required under ERISA or the Code which are true and correct in all material respects as of the date filed, and with respect to each such plan, other than a Qualified Plan, all required contribu- tions and benefits have been paid in accordance with the provisions of each such plan. (d) None of any Loan Party, any of its Subsidiaries or any ERISA Affiliate, with respect to any Qualified Plan, has failed to make any contribution or pay any amount due as required by Section 412 of the Code or Section 302 of ERISA or the terms of any such Qualified Plan. (e) There are no Title IV Plans. (f) There are no Retiree Welfare Plans. (g) With respect to each Pension Plans, other than Qualified Plans, the present value of the liabilities for all participants under each such plan using the actuarial assumptions utilized by the PBGC upon termination of plan does not exceed $500,000. (h) Except as set forth on Schedule 4.9, there has been no, nor is there reasonably expected to occur, any ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan. (i) Except as set forth on Schedule 4.9, there are no pending or, to the knowledge of any Loan Party, threatened claims, actions or lawsuits (other than claims for benefits in the normal course), asserted or instituted against (i) any Plan, Pension Plan or Qualified Plan or its assets, (ii) any fiduciary with respect to any Plan, Pension Plan or Qualified Plan or (iii) any Loan Party, any of its 76 Subsidiaries or any ERISA Affiliate with respect to any Plan. (j) Except as set forth on Schedule 4.9, none of any Loan Party, any of its Subsidiaries or any ERISA Affiliate has incurred or has any reasonable likelihood of incurring any Withdrawal Liability under Section 4201 of ERISA as a result of a complete or partial withdrawal from a Multiemployer Plan (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in any such liability). (k) Except as set forth on Schedule 4.9, within the last five years no Loan Party, any of its Subsidiaries or any ERISA Affiliate has engaged in a transaction which resulted in a Title IV Plan with Unfunded Liabilities being transferred outside of the "controlled group" (within the meaning of Section 4001(a)(14) of ERISA) of any such entity. (l) Each Loan Party, each of its Subsidiaries and each ERISA Affiliate has complied with the notice and continuation coverage requirements of Section 4980B of the Code and the regulations thereunder, except for non- compliances which could in the aggregate not be reasonably expected to have a Material Adverse Effect. (m) No Loan Party nor any of its Subsidiaries has engaged in a prohibited transaction, as defined in Section 4975 of the Code or Section 406 of ERISA, in connection with any Plan, Pension Plan or Qualified Plan which would subject or has any reasonable likelihood of subjecting any Loan Party or any of its Subsidiaries (after giving effect to any exemption) to a tax on prohibited transactions imposed by Section 4975 of the Code or any other liability which could reasonably be expected to have a Material Adverse Effect. (n) Except as set forth on Schedule 4.9, no liability under any Plan, Pension Plan or Qualified Plan (whether terminated or on-going) has been funded or satis- fied through the purchase of a contract from an insurance company that is not rated AA or better by Standard & Poor's Corporation or any equivalent or higher rating by any other nationally recognized rating agency. (o) No Loan Party, none of its Subsidiaries and no ERISA Affiliate has any liability under any terminated "employee benefit plan", as defined in Section 3(3) of ERISA. 77 (p) The present value of the liability, if any, with respect to all unfunded Pension Plans of any Loan Party, each of its Subsidiaries and each ERISA Affiliate is reflected on the most recent audited financial statements delivered to the Lenders pursuant to this Agreement. 4.10. Liens. As of the Closing Date, there are no Liens of any nature whatsoever on any properties of any Borrower or any of its Subsidiaries other than those permitted by Section 7.1. As of the Closing Date, the Liens granted by the Borrowers to the Agent pursuant to the Collateral Documents are fully perfected first priority Liens in and to the Collateral (except for such Collateral for which the Agent has not taken appropriate action to perfect with respect thereto). 4.11. Related Documents; Indentures. None of the Related Documents or any Indenture has been amended or modified in any respect and no provision therein has been waived (except as contemplated by the Exchange Offer and Consent Solicitation), and each of the representations and warranties therein are true and correct in all material respects and no default or event which with the giving of notice or lapse of time or both would be a default has occurred thereunder. 4.12. No Burdensome Restrictions; No Defaults. (a) No Loan Party nor any of its Subsidiaries (i) is a party to any Contractual Obligation the compliance with which could reasonably be expected to have a Material Adverse Effect or the performance of which by any thereof, either unconditionally or upon the happening of an event, will result in the creation of a Lien (other than a Lien granted pursuant to a Loan Document or Liens permitted by Section 7.1) on the property or assets of any thereof, or (ii) is subject to any charter or corporate restriction which could reasonably be expected to have a Material Adverse Effect. (b) No Loan Party or Subsidiary of any Loan Party is in default under or with respect to any Contractual Obligation owed by it and, to the knowledge of any Loan Party, no other party is in default under or with respect to any Contractual Obligation owed to any Loan Party or to any Subsidiary of a Loan Party, other than those defaults which could in the aggregate not be reasonably expected to have a Material Adverse Effect. 78 (c) No Event of Default or Default has occurred and is continuing. (d) There is no Requirement of Law the compliance with which by any Loan Party could reasonably be expected to have a Material Adverse Effect. 4.13. No Other Ventures. Except as set forth on Schedule 4.13, none of the Loan Parties or any of their Subsidiaries is engaged in any joint venture or partnership with any other Person, except as permitted by Section 7.6. 4.14. Investment Company Act. No Borrower is an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. The making of the Loans by the Lenders, the application of the proceeds and repayment thereof by the Borrowers and the consummation of the transactions contemplated by the Loan Documents will not violate any provision of such Act or any rule, regulation or order issued by the Securities and Exchange Commission thereunder. 4.15. Insurance. The Loan Parties and its Subsidiaries have, in full force and effect policies of insurance including, without limitation, policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers' compen- sation and employee health and welfare insurance, which are of a nature and provide such coverage as is sufficient and as is customarily carried by companies of the size and character of such Person. No Loan Party nor any of its Subsidiaries has been refused insurance for which it applied or had any policy of insurance terminated (other than at its request). 4.16. Labor Matters. (a) There are no strikes, work stoppages, slowdowns or lockouts pending or, to such Person's knowledge, threatened against or involving any Loan Party or any of their respective Subsidiaries, other than those which could in the aggregate not be reasonably expected to have a Material Adverse Effect. 79 (b) There are no arbitrations or grievances pending against or involving any Loan Party or any of their respective Subsidiaries, nor, to such Person's knowledge, are there any arbitrations or grievances threatened involving any Loan Party or any of their respective Subsidiaries, other than those which, in the aggregate, if resolved adversely to such Loan Party or such Subsidiary, could not be reasonably expected to have a Material Adverse Effect. (c) Except as set forth on Schedule 4.16, as of the Closing Date, no Loan Party nor any of its Subsidiaries is a party to, or has any obligations under, any collective bargaining agreement. (d) There is no organizing activity involving any Loan Party or any of its Subsidiaries pending or, to such Person's knowledge, threatened by any labor union or group of employees, other than those which could in the aggregate not be reasonably expected to have a Material Adverse Effect. There are no representation proceedings pending or threatened with the National Labor Relations Board, and no labor organization or group of employees of any Loan Party or any of its Subsidiaries has made a pending demand for recognition, other than those which could in the aggregate not be reasonably expected to have a Material Adverse Effect. (e) There are no unfair labor practices charges, grievances or complaints pending or in process or, to such Person's knowledge, threatened by or on behalf of any current or former employee or group of current or former employees of any Loan Party or any of their respective Subsidiaries, other than those which in the aggregate, if adversely determined, could not be reasonably expected to have a Material Adverse Effect. (f) There are no complaints or charges against any Loan Party or any of its Subsidiaries pending or, to the best of such Person's knowledge, threatened to be filed with any federal, state or local court, governmental agency or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment by such Loan Party or any of such Subsidiaries of any individual, other than those which in the aggregate, if resolved adversely, could not be reasonably expected to have a Material Adverse Effect. 80 (g) Each Loan Party and each of their respective Subsidiaries are in compliance with all laws, and all orders of any court, Governmental Authority or arbitrator, relating to the employment of labor, including without limitation all such laws relating to wages, hours, collective bargaining, discrimination, civil rights, and the payment of withholding and/or social security and similar taxes, except for such non-compliances which could in the aggregate not be reasonably expected to have a Material Adverse Effect. 4.17. Force Majeure. Neither the business nor the properties of any Loan Party or any of their respective Subsidiaries are currently suffering from the effects of any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), other than those which could in the aggregate not be reasonably expected to have a Material Adverse Effect. 4.18. Use of Proceeds. The proceeds of the Loans are being used by the Loan Parties for general working capital and corporate purposes and to refinance a portion of the Indebtedness outstanding under the Term Loan Agreement. 4.19. Environmental Protection. Except as disclosed on Schedule 4.19: (a) The operations of each Loan Party and each of their respective Subsidiaries or tenants comply with all Environmental Laws other than such non-compliance the consequences of which could in the aggregate not be reasonably expected to have a Material Adverse Effect; (b) Each Loan Party and each of their respective Subsidiaries have obtained all environmental, health and safety Permits necessary for their operations, and all such Permits are in good standing and each Loan Party and each of their respective Subsidiaries are in compliance with the terms and conditions of such Permits other than such non- compliance or failure to obtain such Permits, the conse- quences of which could in the aggregate not be reasonably expected to have a Material Adverse Effect; 81 (c) No Loan Party or any of their respective Subsidiaries or any of their respective currently or previously owned or leased property or operations is subject to any outstanding or to best of such Person's knowledge, threatened, order from or agreement with any Governmental Authority or other Person or is subject to any judicial or docketed administrative proceeding respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any Environmental Liabilities and Costs arising from a Release or threatened Release, other than those the consequences of which could in the aggregate not be reasonably expected to have a Material Adverse Effect; (d) To the best of the Loan Parties' or their Subsidiaries' knowledge, there are no conditions or circum- stances associated with the currently or previously owned or leased properties or operations of any Loan Party or any of their respective Subsidiaries or tenants which may give rise to any Environmental Liabilities and Costs other than those which could in the aggregate not be reasonably expected to have a Material Adverse Effect; (e) No Loan Party or any of their respective Subsidiaries is a treatment, storage or disposal facility requiring a permit under the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the regulations thereunder or any state analog. Each Loan Party and each of their respective Subsidiaries is in compliance with all applicable financial responsibility requirements of all Environmental Laws, including, without limitation, those contained in 40 C.F.R., parts 264 and 265, subpart H, and any state equivalents; (f) No Loan Party nor any of its Subsidiaries has filed or failed to file any notice required under any applicable Environmental Law reporting a Release; (g) There are no conditions or circumstances which may give rise to any Environmental Liabilities and Costs arising from the operations of any Loan Party or any of its Subsidiaries, including, without limitation, Environmental Liabilities and Costs, that have any reasonable likelihood of exceeding $250,000 in the aggregate associated with any operations of or ownership of property by any Loan Party or any of its Subsidiaries; 82 (h) No Environmental Lien and no unrecorded Environmental Lien has attached to any property of any Loan Party or any of its Subsidiaries; (i) There is not now on or in the property owned, leased or operated by any Loan Party or any of its Subsidiaries (i) any underground storage tanks or surface impoundments, (ii) any asbestos-containing material, or (iii) any polychlorinated biphenyls ("PCBs") used in electrical or other equipment which has any reasonable likelihood of having a Material Adverse Effect; and (j) Each Loan Party has provided to the Agent a complete and accurate copy of every report, audit, analysis, and investigation prepared by it or on its behalf related to environmental and health and safety matters conducted with respect to their currently or previously owned or leased property or operations. 4.20. [Reserved] 4.21. Intellectual Property. The Loan Parties and its Subsidiaries own or license or otherwise have the right to use all material licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, copyright applications, franchises, authorizations and other intellectual property rights (including, without limitation, all Intellectual Property as defined in the Intellectual Property Security Agreement) that are necessary for the operations of their respective businesses, without, to the best of its knowledge, infringement upon or conflict with the rights of any other Person with respect thereto, including, without limitation, all trade names associated with any private label brands of any Loan Party or any of its Subsidiaries. To the best knowledge of the Loan Parties, no slogan or other advertising device, product, process, method, substance, part or component, or other material now employed, or now contemplated to be employed, by any Loan Party or any of their respective Subsidiaries infringes upon or conflicts with any rights owned by any other Person, and no claim or litigation regarding any of the foregoing is pending or, to the best of its knowledge, threatened. 4.22. Title. (a) Each Borrower and their respective Subsidiaries owns good and marketable fee simple absolute title to all of the Real Estate purported to be owned by them, which Real Estate is at the date hereof 83 described in Schedule 4.22(a), and good and marketable title to, or valid leasehold interests in, all other properties and assets purported to be owned by any Borrower or any of their respective Subsidiaries, including, without limita- tion, valid leasehold interests pursuant to the Leases and all property reflected in the balance sheet referred to in Section 4.5(a), and none of such properties and assets, including, without limitation, the Real Estate and the Leases, is subject to any Lien, except those set forth on Schedule 4.22(a). Each Borrower and their respective Subsidiaries have received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and have duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Borrower's and their respective Subsidiaries' right, title and interest in and to all such property. (b) All real property leased at the date hereof by each Borrower or any of their respective Subsidiaries is listed on Schedule 4.22(b), setting forth information regarding the commencement date, termination date and renewal options (if any). Each of such leases is valid and enforceable in accordance with its terms and is in full force and effect. Each Borrower has delivered to the Agent true and complete copies of each of such leases and all documents affecting the rights or obligations of such Borrower or any of its Subsidiaries which is a party thereto, including, without limitation, any non-disturbance and recognition agreements, subordination agreements, attornment agreements and agreements regarding the term or rental of any of the leases. None of the Borrowers nor any of its respective Subsidiaries nor, to the knowledge of any Borrower, any other party to any such lease is in default of its obligations thereunder or has delivered or received any notice of default under any such lease, nor has any event occurred which, with the giving of notice, the passage of time or both, would constitute a default under any such lease, except for defaults which could in the aggregate not be reasonably expected to have a Material Adverse Effect. (c) No Borrower or any of its respective Subsidiaries owns or holds, or is obligated under or a party to, any option, right of first refusal or other contractual right to purchase, acquire, sell, assign or dispose of any real property. 84 (d) Except as permitted by Section 6.8, all water, gas, electrical, steam, compressed air, telecommuni- cation, sanitary and storm sewage lines and systems and other similar systems serving the real property owned or leased by any Borrower or any of their respective Subsidiaries are installed and operating and are sufficient to enable the real property owned or leased by any Borrower and their respective Subsidiaries to continue to be used and operated in the manner currently being used and operated, and no Borrower or any of its Subsidiaries has any knowledge of any factor or condition that could result in the termina- tion or material impairment of the furnishing thereof. No improvements included within the real property owned or leased by any Borrower or any of its respective Subsidiaries (collectively, "Improvements") or portion thereof is dependent for its access, operation or utility on any land, building or other Improvement not included in the real property owned or leased by any Borrower or any of its Subsidiaries. (e) All Permits required to have been issued or appropriate to enable all real property owned or leased by any Borrower or any of its Subsidiaries to be lawfully occupied and used for all of the purposes for which they are currently occupied and used have been lawfully issued and are in full force and effect, other than those which could in the aggregate not be reasonably expected to have a Material Adverse Effect. (f) No Borrower nor any of its Subsidiaries has received any notice, or has any knowledge, of any pending, threatened or contemplated condemnation proceeding affecting any real property owned or leased by any Borrower or any of its Subsidiaries or any part thereof, or any proposed termination or impairment of any parking at any such owned or leased real property or of any sale or other disposition of any real property owned or leased by any Borrower or any of its Subsidiaries or any part thereof in lieu of condemnation. (g) No portion of any real property owned or leased by any Borrower or any of its Subsidiaries has suffered any material damage by fire or other casualty loss which has not heretofore been completely repaired and restored to its original condition. No portion of any real property owned or leased by any Borrower or any of its Subsidiaries is located in a special flood hazard area as designated by any Federal Governmental Authorities. 85 ARTICLE V FINANCIAL COVENANTS From and after the Closing Date and as long as any of the Obligations or Commitments remain outstanding, unless the Majority Lenders otherwise consent in writing, each Borrower agrees with the Lenders and the Agent that: 5.1. Maximum Leverage Ratio. The Borrowers shall on a combined basis maintain at the end of each Fiscal Quarter set forth below on a consolidated basis, a ratio of (a) Total Liabilities to (b) EBITDA for the 12 months then ending (or in the case of the Fiscal Quarter ending June 30, 1996, the product of four and EBITDA for the three months then ending or in the case of the Fiscal Quarter ending September 30, 1996, the product of two and EBITDA for the six months then ending or, in the case of the Fiscal Quarter ending December 31, 1996, the product of 1.333 and EBITDA for the nine months then ending) not in excess of the ratio set forth below opposite such Fiscal Quarter: For the Fiscal Quarter Ending on Maximum Ratio ------------------------ ------------- June 30, 1996 6.70 to 1 September 30, 1996 6.10 to 1 December 31, 1996 6.00 to 1 March 31, 1997 6.00 to 1 5.2. Fixed Charge Coverage Ratio. The Borrowers shall on a combined basis maintain at the end of each Fiscal Quarter set forth below, a ratio of (a) EBITDA less Capital Expenditures (other than in respect of Capitalized Leases) less income taxes paid to (b) Fixed Charges, in each case determined on the basis of the four Fiscal Quarters ending on the date of determination (except that (i) in the case of the Fiscal Quarter ending June 30, 1996, such determination shall be made based on the three months then ending, (ii) in the case of the Fiscal Quarter ending September 30, 1996, such determination shall be made based on the six months then ending, and (iii) in the case of the Fiscal Quarter ending December 31, 1996, such determination shall be based on the 86 nine months then ending), not less than the ratio set forth below opposite such Fiscal Quarter: For the Fiscal Quarter Ending on Minimum Ratio ------------------------ ------------- June 30, 1996 .667 to 1 September 30, 1996 .80 to 1 December 31, 1996 .80 to 1 March 31, 1997 .85 to 1 5.3. Maintenance of Adjusted Net Worth. The Borrowers shall on a combined basis maintain at the end of each month set forth below an Adjusted Net Worth of not less than the minimum amount set forth below for such month: For Each Month in the Minimum Adjusted Fiscal Quarter Ending On Net Worth - ------------------------ ---------------- June 30, 1996 $23,000,000 September 30, 1996 $24,000,000 December 31, 1996 $25,000,000 March 31, 1997 $26,000,000 provided, however, that if the Company chooses to reallocate to the Borrowers certain reserves previously taken by the Company in connection with a proposed sale of Waxman Consumer Products, then each of the numbers set forth below shall be reduced by the amount of the reserves, but not to exceed $6.5 million. 5.4. Capital Expenditures. The Borrowers shall not on a combined basis permit any Capital Expenditures the result of which is that the Capital Expenditures for the period from July 1, 1995 until such date is in excess of the maximum amount set forth below for such Fiscal Quarter in which such date falls: Maximum Amount of Fiscal Quarter Ending On Capital Expenditures ------------------------ -------------------- June 30, 1996 $ 650,000 September 30, 1996 $ 900,000 December 31, 1996 $1,100,000 March 31, 1997 $1,300,000 5.5. EBITDA to Total Cash Interest Ratio. The Borrowers shall on a combined basis maintain at the end of each Fiscal Quarter set forth below a ratio of EBITDA to Cash Interest Expense, in each case determined based on the four Fiscal Quarters ending on the date of determination (except that (i) in the case of the Fiscal Quarter ending June 30, 1996, such 87 determination shall be made based on the three months then ending, (ii) in the case of the Fiscal Quarter ending September 30, 1996, such determination shall be made based on the six months then ending, and (iii) in the case of the Fiscal Quarter ending December 31, 1996, such determination shall be based on the nine months then ending) of not less than the ratio set forth below for such Fiscal Quarter: For Each Fiscal Quarter Ending On Minimum Ratio ----------- ------------- June 30, 1996 .90 to 1 September 30, 1996 .95 to 1 December 31, 1996 .95 to 1 March 31, 1997 1.0 to 1 ARTICLE VI AFFIRMATIVE COVENANTS As long as any of the Obligations or the Commit- ments remain outstanding, unless the Majority Lenders other- wise consent in writing, each of the Company and each Borrower agrees with the Lenders and the Agent that: 6.1. Compliance with Laws, Etc. Each Loan Party shall comply, and shall cause each of its Subsidiaries to comply in all material respects with all Requirements of Law, Contractual Obligations and Permits; provided, however, that the Loan Parties shall not be deemed in default of this Section 6.1 if all such non-compliances in the aggregate could have no reasonable likelihood of having a Material Adverse Effect. 6.2. Conduct of Business. Each Loan Party shall (a) conduct, and shall cause each of its Subsidiaries to conduct, its business in the ordinary course consistent with past practice; (b) use, and cause each of its Subsidiaries to use, its reasonable efforts, in the ordinary course and consistent with past practice, to (i) preserve its business and the goodwill and business of the customers, advertisers, suppliers and others having business relations with such Loan Party or any of its Subsidiaries, and (ii) keep available the services and goodwill of its present employ- ees; (c) preserve, and cause each of its Subsidiaries to preserve, all registered patents, trademarks, trade names, 88 copyrights and service marks with respect to its business; and (d) perform and observe, and cause each of its Subsidiaries to perform and observe, all the terms, cove- nants and conditions required to be performed and observed by it under its Contractual Obligations (including, without limitation, to pay all rent and other charges payable under any lease and all debts and other obligations as the same become due), and do, and cause its Subsidiaries to do, all things necessary to preserve and to keep unimpaired its rights under such Contractual Obligations; provided, however, that, in the case of each of clauses (a) through (d), such Loan Party shall not deemed in default of this Section 6.2 if all such failures in the aggregate could have no reasonable likelihood of having a Material Adverse Effect. 6.3. Payment of Taxes, Etc. Each Loan Party shall pay and discharge, and shall cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, all lawful governmental claims, taxes, assessments, charges and levies, except where contested in good faith, by proper proceedings, if adequate reserves therefor have been established on the books of such Loan Party or the appropriate Subsidiary in conformity with GAAP; provided, however, that such Loan Party shall not be deemed in default of this Section 6.3 if all such non-payments in the aggregate could have no reasonable likelihood of having a Material Adverse Effect. 6.4. Maintenance of Insurance. Each Loan Party shall maintain, and shall cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Loan Party or such Subsidiary operates and as otherwise satisfactory to the Agent, in its sole judgment exercised reasonably, and, in any event, all insur- ance required by any Collateral Document. All insurance of the Borrowers shall name the Agent and the Lenders as addi- tional insured or loss payees as its interest shall appear and shall not be cancelable except upon 30 days' prior notice to the Secured Party, each as the Agent shall deter- mine. The Loan Parties will furnish to the Lenders from time to time such information as may be requested as to such insurance. 89 6.5. Preservation of Corporate Existence, Etc. Each Loan Party shall preserve and maintain, and shall cause each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises (other than those of inactive Subsidiaries). 6.6. Access. Each Borrower shall, at any reasonable time and from time to time, permit the Agent or any of its designees, agents or representatives thereof, to (a) during normal business hours examine and make copies of and abstracts from the records and books of account of such Borrower and each of its Subsidiaries, (b) during normal business hours visit the properties of such Borrower and each of its Subsidiaries, (c) during normal business hours discuss the affairs, finances and accounts of such Borrower and each of its Subsidiaries with any of their respective officers or directors, and (d) communicate directly with such Borrower's independent certified public accountants. Except during the continuance of a Default or Event of Default, such access shall be on reasonable advance notice. The Borrowers shall authorize its independent certified public accountants to disclose to the Agent or any Lender any and all financial statements and other information of any kind, including, without limitation, copies of any management letter. 6.7. Keeping of Books. Each Loan Party shall keep, and shall cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of such Loan Party and each such Subsidiary. 6.8. Maintenance of Properties, Etc. Each Loan Party shall maintain and preserve, and shall cause each of its Subsidiaries to maintain and preserve, (i) all of its properties which are necessary in the conduct of its business in satisfactory working order and condition, and (ii) all rights, permits, licenses, approvals and privileges (including, without limitation, all Permits) which are necessary in the conduct of its business; provided, however, that such Loan Party shall not be deemed in default of this Section 6.8 if all such failures in the aggregate could have no reasonable likelihood of having a Material Adverse Effect. 90 6.9. Performance and Compliance with Other Covenants. The Company and each Borrower shall perform and comply with, and shall cause each of its Subsidiaries to perform and comply with, each of the covenants and agreements set forth in the Related Documents and the Indentures and under each other Contractual Obligation to which it or any of its Subsidiaries is a party; provided, however, that none of the Company or any Borrower shall be deemed in default of this Section 6.9 if all such failures in the aggregate could have no reasonable likelihood of having a Material Adverse Effect. 6.10. Application of Proceeds. The Loan Parties shall use the entire amount of the proceeds of the Loans as provided in Section 4.18. 6.11. Financial Statements. The Company and the Borrowers shall furnish to the Lenders: (a) as soon as available and in any event within 30 days after the end of each of month, consolidated and consolidating balance sheets of the Company and its Subsidiaries as of the end of such month and consolidated and consolidating statements of income and cash flow of the Company and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, all prepared in conformity with GAAP and certified by the chief financial officer of the Company as fairly presenting the financial condition and results of operations of the Company and its Subsidiaries at such date and for such period (subject to ordinary year-end audit adjustments), together with (i) a certificate of said officer stating that no Default or Event of Default has occurred and is continuing or, if a Default or an Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which the Borrowers propose to take with respect thereto, and (ii) a schedule in form satisfactory to the Agent of the computations used by the Company in determining compliance with all financial covenants contained herein; (b) as soon as available and in any event within 45 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, consolidated balance sheets of Holdings and its Subsidiaries and consolidated and consoli- dating balance sheets of the Company and its Subsidiaries, and Barnett, as of the end of such quarter, and consolidated statements of income and cash flow of Holdings and its 91 CAPITAL PRINTING SYSTEMS] Subsidiaries and consolidated and consolidating statements of income and cash flow of the Company and its Subsidiaries, and Barnett, for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, all prepared in conformity with GAAP and certified by the chief financial officer of Holdings or the Company as fairly presenting the financial condition and results of operations of Holdings, the Company and its Subsidiaries, and Barnett, at such date and for such period (subject to ordinary year-end audit adjustments), together with (i) a certificate of said officer stating that no Default or Event of Default has occurred and is continuing or, if a Default or an Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which the Borrowers propose to take with respect thereto, (ii) a schedule in form satisfactory to the Agent of the computations used by the Borrowers in determining compliance with all financial covenants contained herein, and (iii) a written discussion and analysis by the management of Holdings and the Company, and Barnett, of the financial statements furnished in respect of such Fiscal Quarter; (c) as soon as available and in any event within 90 days after the end of each Fiscal Year, consolidated and consolidating balance sheets of the Company and its Subsidiaries, and Barnett, and consolidated balance sheets of Holdings and its Subsidiaries, and Barnett, as of the end of such year and consolidated and consolidating statements of income and cash flow of the Company and its Subsidiaries and consolidated statements of income and cash flow of Holdings and its Subsidiaries, and Barnett, for such Fiscal Year, all prepared in conformity with GAAP and certified, in the case of such consolidated financial statements, without qualification as to the scope of the audit by Arthur Andersen & Co. or other independent public accountants of recognized national standing, together with (i) a certificate of such accounting firm stating that in the course of the regular audit of the business of the Holdings, the Company and each Borrower and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default or Event of Default has occurred and is continuing, or, if in the opinion of such accounting firm, a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof, (ii) a schedule in form satisfactory to the Agent of the computations used by such accountants in determining, as of the end of such Fiscal Year, the 92 Company's and the Borrowers' compliance with all financial covenants contained herein, and (iii) a written discussion and analysis by the management of Holdings, the Company and Barnett of the financial statements furnished in respect of such Fiscal Year; (d) not later than the date on which the Borrowers shall deliver to the Lenders the financial statements referred to in Section 6.11(c) for any Fiscal Year, a letter from the Borrowers' independent public accountants in substantially the form and substance as the letter delivered on the Closing Date pursuant to Section 3.1(n); and (e) promptly after the same are received by Holdings, the Company and each Borrower, a copy of each management letter provided to Holdings, the Company and each Borrower (as the case may be) by its independent certified public accountants which refers in whole or in part to any inadequacy, defect, problem, qualification or other lack of fully satisfactory accounting controls utilized by Holdings, the Company and each Borrower (as the case may be) or any of its Subsidiaries. 