Axia Inc – ‘S-4/A’ on 10/13/98

As of:  Tuesday, 10/13/98   ·   Accession #:  899243-98-1867   ·   File #:  333-64555

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4/A       Amendment #1 to Form S-4                             185    994K 
 2: EX-5        Notes Opinion of Bracewell & Patterson LLP             2     12K 
 3: EX-8        Tax Opinion of Bracewell & Patterson LLP               2      8K 

S-4/A   —   Amendment #1 to Form S-4
Document Table of Contents

S-4/A
1st Page of 185
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 13, 1998      

                                            REGISTRATION NO. 333-64555

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 1     

TO      
FORM S-4

REGISTRATION STATEMENT
UNDER 
THE SECURITIES ACT OF 1933

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

AXIA INCORPORATED 
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

3496
3535
DELAWARE                         3559               13-3205251        
(STATE OR OTHER         (PRIMARY STANDARD INDUSTRIAL(I.R.S. EMPLOYER        
JURISDICTION OF         CLASSIFICATION CODE NUMBER)                         
                                            IDENTIFICATION NUMBER)
INCORPORATION OR                                                              
ORGANIZATION)                                                               

                                LYLE J. FEYE
100 WEST 22ND STREET, SUITE 134      100 WEST 22ND STREET, SUITE 134      
LOMBARD, ILLINOIS 60148              LOMBARD, ILLINOIS 60148      
(630) 629-3360                        (630) 629-3360      
(ADDRESS, INCLUDING ZIP CODE, AND                                           
TELEPHONE                                           
                               (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
                                NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
NUMBER, INCLUDING AREA CODE, OF       AGENT FOR SERVICE OF PROCESS)       
REGISTRANT'S                                            
PRINCIPAL EXECUTIVE OFFICES)                                            

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

COPY TO:

GARY W. ORLOFF
BRACEWELL & PATTERSON, L.L.P. 
SOUTH TOWER PENNZOIL PLACE, SUITE 2900
711 LOUISIANA STREET
HOUSTON, TEXAS 77002-2781 
PHONE: (713) 221-1306 
FAX: (713) 221-1212 

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE  
PUBLIC: As soon as practicable after this Registration Statement becomes        
effective.                                                                      

If the securities being registered on this Form are to be offered in        
connection with the formation of a holding company or there is compliance with  
General Instruction G, check the following box. [_]                             

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

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

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

S-4/A
2nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 2nd
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 SHOULD BE   +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF  +
+ANY SUCH STATE.                                                               +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED OCTOBER 13, 1998     

AXIA INCORPORATED 

OFFER TO EXCHANGE ITS 
10 3/4% EXCHANGE SENIOR SUBORDINATED NOTES DUE 2008 
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT 
FOR ANY AND ALL OUTSTANDING 
10 3/4% SENIOR SUBORDINATED NOTES DUE 2008

THE  EXCHANGE OFFER WILL  EXPIRE AT 5:00 P.M.,  NEW                           
YORK  CITY  TIME  ON NOVEMBER  16,  1998,  UNLESS                           
EXTENDED  BY  AXIA  INCORPORATED  IN  ITS  SOLE                           
DISCRETION (THE  "EXPIRATION DATE"). ALTHOUGH                           
AXIA  INCORPORATED HAS  NO PRESENT  INTENTION                           
TO CONDUCT  ITS EXCHANGE OFFER  LONGER THAN                           
30 DAYS, IT RESERVES  THE RIGHT TO EXTEND                           
THE EXCHANGE OFFER.                                               

AXIA Incorporated, a Delaware corporation (the "Company" or "AXIA"), hereby 
offers, upon the terms and subject to the conditions set forth in the           
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the   
"Letter of Transmittal" and, together with the Prospectus, the "Exchange        
Offer"), to exchange $1,000 principal amount of its 10 3/4% Exchange Senior     
Subordinated Notes due 2008 (the "Exchange Notes"), which have been registered  
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant   
to a Registration Statement of which this Prospectus is a part, for each $1,000 
principal amount of its outstanding 10 3/4% Senior Subordinated Notes due 2008  
(the "Original Notes"), of which an aggregate of $100,000,000 principal amount  
is outstanding.                                                                 

The form and terms of the Exchange Notes are the same as the form and terms 
of the Original Notes except that (i) the Exchange Notes will have been         
registered under the Securities Act and, therefore, will not bear legends       
restricting their transfer pursuant to the Securities Act, and (ii) holders of  
the Exchange Notes generally will not be entitled to the rights of holders of   
the Original Notes under the Registration Rights Agreement (as defined under    
"Prospectus Summary--The Exchange Offer") following the consummation of the     
Exchange Offer. See "The Exchange Offer--Registration Rights," "--Consequences  
of Failure to Exchange" and "--Resale of the Exchange Notes; Plan of            
Distribution." The Exchange Notes will evidence the same debt as the Original   
Notes (which they replace) and will be issued under, and be entitled to the     
benefits of the indenture governing the Exchange Notes.                         

The Company will accept for exchange any and all Original Notes validly     
tendered and not withdrawn prior to the Expiration Date. Tenders of Original    
Notes may be withdrawn at any time prior to the Expiration Date. The Exchange   
Offer is subject to certain customary conditions. See "The Exchange Offer." The 
Original Notes may be tendered only in integral multiples of $1,000 principal   
amount.                                                                         

                                  (Prospectus cover continued on following page)

----------- 
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS 
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN          
INVESTMENT IN THE EXCHANGE NOTES.                                               

----------- 

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

----------- 

The date of this Prospectus is October   , 1998.      

S-4/A
3rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 3rd
The Original Notes and the Exchange Notes are referred to herein            
collectively as the "Notes."                                                    

Interest on the Notes is payable semiannually on January 15 and July 15 of  
each year, commencing January 15, 1999. Except as described below, the Notes    
are not redeemable at the option of the Company prior to July 15, 2003.         
Thereafter, the Notes will be redeemable, in whole or in part, at the option    
of the Company, at the redemption prices set forth herein, together with        
accrued and unpaid interest, if any, to the date of redemption. Up to 35% of    
the original principal amount of the Notes will be redeemable at any time and   
from time to time prior to July 15, 2001, at the option of the Company, with    
the proceeds of any Public Equity Offerings (as defined under "Description of   
the Notes--Certain Definitions") following which there is a Public Market (as   
defined under "Description of the Notes--Certain Definitions") at a redemption  
price equal to 110.75% of the principal amount thereof, together with accrued   
and unpaid interest, if any, to the date of redemption; provided, however,      
that at least $65 million aggregate principal amount of the Notes must remain   
outstanding after each such redemption. Upon a Change in Control (as defined    
under "Description of the Notes--Change of Control"), each holder of Notes may  
require the Company to purchase all or a portion of such holder's Notes at      
101% of the principal amount thereof, together with accrued and unpaid          
interest, if any, to the date of purchase. The Notes are unsecured senior       
subordinated obligations of the Company and will rank subordinate in right of   
payment to all existing and future Senior Indebtedness (as defined under        
"Description of the Notes--Certain Definitions") of the Company. As of June     
30, 1998, on a pro forma basis after giving effect to the issuance of the       
Notes and the application of the proceeds therefrom, the Company would have     
had approximately $39.7 million of Senior Indebtedness outstanding. For a more  
complete description of the Notes, see "Description of the Notes."              

Based on an interpretation by the staff of the Securities and Exchange      
Commission (the "Commission" or the "SEC") set forth in no-action letters       
issued to third parties, the Company believes, except as otherwise described    
herein, the Exchange Notes issued pursuant to the Exchange Offer in exchange    
for the Original Notes may be offered for resale, resold and otherwise          
transferred by any holder thereof (other than any such holder which is an       
"affiliate" of the Company within the meaning of Rule 405 of the Securities     
Act) without compliance with the registration and prospectus delivery           
provisions of the Securities Act, provided that such Exchange Notes are         
acquired in the ordinary course of such holder's business and that such holder  
does not intend to participate and there is no arrangement or understanding     
with any person to participate, in the distribution of such Exchange Notes.     
Each broker-dealer that receives Exchange Notes for its own account pursuant    
to the Exchange Offer must acknowledge that it will deliver a prospectus in     
connection with any resale of such Exchange Notes. The Letter of Transmittal    
states that by so acknowledging and by delivering a prospectus, a broker-       
dealer will not be deemed to admit that it is an "underwriter" within the       
meaning of the Securities Act. This Prospectus, as it may be amended or         
supplemented from to time, may be used by a broker-dealer in connection with    
resales of Exchange Notes received in exchange for Notes where such Notes were  
acquired by such broker-dealer as a result of market-making activities or       
other trading activities. The Issuer has agreed that, for a period of 180 days  
after the Expiration Date, it will make this Prospectus available to any        
broker-dealer for use in connection with any such resale. See "Exchange         
Offer--Resale of the Exchange Notes; Plan of Distribution."                     

Prior to this offering, there has been no public market for the Notes. The  
Notes are not, and are not expected to be, listed on any securities exchange    
or authorized for trading on NASDAQ. The Company does not expect that an        
active market for the Notes will develop. The Original Notes have been          
eligible for trading in the Private Offerings, Resale and Trading through       
Automated Linkages (PORTAL) Market of The Nasdaq Stock Market, Inc., but the    
Exchange Notes will not be so eligible. To the extent that an active market     
for Notes does develop, the market value thereof will depend on many factors,   
including among other things, prevailing interest rates, general economic       
conditions, the Company's financial condition and results of operations, the    
volatility of the market for non-investment grade debt and other factors. Such  
conditions might cause the Notes, to the extent that they are traded, to trade  
at a discount. See "Risk Factors--Lack of Public Market for the Notes."         

2 

S-4/A
4th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 4th
AVAILABLE INFORMATION 

The Company has filed with the Commission a Registration Statement (which   
term shall encompass any and all amendments thereto) on Form S-4 (the           
"Registration Statement") under the Securities Act, with respect to, among      
other things, the Exchange Notes offered hereby. This Prospectus, which is      
part of the Registration Statement, does not contain all the information set    
forth in the Registration Statement and the exhibits and schedules thereto,     
certain items of which are omitted in accordance with the rules and             
regulations of the Commission. Statements made in this Prospectus as to the     
contents of any contract, agreement or other document referred to are not       
necessarily complete. With respect to each such contract, agreement or other    
document filed as an exhibit to the Registration Statement, reference is        
hereby made to the exhibit for a more complete description of the matter        
involved, and each such statement shall be deemed qualified in its entirety by  
such reference. For further information with respect to the Company and the     
Notes, reference is hereby made to the Registration Statement and such          
exhibits and schedules filed as a part thereof, which may be inspected,         
without charge, at the Public Reference Section of the Commission at Room       
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at   
the regional offices of the Commission located at 7 World Trade Center, Suite   
1300, New York, New York 10048 and at 500 West Madison Street, Suite 1400,      
Chicago, Illinois 60661. Copies of all or any portion of the Registration       
Statement may be obtained from the Public Reference Section of the Commission,  
upon payment of prescribed fees. The Commission maintains a Web site that       
contains reports and information regarding registrants that file                
electronically with the Commission at Web site (http://www.sec.gov).            

Pursuant to the Indenture (as defined under "Description of the Notes"), so 
long as any of the Notes are outstanding, whether or not the Company is         
subject to the reporting requirements of Section 13(a) or 15(d) of the          
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company   
is obligated to send to the Commission the annual reports, quarterly reports    
and other documents that the Company would have been required to file with the  
Commission pursuant to Section 13(a) or 15(d) if the Company were subject to    
such reporting requirements. The Company is also obligated to provide to all    
holders of the Notes, and file with the Trustee (as defined under "Description  
of the Notes"), copies of such annual reports, quarterly reports and other      
documents and, if filing such documents by the Company with the Commission is   
not permitted under the Exchange Act, promptly upon written request supply      
copies of such documents to any prospective purchaser of the Notes and to       
securities analysts and broker-dealers upon their request.                      

3 

S-4/A
5th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 5th
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and historical and pro forma    
financial statements, including the notes thereto, appearing elsewhere in this  
Prospectus. Unless otherwise indicated, industry data contained herein, other   
than with respect to the Company, is derived from publicly available industry   
trade journals and other publicly available industry sources, which the Company 
has not independently verified, but which the Company believes to be reliable.  

THE COMPANY 

GENERAL                                                                         

The Company is a leading designer, manufacturer, marketer and distributor of
a diverse range of products in several niche markets including productivity     
enhancing construction tools, formed wire products, industrial bag closing      
equipment and flexible conveyors. Management believes the Company possesses     
strong market leadership positions in its primary markets. The Company believes 
it is: (i) the largest U.S. supplier and distributor of automatic taping and    
finishing ("ATF") tools; (ii) the largest U.S. independent manufacturer of      
dishwasher racks; (iii) a leading worldwide manufacturer and marketer of bag    
closing products and (iv) a leading manufacturer and marketer of flexible       
conveyors and storage racks. The Company believes that its market leadership    
positions, brand name recognition, established national and international       
distribution networks, strong customer base and manufacturing expertise provide 
significant opportunities to grow sales of new and existing products within     
established markets, as well as expand into new markets. The Company also       
believes that its diverse base of products and markets reduces exposure to any  
particular industry, product market or geographic region. The Company operates  
through three business units: Ames, Nestaway and Fischbein. For the twelve      
months ended June 30, 1998, the Company had net revenues and pro forma EBITDA   
of $109.3 million and $26.6 million, respectively.                              

 Ames. Ames is the leading designer, manufacturer, marketer and distributor of
ATF tools, which are rented or sold to interior finishing contractors to finish 
drywall joints prior to painting, wallpapering or other forms of final          
treatment. ATF tools, invented by Ames in 1939, enable interior finishing       
contractors to finish drywall joints three to four times faster than less       
productive hand finishing methods. The Company is the leader in ATF tool        
rentals and sales in the markets in which it serves. The primary business of    
Ames is the rental and service of more than 135,000 ATF tools through its       
extensive distribution network throughout the U.S. and Canada. Ames also sells  
ATF tools under the TapeTech(R) and TapeMaster(R) brand names through an        
established independent network of dealers in the U.S. and Canada. In addition, 
Ames sells a variety of other drywall tools, finishing accessories and supplies 
through its network of Company-managed stores. The Company believes it has      
significant opportunities to increase Ames' revenues by expanding the use of    
ATF tools in the fast growing factory-built housing market, which is            
increasingly utilizing drywall rather than other materials. The Company also    
believes it has a significant opportunity to expand the use of ATF tools by     
converting interior finishing contractors from traditional hand finishing       
methods, particularly in the eastern and midwestern U.S. where the use of ATF   
tools is less prevalent than in the western U.S. For the twelve months ended    
June 30, 1998, Ames had net revenues of $44.7 million.                          

Nestaway. Nestaway is a leading manufacturer of formed wire products which  
are used for a variety of commercial and consumer product applications.         
Nestaway is North America's largest independent manufacturer of coated wire     
dishwasher racks and components which are sold to all the                       

4 

S-4/A
6th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 6th
major U.S. dishwasher appliance manufacturers ("OEMs"). Approximately 75% of    
dishwashers sold in the U.S. are replacements. In 1996, Nestaway produced an    
estimated 68% of all independently manufactured dishwasher racks and an         
estimated 17% of all dishwasher racks produced in the U.S. Nestaway's primary   
OEM customers include Maytag, EBS-Bosch and Whirlpool/KitchenAid. Nestaway has  
had relationships with all major OEMs for an average of approximately 19 years  
and approximately 90% of Nestaway's 1997 revenues were generated pursuant to    
contracts with terms extending through 2002. Nestaway also manufactures, on a   
contract basis, other close tolerance, welded, non-coated or coated formed wire 
products such as dish drainers, sink protectors, shower caddies, dryer racks,   
golf cart baskets, bucket bails, medical baskets and small gauge axles. In      
1994, Nestaway entered into an agreement with a major consumer products company 
it has served for over 50 years to manufacture 100% of this customer's coated   
formed wire dish drainers and sink protectors. In 1997, Nestaway entered into   
an agreement with the same customer to manufacture 100% of its coated wire      
shower caddies. The Company believes it has significant opportunities to        
increase Nestaway's revenues through: (i) increasing sales to existing          
customers; (ii) expanding its product offering and customer base by developing  
new formed wire business; (iii) expanding production in international markets   
and (iv) pursuing strategic acquisitions. For the twelve months ended June 30,  
1998, Nestaway had net revenues of $37.4 million.                               

Fischbein. Fischbein is a leading worldwide manufacturer and marketer of    
industrial bag closing and handling equipment and systems and a leading         
manufacturer and marketer of flexible conveyors and storage racks. Bag closing  
and handling systems products include: (i) portable and stationary industrial   
sewing heads and sewing systems for paper, textile and woven polypropylene      
bags; (ii) industrial heat sealing and bag handling systems for paper and       
plastic bags; (iii) consumables, including thread and tape and (iv) service     
parts. Service parts, which provide a recurring base of revenue, accounted for  
approximately 20% of Fischbein's sales in 1997. Fischbein's bag closing         
products are used across a broad range of industries for packaging chemicals,   
minerals, agricultural and food products. In addition to bag closing products,  
Fischbein manufactures extendible, flexible, gravity and motorized conveyors    
and portable, nestable and stackable warehouse storage racks. Fischbein's       
flexible conveyors are used by retailers for loading and unloading tractor      
trailers at store sites and distribution centers. Storage racks are designed    
for factory and warehouse storage where flexibility in racking is desired and   
are sold to customers in various industries, including retail, distribution,    
food, chemical, pharmaceutical and textile. The Company believes it has         
significant opportunities to increase Fischbein's revenues by expanding the     
product offerings that can be sold through its extensive distribution network   
and by making strategic acquisitions. For the twelve months ended June 30,      
1998, Fischbein had net revenues of $27.2 million.                              

COMPETITIVE STRENGTHS                                                           

Established Leadership Positions in Niche Markets. The Company believes that
its product quality, customer-driven product development and high levels of     
customer service have allowed it to achieve strong market positions and brand   
name recognition. Management believes the Company possesses strong market       
leadership positions in its primary markets. The Company believes it is: (i)    
the largest U.S. supplier and distributor of ATF tools; (ii) the largest U.S.   
independent manufacturer of dishwasher racks; (iii) a leading worldwide         
manufacturer and marketer of bag closing products and (iv) a leading            
manufacturer and marketer of flexible conveyors and storage racks. Ames, which  
invented the ATF tool in 1939, continues to be the leader in ATF tool rentals   
and sales. Nestaway has been a leading independent supplier of dishwasher racks 
to the U.S. dishwasher industry for over 50 years. Fischbein, which first       
introduced a portable bag closer in 1943, is consistently recognized as a       
leading global supplier of bag closing equipment. The Company believes its      
leadership positions will                                                       

5 

S-4/A
7th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 7th
allow it to: (i) broaden its product offerings to existing customers; (ii)      
expand its customer base with both new and existing products and (iii)          
diversify its geographic coverage to secure new customers and to meet the needs 
of existing customers in additional markets.                                    

Diverse Revenue Base. The Company's three business units provide revenue and
cash flow from a diverse base of products, customers and geographic regions.    
The Company's products are sold through multiple distribution channels to       
customers in over 100 countries in a wide variety of end-use markets. In 1997,  
international sales accounted for approximately 15% of the Company's revenues.  
This diversity of products and distribution channels provides the Company with  
a broad base from which to increase sales and expand customer relationships and 
reduces exposure to any particular industry, product market or geographic       
region.                                                                         

Manufacturing Expertise. The Company has a proven track record in product   
manufacturing and development in each of its business units. The Company        
utilizes this expertise in partnership with its customers both to improve       
product performance and to reduce manufacturing costs. Ames invented ATF tools  
and remains the leader in their design and development, and continues to make   
its products easier to use, more productive and less costly to refurbish.       
Nestaway frequently works directly with its OEM customers to design and         
manufacture new dishwasher racks and other formed wire products in a cost-      
effective manner. In addition, Nestaway develops and manufactures custom        
designed tooling and other equipment used in high volume precision wire         
forming, welding and coating, providing Nestaway with the ability to            
manufacture quickly and efficiently both new and redesigned products. Fischbein 
has successfully developed both new products and new features for existing      
products that enhance customer productivity and reduce Fischbein's              
manufacturing costs. The Company believes its manufacturing expertise enables   
it to strengthen customer loyalty, improve the value of its products and reduce 
manufacturing costs.                                                            

Established Distribution Networks. The Company has established broad        
distribution networks serving both domestic and international markets. Ames'    
rental ATF tools are distributed in the U.S. and Canada through over 125        
separate and distinct distribution locations and Ames' sold ATF tools are       
distributed in the U.S. and Canada through a network of over 250 dealers and    
distributors. Fischbein's national and international distribution network       
extends to over 100 countries through international and domestic distributors,  
dealers and packaging machinery manufacturers. Management believes that its     
distribution network provides it with an established base from which to         
introduce new products, expand sales of existing product lines and achieve      
operating efficiencies.                                                         

Proven and Committed Management Team. The Company has assembled a strong and
experienced management team at each of its business units. The Company's senior 
operating managers have an average of over 14 years of experience in their      
respective industries. Management has successfully enhanced operating margins   
through the implementation of various production improvements and cost cutting  
initiatives and as a result, EBITDA margins improved from 16.0% in 1993 to      
23.0% in 1997.                                                                  

STRATEGY                                                                        

The Company's strategy is to increase revenues and cash flow in each of its 
business units through both internal growth and by pursuing selective           
acquisitions. Management believes the Company's market leadership positions,    
brand name recognition, strong customer base, established distribution networks 
and manufacturing expertise provide significant growth opportunities for the    
Company.                                                                        

 Ames' primary business strategy is to pursue the expansion of ATF tool use in
the factory-built housing market and to continue to convert interior finishing  
contractors utilizing traditional hand                                          

6 

S-4/A
8th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 8th
finishing drywall methods to the use of ATF tools. With regard to the continued 
conversion from hand finishing to ATF tools, management believes there is a     
significant opportunity to increase utilization rates in the eastern and        
midwestern U.S. Ames has successfully increased its rental revenues in the      
eastern and midwestern U.S. at a 15% compound annual growth rate since 1993 and 
expects to continue to grow rental revenues in this market. Ames also plans to  
continue to expand its presence in the fast growing factory-built housing       
market which in 1996, accounted for 32% of all new single family homes and has  
grown at a compound annual growth rate of 16% since 1991. Ames has established  
relationships with major factory-built housing companies, including Fleetwood   
Enterprises, Champion Enterprises and Oakwood Homes, and management believes    
that the productivity enhancements associated with ATF tools provide Ames with  
a significant opportunity to increase revenues in this market where hand        
finishing is predominant.                                                       

Nestaway's primary business strategy is to increase sales to existing       
dishwasher rack customers and to expand its product offerings of other formed   
wire products. Management intends to continue to increase sales to existing     
customers by supplying its customers as they expand production in domestic and  
international markets and by further increasing its sales to OEMs that have in- 
house manufacturing operations. Nestaway will continue to pursue new customer   
relationships, and was recently awarded a new contract with EBS-Bosch, a        
leading European manufacturer of high-end dishwashers that has recently         
expanded operations in the U.S. In addition to dishwasher racks, Nestaway       
continues to focus on providing new formed wire products to new and existing    
customers for applications such as sporting goods, home organization, household 
products, computer accessories, air conditioning, utility carts and other       
formed wire products. Revenues from formed wire products other than dishwasher  
racks increased from $4.5 million, or 11% of Nestaway's net revenues, in 1993   
to $11.2 million, or 32% of Nestaway's net revenues, in 1997, a 26% compound    
annual growth rate. Nestaway plans to pursue an acquisition strategy that       
expands its current product offerings by leveraging Nestaway's core competency  
of precision wire forming and coating.                                          

Fischbein's primary business strategy is to expand its bagging product      
offerings through both new product development and by acquiring companies that  
manufacture complementary products in new and existing geographic markets.      
Management believes that the Company has a significant opportunity to increase  
sales of new products by leveraging its extensive national and international    
distribution capabilities and existing customer base. Management also believes  
that Fischbein has an opportunity to utilize its existing distribution network  
to expand sales of its storage and flexible conveyor products in the packaging, 
distribution and delivery industries.                                           

7 

S-4/A
9th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 9th
THE TRANSACTIONS

 By agreement dated June 17, 1998, AXIA Acquisition Corp. ("Acquisition Co."),
a company organized to effect the Acquisition, entered into an Agreement and    
Plan of Merger (the "Merger Agreement") with the Parent to effect the           
Acquisition for a purchase price of $155,250,000 (including the repayment of    
indebtedness), subject to certain post-closing adjustments. Upon completion of  
the Transactions: (i) the Parent and the Company became direct and indirect     
subsidiaries of AXIA Group (the parent company of Acquisition Co.) and (ii) the 
Company became the primary obligor on the Original Notes and borrowings made    
under the bank credit agreement (the "Bank Credit Agreement") as described in   
"Description of the Bank Credit Agreement."                                     

 On the Closing Date (as defined), AXIA Group sold $28.0 million of its common
stock ("Common Stock") and contributed the proceeds thereof to Acquisition Co.  
(the "Equity Investment"). Finance Co., an indirect subsidiary of AXIA Group,   
borrowed approximately $39.3 million under the Bank Credit Agreement and        
received approximately $100.0 million in gross proceeds from the Original       
Notes. Such funds were used: (i) to effect the Acquisition pursuant to the      
Merger Agreement; (ii) to fund the ESOP (as defined); (iii) to repay existing   
indebtedness of the Company and (iv) to pay fees and expenses in connection     
with the Transactions. The Offering, the execution of and initial borrowings    
under the Bank Credit Agreement and the Equity Investment are collectively      
referred to herein as the "Financings." The Financings, the Acquisition, the    
establishment of the ESOP, the payment of certain fees and expenses and other   
related transactions are collectively referred to herein as the "Transactions." 
See "The Transactions" and "Management--Employee Stock Ownership Plan."         

8 

S-4/A
10th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 10th
The following table sets forth the sources and uses of funds used to effect 
the Transactions as if the Transactions had occurred on June 30, 1998.          

                                                                [Download Table]

                                                                  AMOUNT        
                                                           ---------------------
                                                           (DOLLARS IN MILLIONS)
                                                                                
SOURCES OF FUNDS:                                                               
  Bank Credit Agreement(/1/)                                                    
    Revolving Credit Facility.............................        $  3.2        
    Acquisition Facility..................................            --        
    Term Loan.............................................          35.0        
    ESOP Term Loan........................................           1.5        
  Original Notes..........................................         100.0        
  Equity Investment.......................................          28.0        
                                                                  ------        
    Total Sources.........................................        $167.7        
                                                                  ======        
USES OF FUNDS:                                                                  
  Equity purchase price...................................        $131.1        
  Retirement of existing debt(/2/)........................          26.6        
  Company ESOP Loan(/3/)..................................           1.5        
  Fees and expenses(/4/)..................................           8.5        
                                                                  ------        
    Total Uses............................................        $167.7        
                                                                  ======        

--------                                                                        
(1) The Company has available borrowings under the Revolving Credit Facility of 
  up to $15 million, subject to borrowing base limitations. The Company also
has available borrowings under the Acquisition Facility of $25 million, 
subject to the terms thereof. See "Description of the Bank Credit       
Agreement."                                                             
(2) Existing notes of the Company due 2001 were discharged on the day following 
the closing of the Transactions.                                        
(3) For a description of the Company ESOP Loan (as defined), see "Management--  
Employee Stock Ownership Plan."                                         
(4) Represents fees and expenses, including: (i) the discount paid to the       
  Initial Purchasers in connection with the Sale of the Original Notes; (ii)
legal, accounting and other professional fees payable in connection with
the Transactions, including fees to The Sterling Group, Inc., and (iii) 
certain other expenses. See "Related Transactions."                     

THE INVESTORS 

The equity portion of the financing for the Acquisition was provided by an  
investor group (the "Investor Group") led by The Sterling Group, Inc.           
("Sterling"). Sterling is a private financial organization engaged in the       
acquisition and ownership of operating businesses. Since its formation in 1982, 
Sterling has completed 35 acquisitions for total consideration of approximately 
$6.3 billion. Sterling promotes employee ownership through the use of employee  
stock ownership plans, direct equity ownership by management and key employees  
as well as stock option plans. See "Related Transactions."                      

9 

S-4/A
11th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 11th
THE EXCHANGE OFFER

Registration Rights                                                             
Agreement..................  To fund a portion of the Acquisition, the Company
                           sold $100 million in aggregate principal amount
                        of Original Notes to qualified institutional
                    buyers as defined in Rule 144A under the
                         Securities Act or to institutional accredited
                          investors within the meaning of Rule 501 under
                         the Securities Act, through Chase Securities,
                           Inc. and NationsBanc Montgomery Securities LLC,
                             as initial purchasers (the "Initial Purchasers").
                          The Company and the Initial Purchasers entered
                    into an Exchange and Registration Rights
                    Agreement dated as of July 22, 1998 (the
                          "Registration Rights Agreement"), which grants
                     the holders of the Original Notes certain
                          exchange and registration rights. The Exchange
                         Offer made hereby is intended to satisfy such
exchange rights.    

The Exchange Offer..........  $1,000 principal amount of Exchange Notes in      
                        exchange for each $1,000 principal amount of
                       Original Notes. As of the date hereof, $100
                     million aggregate principal amount of the
                            Original Notes are outstanding. The Company will
                      issue the Exchange Notes to holders on the
                   earliest practicable date following the
Expiration Date.    

Resales of the Exchange                                                         
Notes......................  Based on an interpretation by the staff of the   
                            Commission set forth in no-action letters issued
                        to third parties, the Company believes that,
                         except as described below, the Exchange Notes
                        issued pursuant to the Exchange Offer may be
                    offered for resale, resold and otherwise
                           transferred by a holder thereof (other than any
                             such holder that is an "affiliate" of the Company
                    within the meaning of Rule 405 under the
                       Securities Act) without compliance with the
                           registration and prospectus delivery provisions
                     of the Securities Act, provided that such
                       Exchange Notes are acquired in the ordinary
                          course of such holder's business and that such
                           holder has no arrangement or understanding with
                            any person to participate in the distribution of
such Exchange Notes.

                           Each broker-dealer that receives Exchange Notes
                          pursuant to the Exchange Offer in exchange for
                           Original Notes that such broker-dealer acquired
                            for its own account as a result of market-making
                         activities or other trading activities (other
                          than Original Notes acquired directly from the
                            Company or its affiliates) must acknowledge that
                           it will deliver a prospectus in connection with
                            any resale of such Exchange Notes. The Letter of
                           Transmittal states that by so acknowledging and
                            by delivering a prospectus, a broker-dealer will
                not be deemed to admit that it is an
                   "underwriter" within the meaning of the
                           Securities Act. If the Company receives certain
                      notices in the Letter of Transmittal, this
                            Prospectus, as it may be amended or supplemented
                         from time to time, may be used for the period
                            described below by a broker-dealer in connection
with                

10

S-4/A
12th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 12th
                          resales of Exchange Notes received in exchange
                             for Original Notes where such Original Notes were
                         acquired by such broker-dealer as a result of
                     market-making activities or other trading
                         activities and not acquired directly from the
                       Company. The Company has agreed that, if it
                     receives certain notices in the Letter of
                           Transmittal, for a period of 180 days after the
                            date on which the Registration Statement becomes
                             effective, it will make this Prospectus available
                           to any such broker-dealer for use in connection
                           with any such resale. The Letter of Transmittal
                            requires broker-dealers tendering Original Notes
                          in the Exchange Offer to indicate whether such
                          broker-dealer acquired such Original Notes for
                        its own account as a result of market-making
                         activities or other trading activities (other
                          than Original Notes acquired directly from the
                        Company or any of its affiliates), and if no
                            broker-dealer indicates that such Original Notes
                           were so acquired, the Company has no obligation
                      under the Registration Rights Agreement to
                          maintain the effectiveness of the Registration
                           Statement past the consummation of the Exchange
                            Offer or to allow the use of this Prospectus for
                          such resales. See "The Exchange Offer--Purpose
                  and Effect of the Exchange Offer"; "--
                     Registration Rights" and "--Resale of the
                  Exchange Notes; Plan of Distribution."

Expiration Date.............  The Exchange Offer expires at 5:00 p.m., New York 
                           City time, on      , 1998, unless such Exchange
                        Offer is extended by the Company in its sole
                          discretion, in which case the term "Expiration
                         Date" means the latest date and time to which
            such Exchange Offer is extended.

Conditions to the Exchange                                                      
Offer......................  The Exchange Offer is subject to certain         
                           conditions, which may be waived by the Company.
                      See "The Exchange Offer--Conditions to the
Exchange Offer."    

Procedures for Tendering                                                        
the Original Notes.........  Each holder of Original Notes wishing to accept  
                           the Exchange Offer must complete, sign and date
                     the accompanying Letter of Transmittal in
                             accordance with the instructions contained herein
                           and therein, and mail or otherwise deliver such
                            Letter of Transmittal together with the Original
                             Notes and any other required documentation to the
                            Exchange Agent (as defined below under "Exchange
                       Agent") at the address set forth herein. By
                         executing the Letter of Transmittal, a holder
                             will make certain representations to the Company.
                             See "The Exchange Offer--Registration Rights" and
                        "--Procedures for Tendering Original Notes."