6.12. Reporting Requirements. The Company and the Borrowers shall furnish to Agent on behalf of the Lenders unless otherwise specified: (a) a weekly Borrowing Base Certificate from each Borrower (on such day of the week agreed to by the Agent and such Borrower), such Borrowing Base Certificate to contain Eligible Receivables information as of end of the previous week and, if the date of delivery of such Borrowing Base Certificate falls on or after the 20th day of the month, Eligible Inventory information as of the end of the immediately preceding month; (b) to the extent practicable prior to any Asset Sale anticipated to generate in excess of $100,000 in Asset Sales Proceeds, a notice (i) describing the assets being sold and (ii) stating the estimated Asset Sales Proceeds in respect of such Asset Sale; (c) as soon as available and in any event prior to the end of June and December of each Fiscal Year, a budget of the Company and its Subsidiaries and each Borrower and its Subsidiaries for the next succeeding twelve months, displaying on a monthly basis anticipated balance sheets, 93 forecasted revenues, net income and cash flow, each on a consolidated basis; (d) [Reserved] (e) (i) promptly and in any event within 30 days after any Loan Party, any of its Subsidiaries or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, and (ii) promptly and in any event within 10 days after any Loan Party, any of its Subsidiaries or any ERISA Affiliate knows or has reason to know that a request for a minimum funding waiver under Section 412 of the Code has been filed or is reasonably expected to be filed with respect to any Qualified Plan, a written statement of the chief financial officer or other appropriate officer of such Loan Party describing such ERISA Event or waiver request and the action, if any, which such Loan Party, its Subsidiaries and ERISA Affiliates propose to take with respect thereto and a copy of any notice filed with the PBGC or the IRS pertaining thereto; (f) promptly and in any event within 30 days after the filing thereof by any Loan Party, any of its Subsidiaries or any ERISA Affiliate, a copy of each annual report (Form 5500 Series, including Schedule B thereto) filed with respect to a Qualified Plan, and upon request by any Lender through the Agent, with respect to any other Plan or Pension Plan; (g) promptly and in any event within 20 days after receipt thereof, a copy of any adverse notice, determination letter, ruling or opinion any Loan Party, any of its Subsidiaries or any ERISA Affiliate receives from the PBGC, DOL or IRS with respect to any Qualified Plan and, at the request of any Lender, a copy of any favorable notice, determination letter, ruling or opinion with respect thereto from any such Governmental Authority; (h) promptly and in any event within 20 days after receipt thereof, a copy of any correspondence any Loan Party, any of its Subsidiaries or any ERISA Affiliate receives from the plan sponsor (as defined by Section 4001 (a)(10) of ERISA) of any Multiemployer Plan concerning potential Withdrawal Liability of any Loan Party, any of its Subsidiaries or any ERISA Affiliate, or notice of any reorganization with respect to any Multiemployer Plan, together with a written statement of the chief financial officer or other appropriate officer of such Loan Party of 94 the action which such Loan Party, its Subsidiaries and ERISA Affiliates propose to take with respect thereto; (i) promptly and in any event within 30 days after the adoption thereof, notice of (i) any amendment to a Title IV Plan which could result or results in an increase in benefits or the adoption of any new Title IV Plan, and (ii) any amendment to a, or adoption of a new, Retiree Welfare Plan, which could result or results in new or increased benefits; (j) promptly and in any event within 30 days after receipt of written notice of commencement thereof, notice of any action, suit or proceeding before any Governmental Authority or arbitrator affecting any Loan Party, any of its Subsidiaries or any ERISA Affiliate with respect to any Plan, Pension Plan or Qualified Plan except those which in the aggregate, if adversely determined, could have no reasonable likelihood of having a Material Adverse Effect; (k) promptly and in any event within 30 days after notice or knowledge thereof, notice that any Loan Party or any of its Subsidiaries has become or is likely to become subject to the tax on prohibited transactions imposed by Section 4975 of the Code, together with a copy of Form 5330; (l) promptly and in any event within 10 days after receipt thereof by any Loan Party, any of its Subsidiaries or any ERISA Affiliate, such Loan Party shall furnish to the Agent a copy of each notice from the PBGC, received by such Loan Party, any of its Subsidiaries or any ERISA Affiliate of the PBGC's intention to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan; (m) simultaneously with the date that any Loan Party, any of its Subsidiaries or any ERISA Affiliate files a notice of intent to terminate any Title IV Plan under a distress termination within the meaning of Section 4041(c) of ERISA, such Loan Party shall furnish to the Agent a copy of each such notice; (n) simultaneously with the date that any Loan Party, any of its Subsidiaries or any ERISA Affiliate files a notice of intent to terminate any Title IV Plan, if such termination would require material additional contributions 95 in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, such Loan Party shall furnish to the Agent a copy of each notice; (o) promptly after the commencement thereof, notice of all actions, suits and proceedings before any domestic or foreign Governmental Authority or arbitrator, affecting any Loan Party or any of its Subsidiaries, except those which in the aggregate, if adversely determined, could have no reasonable likelihood of having a Material Adverse Effect; (p) promptly and in any event within two Business Days after any Loan Party becomes aware of the existence of (i) any Default or Event of Default, (ii) any breach or non- performance of, or any default under, any Indenture or any Contractual Obligation which could have a reasonable likelihood of having a Material Adverse Effect, (iii) any Material Adverse Change or any event, development or other circumstance which has any reasonable likelihood of causing or resulting in a Material Adverse Change, telephonic or telegraphic notice in reasonable detail specifying the nature of the Default, Event of Default, breach, non- performance, default, event, development or circumstance, including, without limitation, the anticipated effect thereof, which notice shall be promptly confirmed in writing within five days; (q) promptly after the sending or filing thereof, copies of all notices, certificates or reports delivered pursuant to any Indenture; (r) promptly after the sending or filing thereof, copies of all reports which Holdings, the Company or any Borrower sends to its security holders generally, and copies of all reports and registration statements which Holdings, the Company, any Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange or the National Association of Securities Dealers, Inc.; (s) upon the request of the Agent, copies of all federal, state and local tax returns and reports filed by any Borrower or any of its Subsidiaries in respect of taxes measured by income (excluding sales, use and like taxes); 96 (t) promptly and in any event within 30 days of any Borrower or any Subsidiary learning of any of the following, written notice to the Agent of any of the following: (i) any Borrower or any of its Subsidiaries is or may be liable to any Person as a result of a Release or threatened Release which could reasonably be expected to subject any Borrower or any of its Subsidiaries to Environmental Liabilities and Costs of $500,000 or more; (ii) the receipt by any Borrower or any of its Subsidiaries of notification that any real or personal property of any Borrower or any of its Subsidiaries is subject to any Environmental Lien; (iii) the receipt by any Borrower or any of its Subsidiaries of any notice of violation of, or knowledge by any Borrower or any of its Subsidiaries that there exists a condition which might reasonably result in a violation by any Borrower or any of its Subsidiaries of, any Requirement of Law involving environmental, health or safety matters, except for such violations the consequence of which in the aggregate would have no reasonable likelihood of subjecting any Borrower and its Subsidiaries collectively to Environmental Liabilities and Costs of $250,000 or more; (iv) the commencement of any judicial or administrative proceeding or investigation alleging a violation of any Requirement of Law involving environ- mental, health or safety matters, other than those the consequences of which in the aggregate would have no reasonable likelihood of subjecting any Borrower and its Subsidiaries collectively to Environmental Liabilities and Costs of $250,000 or more; (v) any proposed acquisition of stock, assets or real estate, or any proposed leasing of property, or any other action by any Borrower or any of its Subsidiaries other than those the consequences of which in the aggregate have no reasonable likelihood of subjecting any Borrower and its Subsidiaries collectively to Environmental Liabilities and Costs of $250,000 or more; and 97 (vi) any proposed action taken by any Borrower or any of its Subsidiaries to commence, recommence or cease manufacturing, industrial or other operations other than those the consequences of which in the aggregate have no reasonable likelihood of requiring any Borrower and its Subsidiaries to obtain additional environmental, health or safety Permits that collectively require the expenditure of $250,000 or more or become subject to additional Environmental Liabilities and Costs of $250,000 or more; (u) upon written request by any Lender through the Agent, a report providing an update of the status of any environmental, health or safety compliance, hazard or liability issue identified in any notice or report required pursuant to this Section 6.12 and any other environmental, health or safety compliance obligation, remedial obligation or liability, other than those which in the aggregate have no reasonable likelihood of subjecting any Borrower and its Subsidiaries to Environmental Liabilities and Costs of $500,000 or more; and (v) such other information respecting the busi- ness, properties, condition, financial or otherwise, or operations of any Loan Party or any of its Subsidiaries as any Lender through the Agent may from time to time reasonably request. 6.13. New Real Estate. If, at any time, any Borrower or any of its Subsidiaries acquires any Real Estate not covered by a Mortgage, such Borrower or such Subsidiary shall promptly execute, deliver and record a first priority mortgage in favor of the Agent on behalf and for the ratable benefit of the Secured Parties covering such Real Estate (subordinate only to such Liens as are permitted hereunder), in form and substance satisfactory to the Agent, and provide the Agent with a Title Insurance Policy covering such Real Estate in an amount equal to the purchase price of such Real Estate, and a current ALTA survey thereof, and a surveyor's certificate in form and substance satisfactory to the Agent. 6.14. Employee Plans. (a) With respect to other than a Multiemployer Plan, for each Qualified Plan hereafter adopted or maintained by any Loan Party, any of its Subsidiaries or any ERISA Affiliate, such Loan Party shall (i) seek, and cause such of its Subsidiaries and ERISA Affiliates to seek, and receive determination letters from the IRS to the effect that such Qualified Plan is qualified 98 within the meaning of Section 401(a) of the Code; and (ii) from and after the adoption of any such Qualified Plan, cause such plan to be qualified within the meaning of Section 401(a) of the Code and to be administered in all material respects in accordance with the requirements of ERISA and Section 401(a) of the Code. (b) Each Loan Party shall comply, and cause such of its Subsidiaries and ERISA Affiliates to comply, with the notice and continuation coverage requirements of Section 4980B of the Code and the applicable regulations thereunder. 6.15. Fiscal Year. The Company, each Borrower and each of the Company's other Subsidiaries shall maintain as its Fiscal Year the twelve month period ending on June 30 of each year provided that any of the Company, each Borrower and each of the Company's other Subsidiaries may change its Fiscal Year with the prior written consent of the Majority Lenders which consent shall not be unreasonably withheld. 6.16. Environmental. Each of the Company, each Borrower and each of the Company's other Subsidiaries shall, at its cost, upon receipt of any notification or otherwise obtaining knowledge of any Release or other event that could result in any such Person incurring Environmental Liabili- ties and Costs in excess of $250,000, conduct or pay for consultants to conduct, tests or assessments of environ- mental conditions at such operations or properties, includ- ing, without limitation, the investigation and testing of subsurface conditions, and shall take such remedial, investigational or other action as required by Environmental Laws, as any Governmental Authority requires or as is appro- priate and consistent with good business practice. 6.17. Borrowing Base Determination. (a) Each Borrower shall conduct, or shall cause to be conducted, at its expense, and upon request of the Agent, and present to the Agent for approval, such investigations and reviews as the Agent shall reasonably request for the purpose of determining the Borrowing Base of such Borrower, all upon reasonable notice and at such reasonable times during normal business hours and as often as may be reasonably requested. Each Borrower shall furnish to the Agent any information which the Agent may reasonably request regarding the deter- mination and calculation of the Borrowing Base for such Borrower including, without limitation, correct and complete copies of any invoices, underlying agreements, instruments or other documents and the identity of all obligors. 99 (b) The Borrowers shall promptly notify the Agent in writing in the event that at any time any Borrower or any of its Subsidiaries receives or otherwise gains knowledge that (i) the sum of the Borrowing Bases for all Borrowers is less than 110% of the Loans and Letter of Credit Obligations outstanding, (ii) the aggregate Borrowing Base for all Borrowers is 10% less than the aggregate Borrowing Base for all Borrowers as of the last reported Borrowing Base Certificate or (iii) the sum of Loans and Letters of Credit Obligations outstanding at such time to any Borrower exceeds the Borrowing Base of such Borrower as a result of any decrease in the Borrowing Base of such Borrower, and the amount of such excess. (c) The Agent may make test verifications of the Accounts and physical verifications of the Inventory in any manner and through any medium that the Agent considers advisable, and each Borrower shall furnish all such assistance and information as the Agent may require in connection therewith. Except during a Default or Event of Default, verifications of Inventory shall be made during normal business hours and with reasonable advance notice. 6.18. Cash Management System. The Borrowers shall maintain a cash management system acceptable to the Agent, including, without limitation, one or more lockboxes, which cash management system shall provide for all funds received by the Borrowers or any of their Subsidiaries to be deposited in the Cash Collateral Accounts. ARTICLE VII NEGATIVE COVENANTS As long as any of the Obligations or Commitments remain outstanding, without the written consent of the Majority Lenders, the Company and each Borrower agrees with the Lenders and the Agent that: 7.1. Liens, Etc. No Borrower shall create or suffer to exist, nor shall it permit any of its Subsidiaries to create or suffer to exist, any Lien upon or with respect to any of its or such Subsidiary's properties, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, except for (each such exception being given independent effect): 100 (a) Liens created pursuant to the Loan Documents; (b) (i) Purchase money Liens or purchase money security interests upon or in any property (other than Inventory and Accounts (other than Inventory purchased from General Electric Company of the type in existence on the date hereof)) acquired or held by any Borrower or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness incurred in connection with financing the acquisition of such property and (ii) Liens to secure Capitalized Lease Obligations; provided, however, that: (A) any such Lien is created for the purpose of securing solely Indebtedness representing, or incurred to finance, refinance or refund, the cost (including, without limitation, the cost of construction) of the property subject thereto, (B) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such cost and (C) such Lien does not extend to or cover any other property other than such item of property and any improvements on such item; provided, further, that the aggregate principal amount of the Indebtedness secured by the Liens referred to in this clauses (i) and (ii) above, together with Indebtedness incurred pursuant to clause (ii) of Section 7.2(e), shall not exceed the actual amount of Capital Expenditures made by the Borrowers to the extent permitted hereunder; (c) Any Lien securing the renewal, extension or refunding of any Indebtedness or other Obligation secured by any Lien permitted by subsections (b), (i), or (j) of this Section 7.1 without any increase in the amount secured thereby or in the assets subject to such Lien; (d) Liens arising by operation of law in favor of materialmen, mechanics, warehousemen, carriers, lessors or other similar Persons incurred by any Borrower or any of its Subsidiaries in the ordinary course of business which secure its obligations to such Person; provided, however, that (i) such Borrower or such Subsidiary is not in default with respect to such payment obligation to such Person, or (ii) such Borrower or such Subsidiary is in good faith and by appropriate proceedings diligently contesting such 101 obligation and adequate provision is made for the payment thereof; (e) Liens (excluding Environmental Liens) securing taxes, assessments or governmental charges or levies; provided, however, that neither the Borrowers nor any of their Subsidiaries is in default in respect of any payment obligation with respect thereto unless such Borrower or such Subsidiary is in good faith and by appropriate proceedings diligently contesting such obligation and adequate provision is made for the payment thereof; (f) Liens incurred or pledges and deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance, old-age pensions and other social security benefits; (g) Liens securing the performance of bids, tenders, leases, contracts (other than for the repayment of borrowed money), statutory obligations, surety and appeal bonds and other obligations of like nature, incurred as an incident to and in the ordinary course of business, and judgment liens; provided, however, that all such Liens (i) in the aggregate have no reasonable likelihood of having a Material Adverse Effect and (ii) do not secure directly or indirectly judgments in excess of $500,000; (h) Zoning restrictions, easements, licenses, reservations, restrictions on the use of real property or minor irregularities incident thereto which do not in the aggregate materially detract from the value or use of the property or assets of the Borrowers or any of their Subsidiaries or impair, in any material manner, the use of such property for the purposes for which such property is held by such Borrower or any such Subsidiary; (i) Liens in favor of landlords securing operating leases permitted by Section 7.3; and (j) Liens existing on the date of this Agreement and disclosed on Schedule 7.1. 102 7.2. Indebtedness. No Borrower shall create or suffer to exist, nor permit any of its Subsidiaries to create or suffer to exist, any Indebtedness except (each such exception being given independent effect): (a) the Obligations; (b) Indebtedness with respect to Contingent Obligations permitted by Section 7.13; (c) current liabilities in respect of taxes, assessments and governmental charges or levies incurred, or claims for labor, materials, inventory, services, supplies and rentals incurred, or for goods or services purchased, in the ordinary course of business consistent with the past practice; (d) Indebtedness of any Borrower to (i) any other Borrower or (ii) Holdings or the Company, representing loans or advances made by such other Borrower, Holdings or the Company (as the case may be) in each case evidenced by an Intercompany Note; (e) (i) Indebtedness secured by Liens per- mitted by Section 7.1(b) and (ii) additional unsecured Indebtedness of the Borrower in an aggregate amount outstanding which, when added to Indebtedness secured by Liens permitted by Section 7.1(b) does not exceed the actual amount of Capital Expenditures made by the Borrowers to the extent permitted hereunder (such unsecured Indebtedness to be on terms and conditions at least as favorable as those obtained by comparable companies); (f) Indebtedness existing on the date hereof and listed on Schedule 7.2 and any Indebtedness used to refinance or replace such Indebtedness provided such refinancing or replacement Indebtedness is in an aggregate principal amount and at a rate of interest not to exceed such Indebtedness being refinanced or replaced (provided that such Indebtedness used to refinance or replace such Indebtedness in an aggregate amount up to $1,000,000 may be at an interest rate in excess of such Indebtedness being refinanced or replaced as long as such rate of interest is commercially reasonable at the time such Indebtedness is incurred); 103 (g) Indebtedness in respect of reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; provided that the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency; and (h) Indebtedness in respect of interest rate contracts and foreign exchange agreements to the extent entered into in the ordinary course of business on such terms and with such counterparties acceptable to the Agent. 7.3. Lease Obligations. (a) No Borrower shall create or suffer to exist, nor permit any of its Subsidi- aries to create or suffer to exist, any obligations as lessee for the rental or hire of real or personal property of any kind under other leases or agreements to lease (other than Capitalized Leases) having an original term of one year or more which would cause the direct or contingent liabili- ties of the Borrowers and their Subsidiaries, on a consoli- dated basis, in respect of all such obligations to exceed $2,000,000 for the period from the Closing Date until the Termination Date. (b) No Borrower shall, nor shall it permit any of its Subsidiaries to, become or remain liable as lessee or guarantor or other surety with respect to any lease, whether an operating lease or a Capitalized Lease, of any property (whether real or personal or mixed), whether now owned or hereafter acquired, which (i) any Borrower or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person, or (ii) any Borrower or any of its Subsidiaries intends to use for substantially the same purposes as any other property which has been or is to be sold or transferred by that entity to any other Person in connection with such lease provided that the Borrowers may consummate sale-leaseback transactions in an aggregate amount not to exceed $1,000,000. 7.4. Restricted Payments. No Borrower shall, nor shall it permit any of its Subsidiaries to: 104 (a) declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account or in respect of any of its Stock or Stock Equivalents other than (i) dividends paid to any Borrower or any wholly-owned Subsidiary of any Borrower by any wholly-owned Subsidiary of any Borrower and (ii) so long as no Default or Event of Default has occurred and is continuing (or would result therefrom), (A) dividends or distributions to the Company or Holdings necessary to make mandatory interest payments on the Existing Senior Subordinated Notes, the Exchange Notes, the Existing Convertible Debentures and the Deferred Coupon Notes and (B) dividends or distributions to the Company as set forth in the Intercorporate Agreement and Tax Sharing Agreement as in effect on the Original Closing Date, and (iii) additional dividends or distributions to the Company in an aggregate amount not to exceed at any time an amount equal to the $1,000,000, or (b) purchase, redeem, prepay, defease or otherwise acquire for value or make any payment (other than required payments) on account or in respect of any principal amount of Indebtedness for borrowed money, now or hereafter outstanding, except (i) the Loans and (ii) the repayment of up to $6.5 million of loans made by the Company to the Borrowers on the Closing Date in order for the Company to repurchase Existing Senior Subordinated Notes, Existing Convertible Debentures, Deferred Coupon Notes and the Exchange Notes. 7.5. Mergers, Stock Issuances, Sale of Assets, Etc. (a) Except as set forth in Section 7.6, no Borrower shall nor shall it permit any of its Subsidiaries to (i) merge with any Person, (ii) consolidate with any Person, (iii) acquire all or substantially all of the Stock or Stock Equivalents of any Person, (iv) acquire all or substantially all of the assets of any Person or all or substantially all of the assets constituting the business of a division, branch or other unit operation of any Person, (v) enter into any joint venture or partnership with any Person, or (vi) sell, lease, transfer or otherwise dispose of, whether in one transaction or in a series of transactions any substantial part of its assets, including, without limitation, substantially all assets constituting the business of a division, branch or other unit operation (other than a sale of any division, branch or other unit of WOC Inc. in compliance with Section 7.5(c)(iv) below). (b) No Borrower shall issue or transfer, nor permit any of its Subsidiaries to issue or transfer, any Stock or Stock Equivalents other than any such issuance or transfer (A) by a Subsidiary of any Borrower to a wholly- 105 owned Subsidiary of any Borrower or (B) by a wholly-owned Subsidiary of any Borrower to any Borrower. (c) No Borrower shall, nor shall it permit any of its Subsidiaries to, sell, convey, transfer, lease or otherwise dispose of any of its assets or any interest therein to any Person, or permit or suffer any other Person to acquire any interest in any of the assets of any Borrower or any such Subsidiary, except (i) the sale or disposition of assets in the ordinary course of business or assets which have become obsolete or are replaced in the ordinary course of business, (ii) leases of personal property by any Borrower or any wholly-owned Subsidiary of any Borrower to any Borrower or to any wholly-owned Subsidiary of any Borrower, (iii) the lease or sublease of real property not constituting a sale and leaseback, to the extent not otherwise prohibited by this Agreement, (iv) other sales of assets for Fair Market Value for at least 75% in cash, Cash Equivalents and Indebtedness assumed by the purchaser thereof and on such other terms as are commercially reasonable (provided that asset sales after the date hereof in an aggregate amount of not more than $1,000,000 may be sold for Fair Market Value without regard to the requirement of a purchase price of at least 75% in cash, Cash Equivalents and Indebtedness assumed by the purchaser thereof). (d) No Borrower shall sell or otherwise dispose of, or factor at maturity or collection, or permit any of its Subsidiaries to sell or otherwise dispose of, or factor at maturity or collection, any Accounts. 7.6. Investments in Other Persons. No Borrower shall, directly or indirectly, make or maintain, nor permit any of its Subsidiaries to make or maintain, any loan or advance to any Person or own, purchase or otherwise acquire, or permit any of its Subsidiaries to own, purchase or other- wise acquire, any Stock, Stock Equivalents, other equity interest, obligations or other securities of, or any assets constituting the purchase of a business or line of business, or make or maintain, or permit any of its Subsidiaries to make or maintain, any capital contribution to, or otherwise invest in, any Person (any such transaction being an "Investment"), except: 106 (a) Investments in Accounts, contract rights and chattel paper, notes receivable and similar items arising or acquired in the ordinary course of business consistent with the past practice; (b) loans or advances to employees of any Borrower or any of its Subsidiaries, which loans and advances shall not in the aggregate exceed $500,000 outstanding at any time; (c) Investments in Cash Equivalents; (d) Investments existing on the date hereof and set forth on Schedule 7.6; (e) Investments by any Borrower to any other Borrower evidenced by an Intercompany Note; or (f) (i) Investments in joint ventures, newly created Subsidiaries or Subsidiaries acquired after the Closing Date and (ii) loans or advances to TWI evidenced by an Intercompany Note, in an aggregate amount for both clauses (i) and (ii) not to exceed at any time an amount equal to $250,000, provided that, after giving effect to such Investment, the Available Credit of all of the Borrowers is at least $5,000,000. 7.7. Maintenance of Ownership of Subsidiaries. The Company shall not sell or otherwise dispose of any shares of Stock or any Stock Equivalent of any Subsidiary or permit any Subsidiary to issue, sell or otherwise dispose of any shares of its Stock or any Stock Equivalent or the Stock or any Stock Equivalent of any other Subsidiary (other than the options described in clauses (iv) and (v) of the definition of "Change of Control" and inactive Subsidiaries of the Borrowers). 7.8. Change in Nature of Business. No Borrower shall make, nor shall it permit any of its Subsidiaries to make, any material change in the nature or conduct of its business as carried on at the date hereof. 7.9. Compliance with ERISA. (a) No Loan Party shall, directly or indirectly, nor shall it permit any of its Subsidiaries or any ERISA Affiliate to, directly or indirectly, by reason of an amendment or amendments to, or the adoption of, one or more Title IV Plans, permit the present value of all benefit liabilities, as defined in 107 Title IV of ERISA (using the actuarial assumptions utilized by the PBGC upon termination of a plan), (i) to increase by more than $250,000; provided, however, that this limitation shall not be applicable to the extent that the fair market value of assets allocable to such benefits, all determined using actuarial assumptions utilized by the PBGC upon termination of a plan, is in excess of the benefit liabili- ties or (ii) to increase such liabilities such that security must be provided under Section 401(a) of the Code. No Loan Party shall, nor shall any of its Subsidiaries, establish or become obligated with respect to any new Welfare Plan, or modify any existing Welfare Plan, which would result in the present value of future liabilities under all such plans to increase by more than $250,000. No Loan Party shall, nor shall any of its Subsidiaries, establish or become obligated to contribute to any new unfunded Pension Plan, or modify any existing unfunded Pension Plan, which would result in the present value of future liabilities under all such plans to increase by more than $250,000. (b) No Loan Party shall, directly or indirectly, nor shall it permit any of its Subsidiaries or any ERISA Affiliate, directly or indirectly, to (i) satisfy any liability under any Qualified Plan with a policy or other contract from an insurance company or (ii) invest the assets of any Qualified Plan in or in an obligation of an insurance company, unless in each case such insurance company is rated AA or better by Standard & Poor's Corporation and the equivalent or higher rating of each other nationally recognized rating agency. 7.10. Modification of Related Documents and Indentures. The Company shall not, nor shall it permit any of its Subsidiaries to, (i) alter, rescind, terminate, amend, supplement, waive or otherwise modify any provision of or permit any breach or default to exist under any Related Document or any Indenture, or take or fail to take any action thereunder if to do so has a reasonable likelihood of having a Material Adverse Effect; provided, that the Company may make an exchange offer to the holders of Existing Senior Secured Notes on terms no more favorable to such holders than the terms of the Exchange Offer and Consent Solicitation or (ii) amend, modify or change, or consent or agree to any amendment, modification or change to, any of the terms relating to the payment or prepayment of principal of, or premium or interest on, any Debenture (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any 108 payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon). 7.11. Modification of Material Agreements. (a) No Borrower shall, nor shall it permit any of its Subsidiaries to, alter, amend, modify, rescind, terminate or waive any of their respective rights under, or fail to comply in all material respects with, any of its material Contractual Obligations, except in the ordinary course of business consistent with past practice; provided, however, that, with respect to any Contractual Obligation, the Borrowers shall not be deemed in default of this Section 7.11 if all such failures in the aggregate could have no reasonable likelihood of having a Material Adverse Effect; and provided, further, that in the event of any such breach or event of default by a Person other than the Borrowers or any of their Subsidiaries, the Borrowers shall promptly notify the Agent of any such breach or event of default. (b) The Borrowers shall not, nor shall they permit, any amendment, modification or supplement to the Tax Sharing Agreement, the Intercorporate Agreement or the Trademark License Agreement the effect of which in whole or in part is adverse to any of the Borrowers or its Subsidiaries. 7.12. Accounting Changes. No Borrower shall make, nor shall it permit any of its Subsidiaries to make, any change in accounting treatment and reporting practices or tax reporting treatment, except as permitted by GAAP and disclosed to the Lenders and the Agent. 7.13. Contingent Obligations. No Borrower shall, nor shall it permit any of its Subsidiaries to, incur, assume, endorse, be or become liable for, or guarantee, directly or indirectly, or permit or suffer to exist, any Contingent Obligation, except for: (i) Contingent Obligations evidenced by a Loan Document; (ii) guarantees by any Borrower of Indebtedness of any of its Subsidiaries, to the extent such underlying Indebtedness is permitted hereunder; and 109 (iii) guarantees by Subsidiaries of Indebtedness of any Borrower or other Subsidiaries of any Borrower, to the extent such underlying Indebtedness is permitted by Section 7.2. 7.14. Transactions with Affiliates. No Borrower shall nor shall it permit any of its Subsidiaries, to enter into any transaction directly or indirectly with or for the benefit of any Affiliate of any Borrower, except (each ex- ception to be given independent effect) for (A) transactions in the ordinary course of business on a basis no less favorable to such Borrower or such Subsidiary as would be obtained in a comparable arm's length transaction with a Person not an Affiliate, (B) salaries and other employee compensation to officers or directors of any Borrower or any of its Subsidiaries commensurate with current compensation levels or commensurate with companies engaged in similar businesses or as approved by a majority of the members of the Board of Directors of such Borrower or such Subsidiary who are not receiving such compensation, (C) payments made to the Company or Holdings in respect of corporate overhead, interest payments and other dividends solely to the extent expressly set forth in Section 7.4(a), (D) the lease of certain facilities from Holdings and its Affiliates to WOC Inc. and Waxman Consumer Products Group Inc. on terms acceptable to Agent and (E) the transactions contemplated by the Tax Sharing Agreement, the Intercorporate Agreement and the Trademark License Agreement. 7.15. Cancellation of Indebtedness Owed to It. No Borrower shall cancel, nor shall it permit any of its Subsidiaries to cancel, any claim or Indebtedness owed to it except (a) in the case of a claim or Indebtedness owed to any Person who is an Affiliate of such Borrower, for ade- quate consideration and in the ordinary course of business or (b) in the case of a claim or Indebtedness owed to any Person who is not an Affiliate of such Borrower, for adequate consideration or in the ordinary cause of business. 7.16. No New Subsidiaries. No Borrower shall, nor shall it permit any of the Subsidiaries to, (I) incorporate or otherwise organize any Subsidiary which was not in existence on the Closing Date or (II) acquire any Stock of any Person such that such Person becomes a new Subsidiary of such Borrower or such Subsidiary, except as permitted by Section 7.6; provided that (a) if such new Subsidiary is not a foreign Subsidiary, such new Subsidiary shall execute and deliver to the Agent (i) a guaranty in 110 form and substance reasonably satisfactory to the Agent, (ii) a security agreement in substantially the form of the Security Agreement, (iii) if appropriate, a pledge agreement in substantially the form of the Pledge Agreement, pledging 100% (or 65% of any foreign Subsidiaries of such new Subsidiary) of the Stock owned by such new Subsidiary, and (iv) take any and all action necessary or desirable to pledge and perfect a security interest in all of such Subsidiary's assets and (b) the Borrower (or its Subsidiary) owning such new Subsidiary execute and deliver to the Agent a pledge agreement in substantially the form of the Pledge Agreement, pledging 100% (or 65% of such new Subsidiary if such new Subsidiary is a foreign Subsidiary) of all Stock owned by such Person of such new Subsidiary, each with such modifications as are acceptable to the Agent. 7.17. Capital Structure. No Borrower shall make, nor shall it permit any of its Subsidiaries to, make, any change in its capital structure (including, without limitation, in the terms of its outstanding Stock) or amend its certificate of incorporation or by-laws other than for changes or amendments which in the aggregate have no Material Adverse Effect. 7.18. No Speculative Transactions. No Borrower shall, nor shall permit any of its Subsidiaries to, engage in any speculative transaction or in any transaction involving commodity options or futures contracts except for the sole purpose of hedging in the normal course of business and consistent with industry practices. 7.19. Environmental. No Borrower shall, nor shall it permit any of its Subsidiaries, any lessee or any other Person to, dispose of any Contaminant in violation of any Environmental Law by placing it in or on the ground or waters of any property owned or leased by any Borrower or any of its Subsidiaries or any other Person; provided, however, that the Borrowers shall not be deemed in violation of this Section 7.19 if, as the consequence of all such disposals, the Borrowers and their Subsidiaries would not incur Environmental Liabilities and Costs in excess of $1,000,000. 111 ARTICLE VIII EVENTS OF DEFAULT 8.1. Events of Default. Each of the following events shall be an Event of Default: (a) Any Borrower shall fail to pay any principal (including, without limitation, mandatory prepayments of principal) of, or interest on, any Loan, any fee, any other amount due hereunder or under the other Loan Documents or other of the Obligations when the same becomes due and payable; or (b) Any representation or warranty made or deemed made by any Loan Party in any Loan Document or by any Loan Party (or any of its officers) in connection with any Loan Document shall prove to have been incorrect in any material respect when made or deemed made; or (c) Any Loan Party shall fail to perform or observe (i) any term, covenant or agreement contained in Articles VI or VII, or (ii) any other term, covenant or agreement contained in this Agreement or in any other Loan Document if such failure under this clause (ii) shall remain unremedied for ten days after the earlier of the date on which (A) a Responsible Officer of any Borrower becomes aware of such failure or (B) written notice thereof shall have been given to the Borrowers by the Agent or any Lender; or (d) (i) Holdings or any of its Subsidiaries (other than the Ideal Subsidiaries) shall fail to pay any principal of or premium or interest on any Indebtedness of Holdings or such Subsidiary having a principal amount of $1,000,000 or more (excluding Indebtedness evidenced by the Notes), when the same becomes due and payable (whether by scheduled maturity, required pre- payment, acceleration, demand or otherwise); or (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any such Indebtedness, if the effect of such event or condition is to accelerate, or to permit the acceleration of (after the expiration of any applicable period of grace), the maturity of such Indebtedness; or (iii) any such Indebtedness shall become or be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), or Holdings 112 or any of its Subsidiaries (other than the Ideal Subsidiaries) shall be required to repurchase or offer to repurchase such Indebtedness, prior to the stated maturity thereof; provided that no Event of Default shall be deemed to occur under clause (i) hereof if such non-payment occurs because the Borrowers were prohibited from making distributions or dividends to the Company or Holdings pursuant to Section 7.4(a) solely as a result of the occurrence of a Trigger Event; or (e) Holdings or any of its Subsidiaries (other than the Ideal Subsidiaries) shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors, or any proceeding shall be instituted by or against Holdings or any of its Subsidiaries (other than the Ideal Subsidiaries) seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a custodian, receiver, trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceedings instituted against Holdings or any of its Subsidiaries (other than the Ideal Subsidiaries) (but not instituted by Holdings or such Subsidiary (other than the Ideal Subsidiaries)), either such proceedings shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceedings shall occur; or Holdings or any of its Subsidiaries (other than the Ideal Companies) shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess of $500,000 to the extent not fully covered by insurance subject to reasonable deductions shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order, or (ii) there shall be any period of 30 consecutive days during which a stay of enforcement 113 of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (g) (i) With respect to any Plan, a prohibited transaction within the meaning of Section 4975 of the Code or Section 406 of ERISA shall occur which in the reasonable determination of the Agent has a reasonable likelihood of resulting in direct or indirect liability to any Loan Party or any of its Subsidiaries, (ii) with respect to any Title IV Plan, the filing of a notice to voluntarily terminate any such plan in a distress termination, (iii) with respect to any Multiemployer Plan, any Loan Party, any of it Subsidiaries or any ERISA Affiliate shall incur any Withdrawal Liability, (iv) with respect to any Qualified Plan, any Loan Party, any of its Subsidiaries or any ERISA Affiliate shall incur an accumulated funding deficiency or request a funding waiver from the IRS, or (v) with respect to any Title IV Plan or Multiemployer Plan which has an ERISA Event not described in clauses (i) through (iv) hereof, in the reasonable determination of the Agent there is a reasonable likelihood for termination of any such plan by the PBGC; provided, however, that the events listed in clauses (i) through (v) hereof shall constitute Events of Default only if the liability, deficiency or waiver request of any Loan Party, any of its Subsidiaries or any ERISA Affiliate, whether or not assessed, equals or exceeds $1,000,000 in any case set forth in (i) through (v) above, equals or exceeds, $1,000,000 in the aggregate for all such cases; (h) Any material provision of any Collateral Document after delivery thereof under Section 3.1 shall for any reason cease to be valid and binding on any Loan Party party thereto, or any Loan Party shall so state in writing; or (i) Any Collateral Document after delivery thereof shall, for any reason, cease to create a valid Lien on any of the Collateral purported to be covered thereby, or such Lien shall cease to be a perfected and first priority Lien, or any Loan Party shall so state in writing; or (j) There shall occur any Change of Control; or (k) [Reserved] 114 (l) There shall occur a Material Adverse Change or an event which would have a Material Adverse Effect; or (m) Holdings shall have (i) altered, rescinded, terminated, amended, supplemented, waived or otherwise modified any provision of or permitted any breach or default to exist under any Indenture, or taken or failed to take any action thereunder if to do so has a reasonable likelihood of having a Material Adverse Effect; or (ii) amended, modified or changed, or consented or agreed to any amendment, modification or change to, any of the terms relating to the payment or prepayment of principal of, or premium or interest on, any Debenture (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon). 