Special Procedures for                                                          
Beneficial Owners..........  Any beneficial owner whose original Notes are    
                       registered in the name of a broker, dealer,
                           commercial bank, trust company or other nominee
           and who wishes to tender should

11

S-4/A
13th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 13th
                       contact such registered holder promptly and
                             instruct such registered holder to tender on such
                        beneficial owner's behalf. See "The Exchange
                            Offer--Procedures for Tendering Original Notes."

Guaranteed Delivery                                                             
Procedures.................  Holders of Original Notes who wish to tender     
                          their Original Notes when those securities are
                           not immediately available or who cannot deliver
                           their Original Notes, the Letter of Transmittal
                             or any other documents required by such Letter of
                          Transmittal to the Exchange Agent prior to the
                             Expiration Date, must tender their Original Notes
                           according to the guaranteed delivery procedures
                            set forth in "The Exchange Offer--Procedures for
                           Tendering Original Notes--Guaranteed Delivery."

Withdrawal Rights...........  Tenders of Original Notes pursuant to the         
                             Exchange Offer may be withdrawn at any time prior
   to the Expiration Date.

Acceptance of Original                                                          
Notes and Delivery of                                                         
Exchange Notes.............  The Company will accept for exchange any and all 
                            Original Notes that are properly tendered in the
                           Exchange Offer, and not withdrawn, prior to the
                      Expiration Date. The Exchange Notes issued
                            pursuant to the Exchange Offer will be issued on
                       the earliest practicable date following the
                            acceptance for exchange of Original Notes by the
                          Company. See "The Exchange Offer--Terms of the
Exchange Offer."    

Exchange Agent..............  State Street Bank & Trust Company is serving as   
                    exchange agent (the "Exchange Agent") in
               connection with the Exchange Offer.

Federal Income Tax                                                              
Considerations.............  The Company has received an opinion of counsel   
                            advising that the exchange of Original Notes for
                         Exchange Notes pursuant to the Exchange Offer
                         will not be treated as a taxable exchange for
                             federal income tax purposes. See "Certain Federal
       Income Tax Considerations."

12

S-4/A
14th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 14th
THE NOTES 

Maturity Date...............  July 15, 2008.                                    

Interest Payment Dates......  January 15 and July 15 of each year, commencing   
January 15, 1999.   

Optional Redemption.........  The Notes may be redeemed at the option of the    
                           Company, in whole or in part, at any time on or
                            after July 15, 2003 at the redemption prices set
                             forth herein plus accrued interest on the date of
                        redemption. Up to an aggregate of 35% of the
                         principal amount of the Notes may be redeemed
                           from time to time prior to July 15, 2001 at the
                             option of the Company at the redemption price set
                             forth herein plus accrued interest to the date of
                            redemption, with the net proceeds received after
                           the issuance of the Notes of one or more Public
                       Equity Offerings following which there is a
                           Public Market if at least $65 million principal
                         amount of the Notes remains outstanding after
                         each such redemption. See "Description of the
        Notes--Optional Redemption."

Change of Control...........  Upon a Change of Control, the Company will be     
                       required to make an offer to repurchase all
                             outstanding Notes at 101% of the principal amount
                        thereof plus accrued interest to the date of
                             repurchase. See "Description of the Notes--Change
of Control."        

Subsidiary Guarantees.......  The Notes are guaranteed (the "Guarantees"),      
                          jointly and severally on a senior subordinated
                        basis, by each of the Company's existing and
                   future direct and indirect Subsidiaries
                            (excluding Unrestricted Subsidiaries and Foreign
                     Subsidiaries). The Guarantees are general
                        unsecured obligations of the Guarantors. The
                            Guarantors also guarantee all obligations of the
                        Company under the Bank Credit Agreement. The
                            obligations of each Guarantor under its Guaranty
                            is subordinated in right of payment to the prior
                   payment in full of all Guarantor Senior
                     Indebtedness (as defined), including such
                            subsidiary's guarantee of indebtedness under the
                       Bank Credit Agreement, of such Guarantor to
                          substantially the same extent as the Notes are
                          subordinated to all existing and future Senior
                            Indebtedness of the Company. See "Description of
                the Notes--Guarantees of the Notes."

Ranking.....................  The Notes are unsecured senior subordinated       
                        obligations of the Company and, as such, are
                            subordinated in right of payment to all existing
                          and future Senior Indebtedness of the Company.
                         The Notes rank pari passu in right of payment
                            with all senior subordinated indebtedness of the
                   Company, if any, and rank senior to any
                           subordinated indebtedness of the Company. As of
                        June 30, 1998, after giving pro forma effect

13

S-4/A
15th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 15th
                          to the Transactions as if they had occurred on
                     such date, the aggregate amount of Senior
                       Indebtedness of the Company would have been
                            approximately $39.7 million. See "Description of
the Notes--Ranking."

Restrictive Covenants.......  The indenture under which the Notes were issued   
                      and the Exchange Notes will be issued (the
                         "Indenture") contains certain covenants that,
                        among other things, limit the ability of the
                          Company and/or its Restricted Subsidiaries (as
                          defined) to (i) incur additional indebtedness,
                    (ii) pay dividends or make certain other
                             restricted payments, (iii) make investments, (iv)
                             enter into transactions with affiliates, (v) make
                         certain asset dispositions, and (vi) merge or
                           consolidate with, or transfer substantially all
                           of its assets to, another person. The Indenture
                    also limits the ability of the Company's
                          Restricted Subsidiaries to issue Capital Stock
                          (as defined) and to create restrictions on the
                          ability of such Restricted Subsidiaries to pay
                         dividends or make any other distributions. In
                             addition, the Company is obligated, under certain
                            circumstances, to offer to repurchase Notes at a
                         purchase price equal to 100% of the principal
                             amount thereof, plus accrued and unpaid interest,
                           if any, to the date of repurchase, with the net
                   cash proceeds of certain sales or other
                         dispositions of assets. However, all of these
                         limitations and prohibitions are subject to a
                   number of important qualifications. See
                      "Description of Notes--Certain Covenants."

RISK FACTORS

 Prospective purchasers of the Notes should consider carefully the information
set forth under the caption "Risk Factors" and all other information set forth  
in this Prospectus before making any investment in the Notes.                   

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

The Company's principal executive offices are located at 100 West 22nd      
Street, Suite 134, Lombard, Illinois 60148. The Company's telephone number is   
(630) 629-3360.                                                                 

14

S-4/A
16th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 16th
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The summary historical consolidated financial information presented below as
of and for each of the years ended December 31, 1995, 1996 and 1997 is derived  
from the consolidated financial statements of the Company, which have been      
audited by Arthur Andersen LLP, independent public accountants. The summary     
historical consolidated financial information presented below for each of the   
six months ended June 30, 1997 and 1998 is derived from the historical          
unaudited financial statements of the Company. In the opinion of the Company's  
management, the unaudited historical consolidated financial statements include  
all adjustments (consisting only of normal recurring adjustments) necessary for 
a fair presentation of the Company's financial position and results of          
operations for such periods. The summary pro forma financial information        
presented below for the twelve months ended June 30, 1998 is derived from the   
unaudited pro forma financial statements of the Company included herein. The    
unaudited pro forma financial information for the twelve months ended June 30,  
1998 and the unaudited operating results for the six months ended June 30, 1998 
are not necessarily indicative of the results that may be expected for the full 
year ending December 31, 1998. The information presented below should be read   
in conjunction with "Management's Discussion and Analysis of Financial          
Condition and Results of Operations," the Consolidated Financial Statements of  
the Company and the related notes thereto and the Unaudited Pro Forma Financial 
Information and related notes thereto included elsewhere herein.                

                                                                [Download Table]

                                                                          PRO FORMA
                                                                           TWELVE  
                                                          SIX MONTHS       MONTHS  
                           YEAR ENDED DECEMBER 31,      ENDED JUNE 30,      ENDED  
                          ----------------------------  ----------------  JUNE 30, 
                            1995      1996      1997     1997     1998      1998   
                          --------  --------  --------  -------  -------  ---------
                                         (DOLLARS IN THOUSANDS)                    
                                                                                   
STATEMENT OF OPERATIONS                                                            
 DATA:                                                                             
Net revenues                                                                       
 Ames net revenues......  $ 33,854  $ 38,015  $ 42,428  $20,706  $22,954  $ 44,676 
 Nestaway net revenues..    42,649    39,655    35,268   17,958   20,062    37,372 
 Fischbein net revenues.    27,823    27,117    27,104   13,044   13,184    27,244 
                          --------  --------  --------  -------  -------  -------- 
  Total net revenues....   104,326   104,787   104,800   51,708   56,200   109,292 
Cost of revenues........    64,829    61,294    60,144   29,381   31,405    62,205 
Selling, general and                                                               
 administrative                                                                    
 expenses...............    24,181    25,146    25,302   12,843   13,294    27,096 
                          --------  --------  --------  -------  -------  -------- 
Income from operations..    15,316    18,347    19,354    9,484   11,501    19,991 
Interest expense........     6,596     5,123     3,710    2,029    1,393    14,815 
Interest income.........       (44)      (39)     (367)     (14)      (7)     (360)
Other expense (income),                                                            
 net....................       537        57       404     (395)     171       970 
                          --------  --------  --------  -------  -------  -------- 
Income before income                                                               
 taxes and extraordinary                                                           
 item...................     8,227    13,206    15,607    7,864    9,944     4,566 
Provision for income                                                               
 taxes..................     3,338     5,730     6,412    3,375    3,954     2,790 
                          --------  --------  --------  -------  -------  -------- 
Income before                                                                      
 extraordinary item.....     4,889     7,476     9,195    4,489    5,990     1,776 
Loss on early                                                                      
 extinguishment of debt,                                                           
 net....................        --       614       772      772      300       300 
                          --------  --------  --------  -------  -------  -------- 
Net income..............  $  4,889  $  6,862  $  8,423  $ 3,717  $ 5,690  $  1,476 
                          ========  ========  ========  =======  =======  ======== 
OTHER FINANCIAL DATA:                                                              
EBITDA(/1/).............  $ 20,783  $ 24,375  $ 24,069  $11,729  $13,873  $ 26,638 
Depreciation and                                                                   
 amortization(/2/)......     5,467     6,028     4,715    2,245    2,372     6,647 
Capital expenditures....     3,853     3,862     3,475    1,699    3,011     4,787 
Cash interest expense...                                                    13,932 
Ratio of EBITDA to cash                                                            
 interest expense.......                                                      1.9x 
Ratio of total debt to                                                             
 EBITDA.................                                                      5.2x 
BALANCE SHEET DATA (END                                                            
 OF PERIOD):                                                                       
Cash and cash                                                                      
 equivalents............  $     45  $  1,716  $  1,310  $   426  $   490  $    490 
Working capital.........     6,750     7,362     3,824   10,864    1,237    15,733 
Total assets............   103,288    99,331    96,773   98,449   99,643   191,167 
Total debt..............    50,157    41,195    31,364   37,836   26,624   139,746 
Stockholder's equity....    25,828    32,118    40,067   35,363   45,706    26,500 

--------                                                                        
(1) EBITDA is defined as income from operations plus depreciation and           
   amortization. EBITDA is presented because it is a widely accepted financial
 indicator of a company's ability to incur and service debt. EBITDA should
not be considered by an investor as an alternative to income from       
 operations as determined in accordance with generally accepted accounting
 principles as an indicator of the operating performance of the Company or
as an alternative to cash flows as a measure of liquidity.              
(2) Depreciation and amortization does not include amortization of deferred     
financing costs or the discount on the 2001 Notes (as defined) which are
included in interest expense.                                           

15

S-4/A
17th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 17th
RISK FACTORS  

In addition to the other information in this Prospectus, purchasers of the  
Notes offered hereby should consider carefully the risk factors set forth       
below.                                                                          

SUBSTANTIAL LEVERAGE                                                            

In connection with the consummation of the Transactions, the Company        
incurred a significant amount of indebtedness outstanding and will have         
significant debt service requirements. As of June 30, 1998, on a pro forma      
basis after giving effect to the Transactions as if the Transactions had        
occurred on such date, the Company would have had outstanding indebtedness of   
approximately $139.7 million, including the Notes, and stockholder's equity of  
$26.5 million. See "Capitalization." In addition, the Indenture will permit     
the Company to incur or guarantee additional indebtedness, including            
indebtedness under the Bank Credit Agreement, subject to certain limitations.   
The Company will have additional borrowing capacity on a revolving credit       
basis under the Bank Credit Agreement and on a term basis to fund future        
acquisitions under the Acquisition Facility of the Bank Credit Agreement. See   
"Description of the Bank Credit Agreement" and "Description of the Notes."      

The Company's high degree of leverage could have important consequences to  
the holders of the Notes, including but not limited to the following: (i) the   
Company's ability to obtain additional financing for working capital, capital   
expenditures, acquisitions, debt service requirements, general corporate        
purposes or other purposes may be impaired in the future; (ii) a substantial    
portion of the Company's cash flow from operations will be required to be       
dedicated to the payment of principal and interest on its indebtedness,         
thereby reducing the funds available to the Company for other purposes,         
including its operations and future business opportunities; (iii) certain of    
the Company's borrowings, including certain borrowings under the Bank Credit    
Agreement, may be at variable rates of interest, which will expose the Company  
to the risk of increased interest rates; (iv) the indebtedness outstanding      
under the Bank Credit Agreement will be secured by substantially all the        
assets of the Company and will mature prior to the maturity of the Notes and    
(v) the Company's leveraged position and the covenants contained in its debt    
instruments could limit the Company's flexibility to adjust to changing market  
conditions and ability to withstand competitive pressures, and the Company may  
be more vulnerable to a downturn in general economic conditions or in its       
business or be unable to carry out capital spending that is important to its    
growth and productivity improvement programs. See "Description of the Bank      
Credit Agreement" and "Description of the Notes."                               

The Company will be required to make scheduled principal payments under the 
Bank Credit Agreement commencing on December 31, 1998. See "Description of the  
Bank Credit Agreement." The Company's ability to make scheduled payments or to  
refinance its obligations with respect to its indebtedness, including the       
Notes, will depend on its financial and operating performance, which is         
subject to prevailing economic and competitive conditions and to certain        
financial, business and other factors beyond its control, including interest    
rates, unscheduled plant shutdowns, increased operating costs, raw material     
and product prices, and regulatory developments. There can be no assurance      
that the Company will maintain a level of cash flow from operations sufficient  
to permit it to pay the principal, premium, if any, and interest on its         
indebtedness (including the Notes).                                             

If the Company's cash flow and capital resources are insufficient to fund   
its debt service obligations, the Company may be forced to reduce or delay      
capital expenditures, sell assets, or seek to obtain additional equity capital  
or restructure or refinance its debt (including the Notes). There can be no     
assurance that such alternative measures would be successful or would permit    
the Company to meet its scheduled debt service obligations. In the absence of   
such operating results and resources, the Company could face substantial        
liquidity problems and might be required to dispose of material assets or       
operations to meet its debt service and other obligations. The Bank Credit      

16  

S-4/A
18th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 18th
Agreement and the Indenture will restrict the Company's ability to sell assets  
and use the proceeds therefrom. See "Description of the Bank Credit Agreement"  
and "Description of the Notes." There can be no assurance as to the ability of  
the Company to consummate such sales or the proceeds which the Company could    
realize therefrom or that such proceeds would be adequate to meet the           
obligations then due.                                                           

RESTRICTIVE FINANCING COVENANTS; CROSS-DEFAULT RISKS                            

The Bank Credit Agreement and the Indenture contain a number of significant 
covenants that, among other things, restrict the ability of the Company to      
dispose of assets or merge, incur additional indebtedness, incur guarantee      
obligations, prepay the Notes or amend the Indenture, pay dividends, create     
liens on assets, enter into sale and leaseback transactions, make investments,  
loans or advances, make acquisitions, engage in mergers or consolidations,      
make capital expenditures or engage in certain transactions with affiliates,    
and will otherwise restrict corporate activities. In addition, under the Bank   
Credit Agreement, the Company is required to comply with specified financial    
ratios and tests, including a limitation on capital expenditures, an EBITDA to  
fixed charges ratio, a minimum net worth test, a total debt to EBITDA ratio     
and a minimum interest coverage test. See "Description of the Bank Credit       
Agreement" and "Description of the Notes--Certain Covenants."                   

The Company's ability to comply with the covenants and restrictions         
contained in the Bank Credit Agreement and the Indenture may be affected by     
events beyond its control, including prevailing economic, financial and         
industry conditions. The breach of any such covenants or restrictions could     
result in a default under the Bank Credit Agreement or the Indenture which      
would permit the lenders under the Bank Credit Agreement or the holders of the  
Notes, as the case may be, to declare all amounts outstanding thereunder to be  
due and payable, together with accrued and unpaid interest, and the             
commitments of the lenders under the Bank Credit Agreement to make further      
extensions of credit could be terminated. In addition, in the event of a        
default under the Bank Credit Agreement, in certain circumstances the lenders   
under the Bank Credit Agreement could prevent the Company from making any       
payments on the Notes. See "Description of the Notes--Ranking." If the Company  
were unable to repay its indebtedness to the lenders under the Bank Credit      
Agreement, such lenders could proceed against the collateral securing such      
indebtedness as described under "Description of the Bank Credit Agreement."     
There can be no assurance that in the event of any such default the Company     
will have adequate resources to repay in full principal, premium, if any, and   
interest on the Notes.                                                          

SUBORDINATION OF THE NOTES; UNSECURED STATUS OF THE NOTES                       

The payment of principal, premium, if any, and interest on, and any other   
amounts owing in respect of, the Notes will be subordinated in right of         
payment to the prior payment in full of all existing and future Senior          
Indebtedness of the Company, including all amounts owing under the Bank Credit  
Agreement. As of June 30, 1998, on a pro forma basis after giving effect to     
the Transactions as if they had occurred on such date, the aggregate principal  
amount of such Senior Indebtedness of the Company would have been               
approximately $39.7 million. Additional Senior Indebtedness may be incurred by  
the Company from time to time, subject to certain restrictions. See             
"Description of the Bank Credit Agreement" and "Description of the Notes--      
Certain Covenants--Limitation on Indebtedness." Therefore, in the event of a    
bankruptcy, liquidation, dissolution, reorganization or similar proceeding      
with respect to the Company, the assets of the Company will be available to     
pay obligations on the Notes only after all Senior Indebtedness of the Company  
has been paid in full, and there can be no assurance that there will be         
sufficient assets remaining to pay amounts due on all or any of the Notes. In   
addition, the Company may not pay principal of, premium, if any, or interest    
on the Notes, or purchase, redeem or otherwise retire the Notes, if any         
principal, premium, if any, or interest on any Designated Senior Indebtedness   
(as defined) is not paid when due (whether at final                             

17  

S-4/A
19th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 19th
maturity, upon scheduled redemption or installment, acceleration or otherwise)  
unless such default has been cured or waived or such Indebtedness has been      
repaid in full. In addition, under certain circumstances, if any nonpayment     
default exists with respect to Designated Senior Indebtedness, the Company may  
not make any payments on the Notes for a specified period of time, unless such  
default is cured or waived or such Designated Senior Indebtedness has been      
repaid in full. See "Description of the Notes--Ranking."                        

The indebtedness evidenced by the Guarantees of the Notes by the Guarantors 
will be subordinated in right of payment to the prior payment in full of all    
existing and future Guarantor Senior Indebtedness of each such Guarantor,       
including all amounts owing pursuant to their guarantees of the Bank Credit     
Agreement, to substantially the same extent as the Notes are subordinated to    
all existing and future Senior Indebtedness of the Company. See "Description    
of the Notes--Subordination of the Notes" and "--Guarantees of the Notes."      

The Indenture permits the Company to incur certain secured indebtedness,    
including indebtedness under the Bank Credit Agreement, which will be secured   
by a lien on substantially all of the assets of the Company and a pledge of     
all of the capital stock of the Company. The Notes are unsecured and therefore  
do not have the benefit of such collateral. Accordingly, if an event of         
default occurs under the Bank Credit Agreement, the lenders under the Bank      
Credit Agreement will have a prior right to the assets of the Company, and may  
foreclose upon such collateral, to the exclusion of the holders of the Notes.   
In such event, such assets would first be used to repay in full amounts         
outstanding under the Bank Credit Agreement, resulting in all or a portion of   
the Company's assets being unavailable to satisfy the claims of the holders of  
Notes and other unsecured indebtedness.                                         

FORWARD LOOKING STATEMENTS                                                      

This Prospectus contains certain estimates and forward looking statements.  
Actual results could differ materially from those projected in the estimates    
and forward looking statements as a result of any number of factors, including  
the risk factors set forth in this Offering Memorandum. Therefore, undue        
reliance should not be placed upon such estimates and statements. No assurance  
can be given that any of such estimates or statements will be realized and      
actual results may differ materially from those contemplated by such forward    
looking statements. Factors that may cause such differences include: (i)        
increased competition; (ii) increased costs; (iii) loss or retirement of key    
members of management and (iv) changes in general economic conditions in the    
markets in which the Company may from time to time compete. Many of such        
factors will be beyond the control of the Company and its management.           

CHANGE OF CONTROL                                                               

Upon the occurrence of a Change of Control, the Company will be required to 
offer to purchase all of the outstanding Notes at a price equal to 101% of the  
principal amount thereof at the date of purchase plus accrued and unpaid        
interest, if any, to the date of purchase. The occurrence of certain of the     
events which would constitute a Change of Control may constitute a default      
under the Bank Credit Agreement or other indebtedness of the Company that may   
be incurred in the future. In addition, the Bank Credit Agreement will          
prohibit the purchase of the Notes by the Company in the event of a Change of   
Control, unless and until such time as the indebtedness under the Bank Credit   
Agreement is repaid in full. The Company's failure to purchase the Notes upon   
the occurrence of a Change of Control would result in a default under the       
Indenture and the Bank Credit Agreement. In the event of a Change of Control,   
there can be no assurance that the Company would have sufficient assets to      
satisfy all of its obligations under the Bank Credit Agreement and the Notes.   
See "Description of the Notes--Offer to Purchase Upon Change of Control" and    
"Description of the Bank Credit Agreement."                                     

18  

S-4/A
20th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 20th
COMPETITION                                                                     

Each of the business units operates within competitive industries. The      
Company is not aware of any single competitor that competes with the Company    
along all three business lines.                                                 

Ames products compete with alternative methods of drywall finishing and     
other products of ATF tool manufacturers and distributors. Ames' most           
significant competition is from traditional hand finishing by individual        
professional finishers. Ames stores also operate in a highly competitive        
environment with respect to the sale of drywall related merchandise which is    
generally based on price and convenience. Drywall related merchandise is        
available from contractor supply yards, building material retailers and other   
sources.                                                                        

Nestaway's primary independent competitor is Ranger Metal Products. However,
the majority of dishwasher racks are internally manufactured by OEMs. There     
can be no assurance that the Company's existing customers will not increase or  
establish in-house dishwasher rack manufacturing capacity in the future. In     
1996 and 1994, certain dishwasher rack customers decided to produce dishwasher  
racks in-house, resulting in a material decline in the Company's revenues. See  
"Risk Factors--Reliance on Major Customers" and "Management's Discussion and    
Analysis of Financial Condition and Results of Operations." General Electric,   
Frigidaire and Whirlpool/KitchenAid operate in-house dishwasher rack            
manufacturing operations. Competition is generally based on quality,            
flexibility, product design innovation, manufacturing efficiency and price.     
Nestaway's other non-coated and coated formed wire products operate in a        
highly competitive environment based on price, quality and delivery capability  
that includes many companies, none of which compete with Nestaway across all    
its product lines. There can be no assurance the Company will continue to       
innovate its product offerings or continue to reduce manufacturing costs. Such  
inability to continue to innovate products or pass on manufacturing cost        
savings pursuant to contract terms or otherwise could lead to the loss of       
certain customers or lower gross margins.                                       

Fischbein competes with a variety of manufacturers, but does not compete    
with any one company across all its product lines. In bag closing, Fischbein    
competes with Newlong, Union Special and Doboy Packaging Machinery, Inc.        
Competition for bag closing products is generally based on price, geographic    
location, service, reliability and product innovation. With regard to flexible  
conveyors, Fischbein primarily competes with Best Diversified Products, and     
competition is generally based on price and functionality. In storage racks,    
Fischbein competes with Jarke Corporation, Tier-Rack and Federal Prison         
Industries, and competition is based primarily on price and geographic          
location.                                                                       

RELIANCE ON MAJOR CUSTOMERS                                                     

One of Nestaway's dishwasher rack customers accounted for 20%, 19% and 20%  
of the Company's revenues for 1997, 1996 and 1995, respectively. Since the      
contract with this customer requires cost reductions during its term, the       
inability of the Company to continue to achieve manufacturing cost savings      
could lead to lower gross margins. Another Nestaway customer which markets      
dishdrainers and other products accounted for 10%, 11% and 8% of the Company's  
revenues for 1997, 1996 and 1995, respectively. A loss of either or both of     
these customers could have a material adverse effect on the Company.            

In each of 1994 and 1996 the Company discontinued operations at certain of  
its facilities, in each case as a result of a decision by certain major         
dishwasher rack customers to produce dishwasher racks in-house. In each         
instance the Company's revenues were adversely affected. See "Management's      
Discussion and Analysis of Financial Condition and Results of Operations." No   
assurance can be given that such actions by the Company's dishwasher rack       
customers will not recur. Pursuant to the Company's requirement contracts, a    
decrease in sales by the Company's customers may cause a decrease in the        
revenues derived by the Company under such requirements contracts.              

19  

S-4/A
21st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 21st
RISKS RELATING TO ACQUISITION STRATEGY                                          

The Company's strategy includes making acquisitions, but there can be no    
assurance that suitable acquisition candidates will continue to be available.   
In addition, acquisitions that the Company may make will involve risks,         
including the successful integration and management of acquired technology,     
operations and personnel. The integration of acquired businesses may also lead  
to the loss of key employees of the acquired companies and diversion of         
management attention from on-going business concerns. There can be no           
assurance that any additional acquisitions will be made, that the Company will  
be able to obtain additional financing needed for such transactions and, if     
any acquisitions are so made, that they will be successful. See "Business--     
Strategy."                                                                      

FLUCTUATIONS IN RAW MATERIALS COST AND SUPPLY                                   

The Company purchases steel, metal castings, aluminum and other raw         
materials from various suppliers. There can be no assurance that severe         
shortages of such materials will not occur in the future, which could increase  
the cost of or delay the shipment of the Company's products and have a          
material adverse effect on the Company's operating results. Because such        
materials in the aggregate constitute significant components of the Company's   
cost of goods sold, fluctuations in price could have a material adverse effect  
on the Company's results of operations. Historically, the Company has passed    
on any increases in prices of raw materials to its customers. However, there    
can be no assurance that the Company will continue to be able to do so in the   
future. See "Business--Raw Materials and Suppliers."                            

GENERAL ECONOMIC CONDITIONS                                                     

The industries in which the Company operates are affected by changes in     
general economic conditions, including national, regional and local slowdowns   
in home building, remodeling, construction and other industrial activity, all   
of which are outside of the Company's control. There can be no assurance that   
economic slowdowns, adverse economic conditions, cyclical trends, increases in  
interest rates and other factors will not have a material adverse effect on     
the Company's consolidated operating results or financial condition. See        
"Business."                                                                     

POTENTIAL LEGACY LIABILITIES                                                    

The Company has retained or assumed certain environmental liabilities and   
risks of future liabilities associated with businesses previously operated or   
acquired by it, including Bliss and Laughlin Steel Company. The Company does    
not believe that these retained or assumed liabilities and risks would be       
expected to have a material adverse effect on the Company's financial           
condition or operating results. However, changes in laws or regulations,        
liabilities identified or incurred in the future, or other circumstances,       
might (individually or in the aggregate) have such an effect. In addition, the  
Company is currently addressing certain legacy liabilities of this nature. See  
"Business--Environmental Matters."                                              

UNIONIZED EMPLOYEE RELATIONS                                                    

The Company employs approximately 150 unionized full-time employees under   
two separate union contracts at two locations out of a total work force of      
approximately 1,000 employees. The Company's inability to negotiate acceptable  
contracts with these unions could result in, among other things, strikes, work  
stoppages or other slowdowns by the affected workers and increased operating    
costs as a result of higher wages or benefits paid to union members. If the     
Company's unionized workers were to engage in a strike, work stoppage or other  
slowdown, or other employees were to become unionized, the Company could        
experience a significant disruption of its operations and/or higher ongoing     
labor costs, which could have a material adverse effect on the Company's        
business, financial condition and results of operations. See "Business--        
Employees."                                                                     

20  

S-4/A
22nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 22nd
FOREIGN SALES AND OPERATIONS                                                    

In 1997 approximately 15% of the Company's net revenues were derived from   
foreign sales and operations and export sales. A portion of these net revenues  
are derived from sales in countries that have recently experienced economic     
downturns. There can be no assurance that the Company's net revenues will not   
be affected by these economic downturns in such countries. In addition, a       
portion of the Company's anticipated growth is expected to come from foreign    
sales and operations. Foreign sales and operations involve varying degrees of   
risks and uncertainties inherent in doing business abroad. Such risks include   
the possibility of unfavorable circumstances arising from host country laws or  
regulations, including unexpected changes of interpretations thereof. Other     
risks include partial or total expropriation; export duties and quotas;         
currency exchange rate fluctuations; restrictions on repatriation of funds;     
the disruption of operations from labor and political disturbances,             
insurrection, or war; and the requirements of partial local ownership of        
operations in certain countries. Furthermore, customer credit risks are         
exacerbated in foreign sales and operations because there often is little       
information available about the credit histories of customers in certain        
countries.                                                                      

The value of the Company's foreign sales and earnings may vary with currency
exchange rate fluctuations. To the extent that the Company does not take steps  
to mitigate the effects of changes in relative values, changes in currency      
exchange rates could have an adverse effect upon the Company's results of       
operations, which in turn could adversely affect the ability of the Company to  
meet its debt obligations, including payments on the Notes.                     

YEAR 2000 ISSUE                                                                 

The Company faces "Year 2000" issues. Year 2000 issues exist when dates are 
recorded using two digits (rather than four) and are then used for arithmetic   
operations, comparisons or sorting. A two-digit recording may recognize a date  
using "00" as 1900 rather than 2000, which could cause the Company's computer   
systems to perform inaccurate computations. The Company has undertaken          
substantial steps to eliminate Year 2000 risk, including determining which of   
its systems require replacement or modification, and implementing an action     
plan in response thereto, portions of which have been completed to date. The    
Company's Year 2000 issues relate not only to its own systems but also to       
those of its customers and suppliers. It is anticipated that systems            
replacements and modifications will resolve the Year 2000 issue with respect    
to the Company's internal systems. There is no guarantee, however, that such    
systems replacements and modifications will be completed on time, which could   
significantly impact the Company. In addition, the failure of the Company's     
suppliers and customers to address the Year 2000 issue could also               
significantly impact the Company. See "Management Discussion and Analysis of    
Financial Condition and Results of Operations--Other Matters."                  

FRAUDULENT TRANSFER CONSIDERATIONS                                              

In connection with the Transactions, the Company incurred substantial       
indebtedness, including through its incurrence of indebtedness under the Bank   
Credit Agreement and the Notes. If, under relevant federal and state            
fraudulent transfer and conveyance statues, in a bankruptcy, reorganization or  
rehabilitation case or similar preceding or a lawsuit by or on behalf of        
unpaid creditors of the Company, a court were to find that, at the time the     
Notes were issued by the Company, (a) the Company issued the Notes with the     
intent of hindering, delaying or defrauding current or future creditors or (b)  
(i) the Company received less than reasonably equivalent value or fair          
consideration for issuing the Notes and (ii) the Company (A) was insolvent or   
was rendered insolvent by reason of any of the Transactions, including the      
incurrence of the indebtedness to fund the Transactions, (B) was engaged, or    
about to engage, in a business or transaction for which its assets constituted  
unreasonably small capital to carry on its business, or (C) intended to incur,  
or believed or reasonably should have believed that it would incur, debts       
beyond its ability to pay as such debts matured or became due (as all of the    
foregoing terms are defined in or interpreted under the relevant fraudulent     

21  

S-4/A
23rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 23rd
transfer or conveyance statutes), such court could avoid the obligations under  
the Notes or subordinate the Notes to presently existing and future             
indebtedness of the Company or take other action detrimental to the holders of  
the Notes, including, under certain circumstances, invalidating the Notes. In   
that event, there can be no assurance that any repayment on the Notes would     
ever be recovered by holders of the Notes.                                      

The measure of insolvency for purposes of the foregoing considerations will 
vary depending upon the law of the jurisdiction that is being applied in any    
such proceeding. Generally, however, the Company would be considered insolvent  
if, at the time it incurs the indebtedness constituting the Notes, either (i)   
the sum of its debts (including contingent liabilities) is greater than its     
assets, at a fair valuation, or (ii) the present fair saleable value of its     
assets is less than the amount required to pay the probable liability on its    
total existing debts and liabilities (including contingent liabilities) as      
they become absolute and matured. There can be no assurance as to what          
standards a court would use to determine whether the Company was solvent at     
the relevant time, or whether, whatever standard was used, the Notes would not  
be avoided on another of the grounds set forth above.                           

In addition, the Guarantees may be subject to review under fraudulent       
conveyance statutes in a bankruptcy, reorganization or rehabilitation case or   
similar proceedings or a lawsuit on behalf of other creditors of any of the     
Guarantors. In such a case, the analysis set forth above would generally        
apply, except that the Guarantees could also be subject to the claim that,      
since the Guarantees were incurred for the benefit of the Company (and only     
indirectly for the benefit of the Guarantors), they were incurred for less      
than reasonably equivalent value or fair consideration. A court could           
therefore subordinate the Guarantees to the other obligations of the            
Guarantors, or take other action detrimental to holders of the Notes,           
including, under certain circumstances, invalidating the Guarantees. See        
"Description of the Bank Credit Agreement" and "Description of the Notes."      

LACK OF PUBLIC MARKET FOR THE NOTES                                             

The Original Notes have not been registered under the Securities Act, and   
may not be resold by purchasers thereof unless the Original Notes are           
subsequently registered or an exemption from the registration requirements of   
the Securities Act is available. While the Original Notes are at present        
eligible for trading in the PORTAL market of the Nasdaq Stock Market, Inc.,     
the Exchange Notes will not be so eligible, and there can be no assurance,      
even following registration or exchange of the Original Notes for Exchange      
Notes, that an active trading market for the Original Notes or the Exchange     
Notes will exist. At the time of the private placement of the Original Notes,   
the Initial Purchasers advised the Company that they intended to make a market  
in the Original Notes and, if issued, the Exchange Notes. However, the Initial  
Purchasers are not obligated to make a market in the Original Notes or the      
Exchange Notes, and any such market-making may be discontinued at any time at   
the sole discretion of the Initial Purchasers. No assurance can be given as to  
the liquidity of or trading market for the Original Notes or the Exchange       
Notes.                                                                          

CONSEQUENCES TO NON-TENDERED HOLDERS OF ORIGINAL NOTES                          

Consequences of Failure to Exchange. To the extent that Original Notes are  
tendered and accepted for exchange pursuant to the Exchange Offer, the trading  
market for Original Notes that remain outstanding may be significantly more     
limited, which might adversely affect the liquidity of the Original Notes not   
tendered for exchange. The extent of the market therefor and the availability   
of price quotations would depend upon a number of factors, including the        
number of holders of Original Notes remaining at such time and the interest in  
maintaining a market in such Original Notes on the part of securities firms.    
An issue of securities with a smaller outstanding market value available for    
trading (the "float") may command a lower price than would a comparable issue   
of securities with a greater float. Therefore, the market price for Original    
Notes that are not exchanged in the Exchange Offer may be affected adversely    
to the extent that the amount of Original Notes exchanged pursuant to the       
Exchange Offer reduces the float. The reduced float also may tend to make the   
trading price of the Original Notes that are not exchanged more volatile.       

22  

S-4/A
24th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 24th
Consequences of Failure to Properly Tender. Issuance of the Exchange Notes  
in exchange for the Original Notes pursuant to the Exchange Offer will be made  
following the prior satisfaction, or waiver, of the conditions set forth in     
"The Exchange Offer--Conditions to the Exchange Offer" and only after timely    
receipt by the Exchange Agent of such Original Notes, a properly completed and  
duly executed Letter of Transmittal and all other required documents.           
Therefore, holders of Original Notes desiring to tender such Original Notes in  
exchange for Exchange Notes should allow sufficient time to ensure timely       
delivery of all required documentation. Neither the Exchange Agent, the         
Company or any other person is under any duty to give notification of defects   
or irregularities with respect to the tenders of Original Notes for exchange.   
Original Notes that may be tendered in the Exchange Offer but which are not     
validly tendered will, following the consummation of the Exchange Offer,        
remain outstanding and will continue to be subject to the same transfer         
restrictions currently applicable to such Original Notes.                       

23  

S-4/A
25th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 25th
THE TRANSACTIONS  

Acquisition Co. entered into the Merger Agreement with the Parent and Cortec
Capital Corp., as representative of the stockholders of the Parent, to effect   
the Acquisition for a purchase price of $155,250,000 (including the repayment   
of indebtedness), subject to certain post-closing adjustments. Upon completion  
of the Transactions, (i) the Parent and the Company became direct and indirect  
subsidiaries of AXIA Group and (ii) the Company became the primary obligor on   
the Notes and borrowings made under the Bank Credit Agreement.                  

On the Closing Date, AXIA Group sold $28.0 million in common stock to the   
Investor Group, the ESOP, certain directors and officers of AXIA Group and the  
Company, and certain employees of the Company (the "Equity Investment"), which  
included Common Stock issued to the Rollover Investor (as defined under         
"Related Transactions") in exchange for his contribution to AXIA Group of       
capital stock of the Parent representing the aggregate fair value of such       
shares. AXIA Group then contributed to Acquisition Co., its indirect wholly-    
owned subsidiary, the cash received from the issuance of its Common Stock and   
the capital stock of the Parent contributed to AXIA Group. On the Closing       
Date, Finance Co. borrowed approximately $39.3 million under the Bank Credit    
Agreement and received approximately $100.0 million in gross proceeds from the  
consummation of the Offering. Acquisition Co. then borrowed most of such funds  
from Finance Co. pursuant to an intercompany promissory note. The Equity        
Investment, the net proceeds of the Original Notes and borrowings under the     
Bank Credit Agreement were used: (i) to effect the Acquisition; (ii) to fund    
the ESOP; (iii) to repay certain existing indebtedness of the Company and (iv)  
to pay fees and expenses in connection with the Transactions.                   

THE MERGER AGREEMENT                                                            

The Merger Agreement contains customary provisions for such agreements,     
including representations and warranties with respect to the condition and      
operations of the business being acquired, covenants with respect to the        
conduct of the business prior to the closing date and various closing           
conditions.                                                                     

Pursuant to the Merger Agreement, the purchase price for the Acquisition is 
subject to adjustment within 60 days of the closing of the Acquisition based    
on changes in working capital and certain tax liabilities. The Merger           
Agreement contains indemnification provisions binding on each of the parties    
to the Merger Agreement. Pursuant to such provisions each of the parties has    
agreed to indemnify each other for breaches of representations, warranties and  
covenants. In addition, the selling stockholders have agreed to indemnify the   
Company for certain working capital deficiencies, increases in tax              
liabilities, and for certain environmental and litigation matters. In           
connection with the indemnity provisions, $15.0 million of the purchase price   
has been placed into an escrow account, including $12.0 million to cover        
specified indemnification claims and $3.0 million to cover purchase price       
adjustments. See "Business--Environmental Matters." The indemnity provisions    
are subject to certain deductibles and minimum thresholds, and the amounts in   
escrow represent the maximum indemnity available from the selling               
stockholders.                                                                   

24  

S-4/A
26th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 26th
The following table sets forth the sources and uses of funds used to effect 
the Transactions as if the Transactions had occurred on June 30, 1998.          

                                                                [Download Table]

                                                                  AMOUNT        
                                                           ---------------------
                                                           (DOLLARS IN MILLIONS)
                                                                                
SOURCES OF FUNDS:                                                               
  Bank Credit Agreement(/1/)                                                    
    Revolving Credit Facility.............................        $  3.2        
    Acquisition Facility..................................            --        
    Term Loan.............................................          35.0        
    ESOP Term Loan........................................           1.5        
  Original Notes..........................................         100.0        
  Equity Investment.......................................          28.0        
                                                                  ------        
    Total Sources.........................................        $167.7        
                                                                  ======        
USES OF FUNDS:                                                                  
  Equity purchase price...................................        $131.1        
  Retirement of existing debt(/2/)........................          26.6        
  Company ESOP Loan(/3/)..................................           1.5        
  Fees and expenses(/4/)..................................           8.5        
                                                                  ------        
    Total Uses............................................        $167.7        
                                                                  ======        

--------                                                                        
(1) The Company has available borrowings under the Revolving Credit Facility    
of up to $15 million, subject to borrowing base limitations. The Company
also has available borrowings under the Acquisition Facility of $25     
  million, subject to the terms thereof. See "Description of the Bank Credit
Agreement."                                                             
(2) Existing notes of the Company due 2001 were discharged on the day           
following the closing of the Transactions.                              
(3) For a description of the Company ESOP Loan, see "Management--Employee       
Stock Ownership Plan."                                                  
(4) Represents fees and expenses, including: (i) the discount paid to the       
  Initial Purchasers in connection with the Sale of the Original Notes; (ii)
legal, accounting and other professional fees payable in connection with
the Transactions, including fees to Sterling, and (iii) certain other   
expenses. See "Related Transactions."                                   

25  

S-4/A
27th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 27th
THE EXCHANGE OFFER  

REGISTRATION RIGHTS                                                             

At the Closing, the Company entered into the Registration Rights Agreement  
with the Initial Purchasers pursuant to which the Company agreed, for the       
benefit of the holders of the Original Notes, at its cost, (i) within 75 days   
after the date of the original issue of the Original Notes, to file an          
Exchange Offer Registration Statement with the Commission with respect to the   
Exchange Offer for the Exchange Notes, and (ii) to use its reasonable efforts   
to cause the Exchange Offer Registration Statement to be declared effective     
under the Securities Act within 120 days after the date of original issuance    
of the Original Notes. Upon the Exchange Offer Registration Statement being     
declared effective, the Company agreed to offer the Exchange Notes in exchange  
for surrender of the Original Notes. The Company agreed to keep the Exchange    
Offer open for not less than 30 calendar days (or longer if required by         
applicable law) after the date notice of the Exchange Offer is mailed to the    
holders of the Original Notes. For each Original Note surrendered to the        
Company pursuant to its Exchange Offer, the holder of such Original Note will   
receive an Exchange Note having a principal amount equal to that of the         
surrendered Note. Interest on each Exchange Note will accrue from the last      
interest payment date on which interest was paid on the Original Note           
surrendered in exchange therefor or, if no interest has been paid on such       
Original Note, from the date of its original issue. The Registration Rights     
Agreement also provides an agreement to include in the prospectus for the       
Exchange Offer certain information necessary to allow a broker-dealer who       
holds Original Notes that were acquired for its own account as a result of      
market-making activities or other ordinary course trading activities (other     
than Original Notes acquired directly from the Company or one of its            
affiliates) to exchange such Original Notes pursuant to the Exchange Offer and  
to satisfy the prospectus delivery requirements in connection with resales of   
Exchange Notes received by such broker-dealer in the Exchange Offer, and to     
maintain the effectiveness of the Registration Statement for such purposes for  
90 days.                                                                        

The foregoing agreement is needed because any broker-dealer who acquires    
Original Notes for its own account as a result of market-making activities or   
other trading activities is required to deliver a prospectus meeting the        
requirements of the Securities Act. This Prospectus covers the offer and sale   
of the Exchange Notes pursuant to the Exchange Offer made hereby and the        
resale of Exchange Notes received in the Exchange Offer by any broker-dealer    
who held Original Notes acquired for its own account as a result of market-     
making activities or other trading activities (other than Original Notes        
acquired directly from the Company or one of its affiliates).                   

Under existing interpretations of the staff of the Commission contained in  
several no-action letters to third parties, the Exchange Notes would in         
general be freely tradeable after the Exchange Offer without further            
registration under the Securities Act. However, any purchaser of Original       
Notes who is an "affiliate" of the Company or who intends to participate in     
the Exchange Offer for the purpose of distributing the Exchange Notes (i) will  
not be able to rely on the interpretation of the staff of the Commission, (ii)  
will not be able to tender its Original Notes in the Exchange Offer and (iii)   
must comply with the registration and prospectus delivery requirements of the   
Securities Act in connection with any sale or transfer of the Original Notes    
unless such sale or transfer is made pursuant to an exemption from such         
requirements.                                                                   

Each holder of the Original Notes (other than certain specified holders) who
wishes to exchange Original Notes for Exchange Notes in the Exchange Offer      
will be required to make certain representations, including that (i) it is not  
an affiliate of the Company, (ii) any Exchange Notes to be received by it were  
acquired in the ordinary course of its business and (iii) at the time of        
commencement of the Exchange Offer, it has no arrangement with any person to    
participate in the distribution (within the meaning of the Securities Act) of   
the Exchange Notes.                                                             

26  

S-4/A
28th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 28th
In the event that any changes in law or the applicable interpretations of   
the staff of the Commission do not permit the Company to effect the Exchange    
Offer, or if for any other reason the Exchange Offer is not consummated within  
150 days of the date of issuance and sale of the Original Notes, or upon        
request of the Initial Purchasers (under certain circumstances), the Company    
will, at its cost, (i) as promptly as practicable, file a Shelf Registration    
Statement (which may be an amendment of the Registration Statement of which     
this Prospectus is a part) covering resales of the Original Notes, (ii) use     
all reasonable efforts to cause the Shelf Registration Statement to be          
declared effective under the Securities Act and (iii) use all reasonable        
efforts to keep effective the Shelf Registration Statement until three years    
after its effective date (or until one year after such effective date if such   
Shelf Registration Statement is filed at the request of the Initial Purchasers  
under certain circumstances). The Company will, in the event of the filing of   
a Shelf Registration Statement, provide to each holder of the Original Notes    
copies of the prospectus which is a part of the Shelf Registration Statement,   
notify each such holder when the Shelf Registration Statement for the Original  
Notes has become effective and take certain other actions as are required to    
permit unrestricted resales of the Original Notes. A holder of Original Notes   
that sells such Original Notes pursuant to the Shelf Registration Statement     
generally will be required to be named as a selling security holder in the      
related prospectus and to deliver a prospectus to purchasers, will be subject   
to certain of the civil liability provisions under the Securities Act in        
connection with such sales and will be bound by the provisions of the           
Registration Rights Agreement which are applicable to such holder (including    
certain indemnification obligations). In addition, each holder of the Original  
Notes will be required to deliver information to be used in connection with     
the Shelf Registration Statement and to provide comments on the Shelf           
Registration Statement within the time periods set forth in the Registration    
Rights Agreement in order to have their Original Notes included in the Shelf    
Registration Statement and to benefit from the provisions regarding liquidated  
damages set forth in the following paragraph.                                   

In the event either (i) the Exchange Offer Registration Statement is not    
filed with the Commission on or prior to the 75th calendar day following the    
date of original issue of the Original Notes, (ii) the Exchange Offer           
Registration Statement or, if required in lieu thereof, the Shelf Registration  
Statement, is not declared effective on or prior to the 120th calendar day      
following the date of original issue of the Original Notes or (iii) once        
effective, the Exchange Offer Registration Statement or the Shelf Registration  
Statement ceases to be effective or the prospectus ceases to be usable (under   
certain circumstances), the interest rate borne by the Original Notes shall be  
increased by one-half of one percent per annum following such 75-day period in  
the case of (i) above, such 120-day period in the case of clause (ii) above or  
any such period in the case of (iii) above, in each case payable in cash        
semiannually, in arrears, on January 15 and July 15 of each year. Upon (x) the  
filing of the Exchange Offer Registration Statement in the case of clause (i)   
above, (y) the effectiveness of the Exchange Offer Registration Statement or    
Shelf Registration Statement in the case of clause (ii) above or (z) the        
reeffectiveness of the Exchange Offer Registration Statement or a Shelf         
Registration Statement in the case of clause (iii) above, and provided that     
none of the conditions set forth in clauses (i), (ii) and (iii) above           
continues to exist, the interest rate borne by the Original Notes from the      
date of such filing, effectiveness or reeffectiveness, as the case may be,      
will be reduced to the original interest rate.                                  

The summary herein of certain provisions of the Registration Rights         
Agreement does not purport to be complete and is subject to, and is qualified   
in its entirety by reference to, all the provisions of the Registration Rights  
Agreement, a copy of which is filed as an exhibit to the Registration           
Statement.                                                                      

Except as set forth above, after consummation of the Exchange Offer, holders
of Original Notes have no registration or exchange rights under the             
Registration Rights Agreement. See "--Consequences of Failure to Exchange,"     
and "--Resales of Exchange Notes; Plan of Distribution."                        

27  

S-4/A
29th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 29th
CONSEQUENCES OF FAILURE TO EXCHANGE                                             

The Original Notes which are not exchanged for Exchange Notes pursuant to   
the Exchange Offer and are not included in a resale prospectus which, if        
required, will be filed as part of an amendment to the Registration Statement,  
will remain restricted securities and subject to restrictions on transfer.      
Accordingly, such Original Notes may be resold (i) to the Company (upon         
redemption thereof or otherwise), (ii) so long as the Original Notes are        
eligible for resale pursuant to Rule 144A, to a person whom the seller          
reasonably believes is a qualified institutional buyer within the meaning of    
Rule 144A under the Securities Act, purchasing for its own account or for the   
account of a qualified institutional buyer to whom notice is given that the     
resale, pledge or other transfer is being made in reliance on Rule 144A, (iii)  
in an offshore transaction in accordance with Regulation S under the            
Securities Act, (iv) pursuant to an exemption from registration in accordance   
with Rule 144 (if available) under the Securities Act, (v) in reliance on       
another exemption from the registration requirements of the Securities Act, or  
(vi) pursuant to an effective registration statement under the Securities Act,  
in each case in accordance with any applicable securities laws of any state of  
the United States and subject to certain requirements of the registrar or co-   
registrar being met, including receipt by the registrar or co-registrar of a    
certification and (in the case of (iii), (vi) and (v)) an opinion of counsel    
reasonably acceptable to the Company and the registrar.                         

To the extent Original Notes are tendered and accepted in the Exchange      
Offer, the principal amount of outstanding Original Notes will decrease with a  
resulting decrease in the liquidity in the market therefor. Accordingly, the    
liquidity of the market of the Original Notes could be adversely affected. See  
"Risk Factors--Consequences to Non-Tendering Holders of Original Notes."        

TERMS OF THE EXCHANGE OFFER                                                     

Upon the terms and subject to the conditions set forth in the Prospectus and
in the Letter of Transmittal, a copy of which is attached to this Prospectus    
as Annex A, the Company will accept any and all Original Notes validly          
tendered and not withdrawn prior to the Expiration Date. The Company will       
issue $1,000 principal amount of Exchange Notes in exchange for each $1,000     
principal amount of Original Notes accepted in the Exchange Offer. Holders may  
tender some or all of their Original Notes pursuant to the Exchange Offer.      
However, Original Notes may be tendered only in integral multiples of $1,000    
principal amount.                                                               

The form and terms of the Exchange Notes are the same as the form and terms 
of the Original Notes, except that (i) the Exchange Notes will have been        
registered under the Securities Act and hence will not bear legends             
restricting their transfer pursuant to the Securities Act, and (ii) except as   
otherwise described above, holders of the Exchange Notes will not be entitled   
to the rights of holders of Original Notes under the Registration Rights        
Agreement. The Exchange Notes will evidence the same debt as the Original       
Notes (which they replace), and will be issued under, and be entitled to the    
benefits of, the Indenture which governs all of the Notes.                      

Solely for reasons of administration (and for no other purpose) the Company 
has fixed the close of business on October 9, 1998 as the record date for the   
Exchange Offer for purposes of determining the persons to whom this Prospectus  
and the Letter of Transmittal will be mailed initially. Only a registered       
holder of Original Notes (or such holder's legal representative or attorney-    
in-fact) as reflected on the records of the trustee under the Indenture may     
participate in the Exchange Offer. There will be no fixed record date for       
determining registered holders of the Original Notes entitled to participate    
in the Exchange Offer.                                                          

Holders of the Original Notes do not have any appraisal or dissenters'      
rights under the Texas Business Corporation Act or the Indenture in connection  
with the Exchange Offer. The Company                                            

28  

S-4/A
30th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 30th
intends to conduct the Exchange Offer in accordance with the applicable         
requirements of the Exchange Act and the rules and regulations of the           
Commission thereunder.                                                          

The Company shall be deemed to have accepted validly tendered Original Notes
when, as and if they have given oral or written notice thereof to the Exchange  
Agent. The Exchange Agent will act as agent for the tendering holders of the    
Original Notes for the purposes of receiving the Exchange Notes. The Exchange   
Notes delivered pursuant to the Exchange Offer will be issued on the earliest   
practicable date following the acceptance for exchange of Original Notes by     
the Company.                                                                    

If any tendered Original Notes are not accepted for exchange because of an  
invalid tender, the occurrence of certain other events set forth herein or      
otherwise, certificates for any such unaccepted Original Notes will be          
returned, without expense, to the tendering holder thereof as promptly as       
practicable after the Expiration Date.                                          

Holders who tender Original Notes in the Exchange Offer will not be required
to pay brokerage commissions of fees or, subject to the instructions in the     
Letter of Transmittal, transfer taxes with respect to the exchange of the       
Original Notes pursuant to the Exchange Offer. The Company will pay all         
charges and expenses, other than certain applicable taxes, in connection with   
the Exchange Offer. See "--Fees and Expenses."                                  

EXPIRATION DATE; EXTENSIONS; AMENDMENTS                                         

The term "Expiration Date" shall mean 5:00 p.m., New York City time, on     
November 16, 1998, unless the Company, in its sole discretion, extends the      
Exchange Offer, in which case the term "Expiration Date" shall mean the latest  
date and time to which the Exchange Offer is extended.                          

In order to extend the Exchange Offer, the Company will notify the Exchange 
Agent of any extension by oral or written notice and will make a public         
announcement thereof, each prior to 9:00 a.m., New York City time, on the next  
business day after the previously scheduled Expiration Date.                    

The Company reserves the right, in its sole discretion, (i) to delay        
accepting any Original Notes, (ii) to extend the Exchange Offer, (iii) if any   
of the conditions set forth below under "--Conditions to the Exchange Offer"    
shall not have been satisfied, to terminate the Exchange Offer, by giving oral  
or written notice of such delay, extension or termination to the Exchange       
Agent, or (iv) to amend the terms of the Exchange Offer in any manner. Except   
as specified in the immediately preceding paragraph, any such delay in          
acceptance, extension, termination or amendment will be followed as promptly    
as practicable by a public announcement thereof. If the Exchange Offer is       
amended in a manner determined by it to constitute a material change, the       
Company will promptly disclose such amendment by means of a prospectus          
supplement that will be distributed to the registered holders of the Original   
Notes, and the Exchange Offer will be extended for a period of five to 10       
business days, as required by law, depending upon the significance of the       
amendment and the manner of disclosure to the registered holders, if the        
Exchange Offer would otherwise expire during such five to 10 business day       
period.                                                                         

Without limiting the manner in which the Company may choose to make a public
announcement of any delay, extension, termination or amendment of its Exchange  
Offer, the Company shall not have an obligation to publish, advertise, or       
otherwise communicate any such public announcement, other than by making a      
timely release thereof to the Dow Jones News Service.                           

PROCEDURES FOR TENDERING ORIGINAL NOTES                                         

Tenders of Original Notes. The tender by a holder of Original Notes pursuant
to any of the procedures set forth below will constitute the tendering          
holder's acceptance of the terms and                                            

29  

S-4/A
31st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 31st
conditions of the Exchange Offer. The Company's acceptance for exchange of      
Original Notes tendered pursuant to any of the procedures described below will  
constitute a binding agreement between such tendering holder and the Company    
in accordance with the terms and subject to the conditions of the Exchange      
Offer. Only holders are authorized to tender their Original Notes. The          
procedures by which Original Notes may be tendered by beneficial owners that    
are not holders will depend upon the manner in which the Original Notes are     
held.                                                                           

DTC has authorized DTC participants that are beneficial owners of Original  
Notes through DTC to tender their Original Notes as if they were holders. To    
effect a tender, DTC participants should either (i) complete and sign the       
Letter of Transmittal (or a facsimile thereof), have the signature thereon      
guaranteed if required by Instruction 1 of the Letter of Transmittal, and mail  
or deliver the Letter of Transmittal or such facsimile pursuant to the          
procedures for book-entry transfer set forth below under "--Book-Entry          
Delivery Procedures," or (ii) transmit their acceptance to DTC through the DTC  
Automated Tender Offer Program ("ATOP"), for which the transaction will be      
eligible, and follow the procedures for book-entry transfer set forth below     
under "--Book-Entry Delivery Procedures."                                       

Tender of Original Notes Held in Physical Form. To tender effectively       
Original Notes held in physical form pursuant to the Exchange Offer, a          
properly completed Letter of Transmittal (or a facsimile thereof) duly          
executed by the holder thereof, and any other documents required by the Letter  
of Transmittal, must be received by the Exchange Agent at one of its addresses  
set forth below, and tendered Original Notes must be received by the Exchange   
Agent at such address (or delivery effected through the deposit of Original     
Notes into the Exchange Agent's account with DTC and making book-entry          
delivery as set forth below) on or prior to the Expiration Date, or the         
tendering holder must comply with the guaranteed delivery procedure set forth   
below. LETTERS OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT ONLY TO THE      
EXCHANGE AGENT AND SHOULD NOT BE SENT TO THE COMPANY.                           

Tender of Original Notes Held Through a Custodian. To tender effectively    
Original Notes that are held of record by a custodian bank, depository,         
broker, trust company or other nominee, the beneficial owner thereof must       
instruct such holder to tender the Original Notes on the beneficial owner's     
behalf. A Letter of Instructions from the record owner to the beneficial owner  
may be included in the materials provided along with this Prospectus which may  
be used by the beneficial owner in this process to instruct the registered      
holder of such owner's Original Notes to effect the tender.                     

Tender of Original Notes Held Through DTC. To tender effectively Original   
Notes that are held through DTC, DTC participants should either (i) properly    
complete and duly execute the Letter of Transmittal (or a facsimile thereof),   
and any other documents required by the Letter of Transmittal, and mail or      
deliver the Letter of Transmittal or such facsimile pursuant to the procedures  
for book-entry transfer set forth below or (ii) transmit their acceptance       
through ATOP, for which the transaction will be eligible, and DTC will then     
edit and verify the acceptance and send an Agent's Message to the Exchange      
Agent for its acceptance. Delivery of tendering Original Notes held through     
DTC must be made to the Exchange Agent pursuant to the book-entry delivery      
procedures set forth below or the tendering DTC participant must comply with    
the guaranteed delivery procedures set forth below.                             

THE METHOD OF DELIVERY OF ORIGINAL NOTES AND LETTERS OF TRANSMITTAL, ANY    
REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING       
DELIVERY THROUGH DTC AND ANY ACCEPTANCE OR AGENT'S MESSAGE TRANSMITTED THROUGH  
ATOP, IS AT THE ELECTION AND RISK OF THE PERSON TENDERING ORIGINAL NOTES AND    
DELIVERING LETTERS OF TRANSMITTAL AND, EXCEPT AS OTHERWISE PROVIDED IN THE      
LETTER OF TRANSMITTAL, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY          
RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT    
THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT            
REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE          
EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE.    

30  

S-4/A
32nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 32nd
Except as provided below, unless the Original Notes being tendered are      
deposited with the Exchange Agent on or prior to the Expiration Date            
(accompanied by a properly completed and duly executed Letter of Transmittal    
or a properly transmitted Agent's Message), the Company may, at its option,     
reject such tender. Exchange of Exchange Notes for the Original Notes will be   
made only against deposit of the tendered Original Notes and delivery of all    
other required documents.                                                       

Book-Entry Delivery Procedures. The Exchange Agent will establish accounts  
with respect to the Original notes at DTC for purposes of the Exchange Offer    
within two business days after the date of this Prospectus, and any financial   
institution that is a participant in DTC may make book-entry delivery of the    
Original Notes by causing DTC to transfer such Original Notes into the          
Exchange Agent's account in accordance with DTC's procedures for such           
transfer. However, although delivery of Original Notes may be effected through  
book-entry at DTC, the Letter of Transmittal (or facsimile thereof), with any   
required signature guarantees or an Agent's Message in connection with a book-  
entry transfer, and any other required documents, must, in any case, be         
transmitted to and received by the Exchange Agent at one or more of its         
addresses set forth in this Prospectus on or prior to the Expiration Date, or   
compliance must be made with the guaranteed delivery procedures described       
below. Delivery of documents to DTC does not constitute delivery to the         
Exchange Agent. The confirmation of a book-entry transfer into the Exchange     
Agent's account at DTC as described above is referred to herein as a "Book-     
Entry Confirmation."                                                            

The term "Agent's Message" means a message transmitted by DTC to, and       
received by, the Exchange Agent and forming a part of the Book-Entry            
Confirmation, which states that DTC has received an express acknowledgment      
from each participant in DTC tendering the Original Notes and that such         
participant has received the Letter of Transmittal and agrees to be bound by    
the terms of the Letter of Transmittal and the Company may enforce such         
agreement against such participant.                                             

Signature Guarantees. Signatures on all Letters of Transmittal must be      
guaranteed by a recognized member of the Medallion Signature Guarantee Program  
or by any other "eligible guarantor institution," as such term is defined in    
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an      
"Eligible Institution"), unless the Original Notes tendered thereby are         
tendered (i) by a registered holder of Original Notes (or by a participant in   
DTC whose name appears on a DTC security position listing as the owner of such  
Original Notes) who has not completed either the box entitled "Special          
Issuance Instructions" or "Special Delivery Instructions" on the Letter of      
Transmittal, or (ii) for the account of an Eligible Institution. See            
Instruction 1 of the Letter of Transmittal. If the Original Notes are           
registered in the name of a person other than the signer of the Letter of       
Transmittal or if Original Notes not accepted for exchange or not tendered are  
to be returned to a person other than the registered holder, then the           
signatures on the Letter of Transmittal accompanying the tendered Original      
Notes must be guaranteed by an Eligible Institution as described above. See     
Instructions 1 and 5 of the Letter of Transmittal.                              

Guaranteed Delivery. If a holder desires to tender Original Notes pursuant  
to the Exchange Offer and time will not permit the Letter of Transmittal,       
certificates representing such Original Notes and all other required documents  
to reach the Exchange Agent, or the procedures for book-entry transfer cannot   
be completed, on or prior to the Expiration Date, such Original Notes may       
nevertheless be tendered if all the following conditions are satisfied:         

(i) the tender is made by or through an Eligible Institution;           

(ii) a properly completed and duly executed Notice of Guaranteed        
Delivery, substantially in the form provided by the Company herewith, or an 
Agent's Message with respect to guaranteed delivery that is accepted by the 
Company, is received by the Exchange Agent on or prior to the Expiration    
Date, as provided below; and                                                

31  

S-4/A
33rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 33rd
(iii) the certificates for the tendered Original Notes, in proper form  
for transfer (or a Book-Entry Confirmation of the transfer of such Original 
Notes into the Exchange Agent's account at DTC as described above),         
together with a Letter of Transmittal (or facsimile thereof), property      
completed and duly executed, with any required signature guarantees and any 
other documents required by the Letter of Transmittal or a properly         
transmitted Agent's Message, are received by the Exchange Agent within two  
business days after the date of execution of the Notice of Guaranteed       
Delivery.                                                                   

The Notice of Guaranteed Delivery may be sent by hand delivery, telegram,   
facsimile transmission or mail to the Exchange Agent and must include a         
guarantee by an Eligible Institution in the form set forth in the Notice of     
Guaranteed Delivery.                                                            

Notwithstanding any other provision hereof, delivery of Exchange Notes by   
the Exchange Agent for Original Notes tendered and accepted for exchange        
pursuant to the Exchange Offer will, in all cases, be made only after timely    
receipt by the Exchange Agent of such Original Notes (or Book-Entry             
Confirmation of the transfer of such Original Notes into the Exchange Agent's   
account at DTC as described above), and a Letter of Transmittal (or facsimile   
thereof) with respect to such Original Notes, properly completed and duly       
executed, with any required signature guarantees and any other documents        
required by the Letter of Transmittal, or a properly transmitted Agent's        
Message.                                                                        

Determination of Validity. All questions as to the validity, form,          
eligibility (including time of receipt), acceptance and withdrawal of tendered  
Original Notes will be determined by the Company in its sole discretion, which  
determination will be final and binding. The Company reserves the absolute      
right to reject any and all Original Notes not properly tendered or any         
Original Notes the Company's acceptance of which would, in the opinion of       
counsel for the Company, be unlawful. The Company also reserves the right to    
waive any defects, irregularities or conditions of tender as to particular      
Original Notes. The interpretation of the terms and conditions of its Exchange  
Offer (including the instructions in the Letter of Transmittal) by the Company  
will be final and binding on all parties. Unless waived, any defects or         
irregularities in connection with tenders of Original Notes must be cured       
within such time as the Company shall determine. Although the Company intends   
to notify holders of defects or irregularities with respect to tenders of       
Original Notes, neither the Company, the Exchange Agent nor any other person    
is under any duty to give such notice, nor shall they incur any liability for   
failure to give such notification. Tenders of Original Notes will not be        
deemed to have been made until such defects or irregularities have been cured   
or waived. Any Original Notes received by the Exchange Agent that are not       
validly tendered and as to which the defects or irregularities have not been    
cured or waived, or if Original Notes are submitted in a principal amount       
greater than the principal amount of Original Notes being tendered by such      
tendering holder, such unaccepted or non-exchanged Original Notes will be       
returned by the Exchange Agent to the tendering holders (or, in the case of     
Original Notes tendered by book-entry transfer into the Exchange Agent's        
account at the Book-Entry Transfer Facility pursuant to the book-entry          
transfer procedures described below, such unaccepted or non-exchanged Original  
Notes will be credited to an account maintained with such Book-Entry Transfer   
Facility), unless otherwise provided in the Letter of Transmittal, as soon as   
practicable following the Expiration Date.                                      

By tendering, each registered holder will represent to the Company that,    
among other things, (i) the Exchange Notes to be acquired by the holder and     
any beneficial owner(s) of the Original Notes ("Beneficial Owner(s)") in        
connection with the Exchange Offer are being acquired by the holder and any     
Beneficial Owner(s) in the ordinary course of business of the holder and any    
Beneficial Owner(s), (ii) the holder and each Beneficial Owner are not          
participating, do not intend to participate, and have no arrangement or         
understanding with any person to participate, in a distribution of the          
Exchange Notes, (iii) the holder and each Beneficial Owner acknowledge and      
agree that (x) any person participating in the Exchange Offer for the purpose   
of distributing the Exchange Notes must comply                                  

32  

S-4/A
34th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 34th
with the registration and prospectus delivery requirements of the Securities    
Act in connection with a secondary resale transaction with respect to the       
Exchange Notes acquired by such person and cannot rely on the position of the   
Staff of the Commission set forth in no-action letters that are discussed       
herein under "--Resale of the Exchange Notes; Plan of Distribution," and (y)    
any broker-dealer that receives Exchange Notes for its own account in exchange  
for Original Notes pursuant to the Exchange Offer must delivery a prospectus    
in connection with any resale of such Exchange Notes, but by so acknowledging,  
the holder shall not be deemed to admit that, by delivering a prospectus, it    
is an "underwriter" within the meaning of the Securities Act, (iv) neither the  
holder nor any Beneficial Owner is an "affiliate," as defined under Rule 405    
of the Securities Act, of the Company except as otherwise disclosed to the      
Company in writing, and (v) the holder and each Beneficial Owner understands    
that a secondary resale transaction described in clause (iii) above should be   
covered by an effective registration statement containing the selling           
securityholder information required by Item 507 of Regulation S-K of the        
Commission.                                                                     

Each broker-dealer that receives Exchange Notes for its own account in      
exchange for Original Notes, where such Original Notes were acquired by such    
broker-dealer as a result of market-making activities or other trading          
activities, must acknowledge that it will deliver a prospectus in connection    
with any resale of such Exchange Notes. See "--Resale of the Exchange Notes;    
Plan of Distribution."                                                          

WITHDRAWAL OF TENDERS                                                           

Except as otherwise provided herein, tenders of Original Notes pursuant to  
the Exchange Offer may be withdrawn, unless theretofore accepted for exchange   
as provided in the Exchange Offer, at any time prior to the Expiration Date.    