8.2. Remedies. If there shall occur and be continuing any Event of Default, the Agent (i) shall at the request, or may with the consent, of the Majority Lenders by notice to the Borrowers, declare the obligation of each Lender to make Loans and each Issuer to issue a Letter of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Majority Lenders by notice to the Borrowers, declare the Loans, all interest thereon and all other amounts and Obligations payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts and Obligations shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrowers; provided, however, that upon the occurrence of the Event of Default specified in subparagraph (e) above, (A) the obligation of each Lender to make Loans and of each Issuer to issue Letters of credit shall automatically be terminated and (B) the Loans, all such interest and all such amounts and Obligations shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrowers. In addition to the remedies set forth above, the Agent may exercise any remedies provided for by the Collateral Documents in accordance with the terms thereof or any other remedies provided by applicable law. 115 8.3 Actions in Respect of Letters of Credit. (a) Upon the Termination Date, the Borrowers jointly and severally agree to pay to the Agent in immediately available funds at the Agent's office specified in the Notes, for deposit in a special non-interest-bearing cash collateral account (the "L/C Cash Collateral Account") to be maintained with and in the name of the Agent on behalf of the Secured Parties at such place as shall be designated by the Agent, an amount equal to all outstanding Letter of Credit Obligations. (b) The Borrowers hereby pledge, and grant to the Agent a Lien on all of their right, title and interest in and to all funds held in the L/C Cash Collateral Account from time to time, and all proceeds thereof, as security for the payment of all amounts due and to become due from the Borrowers to the Lenders and Issuers under the Loan Documents. (c) The Agent shall, from time to time after funds are deposited in the L/C Cash Collateral Account, apply funds then held in the L/C Cash Collateral Account to the payment of any amounts, in such order as the Agent may elect, as shall have become or shall become due and payable by the Borrowers to the Issuers or Lenders in respect of the Letter of Credit Obligations. (d) Except as set forth in Section 8.3(g), none of the Borrowers nor any Person claiming on behalf of or through the Borrowers shall have any right to withdraw any of the funds held in the L/C Cash Collateral Account. (e) The Borrowers agree that they will not (i) sell or otherwise dispose of any interest in the L/C Cash Collateral Account or any funds held therein or (ii) create or permit to exist any Lien upon or with respect to the L/C Cash Collateral Account or any funds held therein, except as provided in or contemplated by this Agreement. (f) The Agent may also exercise, in its sole discretion, in respect of the L/C Cash Collateral Account, in addition to the other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of New York at that time, and the Agent may, without notice except as specified 116 below, sell the L/C Cash Collateral Account or any part thereof. (g) Any cash held in the L/C Cash Collateral Account, and all cash proceeds received by the Agent in respect of any sale of, collection from or other realization upon all or any part of the L/C Cash Collateral Account, may, in the discretion of the Agent, then or at any time thereafter be applied (after all payments provided for in Section 8.3(c), the expiration of all outstanding Letters of Credit and the payment of any amounts payable pursuant to Section 10.4) in whole or in part by the Agent against all or any part of the other Obligations in such order as the Agent shall elect. Any surplus of such cash or cash proceeds held by the Agent and remaining after the cash payment in full of all of the Obligations shall be paid over to the Borrowers or to whomsoever may be lawfully entitled to receive such surplus. ARTICLE IX THE AGENT 9.1. Authorization and Action. (a) Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Without limitation of the foregoing, each Lender hereby authorizes the Agent to execute and deliver, and to perform its obligations under, each of the Loan Documents to which the Agent is a party, and to exercise all rights, powers and remedies that the Agent may have under such Loan Documents. Each Lender authorizes the Agent to execute and deliver any and all documents and instruments as are reasonably incidental to any release of Collateral to the extent that the sale of such Collateral is permitted hereby. (b) As to any matters not expressly provided for by this Agreement and the other Loan Documents (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding 117 upon all Lenders and all holders of Notes; provided, however, that the Agent shall not be required to take any action which the Agent in good faith believes exposes it to personal liability or is contrary to this Agreement or applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by any Loan Party pursuant to the terms of this Agreement or the other Loan Documents. 9.2. Agent's Reliance, Etc. Neither the Agent, nor any of its Affiliates or any of the respective directors, officers, agents or employees of the Agent or any such Affiliate shall be liable for any action taken or omitted to be taken by it, him, her or them under or in connection with this Agreement or the other Loan Documents, except for its, his, her or their own gross negligence or wilful misconduct. Without limitation of the generality of the foregoing, the Agent (i) may treat the payee of any Note as the holder thereof until such Note has been assigned in accordance with Section 10.7; (ii) may rely on the Register to the extent set forth in Section 10.7(c); (iii) may consult with legal counsel (including, without limitation, counsel to the Borrowers or any other Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iv) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents; (v) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any of the other Loan Documents on the part of the Borrowers or any other Loan Party or to inspect the property (including, without limitation, the books and records) of the Borrowers or any other Loan Party; (vi) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (vii) shall incur no liability under or in respect of this Agreement or any of the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, cable, telex or facsimile transmission) believed by it to be genuine and signed or sent by the proper party or parties. 118 9.3. Citicorp and Affiliates. With respect to its Commitment, the Loans made by it and each Note issued to it and Letters of Credit issued by it, Citicorp shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Citicorp in its individual capacity. Citicorp and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrowers or any other Loan Party or any of their respective Subsidiaries and any Person who may do business with or own securities of the Borrowers or any other Loan Party or any of their respective Subsidiaries, all as if Citicorp were not the Agent and without any duty to account therefor to the Lenders. 9.4. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements referred to in Article IV and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and other Loan Documents. 9.5. Indemnification. The Lenders agree to indemnify the Agent and its Affiliates, and their respective directors, officers, employees, agents and advisors (to the extent not reimbursed by the Borrowers or other Loan Parties), ratably according to the respective unpaid principal amounts of the Notes then held by each of them and Letter of Credit Obligations (including, without limitation, participations therein) owing to them (or if no Notes and Letter of Credit Obligations are at the time outstanding, ratably according to the respective amounts of the aggregate of their Commitments), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements (including, without limitation, reasonable fees and disbursements of legal counsel) of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against, the Agent (in such capacity) in any way relating to 119 or arising out of this Agreement or the other Loan Documents or any action taken or omitted by the Agent under this Agreement or the other Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's or such Affiliate's gross negligence or wilful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of- pocket expenses (including, without limitation, reasonable fees and disbursements of legal counsel) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of its rights or responsibilities under, this Agreement or the other Loan Documents, to the extent that the Agent is not reimbursed for such expenses by the Borrowers or another Loan Party. 9.6. Successor Agent. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrowers. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be (a) a Lender or (b) if no Lender accepts such appointment, a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents. 120 ARTICLE X MISCELLANEOUS 10.1. Amendments, Etc. (a) Subject to the terms of the Intercreditor Agreement, no amendment or waiver of any provision of this Agreement or the Intercreditor Agreement nor consent to any departure by the Company or the Borrowers therefrom shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (i) amend or waive any of the conditions specified in Sections 3.1 and 3.2; (ii) increase the individual or aggregate Commitments of the Lenders or subject the Lenders to any additional obligations; (iii) reduce the principal of, or interest on, the Loans or any fees or other amounts payable hereunder (other than the waiver of the right to receive default interest or any waiver, amendment or consent, the effect of which is to cure any Default or Event of Default which, in turn, results in the lower rates set forth in the definitions of "Applicable Base Rate Margin", "Applicable Eurodollar Margin" or "Letter of Credit Fee Percentage"); (iv) postpone any date fixed for any payment of principal of, or interest on, the Loans or any fees or other amounts payable hereunder; (v) change the percentage of the Commitments, the aggregate unpaid principal amount of the Loans or Letter of Credit Obligations, which shall be required for the Lenders or any of them to take any action hereunder; (vi) release Collateral in excess of 10% of the value of all such Collateral on the date hereof, except as shall otherwise be provided herein or in the Collateral Documents; or (vii) amend Section 8.1(e) or this Section 10.1; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or the other Loan Documents. (b) Each Lender and each Loan Party hereby acknowledges that the Agent has the authority to increase or decrease any advance rate from time to time; provided, however that the Agent may not increase any advance rate above those set forth herein without the written consent of all of the Lenders. 121 (c) Each Lender grants to the Agent the right (which right shall be assignable by the Agent to any Eligible Assignee) to purchase all (but not less than all) of such Lender's Commitments, Commitment to issue Letters of Credit, the Loans and Letter of Credit Obligations owing to it and the Notes held by it and all of its rights and obligations hereunder and under the other Loan Documents at a price equal to the aggregate amount of outstanding Loans and Letter of Credit Obligations owed to such Lender (together with all accrued and unpaid interest and fees owed to such Lender), which right may be exercised by the Agent if such Lender refuses to execute any amendment, waiver or consent which requires the written consent of all of the Lenders and to which the Majority Lenders, the Agent and the Borrowers have agreed. Each Lender agrees that if the Agent exercises its option hereunder, it shall promptly execute and deliver all agreements and documentation necessary to effectuate such assignment as set forth in Section 10.7. 10.2. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including, without limitation, telegraphic, telex, telecopy or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered by hand, if to any Borrower, at its address at c/o Waxman Industries, Inc., 24460 Aurora Road, Bedford Heights, Ohio 44146 (telecopy no.: 216-439- 4909) (telephone number: 216-439-1830), Attention: Chief Financial Officer; if to any Lender, at its Domestic Lending Office specified opposite its name on Schedule II; if to any Issuer at its address set forth on Schedule III; and if to the Agent, at its address at 399 Park Avenue, 6th Floor, New York, NY 10043 (telecopy number: 212-793-1290) (telephone number: 212-559-3149), Attention: Keith Karako; or, as to any Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to such Borrower and the Agent. All such notices and communications shall, when mailed, telegraphed, telexed, telecopied, cabled or delivered, be effective three days after deposited in the mails, or when delivered to the telegraph company, confirmed by telex answerback, telecopied with confirmation of receipt, delivered to the cable company or delivered by hand to the addressee or its agent, respectively, except that notices and communications to the Agent pursuant to Article II or IX shall not be effective 122 until received by the Agent. Any notice given to any Borrower shall be deemed to be given to all Borrowers. 10.3. No Waiver; Remedies. No failure on the part of any Lender or the Agent to exercise, and no delay in exercising, any right hereunder or under any Note or any Letter of Credit Reimbursement Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 10.4. Costs; Expenses; Indemnities. (a) Each Borrower jointly and severally agree to pay on demand (i) all costs and expenses of the Agent in connection with the preparation, execution, delivery, administration, modification and amendment of this Agreement, each of the other Loan Documents and each of the other documents to be delivered hereunder and thereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel, accountants, appraisers, consultants or industry experts retained by the Agent with respect thereto and, as to the Agent, with respect to advising it as to its rights and responsibilities under this Agreement and the other Loan Documents, (ii) all reasonable fees, costs and expenses of counsel retained by each Lender in connection with the preparation, execution and delivery of this Agreement, each of the other Loan Documents and each of the other documents to be delivered hereunder and thereunder in an amount not to exceed $10,000 for each Lender, and (iii) all costs and expenses of the Agent or any of the Lenders and each Lender (including, without limitation, the reasonable fees and out- of-pocket expenses of counsel, accountants, appraisers, consultants or industry experts retained by the Agent or any Lender) in connection with the restructuring or enforcement (whether through negotiation, legal proceedings or otherwise) of this Agreement and the other Loan Documents. (b) Each of the Company, and each Borrower jointly and severally agrees to indemnify and hold harmless the Agent and each Lender and their respective Affiliates, and the directors, officers, employees, agents, attorneys, consultants and advisors of or to any of the foregoing (including, without limitation, those retained in connection with the satisfaction or attempted satisfaction of any of the conditions set forth in Article III) (each of the foregoing being an "Indemnitee") from and against any and 123 all claims, damages, liabilities, obligations, losses, penalties, actions, judgments, suits, costs, disbursements and expenses of any kind or nature (including, without limitation, fees and disbursements of counsel to any such Indemnitee) which may be imposed on, incurred by or asserted against any such Indemnitee in connection with or arising out of any investigation, litigation or proceeding, whether or not any such Indemnitee is a party thereto, whether direct, indirect, or consequential and whether based on any federal, state or local law or other statutory regulation, securities or commercial law or regulation, or under common law or in equity, or on contract, tort or otherwise, in any manner relating to or arising out of this Agreement, any other Loan Document, any Obligation, any Letter of Credit, any Disclosure Document, any Related Document, any Indenture, or any act, event or transaction related or attendant to any thereof, including, without limitation, (i) all Environmental Liabilities and Costs arising from or connected with the past, present or future operations of any Borrower or any of its Subsidiaries involving any property subject to a Collateral Document, or damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Release of Contaminants on, upon or into such property or any contiguous real estate; (ii) any costs or liabilities incurred in connection with any Remedial Action concerning any Borrower or any of its Subsidiaries; (iii) any costs or liabilities incurred in connection with any Environmental Lien; (iv) any costs or liabilities incurred in connection with any other matter under any Environmental Law, including, without limitation, CERCLA and applicable state property transfer laws, whether, with respect to any of the foregoing, such Indemnitee is a mortgagee pursuant to any leasehold mortgage, a mortgagee in possession, the successor in interest to any Borrower or any of its Subsidiaries, or the owner, lessee or operator of any property of any Borrower or any of its Subsidiaries by virtue of foreclosure, except, with respect to any of the foregoing referred to in clauses (i), (ii), (iii) and (iv), to the extent incurred following (A) foreclosure by the Agent or any Lender, or the Agent or any Lender having become the successor in interest to any Borrower or any of its Subsidiaries, and (B) attributable primarily to acts of the Agent or such Lender or any agent on behalf of the Agent or such Lender; or (v) the use or intended use of the proceeds of the Loans or Letters of Credit or in connection with any investigation of any potential matter covered hereby (collectively, the "Indemnified Matters"); provided, however, that any Borrower shall not have any obligation 124 under this Section 10.4(b) to an Indemnitee with respect to any Indemnified Matter caused by or resulting from the gross negligence or willful misconduct of that Indemnitee, as determined by a court of competent jurisdiction in a final non-appealable judgment or order. (c) Each Borrower jointly and severally agrees to indemnify the Agent and the Lenders for, and hold the Agent and the Lenders harmless from and against, any and all claims for brokerage commissions, fees and other compensa- tion made against the Agent and the Lenders for any broker, finder or consultant with respect to any agreement, arrange- ment or understanding made by or on behalf of any Loan Party or any of its Subsidiaries in connection with the transactions contemplated by this Agreement. (d) Each Borrower agrees that any indemnification or other protection provided to any Indemnitee pursuant to this Agreement (including, without limitation, pursuant to this Section 10.4) or any other Loan Document shall (i) survive payment of the Obligations and (ii) inure to the benefit of any Person who was at any time an Indemnitee under this Agreement or any other Loan Document. 10.5. Right of Set-off. Upon the occurrence and during the continuance of any Event of Default each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of any Borrower against any and all of the Obligations now or hereafter existing whether or not such Lender shall have made any demand under this Agreement or any Note or any other Loan Document and although such Obligations may be unmatured. Each Lender agrees promptly to notify the Borrowers after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section are in addition to the other rights and remedies (including, without limitation, other rights of set-off) which such Lender may have. 10.6. Binding Effect. This Agreement shall become effective when it shall have been executed by the Company, each Borrower and the Agent and when the Agent shall have been notified by each Lender that such Lender has 125 executed it and thereafter shall be binding upon and inure to the benefit of each Borrower, the Agent and each Lender and their respective successors and assigns, except that none of the Company or the Borrowers shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. 10.7. Assignments and Participations. (a) Each Lender may sell, transfer, negotiate or assign to one or more other Lenders or Eligible Assignees all or a portion of its Commitments, Commitment to issue Letters of Credit, the Loans and Letter of Credit Obligations owing to it and the Notes held by it and a commensurate portion of its rights and obligations hereunder and under the other Loan Documents; provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all of the assigning Lender's rights and obligations under this Agreement, (ii) each assignee hereunder shall also be an Eligible Assignee approved by the Agent, which consent shall not be unreasonably withheld; (iii) such assignment, if to a Person who is an Affiliate of any Lender and who does not otherwise qualify as an Eligible Assignee, shall be with the consent of the Borrowers and the Agent, which consent shall not be unreasonably withheld; (iv) such assignment, together with all such assignments being executed contemporaneously with such assignment to the assignee (and its Affiliates) shall be not less than 9.09% of the then outstanding Commitments and (v) if such assignment is an assignment in part, after giving effect thereto, the assigning Lender, together with its Affiliates owns not less than 9.09% of the then outstanding Commitments. The parties to each assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a fee of $3,000 and the Notes (or an Affidavit of Loss and Indemnity with respect to such Notes satisfactory to the Agent) subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (A) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to such assignee pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender, and if such Lender was an Issuer, of an Issuer hereunder and thereunder, and (B) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except those which survive the 126 payment in full of the Obligations) and be released from its obligations under the Loan Documents (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto). (b) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any of the statements, warranties or representations made in or in connection with this Agreement or any other Loan Document furnished pursuant thereto or the execution, legality, validity, enforceabil- ity, genuineness, sufficiency or value of this Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under this Agreement or any other Loan Document or of any other instrument or document furnished pursuant hereto or thereto; (iii) such assigning Lender confirms that it has delivered to the assignee and the assignee confirms that it has received a copy of this Agreement and each of the Loan Documents together with a copy of the most recent financial statements delivered by the Borrowers to the Lenders pursuant to each of the clauses of Section 6.11 (or if no such statements have been delivered, the financial statements referred to in Section 4.5 of this Agreement) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and 127 (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender and if such assignor Lender was an Issuer, as an Issuer. (c) The Agent shall maintain at its address referred to in Section 10.2 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitments of and principal amount of the Loans owing to each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Loan Parties, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender or Issuer, as the case may be, for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers, the Agent or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the fee set forth in Section 10.7(a) and the Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrowers. Within five Business Days after its receipt of such notice, the Borrowers, at their own expense, shall execute and deliver to the Agent, in exchange for such surrendered Notes, new Notes to the order of such Eligible Assignee in an amount equal to the Commitments assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained Commitments hereunder, new Notes to the order of the assigning Lender in an amount equal to the Commitments retained by it hereunder. Such new Notes shall be dated the same date as the Surrendered Notes and be in substantially the form of Exhibit A-1 or A-2 hereto, as applicable. (e) In addition to the other assignment rights provided in this Section 10.7, each Lender may assign, as collateral or otherwise, any of its rights under this Agreement (including, without limitation, rights to payments of principal or interest on the Loans) to any Federal 128 Reserve Bank without notice to or consent of the Borrowers or the Agent; provided, however, that no such assignment shall release the assigning Lender from any of its obligations hereunder. The terms and conditions of any such assignment and the documentation evidencing such assignment shall be in form and substance satisfactory to the assigning Lender and the assignee Federal Reserve Bank. (f) Each Lender may sell participations to one or more banks or other Persons in or to all or a portion of its rights and obligations under the Loan Documents (including, without limitation, all or a portion of its Commitments, commitment to issue Letters of Credit, the Letter of Credit Obligations owing to it, the Loans owing to it and the Notes held by it). The terms of such participation shall not, in any event, require the participant's consent to any amendments, waivers or other modifications of any provision of any Loan Documents, the consent to any departure by any Loan Party therefrom, or to the exercising or refraining from exercising any powers or rights which such Lender may have under or in respect of the Loan Documents (including, without limitation, the right to enforce the obligations of the Loan Parties), except if any such amendment, waiver or other modification or consent would (i) reduce the amount, or postpone any date fixed for, any amount (whether of principal, interest or fees) payable to such participant under the Loan Documents, to which such participant would otherwise be entitled under such participation or (ii) result in the release of all or substantially all of the Collateral other than in accordance with the Collateral Documents. Notwithstanding the sale of any participation by any Lender, (i) such Lender's obligations under the Loan Documents (including, without limitation, its Commitments and commitment hereunder to issue Letters of Credit) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of such Notes and Obligations for all purposes of this Agreement, (iv) such Lender shall disclose to the Agent the identity of each bank or other entity purchasing a participation within a reasonable time after the sale and purchase of such participation, and (v) the Borrowers, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and may assume all of such Lender's actions are properly authorized. 129 (g) Each Issuer may at any time assign its rights and obligations hereunder to any other Issuer or to any Lender by an instrument in form and substance satisfactory to the Agent and the parties thereto. 10.8. Governing Law; Severability. This Agree- ment and the Notes and the rights and obligations of the parties hereto and thereto shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. 10.9. Submission to Jurisdiction; Service of Process. (a) Any legal action or proceeding with respect to this Agreement or the Notes or any document related thereto may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, each Borrower hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably waive any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, which any of them may now or hereafter have to the bringing of any such action or proceeding in such respective jurisdictions. (b) Each Borrower irrevocably consents to the service of process of any of the aforesaid courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the borrower at its address provided herein. (c) Nothing contained in this Section 10.9 shall affect the right of the agent, any Lender or any holder of a Note to serve process in any other manner permitted by law or commence legal proceedings or otherwise proceed against any Borrower in any other jurisdiction. 10.10. Section Titles. The Section titles contained in this Agreement are and shall be without sub- stantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 10.11. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by differ- ent parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all 130 of which taken together shall constitute one and the same agreement. 10.12. Entire Agreement. This Agreement, together with all of the other Loan Documents and all certificates and documents delivered hereunder or there- under, and the fee letter between the Company and Citibank embody the entire agreement of the parties and supersedes all prior agreements and understandings relating to the subject matter hereof. 10.13. Confidentiality. Each Lender and the Agent agree to keep information obtained by it pursuant hereto and the other Loan Documents confidential in accord- ance with such Lender's or the Agent's, as the case may be, customary practices and agrees that it will only use such information in connection with the transactions contemplated by this Agreement and not disclose any of such information other than (i) to such Lender's or the Agent's, as the case may be, employees, representatives and agents who are or are expected to be involved in the evaluation of such informa- tion in connection with the transactions contemplated by this Agreement and who are advised of the confidential nature of such information, (ii) to the extent such informa- tion presently is or hereafter becomes available to such Lender or the Agent, as the case may be, on a non-confiden- tial basis from a source other than any Borrower, (iii) to the extent disclosure is required by law, regulation or judicial order or requested or required by bank regulators or auditors, or (iv) to assignees or participants or potential assignees or participants who agree to be bound by the provisions of this sentence. 10.14. Waiver of Jury Trial. Each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, or arising out of, under or in connection with this Agreement or any other Loan Document, or any course of conduct, course of dealing, verbal or written statement or action of any party hereto. 10.15. Joint and Several Obligations. (a) Any term or provision of this Agreement or any other Loan Document to the contrary notwithstanding, the maximum aggregate amount of the Obligations for which any Borrower (which Obligations are not direct borrowings or direct obligations of such Borrower) (the "Non-Direct Obligations") shall be liable shall not exceed the maximum amount for which such Borrower can be liable without rendering such 131 Non-Direct Obligations, as they relate to such Borrower, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer. (b) To the extent that any Borrower shall be required hereunder to pay a portion of its Non-Direct Obligations which shall exceed the greater of (i) the amount of the economic benefit actually received by such Borrower from the Loans and Letters of Credit in respect of such Non- Direct Obligations and (ii) the amount which such Borrower would otherwise have paid if such Borrower had paid the aggregate amount of the Non-Direct Obligations of such Borrower (excluding the amount thereof repaid by the other Borrowers) in the same proportion as such Borrower's net worth at the date enforcement hereunder is sought bears to the aggregate net worth of all the Borrowers at the date enforcement hereunder is sought, then such Borrower shall be reimbursed by the other Borrowers for the amount of such excess, pro rata based on the respective net worths of the Borrowers at the date enforcement hereunder is sought. 10.16. Consent to Proposed Restructuring; Amend- ment to Covenants. The parties hereto agree that all provisions relating to the Proposed Restructuring and the Exchange Notes shall become effective upon the consummation of the Proposed Restructuring provided that the terms of the Indenture or other agreement governing the Exchange Notes are no less favorable to the Company and the Borrowers than as set forth on Exhibit _ hereto. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. WAXMAN USA INC. By: /s/ Michael Vantusko _______________________________ Title: Vice President-Finance 132 Borrowers WOC INC. By: /s/ Michael Vantusko _______________________________ Title: Treasurer WAXMAN CONSUMER PRODUCTS GROUP INC. By: /s/ Michael Vantusko _______________________________ Title: Treasurer Agent CITICORP USA, INC. as Agent By: /s/ Thomas Halsch _______________________________ Title: Vice-President Lenders CITICORP USA, INC. By: /s/ Thomas Halsch _______________________________ Title: Vice-President 133 HELLER FINANCIAL, INC. By: /s/ Tom Bukowski _______________________________ Title: Vice-President Issuers CITIBANK, N.A. as Issuer By: /s/ Thomas Halsch _______________________________ Title: Vice-President 134 ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.1. Defined Terms. . . . . . . . . . . . . . . . . 1 1.2. Computation of Time Periods. . . . . . . . . . 37 1.3. Accounting Terms . . . . . . . . . . . . . . . 37 1.4. Certain Terms. . . . . . . . . . . . . . . . . 37 ARTICLE II AMOUNTS AND TERMS OF THE LOANS 2.1. The Loans. . . . . . . . . . . . . . . . . . . 38 2.2. Making the Loans . . . . . . . . . . . . . . . 39 2.3. Fees . . . . . . . . . . . . . . . . . . . . . 41 2.4. Reduction and Termination of the Revolving Credit Commitments . . . . . . . . . . . . . . 41 2.5. Repayment. . . . . . . . . . . . . . . . . . . 42 2.6. Prepayments. . . . . . . . . . . . . . . . . . 42 2.7. Conversion/Continuation Option . . . . . . . . 43 2.8. Interest . . . . . . . . . . . . . . . . . . . 44 2.9. Interest Rate Determination and Protection . . 44 2.10. Increased Costs . . . . . . . . . . . . . . . 45 2.11. Illegality . . . . . . . . . . . . . . . . . . 45 2.12 Capital Adequacy. . . . . . . . . . . . . . . 46 2.13. Payments and Computations . . . . . . . . . . 46 2.14. Taxes. . . . . . . . . . . . . . . . . . . . . 49 2.15. Sharing of Payments, Etc. . . . . . . . . . . 50 2.16. Letter of Credit Facility . . . . . . . . . . 51 2.17. Cash Collateral Account . . . . . . . . . . . 58 2.18. Swing Advances . . . . . . . . . . . . . . . . 59 2.19. Payment on Account of Collateral . . . . . . . 61 ARTICLE III CONDITIONS OF LENDING 3.1 Conditions Precedent to Initial Loans and Letters of Credit . . . . . . . . . . . . . . . 62 3.2. Additional Conditions Precedent to Initial Loans and Letters of Credit. . . . . . . . . . 65 3.3. Conditions Precedent to Each Loan and Letter of Credit . . . . . . . . . . . . . . . . . . . 67 i ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.1. Corporate Existence; Compliance with Law . . . 68 4.2. Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . 69 4.3. Taxes. . . . . . . . . . . . . . . . . . . . . 71 4.4. Full Disclosure. . . . . . . . . . . . . . . . 72 4.5. Financial Matters. . . . . . . . . . . . . . . 73 4.6. Litigation . . . . . . . . . . . . . . . . . . 74 4.7. Margin Regulations . . . . . . . . . . . . . . 74 4.8. Ownership of Borrower; Subsidiaries. . . . . . 74 4.9. ERISA. . . . . . . . . . . . . . . . . . . . . 75 4.10. Liens . . . . . . . . . . . . . . . . . . . . 77 4.11. Related Documents; Indentures . . . . . . . . 78 4.12. No Burdensome Restrictions; No Defaults . . . 78 4.13. No Other Ventures . . . . . . . . . . . . . . 78 4.14. Investment Company Act . . . . . . . . . . . . 79 4.15. Insurance . . . . . . . . . . . . . . . . . . 79 4.16. Labor Matters . . . . . . . . . . . . . . . . 79 4.17. Force Majeure . . . . . . . . . . . . . . . . 80 4.18. Use of Proceeds . . . . . . . . . . . . . . . 81 4.19. Environmental Protection . . . . . . . . . . . 81 4.20. [Reserved] . . . . . . . . . . . . . . . . . . 82 4.21. Intellectual Property . . . . . . . . . . . . 83 4.22. Title . . . . . . . . . . . . . . . . . . . . 83 ARTICLE V FINANCIAL COVENANTS 5.1. Maximum Leverage Ratio . . . . . . . . . . . . 85 5.2. Fixed Charge Coverage Ratio. . . . . . . . . . 86 5.3. Maintenance of Adjusted Net Worth. . . . . . . 86 5.4. Capital Expenditures . . . . . . . . . . . . . 87 5.5. EBITDA to Total Cash Interest Ratio. . . . . . 87 ARTICLE VI AFFIRMATIVE COVENANTS 6.1. Compliance with Laws, Etc. . . . . . . . . . . 88 6.2. Conduct of Business. . . . . . . . . . . . . . 88 6.3. Payment of Taxes, Etc. . . . . . . . . . . . . 89 6.4. Maintenance of Insurance . . . . . . . . . . . 89 6.5. Preservation of Corporate Existence, Etc.. . . 89 ii 6.6. Access . . . . . . . . . . . . . . . . . . . . 89 6.7. Keeping of Books . . . . . . . . . . . . . . . 90 6.8. Maintenance of Properties, Etc. . . . . . . . 90 6.9. Performance and Compliance with Other Covenants. . . . . . . . . . . . . . . . . . . 90 6.10. Application of Proceeds . . . . . . . . . . . 90 6.11. Financial Statements . . . . . . . . . . . . . 90 6.12. Reporting Requirements . . . . . . . . . . . . 93 6.13. New Real Estate . . . . . . . . . . . . . . . 98 6.14. Employee Plans . . . . . . . . . . . . . . . . 98 6.15. Fiscal Year . . . . . . . . . . . . . . . . . 98 6.16. Environmental . . . . . . . . . . . . . . . . 99 6.17. Borrowing Base Determination . . . . . . . . . 99 6.18. Cash Management System . . . . . . . . . . . . 100 ARTICLE VII NEGATIVE COVENANTS 7.1. Liens, Etc.. . . . . . . . . . . . . . . . . . 100 7.2. Indebtedness . . . . . . . . . . . . . . . . . 102 7.3. Lease Obligations. . . . . . . . . . . . . . . 103 7.4. Restricted Payments. . . . . . . . . . . . . . 104 7.5. Mergers, Stock Issuances, Sale of Assets, Etc. . . . . . . . . . . . . . . . . . . . . . 105 7.6. Investments in Other Persons . . . . . . . . . 106 7.7. Maintenance of Ownership of Subsidiaries . . . 107 7.8. Change in Nature of Business . . . . . . . . . 107 7.9. Compliance with ERISA. . . . . . . . . . . . . 107 7.10. Modification of Related Documents and Indentures. . . . . . . . . . . . . . . . . . 108 7.11. Modification of Material Agreements . . . . . 108 7.12. Accounting Changes. . . . . . . . . . . . . . 109 7.13. Contingent Obligations. . . . . . . . . . . . 109 7.14. Transactions with Affiliates. . . . . . . . . 109 7.15. Cancellation of Indebtedness Owed to It . . . 110 7.16. No New Subsidiaries . . . . . . . . . . . . . 110 7.17. Capital Structure . . . . . . . . . . . . . . 110 7.18. No Speculative Transactions . . . . . . . . . 111 7.19. Environmental . . . . . . . . . . . . . . . . 111 ARTICLE VIII EVENTS OF DEFAULT 8.1. Events of Default . . . . . . . . . . . . . . 111 8.2. Remedies . . . . . . . . . . . . . . . . . . 114 8.3. Actions in Respect of Letters of Credit . . . 115 iii ARTICLE IX THE AGENT 9.1. Authorization and Action . . . . . . . . . . 117 9.2. Agent's Reliance, Etc. . . . . . . . . . . . 117 9.3. Citicorp and Affiliates . . . . . . . . . . . 118 9.4. Lender Credit Decision . . . . . . . . . . . 119 9.5. Indemnification . . . . . . . . . . . . . . . 119 9.6. Successor Agent . . . . . . . . . . . . . . . 120 ARTICLE X MISCELLANEOUS 10.1. Amendments, Etc.. . . . . . . . . . . . . . . 120 10.2. Notices, Etc. . . . . . . . . . . . . . . . . 122 10.3. No Waiver; Remedies . . . . . . . . . . . . . 122 10.4. Costs; Expenses; Indemnities. . . . . . . . . 122 10.5. Right of Set-off. . . . . . . . . . . . . . . 125 10.6. Binding Effect. . . . . . . . . . . . . . . . 125 10.7. Assignments and Participations. . . . . . . . 125 10.8. Governing Law; Severability . . . . . . . . . 129 10.9. Submission to Jurisdiction; Service of Process . . . . . . . . . . . . . . . . . . 129 10.10. Section Titles . . . . . . . . . . . . . . . 130 10.11. Execution in Counterparts . . . . . . . . . . 130 10.12. Entire Agreement . . . . . . . . . . . . . . 130 10.13. Confidentiality . . . . . . . . . . . . . . . 130 10.14. Waiver of Jury Trial . . . . . . . . . . . . 131 10.15. Joint and Several Obligations . . . . . . . . 131 10.16. Consent to Proposed Restructuring; Amendment to Covenants . . . . . . . . . . . 132 iv SCHEDULES Schedule I - Commitments Schedule II - Applicable Lending Offices and Addresses for Notices Schedule 4.2 - Defaults Schedule 4.3 - Taxes Schedule 4.8 - Subsidiaries Schedule 4.9 - ERISA Schedule 4.13 - Joint Ventures Schedule 4.16 - Labor Schedule 4.19 - Environmental Protection Schedule 4.22(a) - Borrower's Owned Real Estate Schedule 4.22(b) - Borrower's Leased Real Estate Schedule 7.1 - Existing Liens Schedule 7.2 - Existing Indebtedness Schedule 7.6 - Existing Investments v EXHIBITS Exhibit A-1 - Form of Revolving Credit Note Exhibit A-2 - Form of Term Note Exhibit B - Form of Notice of Borrowing Exhibit C - Form of Notice of Conversion or Continuation Exhibit D - Form of Collateral Document Amendment Exhibit E - Form of Barnett Pledge Agreement Exhibit F - Form of Opinion of Counsel for the Loan Parties Exhibit G - Form of Assignment and Acceptance Exhibit H - Form of Letter of Credit Request Exhibit I - Form of Borrowing Base Certificate vi EX-10.15 5 STANDSTILL AGREEMENT WAXMAN INDUSTRIES, INC. 24460 AURORA ROAD BEDFORD HEIGHTS, OHIO 44146 March 28, 1996 Barnett Inc. 3333 Lenox Avenue Jacksonville, Florida 32254 Dear Sirs: Waxman Industries, Inc., a Delaware corporation ("Waxman") and Barnett Inc., a Delaware corporation, hereby agree as follows: 1. For purposes of this Agreement the term (a) "Subsidiary" means, with respect to any person, (i) a corporation a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors ("Voting Securities") is at the time, directly or indirectly, owned by such person, by one or more Subsidiaries of such person or by such person and one or more Subsidiaries of such person or (ii) any other person (other than a corporation) in which such person, one or more Subsidiaries of such person or such person and one or more Subsidiaries of such person, directly or indirectly, at the date of determination thereof, has at least a majority ownership interest and (b) "Capital Stock" means, with respect to any person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of such person's capital stock and any and all rights, warrants or options exchangeable for or convertible into such capital stock. 