To be effective, a written or facsimile transmission notice of withdrawal   
must be received by the Exchange Agent at its address set forth herein prior    
to the Expiration Date. Any such notice of withdrawal must (i) specify the      
name of the person having deposited the Original Notes to be withdrawn (the     
"Depositor"), (ii) identify the Original Notes to be withdrawn, including the   
certificate number or numbers of the particular certificates evidencing the     
Original Notes (unless such Original Notes were tendered by book-entry          
transfer), and aggregate principal amount of such Original Notes, and (iii) be  
signed by the holder in the same manner as the original signature on the        
Letter of Transmittal (including any required signature guarantees) or be       
accompanied by documents of transfer sufficient to have the Trustee under the   
Indenture register the transfer of the Original Notes into the name of the      
person withdrawing such Original Notes. If Original Notes have been delivered   
pursuant to the procedures for book-entry transfer set forth in "--Procedures   
for Tendering Original Notes--Book-Entry Delivery Procedures," any notice of    
withdrawal must specify the name and number of the account at the appropriate   
book-entry transfer facility to be credited with such withdrawn Original Notes  
and must otherwise comply with such book-entry transfer facility's procedures.  
If the Original Notes to be withdrawn have been delivered or otherwise          
identified to the Exchange Agent, a signed notice of withdrawal meeting the     
requirements above is effective immediately upon written or facsimile notice    
of withdrawal even if physical release is not yet effected. A withdrawal of     
Original Notes can only be accomplished in accordance with the foregoing        
procedures.                                                                     

All questions as to the validity, form and eligibility (including time of   
receipt) of such notices will be determined by the Company in its sole          
discretion, which determination shall be final and binding on all parties. No   
withdrawal of Original Notes will be deemed to have been properly made until    
all defects or irregularities have been cured or expressly waived. Neither the  
Company nor the Exchange Agent or any other person will be under any duty to    
give notification of any defects or irregularities in any notice of withdrawal  
or revocation, nor shall they incur any liability for failure to give any such  
notification. Any Original Notes so withdrawn will be deemed not to have been   
validly tendered for                                                            

33  

S-4/A
35th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 35th
purposes of the Exchange Offer and no Exchange Notes will be issued with        
respect thereto unless the Original Notes so withdrawn are retendered.          
Properly withdrawn Original Notes may be retendered by following one of the     
procedures described above under "--Procedures for Tendering Original Notes"    
at any time prior to the Expiration Date.                                       

Any Original Notes which have been tendered but which are not accepted for  
exchange due to the rejection of the tender due to uncured defects or the       
prior termination of the Exchange Offer, or which have been validly withdrawn,  
will be returned to the holder thereof (unless otherwise provided in the        
Letter of Transmittal), as soon as practicable following the Expiration Date    
or, if so requested in the notice of withdrawal, promptly after receipt by the  
Company of notice of withdrawal without cost to such holder.                    

CONDITIONS TO THE EXCHANGE OFFER                                                

The Exchange Offer shall not be subject to any conditions, other than that  
(i) the Commission has issued an order or orders declaring the Indenture        
governing the Notes qualified under the Trust Indenture Act of 1939, (ii) the   
Exchange Offer, or the making of any exchange by a holder, does not violate     
applicable law or any applicable interpretation of the staff of the             
Commission, (iii) no action or proceeding shall have been instituted or         
threatened in any court or by or before any governmental agency with respect    
to the Exchange Offer, which, in the judgment of the Company, might impair the  
ability of the Company to proceed with the Exchange Offer, (iv) there shall     
not have been adopted or enacted any law, statute, rule or regulation which,    
in the Company's judgment, would materially impair its ability to proceed with  
the Exchange Offer or (v) there shall not have occurred any material change in  
the financial markets in the United States or any outbreak of hostilities or    
escalation thereof or other calamity or crisis the effect of which on the       
financial markets of the United States, in the Company's judgment, would        
materially impair its ability to proceed with the Exchange Offer.               

If the Company determines in its sole discretion that any of the conditions 
to the Exchange Offer are not satisfied, it may (i) refuse to accept any        
Original Notes and return all tendered Original Notes to the tendering          
holders, (ii) extend its Exchange Offer and retain all Original Notes tendered  
prior to the Expiration Date, subject, however, to the rights of holders to     
withdraw such Original Notes (see "--Withdrawal of Tenders") or (iii) waiver    
such unsatisfied conditions with respect to the Exchange Offer and accept all   
validly tendered Original Notes which have not been withdrawn. If such waiver   
constitutes a material change to the Exchange Offer, the Company will promptly  
disclose such waiver by means of a prospectus supplement that will be           
distributed to the registered holders, and will extend the Exchange Offer for   
a period of five to 10 business days, depending upon the significance of the    
waiver and the manner of disclosure to the registered holders, if the Exchange  
Offer would otherwise expire during such five to 10 business day period.        

EXCHANGE AGENT                                                                  

State Street Bank & Trust Company, the Trustee under the Indenture governing
the Notes, has been appointed as Exchange Agent for the Exchange Offer.         
Questions and requests for assistance, requests for additional copies of this   
Prospectus or of the Letter of Transmittal and requests for Notices of          
Guaranteed Delivery and other documents should be directed to the Exchange      
Agent addressed as follows:                                                     

By Mail:            By Facsimile:              By Hand: 

State Street Bank & Trust     (617) 664-5395      State Street Bank & Trust 
Company                                           Company 
Corporate Trust Department                        Corporate Trust Department  
      P.O. Box 778       Confirm by Telephone:  Two International Place, 4th
                                                 Floor

Boston, Massachusetts 02102-    (617) 664-5587     Boston, Massachusetts 02110  
        0078                                    Attention: Kellie Mullen
Attention: Kellie Mullen                                                      

34  

S-4/A
36th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 36th
FEES AND EXPENSES                                                               

The expenses of soliciting tenders will be borne by the Company. The        
principal solicitation is being made by mail; however, additional solicitation  
may be made by telegraph, telecopy, telephone or in person by officers and      
regular employees of the Company and its affiliates.                            

No dealer-manager has been retained in connection with the Exchange Offer   
and no payments will be made to brokers, dealers or others soliciting           
acceptance of the Exchange Offer. However, reasonable and customary fees will   
be paid to the Exchange Agent for its service and it will be reimbursed for     
its reasonable out-of-pocket expenses in connection therewith.                  

The cash expenses to be incurred in connection with the Exchange Offer will 
be paid by the Company and are estimated in the aggregate to be approximately   
$300,000. Such expenses include fees and expenses of the Exchange Agent and     
the trustee under the Indenture, accounting and legal fees and printing costs,  
among others.                                                                   

The Company will pay all transfer taxes, if any, applicable to the exchange 
of its Original Notes pursuant to the Exchange Offer. If, however, a transfer   
tax is imposed for any reason other than the exchange of its Original Notes     
pursuant to the Exchange Offer, then the amount of any such transfer taxes      
(whether imposed on the registered holder or any other persons) will be         
payable by the tendering holder. If satisfactory evidence of payment of such    
taxes or exemption therefrom is not submitted with the Letter of Transmittal,   
the amount of such transfer taxes will be billed directly to such tendering     
holder.                                                                         

ACCOUNTING TREATMENT                                                            

The carrying values of the Original Notes are not expected to be materially 
different from the fair value of the Exchange Notes at the time of the          
exchange. Accordingly, no gain or loss for accounting purposes will be          
recognized. The expenses of the Exchange Offer will be amortized over the term  
of the Exchange Notes.                                                          

RESALE OF THE EXCHANGE NOTES; PLAN OF DISTRIBUTION                              

Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in     
connection with any resale of such Exchange Notes. This Prospectus, as it may   
be amended or supplemented from time to time, may be used by a broker-dealer    
in connection with resales of Exchange Notes received in exchange for Original  
Notes where such Original Notes were acquired as a result of market-making      
activities or other trading activities. The Company has agreed that, for a      
period of 180 days after the Expiration Date, it will make this prospectus, as  
amended or supplemented, available to any broker-dealer for use in connection   
with any such resale. In addition, until January 16, 1999, all dealers          
effecting transactions in the Exchange Notes may be required to deliver a       
prospectus.                                                                     

The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own         
account pursuant to the Exchange Offer may be sold from time to time in one or  
more transactions in the over-the-counter market, in negotiated transactions,   
through the writing of options on the Exchange Notes or a combination of such   
methods of resale, at market prices prevailing at the time of resale, at        
prices related to such prevailing market prices or negotiated prices. Any such  
resale may be made directly to purchasers or to or through brokers or dealers   
who may receive compensation in the form of commissions or concessions from     
any such broker-dealer or the purchasers of any such Exchange Notes. Any        
broker-dealer that resells Exchange Notes that were received by it for its own  
account pursuant to the Exchange Offer and any broker or dealer that            
participates in a distribution of such Exchanges Notes                          

35  

S-4/A
37th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 37th
may be deemed to be an "underwriter" within the meaning of the Securities Act   
and any profit on any such resale of Exchange Notes and any commission on       
concessions received by any such persons may be deemed to be underwriting       
compensation under the Securities Act. The Letter of Transmittal states that,   
by acknowledging that it will deliver and by delivering a prospectus, a         
broker-dealer will not be deemed to admit that it is an "underwriter" within    
the meaning of the Securities Act.                                              

For a period of 180 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to    
this Prospectus to any broker-dealer that requests such documents in the        
Letter of Transmittal. The Company has agreed to pay all expenses incident to   
the Exchange Offer (including the expenses approved in writing of one counsel   
for the holders of the Notes) other than commissions or concessions of any      
brokers or dealers and will indemnify the holders of the Notes (including any   
broker-dealers) required to use this Prospectus in connection with their        
resale of Exchange Notes as described above against certain liabilities,        
including liabilities under the Securities Act.                                 

USE OF PROCEEDS 

The Exchange Offer is intended to satisfy certain of the Company's          
obligations under the Registration Rights Agreement. The Company will not       
receive any cash proceeds from the issuance of the Exchange Notes offered       
hereby. In consideration for issuing the Exchange Notes as contemplated in      
this Prospectus, the Company will receive in exchange Original Notes in like    
principal amount, the form and terms of which are the same as the form and      
terms of the Exchange Notes, except as otherwise described herein under "The    
Exchange Offer--Terms of the Exchange Offer." The Original Notes surrendered    
in exchange for the Exchange Notes will be retired and canceled and cannot be   
reissued. Accordingly, issuance of the Exchange Notes will not result in any    
increase in the indebtedness of the Company.                                    

36  

S-4/A
38th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 38th
CAPITALIZATION  

The following table sets forth as of June 30, 1998 the capitalization of the
Company and its subsidiaries on a pro forma basis after giving effect to the    
Transactions as if they had occurred on June 30, 1998. See "The Transactions."  
The information set forth below should be read in conjunction with the          
"Unaudited Pro Forma Financial Information" and the Consolidated Financial      
Statements of the Company and its subsidiaries and related notes thereto        
included elsewhere herein.                                                      

                                                                [Download Table]

                                                            AMOUNT       
                                                    ---------------------
                                                    (DOLLARS IN MILLIONS)
                                                                         
Bank Credit Agreement(/1/):                                              
  Revolving Credit Facility........................ $        3.2         
  Term Loan........................................         35.0         
  ESOP Term Loan...................................          1.5         
Original Notes.....................................        100.0         
                                                    ------------         
  Total debt.......................................        139.7         
Common stock held by ESOP(/2/).....................          1.5         
  Less--Note receivable from ESOP..................         (1.5)        
Total stockholder's equity.........................         26.5         
                                                    ------------         
  Total capitalization............................. $      166.2         
                                                    ============         

--------                                                                        
(1) The Company has available borrowings under the Revolving Credit Facility    
of up to $15 million, subject to borrowing base limitations. The Company
also has available borrowings under the Acquisition Facility of $25     
  million, subject to the terms thereof. See "Description of the Bank Credit
Agreement."                                                             
(2) For a description of the Company ESOP Loan, see "Management--Employee       
Stock Ownership Plan."                                                  

37  

S-4/A
39th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 39th
UNAUDITED PRO FORMA FINANCIAL INFORMATION 

The unaudited pro forma financial information set forth below should be read
in conjunction with the historical Consolidated Financial Statements and notes  
thereto of the Company and its subsidiaries included elsewhere in this          
Prospectus and "Management's Discussion and Analysis of Financial Condition     
and Results of Operations." The following unaudited pro forma consolidated      
statements of operations for the year ended December 31, 1997, the six months   
ended June 30, 1998 and the twelve month period ended June 30, 1998 give        
effect to the Transactions as if they had occurred at January 1, 1997, and the  
following unaudited pro forma consolidated balance sheet gives effect to the    
Transactions as if they had occurred on June 30, 1998.                          

The pro forma adjustments are based upon available information and certain  
assumptions that management believes are reasonable. Although management has    
used its best judgment in estimating the fair value of the net assets, various  
pending studies, analyses and operational decisions may result in significant   
changes in the current estimates and corresponding changes of the goodwill      
balance. The pro forma financial information is presented for informational     
purposes only, and does not purport to represent what the results of            
operations or financial condition would actually have been had the              
Transactions in fact occurred on the dates set forth above or to project the    
Company's results of operations or financial condition for any future period    
or as of any date, respectively.                                                

38  

S-4/A
40th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 40th
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS 

FOR THE YEAR ENDED DECEMBER 31, 1997

(DOLLARS IN THOUSANDS)

                                                                [Download Table]

                                          THE COMPANY  PRO FORMA     THE COMPANY
                                          HISTORICAL  ADJUSTMENTS     PRO FORMA 
                                          ----------- -----------    -----------
                                                                                
Net sales................................  $ 77,418          --       $ 77,418  
Net rentals..............................    27,382          --         27,382  
                                           --------    --------       --------  
  Net revenues...........................   104,800          --        104,800  
Cost of sales............................    50,518         163 (a)     50,681  
Cost of rentals..........................     9,626          --          9,626  
Selling, general and administrative                                             
 expenses................................    25,302       1,769 (b)     26,646  
                                                            375 (c)             
                                                           (800)(d)             
                                           --------    --------       --------  
  Income from operations.................    19,354      (1,507)        17,847  
Interest expense.........................     3,710      11,105 (e)     14,815  
Interest income..........................      (367)         --           (367) 
Other expense (income), net..............       404          --            404  
                                           --------    --------       --------  
  Income before income taxes and                                                
   extraordinary item....................    15,607     (12,612)         2,995  
Provision for income taxes (benefit).....     6,412      (4,012)(f)      2,400  
                                           --------    --------       --------  
  Income before extraordinary item.......     9,195      (8,600)           595  
                                           --------    --------       --------  
Extraordinary item.......................       772          --            772  
                                           --------    --------       --------  
  Net income.............................  $  8,423    $ (8,600)      $   (177) 
                                           ========    ========       ========  
EBITDA (g)...............................  $ 24,069    $    425       $ 24,494  
                                           ========    ========       ========  

See Notes to Unaudited Pro Forma Consolidated Statements of Operations

39

S-4/A
41st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 41st
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS 

FOR THE SIX MONTHS ENDED JUNE 30, 1998

(DOLLARS IN THOUSANDS)

                                                                [Download Table]

                                                THE                      THE   
                                              COMPANY    PRO FORMA     COMPANY 
                                             HISTORICAL ADJUSTMENTS   PRO FORMA
                                             ---------- -----------   ---------
                                                                               
Net sales...................................  $41,725          --      $41,725 
Net rentals.................................   14,475          --       14,475 
                                              -------     -------      ------- 
  Net revenues..............................   56,200          --       56,200 
Cost of sales...............................   26,259          77 (a)   26,336 
Cost of rentals.............................    5,146          --        5,146 
Selling, general and administrative                                            
 expenses...................................   13,294         874 (b)   13,956 
                                                              188 (c)          
                                                             (400)(d)          
                                              -------     -------      ------- 
  Income from operations....................   11,501        (739)      10,762 
Interest expense............................    1,393       6,015 (e)    7,408 
Interest income.............................       (7)         --           (7)
Other expense (income), net.................      171          --          171 
                                              -------     -------      ------- 
  Income before income taxes and                                               
   extraordinary item.......................    9,944      (6,754)       3,190 
Provision for income taxes (benefit)........    3,954      (2,176)(f)    1,778 
                                              -------     -------      ------- 
  Income before extraordinary item..........  $ 5,990      (4,578)       1,412 
Extraordinary item..........................      300          --          300 
                                              -------     -------      ------- 
Net income..................................  $ 5,690     $(4,578)     $ 1,112 
                                              =======     =======      ======= 
EBITDA (g)..................................  $13,873     $   212      $14,085 
                                              =======     =======      ======= 

See Notes to Unaudited Pro Forma Consolidated Statements of Operations

40

S-4/A
42nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 42nd
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS 

FOR THE TWELVE MONTHS ENDED JUNE 30, 1998 

(DOLLARS IN THOUSANDS)

                                                                [Download Table]

                                                                        THE    
                                                THE                   COMPANY  
                                              COMPANY    PRO FORMA      PRO    
                                             HISTORICAL ADJUSTMENTS    FORMA   
                                             ---------- -----------   -------- 
                                                                               
Net sales...................................  $ 80,667         --     $ 80,667 
Net rentals.................................    28,625         --       28,625 
                                              --------    -------     -------- 
  Net revenues..............................   109,292         --      109,292 
Cost of sales...............................    52,092         37 (a)   52,129 
Cost of rentals.............................    10,076         --       10,076 
Selling, general and administrative                                            
 expenses...................................    25,753      1,768 (b)   27,096 
                                                              375 (c)          
                                                             (800)(d)          
                                              --------    -------     -------- 
  Income from operations....................    21,371     (1,380)      19,991 
Interest expense............................     3,074     11,741 (e)   14,815 
Interest income.............................      (360)        --         (360)
Other expense (income), net.................       970         --          970 
                                              --------    -------     -------- 
  Income before income taxes and                                               
   extraordinary item.......................    17,687    (13,121)       4,566 
Provision for income taxes (benefit)........     6,991     (4,201)(f)    2,790 
                                              --------    -------     -------- 
  Income before extraordinary item..........    10,696     (8,920)       1,776 
                                              --------    -------     -------- 
Extraordinary item..........................       300         --          300 
                                              --------    -------     -------- 
Net income..................................  $ 10,396    $(8,920)    $  1,476 
                                              ========    =======     ======== 
EBITDA (g)..................................  $ 26,213    $   425     $ 26,638 
                                              ========    =======     ======== 

See Notes to Unaudited Pro Forma Consolidated Statements of Operations

41

S-4/A
43rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 43rd
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS  

(a) Represents the change in depreciation expense resulting from the            
preliminary purchase price allocation in accordance with the purchase   
method of accounting. Of the $30.8 million allocated to property, plant 
and equipment, $0.75 million was allocated to land, $3.75 million was   
  allocated to buildings (depreciated over a 30 year life) and $26.3 million
  was allocated to machinery and equipment (depreciated over a 7 year life).

(b) Represents an increase in amortization resulting from the preliminary       
purchase price allocation in accordance with the purchase method of     
accounting. Goodwill is amortized over 40 years.                        

(c) Represents the estimated annual cost to maintain the ESOP.                  

(d) Reflects the elimination of certain management fees and an officer's        
salary partially offset by the corresponding estimated costs of a new   
Chairman and Board of Directors and the Sterling management fee, and the
cost savings related to the restructuring of certain insurance policies.

(e) Represents the elimination of interest expense related to the historical    
debt outstanding and the incurrence of interest expense related to      
 borrowings under the Bank Credit Agreement and the issuance of the Notes.

                                                                [Download Table]

                                              SIX                   TWELVE 
                                             MONTHS   FISCAL YEAR   MONTHS 
                                             ENDED       ENDED      ENDED  
                                            JUNE 30,  DECEMBER 31, JUNE 30,
                                              1998        1997       1998  
                                            --------  ------------ --------
                                                                           
Interest expense on the Company's                                          
 historical debt..........................  $(1,393)    $(3,710)   $(3,074)
Interest expense on the Bank Credit                                        
 Agreement at an assumed rate of 8.0%.....    1,591       3,182      3,182 
Interest expense on the Notes at a rate of                                 
 10 3/4%..................................    5,375      10,750     10,750 
Amortization of debt issuance costs.......      442         883        883 
                                            -------     -------    ------- 
Total Company.............................  $ 6,015     $11,105    $11,741 
                                            =======     =======    ======= 

Borrowings under the Bank Credit Agreement bear interest at a floating  
 rate based on either LIBOR or a prime rate. A 1/8% change in the interest
rate would change annual interest expense by approximately $50,000.     

(f) Represents the tax effect of all adjustments, excluding the amortization    
of non-deductible goodwill, using a combined statutory and federal      
statutory income tax rate of approximately 37%.                         

(g) EBITDA is defined as income from operations plus depreciation and           
amortization. EBITDA is presented because it is a widely accepted       
financial indicator of a company's ability to incur and service debt.   
  EBITDA should not be considered by an investor as an alternative to income
from operations as determined in accordance with generally accepted     
 accounting principles as an indicator of the operating performance of the
Company or as an alternative to cash flows as a measure of liquidity.   

42  

S-4/A
44th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 44th
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 1998 

(DOLLARS IN THOUSANDS)

                                                                [Download Table]

                                                                         THE    
                                                THE                    COMPANY  
                                              COMPANY    PRO FORMA       PRO    
                  ASSETS                     HISTORICAL ADJUSTMENTS     FORMA   
                  ------                     ---------- -----------    -------- 
                                                                                
Current assets:                                                                 
  Cash and cash equivalents................   $   490     (158,946)(a)      490 
                                                           158,946 (b)          
  Accounts receivables, net................    14,643           --       14,643 
  Inventories, net.........................     9,714           --        9,714 
  Prepaid income taxes and other current                                        
   assets..................................       503           --          503 
  Current income tax receivable............        --        1,353 (a)    1,353 
  Deferred income tax benefit..............     2,847           --        2,847 
                                              -------    ---------     -------- 
    Total current assets...................    28,197        1,353       29,550 
Plant and equipment, net...................    25,165        5,631 (a)   30,796 
Other assets:                                                                   
  Goodwill, net............................    33,055       73,958 (a)  110,582 
                                                             3,569 (c)          
  Intangible assets, net...................       841           --          841 
  Deferred charges, net....................    12,348         (287)(a)   19,361 
                                                             7,300 (b)          
  Other assets.............................        37           --           37 
                                              -------    ---------     -------- 
    Total other assets.....................    46,281       84,540      130,821 
                                              -------    ---------     -------- 
Total assets...............................   $99,643    $  91,524     $191,167 
                                              =======    =========     ======== 

   LIABILITIES AND STOCKHOLDER'S EQUITY                                         
   ------------------------------------                                         
                                                                                
Current Liabilities:                                                            
  Current maturities of long-term debt.....   $13,757      (13,757)(a)    2,875 
                                                             2,875 (b)          
  Accounts payable.........................     4,653           --        4,653 
  Accrued liabilities......................     6,679         (390)(a)    6,289 
  Accrued income taxes.....................     1,871       (1,871)(a)       -- 
                                              -------    ---------     -------- 
    Total current liabilities..............    26,960      (13,143)      13,817 
Non-Current Liabilities:                                                        
  Long-term debt, less current maturities..    12,867      (12,867)(a)       -- 
  Revolving Credit Facility................        --        3,246 (b)    3,246 
  Term Loan................................        --       32,500 (b)   32,500 
  Notes offered hereby.....................        --      100,000 (b)  100,000 
  ESOP Term Loan...........................        --        1,125 (b)    1,125 
  Other non-current liabilities............    11,006       (3,700)(a)    7,306 
  Deferred income taxes....................     3,104        3,569 (c)    6,673 
                                              -------    ---------     -------- 
    Total non-current liabilities..........    26,977      123,873      150,850 
  Common stock held by ESOP................        --        1,500 (b)    1,500 
  Less: Note receivable from ESOP..........        --       (1,500)(b)   (1,500)
Stockholder's Equity:                                                           
  Common stock and additional paid-in                                           
   capital.................................    16,723      (16,723)(a)   26,500 
                                                            26,500 (b)          
  Retained earnings........................    29,508      (29,508)(a)       -- 
  Accumulated other comprehensive income...      (525)         525 (a)       -- 
                                              -------    ---------     -------- 
    Total stockholder's equity.............    45,706      (19,206)      26,500 
                                              -------    ---------     -------- 
Total liabilities and stockholder's equity.   $99,643    $  91,524     $191,167 
                                              =======    =========     ======== 

See Notes to Unaudited Pro Forma Consolidated Balance Sheet 

43

S-4/A
45th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 45th
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET 

(a) Represents the adjustment to record the acquisition in accordance with      
purchase accounting.                                                    

                                                                [Download Table]
                                                                         
Purchase price.................................................. $155,250
Preliminary adjustment for working capital......................    2,496
Acquisition costs...............................................    1,200
                                                                 --------
Total........................................................... $158,946
                                                                 ========

The resultant pro forma purchase price entries are as follows:              

                                                                [Download Table]
                                                                          
Fixed assets.................................................. $  5,631   
Common stock and additional paid in capital...................   16,723   
Retained earnings.............................................   29,508   
Accumulated other comprehensive income........................     (525)  
Elimination of historical debt                                            
  Current.....................................................   13,757   
  Long-term...................................................   12,867   
  Interest payable............................................      309   
Elimination of historical environmental liability.............    3,700   
Elimination of historical deferred debt issuance costs........     (287)  
Elimination of litigation accrual retained by seller..........       81   
Goodwill......................................................   73,958   
Current taxes                                                             
  Current income tax receivable...............................    1,353(i)
  Accrued income taxes........................................    1,871(i)
                                                               --------   
                                                               $158,946   
                                                               ========   

--------                                                                        
(i) Represents the change in accrued income taxes due to additional         
 deductible expenses of approximately $11.6 million resulting from the
Transactions, including bonus plans, the extinguishment of debt and 
 the exercise of stock options. Such amounts shall reduce the proceeds
paid to the selling stockholders.                                   

(b) In order to finance the Acquisition and related fees and expenses, the      
Company used the proceeds of the issuance of the Notes, the Equity      
Investment and borrowings under the Bank Credit Agreement.              

                                                                [Download Table]
                                                                        
Proceeds of Original Notes.................................... $100,000 
Proceeds of Equity Investment.................................   26,500 
Proceeds of Common Stock held by ESOP.........................    1,500 
Proceeds from initial borrowings under the Bank Credit                  
 Agreement                                                              
  Term Loan...................................................   35,000 
  Revolving Credit Facility...................................    3,246 
  ESOP Term Loan..............................................    1,500 
Deferred financing costs......................................   (7,300)
Loan made by the Company to the ESOP..........................   (1,500)
                                                               -------- 
                                                               $158,946 
                                                               ======== 

(c) Represents the adjustment to deferred taxes resulting from the allocation   
of purchase price to the fair values of assets and liabilities acquired.

44

S-4/A
46th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 46th
SELECTED HISTORICAL FINANCIAL DATA  

The selected historical consolidated financial information presented below  
as of December 31, 1993, 1994, 1995, 1996 and 1997 and for the periods ended    
December 31, 1993, March 15, 1994, December 31, 1994, 1995, 1996 and 1997 is    
derived from the consolidated financial statements of the Company, which have   
been audited by Arthur Andersen LLP, independent public accountants. The        
Predecessor Company financial data presented in the table below represents      
financial information for the Company prior to its acquisition by an investor   
group led by Cortec Group on March 15, 1994. Due to the substantial change in   
controlling interest in the Company, the Company reflected a complete change    
in its accounting basis of its assets and liabilities from Predecessor Company  
historical cost to estimated fair value as of March 15, 1994. The selected      
consolidated financial information presented below as of and for each of the    
six month periods ended June 30, 1997 and 1998 is derived from the unaudited    
interim financial statements of the Company. In the opinion of management,      
such unaudited interim financial statements include all adjustments             
(consisting of only normal recurring adjustments) necessary for a fair          
presentation of the Company's financial position and results of operations for  
such periods. The unaudited operating results for the six months ended June     
30, 1998 are not necessarily indicative of the results that may be expected     
for the full year ending December 31, 1998. The information presented below     
should be used in conjunction with "Management's Discussion and Analysis of     
Financial Condition and Results of Operations," and the consolidated financial  
statements of the Company and the related notes thereto included elsewhere      
herein.                                                                         

                                                        [Enlarge/Download Table]

                             PREDECESSOR                                                                     
                               COMPANY                                                                       
                          ------------------                                                                 
                            YEAR     PERIOD    PERIOD                                    SIX MONTHS ENDED    
                           ENDED     ENDED     ENDED     YEAR ENDED DECEMBER 31,             JUNE 30,        
                          DEC. 31,  MAR. 15,  DEC. 31,  ----------------------------  -----------------------
                            1993      1994      1994      1995      1996      1997       1997        1998    
                          --------  --------  --------  --------  --------  --------  ----------- -----------
                                                                                      (UNAUDITED) (UNAUDITED)
                                                     (DOLLARS IN THOUSANDS)                                  
                                                                                                             
STATEMENT OF OPERATIONS                                                                                      
 DATA:                                                                                                       
Net revenues............  $87,767   $18,593   $ 81,304  $104,326  $104,787  $104,800    $51,708     $56,200  
Cost of revenues........   56,594    11,869     51,662    64,829    61,294    60,144     29,381      31,405  
Charges for                                                                                                  
 environmental                                                                                               
 matter(/1/)............    1,430        --         --        --        --        --         --          --  
Selling, general &                                                                                           
 administrative                                                                                              
 expenses...............   20,728     4,587     17,883    24,181    25,146    25,302     12,843      13,294  
                          -------   -------   --------  --------  --------  --------    -------     -------  
Income from operations..    9,015     2,137     11,759    15,316    18,347    19,354      9,484      11,501  
Interest expense........    7,084     1,500      5,300     6,596     5,123     3,710      2,029       1,393  
Interest income.........      (75)      (17)       (61)      (44)      (39)     (367)       (14)         (7) 
Other expense (income),                                                                                      
 net....................      (69)     (105)      (240)      537        57       404       (395)        171  
                          -------   -------   --------  --------  --------  --------    -------     -------  
Income before income                                                                                         
 taxes and extraordinary                                                                                     
 item...................    2,075       759      6,760     8,227    13,206    15,607    $ 7,864     $ 9,944  
Provision for income                                                                                         
 taxes..................      861       315      3,116     3,338     5,730     6,412      3,375       3,954  
                          -------   -------   --------  --------  --------  --------    -------     -------  
Income before                                                                                                
 extraordinary item.....    1,214       444      3,644     4,889     7,476     9,195      4,489       5,990  
Loss on early                                                                                                
 extinguishment of debt,                                                                                     
 net....................       --        --         --        --       614       772        772         300  
                          -------   -------   --------  --------  --------  --------    -------     -------  
Net income..............  $ 1,214   $   444   $  3,644  $  4,889  $  6,862  $  8,423    $ 3,717     $ 5,690  
                          =======   =======   ========  ========  ========  ========    =======     =======  
OTHER FINANCIAL DATA:                                                                                        
EBITDA(/2/).............  $14,033   $ 3,182   $ 16,388  $ 20,783  $ 24,375  $ 24,069    $11,729     $13,873  
Depreciation and                                                                                             
 amortization(/3/)......    5,018     1,045      4,629     5,467     6,028     4,715      2,245       2,372  
Capital expenditures....    3,532       445      2,676     3,853     3,862     3,475      1,699       3,011  
Ratio of earnings to                                                                                         
 fixed charges(/4/).....      1.3x      1.5x       2.2x      2.1x      3.2x      4.5x       4.3x        6.5x 
BALANCE SHEET DATA (END                                                                                      
 OF PERIOD):                                                                                                 
Cash and cash                                                                                                
 equivalents............  $ 1,733   $ 2,227   $    872  $     45  $  1,716  $  1,310    $   426     $   490  
Working capital.........    7,120     8,144      7,872     6,750     7,362     3,824     10,864       1,237  
Total assets............   67,963    69,165    104,397   103,288    99,331    96,773     98,449      99,643  
Total debt..............   50,109    49,368     57,063    50,157    41,195    31,364     37,836      26,624  
Stockholder's                                                                                                
 equity(/5/)............   (7,408)   (7,058)    20,796    25,828    32,118    40,067     35,363      45,706  

See Notes to Selected Historical Financial Data 

45  

S-4/A
47th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 47th
NOTES TO SELECTED HISTORICAL FINANCIAL DATA 

(1) Charges related to involvement in an environmental matter and action at a   
property formerly owned by a predecessor of the Company.                
(2) EBITDA is defined as income from operations plus depreciation and           
amortization. EBITDA is presented because it is a widely accepted       
financial indicator of a company's ability to incur and service debt.   
  EBITDA should not be considered by an investor as an alternative to income
from operations as determined in accordance with generally accepted     
 accounting principles as an indicator of the operating performance of the
Company or as an alternative to cash flows as a measure of liquidity.   
(3) Depreciation and amortization does not include amortization of deferred     
financing costs or the discount on the 2001 Notes which are included in 
interest expense.                                                       
(4) The ratio of earnings to fixed charges is calculated as (a) income from     
continuing operations before income taxes plus fixed charges, divided by
(b) fixed charges. Fixed charges include interest expense, capitalized  
  interest and the interest portion of rent expense. The interest portion of
rent expense is calculated as one-third of total rent expense.          
(5) As part of the recapitalization of the Predecessor Company, which occurred  
on December 21, 1989, the Company paid a $65,695,000 cash dividend on   
common stock and recognized a $617,000 premium on the redemption of     
previously outstanding shares of preferred stock, resulting in a        
 stockholder's deficit at the end of 1989 and the succeeding periods until
the acquisition of the Predecessor Company in 1994.                     

46  

S-4/A
48th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 48th
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS 

GENERAL                                                                         

The Company is a leading designer, manufacturer, marketer and distributor of
a diverse range of products in several niche markets including productivity     
enhancing construction tools, formed wire products, industrial bag closing      
equipment and flexible conveyors. The Company operates through three business   
units: Ames, Nestaway and Fischbein. Ames is the leading designer,              
manufacturer, marketer and distributor of ATF tools, which are rented or sold   
to interior finishing contractors to finish drywall joints prior to painting,   
wallpapering or other forms of final treatment. Nestaway is a leading           
manufacturer of formed wire products which are used for a variety of            
commercial and consumer product applications. Fischbein is a leading worldwide  
manufacturer and marketer of industrial bag closing and handling equipment and  
systems and a leading manufacturer of flexible conveyors and storage racks.     

The Company distributes certain of its products through subsidiaries located
in Belgium, France, the United Kingdom, Singapore and Canada. The Company       
accounts for gains and losses resulting from foreign currency transactions in   
its consolidated statement of income. Income and expense items are translated   
at the average exchange rate for the period. The assets and liabilities of      
foreign subsidiaries are translated at the current rate of exchange at the      
balance sheet date. Balance sheet translation adjustments have been excluded    
from the results of operations and are reported as a separate component of      
stockholder's equity. As the Company's foreign revenues accounted for           
approximately 15% of the Company's net revenues, the results of the Company     
may be favorably or unfavorably affected to the extent the U.S. dollar weakens  
or strengthens versus the applicable corresponding foreign currency. The        
Company currently does not enter into hedging programs in an attempt to         
mitigate the fluctuations against the U.S. dollar.                              

During the periods discussed below, except as may be noted, inflation and   
changing prices have not had, and are not expected to have, a material impact   
on the Company's net revenues or its income from operations.                    

In 1997, the Company repurchased and extinguished $9.3 million in principal 
of its 11% Senior Subordinated Notes due 2001 (the "2001 Notes"). The Company   
recorded a charge of $1.3 million, $0.8 million net of tax, for the redemption  
premium, the writeoff of unamortized capitalized financing costs associated     
with the issuance of the 2001 Notes, the applicable original issue discount,    
and the expenses of the transaction. In May 1998, the Company repurchased and   
extinguished the remaining $5.3 million in principal of its 2001 Notes, and     
similarly recorded a charge of $0.5 million, $0.3 million net of tax. As a      
result of the refinancing of its bank debt in 1996, the Company recorded a      
debt extinguishment charge of $1.0 million on a pretax basis, $0.6 million net  
of tax, due to the writeoff of the unamortized capitalized financing costs      
related to the previous bank agreement.                                         

47  

S-4/A
49th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 49th
RESULTS OF OPERATIONS                                                           

                                                        [Enlarge/Download Table]

                                                                      SIX MONTHS ENDED       
                                 YEAR ENDED DECEMBER 31,                  JUNE 30,           
                          ---------------------------------------  ------------------------- 
                              1995          1996         1997         1997          1998     
                          ------------  ------------  -----------  ------------  ----------- 
                                              (DOLLARS IN MILLIONS)                          
                                                                                             
Net revenues                                                                                 
  Ames net revenues.....  $ 33.9  32.5% $ 38.0  36.2% $42.4  40.4% $20.7   40.0% $23.0  40.9%
  Nestaway net revenues.    42.6  40.8    39.7  37.9   35.3  33.7   18.0   34.8   20.0  35.6 
  Fischbein net                                                                              
   revenues.............    27.8  26.7    27.1  25.9   27.1  25.9   13.0   25.2   13.2  23.5 
                          ------ -----  ------ -----  ----- -----  -----  -----  ----- ----- 
   Total net revenues...   104.3 100.0   104.8 100.0  104.8 100.0   51.7  100.0   56.2 100.0 
                          ------ -----  ------ -----  ----- -----  -----  -----  ----- ----- 
Cost of revenues........    64.8  62.1    61.3  58.5   60.1  57.3   29.4   56.9   31.4  55.9 
                          ------ -----  ------ -----  ----- -----  -----  -----  ----- ----- 
Gross profit............    39.5  37.9    43.5  41.5   44.7  42.7   22.3   43.1   24.8  44.1 
Selling, general,                                                                            
 administrative                                                                              
 expenses...............    24.2  23.2    25.2  24.0   25.3  24.2   12.8   24.7   13.3  23.6 
                          ------ -----  ------ -----  ----- -----  -----  -----  ----- ----- 
Income from operations..    15.3  14.7    18.3  17.5   19.4  18.5    9.5   18.4   11.5  20.5 
Interest expense........     6.6   6.3     5.1   4.9    3.7   3.5    2.0    3.9    1.4   2.5 
Other expense (income)..     0.5   0.5      --   0.0    0.1   0.1   (0.4)  (0.8)   0.2   0.4 
                          ------ -----  ------ -----  ----- -----  -----  -----  ----- ----- 
Income before income                                                                         
 taxes and extraordinary                                                                     
 item...................     8.2   7.9    13.2  12.6   15.6  14.9    7.9   15.3    9.9  17.6 
Provision for income                                                                         
 taxes..................     3.3   3.2     5.7   5.4    6.4   6.1    3.4    6.6    3.9   6.9 
                          ------ -----  ------ -----  ----- -----  -----  -----  ----- ----- 
Income before                                                                                
 extraordinary item.....     4.9   4.7     7.5   7.2    9.2   8.8    4.5    8.7    6.0  10.7 
Extraordinary item......      --    --     0.6   0.6    0.8   0.8    0.8    1.5    0.3   0.6 
                          ------ -----  ------ -----  ----- -----  -----  -----  ----- ----- 
Net income..............  $  4.9   4.7% $  6.9   6.6% $ 8.4   8.0% $ 3.7    7.2% $ 5.7  10.1%
                          ====== =====  ====== =====  ===== =====  =====  =====  ===== ===== 

Six months ended June 30, 1998 compared to six months ended June 30, 1997     

Net Revenues. Net revenues for the six month period ended June 30, 1998     
increased 8.7% to $56.2 million from $51.7 million in the comparable period in  
1997. The increase in net revenues was a result of increased rentals and sales  
of ATF tools and increased sales of drywall related merchandise, dishwasher     
racks, other formed wire products and bag closing equipment.                    

Ames' net revenues increased 11.1% to $23.0 million in the six month period 
ended June 30, 1998 from $20.7 million in the comparable period in 1997. The    
increase was primarily the result of an increase in both price and volume of    
rented ATF tools. Factory-built housing initiatives also resulted in higher     
ATF rental revenues. In addition, Ames' revenues increased due to higher        
demand for drywall related merchandise and ATF tool sales.                      

Nestaway's net revenues increased 11.1% to $20.0 million in the six month   
period ended June 30, 1998 from $18.0 million in the comparable period in       
1997. The increase was primarily due to growth in formed wire products          
including dishdrainers and shower caddies, and several recent product           
additions, such as golf cart baskets and dryer racks. Revenues from dishwasher  
racks were also improved with the addition of a new OEM customer.               

Fischbein's net revenues increased 1.5% to $13.2 million in the six month   
period ended June 30, 1998 from $13.0 million in the comparable period in       
1997. The increase was primarily due to increased bag closing equipment sales   
in the U.S. and in Europe. This increase was partially offset by reduced        
revenues in Asian markets. In addition, revenues derived from sales of          
Fischbein's flexible conveyors declined due to lower market demand in the U.S.  

48  

S-4/A
50th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 50th
Gross Profit. Gross profit for the six month period ended June 30, 1998     
increased 11.2% to $24.8 million from $22.3 million in the comparable period    
in 1997. The increase in gross profit was attributable to the net revenue       
increase discussed above. Gross profit as a percentage of net revenues          
improved to 44.1% from 43.1% due to a favorable mix of higher margin products.  

Ames' gross profit improved with revenues. This improvement was offset by   
temporary operating inefficiencies as the Bensenville, Illinois and Tucker,     
Georgia rental ATF tool repair operations were consolidated into a new          
facility in Stone Mountain, Georgia. Nestaway's gross profit improved due to    
revenue growth, a non-recurring refund and temporary reduction in workers'      
compensation premiums, and a one-time favorable pricing adjustment.             
Fischbein's gross profit also improved due to product mix.                      

Selling, General and Administrative Expenses. Selling, general and          
administrative expenses for the six month period ended June 30, 1998 increased  
3.9% to $13.3 million from $12.8 million in the comparable period in 1997. As   
a percentage of net revenues, selling, general and administrative expenses      
declined from 24.8% to 23.7% due to improved overhead efficiency from           
increased sales.                                                                

Interest Expense. Interest expense for the six month period ended June 30,  
1998 decreased to $1.4 million from $2.0 million in the comparable period in    
1997. The decrease was the result of both a reduction in outstanding debt and   
the aforementioned repurchase of the 2001 Notes in May 1997 utilizing the       
Company's lower interest revolving credit loan and the final repurchase of the  
2001 Notes in May 1998. The repurchase of the 2001 Notes also reduced the       
amortization of the original issue discount and capitalized financing costs.    

Other Expense. Other expense was $0.2 million for the six month period ended
June 30, 1998 compared to other income of $0.4 million in 1997. The decrease    
was primarily due to a $0.5 million gain from the sale of an investment during  
the comparable period in 1997.                                                  

Income Taxes, Extraordinary Item and Net Income. The effective tax rate for 
the six month period ended June 30, 1998 was 39.4% compared to 43.0% for the    
prior year comparable period. This decrease in the effective tax rate was due   
in part to a reduction in the impact of non-deductible amortization expense.    
During the second quarter of 1998, the Company recorded a $0.3 million          
extraordinary charge related to the loss on extinguishment of the 2001 Notes.   
As a result of the above factors, net income was $5.7 million compared to $3.7  
million for the prior comparable period.                                        

Year ended December 31, 1997 compared to year ended December 31, 1996         

Net Revenues. Net revenues were unchanged at $104.8 million in 1997 compared
to 1996. Excluding the loss of an OEM customer in the second quarter of 1996,   
consolidated net revenues grew 4.3% over the prior year period. The loss of     
the OEM customer was offset by the increase in the rental and sale of ATF       
tools and drywall related merchandise sales through Company-managed stores. As  
a result of targeted marketing activities, bag closing equipment revenues in    
Latin America also increased. Currency changes resulted in a reduction in       
revenues of $1.6 million from 1996.                                             

Ames' net revenues increased 11.6% to $42.4 million in 1997 from $38.0      
million in 1996. ATF tool rental sales increased $2.5 million primarily due to  
both price and volume increases in rented ATF tools. Drywall related            
merchandise sales also improved $0.9 million as product offerings were          
expanded and additional marketing programs were developed to improve store      
sales. ATF tool sales increased $1.0 million in part due to the addition of     
new distribution locations.                                                     

Nestaway's net revenues decreased 11.1% to $35.3 million in 1997 from $39.7 
million in 1996. The decrease was primarily attributable to the loss of the     
aforementioned OEM customer, which resulted in a decline in revenues of $4.3    
million. Offsetting this decline were increased sales to a new OEM which        
accounted for $0.6 million in revenues in 1997.                                 

49  

S-4/A
51st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 51st
Fischbein's net revenues were unchanged at $27.1 million in 1997 compared to
1996. Fischbein recorded revenue growth in its bag closing product line in the  
U.S., Latin America and Europe of $0.7 million. Revenues from Europe, however,  
were negatively impacted by foreign currency translation rate changes which     
reduced revenues by $1.6 million. Excluding this event, bag closing revenues    
would have increased $2.3 million. Specific marketing programs directed         
towards Latin American markets improved revenues by $1.1 million. Revenues      
from storage racks declined $0.7 million primarily as a result of lower         
demand.                                                                         

Gross Profit. Gross profit increased 2.8% to $44.7 million in 1997 from     
$43.5 million in 1996. The improvement was directly related to rental revenue   
growth within the Ames business unit. Additionally, gross profit as a           
percentage of net revenues improved to 42.7% from 41.5% as a result of a shift  
towards higher margin products.                                                 

Ames' gross profit improved as a result of rental revenue increases together
with a reduction in tool refurbishment costs as a result of foreign             
outsourcing of parts and programs to reduce parts consumption. Nestaway's       
gross profit declined primarily due to product mix with a higher proportion of  
sales in lower margin non-dishwasher rack formed wire products and the impact   
of the startup of several new products including shower caddies, golf cart      
baskets and dishwasher racks for a new OEM customer offset by the elimination   
of certain fixed costs associated with the closure of a leased production       
facility in 1996. Fischbein's profit margins continued to improve due to cost   
reduction programs and improved operating efficiencies at the Statesville,      
North Carolina bag closing production facility. Fischbein also implemented a    
foreign parts sourcing program which resulted in lower components costs.        

Selling, General and Administrative Expenses. Selling, general and          
administrative expenses increased 0.4% to $25.3 million in 1997 from $25.2      
million in 1996. This was primarily attributable to an increase in bad debt     
expense accompanying increased revenue within the Ames business unit. The       
Company also recorded an increase in administrative and selling compensation.   
These increases were offset by lower insurance, benefits and amortization       
expense. Ames also recorded lower facility rental expenses with the closure of  
a training center. As a percentage of net revenues, selling, general and        
administrative expenses increased slightly to 24.2% in 1997 from 24.0% in       
1996.                                                                           

Interest Expense. Interest expense decreased to $3.7 million in 1997 from   
$5.1 million in 1996. The decrease was the result of a reduction in             
outstanding debt, a reduction in the interest rate on its revolving credit      
agreement as a result of a bank credit refinancing which occurred in June 1996  
and the repurchase of a portion of the 2001 Notes in May 1997 utilizing a       
lower cost bank line of credit.                                                 

Other Expense. Other expense was $0.1 million in 1997. In 1997, the Company 
recorded a gain on the sale of an investment. This income was offset by         
expenses related to efforts to sell one of the Company's divisions and the      
loss incurred on disposal of fixed assets.                                      

Income Taxes, Extraordinary Item and Net Income. The effective tax rate for 
the year ended 1997 was 41.0% compared to 43.2% in 1996. The decrease was due   
to a reduction in the estimate of state and foreign tax liabilities. During     
1997, the Company recorded a $0.8 million extraordinary charge related to the   
loss on extinguishment of a portion of the 2001 Notes. As a result of the       
above factors, net income increased to $8.4 million in 1997 from $6.9 million   
in 1996.                                                                        

Year ended December 31, 1996 compared to year ended December 31, 1995         

Net Revenues. Net revenues increased 0.5% to $104.8 million in 1996 from    
$104.3 million in 1995. Revenue growth was primarily the result of increased    
rental revenues of Ames' ATF tools and                                          

50  

S-4/A
52nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 52nd
drywall related merchandise. This increase in revenues offset the loss of the   
OEM customer in the second quarter of 1996 discussed above, which resulted in   
a revenue decline of $3.5 million from 1995.                                    

Ames' net revenues increased 12.1% to $38.0 million in 1996 from $33.9      
million in 1995. The increase in revenues was attributable to increased ATF     
tool rentals and increased sales of drywall merchandise. The increase in ATF    
rentals was, in part, due to the expansion of distribution opportunities with   
the addition of new franchises, a program begun in 1995. Increased rentals of   
ATF tools in the eastern and midwestern U.S. also contributed to volume         
increases. New product introductions and marketing programs facilitated a gain  
in drywall related merchandise sales.                                           

Nestaway's net revenues decreased 6.8% to $39.7 million in 1996 from $42.6  
million in 1995. The decrease was primarily attributable to the loss of the     
OEM customer discussed above. An additional OEM customer brought dishwasher     
rack production in-house in the third quarter of 1996 contributing to a $1.7    
million reduction in revenues. Other formed wire products contributed an        
additional $2.7 million in revenues primarily from the dishdrainer product      
line where Nestaway added coating capacity in 1995.                             

Fischbein's net revenues decreased 2.5% to $27.1 million in 1996 from $27.8 
million in 1995. This decrease was due to the inclusion of an additional month  
of sales in 1995 as the Company eliminated a one month financial reporting lag  
(the impact on income from operations was not material), and by a $0.6 million  
negative impact from translation changes. This decrease was offset by           
increased revenues of bag closing equipment and flexible conveyors.             

Gross Profit. Gross profit increased 10.1% to $43.5 million in 1996 from    
$39.5 million in 1995. The gross profit improvement was primarily attributable  
to changes in product and customer mix and cost reduction and efficiency        
programs in each of the business units. The gross profit as a percentage of     
net revenues improved to 41.5% in 1996 from 37.9% in 1995.                      

Gross profit improved at Ames due to the substantial growth in ATF rentals  
and lower refurbishment costs resulting from foreign parts sourcing and parts   
consumption reduction programs. Nestaway's gross profit increased due to        
improved operating efficiencies, product mix and reductions in workers'         
compensation premiums and real and personal property taxes. Fischbein also      
recorded improved gross profit margins in part due to equipment acquisitions    
which improved production capabilities and lowered production costs.            

Selling, General and Administrative Expenses. Selling, general and          
administrative expenses increased 4.1% to $25.2 million in 1996 from $24.2      
million in 1995. This increase was primarily attributable to additional         
marketing programs and bad debt expense incurred to support revenue growth,     
particularly at Ames. Bad debt expense on a consolidated basis increased $0.4   
million primarily due to revenue increases at Ames. Advertising and promotions  
increased $0.1 million. As a percentage of net revenues, selling, general and   
administrative expenses increased to 24.0% in 1996 from 23.2% in 1995.          

Interest Expense. Interest expense decreased to $5.1 million in 1996 from   
$6.6 million in 1995 due to a reduction in the interest rate on its revolving   
credit agreement as a result of a refinancing which occurred in June 1996.      

Other Expense. Other expense decreased from $0.5 million recorded in 1995.  
The Company recorded income in 1996 of $0.2 million as a result of a            
distribution relating to past claims received from the liquidation of an        
insurance company. In 1995, the Company had recorded charges for the disposal   
of fixed assets ($0.1 million) and the consolidation of two tool repair         
centers ($0.2 million).                                                         

51  

S-4/A
53rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 53rd
Income Taxes, Extraordinary Item and Net Income. The effective tax rate in  
1996 was 43.2% compared to 40.2% in 1995. This increase was due to an increase  
in the estimate of state and foreign tax liabilities. During 1996, the Company  
recorded a $0.6 million extraordinary charge related to the loss on             
extinguishment of its bank debt. As a result of the above factors, net income   
increased to $6.9 million from $4.9 million.                                    

LIQUIDITY AND CAPITAL RESOURCES                                                 

The Company generated cash from operations of $7.3 million for the six month
period ended June 30, 1998 compared to $3.0 million for the six month period    
ended June 30, 1997, and had cash on hand of $0.5 million at June 30, 1998.     
Cash from operations and cash on hand were utilized to fund capital             
expenditures of $3.0 million and a $5.0 million repayment of debt.              

At June 30, 1998, the Company had working capital of $1.2 million compared  
to working capital of $3.8 million at December 31, 1997. The decline in         
working capital was due to an increase in the current maturities of long-term   
debt of $2.8 million. The Company classified amounts outstanding under its      
revolving credit loan as a current liability. The Company increased its         
borrowings by $3.2 million as a result of the repurchase and extinguishment of  
$5.3 million of the 2001 Notes. Accounts receivable grew $1.9 million and       
inventories $0.6 million. The growth in accounts receivable occurred primarily  
at Nestaway. Due to the closure of many of its customer's plants during the     
period between Christmas and New Year's Day, Nestaway's receivables decline at  
year-end and increase in the first quarter as customer production activity      
resumes to normal levels. Accrued income taxes increased $1.6 million as a      
result of increased earnings and lower estimate payments.                       

During the six month period ended June 30, 1998, the Company utilized net   
cash provided by operations to fund capital expenditures of $3.0 million        
primarily for revenue maintenance and growth. Nestaway invested $0.7 million    
as it continued to convert the production capacity of its Clinton, North        
Carolina facility to produce dishwasher racks for a new customer and purchased  
equipment to manufacture new formed wire products. Ames expended $1.2 million   
on new ATF tools for the rental market and for wash systems for rental to       
manufactured housing customers.                                                 

Upon consummation of the Transactions, interest payments on the Notes and   
under the Bank Credit Agreement and amortization of the Term Loan will          
represent significant obligations of the Company. The Company's remaining       
liquidity demands relate to capital expenditures and working capital needs.     
For the year ended December 31, 1997, the Company spent $3.5 million on         
capital projects. The Company anticipates capital expenditures totaling $5.6    
million in 1998. Of this amount, $3.0 million had been spent through June 30,   
1998. Exclusive of the impact of any future acquisitions, the Company does not  
expect its capital expenditure requirements to increase materially in the       
foreseeable future.                                                             

The Company's primary sources of liquidity will be cash flows from          
operations and borrowings under the Bank Credit Agreement. The Revolving        
Credit Facility will provide the Company with $15.0 million of borrowings,      
subject to availability under the borrowing base. The Acquisition Facility      
will provide the Company with $25.0 million of borrowings, subject to           
customary conditions. "See Description of the Bank Credit Agreement". The       
Company believes that, based on current and anticipated financial performance,  
cash flow from operations and borrowings under the Revolving Credit Facility    
will be adequate to meet anticipated requirements for capital expenditures,     
working capital and scheduled interest payments. However, the Company's         
capital requirements may change, particularly if the Company should complete    
any material acquisitions. The ability of the Company to satisfy its capital    
requirements will be dependent upon the future financial performance of the     
Company, which in turn will be subject to general economic conditions and to    
financial, business and other factors, including factors beyond the Company's   
control.                                                                        

52  

S-4/A
54th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 54th
ACCOUNTING CHANGES                                                              

In 1997, the Financial Accounting Standards Board issued two new disclosure 
standards. Results of operations and financial position will be unaffected by   
implementation of these new standards.                                          

In 1998, the Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income," which requires companies    
to report all changes in equity during a period, except those resulting from    
investment by owners and distribution to owners, in a financial statement for   
the period in which they are recognized. The Company has chosen to disclose     
comprehensive income, which encompasses net income, minimum pension liability   
and foreign currency translation adjustments, in the consolidated statements    
of stockholder's equity. Prior periods have been restated to conform with SFAS  
130 requirements.                                                               

Statement of Financial Accounting Standards No. 131, "Disclosure about      
Segments of an Enterprise and Related Information" ("SFAS No. 131"), which      
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business         
Enterprise," establishes standards for the way that public enterprises report   
information about operating segments in annual financial statements and         
requires reporting of selected information about operating segments in interim  
financial statements issued to the public. It also establishes standards for    
disclosures regarding products and services, geographic areas, and major        
customers. SFAS No. 131 defines operating segments as components of an          
enterprise about which separate financial information is available that is      
evaluated regularly by the chief operating decision maker in deciding how to    
allocate resources and in assessing performance. Due to the recent issuance of  
this standard, management has been unable to fully evaluate the impact, if      
any, it may have on future financial statement disclosure.                      

OTHER MATTERS                                                                   

With the coming of the year 2000, there has been a great deal of publicity  
concerning computer information reporting and equipment failure due to          
hardware's and software's use of two-digit dates ("Year 2000"). Management is   
responsible for identifying the Company's computer systems affected by the      
Year 2000 issue and developing and executing a compliance plan. Each business   
unit has prepared and is in the process of implementing plans to replace        
current management information systems due to current hardware and software     
language obsolescence and the need to upgrade system capacities to management   
requirements. As a result, all business units expect their management           
information systems to be Year 2000 compliant by the end of 1998 or in early    
1999. The Company has spent approximately $0.6 million in 1997 and estimates    
spending an additional $0.7 million in the aggregate in 1998 and 1999 to        
upgrade its management information systems. There is no guarantee, however,     
that such systems replacements and modifications will be completed on time.     
The failure of the Company's suppliers and customers to address the Year 2000   
issue could significantly impact the Company.                                   

As a result of dishwasher rack sourcing decisions made by its customers in  
1996, the Company shut down a leased production facility in Canal Winchester,   
Ohio, and temporarily idled a second plant in Clinton, North Carolina. The      
Clinton facility resumed operations in 1997 when the Company was awarded a      
contract by a new dishwasher rack customer. The Beaver Dam, Kentucky plant,     
shut down in 1994 due to a customer's decision to utilize an alternative        
source of supply, was reopened in 1996 to produce dishwasher rack components,   
lower volume dishwasher racks, and other formed and coated wire products.       
During 1997 and 1996, the Company charged $0.6 million and $1.0 million,        
respectively, of the costs incurred against a facility realignment reserve      
established in prior periods. The Company has no further reserves for the       
realignment of its production capacities as of December 31, 1997, and           
management believes its current manufacturing operations are properly           
positioned to service current and future customers.                             

53  

S-4/A
55th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 55th
INDUSTRY  

ATF TOOLS                                                                       

Drywall construction was introduced in the U.S. in the 1930s as an          
alternative to plaster walls and is the leading interior wall material used     
today. Drywall has become the industry standard wall material due to its        
desirable physical properties (e.g. durability, hardness), cost, and ease of    
installation relative to plaster and is used in the vast majority of new        
residential, commercial, and industrial construction projects, as well as       
remodeling activity involving wall installation and replacement.                

The installation of drywall requires taping and finishing at the joints of  
the drywall construction. When drywall was first introduced, all taping and     
finishing was done by hand. In 1939, the Ames brothers in California invented   
the first ATF tools, which allowed drywall contractors to apply tape and        
compound with more consistent quality and less waste. Currently, ATF finishing  
techniques are generally three to four times faster than hand taping methods.   
As a result of these benefits, once finishers are trained in the use of ATF     
tools and have used them for a period of time, they typically do not revert     
back to hand taping techniques.                                                 

Due primarily to Ames' historical focus on the western U.S., ATF tools are  
more widely used in that market than in the eastern and midwestern U.S.         
Management believes that ATF tools have the potential for significant           
continued growth through increased sales efforts in the eastern and midwestern  
U.S. markets.                                                                   

In addition to the rate at which drywall professionals are converted from   
hand taping methods to ATF tools, demand is also influenced by housing starts.  
According to the U.S. Bureau of Census, total U.S. housing starts have grown    
at a 6.4% compound annual growth rate since 1991, reaching 1.5 million in       
1997. In addition, the median size of new, single family homes has increased    
25% since 1985 and this trend is expected to continue, leading to further       
growth in drywall shipments.                                                    

Drywall material is used in the construction of factory-built homes as well 
as traditional homes. Factory-built homes represented approximately 32% of the  
total number of single family homes sold in 1996 and shipments of factory-      
built homes totaled approximately 363,000 units in 1996, a compound annual      
growth rate of approximately 16% since 1991. Demand for factory-built homes is  
increasing due to greater community acceptance, size and affordability. In      
1996, management instituted a program to penetrate the factory-built housing    
market and believes this market offers significant growth potential.            

FORMED WIRE PRODUCTS                                                            

The formed wire products market includes a wide range of coated and non-    
coated formed wire products for various consumer, commercial and industrial     
applications including dishwasher racks, refrigerator racks, oven racks,        
bakery racks, shelving, dishdrainers, sink protectors, shower caddies, fan      
guards, dryer racks, golf cart baskets, bucket bails and medical baskets. The   
Company's primary formed wire products are dishwasher racks which are used by   
OEMs. The dishwasher rack is a key component for the OEMs and is an important   
driver of consumer preference. Because the dishwasher rack is visible to the    
consumer, it is a critical component for dishwasher manufacturers that utilize  
rack design to differentiate their products from competitors and to             
differentiate among their own models.                                           

The market for dishwasher racks is expected to continue to grow as          
dishwasher sales continue to increase. Dishwasher penetration among U.S.        
households has increased steadily from approximately 34% in 1973 to             
approximately 55% in 1996. This increased penetration has led to                

54  

S-4/A
56th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 56th
increased sales of dishwashers, which have grown at a compound annual rate of   
approximately 6% since 1991 reaching 5.1 million dishwashers in 1997.           
Replacements, which constitute 75% of dishwasher sales, and housing starts are  
the two major factors driving the demand for dishwashers. The Company believes  
it is the largest independent major supplier of dishwasher racks in North       
America.                                                                        

The U.S. market for formed wire products other than dishwasher racks is     
extremely fragmented and is comprised of many companies manufacturing a wide    
range of products. The Company believes there are no dominant manufacturers     
serving the formed wire products industry, but certain suppliers have           
established leading positions in certain niche markets.                         

BAG CLOSING EQUIPMENT                                                           

The bag closing equipment market includes equipment and consumables used in 
the closing, sealing, and handling of paper, textile and plastic bags across a  
wide variety of industries. 1996 U.S. manufacturers' shipments of bag opening,  
filling and closing machinery (excluding heat sealing) were approximately $133  
million, with bag closing and sealing machinery accounting for $61 million of   
total shipments. 1996 U.S. shipments of shrink film and heat sealing machinery  
were $124 million, with heat sealing equipment representing $68 million of the  
total. Between 1994 and 1996, the U.S. machinery manufacturers' sales of bag    
opening, filling and closing, grew at a compound annual growth rate of 6%,      
while sales of shrink film and heat sealing machinery grew at a compound        
annual growth rate of 10%. This growth is due to the increased productivity     
provided by automated bag closing systems.                                      

While data on the size and growth of the international markets for bag      
closing equipment is not available, management believes that international      
markets have exhibited higher rates of growth than the U.S. market due to the   
relative underpenetration of automated bag closing systems in these markets.    
Management expects global demand for bag closing and handling equipment and     
systems to continue to grow.                                                    

FLEXIBLE CONVEYORS                                                              

Flexible conveyors are part of the $60 billion worldwide material handling  
industry. The markets for flexible conveyors have grown at a 6.6% compound      
annual growth rate since 1994, reaching an estimated $910 million in 1997.      
This growth has been driven by trends towards greater efficiency and            
improvements in employee safety. Flexible conveyor products constitute a small  
portion of the overall conveyor equipment market, but are subject to the same   
overall industry growth trends.                                                 

55  

S-4/A
57th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 57th
BUSINESS  

GENERAL                                                                         

The Company is a leading designer, manufacturer, marketer and distributor of
a diverse range of products in several niche markets including productivity     
enhancing construction tools, formed wire products, industrial bag closing      
equipment and flexible conveyors. Management believes the Company possesses     
strong market leadership positions in its primary markets. The Company          
believes it is: (i) the largest U.S. supplier and distributor of ATF tools;     
(ii) the largest U.S. independent manufacturer of dishwasher racks; (iii) a     
leading worldwide manufacturer and marketer of bag closing products and (iv) a  
leading manufacturer and marketer of flexible conveyors and warehouse storage   
racks. The Company believes that its market leadership positions, brand name    
recognition, established national and international distribution networks,      
strong customer base and manufacturing expertise provide significant            
opportunities to grow sales of new and existing products within established     
markets, as well as expand into new markets. The Company also believes that     
its diverse base of products and markets reduces exposure to any particular     
industry, product market or geographic region. The Company operates through     
three business units: Ames, Nestaway and Fischbein. For the twelve months       
ended June 30, 1998, the Company had net revenues and pro forma EBITDA of       
$109.3 million and $26.6 million, respectively.                                 