2. During the term of this Agreement, Waxman will not, and will cause each of its Subsidiaries not to, acquire, offer to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, any Voting Securities (including shares of common stock, par value $.01 per share) of Barnett or direct or indirect rights or options to acquire (through purchase, exchange, conversion or otherwise) any Voting Securities of Barnett if such acquisition, at the time it is made, together with the Voting Securities of Barnett otherwise owned collectively by Waxman and its Subsidiaries, would result in Waxman's aggregate beneficial (as defined below) or record ownership of Voting Securities of Barnett during the term of this Agreement equalling or exceeding a majority of the Voting Securities of Barnett as most recently publicly reported on or prior to the date of such acquisition, it being understood that no subsequent reduction in the outstanding Voting Securities of Barnett shall result in a violation of this paragraph. 3. During the term of this Agreement, Waxman and any of its Subsidiaries shall have the right, directly or indirectly, to offer, sell, transfer, pledge, assign, hypothecate or otherwise dispose of any Voting Securities of Barnett beneficially owned by Waxman or any of its Subsidiaries. 4. The parties to this Agreement shall take all actions and execute all instruments, documents, stipulations and agreements reasonably necessary to implement or carry out the terms hereof. 5. This Agreement shall become effective upon the execution hereof and shall remain effective for a period of four years. 6. Each of the parties hereto represents and warrants that it is duly authorized to execute and deliver this Agreement and that this Agreement is a valid and binding obligation of such party enforceable against such party in accordance with its terms. This Agreement shall be binding upon, and shall inure to the benefit of and be enforceable by, the respective successors and, assigns of the parties hereto. 7. The parties agree that the provisions of this Agreement shall be severable in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and that the remaining provisions shall remain enforceable to the fullest extent permitted by law. 8. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without giving effect to the principles of conflict of laws thereof). 9. This Agreement may be executed in two or more counterparts which together shall constitute a single agreement. Very truly yours, Waxman Industries, Inc. By: /s/ Michael J. Vantusko -------------------------------- Accepted and Agreed: Barnett Inc. By: /s/ William R. Pray ---------------------------- EX-10.16 6 INDENTURE =============================================================== WAXMAN USA INC., as Issuer and UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee -------------------- INDENTURE Dated as of April 1, 1996 -------------------- $48,750,000 11 1/8% Senior Notes Due 2001, Series A and 11 1/8% Senior Notes Due 2001, Series B =============================================================== CROSS-REFERENCE TABLE TIA Indenture Section Section 310(a)(1)........................................ 7.10 (a)(2)........................................ 7.10 (a)(3)........................................ N.A. (a)(4)........................................ N.A. (a)(5)........................................ 7.08; 7.10 (b)........................................... 7.08; 7.10; 10.02 (c)........................................... N.A. 311(a)........................................... 7.11 (b)........................................... 7.11 (c)........................................... N.A. 312(a)........................................... 2.05 (b)........................................... 10.03 (c)........................................... 10.03 313(a)........................................... 7.06 (b)(1)........................................ 7.06 (b)(2)........................................ 7.06 (c)........................................... 7.06; 10.02 (d)........................................... 7.06 314(a)........................................... 4.07; 4.08; 10.02 (b)........................................... N.A. (c)(1)........................................ 7.02; 10.04 (c)(2)........................................ 7.02; 10.04 (c)(3)........................................ N.A. (d)........................................... N.A. (e)........................................... 10.05 (f)........................................... N.A 315(a)........................................... 7.01(b) (b)........................................... 7.05; 10.02 (c)........................................... 7.01(a) (d)........................................... 6.05; 7.01(c) (e)........................................... 6.11 316(a)(last sentence)............................ 2.09 (a)(1)(A)..................................... 6.05 (a)(1)(B)..................................... 6.04 (a)(2)........................................ N.A. (b)........................................... 6.07 317(a)(1)........................................ 6.08 (a)(2)........................................ 6.09 (b)........................................... 2.04 318(a)........................................... 10.01 (c)........................................... 10.01 - ---------------------- N.A. means Not Applicable NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -i- TABLE OF CONTENTS Page ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions....................................... 1 Section 1.02 Incorporation by Reference of TIA................. 20 Section 1.03 Rules of Construction............................. 21 ARTICLE TWO THE SECURITIES Section 2.01 Form and Dating................................... 21 Section 2.02 Execution and Authentication...................... 22 Section 2.03 Registrar and Paying Agent........................ 23 Section 2.04 Paying Agent To Hold Assets in Trust.............. 24 Section 2.05 Securityholder Lists.............................. 25 Section 2.06 Transfer and Exchange............................. 25 Section 2.07 Replacement Securities............................ 27 Section 2.08 Outstanding Securities............................ 27 Section 2.09 Treasury Securities............................... 28 Section 2.10 Temporary Securities.............................. 28 Section 2.11 Cancellation...................................... 29 Section 2.12 Defaulted Interest................................ 29 Section 2.13 CUSIP Number...................................... 29 Section 2.14 Deposit of Monies................................. 30 ARTICLE THREE REDEMPTION Section 3.01 Notices to Trustee................................ 30 Section 3.02 Selection of Securities To Be Redeemed........................................ 30 Section 3.03 Notice of Redemption.............................. 31 Section 3.04 Effect of Notice of Redemption.................... 32 Section 3.05 Deposit of Redemption Price....................... 32 Section 3.06 Securities Redeemed in Part....................... 33 -ii- Page ARTICLE FOUR COVENANTS Section 4.01 Payment of Securities............................. 33 Section 4.02 Maintenance of Office or Agency................... 33 Section 4.03 Corporate Existence............................... 34 Section 4.04 Payment of Taxes and Other Claims................. 34 Section 4.05 Maintenance of Properties and Insurance....................................... 34 Section 4.06 Compliance Certificate; Notice of Default......................................... 35 Section 4.07 Compliance with Laws.............................. 36 Section 4.08 SEC Reports and Other Information................. 37 Section 4.09 Waiver of Stay, Extension or Usury Laws............................................ 38 Section 4.10 Limitation on Additional Indebtedness............. 38 Section 4.11 Limitation on Restricted Payments................. 40 Section 4.12 Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries.................................... 43 Section 4.13 Limitation on Liens............................... 43 Section 4.14 Limitation on Investment, Loans and Advances.................................... 44 Section 4.15 Limitation on Transactions with Affiliates...................................... 44 Section 4.16 Change of Control................................. 45 Section 4.17 Disposition of Proceeds of Asset Sales........................................... 47 Section 4.18 Limitation on Issuances and Sales of Preferred Stock by Subsidiaries................. 51 ARTICLE FIVE SUCCESSOR CORPORATION Section 5.01 Consolidation, Merger, Conveyance, Transfer or Lease............................... 51 Section 5.02 Successor Entity Substituted...................... 53 ARTICLE SIX DEFAULT AND REMEDIES Section 6.01 Events of Default................................. 53 Section 6.02 Acceleration...................................... 55 -iii- Page Section 6.03 Other Remedies.................................... 56 Section 6.04 Waiver of Past Defaults........................... 56 Section 6.05 Control by Majority............................... 56 Section 6.06 Limitation on Suits............................... 57 Section 6.07 Rights of Holders To Receive Payment.............. 57 Section 6.08 Collection Suit by Trustee........................ 57 Section 6.09 Trustee May File Proofs of Claim.................. 58 Section 6.10 Priorities........................................ 58 Section 6.11 Undertaking for Costs............................. 59 ARTICLE SEVEN TRUSTEE Section 7.01 Duties of Trustee................................. 60 Section 7.02 Rights of Trustee................................. 61 Section 7.03 Individual Rights of Trustee...................... 62 Section 7.04 Trustee's Disclaimer.............................. 62 Section 7.05 Notice of Default................................. 62 Section 7.06 Reports by Trustee to Holders..................... 63 Section 7.07 Compensation and Indemnity........................ 63 Section 7.08 Replacement of Trustee............................ 64 Section 7.09 Successor Trustee by Merger, Etc.................. 65 Section 7.10 Eligibility; Disqualification..................... 66 Section 7.11 Preferential Collection of Claims Against Company................................. 66 ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE Section 8.01 Discharge of Indenture............................ 66 Section 8.02 Legal Defeasance and Covenant Defeasance...................................... 68 Section 8.03 Application of Trust Money........................ 72 Section 8.04 Repayment to Company.............................. 72 Section 8.05 Reinstatement..................................... 72 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.01 Without Consent of Holders........................ 73 Section 9.02 With Consent of Holders........................... 73 Section 9.03 Compliance with TIA............................... 75 -iv- Page Section 9.04 Revocation and Effect of Consents................. 75 Section 9.05 Notation on or Exchange of Securities............. 76 Section 9.06 Trustee To Sign Amendments, Etc................... 76 ARTICLE TEN MISCELLANEOUS Section 10.01 TIA Controls...................................... 76 Section 10.02 Notices........................................... 76 Section 10.03 Communications by Holders with Other Holders......................................... 78 Section 10.04 Certificate and Opinion as to Conditions Precedent............................ 78 Section 10.05 Statements Required in Certificate or Opinion......................................... 78 Section 10.06 Rules by Trustee, Paying Agent, Registrar....................................... 79 Section 10.07 Legal Holidays.................................... 79 Section 10.08 Governing Law..................................... 79 Section 10.09 No Adverse Interpretation of Other Agreements...................................... 79 Section 10.10 No Recourse Against Others........................ 80 Section 10.11 Successors........................................ 80 Section 10.12 Duplicate Originals............................... 80 Section 10.13 Severability...................................... 80 Section 10.14 Table of Contents, Headings, Etc.................. 80 Signatures.......................................................... 81 Exhibit A - Form of Series A Note Exhibit B - Form of Series B Note Exhibit C - Form of Legend for Book-Entry Securities Exhibit D - Form of Transferee Letter of Representation Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture. -v- INDENTURE, dated as of April 1, 1996, between WAXMAN USA INC., a Delaware corporation (the "Company"), and UNITED STATES TRUST COMPANY OF NEW YORK, a bank and trust company organized under the New York Banking Law, as Trustee (the "Trustee"). Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders of the Company's 11 1/8% Senior Notes Due 2001, Series A, and 11 1/8% Senior Notes Due 2001, Series B, without distinction as to Series: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Acquired Indebtedness" means with respect to any person, Indebtedness of another person existing at the time such other person becomes a Subsidiary of such person or is merged with or into such person or a Subsidiary of such person, including, without limitation, Indebtedness incurred in connection with, or in anticipation of, such other person becoming a Subsidiary of such person or the merger with or into such other person. "Affiliate" of any specified person means any other person which, directly or indirectly, controls, is controlled by or is under direct or indirect common control with such specified person. For the purposes of this definition, "control" when used with respect to any person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Affiliate Transaction" has the meaning provided in Section 4.15 hereof. "Agent" means any Registrar, Paying Agent or co-Registrar. "Asset Acquisition" means (i) any capital contribution (by means of transfer of cash or other property to others -2- or payment for property or services for the account or use of others, or otherwise) to, or purchase or acquisition of Capital Stock in, any other person by the Company or any of its Subsidiaries, in either case pursuant to which such person shall become a Subsidiary of the Company or any of its Subsidiaries or shall be merged with or into the Company or any of its Subsidiaries or (ii) any acquisition by the Company or any of its Subsidiaries of the assets of any person which constitute substantially all of an operating unit or business of such person. "Asset Sale" means with respect to any person, any direct or indirect sale, conveyance, transfer, lease or other disposition to any other person other than such person or a Subsidiary of such person, in one transaction or a series of related transactions, of (i) any Capital Stock of any Subsidiary of such person (whether structured as a sale, issuance or other disposition by such person or a Subsidiary of such person) or (ii) any other property or asset of such person or any Subsidiary of such person (other than cash or Cash Equivalents), in each case, other than inventory in the ordinary course of business and other than isolated transactions which do not exceed $1,000,000 individually. With respect to the Company and its Subsidiaries, the term "Asset Sale" shall not include (a) any disposition of properties and assets of the Company or any Subsidiary of the Company that is governed under and complies with the requirements set forth in Article Five hereof or (b) any sale by the Company of its Capital Stock. "Asset Sale Offer" has the meaning provided in Section 4.17. "Asset Sale Payment Date" means, with respect to any Excess Proceeds from an Asset Sale, the earlier of (x) the 360th day following receipt of such Excess Proceeds or (y) such earlier date on which an Asset Sale Offer shall expire. "Attributable Indebtedness" means, in respect of a Sale/Leaseback Transaction, as at the time of determination, the present value (discounted at the interest rate borne, or to be borne, as the case may be, by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). -3- "Bankruptcy Law" means Title 11 of the U.S. Code or any similar Federal, state or foreign law for the relief of debtors. "Barnett" means Barnett Inc., a Delaware corporation. "Barnett Common Stock" means the common stock, $.01 par value per share, of Barnett. "Barnett Intercorporate Agreement" means the Intercorporate Agreement among Waxman Industries, the Company, Barnett, Waxman Consumer Products Group Inc. and WOC Inc. as in existence as of the consummation of the Barnett Public Offering. "Barnett Public Offering" means the initial public offering of Barnett Common Stock. "Barnett Sale Proceeds" means the net proceeds from the sale of Barnett Common Stock. "Base Period" has the meaning provided in Section 4.11. "Board of Directors" means, with respect to any person, the Board of Directors of such person or any committee of the Board of Directors of such person duly authorized, with respect to any particular matter, to exercise the power of the Board of Directors of such person. "Board Resolution" means, with respect to any person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such person, to have been duly adopted by the Board of Directors of such person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Book-Entry Security" means a Security represented by a Global Security and registered in the name of the nominee of the Depository. "Business Day" means any day that is not a Legal Holiday. "Capital Stock" means, with respect to any person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or -4- non-voting) of such person's capital stock, whether outstanding on the Issue Date or issued after the Issue Date, and any and all rights, warrants or options exchangeable for or convertible into such capital stock. "Capitalized Lease Obligation" means any obligation to pay rent or other amounts under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed) that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP. "Cash Equivalents" means at any time (i) any evidence of Indebtedness with a maturity of 180 days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) certificates of deposit or acceptances with a maturity of 180 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; (iii) commercial paper with a maturity of 180 days or less issued by a corporation (except an Affiliate of the Company) organized under the laws of any state of the United States or the District of Columbia and rated at least A-l by Standard & Poor's Corporation or at least P-1 by Moody's Investors Service, Inc.; and (iv) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; provided, however, that the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency. "Change of Control" means (i) the direct or indirect sale, lease, exchange or other transfer of all or substantially all of the assets of the Company to any person or entity or group of persons or entities acting in concert as a partnership or other group (as such term is used in Section 13(d)(3) of the Exchange Act) (a "Group of Persons") other than Permitted Holders, (ii) the merger or consolidation of the Company or Waxman Industries, with or into another corporation with the effect -5- that the then existing shareholders of the Company or Waxman Industries, as the case may be, together with the Permitted Holders beneficially own (within the meaning of Rule 13d-3 under the Exchange Act) securities representing less than 50% of the Voting Power of the surviving corporation of such merger or the corporation resulting from such consolidation and do not otherwise have the right or ability by contract or otherwise to elect a majority of the Board of Directors of such surviving corporation, (iii) the replacement of a majority of the Board of Directors of the Company or Waxman Industries, from the directors who constituted such Board of Directors on the Issue Date, and such replacement shall not have been approved by a majority of the Board of Directors of the Company then still in office who either were (x) members of the Board of Directors on the Issue Date or (y) whose election as a member of the Board of Directors was approved in the manner provided in this clause (iii) or (iv) a person or Group of Persons shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company or Waxman Industries representing 35% or more of the Voting Power of the Company or Waxman Industries, as the case may be, and, at such time, Permitted Holders are not the beneficial owners (as so defined) of securities representing a greater percentage of such Voting Power and do not otherwise have the right or ability by contract or otherwise to elect a majority of the Board of Directors of the Company or Waxman Industries, as the case may be. "Change of Control Date" has the meaning provided in Section 4.16. "Change of Control Offer" has the meaning provided in Section 4.16. "Change of Control Payment Date" has the meaning provided in Section 4.16. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means such successor. "Company Order" means a written order or request signed in the name of the Company by its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. -6- "Consolidated Cash Flow" means, with respect to any person for any period, the Consolidated Net Income of such person for such period increased (to the extent deducted in determining Consolidated Net Income) by the sum of the following for such period: (i) all income taxes paid or accrued according to GAAP for such period (other than income taxes attributable to extraordinary, unusual or non-recurring gains); (ii) Consolidated Interest Expense of such person for such period; (iii) depreciation expense of such person for such period; (iv) amortization expense of such person for such period including, without limitation, amortization of capitalized debt issuance costs; and (v) any other non-cash charges of such person for such period (excluding any non-cash charge to the extent that it requires an accrual of or a reserve for cash disbursements for any future period). "Consolidated Interest Coverage Ratio" means, with respect to any person, the ratio of (i) Consolidated Cash Flow of such person for the four full fiscal quarters for which financial statements are available that immediately precede the date of the transaction or other circumstances giving rise to the need to calculate the Consolidated Interest Coverage Ratio (the "Transaction Date") to (ii) Consolidated Interest Expense of such person and the aggregate amount of dividends or other distributions declared or paid on Capital Stock (other than Common Stock) of such person and its Subsidiaries, in each case for such four full fiscal quarter period. For purposes of this definition, "Consolidated Cash Flow" and the items referred to in the preceding clause (ii) shall be calculated after giving effect on a pro forma basis for the period of such calculation to (i) the incurrence or retirement of any Indebtedness of such person or any of its Subsidiaries, other than the incurrence or retirement of Indebtedness in the ordinary course of business pursuant to working capital or revolving credit facilities, at any time during the period (the "Reference Period") (A) commencing on the first day of the four full fiscal quarter period for which financial statements are available that precedes the Transaction Date and (B) ending on and including the Transaction Date, including, without limitation, the incurrence of the Indebtedness giving rise to the need to make such calculation, as if such incurrence or retirement occurred on the first day of the Reference Period; provided, that if such person or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a third person, the above clause shall give effect to the incurrence of such guaranteed Indebtedness as if such person or Subsidiary had directly incurred such guaranteed Indebtedness and (ii) any Asset Sales or Asset Acquisitions -7- (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such person or any of its Subsidiaries (including any person who becomes a Subsidiary as a result of the Asset Acquisition) incurring Acquired Indebtedness) occurring during the Reference Period and any retirement of Indebtedness in connection with such Asset Sales, as if such Asset Sale or Asset Acquisition and/or retirement occurred on the first day of the Reference Period. Furthermore, in calculating the denominator (but not the numerator) of this fraction (1) interest on Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate based upon a factor of a prime or similar rate shall be deemed to have been in effect; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Rate Protection Obligations, shall be deemed to have accrued at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Interest Expense" means, with respect to any person for any period, without duplication, the sum of (i) the cash and non-cash interest expense of such person and its Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP consistently applied (net of any interest income), including, without limitation, (a) any amortization of debt discount, (b) the net cost under Interest Rate Protection Obligations and Currency Hedging Agreements insofar as they relate to interest, (c) the interest portion of any deferred payment obligation and (d) all accrued interest, and (ii) the aggregate amount of the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP consistently applied. "Consolidated Net Income" means, with respect to any person, for any period, the aggregate of the Net Income of such person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided, however, -8- that (a) the Net Income of any person (the "other person") in which the person in question or one of its Subsidiaries has a joint interest with a third party (which interest does not cause the Net Income of such other person to be consolidated into the Net Income of the person in question in accordance with GAAP) shall be included only to the extent of the amount of dividends or distributions paid to the person in question or the Subsidiary, (b) the Net Income of any Subsidiary of the person in question that is subject to any restriction or limitation on the payment of dividends or the making of other distributions (including limitations resulting from the ownership of less than 100% of the Capital Stock of such Subsidiary) shall be excluded to the extent of such restriction or limitation, (c) (i) the Net Income (or loss) of any person acquired in a pooling of interests transaction for any period prior to the date of such acquisition and (ii) any net gain or loss resulting from an Asset Sale by the person in question or any of its Subsidiaries shall be excluded, and (d) any extraordinary gains and losses and any one-time increase or decrease in Net Income recorded because of the adoption of new accounting policies, practices or standards required or permitted by GAAP shall be excluded. "Consolidated Net Worth" means, with respect to any person at any date of determination, the consolidated equity represented by the shares of such person's Capital Stock (other than Disqualified Stock) at such date, as determined on a consolidated basis in accordance with GAAP. "Covered Amount" means with respect to any disposition of Capital Stock of Barnett or any Asset Sale involving WOC Inc. an amount equal to the excess of (x) the aggregate fair value of the Capital Stock of Barnett owned by the Company and its Subsidiaries immediately upon consummation of such disposition or Asset Sale less the aggregate principal amount of any outstanding Permitted Barnett Secured Indebtedness after taking into account the application of the proceeds of such disposition or Asset Sale over (y) the product of (i) the aggregate principal amount of Exchange Notes and other Indebtedness incurred after the Issue Date that is pari passu or structurally senior in right of payment (other than Indebtedness under the Credit Agreement) to the Exchange Notes and is outstanding after taking into account the application of the proceeds of such disposition or Asset Sale and (ii) two (2). "Credit Agreement" means the credit agreement dated as of May 20, 1994, entered into between the Company, certain -9- of the Subsidiaries of the Company, the lenders listed therein and Citicorp USA, Inc., as agent, providing for working capital and other financing, as the same may at any time be amended, amended and restated, supplemented or otherwise modified, including any refinancing, refunding, replacement or extension thereof which provides for working capital and other financing, whether by the same or any other lender or group of lenders. "Currency Hedging Agreements" means, with respect to any person, the obligations and/or rights of such person under currency hedging arrangements designed to protect such person against currency fluctuations. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means any event that is, or after notice or the passage of time or both would be, an Event of Default. "Default Amount" shall have the meaning set forth under "Events of Default." "Deferred Coupon Notes" means Waxman Industries' $92,797,000 aggregate principal amount at maturity of 12 3/4% Senior Secured Deferred Coupon Notes due June 1, 2004. "Deferred Coupon Note Refinancing Indebtedness" means any Indebtedness the net proceeds of which are used entirely to refinance, in whole or in part, the Deferred Coupon Notes provided that (i) such Indebtedness does not accrue interest prior to June 1, 1999, (ii) after June 1, 1999 such Indebtedness does not accrue interest at a rate per annum in excess of the rate per annum that the Deferred Coupon Notes, as in existence on the Issue Date, accrue interest and (iii) such Indebtedness does not provide for any mandatory redemption, amortization or sinking fund requirement earlier than six months after the final maturity of the Securities. "Depository" means, with respect to the Securities issued in the form of one or more Book-Entry Securities, The Depository Trust Company or another person designated as Depository by the Company, which must be a clearing agency registered under the Exchange Act. "Disqualified Stock" means with respect to any person, any Capital Stock which, by its terms (or by the terms of -10- any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the Maturity Date. "Eligible Sale Proceeds" means an amount equal to the excess of (i) the net cash proceeds received from any disposition of Capital Stock of Barnett or any Asset Sale involving WOC Inc. over (ii) the Covered Amount. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Event of Default" has the meaning provided in Section 6.01. "Excess Proceeds" shall have the meaning set forth in Section 4.17. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder. "Exchange Offer" means the registration by the Company under the Securities Act of all the Series B Notes pursuant to a registration statement under which the Company offers each Holder of Series A Notes the opportunity to exchange all Series A Notes held by such Holder for Series B Notes in an aggregate principal amount equal to the aggregate principal amount of Series A Notes held by such Holder, all in accordance with the terms and conditions of the Registration Rights Agreement. "Fair Market Value" or "fair value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. With respect to any person, Fair Market Value shall be determined by the Board of Directors of such person (and with respect to the Company or any of its Subsidiaries, a majority of the Independent Directors of the Company) acting in good faith and shall be evidenced by a Board Resolution thereof delivered to the Trustee. -11- "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are applicable as of the date of determination. "Global Security" means a Security evidencing all or a part of the Securities to be issued as Book-Entry Securities, issued to the Depository in accordance with Section 2.02 and bearing the legend prescribed in Exhibit C to this Indenture. "Holder" or "Securityholder" means the person in whose name a Security is registered on the Registrar's books. "Indebtedness" means, with respect to any person, without duplication, (i) any liability, contingent or otherwise, of such person (A) for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such person or only to a portion thereof), (B) evidenced by a note, debenture or similar instrument or letter of credit (including purchase money obligations but excluding undrawn documentary letters of credit for trade payables arising in the ordinary course of business) or (C) for the payment of money relating to a Capitalized Lease Obligation or other obligation relating to the deferred purchase price of property (other than trade payables or accrued liabilities arising in the ordinary course of business); (ii) any liability of others of the kind described in the preceding clause (i) which the person has guaranteed or which is otherwise its legal liability; (iii) any obligation secured by a lien to which the property or assets of such person are subject, whether or not the obligations secured thereby shall have been assumed by or shall otherwise be such person's legal liability (the amount of such obligation being deemed to be the lesser of the fair value of such property or asset or the amount of the obligation so secured); and (iv) any and all deferrals, renewals, extensions and refundings of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (i), (ii) or (iii). "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. -12- "Independent Director" means any director that (i) is not and has not been an officer or employee of Waxman Industries or any of its Affiliates, (ii) does not have any relationship that, in the opinion of the Board of Directors of the Company (exclusive of any such Independent Director), would interfere with his/her exercise of independent judgment in carrying out the responsibilities of director and (iii) with respect to any transaction or series of related transactions, does not have any material direct or indirect financial interest in or with respect to such transaction or series of related transactions. "Intercorporate Agreement" means the Intercorporate Agreement among Waxman Industries, the Company, Barnett, Waxman Consumer Products Group Inc. and WOC Inc. dated as of May 20, 1994, as amended to the Issue Date. "Interest Payment Date" means the stated maturity of an installment of interest on the Securities. "Interest Rate Protection Obligations" means the obligations and/or rights of any person pursuant to any arrangement with any other person, designed to protect such person against fluctuations in interest rates, whereby, directly or indirectly, such person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter. "Investment" means, with respect to any person, any direct or indirect advance, loan or other extension of credit to (including any guarantee of a loan or other extension of credit) or investment in, capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others or otherwise), or purchase of Capital Stock, bonds, notes, debentures or other securities issued by, any other person. -13- "Issue Date" means the date of first issuance of the Securities under this Indenture. "Legal Holiday" has the meaning provided in Section 10.07. "Lien" means any mortgage, lien (statutory or other), pledge, security interest, encumbrance, claim, hypothecation, assignment for security, deposit arrangement or preference or other security agreement of any kind or nature whatsoever. For purposes hereof, a person shall be deemed to own subject to a Lien any property which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Material Subsidiary" means, with respect to any person, any Subsidiary of such person which would be a "significant subsidiary" pursuant to Article 1-02 of Regulation S-X. "Maturity Date" means September 1, 2001. "Net Cash Proceeds" means, with respect to any Asset Sale the proceeds thereof in the form of cash or Cash Equivalents, including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents net of (i) brokerage commissions and other reasonable fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale; (ii) provisions for all taxes payable within one year as a result of such Asset Sale; (iii) payments made to retire Indebtedness secured by the assets subject to such Asset Sale to the extent required pursuant to the terms of such Indebtedness; (iv) appropriate amounts to be provided by the Company or any of its Subsidiaries, as the case may be, as a reserve, required in accordance with GAAP against any liabilities associated with such Asset Sale and retained by the Company or any of its Subsidiaries, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, provided, however, that the amount of any such reserve at such time that such amount is no longer required to be provided as a reserve in accordance with GAAP and is not applied to the liability for which such reserve was established shall be deemed Net Cash Proceeds; and (v) any amount required to be paid to any person owning a beneficial interest in the property or assets sold, conveyed, transferred, leased or otherwise -14- disposed of in an amount proportionate to such beneficial interest. "Net Income" means, with respect to any person for any period, the net income (loss) of such person determined in accordance with GAAP. "Net Proceeds" means, with respect to any person (a) in the case of any sale of Capital Stock by such person or common equity contribution to such person, the aggregate net cash proceeds received by such person after payment of expenses, commissions and the like, if any, incurred in connection therewith, (b) in the case of the issuance of any Indebtedness by such person, the aggregate net cash proceeds received by such person, after payment of expenses, commissions and the like incurred in connection therewith, or (c) in the case of any exchange, exercise, conversion or surrender of outstanding securities of any kind of the Company for or into shares of Capital Stock of the Company which is not Disqualified Stock, the net cash proceeds received by the Company upon such exchange, exercise, conversion or surrender (plus, with respect to the issuance of any such securities after the Issue Date, the net cash proceeds received by such person upon the issuance of such securities), less any and all payments made to the holders, e.g., on account of fractional shares, and less all expenses, commissions and the like incurred by the Company in connection therewith. "Officer" means, with respect to any person, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Controller, or the Secretary of such person. "Officers' Certificate" means, with respect to any person, a certificate signed by two Officers (one of whom shall be the Chief Financial Officer) or by an Officer and either an Assistant Treasurer or an Assistant Secretary of such person and otherwise complying with the requirements of Sections 10.04 and 10.05. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee complying with the requirements of Sections 10.04 and 10.05. Unless otherwise required by the TIA, the legal counsel may be an employee of or counsel to the Company. -15- "Paying Agent" has the meaning provided in Section 2.03. "Permitted Amount" has the meaning provided in Section 4.10. "Permitted Barnett Secured Indebtedness" means Indebtedness of the Company or any of its Subsidiaries in an aggregate principal amount not to exceed $5.0 million that is secured by a Lien described under clause (h) of the definition of "Permitted Liens," less the principal amount of Permitted Barnett Secured Indebtedness permanently prepared pursuant to Section 4.17 hereof. "Permitted Holders" means Armond Waxman, Melvin Waxman, trusts for the benefit of any of Armond Waxman, Melvin Waxman or members of their families, the heirs of or administrators or executors for the respective estates of Armond Waxman or Melvin Waxman or any person, entity or group of persons controlled by any of the foregoing. "Permitted Investments" means (i) obligations of the United States government due within one year; (ii) certificates of deposit or Eurodollar deposits due within one year with a commercial bank having capital funds of at least $500,000,000 or more; (iii) commercial paper rated at least A-1 by Standard & Poor's Corporation or at least P-1 by Moody's Investors Service, Inc.; (iv) debt of any state or political subdivision that is rated among the two highest rating categories obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc. and is due within one year; (v) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; provided, however, that the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency; and (vi) Investments represented by Interest Rate Protection Obligations and Currency Hedging Agreements. "Permitted Liens" means, with respect to any person, any Lien arising by reason of (a) any judgment, decree or order of any court, so long as such Lien is being contested in good faith and is adequately bonded, and any appropriate legal -16- proceedings which may have been duly initiated for the review of such judgment, decree or order shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (b) taxes, assessments, governmental charges or claims not yet delinquent or which are being contested in good faith; (c) security for payment of workers' compensation or other insurance or social security legislation; (d) security for the performance of tenders, contracts (other than contracts for the payment of money) or leases (excluding any Capitalized Lease Obligations); (e) deposits to secure public or statutory obligations, or in lieu of surety, performance or appeal bonds, entered into in the ordinary course of business; (f) Liens arising by operation of law in favor of carriers, warehousemen, landlords, mechanics, materialmen, laborers, employees or suppliers, incurred in the ordinary course of business for sums which are not yet delinquent or are being contested in good faith by negotiations or by appropriate proceedings which suspend the collection thereof; (g) easements, rights-of-way, zoning and similar covenants and restrictions and other similar encumbrances or title defects which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Company or any of its Subsidiaries; (h) Liens on up to $10.0 million fair value of Barnett Common Stock provided such Liens secure not more than $5.0 million of Permitted Barnett Secured Indebtedness; and (i) Liens arising in the ordinary course of business in favor of custom and revenue authorities to secure payment of custom duties. "Permitted Term Loan Indebtedness" means Indebtedness of the Company or any of its Subsidiaries, the proceeds of which are used to refinance the term loan portion of the Credit Agreement (including the payment of any related fees and expenses and the amount of accrued interest on such Indebtedness refinanced and the amount of any premium required to be paid in connection with the refinancing of such Indebtedness). "person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. "Preferred Stock" means, with respect to any person, any and all shares, interests, participations or other equivalents (however designated) of such person's preferred or -17- preference stock, whether now outstanding or issued after the Issue Date, and including, without limitation, all classes and series of preferred or preference stock of such person. "principal" of any Indebtedness (including the Securities) means the principal of such Indebtedness plus the premium, if any, on such Indebtedness. "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A under the Securities Act. "Record Date" means the Record Dates specified in the Securities; provided that if any such date is a Legal Holiday, the Record Date shall be the first day immediately preceding such specified day that is not a Legal Holiday. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to this Indenture and the Securities. "Redemption Price," when used with respect to any Security to be redeemed, means the price fixed for such redemption pursuant to this Indenture and the Securities. "Registrar" has the meaning provided in Section 2.03. "Registration Rights Agreement" means the Registration Rights Agreement between the Company and the Trustee, dated as of April 3, 1996, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "Restricted Payment" means any of the following: (i) the declaration or payment of any dividend or any other distribution on Capital Stock of the Company or any Subsidiary of the Company or any payment made to the direct or indirect holders (in their capacities as such) of Capital Stock of the Company or any Subsidiary of the Company (other than (x) dividends or distributions payable solely in Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to purchase Capital Stock (other than Disqualified Stock) and (y) in the case of Subsidiaries of the Company, dividends or distributions payable to the Company or to a Wholly-Owned Subsidiary of the Company), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any of its Subsidiaries, (iii) the making of any principal payment on, or the purchase, defeasance, -18- repurchase, redemption or other acquisition or retirement for value, prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, of any Indebtedness of the Company which is subordinated in right of payment to the Securities (other than Indebtedness of the Company acquired in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) and (iv) the making of any Investment other than pursuant to clause (i), (ii), (iv) or (v) of Section 4.14 hereof. "Restricted Security" has the meaning set forth in Rule 144(a)(3) under the Securities Act. "Sale/Leaseback Transaction" means any arrangement with any person providing for the leasing to the Company or any Subsidiary of the Company of any real or tangible personal property (except for leases between or among the Company and any of its Subsidiaries), which property or similar property has been or is to be sold or transferred by the Company or such Subsidiary to such person in contemplation of such leasing. "SEC" means the Securities and Exchange Commission. "Securities" means the Series A Notes and the Series B Notes. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "Series A Notes" means the Company's 11 1/8% Senior Notes Due 2001, Series A, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Series B Notes" means the Company's 11 1/8% Senior Notes Due 2001, Series B, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Subsidiary" means with respect to any person (i) a corporation a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such person, by one or more Subsidiaries of such person or by such person and one or more Subsidiaries of such person or (ii) any other person -19- (other than a corporation) in which such person, one or more Subsidiaries of such person or such person and one or more Subsidiaries of such person, directly or indirectly, at the date of determination thereof, has at least a majority ownership interest. "Tax Sharing Agreement" means the Tax Sharing Agreement among Waxman Industries and certain of its Subsidiaries, dated as of May 20, 1994, as in existence on the Issue Date. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (SECTIONS) 77aaa-77bbbb), as amended, as in effect on the date of the execution of this Indenture until such time as this Indenture is qualified under the TIA, and thereafter as in effect on the date on which this Indenture is qualified under the TIA. "Trademark License Agreement" means, collectively, the Trademark License Agreement between Barnett Inc. and WOC Inc., dated as of May 20, 1994, the Trademark License Agreement between Barnett Inc. and Waxman Consumer Products Group Inc., dated as of May 20, 1994, the Trademark License Agreement between WOC Inc. and Barnett Inc., dated as of May 20, 1994, and the Trademark License Agreement between Waxman Consumer Products Group Inc. and WOC Inc., dated as of May 20, 1994, in each case as in existence on the Issue Date. "Transferee Certificate" means the Transferee Letter of Representation attached as Exhibit D to this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "Trust Officer" means any officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "U.S. Government Obligations" has the meaning provided in Section 8.01. "U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. -20- "Voting Power" means with respect to any person, the power under ordinary circumstances, pursuant to the ownership of shares of any class or classes of Capital Stock, to elect at least a majority of the board of directors, managers or trustees of such person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). "Waxman Industries" means Waxman Industries, Inc., a Delaware corporation. "Wholly-Owned Subsidiary" means with respect to any person any Subsidiary of such person, 100% of the Capital Stock of which (other than shares of Capital Stock representing any director's qualifying shares or investments by foreign nationals mandated by applicable law) is owned by such person, by a Wholly-Owned Subsidiary of such person or by such person and one or more Wholly-Owned Subsidiaries of such person. SECTION 1.02. Incorporation by Reference of TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Holder or a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company or any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. -21- SECTION 1.03. Rules of Construction. (a) Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) words in the singular include the plural, and words in the plural include the singular; (4) provisions apply to successive events and transactions; and (5) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. (b) Except as otherwise expressly provided herein, the provisions hereof shall not apply to the Barnett Public Offering or the application of the net proceeds therefrom. ARTICLE TWO THE SECURITIES SECTION 2.01. Form and Dating. The Securities and the Trustee's certificate of authentication with respect thereto shall be substantially in the form of Exhibit A or Exhibit B hereto, as the case may be, which are hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, usage or agreement to which the Company is subject, including without limitation the legend set forth in Exhibit C hereto. The Company and the Trustee shall approve the form of the Securities and any notation, legend or endorsement on them. Each Security shall be dated the date of its authentication, shall bear interest from the applicable date and shall be payable on the Interest Payment Dates and the Maturity Date. The terms and provisions contained in the Securities shall constitute, and are hereby expressly made, a part of this -22- Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. SECTION 2.02. Execution and Authentication. Two Officers shall sign (each of whom shall have been duly authorized by all requisite corporate actions) the Securities for the Company by manual or facsimile signature. If an Officer whose signature is on a Security was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Security, the Security shall nevertheless be valid. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee shall authenticate Securities for original issue in the aggregate principal amount of $48,750,000, upon receipt of a written order of the Company in the form of an Officers' Certificate and directing the Trustee to authenticate the Securities and certifying that all conditions precedent to the issuance of the Securities contained herein have been complied with. The Officers' Certificate shall further specify the amount of Securities to be authenticated and the date on which the Securities are to be authenticated. The Trustee may authenticate Series B Securities for issuance in connection with an exchange offer effected pursuant to the Registration Rights Agreement upon a written order of the Company signed by two Officers certifying that all conditions precedent to the issuance of the Securities have been complied with and specifying the amount of Securities to be authenticated and the date on which the Securities are to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed $48,750,000, except as provided in Section 2.07. Upon the written order of the Company in the form of an Officers' Certificate, the Trustee shall authenticate Securities in substitution of Securities originally issued to reflect any name change of the Company. -23- Series B Notes may be issued only in exchange for a like principal amount of Series A Notes pursuant to an Exchange Offer. The principal and interest on Book-Entry Securities shall be payable to the Depository or its nominee, as the case may be, as the sole registered owner and the sole holder of the Book-Entry Securities represented thereby. The principal and interest on Securities in certificated form shall be payable at the office of the Paying Agent. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate Securities. Unless otherwise provided in the appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company and Affiliates of the Company. The Securities shall be issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. If the Securities are to be issued in the form of one or more Global Securities, then the Company shall execute and the Trustee shall authenticate and deliver one or more Global Securities that (i) shall represent and shall be in minimum denominations of $1,000, (ii) shall be registered in the name of the Depository for such Global Security or Securities or the nominee of such Depository, (iii) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions and (iv) shall bear the legend set forth in Exhibit C. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York, where (a) Securities may be presented or surrendered for registration of transfer or for exchange (the "Registrar"), (b) Securities may be presented or surrendered for payment (the "Paying Agent") and (c) notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to -24- time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. Neither the Company nor any Affiliate of the Company shall act as Paying Agent. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company, upon notice to the Trustee, may have one or more co-Registrars and one or more additional paying agents reasonably acceptable to the Trustee. The term "Paying Agent" includes any additional paying agent. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices or demands in connection with the Securities and this Indenture until such time as the Trustee has resigned or a successor has been appointed. Securities, notices and demands may be delivered to the Trustee at its New York office, 114 West 47th Street, New York, New York 10036-1532, Attn: Corporate Trust Department. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee, in advance, of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.07 hereof. SECTION 2.04. Paying Agent To Hold Assets in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that each Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, or interest on, the Securities (whether such assets have been distributed to it by the Company or any other obligor on the Securities), and shall notify the Trustee of any Default by the Company (or any other obligor on the Securities) in making any such payment. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution -25- to the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent shall have no further liability for such assets. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee five days before each Record Date and at such other times as the Trustee may request in writing a list as of such date and in such form as the Trustee may reasonably require of the names and addresses of the Holders, which list may be conclusively relied upon by the Trustee. SECTION 2.06. Transfer and Exchange. When Securities in certificated form are presented to the Registrar or a co-Registrar with a request from the Holder thereof to register the transfer of such Securities or to exchange such Securities for an equal principal amount of Securities of other authorized denominations, the Registrar or co-Registrar, as the case may be, shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Securities surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar, or co-Registrar, as the case may be, duly executed by the Holder thereof or such Holder's attorney duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall execute and issue, and the Trustee shall authenticate new Securities evidencing such transfer or exchange at the Registrar's or co-Registrar's request, as the case may be. No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Section 2.02, 2.06, 2.10, 3.06, 4.16, 4.17 or 9.05). The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Security (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Securities and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part -26- pursuant to Article Three, except the unredeemed portion of any Security being redeemed in part. If a Series A Note is a Restricted Security in certificated form, then as provided in this Indenture and subject to the limitations herein set forth, the Holder, provided it is a Qualified Institutional Buyer, may exchange such Security for a Book-Entry Security by instructing the Trustee to arrange for such Series A Note to be represented by a beneficial interest in a Global Security in accordance with the customary procedures of the Depository. In accordance with the provisions of this Indenture and subject to certain limitations herein set forth, an owner of a beneficial interest in a Global Security which is a Series A Note may request a Series A Note in certificated form, in exchange in whole or in part, as the case may be, for such beneficial owner's interest in the Global Security. Upon any exchange provided for in the preceding paragraph, the Company shall execute and the Trustee shall authenticate and deliver to the person specified by the Depository a new Series A Note or Series A Notes registered in such names and in such authorized denominations as the Depository, pursuant to the instructions of the beneficial owner of the Securities requesting the exchange, shall instruct the Trustee. Thereupon, the beneficial ownership of such Global Security shown on the records maintained by the Depository or its nominee shall be reduced by the amounts so exchanged and an appropriate endorsement shall be made by or on behalf of the Trustee on the Global Security. Any such exchange shall be effected through the Depository in accordance with the procedures of the Depository therefor. Notwithstanding any other provision of this Section 2.06, a Global Security representing Book-Entry Securities may not be transferred in whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor depository or a nominee of such successor depository. Notwithstanding the foregoing, no Global Security shall be registered for transfer or exchange, or authenticated and delivered, whether pursuant to this Section 2.06, Section 2.07, 2.10 or 3.06 or otherwise, in the name of a person other than the Depository for such Global Security or its -27- nominee until (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Security or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act, and a successor depository is not appointed by the Company within 30 days, (ii) the Company executes and delivers to the Trustee a Company Order that all such Global Securities shall be exchangeable or (iii) there shall have occurred and be continuing an Event of Default. Upon the occurrence in respect of any Global Security representing the Series A Notes of any one or more of the conditions specified in clause (i), (ii) or (iii) of the preceding sentence, such Global Security may be registered for transfer or exchange for Series A Notes registered in the names of, authenticated and delivered to, such persons as the Trustee or the Depository, as the case may be, shall direct. Except as provided above, any Security authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, any Global Security, whether pursuant to this Section 2.06, Section 2.07, 2.10 or 3.06 or otherwise, shall also be a Global Security and bear the legend specified in Exhibit C. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Trustee or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the Trustee's requirements are met. If required by the Trustee or the Company, such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of both the Company and the Trustee, to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge such Holder for their respective reasonable, out-of-pocket expenses in replacing a Security, including reasonable fees and expenses of counsel. Every replacement Security shall constitute an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all the Securities that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security -28- does not cease to be outstanding because the Company or any of its Affiliates holds the Security. If a Security is replaced pursuant to Section 2.07 (other than a mutilated Security surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. A mutilated Security ceases to be outstanding upon surrender of such Security and replacement thereof pursuant to Section 2.07. If on a Redemption Date or the Maturity Date the Paying Agent holds U.S. Legal Tender sufficient to pay all of the principal and interest due on the Securities payable on that date and is not prohibited from paying such principal and interest due on such date, then on and after such date such Securities cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Treasury Securities. In determining whether the Holders of the required principal amount of Securities have concurred in any declaration of acceleration or notice of default or direction, waiver or consent or any amendment, modification or other change to this Indenture, the Securities owned by the Company or an Affiliate of the Company shall be disregarded as though they were not outstanding, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities that the Trustee knows are so owned shall be disregarded. SECTION 2.10. Temporary Securities. Until definitive Securities are prepared and ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities upon receipt of a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Securities to be authenticated and the date on which the temporary Securities are to be authenticated. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate, upon receipt of a written order of the Company pursuant to Section 2.02, definitive Securities in exchange for temporary Securities. -29- Until such exchange, temporary Securities shall be entitled to the same rights, benefits and privileges as definitive Securities. SECTION 2.11. Cancellation. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, at the written direction of the Company, shall dispose of all Securities surrendered for registration of transfer, exchange, payment or cancellation. Subject to Section 2.07, the Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation. If the Company shall acquire any of the Securities, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Securities unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, it shall, unless the Trustee fixes another record date pursuant to Section 6.10, pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest to the persons who are Holders on a subsequent special record date, which date shall be a Business Day at least five Business Days prior to the payment date. The Company shall fix or cause to be fixed such special record date and payment date in a manner satisfactory to the Trustee. At least 15 days before the subsequent special record date, the Company shall mail or cause to be mailed to each Holder, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. SECTION 2.13. CUSIP Number. The Company in issuing the Securities may use a CUSIP number, and if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation -30- is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. SECTION 2.14. Deposit of Monies. On or before each Interest Payment Date and the Maturity Date, the Company shall deposit or cause to be deposited with the Paying Agent, U.S. Legal Tender sufficient to make cash payments, if any, due on such Interest Payment Date or the Maturity Date, as the case may be, in a timely manner that permits the Trustee to remit payment to the Holders on such Interest Payment Date or the Maturity Date, as the case may be. ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee and the Paying Agent in writing of the Redemption Date and the principal amount of the Securities to be redeemed and whether it wants the Trustee to give notice of redemption to the Holders (at the Company's expense) at least 45 days (unless a shorter notice shall be satisfactory to the Trustee) but not more than 60 days before the Redemption Date, together with an Officers' Certificate stating that such redemption will comply with the conditions contained herein and in the Securities. Any such notice may be cancelled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. SECTION 3.02. Selection of Securities To Be Redeemed. If less than all of the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Securities being redeemed are listed, or, if the Securities are not listed on a national securities exchange, on a pro rata basis (in amounts equal to $1,000 or any whole multiple thereof), by lot -31- or by such other method as the Trustee considers to be fair and appropriate. The Trustee shall make the selection from the Securities outstanding and not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Security selected for partial redemption, the principal amount thereof to be redeemed. Securities in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first class mail to each Holder whose Securities are to be redeemed at the address of such Holder appearing in the Security register maintained by the Registrar. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Failure to give notice by mail, or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part, shall not affect the validity of the proceedings for the redemption of any other Securities. Each notice of redemption shall identify the Securities to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and accrued interest, if any; (5) that, unless the Company defaults in making the redemption payment, interest on Securities called for -32- redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Securities is to receive payment of the Redemption Price upon surrender to the Paying Agent of the Securities redeemed; (6) if any Security is being redeemed in part, the portion of the principal amount (equal to $1,000 or any integral multiple thereof) of such Security to be redeemed and that, after the Redemption Date, and upon surrender of such Security, a new Security or Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued without charge to the Security- holder; (7) if fewer than all the Securities are to be redeemed, the identification of the particular Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of Securities to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption; and (8) the CUSIP number, if any, relating to such Securities pursuant to Section 2.13 hereof. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender to the Trustee or Paying Agent, such Securities called for redemption shall be paid at the Redemption Price plus accrued interest, if any, to the Redemption Date, but interest installments whose maturity is on or prior to such Redemption Date will be payable on the relevant Interest Payment Dates to the Holders of record at the close of business on the relevant Record Dates referred to in the Securities. SECTION 3.05. Deposit of Redemption Price. On or before the Redemption Date, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price of all Securities to be redeemed on that date. The Paying Agent shall promptly return to the Company any U.S. Legal Tender so deposited which is not required for that purpose upon the written request of the Company, -33- except with respect to monies owed as obligations to the Trustee pursuant to Article Seven. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is to be redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder a new Security or Securities equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Securities. The Company shall pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and this Indenture. An installment of principal of or interest on the Securities shall be considered paid on the date it is due if the Trustee or Paying Agent holds on that date U.S. Legal Tender designated for and sufficient to pay the installment and is not prohibited from paying such installment on such date. The Company shall pay interest on overdue principal at the rate set forth in the second paragraph of paragraph 1 of the Securities and it shall pay interest on overdue installments of interest at the same rate, to the extent lawful. SECTION 4.02. Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, The City of New York, the office or agency required under Section 2.03. The Company shall give prior notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands described in such Section 2.03 may be made or served at the address of the Trustee set forth in Section 2.03. -34- SECTION 4.03. Corporate Existence. Except as otherwise permitted by Article Five, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate or other existence of each of its Subsidiaries in accordance with the respective organizational documents of each such Subsidiary and the rights (charter and statutory) and franchises of the Company and each such Subsidiary; provided, however, that the Company shall not be required to preserve, with respect to itself, any right or franchise, and with respect to any of its Subsidiaries any such existence, right or franchise, if the Board of Directors of the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and will not be adverse in any material respect to the Holders. SECTION 4.04. Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon it or any of its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of it or any of its Subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim if either (a) the amount, applicability or validity thereof is being contested in good faith by appropriate proceedings and an adequate reserve has been established therefor to the extent required by GAAP or (b) the failure to make such payment or effect such discharge (together with all other such failures) would not have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries, taken as a whole. SECTION 4.05. Maintenance of Properties and Insurance. (a) The Company shall cause all properties used or useful in the conduct of its business or the business of any of its Subsidiaries to be maintained and kept in satisfactory condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements -35- thereof, all as in its judgment may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times unless the failure to so maintain such properties (together with all other such failures) would not have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole; provided, however, that nothing in this Section 4.05 shall prevent the Company or any Subsidiary of the Company from discontinuing the operation or maintenance of any of such properties or disposing of any of them if such discontinuance or disposal is either (i) in the ordinary course of business, (ii) in the good faith judgment of the Board of Directors of the Company or the Subsidiary concerned, or of the senior officers of the Company or such Subsidiary, as the case may be, desirable in the conduct of the business of the Company or such Subsidiary, as the case may be, or (iii) is otherwise permitted by this Indenture. (b) The Company shall provide or cause to be provided, for itself and each of its Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the reasonable, good faith opinion of the Company are adequate and appropriate for the conduct of the business of the Company and such Subsidiaries in a prudent manner, with reputable insurers or with the government of the United States of America or an agency or instrumentality thereof, in such amounts, with such deductibles, and by such methods as shall be customary, in the reasonable, good faith opinion of the Company, for companies similarly situated in the industry, unless the failure to provide such insurance (together with all other such failures) would not have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries, taken as a whole. (c) The Company shall and shall cause each of its Subsidiaries to keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and each Subsidiary in accordance with GAAP consistently applied to the Company and its Subsidiaries taken as a whole. SECTION 4.06. Compliance Certificate; Notice of Default. (a) The Company shall deliver to the Trustee, within 60 days after the end of the Company's fiscal quarters and within 105 days after the end of the Company's fiscal year, an -36- Officers' Certificate stating that a review of its activities and the activities of its Subsidiaries during the preceding fiscal period has been made under the supervision of the signing Officers with a view to determining whether it has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of his knowledge, the Company during such preceding fiscal period has kept, observed, performed and fulfilled each and every such covenant and no Default or Event of Default occurred during such period and at the date of such certificate there is no Default or Event of Default that has occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe the Default or Event of Default and its status with particularity and what action the Company has taken or proposes to take with respect thereto. The Officers' Certificate shall also include all calculations necessary to show covenant compliance. The Officers' Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year end. (b) So long as (and to the extent) not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the Company shall deliver to the Trustee within 105 days after the end of each fiscal year a written statement by the Company's independent certified public accountants stating (A) that their audit examination has included a review of the terms of this Indenture and the Securities as they relate to accounting matters, and (B) whether, in connection with their audit examination, any Default or Event of Default has come to their attention and if such a Default or Event of Default has come to their attention, specifying the nature and period of existence thereof. (c) The Company will deliver to the Trustee promptly, and in any event within 10 days after the Company becomes aware or should reasonably have become aware of the occurrence of any Default or Event of Default, an Officers' Certificate describing such Default or Event of Default and its status with particularity and what action the Company is taking or proposes to take with respect thereto. SECTION 4.07. Compliance with Laws. The Company shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of -37- America, Canada, all states, provinces and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except such the noncompliance with which would not in the aggregate have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole. SECTION 4.08. SEC Reports and Other Information. (a) Whether or not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, the Company shall file with the SEC the annual reports, quarterly reports and other documents which the Company would have been required to file with the SEC pursuant to such Sections 13(a) and 15(d) if the Company were so subject, such documents to be filed with the SEC on or prior to the respective dates (the "Required Filing Dates") by which the Company would have been required so to file such documents if the Company were so subject. The Company shall also in any event (x) within 15 days after each Required Filing Date (i) transmit by mail to all Holders, as their names and addresses appear in the register of Securities maintained by the Registrar, without cost to such Holders and (ii) file with the Trustee copies of the annual reports, quarterly reports and other documents which the Company would have been required to file with the SEC pursuant to Sections 13(a) and 15(d) of the Exchange Act if the Company were subject to such Sections and (y) if filing such documents by the Company with the SEC is not permitted under the Exchange Act, promptly upon written request supply copies of such documents to any prospective Holder. In any event, such annual reports will contain consolidated financial statements and notes thereto, together with an opinion thereon expressed by an independent public accounting firm, and management's discussion and analysis of financial condition and results of operations and such quarterly reports will contain unaudited condensed consolidated financial statements for the first three quarters of each fiscal year. Upon qualification of this Indenture under the TIA, the Company shall also comply with the provisions of TIA (SECTION) 314(a). (b) At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder of a Series A Note, the Company will promptly furnish or cause to be furnished such information as is specified pursuant -38- to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) to such Holder or to a prospective purchaser of such Series A Note designated by such Holder, as the case may be, in order to permit compliance by such Holder with Rule 144A under the Securities Act. SECTION 4.09. Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.10. Limitation on Additional Indebtedness. The Company shall not, and shall not cause or permit any of its Subsidiaries to, directly or indirectly, create, incur, assume, issue, guarantee or in any manner become liable for or with respect to the payment of, any Attributable Indebtedness or Indebtedness (including any Acquired Indebtedness) except for (each of which shall be given independent effect): (a) Indebtedness of the Company under the Securities and this Indenture; (b) Indebtedness of Subsidiaries of the Company outstanding from time to time pursuant to the Credit Agreement not to exceed at any one time, an amount (the "Permitted Amount") equal to, when added to the principal amount of Indebtedness of Subsidiaries of the Company outstanding pursuant to clause (h) below, (A) the sum of 85% of the net book value of the accounts receivable and 50% of the net book value of the inventory of the Subsidiaries of the Company, in each case calculated on a consolidated basis in accordance with GAAP minus (B) the amount of Indebtedness pursuant to the Credit Agreement prepaid -39- after the Issue Date with the Net Cash Proceeds from an Asset Sale pursuant to Section 4.17; (c) Indebtedness of the Company and Subsidiaries of the Company outstanding on the Issue Date; (d) Indebtedness of the Company that is subordinated or pari passu in right of payment to the Securities if, immediately after giving pro forma effect to the incurrence thereof, the Consolidated Interest Coverage Ratio of the Company would be equal to or greater than 2.25:1; (e) Indebtedness of a Subsidiary of the Company issued to and held by the Company or a Wholly-Owned Subsidiary of the Company or Indebtedness of the Company to a Wholly-Owned Subsidiary of the Company in respect of intercompany advances or transactions; (f) Indebtedness represented by Interest Rate Protection Obligations and Currency Hedging Agreements of Subsidiaries of the Company with respect to Indebtedness of Subsidiaries of the Company (which Indebtedness is otherwise permitted to be incurred under this Section 4.10) to the extent the notional principal amount of such Interest Rate Protection Obligations or Currency Hedging Agreements, as the case may be, does not exceed the principal amount of the Indebtedness to which such Interest Rate Protection Obligations or Currency Hedging Agreements, as the case may be, relate; (g) any replacements, renewals, refinancings and extensions of Indebtedness incurred under clauses (a), (c) and (d) above, provided that (i) except with respect to Permitted Term Loan Indebtedness, any such replacement, renewal, refinancing and extension (x) shall not provide for any mandatory redemption, amortization or sinking fund requirement in an amount greater than or at a time prior to the amounts and times specified in the Indebtedness being replaced, renewed, refinanced or extended and (y) shall be contractually subordinated to the Securities at least to the extent, if at all, that the Indebtedness being replaced, renewed, refinanced or extended is subordinate to the Securities, (ii) except with respect to Permitted Term Loan Indebtedness, any such Indebtedness of any person must be replaced, refinanced or extended with Indebtedness incurred by such person or by the Company and (iii) the principal amount of Indebtedness incurred -40- pursuant to this clause (g) (or, if such Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof, the original issue price of such Indebtedness) shall not exceed the sum of the principal amount (or with respect to Indebtedness which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof, the accreted value thereof) of Indebtedness so replaced, renewed, refinanced or extended, plus accrued interest, the amount of any premium required to be paid in connection with such replacement, renewal, refinancing or extension pursuant to the terms of such Indebtedness or the amount of any premium reasonably determined by the Company as necessary to accomplish such replacement, renewal, refinancing or extension by means of a tender offer or privately negotiated purchase and the amount of fees and expenses incurred in connection therewith; and (h) in addition to the items referred to in clauses (a) through (g) above, (x) Indebtedness and Attributable Indebtedness of the Company or Subsidiaries of the Company in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding, provided that Indebtedness of Subsidiaries of the Company shall not exceed at any one time, when added to the principal amount of Indebtedness outstanding pursuant to the preceding clause (b), the Permitted Amount and (y) additional Indebtedness and Attributable Indebtedness of the Company in an aggregate principal amount not to exceed $10,000,000 at any one time outstanding. SECTION 4.11. Limitation on Restricted Payments. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, make any Restricted Payment, unless: (a) no Default or Event of Default shall have occurred and be continuing at the time of or after giving effect to such Restricted Payment; (b) at the time of and after giving effect to such Restricted Payment, the Company could incur at least $1.00 of Indebtedness pursuant to clause (d) of Section 4.10 hereof; and -41- (c) immediately after giving effect to such Restricted Payment, the aggregate of all Restricted Payments declared or made after the Issue Date through and including the date of such Restricted Payment does not exceed the sum of (1) 50% of the Company's Consolidated Net Income (or in the event such Consolidated Net Income shall be a deficit, minus 100% of such deficit) from and including April 1, 1996 to and including the last day of the fiscal quarter immediately preceding the date of such Restricted Payment (the "Base Period"), (2) 100% of the aggregate Net Proceeds received by the Company from (x) the issue or sale, during the Base Period, of Capital Stock (other than Disqualified Stock) of the Company or any Indebtedness or other securities of the Company convertible into or exercisable or exchangeable for Capital Stock (other than Disqualified Stock) of the Company which has been so converted, exercised or exchanged, as the case may be and (y) any common equity contribution made to the Company during the Base Period and (3) in the case of the disposition of any Investment (other than an Investment which is a loan) made after the Issue Date or the repayment or disposition of any loan made after the Issue Date (other than any such Investment or loan made pursuant to clause (i), (ii), (iv) or (v) of Section 4.14 hereof), an amount equal to, with respect to any such Investment (other than an Investment which is a loan), the lesser of the net cash proceeds received on disposition with respect to such Investment or the initial amount of such Investment, in either case, less the cost of disposition of such Investment and with respect to any such loan, an amount equal to any cash received on account of (A) the repayment of principal on such loan or (B) the disposition of such loan, less the cost of such disposition and in each of the foregoing cases, not to exceed the principal amount of such disposed of loan. For purposes of determining under this clause (c) the amount expended for Restricted Payments, cash distributed shall be valued at the face amount thereof and property other than cash shall be valued at its Fair Market Value. The provisions of this Section 4.11 shall not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if such payment would comply with the provisions of this Indenture at the date of the declaration of such payment, (ii) the retirement of any shares of Capital Stock of the Company or Indebtedness of the Company which is subordinated in right of payment to the Securities by -42- conversion into, or by an exchange for, shares of Capital Stock of the Company that are not Disqualified Stock or out of the Net Proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of other shares of Capital Stock (other than Disqualified Stock) of the Company, (iii) the redemption or retirement of Indebtedness of the Company which is subordinated in right of payment to the Securities in exchange for, by conversion into, or out of the Net Proceeds of, a substantially concurrent sale of subordinated Indebtedness of the Company (other than to a Subsidiary of the Company) that (x) is contractually subordinated in right of payment to the Securities at least to the same extent that the Indebtedness being redeemed or retired is subordinated to the Securities and (y) is permitted to be incurred in accordance with Section 4.10 hereof, (iv) dividends to Waxman Industries to satisfy interest payments on the Deferred Coupon Notes, including any Deferred Coupon Note Refinancing Indebtedness, provided that any such dividend is used on the date such dividend is paid to make interest payments on the Deferred Coupon Notes or Deferred Coupon Note Refinancing Indebtedness, as the case may be, and provided further that no Default or Event of Default shall have occurred and be continuing after the payment of any such dividend (v) the redemption or retirement, or dividends to Waxman Industries for the redemption or retirement, (by way of open market purchase or otherwise) within 365 days of the Issue Date of Deferred Coupon Notes or Deferred Coupon Note Refinancing Indebtedness in an amount not to exceed the aggregate net cash proceeds received by the Company and/or Barnett from the sale of shares of Capital Stock of Barnett representing not more than 55.1% of the Barnett Common Stock pursuant to the Barnett Public Offering that are in excess of $75.0 million, provided no Default or Event of Default shall have occurred and be continuing after such redemption or retirement or the payment of such dividend, as the case may be, (vi) the payment of any dividend or distribution by the Company to Waxman Industries (A) pursuant to the Tax Sharing Agreement, which dividend or distribution is used solely to pay income taxes and may not exceed the lesser of (x) income taxes actually paid by Waxman Industries (on a consolidated basis with its Subsidiaries) and (y) the amount of income taxes which would be paid by the Company and its Subsidiaries if they were a consolidated tax paying group filing a consolidated return and (B) which dividend or distribution is used solely to pay taxes (other than income taxes) actually payable by Waxman Industries; and (vii) Restricted Payments consisting of 50% of Eligible Sale Proceeds (100% in the case of clause (iv) above), provided no Default or -43- Event of Default shall have occurred and be continuing after the making of such Restricted Payment. In determining the amount of Restricted Payments permissible under clause (c) above, amounts expended pursuant to clauses (i), (ii), (iv) and (vii) above shall be included as Restricted Payments. SECTION 4.12. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective or enter into any agreement with any person that would cause any consensual encumbrance or restriction of any kind on the ability of any Subsidiary of the Company to (a) pay dividends, in cash or otherwise, or make any other distributions on its Capital Stock or any other interest or participation in, or measured by, its profits owned by, or pay any Indebtedness owed to, the Company or a Subsidiary of the Company, (b) make loans or advances to the Company or a Subsidiary of the Company or (c) transfer any of its properties or assets to the Company or any Subsidiary of the Company, except, in each case, for such encumbrances or restrictions existing under or contemplated by or by reason of (i) any restrictions existing under the Credit Agreement as in effect on the Issue Date, (ii) any restrictions existing under any agreement that refinances, replaces, amends or extends an agreement containing a restriction permitted by clause (i) above; provided that the terms and conditions of any such restrictions are not materially less favorable to the holders of the Securities than those under or pursuant to the agreement being refinanced, replaced, amended or extended or (iii) customary non-assignment or sublease provisions of any agreement of the Company or its Subsidiaries. SECTION 4.13. Limitation on Liens. The Company shall not, and the Company shall not permit, cause or suffer any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind upon any of its property or assets now owned or hereafter acquired by it, which (a) secures Indebtedness of the Company subordinated in right of payment to the Securities, unless the Securities are secured by a Lien on such property that is senior to such Lien or (b) secured Indebtedness of the Company which is pari passu in right of payment with the Securities, unless the Securities are -44- secured by a Lien on such property that is equal and ratable with such Lien, except for Liens existing as of the Issue Date and Permitted Liens. Notwithstanding the foregoing, Liens shall be permitted by the previous clauses (a) through (b) only to the extent that any Indebtedness secured by such Liens is incurred pursuant to and in accordance with this Indenture. SECTION 4.14. Limitation on Investments, Loans and Advances. The Company shall not make and shall not permit any of its Subsidiaries to make any Investment, except: (i) Investments by the Company or a Subsidiary of the Company in any Wholly-Owned Subsidiary of the Company (including any such Investment pursuant to which a person becomes a Wholly-Owned Subsidiary of the Company) or in the Company by any Subsidiary of the Company; (ii) Investments represented by receivables created or acquired in the ordinary course of business or the settlement of such receivables in the ordinary course of business; (iii) Investments permitted to be made pursuant to Section 4.11 hereof; (iv) Investments represented by advances to employees of the Company or its Subsidiaries made in the ordinary course of business and consistent with past business practices; and (v) Permitted Investments. SECTION 4.15. Limitation on Transactions with Affiliates. The Company will not, and will not permit, cause or suffer, any of its Subsidiaries to, conduct any business or enter into any transaction or series of transactions with or for the benefit of any of their respective Affiliates (each an "Affiliate Transaction"), except in good faith and on terms that are no less favorable to the Company or such Subsidiary, as the case may be, than those that could have been obtained in a comparable transaction on an arm's length basis from a person not an Affiliate of the Company or such Subsidiary. With respect to any Affiliate Transaction (and each series of -45- related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other market value in excess of $1,000,000, the Company shall deliver an Officers' Certificate to the Trustee certifying that such Affiliate Transaction (or series of related Affiliate Transactions) complies with the foregoing provisions and that such Affiliate Transaction (or series of related Affiliate Transactions) was approved by a majority of the Independent Directors of the Company and the Board of Directors of the Company as a whole. Notwithstanding the foregoing, the restrictions set forth in this Section 4.15 shall not apply to (x) customary directors' fees and consulting fees or (y) any Affiliate Transaction pursuant to and in accordance with the provisions of the Tax Sharing Agreement, Intercorporate Agreement, Barnett Intercorporate Agreement or the Trademark License Agreements. SECTION 4.16. Change of Control. (a) Upon the occurrence of a Change of Control (the date of such occurrence being the "Change of Control Date"), the Company shall notify or cause to be notified the Holders in writing of such occurrence and shall make an offer to purchase (the "Change of Control Offer"), on a business day (the "Change of Control Payment Date") not later than 60 days following the Change of Control Date, all Securities then outstanding at a purchase price equal to 101% of the principal amount thereof plus accrued interest, if any, to the Change of Control Payment Date. Within 10 days after the date upon which the Change of Control occurred requiring the Company to make a Change of Control Offer pursuant to this Section 4.16, the Company shall so notify the Trustee. In connection with such notification to the Trustee, the Company may instruct the Trustee to give, at the cost and expense of the Company, the notice required to be given by clause (b) below. (b) Notice of a Change of Control Offer shall be sent, by first class mail, to each Holder not less than 25 days nor more than 45 days before the Change of Control Payment Date, with copies to the Trustee, which notice shall, consistent with the provisions of this Section 4.16, govern the terms of the Change of Control Offer. Such notice shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Change of Control Offer and shall state: -46- (1) that the Change of Control Offer is being made pursuant to this Section 4.16 and that all Securities properly tendered will be accepted for payment; (2) the purchase price (including the amount of accrued interest) and the Change of Control Payment Date; (3) that any Security not tendered will continue to accrue interest in accordance with the terms thereof; (4) that, unless the Company defaults in making payment therefor, any Security accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have a Security purchased pursuant to a Change of Control Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the last page of the Security completed, to the Paying Agent at the address specified in the notice prior to 5:00 p.m., New York City time, on the Business Day prior to the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder delivered for purchase, the Security certificate number (if any) and a statement that such Holder is withdrawing its election to have such Security purchased; (7) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount equal to the unpurchased portion of the Securities surrendered; and (8) the circumstances and relevant facts regarding such Change of Control. (c) On or before the Change of Control Payment Date, the Company shall (i) accept for payment Securities or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price of all Securities so tendered and -47- (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders new Securities equal in principal amount to any unpurchased portion of the Securities surrendered. Any Securities not so accepted shall be promptly mailed by the Company to the Holder thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of securities pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.16, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.16 by virtue thereof. The Change of Control Offer shall remain open for at least 20 Business Days and until 5:00 p.m., New York City time, on the Business Day next preceding the Change of Control Payment Date. SECTION 4.17. Disposition of Proceeds of Asset Sales. (a) The Company will not, and will not permit any of its Subsidiaries to, make any Asset Sale unless (i) the Company or the applicable Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of and (ii) at least 75% of the net proceeds received by the Company or such Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents (with Indebtedness of the Company or its Subsidiaries assumed by the purchaser being counted as cash for such purposes if the Company and its Subsidiaries are permanently released from all liability therefor). (b) The Company shall or shall cause its Subsidiaries to, within 360 days of receipt of any Net Cash Proceeds from an Asset Sale: (x) apply such Net Cash Proceeds to permanently prepay Indebtedness outstanding under the Credit Agreement; or -48- (y) apply such Net Cash Proceeds to acquire or construct assets of the Company or a Subsidiary of the Company in lines of business related to the Company's and its Subsidiaries' businesses as in existence on the Issue Date. To the extent such Net Cash Proceeds are not applied as provided in the previous clauses (x) and (y), such Net Cash Proceeds shall constitute Excess Proceeds subject to disposition as provided in clause (c) below; provided, however, that (i) to the extent that the Net Cash Proceeds applied to permanently prepay Indebtedness consist in whole or in part of Barnett Sale Proceeds, then such Barnett Sale Proceeds may be applied to permanently prepay such Indebtedness to the extent required by the terms of the Credit Agreement (as in existence on the Issue Date) and, to the extent such prepayment is not so required, such Barnett Sale Proceeds may be used to prepay such Indebtedness and to make an offer to purchase Securities as set forth below on a pro rata basis based on the aggregate principal amount of Indebtedness outstanding under the Credit Agreement and Securities outstanding, (ii) up to $10.0 million of Barnett Sale Proceeds may be applied pursuant to clause (x) above and not subject to the preceding clause (i) provided that any such Barnett Sale Proceeds so applied must first be applied to permanently prepay any Permitted Barnett Secured Indebtedness then outstanding. (c) When the aggregate amount of unutilized Excess Proceeds equals or exceeds $2.5 million, the Company shall make an offer to repurchase (the "Asset Sale Offer") on the Asset Sale Payment Date an aggregate principal amount of the Securities equal to such entire unutilized Company Excess Proceeds (and not just the amount in excess of $2.5 million) at a price in cash equal to 100% of the outstanding principal amount thereof, plus accrued interest, if any, to the Asset Sale Payment Date. The Company shall, subject to the provisions described herein, be required to repurchase all Securities validly tendered into such Asset Sale Offer and not withdrawn. Upon completion of such Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero and any unutilized Excess Proceeds may be utilized by the Company for any purpose. The provisions of this Section 4.17 shall not apply to any Eligible Sale Proceeds used in accordance with clause (iv) of Section 4.11 hereof and shall otherwise only apply to 50% of any Eligible Sale Proceeds. -49- (d) The Company shall provide the Trustee with prompt notice of the occurrence of an Asset Sale Offer. Such notice shall be accompanied by an Officers' Certificate setting forth (i) a statement to the effect that the Company or a Subsidiary of the Company has made an Asset Sale and (ii) the aggregate principal amount of Securities offered to be purchased and the basis of calculation in determining such aggregate principal amount. (e) Notice of an Asset Sale Offer shall be sent, by first class mail, by the Company (or caused to be mailed by the Company), with a copy to the Trustee, to all Holders of Securities not less than 30 days nor more than 60 days before the Asset Sale Payment Date at their last registered address. The Asset Sale Offer shall remain open from the time of mailing for at least 20 Business Days and until at least 5:00 p.m., New York City time, on the Business Day next preceding the Asset Sale Payment Date. The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Asset Sale Offer. At the Company's request,the Trustee shall give, at the cost and expense of the Company, the notice required by this paragraph (e). Such notice shall state: (1) that the Asset Sale Offer is being made pursuant to this Section 4.17; (2) the purchase price (including the amount of accrued interest, if any) for each Security and the Asset Sale Payment Date; (3) that any Security not tendered or accepted for payment will continue to accrue interest in accordance with the terms thereof; (4) that unless the Company defaults on making payment therefor, any Security accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Payment Date; (5) that Holders electing to have a Security purchased pursuant to an Asset Sale Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the last page of the Security completed, to the Paying Agent at the address specified in the notice prior to 5:00 p.m., New York City time, on the Business Day prior to the Asset Sale Payment Date; -50- (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the Business Day prior to the Asset Sale Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Securities the Holder delivered for purchase, the Security certificate number (if any) and a statement that such Holder is withdrawing his election to have such Securities purchased; (7) that if Securities in a principal amount in excess of the principal amount of the Securities to be acquired pursuant to the Asset Sale Offer are tendered and not withdrawn pursuant to the Asset Sale Offer, the Company shall purchase Securities on a pro rata basis among the Securities tendered (with such adjustment as may be deemed appropriate by the Company so that only Securities in denominations of $1,000 or integral multiples of $1,000 shall be so acquired); (8) that Holders whose Securities are purchased only in part will be issued new Securities in a principal amount equal to the unpurchased portion of the Securities surrendered; and (9) the instructions that Holders must follow in order to tender their Securities. (f) On or before an Asset Sale Payment Date, the Company shall (i) accept for payment on a pro rata basis among the Securities or portions thereof tendered pursuant to the Asset Sale Offer (subject to adjustment as contemplated by paragraph (7) above), (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price of all Securities or portions thereof so tendered and (iii) deliver to the Paying Agent the Securities so accepted together with an Officers' Certificate identifying the Securities or portions thereof accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to Holders of Securities tendered to and accepted for payment an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders new Securities equal in principal amount to any unpurchased portion of the Securities surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Paying Agent shall return to the Company any money not required to fund the payment for Securities accepted for payment by the Company. The -51- Company will publicly announce the results of the Asset Sale Offer as promptly as practicable following the Asset Sale Payment Date. (g) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.17, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.17 by virtue thereof. SECTION 4.18. Limitation on Issuances and Sales of Preferred Stock by Subsidiaries. The Company (i) will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly-Owned Subsidiary of the Company) and (ii) will not permit any person (other than the Company or a Wholly-Owned Subsidiary of the Company) to own any Preferred Stock of any Subsidiary of the Company. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Consolidation, Merger, Conveyance, Transfer or Lease. The Company shall not consolidate with or merge with or into or sell, assign, convey, lease, transfer or otherwise dispose of all or substantially all of its properties and assets (determined on a consolidated basis for the Company and its Subsidiaries, taken as a whole) to another person or persons, in a single transaction or through a series of related transactions, or cause or permit any of its Subsidiaries to do any of the foregoing, unless: (a) the Company is the continuing person, or the person formed by or surviving such consolidation or merger or the person to which such sale, assignment, conveyance, lease, transfer or other disposition is made (the "surviving entity") is a corporation organized and validly -52- existing under the laws of the United States, any State thereof or the District of Columbia; (b) the surviving entity shall expressly assume, by a supplemental indenture executed and delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, all of the obligations of the Company under the Securities and this Indenture; (c) immediately before and immediately after giving effect to such transaction, or series of transactions (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing; (d) the Company or the surviving entity (in the case of a merger or consolidation involving the Company or any sale, assignment, conveyance, lease, transfer or other disposition of all or substantially all of the Company's properties and assets) shall immediately after giving effect to such transaction or series of transactions (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions) have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction or series of transactions; (e) immediately after giving effect to such transaction or series of transactions, the Company or the surviving entity (in the case of a merger or consolidation involving the Company or any sale, assignment, conveyance, lease, transfer or other disposition of all or substantially all of the Company's assets) could incur $1.00 of Indebtedness pursuant to clause (d) of Section 4.10 hereof; and (f) the Company or the surviving entity shall have delivered to the Trustee an Officers' Certificate stating that such consolidation, merger, sale, assignment, conveyance, lease, transfer or other disposition and, if a supplemental indenture is required in connection with such transaction or series of transactions, such supplemental indenture complies with this Section 5.01 and that all -53- conditions precedent in this Indenture relating to the transaction or series of transactions have been satisfied. SECTION 5.02. Successor Entity Substituted. Upon any consolidation, merger or any transfer of all or substantially all of the assets of the Company in accordance with Section 5.01, the surviving entity formed by such consolidation or into which the Company is merged or to which such transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such surviving entity had been named as the Company herein and the Company shall be discharged from all obligations and covenants under the Indenture and the Securities. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. An "Event of Default" occurs if: (i) the Company defaults in the payment of interest on any Security when the same becomes due and payable and continuance of any such default for a period of 30 days; or (ii) the Company defaults in the payment of the principal of any Security when due (including a default in payment upon an offer to purchase required to be made by this Indenture); or (iii) the Company defaults in the performance of, or breaches, any covenant hereof (other than defaults specified in clause (i) or (ii) above), and such default or breach continues for a period of 30 days after written notice to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the outstanding Securities; or (iv) failure by the Company or any of its Subsidiaries (a) to make any payment when due with respect to any other Indebtedness under one or more classes or issues of Indebtedness which one or more classes or issues of -54- Indebtedness are in an aggregate principal amount of $5,000,000 or more; or (b) to perform any term, covenant, condition, or provision of one or more classes or issues of Indebtedness which one or more classes or issues of Indebtedness are in an aggregate principal amount of $5,000,000 or more, which failure, in the case of this clause (b), results in an acceleration of the maturity thereof; or (v) one or more judgments, orders or decrees for the payment of money in excess of $5,000,000, either individually or in an aggregate amount, shall be entered against the Company or any of its Subsidiaries or any of their respective properties and shall not be discharged and there shall have been a period of 60 days during which a stay of enforcement of such judgment or order, by reason of pending appeal or otherwise, shall not be in effect; or (vi) the Company or any Material Subsidiary of the Company pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case or proceeding, (B) consents to the entry of an order for relief against it in an involuntary case or proceeding, (C) consents to the appointment of a Custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors or (E) shall generally not pay its debts when such debts become due or shall admit in writing its inability to pay its debts generally; or (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Material Subsidiary of the Company in an involuntary case or proceeding, -55- (B) appoints a Custodian of the Company or any Material Subsidiary of the Company for all or substantially all of its properties, or (C) orders the liquidation of the Company or any Material Subsidiary of the Company, and in each case the order or decree remains unstayed and in effect for 60 days; provided, however, that if the entry of such order or decree is appealed and dismissed on appeal, then the Event of Default hereunder by reason of the entry of such order or decree shall be deemed to have been cured. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in clause (vi) or (vii) above with respect to the Company) occurs and is continuing, then the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Securities may, by written notice, and the Trustee upon the request of the Holders of not less than 25% in aggregate principal amount of the outstanding Securities shall, declare the principal of and accrued interest, if any, on all the Securities on the date of such declaration to be due and payable immediately (the "Default Amount"). Upon any such declaration, the Default Amount shall become due and payable immediately. If an Event of Default specified in clause (vi) or (vii) above with respect to the Company occurs and is continuing, then the Default Amount on all the Securities shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. After a declaration of acceleration, the Holders of a majority in aggregate principal amount of outstanding Securities may, by notice to the Trustee, rescind such declaration of acceleration if all existing Events of Default have been cured or waived, other than nonpayment of the Default Amount on the Securities that have become due solely as a result of such acceleration and if the rescission of acceleration would not conflict with any judgment or decree. No such rescission shall affect any subsequent Default or impair any right consequent thereto. -56- SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, premium, if any, or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture as may be required or permitted thereunder. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount of the outstanding Securities by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of, premium, if any, or interest on any Security as specified in clauses (i) and (ii) of Section 6.01 or in respect of any provision hereof which cannot be modified or amended without the consent of the Holder so affected pursuant to Section 9.02. When a Default or Event of Default is so waived, it shall be deemed cured and ceases to exist. SECTION 6.05. Control by Majority. The Holders of at least a majority in principal amount of the outstanding Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it including, without limitation, any remedies provided for in Section 6.03. Subject to Section 7.01, however, the Trustee may refuse to follow any direction that conflicts with any law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of another Securityholder, or that may involve the Trustee in personal liability unless the Trustee has asked for and received indemnification reasonably satisfactory to it against any loss, liability or expense -57- caused by its following such direction; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 6.06. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee notice of a continuing Event of Default; (2) Holders of at least 25% in principal amount of the outstanding Securities make a written request to the Trustee to pursue the remedy; (3) such Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense to be incurred in compliance with such request; (4) the Trustee does not comply with the request within 30 days after receipt of the request and the offer of indemnity; and (5) during such 30-day period the Holders of a majority in principal amount of the outstanding Securities do not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with the request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. SECTION 6.07. Rights of Holders To Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, premium, if any, and interest on a Security, on or after the respective due dates expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment of principal, premium or interest specified in clause (i) or (ii) of -58- Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of principal, premium, if any, and accrued interest remaining unpaid, together with interest on overdue principal, premium and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum borne by the Securities and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, taxes, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relating to the Company or any other obligor upon the Securities, any of their respective creditors or any of their respective property and shall be entitled and empowered to collect and receive any monies or other securities or property payable or deliverable upon the conversion or exchange of the Securities or upon any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to first pay to the Trustee any amount due to it for the reasonable compensation, expenses, taxes, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article Six, it shall pay out the money in the following order: -59- First: to the Trustee for amounts due under Section 7.07; Second: to Holders for interest accrued on the Securities, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for interest; Third: to Holders for principal and premium, if any, owing under the Securities, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and premium, if any; and Fourth: to the Company or any other obligor on the Securities, as their interests may appear, or as a court of competent jurisdiction may direct. The Trustee, upon prior notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in principal amount of the outstanding Securities. ARTICLE SEVEN TRUSTEE The Trustee hereby accepts the trust imposed upon it by this Indenture and covenants and agrees to perform the same, as herein expressed. -60- SECTION 7.01. Duties of Trustee. (a) If a Default or an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of a Default or an Event of Default: (1) The Trustee need perform only those duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in this Indenture that are adverse to the Trustee. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if -61- it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01. (f) The Trustee shall not be liable for interest on any money or assets received by it except as the Trustee may agree with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The Trustee may rely and shall be fully protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may consult with counsel and may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Sections 10.04 and 10.05 hereof. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent (other than the negligence or misconduct of an agent who is an employee of the Trustee) appointed with due care. (d) The Trustee shall not be liable for any action that it takes or omits to take in good faith which it believes to be authorized or within its rights or powers, provided that the Trustee's conduct does not constitute negligence or bad faith. (e) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, -62- notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Company, to examine the books, records, and premises of the Company, personally or by agent or attorney. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred by it in compliance with such request, order or direction. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company, any Subsidiary of the Company or their respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11 hereof. SECTION 7.04. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Default. If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder, as their names and addresses appear on the Securityholder list described in Section 2.05 hereof, notice of the uncured Default or Event of Default within 30 days after such Default or Event of Default has occurred. Except in the case of a Default or an Event of -63- Default in payment of principal of, premium, if any, or interest on, any Security, and a Default or Event of Default that resulted from the failure to comply with Section 4.16, 4.17 or 5.01 hereof, the Trustee may withhold the notice if and so long as its board of directors, the executive committee of its board of directors or a committee of its directors and/or Trust Officers in good faith determines that withholding the notice is in the interest of the Securityholders. SECTION 7.06. Reports by Trustee to Holders. This Section 7.06 shall not be operative as a part of this Indenture until this Indenture is qualified under the TIA, and, until such qualification, this Indenture shall be construed as if this Section 7.06 were not contained herein. Within 60 days after each March 15 beginning with the March 15 following the date of this Indenture, the Trustee shall, to the extent that any of the events described in TIA (SECTION) 313(a) occurred within the previous twelve months, but not otherwise, mail to each Securityholder a brief report dated as of such March 15 that complies with TIA (SECTION) 313(a). The Trustee also shall comply with TIA (SECTION) 313(b). A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Company shall notify the Trustee if the Securities become listed on any securities exchange. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services as the Company and the Trustee may agree. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all tax obligations imposed on the Trustee related to this Indenture and all reasonable out-of-pocket expenses incurred or made by it. Such expenses shall include the reasonable fees and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee and its agents for, and hold them harmless against, any loss, liability or expense incurred by them except for such actions to the -64- extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the administration of this trust including the reasonable costs and expenses of enforcing this Indenture against the Company (including Section 7.07 hereof) and of defending themselves against any claim (whether asserted by any Securityholder or the Company) or liability in connection with the exercise or performance of any of their rights, powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity, but the Trustee's failure to so notify the Company shall not affect the Company's obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; provided that the Company will not be required to pay such fees and expenses if they assume the Trustee's defense and there is no conflict of interest between the Company and the Trustee in connection with such defense as reasonably determined by the Trustee. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Securities on all assets or money held or collected by the Trustee, in its capacity as Trustee, except assets or money held in trust to pay principal of or interest on Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(vi) or (vii) occurs, such expenses and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee with the Company's consent. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; -65- (2) the Trustee is adjudged a bankrupt or an insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Securities may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate -66- trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee. SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirement of TIA (SECTIONS) 310(a)(1) and 310(a)(5). The Trustee (or in the case of a corporation included in a bank holding company system, the related bank holding company) shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of such bank holding company, shall meet the capital requirements of TIA (SECTION) 310(a)(2). The Trustee shall comply with TIA (SECTION) 310(b); provided, however, that there shall be excluded from the operation of TIA (SECTION) 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA (SECTION) 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA (SECTION) 311(a), excluding any creditor relationship listed in TIA (SECTION) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (SECTION) 311(a) to the extent indicated therein. ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Discharge of Indenture. The Company may at any time terminate all of its obligations under the Securities and this Indenture shall terminate, except for those obligations referred to in the penultimate paragraph of this Section 8.01, if all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid and Securities for whose payment money has heretofore been deposited in -67- trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder, or if: (a) pursuant to Article Three, the Company shall have given notice to the Trustee and mailed a notice of redemption to each Holder of the redemption of all of the Securities under arrangements satisfactory to the Trustee for the giving of such notice; (b) the Company shall have irrevocably deposited or caused to be deposited with the Trustee or a trustee satisfactory to the Trustee, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Holders for that purpose, U.S. Legal Tender sufficient to pay principal of and interest, if any, on the outstanding Securities to redemption; provided that the Trustee shall have been irrevocably instructed to apply such U.S. Legal Tender to the payment of said principal and interest with respect to the Securities; (c) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent providing for the termination of the Company's obligation under the Securities and this Indenture have been complied with; and (d) the Company shall have paid all sums payable by it hereunder. Notwithstanding the foregoing paragraph, the Company's obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 7.08, 8.04 and 8.05 hereof shall survive until the Securities are no longer outstanding. After the Securities are no longer outstanding, the Company's obligations in Sections 7.07, 8.04 and 8.05 hereof shall survive. After such delivery or irrevocable deposit the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Securities and this Indenture except for those surviving obligations specified above. -68- SECTION 8.02. Legal Defeasance and Covenant Defeasance. (a) The Company may, at its option by Board Resolution, at any time, with respect to the Securities, elect to have either paragraph (b) or paragraph (c) below be applied to the outstanding Securities upon compliance with the conditions set forth in paragraph (d). (b) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (b), the Company shall be deemed to have been released and discharged from its obligations with respect to the outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, "legal defeasance"). For this purpose, such legal defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Securities, which shall thereafter be deemed to be "outstanding" only for the purposes of paragraph (e) below and the other Sections of and matters under this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Securities to receive solely from the trust fund described in paragraph (d) below and as more fully set forth in such paragraph, payments in respect of the principal of and interest on such Securities when such payments are due, (ii) the Company's obligations with respect to such Securities under Sections 2.05, 2.06, 2.07, 2.08, 4.02, 7.07, 7.08, 8.04 and 8.05, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv) this Section 8.02. Subject to compliance with this Section 8.02, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) below with respect to the Securities. (c) Upon the Company's exercise under paragraph (a) of the option applicable to this paragraph (c), the Company shall be released and discharged from its obligations under any covenant contained in Article Five and in Sections 4.10 through 4.18 with respect to the outstanding Securities on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Securities shall thereafter be deemed to be not "outstanding" for the purpose of any direction, waiver, consent or declaration or act of Holders -69- (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the outstanding Securities, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01, but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. (d) The following shall be the conditions to application of either paragraph (b) or paragraph (c) above to the outstanding Securities: (i) the Company shall irrevocably have deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) U.S. Legal Tender in an amount, or (B) direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which guarantee or obligation the full faith and credit of the United States is pledged ("U.S. Government Obligations") which through the scheduled payment of principal of and interest in respect thereof in accordance with their terms will provide (without giving effect to the reinvestment of any interest thereon), not later than one day before the due date of any payment, U.S. Legal Tender in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge principal of and interest, if any, on the outstanding Securities on the Maturity Date of such principal or installment of principal or interest in accordance with the terms of this Indenture and of such Securities; provided, however, that the Trustee (or other qualifying trustee) shall have received an irrevocable written order from the Company instructing the Trustee (or other qualifying trustee) to apply such U.S. Legal Tender -70- or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities; (ii) no Default or Event of Default or event which with notice or lapse of time or both would become a Default or an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit; (iii) such legal defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default or Event of Default under, this Indenture or any other agreement or instrument to which the Company or any Subsidiary of the Company is a party or by which any of them is bound; (iv) in the case of an election under paragraph (b) above, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date of this Indenture, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the outstanding Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such legal defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred; (v) in the case of an election under paragraph (c) above, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the outstanding Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; (vi) in the case of an election under either paragraph (b) or (c) above, an Opinion of Counsel to the effect that, (x) the trust funds will not be subject to any rights of any other holders of any other Indebtedness of the Company, and (y) after the 91st day following the -71- deposit, the trust funds will not be subject to the effect of any applicable Bankruptcy Law; and (vii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that (A) all conditions precedent provided for relating to either the legal defeasance under paragraph (b) above or the covenant defeasance under paragraph (c) above, as the case may be, have been complied with and (B) if any other Indebtedness of the Company shall then be outstanding, such legal defeasance or covenant defeasance will not violate the provisions of the agreements or instruments evidencing such Indebtedness. (e) All money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this paragraph (e), the "Trustee") pursuant to paragraph (d) above in respect of the outstanding Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to paragraph (d) above or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Securities. Anything in this Section 8.02 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request, in writing, by the Company any money or U.S. Government Obligations held by it as provided in paragraph (d) above which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent legal defeasance or covenant defeasance. -72- SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust U.S. Legal Tender or U.S. Government Obligations deposited with it pursuant to Sections 8.01 and 8.02, and shall apply the deposited U.S. Legal Tender and the U.S. Legal Tender from U.S. Government Obligations in accordance with this Indenture to the payment of principal of, premium, if any, and interest on the Securities. SECTION 8.04. Repayment to Company. Subject to Sections 7.07, 8.01 and 8.02, the Trustee shall promptly pay to the Company, upon receipt by the Trustee of an Officers' Certificate, any excess money, determined in accordance with Sections 8.02(d)(i) and (e), held by it at any time. The Trustee and the Paying Agent shall pay to the Company upon receipt by the Trustee or the Paying Agent, as the case may be, of an Officers' Certificate, any money held by it for the payment of principal, premium, if any, or interest that remains unclaimed for two years; provided, however, that the Trustee and the Paying Agent before being required to make any payment may, but need not, at the expense of the Company, cause to be published once in a newspaper of general circulation in The City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Securityholders entitled to money must look solely to the Company for payment as general creditors unless an applicable abandoned property law designates another person, and all liability of the Trustee or Paying Agent with respect to such money shall thereupon cease. SECTION 8.05. Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with this Indenture by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then and only then the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had been made pursuant to this Indenture until such time as the Trustee is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance with this Indenture; provided, however, that if the -73- Company has made any payment of interest on, premium, if any, or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. The Company, when authorized by its Board Resolution, and the Trustee, together, may without notice to or the consent of any Securityholder amend, waive or supplement this Indenture or the Securities: (1) to cure any ambiguity, defect or inconsistency, maintain qualification of this Indenture under the TIA; provided that such amendment or supplement does not adversely affect the rights of any Holder; (2) to comply with Article Five; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; (4) to make any other change that does not adversely affect the rights of any Securityholders hereunder; or (5) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA; provided that the Company has delivered to the Trustee an Opinion of Counsel and an Officers' Certificate, each stating that such amendment or supplement complies with the provisions of this Section 9.01. SECTION 9.02. With Consent of Holders. Subject to Section 6.07, the Company when authorized by its Board Resolution, and the Trustee, together, with the written consent of the Holder or Holders of at least a majority -74- in aggregate principal amount of the outstanding Securities, may amend or supplement this Indenture or the Securities, without notice to any other Securityholders. However, without the consent of each Securityholder affected, no amendment, supplement or waiver, including a waiver pursuant to Section 6.04, may: (i) reduce the principal amount outstanding of, extend the fixed maturity of, or alter the redemption provisions of, the Securities; (ii) change the currency in which Securities or any principal or the accrued interest thereon is payable; (iii) reduce the percentage in principal amount outstanding of Securities which must consent to an amendment, supplement or waiver or consent to take any action under this Indenture or the Securities; (iv) impair the right to institute suit for the enforcement of any payment on or with respect to the Securities; (v) waive a default in payment with respect to the Securities; (vi) reduce the rate or extend the time for payment of interest, if any, on the Securities; or (vii) following the mailing of a Change of Control Offer, modify the provisions of this Indenture with respect to such Change of Control Offer in a manner adverse to any Holder. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver. -75- SECTION 9.03. Compliance with TIA. From the date on which the Indenture is qualified under the TIA, every amendment, waiver or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of his Security by notice to the Trustee or the Company received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. Notwithstanding the above, nothing in this paragraph shall impair the right of any Securityholder under (SECTION) 316(b) of the TIA. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those persons who were Holders at such record date (or their duly designated proxies), and only those persons, shall be entitled to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (i) through (ix) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security. -76- SECTION 9.05. Notation on or Exchange of Securities. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or issue a new Security shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. Trustee To Sign Amendments, Etc. Subject to the next sentence, the Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver is authorized and permitted by this Indenture. ARTICLE TEN MISCELLANEOUS SECTION 10.01. TIA Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 10.02. Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, or overnight courier addressed as follows: -77- if to the Company: Waxman USA Inc. 24460 Aurora Road Bedford Heights, Ohio 44146 Attention: Chief Financial Officer with a copy to: Shereff, Friedman, Hoffman & Goodman, LLP 919 Third Avenue New York, New York 10022 Attention: Scott M. Zimmerman, Esq. if to the Trustee: United States Trust Company of New York 114 West 47th Street New York, New York 10036-1532 Attention: Corporate Trust Department Each of the Company and the Trustee by written notice to each other may designate additional or different addresses for notices. Any notice or communication to the Company or the Trustee shall be deemed to have been given or made as of the date so delivered, if personally delivered; when answered back, if telexed; when receipt is acknowledged, if faxed; and five (5) calendar days after mailing, if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Security- holder, including any notice delivered in connection with TIA (SECTION) 310(b), TIA (SECTION) 313(c), TIA (SECTION) 314(a) and TIA (SECTION) 315(b), shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or -78- communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 10.03. Communications by Holders with Other Holders. Securityholders may communicate pursuant to TIA (SECTION) 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of TIA (SECTION) 312(c). SECTION 10.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee at the request of the Trustee: (1) an Officers' Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with; and (3) where applicable, a certificate or opinion by an independent certified public accountant satisfactory to the Trustee that complies with TIA (SECTION) 314(c). SECTION 10.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; -79- (3) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with. SECTION 10.06. Rules by Trustee, Paying Agent, Registrar. The Trustee may make reasonable rules in accordance with the Trustee's customary practices for action by or at a meeting of Securityholders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 10.07. Legal Holidays. A "Legal Holiday" used with respect to a particular place of payment is a Saturday, a Sunday or a day on which banking institutions in New York, New York or at such place of payment are not required to be open. If a payment date is a Legal Holiday at such place, payment may be made at such place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 10.08. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the jurisdiction of any United States federal court or state court in the State of New York in any action or proceeding arising out of or relating to this Indenture and the Securities and the Company hereby irrevocably appoints the Trustee as its agent to receive service of process in connection with any such action or proceeding and the Trustee hereby accepts such appointment. SECTION 10.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. -80- SECTION 10.10. No Recourse Against Others. A director, officer, employee, stockholder or Affiliate, as such, of the Company and each of its Subsidiaries shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. SECTION 10.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 10.12. Duplicate Originals. All parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together shall represent the same agreement. SECTION 10.13. Severability. In case any provision in this Indenture or in the Securities shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent of the law. SECTION 10.14. Table of Contents, Headings, Etc. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, and are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. -81- SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above. WAXMAN USA INC., as Issuer By: /S/ ARMOND WAXMAN -------------------------- Name: Armond Waxman Title: Co-Chairman of the Board and Co-Chief Executive Officer UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: /S/ JAMES E. LOGAN -------------------------- Name: JAMES E. LOGAN Title: VICE PRESIDENT EXHIBIT A [FORM OF SERIES A NOTE] THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO (X) THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY ANY SUBSEQUENT CHANGE IN APPLICABLE LAW (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH IS, AS OF THE DATE OF SUCH OFFER, SALE OR TRANSFER, EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1), (a)(2), (a)(3) OR (a)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT IN THEIR SOLE DISCRETION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C), (D), (E) OR (F) TO REQUIRE THE DELIVERY OF OPINIONS OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF THE FOREGOING CLAUSE (E), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM ATTACHED AS EXHIBIT D TO THE INDENTURE (A COPY OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO EACH OF THEM. A-1 THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. A-2 WAXMAN USA INC. 11 1/8% Senior Note Due 2001, Series A No. $ WAXMAN USA INC., a Delaware corporation (the "Company," which term includes any successor entity), for value received promises to pay to or registered assigns, the principal sum of Dollars ($ ), on September 1, 2001. Interest Payment Dates: March 1 and September 1, beginning September 1, 1996. Record Dates: February 15 and August 15, beginning August 15, 1996. A-3 Reference is made to the further provisions of this Security contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers. Dated: , 1996 WAXMAN USA INC. By: --------------------------- Name: Title: By: --------------------------- Name: Title: A-4 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 11 1/8% Senior Notes Due 2001, Series A, described in the within-mentioned Indenture. UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: --------------------------- Authorized Signer A-5 WAXMAN USA INC. 11 1/8% Senior Note Due 2001, Series A 1. Interest. WAXMAN USA INC., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semi-annually in arrears on March 1 and September 1 of each year (the "Interest Payment Date"), commencing September 1, 1996. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from April 3, 1996. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and interest on overdue installments of interest, to the extent lawful, at a rate equal to 11 1/8% per annum. 2. Method of Payment. The Company shall pay interest on the Securities (except defaulted interest) to the persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Securities are cancelled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal, premium, if any, and interest in U.S. Legal Tender. If this Security is a Global Security, all payments in respect of this Security will be made to the Depository or its nominee in immediately available funds in accordance with customary procedures established from time to time by the Depository. If this Security is a Global Security and a Restricted Security, only Qualified Institutional Buyers (as defined in Rule 144A under the Securities Act) may hold a beneficial interest herein. 3. Paying Agent and Registrar. Initially, United States Trust Company of New York (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. A-6 4. Indenture. The Company issued the Securities under an Indenture, dated as of April 1, 1996 (the "Indenture"), between the Company and the Trustee. This Security is one of a duly authorized issue of Securities of the Company designated as its 11 1/8% Senior Notes Due 2001, Series A (the "Series A Securities"). Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code (SECTIONS) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such time as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under the TIA. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. The Securities are unsecured obligations of the Company limited (except as otherwise provided in the Indenture) in aggregate principal amount to $48,750,000. 5. Optional Redemption. The Securities may be redeemed, at the option of the Company, in whole or in part, at any time at a redemption price equal to a percentage of the principal amount thereof, as set forth in the immediately succeeding paragraph, plus accrued interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant Record Dates to receive interest due on an Interest Payment Date). The Company may at any time or from time to time purchase Securities from Securityholders in market transactions and such purchases shall not be considered redemptions. The redemption price as a percentage of the principal amount shall be as follows, if the Securities are redeemed during the 12-month period beginning June 1 of the years indicated below: Year Percentage 1995................................... 103.438% 1996................................... 101.719% 1997 and thereafter.................... 100.000% 6. Notice of Redemption. Notice of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the A-7 Redemption Date to each Holder of Securities to be redeemed at such Holder's registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in multiples of $1,000. Except as set forth in the Indenture, from and after any Redemption Date, if on such Redemption Date the Paying Agent holds U.S. Legal Tender sufficient for the redemption of the Securities called for redemption on such Redemption Date, then, unless the Company defaults in the payment of the Redemption Price or the Paying Agent is otherwise prohibited from paying the Redemption Price, the Securities called for redemption will cease to bear interest and the only right of the Holders of such Securities will be to receive payment of the Redemption Price. 7. Registration Rights. Pursuant to the Registration Rights Agreement among the Company and the Trustee, the Company will be obligated to consummate an exchange offer pursuant to which the Holder of this Security shall have the right to exchange this Security for 11 1/8% Senior Notes Due 2001, Series B, of the Company (the "Series B Securities"), which have been registered under the Securities Act, in like principal amount and having identical terms as the Series A Securities. The Holders of Series A Securities shall be entitled to receive liquidated damages in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. The Series A Securities and the Series B Securities are together referred to herein as the "Securities." 8. Offers To Purchase. Sections 4.17 and 4.16 of the Indenture provide that after an Asset Sale or upon the occurrence of a Change of Control, and subject to further limitations contained therein, the Company shall make an offer to purchase a certain amount of the outstanding Securities in the event of an Asset Sale and 100% of the outstanding Securities in the event of a Change of Control, in each case in accordance with the procedures set forth in the Indenture. 9. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may A-8 require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities or portions thereof selected for redemption. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. 10. Discharge Prior to Redemption or Maturity; Defeasance. The Company's obligations pursuant to the Indenture will be discharged, except for obligations pursuant to certain sections thereof, subject to the terms of the Indenture, upon the payment of all the Securities or upon the irrevocable deposit with the Trustee of U.S. Legal Tender sufficient to pay when due principal of and interest, if any, on the Securities to maturity or redemption, as the case may be. The Indenture contains provisions (which provisions apply to this Security) for defeasance at any time of (a) the entire Indebtedness of the Company on this Security or (b) certain restrictive covenants and the Defaults and Events of Default related thereto, in each case upon compliance by the Company with certain conditions set forth therein. 11. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities, comply with Article Five of the Indenture or comply with any requirements of the SEC in connection with the qualification of the Indenture under the TIA, or make any other change that does not adversely affect the rights of any Holder of a Security. A-9 12. Restrictive Covenants. The Indenture contains certain covenants that, among other things, limit the ability of the Company and its Subsidiaries to incur additional Indebtedness, transfer or sell assets, pay dividends, make certain other Restricted Payments and Investments, create Liens or enter into transactions with Affiliates and mergers. The Company must quarterly report to the Trustee on compliance with such limitations. 13. Successors. When a successor assumes all the obligations of its predecessor under the Securities and the Indenture and the transaction complies with the terms of Article Five of the Indenture, the predecessor will be released from those obligations. 14. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare all the Securities to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has received indemnity reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal or interest or a Default or Event of Default that resulted from failure to comply with Section 4.16, 4.17 or 5.01 of the Indenture) if it determines that withholding notice is in their interest. 15. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. A-10 16. No Recourse Against Others. No stockholder, director, officer, employee or incorporator, as such, of the Company or any of its Subsidiaries shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. 17. Authentication. This Security shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on this Security. 18. Governing Law. The Laws of the State of New York shall govern this Security and the Indenture. 19. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 20. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities immediately prior to the qualification of the Indenture under the TIA as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 21. Indenture. Each Holder, by accepting a Security, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. A-11 The Company will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture. Requests may be made to: WAXMAN USA INC., 24460 Aurora Road, Bedford Heights, Ohio 44146, Attn.: President. 22. Certain Information Obligations. At any time when the Company is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, upon the request of a Holder of a Series A Security, the Company will promptly furnish or cause to be furnished such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) to such Holder or to a prospective purchaser of such Series A Security designated by such Holder, as the case may be, in order to permit compliance by such Holder with Rule 144A under the Securities Act. A-12 [FORM OF ASSIGNMENT] I or we assign this Security to - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- (Print or type name, address and zip code of assignee) Please insert Social Security or other identifying number of assignee - --------------------------------------- and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for it. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to (x) the date which is three years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Securities, or any predecessor thereto, and (y) such later date, if any, as may be required by any subsequent change in applicable law (the "Resale Restriction Termination Date"), the undersigned confirms that such Securities are being transferred: CHECK ONE BOX BELOW (1) / / to the Company; or (2) / / pursuant to a registration statement which has been declared effective under the Securities Act; or (3) / / pursuant to and in compliance with Rule 144A under the Securities Act; or (4) / / pursuant to and in compliance with Regulation S under the Securities Act; or (5) / / to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the A-13 Securities Act) that has furnished to the Company and the Trustee the Transferee Certificate in the form attached as Exhibit D to the Indenture (such Transferee Certificate can be obtained from the Trustee); or (6) / / pursuant to another available exemption from the registration requirements of the Securities Act. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3), (4), (5) or (6) is checked, the Company and the Trustee may require, prior to registering any such transfer of the Securities, in their sole discretion, such opinions of counsel, certifications and/or other information satisfactory to each of them to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Dated: Signed: -------------------- ------------------------------------------ - ----------------------------------------------------------------------------- (Sign exactly as your name appears on the front of this Security) Signature Guarantee: --------------------------------------------------------- A-14 [OPTION OF HOLDER TO ELECT PURCHASE] If you want to elect to have this Security purchased by the Company pursuant to Section 4.16 or Section 4.17 of the Indenture, check the appropriate box: Section 4.16 [ ] Section 4.17 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.16 or Section 4.17 of the Indenture, state the amount: $ Date: Signature: ---------- ------------------------------------------- (Sign exactly as your name appears on the front of this Security) Signature Guarantee: --------------------------------------------------------- A-15 EXHIBIT B [FORM OF SERIES B NOTE] WAXMAN USA INC. 11 1/8% Senior Note Due 2001, Series B No. $ WAXMAN USA INC., a Delaware corporation (the "Company," which term includes any successor entity), for value received promises to pay to or registered assigns, the principal sum of Dollars ($ ), on September 1, 2001. Interest Payment Dates: March 1 and September 1 beginning September 1, 1996. Record Dates: February 15 and August 15 beginning August 15, 1996. B-1 Reference is made to the further provisions of this Security contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Security to be signed manually or by facsimile by its duly authorized officers. Dated: WAXMAN USA INC. By: ----------------------------- Name: Title: By: ----------------------------- Name: Title: B-2 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 11 1/8% Senior Notes Due 2001, Series B, described in the within-mentioned Indenture. UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By ----------------------------- Authorized Signer B-3 WAXMAN USA INC. 11 1/8% Senior Note Due 2001, Series B 1. Interest. WAXMAN USA INC., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Security at the rate per annum shown above. The Company will pay interest semi-annually in arrears on March 1 and September 1 of each year (the "Interest Payment Date"), commencing September 1, 1996. Interest on the Securities will accrue from the most recent date to which interest has been paid, or if no interest has been paid, from April 3, 1996. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and interest on overdue installments of interest, to the extent lawful, at a rate equal to 11 1/8% per annum. 2. Method of Payment. The Company shall pay interest on the Securities (except defaulted interest) to the persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Securities are cancelled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company shall pay principal and interest in U.S. Legal Tender. 3. Paying Agent and Registrar. Initially, United States Trust Company of New York (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. 4. Indenture. The Company issued the Securities under an Indenture, dated as of April 1, 1996 (the "Indenture"), between the Company and the Trustee. This Security is one of a duly authorized issue of Securities of the Company designated as its 11 1/8% Senior Notes Due 2001, Series B (the "Series B B-4 Securities"). Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code (SECTIONS) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture until such time as the Indenture is qualified under the TIA, and thereafter as in effect on the date on which the Indenture is qualified under the TIA. Notwithstanding anything to the contrary herein, the Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and the TIA for a statement of them. The Securities are unsecured obligations of the Company limited (except as otherwise provided in the Indenture) in aggregate principal amount to $48,750,000. 5. Exchange Offer. The Series B Securities were issued pursuant to an exchange offer pursuant to which 11 1/8% Senior Notes Due 2001, Series A, of the Company (the "Series A Securities"), in like principal amount and having substantially identical terms as the Series B Securities, were exchanged for the Series B Securities. The Series A Securities and the Series B Securities are together referred to herein as the "Securities." 6. Optional Redemption. The Securities may be redeemed, at the option of the Company, in whole or in part, at any time at a redemption price equal to a percentage of the principal amount thereof, as set forth in the immediately succeeding paragraph, plus accrued interest, if any, to the Redemption Date (subject to the right of Holders of record on relevant Record Dates to receive interest due on an Interest Payment Date). The Company may at any time or from time to time purchase Securities from Securityholders in market transactions and such purchases shall not be considered redemptions. The redemption price as a percentage of the principal amount shall be as follows, if the Securities are redeemed during the 12-month period beginning June 1 of the years indicated below: Year Percentage 1995................................... 103.438% 1996................................... 101.719% 1997 and thereafter.................... 100.000% B-5 7. Notice of Redemption. Notice of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the Redemption Date to each Holder of Securities to be redeemed at such Holder's registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in multiples of $1,000. Except as set forth in the Indenture, from and after any Redemption Date, if on such Redemption Date the Paying Agent holds U.S. Legal Tender for the redemption of the Securities called for redemption on such Redemption Date, then, unless the Company defaults in the payment of the Redemption Price or the Paying Agent is otherwise prohibited from paying the Redemption Price, the Securities called for redemption will cease to bear interest and the only right of the Holders of such Securities will be to receive payment of the Redemption Price. 8. Offers To Purchase. Sections 4.17 and 4.16 of the Indenture provide that after an Asset Sale or upon the occurrence of a Change of Control, and subject to further limitations contained therein, the Company shall make an offer to purchase a certain amount of the outstanding Securities in the event of an Asset Sale and 100% of the outstanding Securities in the event of a Change of Control, in each case in accordance with the procedures set forth in the Indenture. 9. Denominations; Transfer; Exchange. The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities or portions thereof selected for redemption. No service charge shall be made for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. B-6 10. Discharge Prior to Redemption or Maturity; Defeasance. The Company's obligations pursuant to the Indenture will be discharged, except for obligations pursuant to certain sections thereof, subject to the terms of the Indenture, upon the payment of all the Securities or upon the irrevocable deposit with the Trustee of U.S. Legal Tender sufficient to pay when due principal of and interest, if any, on the Securities to maturity or redemption, as the case may be. The Indenture contains provisions (which provisions apply to this Security) for defeasance at any time of (a) the entire Indebtedness of the Company on this Security or (b) certain restrictive covenants and the Defaults and Events of Default related thereto, in each case upon compliance by the Company with certain conditions set forth therein. 11. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities, comply with Article Five of the Indenture or comply with any requirements of the SEC in connection with the qualification of the Indenture under the TIA, or make any other change that does not adversely affect the rights of any Holder of a Security. 12. Restrictive Covenants. The Indenture contains certain covenants that, among other things, limit the ability of the Company and its Subsidiaries to incur additional Indebtedness, transfer or sell assets, pay dividends, make certain other Restricted Payments and Investments, create Liens or enter into transactions with Affiliates and mergers. The Company must quarterly report to the Trustee on compliance with such limitations. 13. Successors. When a successor assumes all the obligations of its predecessor under the Securities and the Indenture and the B-7 transaction complies with the terms of Article Five of the Indenture, the predecessor will be released from those obligations. 14. Defaults and Remedies. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare all the Securities to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Securities unless it has received indemnity reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Securities then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Securities notice of any continuing Default or Event of Default (except a Default or Event of Default in payment of principal or interest or a Default or Event of Default that resulted from failure to comply with Section 4.16, 4.17 or 5.01 of the Indenture) if it determines that withholding notice is in their interest. 15. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. 16. No Recourse Against Others. No stockholder, director, officer, employee or incorporator, as such, of the Company or any of its Subsidiaries shall have any liability for any obligation of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. 17. Authentication. This Security shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on this Security. B-8 18. Governing Law. The Laws of the State of New York shall govern this Security and the Indenture. 19. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 20. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities immediately prior to the qualification of the Indenture under the TIA as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. 21. Indenture. Each Holder, by accepting a Security, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. The Company will furnish to any Holder of a Security upon written request and without charge a copy of the Indenture. Requests may be made to: WAXMAN USA INC., 24460 Aurora Road, Bedford Heights, Ohio 44146, Attn.: President. B-9 [FORM OF ASSIGNMENT] I or we assign this Security to - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- (Print or type name, address and zip code of assignee) Please insert Social Security or other identifying number of assignee - --------------------------------------- and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for it. Dated: Signed: -------------------- ------------------------------------------ - ---------------------------------------------------------------------------- (Sign exactly as your name appears on the front of this Security) Signature Guarantee: -------------------------------------------------------- B-10 [OPTION OF HOLDER TO ELECT PURCHASE] If you want to elect to have this Security purchased by the Company pursuant to Section 4.16 or Section 4.17 of the Indenture, check the appropriate box: Section 4.16 [ ] Section 4.17 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.16 or Section 4.17 of the Indenture, state the amount: $ Date: Signature: ---------- ------------------------------------------ (Sign exactly as your name appears on the front of this Security) Signature Guarantee: -------------------------------------------------------- B-11 EXHIBIT C [FORM OF LEGEND FOR BOOK-ENTRY SECURITIES] Any Global Security authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Security) in substantially the following form: THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. C-1 EXHIBIT D Transferee Letter of Representation c/o United States Trust Company of New York Ladies and Gentlemen: In connection with our proposed purchase of $ aggregate principal amount of the 11 1/8% Senior Notes Due 2001 (the "Notes") of Waxman USA Inc., a Delaware corporation (the "Company"), we confirm that: 1. We understand that the Notes have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to (x) the date which is three years after the later of the date of original issue and the last date on which the Company or any affiliate of the Company was the owner of such Notes (or any predecessor thereto) and (y) such later date, if any, as may be required by any subsequent change in applicable law (the "Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to a registration statement which, at the time of such offer, sale or transfer, is effective under the Securities Act, (c) so long as the Notes are eligible for resale pursuant to Rule 144A under the Securities Act, to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act that is purchasing for his own account or for the account of such an institutional "accredited investor," in each case in a minimum principal amount of Notes of $500,000 or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the D-1 disposition of our property or the property of such investor account or accounts be at all times within our or their control and to compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Notes is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Trustee, which shall provide, among other things, that the transferee is an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act. The Company and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Restriction Termination Date of the Notes pursuant to clause (c), (d), (e) or (f) above to require the delivery of opinions of counsel, certifications and/or other information satisfactory to the Company and the Trustee. 2. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) purchasing for our own account or for the account of such an institutional "accredited investor," and we are acquiring the Notes for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment for an indefinite period. 3. We are acquiring the Notes purchased by us for our own account or for one or more accounts as to each of which we exercise sole investment discretion. D-2 4. You are entitled to rely upon this letter and you are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, ------------------------------- (Name of Purchaser) By: ---------------------------- Date: -------------------------- Upon transfer the Notes would be registered in the name of the new beneficial owner as follows: Name: -------------------------------- Address: ----------------------------- Taxpayer ID Number: ------------------ D-3 EX-10.17 7 REGISTRATION RIGHTS AGREEMENT WAXMAN USA INC. $48,750,000 11 1/8% Senior Notes Due 2001 REGISTRATION RIGHTS AGREEMENT April 3, 1996 United States Trust Company of New York 114 West 47th Street New York, New York 10036-1532 Ladies and Gentlemen: Waxman USA Inc., a Delaware corporation (the "Company"), proposes, upon the terms and subject to the conditions set forth in the Offer to Exchange and Consent Solicitation dated February 27, 1996, as supplemented by Supplement No. 1 thereto dated March 27, 1996 (the "Exchange Offer Circular") and the related Consent and Letter of Transmittal to (x) offer to exchange for $48,750,000 aggregate principal amount of Waxman Industries, Inc.'s 13 3/4% Senior Subordinated Notes due 1999 (the "Notes"), $48,750,000 aggregate principal amount of the Company's 11 1/8% Senior Notes Due 2001 (the "Exchange Notes") and (y) solicit holders of Notes to consent to waivers and amendments to certain of the provisions in the indenture governing the Notes (the solicitation of holders of Notes to such exchange and consent being referred to herein as the "Exchange Offer"). The Exchange Notes will be issued pursuant to an indenture (the "Indenture") between the Company and The United States Trust Company of New York, as trustee (the "Trustee"), dated as of April 3, 1996. As an inducement to the holders of the Notes to tender such Notes in the Exchange Offer, the Company agrees with you, as Trustee, for the benefit of the holders of the Exchange Notes (the "Holders"), as follows: 1. Exchange Offer. The Company shall prepare and, not later than 60 days after the date of original issuance of the Exchange Notes (the "Closing Date"), file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the Holders of the Exchange Notes to issue and deliver to such Holders, in exchange for the -2- Exchange Notes, a like principal amount of debt securities of the Company identical in all material respects to the Exchange Notes (the "Registered Exchange Notes"), except for the transfer restrictions relating to the Exchange Notes. The Company shall use its best efforts to cause such Exchange Offer Registration Statement to become effective under the Securities Act within 120 days of the Closing Date and shall use its best efforts to keep the Exchange Offer Registration Statement effective until the closing of the Registered Exchange Offer. Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of the Exchange Notes electing to exchange the Exchange Notes for Registered Exchange Notes (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Registered Exchange Notes in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Registered Exchange Notes) to trade such Registered Exchange Notes from and after their receipt without any limitations or restrictions under the Securities Act and the securities laws of the several states of the United States. In connection with such Registered Exchange Offer, the Company shall take such further action, including, without limitation, appropriate filings under state securities laws (subject to the qualifications contained in Section 3(g)), as may be necessary to realize the foregoing objective. The Company shall include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," which shall contain a summary statement of the positions taken or policies made by the Staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Registered Exchange Notes received by such broker-dealer in the Registered Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribution" section shall also allow the use of the prospectus by all persons subject to the prospectus delivery requirements of the Securities Act, including Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Registered Exchange Notes. The Company shall use its best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the -3- Securities Act for such period of time as such persons must comply with such requirements in order to resell the Registered Exchange Notes; provided that such period shall not exceed 180 days. In connection with the Registered Exchange Offer, the Company shall: (a) mail, or cause to be mailed, to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 days after the date notice thereof is mailed to the Holders (or longer if required by applicable law); (c) utilize the services of a Depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; (d) permit Holders to withdraw tendered Exchange Notes at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; (e) require each Holder of Exchange Notes who wishes to exchange such Exchange Notes for Registered Exchange Notes to represent that it is not an affiliate of the Company and that any Registered Exchange Notes to be received by it will be acquired in the ordinary course of its business and that at the time of the commencement of the Exchange Offer, and as of the date of such representation, it has no arrangement with any person to participate in the distribution (within the meaning of the Act) of the Registered Exchange Notes; and (f) otherwise comply in all respects with all applicable laws. As soon as practicable after the close of the Registered Exchange Offer the Company shall: (i) accept for exchange all the Exchange Notes tendered and not validly withdrawn pursuant to the Registered Exchange Offer; (ii) deliver to, or cause to be delivered to, the Trustee for cancellation all the Exchange Notes so accepted for exchange; and -4- (iii) cause the Trustee to authenticate and deliver promptly to each Holder of the Exchange Notes, Registered Exchange Notes equal in principal amount to the Exchange Notes of such Holder so accepted for exchange. The Registered Exchange Notes may be issued under (i) the Indenture or (ii) an indenture substantially similar to the Indenture, which in either event will provide that the Registered Exchange Notes will not be subject to the transfer restrictions set forth in the Indenture and that the Registered Exchange Notes and the Exchange Notes will vote and consent together on all matters as one class and that none of the Registered Exchange Notes or the Exchange Notes will have the right to vote or consent as a separate class on any matter. 2. Shelf Registration. If, (i) prior to the consummation of the Registered Exchange Offer, the Company or the Holders of at least 25% of the aggregate principal amount of Exchange Notes reasonably determine in good faith that because of any change in law or in then prevailing interpretations of the Staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within 180 days of the date hereof or (iii) a Holder of Exchange Notes is not eligible to participate in the Registered Exchange Offer because of a change in law or in prevailing interpretations of the Staff of the Commission, the Company shall take the following actions: (a) The Company shall as promptly as reasonably practicable file with the Commission and thereafter shall use its best efforts to cause to be declared effective a registration statement (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, a "Registration Statement") on an appropriate form under the Securities Act relating to the offer and sale of the Exchange Notes by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereafter, the "Shelf Registration"). (b) The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the Exchange Notes for a period of three years from the date the Shelf Registration Statement is declared effective by the Commission or such shorter period that will terminate when all the Exchange Notes covered by the Shelf Registration Statement have -5- been sold pursuant thereto; provided that the Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of the Exchange Notes covered thereby not being able to offer and sell the Exchange Notes during that period, unless such action is required by applicable law. Notwithstanding the foregoing, the Company shall not be required to amend or supplement the Shelf Registration Statement, any related prospectus or any document incorporated therein by reference in the event that, and for a period not to exceed, for so long as this Agreement is in effect, an aggregate of 60 days if (i) an event occurs and is continuing as a result of which the Shelf Registration Statement, any related prospectus or any document incorporated therein by reference as then amended or supplemented would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading, and (ii) the Company determines in its good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Company. (c) The Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3. Registration Procedures. To the extent applicable, in connection with any Shelf Registration contemplated by Section 2 hereof and any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply: (a) The Company shall give written notice to the Holders of the Exchange Notes and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer: -6- (i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information (excluding the particulars of any such request); (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation or threatening of any proceedings for that purpose; (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Exchange Notes or Registered Exchange Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (v) of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order to make the statements therein not misleading (which notice shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made); and (vi) when the prospectus contained in any Registration Statement shall not contain the current information required by the Securities Act. (b) The Company shall use its best efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible time. (c) The Company shall furnish to each Holder of the Exchange Notes included within the coverage of the Shelf Registration, without charge, at least one copy of the Registration Statement and any post-effective amendment which was declared effective by the Commission, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those, if any, incorporated by reference). -7- (d) The Company shall deliver to any Holder of the Exchange Notes who so requests, without charge, at least one copy of the Exchange Offer Registration Statement which was declared effective by the Commission and any post-effective amendment which was declared effective by the Commission, including financial statements and schedules, and, if any such Holder requests, all exhibits (including those, if any, incorporated by reference). (e) The Company shall deliver to each Holder of the Exchange Notes included within the coverage of the Shelf Registration which was declared effective by the Commission, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any post-effective amendment which was declared effective by the Commission or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Exchange Notes in connection with the offering and sale of the Exchange Notes covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. (f) The Company shall deliver to any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any post-effective amendment declared effective by the Commission or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any post-effective amendment declared effective by the Commission or supplement thereto by any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Registered Exchange Notes covered by the prospectus, or any post-effective amendment declared effective by the Commission or supplement thereto, included in such Exchange Offer Registration Statement. (g) Prior to any public offering of the Exchange Notes pursuant to a Registration Statement, the Company shall register or qualify or cooperate with the Holders of the Exchange Notes included therein and their counsel in connection with the registration or qualification of the Exchange Notes for offer and sale under the securities or -8- blue sky laws of such jurisdictions as any Holder of the Exchange Notes reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Exchange Notes covered by such Registration Statement; provided that the Company shall not be required to (i) qualify to do business as a foreign corporation or as a broker-dealer in any jurisdiction where it is not then so qualified, (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject or (iii) amend the terms of the Exchange Notes. (h) The Company shall cooperate with the Holders of the Exchange Notes to facilitate the timely preparation and delivery of certificates representing the Exchange Notes to be sold in the Shelf Registration free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Exchange Notes pursuant to the Shelf Registration. (i) Upon the occurrence of any event contemplated by Section 3(a)(v) or (vi) above, subject to the last sentence of Section 2(b), the Company shall promptly prepare a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to Holders of the Exchange Notes or the Registered Exchange Notes, as the case may be, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and will contain the current information required by the Securities Act. (j) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Exchange Notes or the Registered Exchange Notes, as the case may be, and provide the applicable trustee with certificates for the Exchange Notes or the Registered Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company. (k) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its securities holders (or otherwise provide in -9- accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days (plus any extension permitted by Rule 12b-25 under the Exchange Act) after the end of a 12-month period (or 90 days, if such period is a fiscal year (plus any extension permitted by Rule 12b-25 under the Exchange Act)) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. (l) The Company shall cause the Indenture (or an indenture substantially identical to the Indenture in the case of a Registered Exchange Offer) to be qualified under the Trust Indenture Act of 1939, as amended. (m) The Company may require each Holder of the Exchange Notes to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Exchange Notes as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement. If requested by the Company, prior to the filing of any Shelf Registration Statement and the filing of any amendments or supplements thereto, each Holder of the Exchange Notes to be sold pursuant to such Registration Statement, shall deliver a written representation to the Company that neither such Shelf Registration Statement nor the prospectus contained therein contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading but only insofar as any such untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of, or approved in writing by, such Holder specifically for inclusion therein. (n) The Company shall enter into such customary agreements (including if requested an underwriting agreement in customary form) and take all such other action, if any, as Holders of 25% in aggregate principal amount of Registrable Securities shall reasonably request in order to facilitate the disposition of the Registrable Securities held by them pursuant to any Shelf Registration. (o) In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Exchange Notes, any underwriter participating in any disposition pursuant to the Shelf -10- Registration Statement and any attorney, accountant or other agent retained by the Holders of the Exchange Notes or any such underwriter (collectively, the "Inspectors") all relevant financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records") and (ii) cause the Company's officers, directors and employees to supply all relevant information reasonably requested by the Holders of the Exchange Notes or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement; provided that the Company shall not be required to provide any such Records if the Company reasonably determines in good faith that such Records are confidential and so notifies the Inspectors in writing unless, prior to furnishing any such Records, such Holder requesting such Records agrees to enter into a confidentiality agreement in customary form and subject to customary exceptions; and provided further that each such Holder agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of such Records. (p) In the case of the Registered Exchange Offer, the Company shall (i) make reasonably available for inspection by any known Participating Broker-Dealer and any attorney, accountant or other agent retained by such Participating Broker-Dealer (collectively the "Exchange Offer Inspectors") all relevant financial and other records, pertinent corporate documents and properties of the Company (collectively the "Exchange Offer Records") and (ii) cause the Company's officers, directors and employees to supply all relevant information reasonably requested by such Participating Broker-Dealer or any such attorney, accountant or agent in connection with the Exchange Offer Registration Statement; provided that the Company shall not be required to provide any such Exchange Offer Records if the Company reasonably determines in good faith that such Exchange Offers Records are confidential and so notifies the Exchange Offer Inspectors in writing unless, prior to furnishing any such Exchange Offer Records, such Holder requesting such Exchange Offer Records agrees to enter into a confidentiality agreement in customary form and subject to customary exceptions; and provided further that each such Holder agrees that it will, upon learning that disclosure of such Exchange Offer Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of such Exchange Offer Records. -11- (q) In the case of any Shelf Registration, the Company, if requested by Holders of 25% in aggregate principal amount of Registrable Securities, shall cause its outside legal counsel to deliver an opinion relating to the Exchange in customary form to such Holders and any underwriter therefor, cause its officers to execute and deliver all customary documents and certificates requested by any underwriters of the Exchange Notes and cause its independent public accountants to provide to such Holders and any underwriter therefor one or more comfort letters in customary form. (r) Each Holder of Exchange Notes in the case of any Shelf Registration and each Participating Broker Dealer in the case of any Registered Exchange Offer agrees by acquisition of the Exchange Notes that, upon receipt of notice from the Company as set forth in Section 3(a)(v) or (vi) hereof, such Holder and Participating Broker Dealer will forthwith discontinue disposition of the Exchange Notes or the Registered Exchange Notes, as applicable, until such Holder's or Participating Broker Dealer's receipt of the copies of a supplemented or amended prospectus, or until it is advised in writing by the Company that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the prospectus. If so directed by the Company, each such Holder and Participating Broker Dealer will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in its possession, of the prospectus covering such Exchange Notes or Registered Exchange Notes, as applicable, which are the subject of such instruction. 4. Registration Expenses. The Company shall bear all expenses incurred by it in connection with the performance of its obligations under Sections 1 through 3 hereof and, in the event of a Shelf Registration, shall bear or reimburse the Holders of the Exchange Notes for the reasonable fees and disbursements of one firm of counsel designated by the Holders of a majority in principal amount of the Exchange Notes to act as counsel for the Holders of the Exchange Notes in connection therewith. 5. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder of the Exchange Notes and each person, if any, who controls such Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each director, officer, employee or agent of such Holder and each director, officer, employee or agent of each such controlling person (each Holder, such controlling -12- persons and each such director, officer, employee and agent are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Exchange Notes), to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus contained therein or in any amendment or supplement thereto, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending or preparing to defend against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action in respect thereof; provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus contained therein or in any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by or on behalf of or approved in writing by such Holder specifically for inclusion therein and provided further that the Company will not be liable to any Indemnified Party with respect to any such untrue statement or omission made in any preliminary prospectus that is corrected in the final prospectus (or any amendment or supplement thereto) if the person asserting any such loss, claim, damage or liability purchased Exchange Notes from such Indemnified Party but was not sent or given a copy of the prospectus (as amended or supplemented), at or prior to the written confirmation of the sale of such Exchange Notes to such person in any case where such delivery of the prospectus (as amended or supplemented) is required by the Securities Act and the untrue statement or alleged untrue statement of a material fact, or the omission or alleged omission to state a material fact, that is found to be or is alleged to be the basis of liability in such preliminary prospectus was corrected in the prospectus as amended or supplemented and if such Indemnified Party would not have been liable had a copy of such prospectus been so sent or given, unless such failure to deliver the prospectus (as amended or supplemented) was a result of noncompliance by the Company with Section 3(e) of this Agreement. This indemnity agreement will be in addition to any liability which the -13- Company may otherwise have to such Indemnified Party. The Company will not settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not such Indemnified Party or any person who controls such Indemnified Party within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is a party to such claim, action, suit or proceeding) without the prior written consent of such Indemnified Party, unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party. The Company shall also indemnify any underwriters participating in the distribution (as described in such Registration Statement), their officers and directors and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders of the Exchange Notes if requested by such Holders. (b) The Company agrees to indemnify and hold harmless any Participating Broker-Dealer and each person, if any, who controls such Participating Broker-Dealer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each director, officer, employee or agent of such Participating Broker-Dealer and each director, officer, employee or agent of each such controlling person (any Participating Broker-Dealer, such controlling persons and each such director, officer, employee and agent of such Participating Broker-Dealer are referred to collectively as the "Exchange Offer Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of Registered Exchange Notes), to which each Exchange Offer Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Exchange Offer Registration Statement or prospectus contained therein or in any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Exchange Offer Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending or preparing to defend against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action in respect thereof; provided, however, that the Company shall not -14- be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any Exchange Offer Registration Statement or prospectus contained therein or in any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by or on behalf of, or approved in writing by, such Exchange Offer Indemnified Party specifically for inclusion therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have to such Exchange Offer Indemnified Party. The Company will not settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not such Exchange Offer Indemnified Party or any person who controls such Exchange Offer Indemnified Party within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is a party to such claim, action, suit or proceeding) without the prior written consent of such Exchange Offer Indemnified Party, unless such settlement, compromise or consent includes an unconditional release of such Exchange Offer Indemnified Party and each such controlling person from all liability arising out of such claim, action, suit or proceeding. (c) Each Holder of the Exchange Notes severally and not jointly, will indemnify and hold harmless the Company, each director and officer of the Company and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such director, officer or controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Shelf Registration Statement or prospectus contained therein or in any amendment or supplement thereto or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of, or approved in writing by, such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in -15- connection with investigating or defending or preparing to defend against or appearing as a third-party witness in connection with any loss, claim, damage, liability or action in respect thereof. Each Holder of the Exchange Notes will not settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not the Company, each director and officer of the Company or any person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is a party to such claim, action, suit or proceeding) without the prior written consent of the Company, unless such settlement, compromise or consent includes an unconditional release of the Company and each director, officer and such controlling person from all liability arising out of such claim, action, suit or proceeding. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its directors, officers or controlling persons. (d) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof, enclosing a copy of all papers served on such indemnified party with respect to such claim; but the omission so to notify the indemnifying party (i) will not relieve the indemnifying party from any liability under paragraph (a), (b) or (c) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights, whether substantive or procedural, or defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a), (b) or (c) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it elects by delivery of notice to the indemnified party promptly after receiving notice of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be one or more legal defenses available to it and/or other indemnified parties which are different from or additional to those -16- available to the indemnifying party, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action, the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable out of pocket costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances), (ii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party or (iii) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the action. (e) In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 5 is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, expenses or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Exchange Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates -17- to information supplied by the Company on the one hand or such Holder or such other indemnified person, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. The Company and each indemnified party agrees that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (e). Notwithstanding any other provision of this Section 5(e), the Holders of the Exchange Notes shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Exchange Notes pursuant to a Shelf Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay in respect of the same or a similar claim, and no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (e), each director, officer, employee and agent of any indemnified party and each person, if any, who controls such indemnified party within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such indemnified party and each director and officer of the Company, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Company. (f) The agreements contained in this Section 5 and 7 shall survive the sale of the Exchange Notes pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 6. Liquidated Damages. (a) The Company agrees that the Holders of Registrable Securities will suffer damages if the Company fails to fulfill its obligations under Sections 1 and 2 and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, if (i) the Exchange Offer Registration Statement has not been filed on or prior to the 60th calendar day following the Closing Date, (ii) the Exchange Offer Registration Statement is not declared effective on or prior to the 120th calendar day following the Closing Date, (iii) the Registered Exchange Offer is not consummated or a Shelf Registration Statement is not -18- declared effective on or prior to the 180th calendar day following the Closing Date or (iv) the Commission shall have issued a stop order suspending the effectiveness of the Exchange Offer Registration Statement or Shelf Registration Statement, at a time when such Exchange Offer Registration Statement or Shelf Registration Statement, as the case may be, is required to be kept effective by the Company pursuant to the provisions of this Agreement or at any such time the prospectus contained in any such Exchange Offer Registration Statement or Shelf Registration Statement, as amended or supplemented, shall (x) not contain current information required by the Securities Act and the rules and regulations promulgated thereunder or (y) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (other than as permitted by the last sentence of Section 2(b)), then the Company agrees to pay, or cause to be paid, in addition to amounts otherwise due under the Indenture and the Exchange Notes, as liquidated damages and not as a penalty, to each Holder of Registrable Securities, an amount equal to $0.05 per week per $1,000 principal amount of Registrable Securities held by such Holder for each week during the 90-day period beginning on such 60th calendar day in the case of clause (i) above, such 120th calendar day in the case of clause (ii) above, such 180th calendar day in the case of clause (iii) above and the date of the order suspending effectiveness or the date on which the prospectus shall not contain such current information or shall contain any such untrue statement or omit to state any such material fact in the case of clause (iv) above. Such liquidated damages shall be increased by $0.05 per week per $1,000 principal amount of Registrable Securities at the beginning of each subsequent 90-day period up to a maximum aggregate amount of $0.20 per week per $1,000 principal amount of Registrable Securities. Upon (w) the filing of the Exchange Offer Registration Statement in the case of clause (i) above, (x) the effectiveness of the Exchange Offer Registration Statement in the case of clause (ii) above, (y) the consummation of the Registered Exchange Offer or the effectiveness of a Shelf Registration Statement in the case of clause (iii) above and (z) the Exchange Offer Registration Statement or Shelf Registration Statement, as the case may be, not being subject to an order suspending the effectiveness thereof and the prospectus contained in any such Exchange Offer Registration Statement or Shelf Registration Statement, as amended or supplemented, containing the current information required by the Securities Act and the rules and regulations promulgated thereunder and not containing any untrue statement of a material fact or omitting to state any material fact required to be stated therein or necessary to make the statements therein, in light of the -19- circumstances under which they were made, not misleading, in the case of clause (iv) above, such liquidated damages will cease to accrue. (b) The Company shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which liquidated damages are required to be paid (an "Event Date"). The Company shall pay the liquidated damages due on the Registrable Securities by depositing with the Trustee, in trust, for the benefit of the Holders thereof, on or before the applicable liquidated damages payment date specified below, immediately available funds in sums sufficient to pay the liquidated damages then due. At such time as the foregoing funds are deposited with the Trustee, the Company shall also deposit with the Trustee an amount sufficient to pay any fees and expenses of the Trustee related to the distribution of such liquidated damages. The liquidated damages amount due shall be payable on each March 1 and September 1 (the "liquidated damages payment dates") to Holders of record of Registrable Securities on the February 15 and August 15 next preceding such liquidated damages payment dates. Each obligation to pay liquidated damages shall be deemed to accrue on the applicable Event Date. The Company and the Holders of the Exchange Notes, by their acquisition of the Exchange Notes, agree that the liquidated damages provided for in this Section 6 constitute a reasonable estimate of the damages that may be incurred by Holders of Registrable Securities by reason of the failure of the Company to satisfy its obligations in the Agreement. (c) If the Company effects the Registered Exchange Offer, the Company will be entitled to close the Registered Exchange Offer provided that the Company has accepted all the Exchange Notes theretofore validly tendered in accordance with the terms of the Registered Exchange Offer. Exchange Notes not tendered in the Registered Exchange Offer shall accrete interest at the same rates in effect at the time of issuance of the Exchange Notes. As used in this Agreement, the following capitalized terms shall have the meanings indicated below: "Registrable Securities" means the Exchange Notes; provided, however, that any Exchange Note shall cease to be a Registrable Security when it is no longer a Transfer Restricted Security. "Transfer Restricted Securities" means the Exchange Notes upon original issuance thereof, and at all times subsequent thereto, until, in the case of any such Exchange Notes, -20- the occurrence of any of the following events: (i) a Registration Statement with respect to such Exchange Notes shall have been declared effective under the Securities Act and such Exchange Notes shall have been disposed of by the Holder thereof pursuant to such Registration Statement; (ii) such Exchange Notes are transferred to any person pursuant to Rule 144 (or any successor provisions) promulgated under the Securities Act; or (iii) such Exchange Notes shall have ceased to be outstanding. 7. Trustee. (a) The Trustee shall have no responsibility as to the genuineness of the signatures on this Agreement, nor as to the legal capacity or identity of the parties to this Agreement, and the Trustee shall be justified in every act, omission or forbearance in reliance upon this Agreement so long as and to the extent that it shall act or have acted in good faith. (b) All of the terms and conditions in connection with the Trustee's duties and responsibilities with respect to this Agreement, and the rights of the undersigned parties, are contained in this Agreement. With respect to its duties hereunder, the Trustee is not required to be familiar with the provisions of any other instrument or agreement and shall not be charged with any responsibility or liability in connection with the observance or non-observance, by any person, of the provisions of any other such instrument or agreement. (c) The Trustee shall not be responsible for the determination of any facts or conditions on which the parties may give notice, but the Trustee may rely in good faith on the notice received from the parties as to the existence of such facts or conditions. (d) The Trustee may rely and shall be protected in acting upon any paper or other document which may be submitted to it in connection with its duties under this Agreement and which is believed in good faith by the Trustee to be genuine and to have been signed or presented by the proper party or parties, and the Trustee shall have no liability or responsibility with respect to the form, execution or validity thereof. (e) The Trustee may act or refrain from acting in respect of any matter referred to in this Agreement or in additional instructions received in the performance of its duties in reliance in good faith upon the advice of counsel which may be selected by it, and shall be fully protected in so acting or refraining from acting in good faith upon the advice of such counsel. -21- (f) The Trustee may obey and comply with any order or process of a court (whether or not such court shall have jurisdiction) commanding it to do or to refrain from some act in relation to the subject matter of this Agreement. It may rely and continue to rely conclusively upon such orders or process, notwithstanding that it may be found subsequently to be void or voidable, until one of the officers of the Trustee, shall have actual knowledge that such order or process shall have been modified, annulled, set aside, vacated or quashed. (g) The Trustee shall have a lien, which shall be paramount and prior in right of all other persons, upon all money and other property which shall have been received by it under this Agreement, to secure the payment to it of fees and expenses hereunder due to the Trustee. The Trustee shall not be required without its consent to relinquish, deliver or pay over any instrument,money or other property deposited with it pursuant to this Agreement unless and until it shall have paid and reimbursed its fees and expenses. (h) The Company agrees to reimburse the Trustee for any and all reasonable expenses which it may have at any time incurred in connection with this Agreement, and shall indemnify and hold harmless the Trustee and each person, if any, who controls the Trustee within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each director, officer, employee or agent of the Trustee and of each such controlling persons from any losses, damages, claims, liabilities, judgments, attorney's fees, court costs and all other expenses of every kind and nature which may at any time be incurred by reason of the Trustee's acceptance of, and its performance under, this Agreement. 8. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of Registrable Securities. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, telex, telecopy, or air courier which guarantees overnight delivery: (1) if to a Holder of the Exchange Notes, at the address of such Holder maintained by the Trustee. -22- (2) if to the Trustee, at its address as follows: United States Trust Company of New York 114 West 47th Street New York, New York 10036-1532 Attention: Corporate Trust Department with a copy to: Olshan Grundman Frome & Rosenzweig LLP 505 Park Avenue, New York, New York 10022 Attention: Aaron R. Cahn, Esq. (3) if to the Company, at its address as follows: Waxman USA Inc. 24460 Aurora Road Bedford Heights, Ohio 44146 Attention: Corporate Secretary with a copy to: Shereff, Friedman, Hoffman & Goodman, LLP 919 Third Avenue New York, New York 10022-9998 Attention: Scott M. Zimmerman, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged by recipient's telecopy operator, if telecopied; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (c) Successors and Assigns. This Agreement shall be binding upon the Company and its respective successors and assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. -23- (e) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. (g) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (h) Third Party Beneficiaries. Holders of the Exchange Notes and Registered Exchange Notes are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Holders. -24- If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the parties hereto in accordance with its terms. Very truly yours, WAXMAN USA INC. By: /s/ Michael Vantusko --------------------------------- Name: Michael Vantusko Title: Vice President - Finance Confirmed and accepted as of the date first above written: By: UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: /S/ JAMES E. LOGAN ------------------------------ Name: JAMES E. LOGAN Title: VICE PRESIDENT EX-23.1 8 CONSENT OF ARTHUR ANDERSEN LLP 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). Arthur Andersen LLP Cleveland, Ohio, April 12, 1996. -----END PRIVACY-ENHANCED MESSAGE-----