Ames. Ames is the leading designer, manufacturer, marketer and distributor  
of ATF tools, which are rented or sold to interior finishing contractors to     
finish drywall joints prior to painting, wallpapering or other forms of final   
treatment. ATF tools, invented by Ames in 1939, enable interior finishing       
contractors to finish drywall joints three to four times faster than less       
productive hand finishing methods. The Company is the leader in ATF tool        
rentals and sales in the markets in which it serves. The primary business of    
Ames is the rental and service of more than 135,000 ATF tools through its       
extensive distribution network throughout the U.S. and Canada. Ames also sells  
ATF tools under the TapeTech(R) and TapeMaster(R) brand names through an        
established independent network of dealers in the U.S. and Canada. In           
addition, Ames sells a variety of other drywall tools, finishing accessories    
and supplies through its network of Company-managed stores. The Company         
believes it has significant opportunities to increase Ames' revenues by         
expanding the use of ATF tools in the fast growing factory-built housing        
market, which is increasingly utilizing drywall rather than other materials.    
The Company also believes it has a significant opportunity to expand the use    
of ATF tools by converting interior finishing contractors from traditional      
hand finishing methods, particularly in the eastern and midwestern U.S. where   
the use of ATF tools is less prevalent than in the western U.S. For the twelve  
months ended June 30, 1998, Ames had net revenues of $44.7 million.             

Nestaway. Nestaway is a leading manufacturer of formed wire products which  
are used for a variety of commercial and consumer product applications.         
Nestaway is North America's largest independent manufacturer of coated wire     
dishwasher racks and components which are sold to all the                       
major U.S. OEMs. Approximately 75% of dishwashers sold in the U.S. are          
replacements. In 1996, Nestaway produced an estimated 68% of all independently  
manufactured dishwasher racks and an estimated 17% of all dishwasher racks      
produced in the U.S. Nestaway's primary OEM customers include Maytag, EBS-      
Bosch and Whirlpool/KitchenAid. Nestaway has had relationships with all major   
OEMs for an average of approximately 19 years and approximately 90% of          
Nestaway's 1997 revenues were generated pursuant to requirements contracts      
with terms extending through 2002. Nestaway also manufactures, on a contract    
basis, other close tolerance, welded, non-coated or coated formed wire          
products such as dish drainers, sink protectors, shower caddies, dryer racks,   
golf cart baskets, bucket bails, medical baskets and small gauge axles. In      
1994, Nestaway entered into an agreement with a major consumer products         
company it has served for over 50 years to manufacture 100% of this customer's  
coated formed wire dish drainers and sink protectors. In 1997, Nestaway         
entered into an agreement with the same customer to manufacture 100% of its     
coated wire shower caddies. The Company believes it has significant             
opportunities to increase Nestaway's                                            

56  

S-4/A
58th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 58th
revenues through: (i) increasing sales to existing customers; (ii) expanding    
its product offering and customer base by developing new formed wire business;  
(iii) expanding production in international markets and (iv) pursuing           
strategic acquisitions. For the twelve months ended June 30, 1998, Nestaway     
had net revenues of $37.4 million.                                              

Fischbein. Fischbein is a leading worldwide manufacturer and marketer of    
industrial bag closing and handling equipment and systems and a leading         
manufacturer and marketer of flexible conveyors and storage racks. Bag closing  
and handling systems products include: (i) portable and stationary industrial   
sewing heads and sewing systems for paper, textile and woven polypropylene      
bags; (ii) industrial heat sealing and bag handling systems for paper and       
plastic bags; (iii) consumables, including thread and tape and (iv) service     
parts. Service parts, which provide a recurring base of revenue, accounted for  
approximately 20% of Fischbein's sales in 1997. Fischbein's bag closing         
products are used across a broad range of industries for packaging chemicals,   
minerals, agricultural and food products. In addition to bag closing products,  
Fischbein manufactures extendible, flexible, gravity and motorized conveyors    
and portable, nestable and stackable warehouse storage racks. Fischbein's       
flexible conveyors are used by retailers for loading and unloading tractor      
trailers at store sites and distribution centers. Storage racks are designed    
for factory and warehouse storage where flexibility in racking is desired and   
are sold to customers in various industries, including retail, distribution,    
food, chemical, pharmaceutical and textile. The Company believes it has         
significant opportunities to increase Fischbein's revenues by expanding the     
product offerings that can be sold through its extensive distribution network   
and by making strategic acquisitions. For the twelve months ended June 30,      
1998, Fischbein had net revenues of $27.2 million.                              

COMPETITIVE STRENGTHS                                                           

Established Leadership Positions in Niche Markets. The Company believes that
its product quality, customer-driven product development and high levels of     
customer service have allowed it to achieve strong market positions and brand   
name recognition. Management believes the Company possesses strong market       
leadership positions in its primary markets. The Company believes it is: (i)    
the largest U.S. supplier and distributor of ATF tools; (ii) the largest U.S.   
independent manufacturer of dishwasher racks; (iii) a leading worldwide         
manufacturer and marketer of bag closing products and (iv) a leading            
manufacturer and marketer of flexible conveyors and storage racks. Ames, which  
invented the ATF tool in 1939, continues to be the leader in ATF tool rentals   
and sales. Nestaway has been a leading independent supplier of dishwasher       
racks to the U.S. dishwasher industry for over 50 years. Fischbein, which       
first introduced a portable bag closer in 1943, is consistently recognized as   
a leading global supplier of bag closing equipment. The Company believes its    
leadership positions will allow it to: (i) broaden its product offerings to     
existing customers; (ii) expand its customer base with both new and existing    
products and (iii) diversify its geographic coverage to secure new customers    
and to meet the needs of existing customers in additional markets.              

Diverse Revenue Base. The Company's three business units provide revenue and
cash flow from a diverse base of products, customers and geographic regions.    
The Company's products are sold through multiple distribution channels to       
customers in over 100 countries in a wide variety of end-use markets. In 1997,  
international sales accounted for approximately 15% of the Company's revenues.  
This diversity of products and distribution channels provides the Company with  
a broad base from which to increase sales and expand customer relationships     
and reduces exposure to any particular industry, product market or geographic   
region.                                                                         

Manufacturing Expertise. The Company has a proven track record in product   
manufacturing and development in each of its business units. The Company        
utilizes this expertise in partnership with its customers both to improve       
product performance and to reduce manufacturing costs. Ames invented            

57  

S-4/A
59th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 59th
ATF tools and remains the leader in their design and development, and           
continues to make its products easier to use, more productive and less costly   
to refurbish. Nestaway frequently works directly with its OEM customers to      
design and manufacture new dishwasher racks and other formed wire products in   
a cost-effective manner. In addition, Nestaway develops and manufactures        
custom designed tooling and other equipment used in high volume precision wire  
forming, welding and coating, providing Nestaway with the ability to            
manufacture quickly and efficiently both new and redesigned products.           
Fischbein has successfully developed both new products and new features for     
existing products that enhance customer productivity and reduce Fischbein's     
manufacturing costs. The Company believes its manufacturing expertise enables   
it to strengthen customer loyalty, improve the value of its products and        
reduce manufacturing costs.                                                     

Established Distribution Networks. The Company has established broad        
distribution networks serving both domestic and international markets. Ames'    
rental ATF tools are distributed in the U.S. and Canada through over 125        
separate and distinct distribution locations and Ames' sold ATF tools are       
distributed in the U.S. and Canada through a network of over 250 dealers and    
distributors. Fischbein's national and international distribution network       
extends to over 100 countries through international and domestic distributors,  
dealers and packaging machinery manufacturers. Management believes that its     
distribution network provides it with an established base from which to         
introduce new products, expand sales of existing product lines and achieve      
operating efficiencies.                                                         

Proven and Committed Management Team. The Company has assembled a strong and
experienced management team at each of its business units. The Company's        
senior operating managers have an average of over 14 years of experience in     
their respective industries. Management has successfully enhanced operating     
margins through the implementation of various production improvements and cost  
cutting initiatives and as a result, EBITDA margins improved from 16.0% in      
1993 to 23.0% in 1997.                                                          

STRATEGY                                                                        

The Company's strategy is to increase revenues and cash flow in each of its 
business units through both internal growth and by pursuing selective           
acquisitions. Management believes the Company's market leadership positions,    
brand name recognition, strong customer base, established distribution          
networks and manufacturing expertise provide significant growth opportunities   
for the Company.                                                                

Ames' primary business strategy is to pursue the expansion of ATF tool use  
in the factory-built housing market and to continue to convert interior         
finishing contractors utilizing traditional hand finishing drywall methods to   
the use of ATF tools. With regard to the continued conversion from hand         
finishing to ATF tools, management believes there is a significant opportunity  
to increase utilization rates in the eastern and midwestern U.S. Ames has       
successfully increased its rental revenues in the eastern and midwestern U.S.   
at a 15% compound annual growth rate since 1993 and expects to continue to      
grow rental revenues in this market. Ames also plans to continue to expand its  
presence in the fast growing factory-built housing market which in 1996,        
accounted for 32% of all new single family homes and has grown at a compound    
annual growth rate of 16% since 1991. Ames has established relationships with   
major factory-built housing companies, including Fleetwood Enterprises,         
Champion Enterprises and Oakwood Homes, and management believes that the        
productivity enhancements associated with ATF tools provide Ames with a         
significant opportunity to increase revenues in this market where hand          
finishing is predominant.                                                       

Nestaway's primary business strategy is to increase sales to existing       
dishwasher rack customers and to expand its product offerings of other formed   
wire products. Management intends to continue to increase sales to existing     
customers by supplying its customers as they expand production in               

58  

S-4/A
60th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 60th
domestic and international markets and by further increasing its sales to OEMs  
that have in-house manufacturing operations. Nestaway will continue to pursue   
new customer relationships, and was recently awarded a new contract with EBS-   
Bosch, a leading European manufacturer of high-end dishwashers that has         
recently expanded operations in the U.S. In addition to dishwasher racks,       
Nestaway continues to focus on providing new formed wire products to new and    
existing customers for applications such as sporting goods, home organization,  
household products, computer accessories, air conditioning, utility carts and   
other formed wire products. Revenues from formed wire products other than       
dishwasher racks increased from $4.5 million, or 11% of Nestaway's net          
revenues, in 1993 to $11.3 million, or 32% of Nestaway's net revenues, in       
1997, a 26% compound annual growth rate. Nestaway plans to pursue an            
acquisition strategy that expands its current product offerings by leveraging   
Nestaway's core competency of precision wire forming and coating.               

Fischbein's primary business strategy is to expand its bagging product      
offerings through both new product development and by acquiring companies that  
manufacture complementary products in new and existing geographic markets.      
Management believes that the Company has a significant opportunity to increase  
sales of new products by leveraging its extensive national and international    
distribution capabilities and existing customer base. Management also believes  
that Fischbein has an opportunity to utilize its existing distribution network  
to expand sales of its storage and flexible conveyor products in the            
packaging, distribution and delivery industries.                                

PRODUCTS                                                                        

Ames. Ames' ATF tools are used in the construction industry by professional 
interior finishing contractors to finish and prepare drywall for painting or    
other forms of final treatment. ATF tools simultaneously apply joint tape and   
compound to all drywall joints and automatically dispense a controlled amount   
of joint compound for fast, efficient operation. Ames offers three sizes of     
ATF tools for rent to meet the needs of a variety of customers, including the   
standard size ("Bazooka(R)"), the short size ("Minizooka(R)"), and the extra    
long size ("Maxizooka(TM)"). For drywall finishers that prefer to purchase      
their ATF tools, Ames markets ATF tools under the TapeTech(R) and               
TapeMaster(R) brand names.                                                      

Ames also offers its customers a wide variety of other products used in     
drywall finishing including corner rollers, flat finishers, corner finishers,   
nail spotters, loading pumps and finisher handles. Corner rollers embed joint   
tape firmly into an interior corner or ceiling angle with metal wheels,         
forcing out excess compound and leaving the angle ready for finishing. Flat     
finishers are used to apply a final coat of joint compound over taped joints    
which does not require sanding. Corner finishers remove excess compound,        
feathering both sides at once and apply the second coat of compound for inside  
corners. Nail spotters apply compound to nail or screw head dimples, preparing  
them for painting or other final treatment. Loading pumps are used to fill      
Ames' ATF tools, nail spotters and flat finishers with joint compound.          
Finisher handles are specifically designed for use with Ames' products and      
allows the user to complete most of the taping and finishing work from the      
floor instead of using scaffolding or stilts.                                   

In addition, Ames' stores provide its customers with a variety of supplies  
and other products including hand finishing drywall tools, drywall finishing    
accessories, including spray rigs, power sanders, scaffolds and board handling  
devices, and drywall supplies, including compound, paper and mesh joint tape    
and corner bead.                                                                

Nestaway. Nestaway's products consist of formed, coated and non-coated wire 
products used for a variety of commercial and consumer product applications.    
Nestaway's primary focus is on producing dishwasher racks for OEMs. Nestaway    
also manufactures, on a contract basis, other close tolerance, welded, non-     
coated or coated formed wire products such as dishdrainers, sink protectors,    

59  

S-4/A
61st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 61st
shower caddies, dryer racks, golf cart baskets, bucket bails, medical baskets   
and small gauge axles. Nestaway's engineers frequently work with each           
individual customer to design new or improved products which are tailored to    
meet their customer's specific needs.                                           

Fischbein. Fischbein manufactures a variety of bag closing equipment,       
flexible conveyors and storage equipment. Fischbein's bag closing products      
consist of a variety of hand-held and stationary industrial sewing and sealing  
units which utilize portable sewing machines, industrial sewing heads, sewing   
systems and heat sealing and handling systems. Portable sewing machines are     
hand-held and lightweight for low and moderate volume applications and are      
effective in closing a wide variety of bags, including paper and woven          
polypropylene. Industrial sewing heads are designed for continuous use in       
moderate to high volume applications and are used to close paper, textile and   
woven polypropylene bags. Sewing systems consist of pedestal-mounted sewing     
heads with integrated conveying capabilities. These systems can be integrated   
into new or existing bagging lines and can be fully automated. Heat sealing     
and handling systems are generally used for medium to high speed bag closing    
and sealing applications. These systems incorporate programmable logic          
controllers, pneumatics, airflow and hot melt adhesive technologies, and are    
used to close polyethylene bags, paper bags, heat sealable inner liners, pinch  
style bags and hot melt adhesive closures. Fischbein also provides service      
parts, consumables, accessories, thread and tape used with Fischbein            
equipment.                                                                      

Fischbein also offers flexible conveyors and storage racks marketed under   
the Nestaflex(R), Nestainer(R) and Postainer(TM) brand names. Nestaflex(R)      
products include a full line of conveyors for a wide variety of material        
handling applications where stationary conveyors do not provide adequate        
flexibility. These products are used by major retailers for loading and         
unloading tractor trailers at store sites, by distribution centers and also in  
light manufacturing operations. Nestainer(R) and Postainer(TM) products         
consist of large, welded steel racks designed for factory and warehouse         
storage and transportation purposes where changes in stored products and        
quantities make stationary racking inefficient or impractical. The stackable    
and nestable features of both systems maximize vertical storage capacity and    
their unique design allows for compact storage when not in use. Nestainer(R)    
products are also used as containers for transporting products.                 

SALES AND MARKETING                                                             

The Company markets and sells its broad range of products to a wide variety 
of customers through an extensive sales and marketing network which utilizes    
full time sales representatives, franchisees and third party distributors.      
These sales efforts are enhanced by its product development staff, who work     
closely with customers to develop products which are customized to meet their   
specific needs.                                                                 

Ames. Ames' rental tool sales organization consists of over 100 individuals 
engaged in sales and marketing activities throughout North America. Ames' ATF   
rental tools reach drywall professionals in North America through over 125      
distribution locations including 57 Company-managed stores and 53 franchised    
operations. Ames sells ATF tools under the TapeTech(R) and Tapemaster(R) brand  
names through a network of 263 dealers and distributors.                        

Ames utilizes franchises, rental stations, field specialists and mobile     
operations to support its sales and marketing activities. Franchisees are       
typically major drywall and construction material distributors who operate      
multiple locations. Under its franchise arrangements, Ames trains franchisee    
personnel to demonstrate the advantages of using ATF tools, supplies Ames       
owned tools to the franchisee and uses the franchisees' employees to rent Ames  
tools to interior drywall finishers. Rental stations are used in locations      
where the usage of ATF tools cannot support stand-alone Company- managed        
stores. Ames typically operates its rental stores within a drywall              
distribution yard owned by a third party. Field specialists, who cover          
territories in well marked Ames vans, serve as direct marketers and on-site     
trainers, and operate as rental centers for job site customers. An important    

60  

S-4/A
62nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 62nd
component of Ames' marketing strategy is the demonstration of the advantages    
and techniques of Ames' products for existing and potential customers. In       
addition to training conducted by the field specialists during on-site          
demonstrations, training is conducted through eight training centers located    
at the Company's rental stores.                                                 

Nestaway. As a result of Nestaway's focus on large OEMs, senior executives  
are directly involved in sales and marketing efforts. Nestaway's sales and      
marketing efforts also include technical, engineering and manufacturing         
employees who regularly communicate with their counterparts of the OEM          
customer. As a result, the Company is able to customize its products to meet    
the needs of the customer in a timely and efficient manner with regard to both  
product development and assisting OEMs in developing more efficient             
manufacturing processes. The Company believes Nestaway's sales and marketing    
efforts are substantially enhanced by these inter-organizational                
relationships.                                                                  

Fischbein. Sales and marketing activities relating to Fischbein's bag       
closing products are divided into two regions: Western Hemisphere and Eastern   
Hemisphere. Western Hemisphere sales and marketing efforts are directed by the  
Vice President of Sales and Marketing, a U.S. and Canadian sales manager and a  
Latin American sales manager supported by three customer service specialists    
and a nine person engineering department. Products are also marketed by 47      
independent distributors and dealers, 20 packaging machinery manufacturers and  
directly to national accounts. In the Eastern Hemisphere, Fischbein manages a   
network of 67 independent distributors and dealers and 53 packaging machinery   
manufacturers in Belgium, the United Kingdom, France and Singapore.             

Fischbein's flexible conveyors and storage racks sales and marketing efforts
are directed by a sales manager with the assistance of four regional sales      
managers and supported by three sales specialists who are focused on sales      
support and customer service activities. Products are also sold through more    
than 500 independent material handling dealers throughout the U.S. and to a     
lesser extent in Canada and Latin America. Fischbein has sales partnership      
arrangements with 18 material handling systems manufacturers and sells          
directly to national end-user accounts. Fischbein supplements its sales         
activity with trade advertising, training, demonstrations, application videos   
and product literature and by participation in regional trade shows.            

CUSTOMERS                                                                       

The Company's customers are diversified across each of the Company's        
business units. Ames' products are generally used by interior finishing         
contractors and Ames currently has over 10,000 active customer accounts.        
Nestaway's products are sold to dishwasher manufacturers and other marketers    
of formed wire products, including major OEMs such as Maytag, Frigidaire, EBS-  
Bosch, Whirlpool/Kitchen Aid and General Electric. The Company's most           
significant OEM customer, Maytag, accounted for approximately 20% of the        
Company's consolidated revenues in 1997. The Company's customers of other       
formed wire products currently include the E-Z Go Division of Textron, Inc.,    
Melex International, Allegiance Healthcare and a major consumer products        
company. Fischbein's customers include companies in a variety of industries     
including the food, chemical, agriculture and other industries.                 

OPERATIONS                                                                      

Ames. Ames purchases proprietary ATF tool components from both domestic and 
foreign suppliers and either assembles the parts into finished tools in the     
Company's service centers or uses the parts to refurbish rental tools. These    
tools are then rented or sold through Ames' national distribution network. In   
addition, Ames cleans and refurbishes ATF tools at the end of each rental.      

Nestaway. Nestaway operates four manufacturing plants which are located near
its major customers. Nestaway's manufacturing operations consist of wire        
preparation and forming, welding,                                               

61  

S-4/A
63rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 63rd
coating and assembly and packaging. These manufacturing operations are highly   
automated and require high tolerance levels. The Company's processes include    
the use of robotics, custom designed manufacturing processes and tooling, the   
ability to weld up to 412 spots per unit and highly complex coating processes.  

Fischbein. Fischbein's manufacturing processes include precision machining, 
welding, final assembly and the integration of electronic controls. While most  
orders are for standard products, Fischbein also designs and builds custom      
systems.                                                                        

RAW MATERIALS AND SUPPLIERS                                                     

The Company purchases steel, metal castings, aluminum and other raw         
materials from various suppliers. While all such materials are available from   
numerous independent suppliers, commodity raw materials are subject to          
fluctuations in price. There can be no assurance that severe shortages of such  
materials will not occur in the future, which could increase the cost of or     
delay the shipment of the Company's products and have a material adverse        
effect on the Company's operating results. Because such materials in the        
aggregate constitute significant components of the Company's cost of goods      
sold, fluctuations in price could have a material adverse effect on the         
Company's results of operations. Historically, the Company has passed on any    
increases in prices of raw materials to its customers. However, there can be    
no assurance that the Company will continue to be able to do so in the future.  

COMPETITION                                                                     

Each of the business units operates within competitive industries. The      
Company is not aware of any single competitor that competes with the Company    
along all three business lines.                                                 

Ames products compete with alternative methods of drywall finishing and     
other products of ATF tool manufacturers and distributors. Ames' most           
significant competition is from traditional hand finishing by individual        
professional finishers. Ames stores also operate in a highly competitive        
environment with respect to the sale of drywall related merchandise which is    
generally based on price and convenience. Drywall related merchandise is        
available from contractor supply yards, building material retailers and other   
sources.                                                                        

Nestaway's primary independent competitor is Ranger Metal Products. However,
the majority of dishwasher racks are internally manufactured by OEMs. There     
can be no assurance that the Company's existing customers will not increase or  
establish in-house dishwasher rack manufacturing capacity in the future. In     
1996 and 1994, certain dishwasher rack customers decided to produce dishwasher  
racks in-house, resulting in a material decline in the Company's revenues. See  
"Risk Factors--Reliance on Major Customers" and "Management's Discussion and    
Analysis of Financial Condition and Results of Operations." General Electric,   
Frigidaire and Whirlpool operate in-house dishwasher rack manufacturing         
operations. Competition is generally based on quality, flexibility, product     
design innovation, manufacturing efficiency and price. Nestaway's other non-    
coated and coated formed wire products operate in a highly competitive          
environment based on price, quality and delivery capability and includes many   
companies, none of which compete with Nestaway across all its product lines.    
There can be no assurance the Company will continue to innovate its product     
offerings or continue to reduce manufacturing costs. Such inability to          
continue to innovate products or pass on manufacturing cost savings pursuant    
to contract terms or otherwise could lead to the loss of certain customers or   
lower gross margins.                                                            

Fischbein competes with a variety of manufacturers, but does not compete    
with any one company across all its product lines. In bag closing, Fischbein    
competes with Newlong, Union Special and Doboy Packaging Machinery, Inc.        
Competition for bag closing products is generally based on price, geographic    
location, service, reliability and product innovation. With regard to flexible  

62  

S-4/A
64th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 64th
conveyors, Fischbein primarily competes with Best Diversified Products, and     
competition is generally based on price and functionality. In storage racks,    
Fischbein competes with Jarke Corporation, Tier-Rack and Federal Prison         
Industries, and competition is based primarily on price and geographic          
location.                                                                       

ENVIRONMENTAL MATTERS                                                           

The Company is subject to various federal, state, local and foreign laws and
regulations governing environmental and employee health and safety matters,     
including the handling, the use, discharge and disposal of hazardous materials  
and pollutants. The Company believes that the conduct of its operations is in   
substantial compliance with current applicable environmental laws and           
regulations. Maintaining such compliance in the conduct of its operations has   
not had, and is not expected to have, a material adverse effect on the          
Company's financial condition or operating results. However, changes in laws    
or regulations or other circumstances might, individually or in the aggregate,  
have a material adverse effect on the Company's financial condition or          
operating results.                                                              

On February 25, 1991, the New York State Department of Environmental        
Conservation ("NYSDEC") sent a notice letter to the Company alleging that it    
had documented the release and/or threatened release of "hazardous substances"  
and/or the presence of "hazardous wastes" at a property located in Buffalo,     
New York, formerly owned by Bliss and Laughlin Steel Company, a predecessor of  
the Company. NYSDEC determined that the Company, among others, may be a         
responsible party through its past ownership of the property. The site is       
currently listed on the New York State Registry of Inactive Hazardous Waste     
Disposal Sites. Environmental consultants engaged by the Company have           
established a range of estimated remediation costs of approximately $1.0        
million to $3.0 million, plus or minus 30% of those costs. The Company          
established an accrual of $3.9 million for the remediation and associated       
costs.                                                                          

In 1997, the Company entered into an agreement with an adjoining landowner, 
who is obligated by NYSDEC to address environmental concerns at his property.   
By this agreement, the adjoining landowner agreed to accept responsibility for  
remediating the property formerly owned by the Company if a particular remedy   
for that property is ultimately approved by NYSDEC. On the advice of its        
environmental consultants, provided after reviewing available data about the    
Company's former property, the Company believes it is likely that NYSDEC will   
approve the remedy in question, but the Company can give no assurance that      
NYSDEC will in fact offer its approval. The Company paid the $520,000 payable   
under the agreement and has an exposure under the agreement of up to an         
additional $120,000 if contamination is more widespread than estimated by the   
Company's environmental consultants. In the event NYSDEC does not approve the   
remedy envisioned in the agreement with the adjoining landowner, the Company    
may terminate the agreement and demand the return of its payment with           
interest. In that case, the adjoining landowner would no longer be obligated    
to undertake the remediation of the property formerly owned by the Company.     

Of the consideration paid pursuant to the Merger Agreement, $5 million was  
set aside in a special escrow account to cover environmental costs which may    
be incurred by the Company in connection with cleanup of the site and any       
damages or other required environmental expenditures relating to the site. The  
balance in the account, after payment of such costs, will be released to the    
former stockholders upon the first to occur of the approval by NYSDEC of the    
proposed remediation action or the confirmation by NYSDEC that remediation at   
the site has been completed in accordance with its then applicable decision in  
the matter (the "Early Release Date"). If, however, the Early Release Date      
occurs before the additional $120,000 is paid under the above-described         
agreement, the special escrow account will continue as to that $120,000 until   
it is paid or it has become clear that no claim will be made for such funds.    
In addition, if certain additional specified cleanup activities are not         
completed by the Early Release Date, an additional $80,000 will be withheld in  
the special escrow account until such cleanup is completed. If all of the       
funds in the special escrow account have                                        

63  

S-4/A
65th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 65th
not been released by the third anniversary of the Closing Date, the funds       
remaining in the special escrow account will be disbursed to the Company to     
cover the remaining estimated costs, with the balance to be distributed to the  
former stockholders of the Company, in accordance with an agreement to be       
reached by the Stockholder Representative and the Company, or upon failure of   
such parties to agree, through an arbitration procedure.                        

The Company may also make claims against the warranty fund of the escrow    
fund for breach of certain representations and warranties in the Merger         
Agreement regarding other environmental matters for a period of 24 months       
after Closing Date, subject to a specified threshold and deductible.            

The Company is aware of other formerly-owned sites at which activities      
similar to the operations previously conducted on the Buffalo, New York         
property have taken place. However, the Company has received no claims in       
connection with those sites, and has no information that would lead it to       
believe that any such claim is likely to be made. The Company is also a part-   
owner and landlord at a stainless steel and aluminum facility in Commerce,      
California that is leased to and operated by an unrelated company. The Company  
has received no claims against it in connection with this site, but the         
Company cannot rule out the possibility that it might incur some liability      
should a claim actually be made against it as current owner of the property.    

The Buffalo, New York property formerly owned by the Company was at one time
used to mill uranium rods for the Atomic Energy Commission. The U.S.            
Department of Energy has since identified residual radioactivity in a building  
at the site. In 1996, the government estimated the costs of addressing the      
residual radioactivity at $965,000. Given the available data, the Company and   
its environmental consultants believe that a more likely total cost is less     
than $100,000. To date, no clean up costs have been assessed against the        
Company.                                                                        

In addition, the Company has retained or assumed certain environmental      
liabilities and risks of future liabilities associated with businesses          
previously operated or acquired by it, including Bliss and Laughlin Steel       
Company. The Company does not believe that these retained or assumed            
liabilities and risks would be expected to have a material adverse effect on    
the Company's financial condition or operating results. However, changes in     
laws or regulations, liabilities identified or incurred in the future, or       
other circumstances, might (individually or in the aggregate) have such an      
effect.                                                                         

EMPLOYEES                                                                       

As of June 30, 1998, the Company had approximately 1,000 employees, of which
approximately 150 were represented by two unions under two contracts which      
expire in 1999. The Company believes that its relations with its employees are  
satisfactory.                                                                   

64  

S-4/A
66th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 66th
PROPERTIES AND FACILITIES                                                       

The Company believes it has adequate capacity to meet the current           
requirements of its customers. The major properties of the Company are listed   
below. The Company also leases several offices, two service centers, a          
warehouse and 64 stores. These locations are historically leased on a short-    
term basis of one to five years to provide maximum flexibility. The business    
conducted at these leased locations is relocatable and no individual lease or   
location is material to the Company.                                            

                                                                [Download Table]

                            SIZE IN                                             
                              SQ.                                               
         LOCATION            FEET   OWNED/LEASED           DESCRIPTION          
         --------           ------- ------------ -------------------------------
                                                                                
Garfield Heights,                                                               
 Cleveland, Ohio..........  120,000    Owned     Fabrication of dishdrainer     
                                                 racks, wire products and       
                                                 storage racks and assembly of  
                                                 flexible conveyors             
McKenzie, Tennessee.......   79,000    Owned     Fabrication of dishwasher racks
Beaver Dam, Kentucky......   64,000    Owned     Fabrication of dishwasher      
                                                 racks, dishwasher rack         
                                                 components and other formed    
                                                 wire products                  
Clinton, North Carolina...   60,000    Owned     Fabrication of dishwasher racks
Commerce, California(/1/).   54,500 Owned/Leased Subleased                      
Statesville, North                                                              
 Carolina(/2/)............   50,000    Leased    Assembly and manufacture of    
                                                 industrial sewing and packaging
Livermore,                                       machines                       
 California(/3/)..........   27,600    Leased    Office and warehouse space for 
                                                 the manufacture, distribution, 
                                                 repair and maintenance of ATF  
Stone Mountain,                                  tools                          
 Georgia(/2/).............   18,200    Leased    Office and warehouse space for 
                                                 the manufacture, distribution, 
                                                 repair and maintenance of ATF  
                                                 tools                          
Duluth, Georgia(/4/)......   11,896    Leased    General office                 
Brussels, Belgium(/5/)....   11,000    Leased    Assembly and warehousing of    
                                                 packaging machines             
Hayward, California(/6/)..    8,000    Leased    Office, warehouse and parts    
                                                 distribution                   
Union City,                                                                     
 California(/6/)..........    5,800    Leased    Warehousing, distribution and  
                                                 assembly of sold ATF tools     
Paris, France.............    5,200    Owned     Assembly and distribution of   
                                                 packaging machines             
Lombard, Illinois(/6/)....    4,800    Leased    General office                 

--------                                                                        
(1) Property is 50% owned and 50% leased on a monthly basis                     
(2) Lease expires in 2003                                                       
(3) Lease expires in 2008                                                       
(4) Lease expires in 2001                                                       
(5) Lease expires in 2006                                                       
(6) Lease expires in 1999                                                       

65  

S-4/A
67th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 67th
LEGAL PROCEEDINGS                                                               

The Company is a defendant in a number of lawsuits incidental to its        
business. Including the environmental matters discussed above and taking into   
account the proceeds held in escrow pursuant to the Merger Agreement, the       
Company believes that none of these proceedings, individually, or in the        
aggregate, will have a material adverse effect on the Company's financial       
condition or operating results. See "--Environmental Matters."                  

66  

S-4/A
68th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 68th
MANAGEMENT  

DIRECTORS AND EXECUTIVE OFFICERS                                                

The following table sets forth the name, age and position held by the       
directors, and executive officers of AXIA Group and the Company. Each director  
is elected for a one year term or until such person's successor is duly         
elected and qualified.                                                          

                                                                [Download Table]

          NAME           AGE POSITION                                  
          ----           --- --------                                  
                                                                       
Gary L. Rosenthal.......  48 Chairman of the Board                     
Lyle J. Feye............  45 Vice President--Finance, Treasurer        
                              and Chief Financial Officer              
David H. Chesney........  55 President and General Manager of Nestaway 
Ian G. Wilkins..........  59 President and General Manager of Fischbein
Robert G. Zdravecky.....  52 President and General Manager of Ames     
Susan O. Rheney.........  39 Director                                  
Dennis W. Sheehan.......  64 Director                                  

Gary L. Rosenthal became Chairman of the Board in July 1998. Mr. Rosenthal  
is the President of Heaney Rosenthal, Inc., a private financial organization    
specializing in the acquisition of businesses, a position he has held since     
1994. From 1990 to 1994, he was Chairman, and in 1994 assumed the additional    
titles of Chief Executive Officer and President of Wheatley TXT Corp., a        
publicly-traded oilfield equipment manufacturer. From 1988 to 1990, he was a    
principal of Sterling. From 1987 to 1988, he was a Senior Vice President of     
Cain Chemical, Inc. Mr. Rosenthal currently serves as Chairman of the Board of  
Diamond Products International, Inc. and is a director of Texas Petrochemical   
Holdings, Inc. Mr. Rosenthal will continue to devote a substantial portion of   
his time to Heaney Rosenthal, Inc.                                              

Lyle J. Feye became Vice President--Finance, Treasurer and Chief Financial  
Officer of the Company in March 1994. From 1988 to March 1994, Mr. Feye was     
Corporate Controller and Assistant Treasurer of the Company. From 1975 to       
1988, Mr. Feye served in various positions with the Continental Group Inc.      
(formerly the Continental Can Company), including divisional financial and      
accounting management.                                                          

David H. Chesney became President and General Manager of Nestaway in 1991.  
From 1987 to 1991, Mr. Chesney served as General Manager of Lawrence            
Industries, a division of Electrolux, an assembler of vacuum cleaners and       
manufacturer of vacuum cleaner components, rubber and plastic hoses and         
electrical cord sets and harnesses. From 1967 to 1987, Mr. Chesney worked for   
General Electric Company where he held a variety of positions, the most recent  
being Materials Manager & Quality Assurance Manager with the Major Appliance    
Business Group.                                                                 

Ian G. Wilkins became President and General Manager of Fischbein in May     
1994. From 1988 to May 1994, Mr. Wilkins was Chief Operating Officer and        
General Manager of HK Metalcraft Manufacturing, a manufacturer of metal         
assemblies, components and other precision products primarily for the auto      
industry. Mr. Wilkins' responsibilities included supervision of manufacturing,  
sales and customer service. From 1984 to 1988, Mr. Wilkins had responsibility   
for all operations of Scott Aviation, a Division of Figgie International, as    
Vice President of Manufacturing.                                                

Robert G. Zdravecky became President and General Manager of Ames in 1993.   
Mr. Zdravecky first joined the Company in 1986 as General Manager of Sales and  
Marketing for Ames. He was promoted to Vice President of the Construction Tool  
Group, a position he held until 1992, when his                                  

67  

S-4/A
69th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 69th
employment with the Company terminated as a result of the sale of two of the    
Company's divisions to The Stanley Works. He rejoined the Company in 1993 in    
his current position. From 1981 to 1986, Mr. Zdravecky served as Vice           
President-Marketing and Sales with Adhesive Engineering Co.                     

Susan O. Rheney has been a principal of Sterling since February 1992. She   
worked as an independent financial consultant from December 1990 to January     
1992. Prior to that time, from June 1987 to November 1990, she was an           
associate at Sterling. Ms. Rheney is also a director of Texas Petrochemical     
Holdings, Inc.                                                                  

Dennis W. Sheehan was President and Chief Executive Officer of the Company  
from 1984 to July 1998. He joined the Company in 1977 as Vice President,        
General Counsel and Secretary. Mr. Sheehan is Chairman of the Board of          
Directors of Allied Healthcare Products, Inc., St. Louis, Missouri, a           
publicly-traded manufacturer and distributor of healthcare and related          
products.                                                                       

THE BOARD AND CERTAIN BOARD COMMITTEES                                          

The Company's Board supervises the management of the Company as provided by 
Delaware law.                                                                   

AXIA Group's Board expects to establish the following committees:           

The Executive Committee, which will possess all the powers and authority
of AXIA Group's Board with respect to the management and direction of the   
business and affairs of AXIA Group, except as limited by law.               

The Audit Committee, which will recommend independent public accountants
to AXIA Group's Board, review the annual audit reports of AXIA Group and    
review the fees paid to AXIA Group's independent public accountants. The    
Audit Committee will report its findings and recommendations to the Board   
for ratification.                                                           

 The Compensation Committee, which will be charged with the responsibility
for supervising AXIA Group's executive compensation policies, administering 
the employee incentive plans, reviewing officers' salaries, approving       
significant changes in executive employee benefits and recommending to the  
Board such other forms of remuneration as it deems appropriate.             

AXIA Group's Board, acting as a committee of the whole, will have the       
responsibility for considering nominations for prospective AXIA Group Board     
members. The Board will consider nominees recommended by other AXIA Group       
directors, stockholders and management provided that nominations by             
stockholders are made in accordance with AXIA Group's by-laws. AXIA Group's     
Board may also establish other committees.                                      

COMPENSATION OF DIRECTORS                                                       

Directors of AXIA Group and the Company who are not employees of the Company
receive an annual retainer of $15,000 and a fee of $500 for each meeting of     
the Board or any committee thereof that they attend. Directors who are also     
employees of the Company do not receive Director compensation.                  

68  

S-4/A
70th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 70th
EXECUTIVE COMPENSATION                                                          

The following table sets forth the total value of compensation received by  
the Chief Executive Officer and the four most highly compensated executive      
officers, other than the Chief Executive Officer, who served as executive       
officers of the Company as of December 31, 1997 (the "Named Executive           
Officers") for services rendered in all capacities to the Company for the       
years ended December 31, 1997, 1996 and 1995.                                   

SUMMARY COMPENSATION TABLE  

                                                                [Download Table]

                                                              OTHER ANNUAL     
NAME AND PRINCIPAL POSITION(/1/)   YEAR  SALARY   BONUS(/2/)  COMPENSATION(/3/)
--------------------------------   ---- -------- --------     ------------     
                                                                               
Dennis W. Sheehan................  1997 $336,000 $200,000       $19,837        
President and Chief Executive                                                  
 Officer(/4/)                      1996  336,000  200,000        19,626        
                                   1995  336,000  100,000        20,243        
Lyle J. Feye.....................  1997 $140,500 $ 45,000       $10,210        
Vice President--Finance,                                                       
 Treasurer and                     1996  134,208   45,000        10,183        
Chief Financial Officer            1995  127,709   28,000        10,150        
Robert G. Zdravecky..............  1997 $171,500 $ 62,640       $11,766        
President and General Manager of                                               
 Ames                              1996  163,333   67,500        11,664        
                                   1995  154,165   22,100        10,767        
David H. Chesney.................  1997 $166,900 $ 25,000       $ 9,317        
President and General Manager of                                               
 Nestaway                          1996  158,875  114,000         9,202        
                                   1995  152,502   67,900         8,731        
Ian G. Wilkins...................  1997 $163,083 $ 48,000       $ 8,958        
President and General Manager of                                               
 Fischbein                         1996  155,250   52,000         9,339        
                                   1995  145,835   22,100         9,145        

--------                                                                        
(1) Since 1994, these individuals have not received any restricted stock        
awards or options. None of the executive officers has received          
perquisites, the value of which exceeded the lesser of $50,000 or 10% of
the salary and bonus of such executive officer.                         
(2) The Company provides a bonus plan with bonus payments to be made in cash.   
(3) Includes payments for life insurance and automobile allowance.              
(4) In connection with the closing of the Transactions, Mr. Sheehan ceased to   
serve as President and Chief Executive Officer.                         

Mr. Rosenthal will receive annual compensation of $150,000 for his services 
as Chairman and will be eligible to participate in the Company's bonus plan     
and the 1998 Stock Awards Plan (as defined herein).                             

EMPLOYEE STOCK OWNERSHIP AND 401(K) PLAN                                        

All U.S. salaried and non-bargaining hourly employees, who have provided    
service to AXIA Incorporated for one-half of a year and are at least age 21,    
may participate in the AXIA Incorporated 401(k) Plan ("401(k) Plan"). The       
401(k) Plan is designed to qualify under Section 401(k) of the Internal         
Revenue Code of 1986, as amended (the "Code"). Each such employee has the       
option to defer taxation of a portion of his or her earnings by directing AXIA  
Incorporated to contribute a percentage of earnings to the 401(k) Plan          
("Deferral Contributions"). A participant may defer up to 15% of eligible       
earnings to the 401(k) Plan, subject to certain limitations set forth in the    
401(k) Plan. A participant is always 100% vested in his or her Deferral         
Contributions. A participant's Deferral Contributions become distributable      
upon the termination of his or her employment for any reason.                   

In connection with the Transactions, the Company established an Employee    
Stock Ownership Plan (the "ESOP"), covering substantially all full time         
employees, including executive officers, of the Company who satisfy the         
requirements described below. Following the Transactions, the 401(k) Plan       

69  

S-4/A
71st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 71st
will be merged into the ESOP, and an employee satisfying the eligibility        
requirements under the 401(k) Plan will be able to make Deferral Contributions  
to the ESOP as was allowed under the 401(k) Plan. The ESOP borrowed $1.5        
million from Finance Co. (the "Company ESOP Loan") to purchase 15,000 shares    
of Common Stock at the Closing. Finance Co. funded the Company ESOP Loan from   
the ESOP Term Loan. The Company ESOP Loan matures on December 31, 2003 and      
bears interest at interest rates based on the Alternative Base Rate (as         
defined) or the LIBOR Rate (as defined). The outstanding principal of the       
Company ESOP Loan is payable in 22 equal quarterly installments of $68,182      
during the period beginning September 30, 1998. The 15,000 shares of Common     
Stock purchased by the ESOP are pledged (the "ESOP Pledge") as security for     
the Company ESOP Loan, and such shares will be released and allocated to ESOP   
participants' accounts as the Company ESOP Loan is discharged. The Company      
will make ESOP contributions in amounts sufficient to enable the ESOP to        
discharge its indebtedness under the Company ESOP Loan. A percentage of the     
shares released under the ESOP Pledge will be allocated to each participant     
based on a percentage of such participant's Deferral Contributions ("Matching   
Contributions"), and (ii) the remaining percentage of such shares released are  
allocated to each participant based on such participant's compensation          
relative to total compensation for all ESOP participants ("Discretionary        
Contributions"). Until the Company ESOP Loan is paid in full, ESOP              
Contributions will be used to pay the outstanding principal and interest on     
the Company ESOP Loan. Participation begins as employees satisfy the            
eligibility requirements to make Deferral Contributions.                        

A participant's ESOP account, which is such participant's allocation of     
shares based on Matching or Discretionary Contributions, vests at the rate of   
20% per year. Distributions from the participant's ESOP account are made in     
cash or Common Stock upon a participant's retirement, death, disability or      
termination of employment. In the event of retirement, death or disability,     
the entire balance of a participant's ESOP account will become distributable    
without regard to the ordinary vesting schedule. In the event of termination    
of employment for any other reason, the vested portion of a participant's ESOP  
account will become distributable and the remaining portion, if any, will be    
forfeited. If Common Stock is distributed to a participant, the participant     
may, within two 60-day periods, require the Company to purchase all or a        
portion of such Common Stock at the fair market value of the Common Stock as    
determined under the ESOP (the "Put Options"). The first 60-day period          
commences on the date the participant receives a distribution of Common Stock   
and the second 60-day period commences a year from such date. If a participant  
fails to exercise either of the two Put Options, the participant may transfer   
the shares of Common Stock only upon receipt of a bona fide third party offer   
and only after first offering the shares to the ESOP and then to the Company.   
Employees of the Company own approximately 5.4% of the outstanding Common       
Stock through the ESOP.                                                         

RETIREMENT PLAN                                                                 

Substantially all salaried and non-bargaining hourly employees participate  
in the AXIA Incorporated Salaried Employees' Retirement Plan. Under the terms   
of the Plan, each eligible employee receives a retirement benefit based on the  
number of years of credited service with the Company and average total          
earnings for the five consecutive years of highest earnings during the fifteen  
years preceding termination of employment.                                      

As of December 31, 1997, the number of years of credited service for the    
indicated persons are: Mr. Sheehan, 19.08 years; Mr. Feye, 8.33 years; Mr.      
Zdravecky, 9.08 years; Mr. Chesney, 5.83 years and Mr. Wilkins, 2.58 years.     

70  

S-4/A
72nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 72nd
The amounts shown in the following table are estimated annual retirement    
benefits (payable as a straight life annuity) for the respective compensation   
levels and years of service, after deduction of an offset of anticipated        
Social Security benefits as provided under the terms of the Plan:               

                                                        [Enlarge/Download Table]

                                     YEARS OF SERVICE                                    
REMUNERATION        10              15              20              25              30   
---------------                                                                          
                 ------------------------------------------------------------------------
                                                                                         
$125,000          $22,568         $33,852         $45,136         $56,420         $67,704
$150,000           27,568          41,352          55,136          68,920          82,704
$175,000           32,568          48,852          65,136          81,420          97,704
$200,000           37,568          56,352          75,136          93,920         112,704
$225,000           42,568          63,852          85,136         106,420         127,704

MEDICAL INSURANCE                                                               

Certain Company officers participate in a medical insurance plan covering up
to $100,000 per participant in annual medical expenses. The aggregate benefit   
amount paid for such participants totaled $6,287 for 1997.                      

SALARY CONTINUATION                                                             

In order to attract and encourage key executives to remain with the Company,
the Company instituted a salary continuation program which provides certain     
key executives with a death benefit, contingent upon employment or service as   
a consultant with the Company until retirement or death. Upon the executive's   
death, the Company will pay to his designated beneficiary, annually for a       
period of ten years, an amount equal to 40% of the executive's current annual   
salary or salary at date of retirement. The Company may terminate the death     
benefit program and the agreement with any executive at any time prior to the   
executive's death, disability or retirement, except that, during the three      
year period following certain events involving a "change of control" of the     
Company, only a portion of those benefits may be terminated. The Company has    
purchased life insurance policies on the lives of the executives, naming the    
Company as the sole beneficiary. The amount of such coverage is designed to     
provide to the Company a source of funds to satisfy its obligations under the   
program. Annual premiums paid in 1997 with respect to Mr. Sheehan, was          
approximately $53,839; however, if current assumptions as to mortality          
experience, policy dividends and other factors are realized, the Company will   
recover, through tax deductions over the life of the program, all of its        
payments to the insurance company and the executives. Mr. Sheehan was the last  
active executive covered by this program.                                       

MANAGEMENT INCENTIVE COMPENSATION PLAN                                          

The Company has adopted an incentive plan which provides to certain         
employees, including the executives listed above, an annual performance bonus.  
These bonuses are calculated on the basis of the employee's base annual salary  
and percentage eligibility as defined in the plan. Bonuses are paid in the      
first quarter of the following year, assuming the Company meets a targeted      
earnings improvement, revenues, gross margin, cash flow, and/or such other      
measures as may be determined annually by the Company's directors.              

71  

S-4/A
73rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 73rd
STOCK OPTIONS                                                                   

The Parent has granted to certain employees stock options providing them the
option to purchase restricted shares of common stock of the Parent aggregating  
approximately 4% of the common stock on a fully diluted basis. All stock        
options were exercised prior to the closing of the Transactions and the new     
stock awards plan described below was adopted.                                  

1998 STOCK AWARDS PLAN                                                          

In connection with the closing of the Transactions, the Board of Directors  
and the Company's stockholders approved the Company's 1998 Stock Awards Plan    
(the "1998 Stock Awards Plan"). The 1998 Stock Awards Plan is intended to       
provide employees, consultants and other service providers with an opportunity  
to acquire a proprietary interest in AXIA Group and additional incentive and    
reward opportunities based on the growth in the Common Stock price of AXIA      
Group. The 1998 Stock Awards Plan provides for the granting of options (either  
incentive stock options within the meaning of Code Section 422(b), or options   
that do not constitute incentive stock options ("non-qualified stock            
options")), restricted stock awards, stock appreciation rights, performance     
awards and phantom stock awards, or any combination thereof. The number of      
shares of Common Stock that may be subject to outstanding awards is 31,111      
shares of Common Stock. Shares of Common Stock which are attributable to        
awards which have expired, terminated or been canceled or forfeited are         
available for issuance or use in connection with future awards.                 

Administration. The 1998 Stock Awards Plan will be administered by the      
Compensation Committee of AXIA Group. The Compensation Committee will have the  
power to determine which employees, consultants and other service providers     
will receive an award, the time or times when such award will be made, the      
type of the award and the number of shares of Common Stock to be issued under   
the award or the value of the award. Only persons who at the time of the award  
are employees of or service providers to AXIA Group or of any subsidiary of     
AXIA Group will be eligible to receive awards under the 1998 Stock Awards       
Plan. A director of AXIA Group is not eligible to receive an award under the    
1998 Stock Awards Plan unless such director is an employee of AXIA Group or     
any of its subsidiaries.                                                        

Options. The 1998 Stock Awards Plan provides for two types of options:      
incentive stock options and non-qualified stock options. The Compensation       
Committee will designate the persons to receive the options, the number of      
shares subject to the options and the terms and conditions of each option       
granted under the 1998 Stock Awards Plan. The term of any option granted under  
the 1998 Stock Awards Plan shall be determined by the Compensation Committee;   
provided, however, that an incentive stock option may only be awarded to an     
employee and that the term of any incentive stock option cannot exceed ten      
years from the date of the grant and any incentive stock option granted to an   
employee who possesses more than 10.0% of the total combined voting power of    
all classes of shares of AXIA Group or of its subsidiary within the meaning of  
Section 422(b)(6) of the Code must not be exercisable after the expiration of   
five years from the date of grant. The exercise price of options granted under  
the 1998 Stock Awards Plan will be determined by the Compensation Committee;    
provided, however, than an incentive stock option exercise price cannot be      
less than the fair market value of a share of Common Stock on the date such     
option is granted (subject to certain adjustments provided under the 1998       
Stock Awards Plan). Further, the exercise price of any incentive stock option   
granted to an employee who possesses more than 10.0% of the total combined      
voting power of all classes of shares of AXIA Group or of its subsidiaries      
within the meaning of Section 422(b)(6) of the Code must be at least 110% of    
the fair market value of the Common Stock on the date such option is granted.   
The exercise price of options granted under the 1998 Stock Awards Plan will be  
paid in full in a manner prescribed by the Compensation Committee.              

Restricted Stock Awards. Pursuant to a restricted stock award, Common Stock 
will be granted to an eligible person at the time the award is made without     
any cash payment to AXIA Group,                                                 

72  

S-4/A
74th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 74th
except to the extent otherwise provided by the Compensation Committee or        
required by law; provided, however, that such shares will be subject to         
certain restrictions on the disposition thereof and certain obligations to      
forfeit such shares to the Company as may be determined in the discretion of    
the Compensation Committee. The restrictions on disposition may lapse based     
upon (a) AXIA Group's attainment of specific performance targets established    
by the Compensation Committee that are based on; (i) the fair market value of   
a share of Common Stock; (ii) AXIA Group earnings per share; (iii) the          
Company's revenue; (iv) the revenue of a business unit of AXIA Group            
designated by the Compensation Committee; (v) the return on stockholders'       
equity achieved by AXIA Group or (vi) AXIA Group's pre-tax cash flow from       
operation (b) the grantee's tenure with AXIA Group, or (c) a combination of     
factors. AXIA Group will retain custody of the Common Stock issued pursuant to  
a restricted stock award until the disposition restrictions lapse. A grantee    
may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of  
such shares until the expiration of the restriction period. However, upon the   
issuance to the grantee of Common Stock pursuant to a restricted stock award,   
except for the foregoing restrictions, such grantee will have all the rights    
of a stockholder of the Company with respect to such shares, including the      
right to vote such shares and to receive all dividends and other distributions  
paid with respect to such shares.                                               

Stock Appreciation Rights. A stock appreciation right permits the holder    
thereof to receive an amount (in cash, Common Stock, or a combination thereof   
(as determined by the Compensation Committee)), equal in value to the number    
of stock appreciation rights exercised by the holder multiplied by the excess   
of the fair market value of Common Stock on the exercise date over the stock    
appreciation rights' exercise price. Stock appreciation rights may or may not   
be granted in connection with the grant of an option and no stock appreciation  
right may be exercised earlier than six months from the date of grant. A stock  
appreciation right may be exercised in whole or in installments and at such     
time as determined by the Compensation Committee.                               

Performance and Phantom Stock Awards. The 1998 Stock Awards Plan permits    
grants of performance awards and phantom stock awards, which may be paid in     
cash, Common Stock, or a combination thereof as determined by the Compensation  
Committee. Performance awards granted under the 1998 Stock Awards Plan will     
have a maximum value established by the Compensation Committee at the time of   
the grant. A grantee's receipt of such amount will be contingent upon           
satisfaction by AXIA Group, or any subsidiary, division or department thereof,  
of performance conditions established by the Compensation Committee prior to    
the beginning of the performance period. Future performance conditions may be   
based on: (i) the price of a share of Common Stock; (ii) AXIA Group's earnings  
per share; (iii) the Company's revenue; (iv) the revenue of a business unit of  
AXIA Group designated by the Compensation Committee; (v) the return on          
stockholder's equity achieved by AXIA Group; (vi) AXIA Group or business        
unit's pre-tax cashflow from operations or (vii) a combination of such          
factors. Such performance awards, however, may be subject to later revisions    
as the Compensation Committee deems appropriate to reflect significant          
unforeseen events or changes. A performance award will terminate if the         
grantee's employment or service with the Company terminates during the          
applicable performance period except as otherwise provided by the Compensation  
Committee at the time of grant. Phantom stock awards granted under the 1998     
Stock Awards Plan are awards of Common Stock or rights to receive amounts       
equal to stock appreciation over a specific period of time. Such awards vest    
over a period of time or upon the occurrence of a specific event(s)             
established by the Compensation Committee, without payment of any amounts by    
the holder thereof (except to the extent required by law) or satisfaction of    
any performance criteria or objectives. Future performance conditions may be    
based on (i) the price of a share of Common Stock; (ii) AXIA Group's earnings   
per share; (iii) AXIA Group's revenue; (iv) the revenue of a business unit of   
AXIA Group designated by the Compensation Committee; (v) the return on          
stockholder's equity achieved by AXIA Group; (vi) AXIA Group or business        
unit's pre-tax cashflow from operations or (vii) a combination of such          
factors. A phantom stock award will terminate if the grantee's employment or    
service with the Company terminates during the applicable vesting period or,    
if applicable, the                                                              

73  

S-4/A
75th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 75th
occurrence of a specific event(s), except as otherwise provided by the          
Compensation Committee at the time of grant. In determining the value of        
performance awards or phantom stock awards, the Compensation Committee must     
take into account a grantee's responsibility level, performance, potential,     
other awards under the 1998 Stock Awards Plan and such other considerations as  
it deems appropriate. Such payment may be made in a lump sum or in              
installments as prescribed by the Compensation Committee. Any payment made in   
Common Stock will be based upon the fair market value of the Common Stock on    
the payment date.                                                               

Income Tax Considerations. Upon the exercise of a nonqualified option, the  
optionee will recognize ordinary taxable income on the amount by which the      
fair market value of the Common Stock purchased exceeds the price paid for      
such Common Stock under the option. The Company shall be able to deduct the     
same amount for federal income tax purposes. The exercise of an incentive       
stock option has no tax consequence to an optionee or the Company. At the time  
the restrictions lapse on a restricted stock award, the holder of such award    
will recognize ordinary taxable income in an amount equal to the fair market    
value of the shares of Common Stock on which the restrictions lapse. The        
amount of ordinary taxable income recognized by such holder of a restricted     
stock award is deductible by the Company. Upon the exercise of a stock          
appreciation right, the holder of such right must include in ordinary taxable   
income the amount of cash or the fair market value of the shares of Common      
Stock received. The amount of ordinary taxable income recognized by such        
holder of the stock appreciation right is deductible by the Company. A holder   
of a performance award or a phantom stock award will include in his or her      
ordinary taxable income the fair market value of the shares of Common Stock     
related to such award when the holder's rights in such award first becomes      
transferable or is no longer subject to a substantial risk of forfeiture. The   
amount of ordinary taxable income recognized by the holder of either award is   
deductible by the Company.                                                      

74  

S-4/A
76th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 76th
RELATED TRANSACTIONS  

Sterling entered into an agreement with AXIA Group and Acquisition Co.      
pursuant to which Sterling is to provide consulting and advisory services with  
respect to the organization of AXIA Group, Acquisition Co. and Finance Co.,     
the structuring of the Transactions, employee benefit and compensation          
arrangements and other matters. The agreement also provides that AXIA Group     
and Acquisition Co., jointly and severally, will indemnify Sterling against     
liabilities relating to its services. At the Closing, the Company paid          
Sterling a one-time transaction fee of $2.5 million for these services, and     
reimbursed Sterling for its expenses. From the transaction fee received at      
Closing, Sterling paid Gary Rosenthal a fee of $250,000 for consulting          
services rendered in connection with the Transactions, and AXIA Group and the   
Company will indemnify Mr. Rosenthal against liabilities related to his         
services. In addition, through 2008 AXIA Group will pay Sterling an annual      
management fee of $100,000 in cash and annually grant Sterling AXIA Group       
Common Stock having a value of $100,000 calculated based upon the latest ESOP   
valuation price. In addition, each of AXIA Group, and Acquisition Co. has       
agreed that if any one or more of them or any of their subsidiaries determines  
within ten years of the date of the closing of the Acquisition to dispose of    
or acquire any assets or business having a value of $1 million or more (a       
"Future Corporate Transaction") or to offer its securities for sale publicly    
or privately to raise any debt or equity financing (a "Future Securities        
Transaction"), either AXIA Group, Acquisition Co., or the relevant subsidiary   
will retain Sterling as a consultant with respect to the transaction, provided  
a principal, officer or director of Sterling or any of their respective         
affiliates or family members owns any equity securities of AXIA Group or any    
of its successors. For any Future Corporate Transactions, Sterling is entitled  
to receive a fee in the amount of 1% of the aggregate consideration paid or     
received plus the aggregate amount of any liabilities assumed in connection     
with an acquisition or disposition and reimbursement of any expenses or fees    
incurred by Sterling in connection therewith. For any Future Securities         
Transactions, Sterling is entitled to receive a fee in the amount of 0.5% of    
the aggregate gross selling price of such securities and, regardless of         
whether such Future Securities Transaction is consummated, Sterling is          
entitled to receive reimbursements of any expenses or fees incurred by          
Sterling in connection therewith. The agreement is automatically renewable for  
successive one-year periods, subject to notice of termination by either         
Sterling or AXIA Group.                                                         

AXIA Group, Acquisition Co. and Finance Co. were organized by Sterling for  
the purpose of effecting the Acquisition. Ms. Susan Rheney, a principal of      
Sterling, is a director of AXIA Group, Acquisition Co. and the Company. See     
"Management." Ms. Rheney, Mr. Hevrdejs and Mr. Oehmig, all associated with      
Sterling, purchased 5,000 shares, 25,000 shares and 16,500 shares,              
respectively, of AXIA Group Common Stock as part of the Equity Investment.      
Additionally, Messrs. Chesney, Feye, Sheehan, Wilkins, Zdravecky and Rosenthal  
(or a trust for his descendants) purchased 3,750 shares, 3,000 shares, 4,000    
shares, 2,500 shares, 3,500 shares and 10,000 shares, respectively, of AXIA     
Group Common Stock as part of the Equity Investment. All such purchases of      
Common Stock were made at a price of $100 per share, the same price at which    
all shares were sold in the Equity Investment referred to above. See            
"Beneficial Ownership."                                                         

Messrs. Chesney, Feye, Wilkins and Zdravecky will receive proceeds from the 
sale of stock of the Parent or stock option proceeds, or both, and payments     
pursuant to various employee incentive bonus programs of approximately $2.0-    
$2.4 million each. Mr. Sheehan will receive proceeds from the sale of stock of  
the Parent and a payment pursuant to an employee incentive bonus program of     
approximately $10.8 million.                                                    

Mr. Sheehan (the "Rollover Investor") contributed to AXIA Group             
approximately $400,000 of existing shares of the Parent in exchange for shares  
of AXIA Group's Common Stock. The Common Stock was valued at $100 per share,    
the same price at which all shares were sold in the Equity Investment referred  
to above. The merger consideration described in the "The Transactions" was      
proportionately reduced.                                                        

75  

S-4/A
77th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 77th
BENEFICIAL OWNERSHIP  

The following table sets forth as of October 1, 1998, the number and        
percentage of the outstanding shares of AXIA Group's Common Stock beneficially  
owned by the ESOP, the Named Executive Officers, each director of AXIA Group    
and the Company, all directors and officers as a group and each person who is   
the beneficial owner of more than 5% of the outstanding Common Stock.           

                                                                [Download Table]

                                          AMOUNT AND NATURE        % OF    
                                       OF BENEFICIAL OWNERSHIP OUTSTANDING 
 NAME AND ADDRESS OF BENEFICIAL OWNER      OF COMMON STOCK     COMMON STOCK
 ------------------------------------  ----------------------- ------------
                                                                           
David H. Chesney......................          3,750              1.3%    
 9501 Granger Rd.                                                          
 Cleveland, Ohio 44125                                                     
Lyle J. Feye..........................          3,000              1.1%    
 100 West 22nd Street, Suite 134                                           
 Lombard, Illinois 60148                                                   
Susan O. Rheney.......................          5,000              1.8%    
 Eight Greenway Plaza, Suite 702                                           
 Houston, Texas 77046                                                      
Gary L. Rosenthal.....................          4,975(1)           1.8%    
 Eight Greenway Plaza, Suite 714                                           
 Houston, Texas 77046                                                      
Dennis W. Sheehan.....................          4,000              1.4%    
 100 West 22nd Street, Suite 134                                           
 Lombard, Illinois 60148                                                   
Ian G. Wilkins........................          2,500              0.9%    
 151 Walker Road                                                           
 Statesville, North Carolina 28625                                         
Robert G. Zdravecky...................          3,500              1.3%    
 3305 Breckinridge Blvd., Suite 122                                        
 Duluth, Georgia 30096                                                     
All directors and Named Executive                                          
 Officers                                                                  
 as a group (7 persons)...............         28,750             10.3%    
The CIT Group/Equity Investments,                                          
 Inc..................................         25,000              8.9%    
 650 CIT Drive                                                             
 Livingston, New Jersey 07039                                              
Fayez Sarofim Investment Partnership                                       
 No. 7, L.P...........................         25,000              8.9%    
 Two Houston Center, Suite 2907                                            
 Houston, Texas 77010                                                      
Frank J. Hevrdejs.....................         25,000              8.9%    
 Eight Greenway Plaza, Suite 702                                           
 Houston, Texas 77046                                                      
Paribas North America.................         25,000              8.9%    
 787 Seventh Avenue                                                        
 New York, New York 10019                                                  
Gordon A. Cain........................         17,500              6.3%    
 Eight Greenway Plaza, Suite 702                                           
 Houston, Texas 77046                                                      
William C. Oehmig.....................         10,400              3.7%    
 Eight Greenway Plaza, Suite 702                                           
 Houston, Texas 77046                                                      
AXIA Incorporated Employee Stock                                           
 Ownership Plan ......................         15,000              5.4%    

--------                                                                        
(1) Does not include 3,000 shares held in trust for Mr. Rosenthal's             
 descendants. Mr. Rosenthal disclaims beneficial ownership of such shares.

Any shares of Common Stock acquired by the ESOP in the Equity Investment    
will be voted by the trustee of the ESOP (the "ESOP Trustee") pursuant to the   
direction of the Board of Directors or by a committee to be designated by the   
Board of Directors, except that participants will be entitled to direct the     
ESOP Trustee to vote the shares of Common Stock allocated to their accounts     
with respect to the approval or disapproval of any corporate merger or          
consolidation, recapitalization, reclassification, liquidation, dissolution,    
sale of substantially all assets of a trade or business or such similar         
transaction as may be prescribed in regulations under the Code.                 

76  

S-4/A
78th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 78th
DESCRIPTION OF THE BANK CREDIT AGREEMENT  

GENERAL                                                                         

Finance Co. and the Company entered into the Bank Credit Agreement with a   
syndicate of lenders (the "Lenders"), and Paribas, as Agent for such Lenders    
(the "Agent"), to make the initial borrowings described below on the Closing    
Date. The following description summarizes the material provisions of the Bank  
Credit Agreement and does not purport to be complete and is subject to, and is  
qualified in its entirety by reference to, the provisions of the Bank Credit    
Agreement. All capitalized terms in this "Description of the Bank Credit        
Agreement" section not defined in this Prospectus have the meanings assigned    
thereto in the Bank Credit Agreement.                                           

The Bank Credit Agreement provides for secured facilities consisting of a   
$35 million Term Loan, a $1.5 million ESOP Term Loan, a $15 million Revolving   
Credit Facility and a $25 million Acquisition Facility.                         

The Bank Credit Agreement permits, at the option of the Company, the        
issuance of letters of credit in principal amounts of up to $2.0 million.       
Borrowings under the Revolving Credit Facility will be subject to a borrowing   
base consisting of the sum of (i) 85% of Eligible Domestic Accounts; (ii) 70%   
of Eligible Foreign Accounts; and (iii) 60% of Eligible Inventory (the          
"Borrowing Base"). Finance Co. used the proceeds of borrowings under the Bank   
Credit Agreement to finance a portion of the purchase price of the              
Acquisition, to repay existing indebtedness of the Company, and to pay a        
portion of the fees and expenses related to the Transactions. Finance Co. also  
borrowed the full amount of the ESOP Term Loan and then lent such amount to     
the ESOP. The ESOP then used those funds to purchase Common Stock at the        
Closing.                                                                        

The Revolving Credit Facility, Acquisition Facility, Term Loan and ESOP Term
Loan (collectively, the "Loans") may bear interest at an Alternate Base Rate,   
based in part on a Prime Rate, or at a LIBOR Rate, in each case plus an         
applicable margin, which is initially 2.25% for LIBOR Rate Advances and 1.00%   
for Alternate Base Rate Advances. The applicable margin may be adjusted based   
on the ratio of Total Debt to EBITDA and will range from 0% to 1.00% for        
Alternate Base Rate Advances and 1.00% to 2.25% for LIBOR Rate Advances. The    
default rate is the sum of the Alternate Base Rate or LIBOR Rate plus the       
applicable margin plus 2.00%.                                                   

AMORTIZATION; PREPAYMENTS                                                       

All principal and interest on the Loans are due in 2004, except the ESOP    
Term Loan, which is due in 2002, and are subject to certain mandatory           
prepayments and scheduled payments. Accrued interest under the Loans is due     
quarterly (and at the end of the relevant interest period in the case of LIBOR  
Rate Advances). The Term Loan matures June 30, 2004 with quarterly              
amortization payments commencing December 31, 1998. Certain amounts of          
principal on notes issued under the Acquisition Facility are due on the last    
day of each September, December, March and June, from September 2001 to June    
2004. The Bank Credit Agreement allows prepayments with notice and              
reimbursement for certain costs, and requires prepayments to the extent cash    
proceeds from certain events exceed amounts determined by certain formulas.     

The Acquisition Facility Loans are subject to certain conditions precedent, 
including delivering certain information to the Lenders about the proposed      
acquisition, the delivery of guarantees and security documents as to the        
proposed acquisition and the conformance of the acquisition to certain          
criteria.                                                                       

77  

S-4/A
79th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 79th
FEES, EXPENSES AND COSTS                                                        

The Bank Credit Agreement requires the Company to pay the following fees:   
(i) commitment fees to be paid to the Lenders in amounts equal to 0.375% of     
the average daily unused amount under the Revolving Credit Facility and         
Acquisition Facility, payable quarterly in arrears until such time as such      
commitments thereunder are terminated; (ii) letter of credit fees and (iii)     
administration fees payable annually to the Agent. In addition, the Company     
paid various underwriting and arrangement fees and closing costs on the         
Closing Date in connection with the origination and syndication of the Bank     
Credit Agreement and other customary fees and expenses.                         

COVENANTS                                                                       

The Bank Credit Agreement contains restrictive covenants limiting the       
ability (subject to certain exceptions) of the Company and its Subsidiaries     
to, among other things: (i) incur debt or contractual contingent obligations;   
(ii) pay certain subordinated debt or amend subordinated debt documents         
without the prior consent of the Lenders; (iii) create or allow to exist liens  
or other encumbrances; (iv) transfer assets outside the Company except for      
sales and other transfers of inventory or surplus, immaterial or obsolete       
assets in the ordinary course of business of the Company; (v) enter into        
mergers, consolidations and asset dispositions of all or substantially all of   
its properties; (vi) make Investments; (vii) sell, transfer or otherwise        
dispose of any class of stock or the voting rights of any subsidiary of the     
Company; (viii) enter into transactions with related parties other than in the  
ordinary course of business on an arm's-length basis on terms no less           
favorable to the Company than those available from third parties; (ix) amend    
certain agreements, unless such amendment is not expected to have a Material    
Adverse Effect; (x) make any material change in the general nature of the       
business conducted by the Company; (xi) pay cash dividends or redeem shares of  
capital stock; (xii) make capital expenditures and (xiii) pay dividends or      
repurchase stock.                                                               

Under the Bank Credit Agreement, the Company is required to satisfy the     
following financial covenants: (i) a Fixed Charge Coverage Ratio of at least    
1.05 to 1; (ii) a minimum Net Worth test (a) at September 30, 1998 of at least  
$24 million and (b) at each quarter thereafter of at least $24 million plus     
75% of positive net income plus 75% of any equity offering; (iii) a ratio of    
Total Debt to EBITDA (a) at each quarter until June 30, 2001 of 5.75 to 1 and   
(b) declining annually thereafter to 5.5 to 1 and 5.25 to 1; and (iv) a         
Minimum Interest Coverage Ratio (a) at December 31, 1999 of at least 1.75 to 1  
and (b) increasing thereafter semiannually to 1.85 to 1 and 1.95 to 1.          

SECURITY; GUARANTIES                                                            

Obligations under the Bank Credit Agreement are guaranteed by the same      
Subsidiaries that guarantee the Notes, and are secured by a first priority      
lien on the capital stock of the Company and its Subsidiaries and on            
substantially all of the assets of such companies (other than foreign           
subsidiaries).                                                                  

EVENTS OF DEFAULT                                                               

Events of Default under the Bank Credit Agreement include, subject to       
applicable notice, grace and cure periods, the following: (i) a default in the  
payment when due of any principal, interest or fees under the Bank Credit       
Agreement; (ii) a default by the Company under any debt instruments in excess   
of a certain amount, or the occurrence of any event or condition that enables   
the holder of such debt to accelerate the maturity thereof; (iii) any material  
breach of any representation, warranty or statement in, or failure to perform   
any duty or covenant under the Bank Credit Agreement or any of the other Loan   
Documents; (iv) commencement of voluntary or involuntary bankruptcy,            
insolvency or similar proceedings by or against AXIA Group, the Company or any  
subsidiary thereof; (v) the Loans cease to be secured by substantially all of   
the assets of the Company and its domestic subsidiaries; (vi) material          
defaults related to employee benefits plans subject to the Employee Retirement  
Income Security Act of 1974, as amended; (vii) any uninsured judgment or order  
in excess of a certain amount                                                   

78  

S-4/A
80th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 80th
remaining undischarged or unstayed for longer than certain periods; (viii) a    
default by the Company in the payment when due of principal, interest or        
premium, if any, on the Notes, or the failure to observe, perform or comply     
with any agreement beyond any grace period with respect thereto that enables    
the holder of such debt to accelerate the maturity thereof or the Company       
becoming obligated to redeem, repurchase, or repay all or any portion of any    
principal, interest or premium on the Notes prior to its scheduled payment and  
(ix) the occurrence of any change of control.                                   

79  

S-4/A
81st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 81st
DESCRIPTION OF THE NOTES  

The Notes will be issued under an Indenture (the "Indenture") dated as of   
July 22, 1998 among the Company, Finance Co., the Guarantors and State Street   
Bank and Trust Company, as trustee (the "Trustee"). The following summary of    
certain provisions of the Indenture and the Registration Rights Agreement does  
not purport to be complete and is subject to, and is qualified in its entirety  
by reference to, the Trust Indenture Act of 1939, as amended (the "Trust        
Indenture Act"), and to all of the provisions of the Indenture and the          
Registration Rights Agreement, including the definitions of certain terms       
therein and those terms made a part of the Indenture by reference to the Trust  
Indenture Act, as in effect on the date of the Indenture. The definitions of    
certain capitalized terms used in the following summary are set forth below     
under "Certain Definitions."                                                    

GENERAL                                                                         

The Notes will be issued only in registered form, without coupons, in       
denominations of $1,000 and integral multiples of $1,000. See "Book Entry;      
Delivery and Form." The Company has appointed the Trustee to serve as           
registrar and paying agent under the Indenture at its offices in the Borough    
of Manhattan, the City of New York. No service charge will be made for any      
registration of transfer or exchange of the Notes, except for any tax or other  
governmental charge that may be imposed in connection therewith.                

RANKING                                                                         

The Notes will rank junior to, and be subordinated in right of payment to,  
all existing and future Senior Indebtedness of the Company, pari passu in       
right of payment with all senior subordinated Indebtedness of the Company and   
senior in right of payment to all Subordinated Indebtedness of the Company. At  
June 30, 1998, on a pro forma basis after giving effect to the Transactions,    
the Company would have had approximately $39.7 million of Senior Indebtedness   
outstanding. All debt incurred under the Bank Credit Agreement will be Senior   
Indebtedness of the Company, will be guaranteed by each of the Guarantors on a  
senior basis and will be secured by substantially all of the assets of the      
Company and the Guarantors.                                                     

MATURITY, INTEREST AND PRINCIPAL OF THE NOTES                                   

The maximum aggregate principal amount of Notes to be issued under the      
Indenture will be $150.0 million, of which an aggregate principal amount of     
$100.0 million of Original Notes were issued. Additional Notes may be issued    
from time to time subject to the limitations set forth under "Certain           
Covenants--Limitation on Indebtedness." The Notes will mature on July 15,       
2008. Cash interest on the Notes will accrue at a rate of 10 3/4% per annum     
and will be payable semi-annually in arrears on each January 15 and July 15,    
commencing January 15, 1999, to the Holders of record of Notes at the close of  
business on the January 1 and July 1, respectively, immediately preceding such  
interest payment date. Cash interest will accrue from the most recent interest  
payment date to which interest has been paid or, if no interest has been paid,  
from July 22, 1998. Interest will be computed on the basis of a 360-day year    
of twelve 30-day months.                                                        

OPTIONAL REDEMPTION                                                             

The Notes will be redeemable at the option of the Company, in whole or in   
part, at any time on or after July 15, 2003, at the redemption prices           
(expressed as a percentage of principal amount) set forth below, plus accrued   
and unpaid interest thereon, if any, to the redemption date (subject to the     
right of Holders of record on the relevant record date to receive interest due  
on the relevant interest payment date), if redeemed during the twelve-month     
period beginning on July 15 of the years indicated below:                       

                                                                [Download Table]

                                                                REDEMPTION
YEAR                                                              PRICE   
----                                                            ----------
                                                                          
2003...........................................................  105.375% 
2004...........................................................  103.583% 
2005...........................................................  101.792% 
2006 and thereafter............................................  100.000% 

80  

S-4/A
82nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 82nd
In addition, at any time and from time to time on or prior to July 15, 2001,
the Company may redeem in the aggregate up to 35% aggregate principal amount    
of the Notes with the net proceeds of one or more Public Equity Offerings by    
the Company or AXIA Group at a redemption price (expressed as a percentage of   
principal amount) equal to 110.75% of the principal amount thereof, plus        
accrued and unpaid interest thereon, if any, to the date of redemption;         
provided, however, that at least 65% aggregate principal amount of the Notes    
must remain outstanding immediately after giving effect to each such            
redemption (excluding any Notes held by the Company or any of its Affiliates);  
provided, further, that if the Public Equity Offering is by AXIA Group, the     
proceeds thereof to be used to redeem the Notes shall have been contributed as  
common equity or as a capital contribution to the Company on or prior to the    
date of redemption. Notice of any such redemption must be given within 60 days  
after the date of the closing of the relevant Public Equity Offering of the     
Company.                                                                        

The Bank Credit Agreement prohibits the Company from making an optional     
redemption of the Notes without the consent of the Lenders.                     

SELECTION AND NOTICE OF REDEMPTION                                              

In the event that less than all of the Notes are to be redeemed at any time 
pursuant to an optional redemption, selection of such Notes for redemption      
will be made by the Trustee in compliance with the requirements of the          
principal national securities exchange, if any, on which the Notes are listed   
or, if the Notes are not then listed on a national securities exchange, on a    
pro rata basis, by lot or by such method as the Trustee shall deem fair and     
appropriate; provided, however, that no Notes of a principal amount of $1,000   
or less shall be redeemed in part; provided, further, however, that if a        
partial redemption is made with the net cash proceeds of a Public Equity        
Offering by the Company, selection of the Notes or portions thereof for         
redemption shall be made by the Trustee only on a pro rata basis or on as       
nearly a pro rata basis as is practicable (subject to the procedures of The     
Depository Trust Company), unless such method is otherwise prohibited. Notice   
of redemption shall be mailed by first-class mail at least 30 but not more      
than 60 days before the redemption date to each Holder of Notes to be redeemed  
at its registered address. See "Book Entry; Delivery and Form." If any Note is  
to be redeemed in part only, the notice of redemption that relates to such      
Note shall state the portion of the principal amount thereof to be redeemed. A  
new Note in a principal amount equal to the unredeemed portion thereof will be  
issued in the name of the Holder thereof upon cancellation of the original      
Note. On and after the redemption date, interest will cease to accrue on Notes  
or portions thereof called for redemption as long as the Company has deposited  
with the paying agent for the Notes funds in satisfaction of the applicable     
redemption price pursuant to the Indenture.                                     

SUBORDINATION OF THE NOTES                                                      

The payment of the principal of, premium, if any, and interest on the Notes 
is subordinated in right of payment, to the extent and in the manner provided   
in the Indenture, to the prior payment in full in cash of all Senior            
Indebtedness.                                                                   

Upon any payment or distribution of assets or securities of the Company of  
any kind or character, whether in cash, property or securities (excluding any   
payment or distribution of Permitted Junior Securities and excluding any        
payment from the trust described under "Satisfaction and Discharge of           
Indenture; Defeasance" (a "Defeasance Trust Payment")), upon any dissolution    
or winding-up or total liquidation or reorganization of the Company, whether    
voluntary or involuntary or in bankruptcy, insolvency, receivership or other    
proceedings, all Senior Indebtedness shall first be paid in full in cash        
before the Holders of the Notes or the Trustee on behalf of such Holders shall  
be entitled to receive any payment by the Company of the principal of,          
premium, if any, or interest on the Notes, or any payment by the Company to     
acquire any of the Notes for cash, property or securities, or any distribution  
by the Company with respect to the Notes of any cash, property or securities    
(excluding                                                                      

81  

S-4/A
83rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 83rd
any payment or distribution of Permitted Junior Securities and excluding any    
Defeasance Trust Payment). Before any payment may be made by, or on behalf of,  
the Company of the principal of, premium, if any, or interest on the Notes      
upon any such dissolution or winding-up or total liquidation                    
or reorganization, any payment or distribution of assets or securities of the   
Company of any kind or character, whether in cash, property or securities       
(excluding any payment or distribution of Permitted Junior Securities and       
excluding any Defeasance Trust Payment), to which the Holders of the Notes or   
the Trustee on their behalf would be entitled, but for the subordination        
provisions of the Indenture, shall be made by the Company or by any receiver,   
trustee in bankruptcy, liquidation trustee, agent or other Person making such   
payment or distribution, directly to the holders of the Senior Indebtedness     
(pro rata to such holders on the basis of the respective amounts of Senior      
Indebtedness held by such holders) or their representatives or to the trustee   
or trustees or agent or agents under any agreement or indenture pursuant to     
which any of such Senior Indebtedness may have been issued, as their            
respective interests may appear, to the extent necessary to pay all such        
Senior Indebtedness in full in cash after giving effect to any prior or         
concurrent payment, distribution or provision therefor to or for the holders    
of such Senior Indebtedness.                                                    

No direct or indirect payment (excluding any payment or distribution of     
Permitted Junior Securities and excluding any Defeasance Trust Payment) by or   
on behalf of the Company of principal of, premium, if any, or interest on the   
Notes, whether pursuant to the terms of the Notes, upon acceleration, pursuant  
to an Offer to Purchase or otherwise, will be made if, at the time of such      
payment, there exists a default in the payment of all or any portion of the     
obligations on any Designated Senior Indebtedness, whether at maturity, on      
account of mandatory redemption or prepayment, acceleration or otherwise, and   
such default shall not have been cured or waived or the benefits of this        
sentence waived by or on behalf of the holders of such Designated Senior        
Indebtedness. In addition, during the continuance of any non-payment event of   
default with respect to any Designated Senior Indebtedness pursuant to which    
the maturity thereof may be immediately accelerated, and upon receipt by the    
Trustee of written notice (a "Payment Blockage Notice") from the holder or      
holders of such Designated Senior Indebtedness or the trustee or agent acting   
on behalf of the holders of such Designated Senior Indebtedness, then, unless   
and until such event of default has been cured or waived or has ceased to       
exist or such Designated Senior Indebtedness has been discharged or repaid in   
full in cash or the benefits of these provisions have been waived by the        
holders of such Designated Senior Indebtedness, no direct or indirect payment   
(excluding any payment or distribution of Permitted Junior Securities and       
excluding any Defeasance Trust Payment) will be made by or on behalf of the     
Company of principal of, premium, if any, or interest on the Notes, to such     
Holders, during a period (a "Payment Blockage Period") commencing on the date   
of receipt of such notice by the Trustee and ending 179 days thereafter.        
Notwithstanding anything in the subordination provisions of the Indenture or    
the Notes to the contrary, (x) in no event will a Payment Blockage Period       
extend beyond 179 days from the date the Payment Blockage Notice in respect     
thereof was given, (y) there shall be a period of at least 181 consecutive      
days in each 360-day period when no Payment Blockage Period is in effect and    
(z) not more than one Payment Blockage Period may be commenced with respect to  
the Notes during any period of 360 consecutive days. No event of default that   
existed or was continuing on the date of commencement of any Payment Blockage   
Period with respect to the Designated Senior Indebtedness initiating such       
Payment Blockage Period (to the extent the holder of Designated Senior          
Indebtedness, or trustee or agent, giving notice commencing such Payment        
Blockage Period had knowledge of such existing or continuing event of default)  
may be, or be made, the basis for the commencement of any other Payment         
Blockage Period by the holder or holders of such Designated Senior              
Indebtedness or the trustee or agent acting on behalf of such Designated        
Senior Indebtedness, whether or not within a period of 360 consecutive days,    
unless such event of default has been cured or waived for a period of not less  
than 90 consecutive days.                                                       

The failure to make any payment or distribution for or on account of the    
Notes by reason of the provisions of the Indenture described under this         
"Subordination of the Notes" heading will not be                                

82  

S-4/A
84th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 84th
construed as preventing the occurrence of any Event of Default in respect of    
the Notes. See "Events of Default" below.                                       

By reason of the subordination provisions described above, in the event of  
insolvency of the Company, funds which would otherwise be payable to Holders    
of the Notes will be paid to the holders of Senior Indebtedness to the extent   
necessary to pay the Senior Indebtedness in full in cash, and the Company may   
be unable to meet fully its obligations with respect to the Notes.              

Subject to the restrictions set forth in the Indenture, in the future the   
Company may issue additional Senior Indebtedness to refinance existing          
Indebtedness or for other corporate purposes.                                   

GUARANTEES OF THE NOTES                                                         

The Indenture provides that each of the Guarantors will unconditionally     
guarantee on a joint and several basis (the "Guarantees") all of the Company's  
obligations under the Notes, including its obligations to pay principal,        
premium, if any, and interest with respect to the Notes. The Guarantors will    
also be guaranteeing all obligations of the Company under the Bank Credit       
Agreement, and each Guarantor will be granting a security interest in all or    
substantially all of its assets to secure the obligations under the Bank        
Credit Agreement. The obligations of each Guarantor are limited to the maximum  
amount which, after giving effect to all other contingent and fixed             
liabilities of such Guarantor and after giving effect to any collections from   
or payments made by or on behalf of any other Guarantor in respect of the       
obligations of such other Guarantor under its Guarantee or pursuant to its      
contribution obligations under the Indenture, will result in the obligations    
of such Guarantor under its Guarantee not constituting a fraudulent conveyance  
or fraudulent transfer under Federal or state law. Each Guarantor that makes a  
payment or distribution under a Guarantee shall be entitled to a contribution   
from each other Guarantor in a pro rata amount based on the net assets of each  
Guarantor determined in accordance with GAAP. Except as provided in "Certain    
Covenants" below, the Company is not restricted from selling or otherwise       
disposing of any of the Equity Interests of the Guarantors.                     

The Indenture provides that each of the Company's Subsidiaries (excluding   
Unrestricted Subsidiaries and Foreign Subsidiaries) on the Issue Date and each  
of the Company's Subsidiaries (excluding Unrestricted Subsidiaries and Foreign  
Subsidiaries) formed or acquired thereafter are required to be Guarantors. The  
Company shall cause each Restricted Subsidiary issuing a Guarantee after the    
Issue Date to (i) execute and deliver to the Trustee a supplemental indenture   
in form reasonably satisfactory to the Trustee pursuant to which such           
Restricted Subsidiary shall become a party to the Indenture and thereby         
unconditionally guarantee all of the Company's Obligations under the Notes and  
the Indenture on the terms set forth therein and (ii) deliver to the Trustee    
an opinion of counsel that such supplemental indenture has been duly            
authorized, executed and delivered by such Restricted Subsidiary and            
constitutes a legal, valid, binding and enforceable obligation of such          
Restricted Subsidiary (which opinion may be subject to customary assumptions    
and qualifications). Thereafter, such Restricted Subsidiary shall (unless       
released in accordance with the terms of this Indenture) be a Guarantor for     
all purposes of the Indenture.                                                  

The Indenture provides that if the Notes thereunder are defeased in         
accordance with the terms of the Indenture, or if, subject to the requirements  
of the first paragraph under "Certain Covenants--Merger, Sale of Assets,        
Etc.," all or substantially all of the assets of any Guarantor or all of the    
Equity Interests of any Guarantor are sold (including by issuance or            
otherwise) by the Company in a transaction constituting an Asset Sale, and if   
(x) the Net Cash Proceeds from such Asset Sale are used in accordance with the  
covenant described under "Certain Covenants--Disposition of Proceeds of Asset   
Sales" or (y) the Company delivers to the Trustee an Officers' Certificate      
representing that the Net Cash Proceeds from such Asset Sale shall be used in   
accordance with the covenant described under "Certain Covenants--Disposition    
of Proceeds of Asset Sales" and within the time limits specified by such        
covenant, then such Guarantor (in the event of a sale or other disposition of   
all of the Equity Interests of such Guarantor) or the corporation acquiring     
such assets (in the event of                                                    

83  

S-4/A
85th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 85th
a sale or other disposition of all or substantially all of the assets of such   
Guarantor) shall be automatically and unconditionally released and discharged   
of its Guarantee obligations in respect of the Indenture and the Notes.         

The Guarantees will be general unsecured obligations of the Guarantors. The 
obligations of each Guarantor under its Guarantee will be subordinated and      
junior in right of payment to the prior payment in full of all existing and     
future Guarantor Senior Indebtedness of such Guarantor to substantially the     
same extent as the Notes are subordinated to all existing and future Senior     
Indebtedness. In particular, the Guarantee will rank subordinate to the         
Guarantor's guarantee of obligations under the Bank Credit Agreement.           

Any Guarantor that is designated an Unrestricted Subsidiary pursuant to and 
in accordance with "Certain Covenants--Designation of Unrestricted              
Subsidiaries" below shall upon such Designation be released and discharged of   
its Guarantee obligations in respect of the Indenture and the Notes and any     
Unrestricted Subsidiary (other than a Foreign Subsidiary) whose Designation is  
revoked pursuant to "Certain Covenant--Designation of Unrestricted              
Subsidiaries" below will be required to become a Guarantor in accordance with   
the procedure described in the third preceding paragraph.                       

OFFER TO PURCHASE UPON CHANGE OF CONTROL                                        

Following the occurrence of a Change of Control (the date of such occurrence
being the "Change of Control Date"), the Company shall notify the Holders of    
the Notes of such occurrence in the manner prescribed by the Indenture and      
shall, within 30 days after the Change of Control Date, make an Offer to        
Purchase all Notes then outstanding, and shall purchase all Notes validly       
tendered, at a purchase price in cash equal to 101% of the aggregate principal  
amount thereof, plus accrued and unpaid interest thereon, if any, to the        
Purchase Date (subject to the right of Holders of record on the relevant        
record date to receive interest due on the relevant interest payment date).     

If a Change of Control occurs which also constitutes an event of default    
under the Bank Credit Agreement, the lenders under the Bank Credit Agreement    
will be entitled to exercise the remedies available to a secured lender under   
applicable law and pursuant to the terms of the Bank Credit Agreement.          
Accordingly, any claims of such lenders with respect to the assets of the       
Company will be prior to any claim of the Holders of the Notes with respect to  
such assets.                                                                    

If an Offer to Purchase is made, there can be no assurance that the Company 
will have available funds sufficient to pay for all of the Notes that might be  
tendered by Holders of Notes seeking to accept the Offer to Purchase. If the    
Company fails to repurchase all of the Notes tendered for purchase, such        
failure will constitute an Event of Default under the Indenture. See "Events    
of Default" below.                                                              

If the Company makes an Offer to Purchase, the Company will comply with all 
applicable tender offer laws and regulations, including, to the extent          
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other  
applicable Federal or state securities laws and regulations and any applicable  
requirements of any securities exchange on which the Notes are listed, and any  
violation of the provisions of the Indenture relating to such Offer to          
Purchase occurring as a result of such compliance shall not be deemed an Event  
of Default or an event that, with the passing of time or giving of notice, or   
both, would constitute an Event of Default.                                     

The use of the terms "all or substantially all" and "substantially as an    
entirety" in Indenture provisions such as clause (ii) of the definition of      
"Change of Control" and under "--Merger, Sale of Assets, etc." has no clearly   
established meaning under New York law (which governs the Indenture) and has    
been the subject of limited judicial interpretation in few jurisdictions.       
Accordingly, there may                                                          

84  

S-4/A
86th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 86th
be a degree of uncertainty in ascertaining whether a particular transaction     
would involve a disposition of "all or substantially all" of the assets of a    
person, or a disposition of such assets "substantially as an entirety," which   
uncertainty should be considered by prospective investors in the Notes.         

The Change of Control purchase feature is a result of negotiations between  
the Company and the Initial Purchasers. Management has no present intention to  
engage in a transaction involving a Change of Control, although it is possible  
that the Company or AXIA Group would decided to do so in the future. Subject    
to the limitations discussed below, the Company could, in the future, enter     
into certain transactions, including acquisitions, refinancings or other        
recapitalizations, that would not constitute a Change of Control under the      
Indenture, but that would increase the amount of indebtedness outstanding at    
such time or otherwise affect the Company's or AXIA Group's capital structure   
or credit ratings. Restrictions on the ability of the Company to incur          
additional Indebtedness are contained in the covenant described under "--       
Limitation on Indebtedness." Such restrictions can only be waived with the      
consent of the Holders of a majority in principal amount of the Notes then      
outstanding. Except for the limitations contained in such covenant, however,    
the Indenture will not contain any covenants or protections that may afford     
Holders of the Notes protection in the event of a highly leveraged              
transaction. The Indenture will not contain covenants that restrict the         
ability of AXIA Group to incur Indebtedness.                                    

Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Notes to require     
that the Company repurchase or redeem the Notes in the event of a takeover,     
recapitalization or similar transaction.                                        

CERTAIN COVENANTS                                                               

Limitation on Restricted Payments. The Company shall not, and shall not     
cause or permit any Restricted Subsidiary to, directly or indirectly,           

(i) declare or pay any dividend or any other distribution on any Equity 
Interests of the Company or any Restricted Subsidiary or make any payment   
or distribution to the direct or indirect holders (in their capacities as   
such) of Equity Interests of the Company or any Restricted Subsidiary       
(other than any dividends, distributions and payments made to the Company   
or any Restricted Subsidiary and dividends or distributions payable to any  
Person solely in Qualified Equity Interests of the Company or any           
Restricted Subsidiary which is a Guarantor, or in options, warrants or      
other rights to purchase Qualified Equity Interests of the Company and any  
Restricted Subsidiary which is a Guarantor, and other than pro rata         
dividends or distributions made by a Subsidiary that is not a wholly-owned  
Subsidiary to minority stockholders (or owners of an equivalent interest in 
the case of a Subsidiary that in not a corporation));                       

 (ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company or any Restricted Subsidiary (other than any such  
Equity Interests owned by the Company or any Restricted Subsidiary);        

(iii) purchase, redeem, defease or retire for value, or make any        
principal payment on, prior to any scheduled maturity, scheduled repayment  
or scheduled sinking fund payment, any Subordinated Indebtedness (other     
than any Subordinated Indebtedness held by the Company or any Restricted    
Subsidiary or Subordinated Indebtedness purchased in anticipation of        
satisfying a sinking fund payment due within two years of such              
acquisition); or                                                            

(iv) make any Investment (other than Permitted Investments) in any Person 
(other than in the Company, any Restricted Subsidiary or a Person that      
becomes a Restricted Subsidiary, or is merged with or into or consolidated  
with the Company or a Restricted Subsidiary (provided the Company or a      
Restricted Subsidiary is the survivor), as a result of or in connection     
with such Investment)                                                       

85  

S-4/A
87th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 87th
(any such payment or any other action (other than any exception thereto)        
described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless     

(a) no Default shall have occurred and be continuing at the time or 
immediately after giving effect to such Restricted Payment;             

(b) immediately after giving effect to such Restricted Payment, the 
Company would be able to Incur $1.00 of additional Indebtedness (other  
than Permitted Indebtedness) under the Consolidated Coverage Ratio of   
the first paragraph of "Limitation on Indebtedness" below; and          

(c) immediately after giving effect to such Restricted Payment, the 
aggregate amount of all Restricted Payments declared or made on or      
after the Issue Date does not exceed an amount equal to the sum of (1)  
50% of cumulative Consolidated Net Income determined for the period     
(taken as one period) commencing on the Issue Date and ending on the    
last day of the most recent fiscal quarter immediately preceding the    
date of such Restricted Payment for which consolidated financial        
information of the Company is available (or if such cumulative          
Consolidated Net Income shall be a loss, minus 100% of such loss), plus 
(2) the aggregate net cash proceeds received by the Company either (x)  
as capital contributions to the Company after the Issue Date or (y)     
from the issue and sale (other than to a Restricted Subsidiary) of its  
Qualified Equity Interests after the Issue Date (excluding the net      
proceeds from any issuance and sale of Qualified Equity Interests       
financed, directly or indirectly, using funds borrowed from the Company 
or any Restricted Subsidiary until and to the extent such borrowing is  
repaid), plus (3) the principal amount (or accreted amount (determined  
in accordance with GAAP), if less) of any Indebtedness of the Company   
or any Restricted Subsidiary Incurred after the Issue Date which has    
been converted into or exchanged for Qualified Equity Interests of the  
Company, plus (4) in the case of the disposition or repayment of any    
Investment constituting a Restricted Payment made after the Issue Date, 
an amount (to the extent not included in the computation of             
Consolidated Net Income) equal to the lesser of: (x) the return of      
capital with respect to such Investment and (y) the amount of such      
Investment which was treated as a Restricted Payment, in either case,   
less the cost of the disposition of such Investment, plus (5) so long   
as the Designation thereof was treated as a Restricted Payment made     
after the Issue Date, with respect to any Unrestricted Subsidiary that  
has been redesignated as a Restricted Subsidiary after the Issue Date   
in accordance with "Designation of Unrestricted Subsidiaries" below,    
the Company's proportionate interest in an amount equal to the excess   
of (x) the total assets of such Subsidiary, valued on an aggregate      
basis at Fair Market Value, over (y) the total liabilities of such      
Subsidiary, determined in accordance with GAAP (and provided that such  
amount shall not in any case exceed the Designation Amount with respect 
to such Restricted Subsidiary upon its Designation), plus (6) (to the   
extent not included in the computation of Consolidated Net Income) the  
amount of cash dividends or cash distributions (other than to pay       
taxes) received from any Unrestricted Subsidiary since the Issue Date,  
minus (7) the greater of (x) $0 and (y) the Designation Amount          
(measured as of the date of Designation) with respect to any Subsidiary 
of the Company which has been designated as an Unrestricted Subsidiary  
after the Issue Date in accordance with "Designation of Unrestricted    
Subsidiaries" below.                                                    

The foregoing provisions will not prevent (i) the payment of any dividend or
distribution on, or redemption of, Equity Interests within 60 days after the    
date of declaration of such dividend or distribution or the giving of formal    
notice of such redemption, if at the date of such declaration or giving of      
such formal notice such payment or redemption would comply with the provisions  
of the Indenture; (ii) a payment to AXIA Group to allow AXIA Group to           
purchase, redeem, retire or otherwise acquire any Equity Interests of AXIA      
Group or the Company in exchange for, or out of the net cash proceeds of the    
substantially concurrent issue and sale (other than to a Restricted             
Subsidiary) of, Qualified Equity Interests of the Company or out of the net     
cash proceeds received by the Company                                           

86  

S-4/A
88th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 88th
as capital contributions to the Company after the Issue Date; provided,         
however, that any such net cash proceeds and the value of any Qualified Equity  
Interests issued in exchange for such retired Equity Interests are excluded     
from clause (c)(2) of the preceding paragraph (and were not included therein    
at any time); (iii) the purchase, redemption, retirement, defeasance or other   
acquisition of Subordinated Indebtedness, or any other payment thereon, made    
in exchange for, or out of the net cash proceeds of, a substantially            
concurrent issue and sale (other than to a Restricted Subsidiary) of (x)        
Qualified Equity Interests of the Company or out of the net cash proceeds       
received by the Company as capital contributions to the Company after the       
Issue Date; provided, however, that any such net cash proceeds and the value    
of any Qualified Equity Interests issued in exchange for Subordinated           
Indebtedness are excluded from clauses (c)(2) and (c)(3) of the preceding       
paragraph (and were not included therein at any time) or (y) other              
Subordinated Indebtedness having no stated maturity for the payment of          
principal thereof prior to the final stated maturity of the Notes; (iv) any     
Investment to the extent that it is funded with the net cash proceeds of the    
substantially concurrent issue and sale (other than to a Restricted             
Subsidiary) of Qualified Equity Interests of the Company; provided, however,    
that any such net cash proceeds are excluded from clause (c)(2) of the          
preceding paragraph (and were not included therein at any time); (v) payments   
to AXIA Group (for purposes of AXIA Group making payments to the ESOP) or to    
the ESOP on behalf of the employees of the Company or its Restricted            
Subsidiaries; provided, however, that all such payments by the Company and its  
Restricted Subsidiaries may not exceed, during any fiscal year, 10% of the      
aggregate compensation expense during such fiscal year attributable to          
employees of the Company and its Restricted Subsidiaries who are eligible to    
participate in the ESOP; (vi) a payment to AXIA Group to pay its operating and  
administrative expenses including, without limitation, directors fees, legal    
and audit expenses, SEC compliance expenses and corporate franchise and other   
taxes, in an amount not to exceed the greater of $1.0 million per fiscal year   
and 1% of revenues of the Company for the proceeding fiscal year; (vii) a       
payment by the Company to AXIA Group or the ESOP, or directly by the Company,   
to be used to repurchase the Equity Interests distributed to participants and   
beneficiaries of the ESOP as required by and in accordance with the ESOP and    
Section 409(h)(i)(B) of the Code and the regulations thereunder; (viii) a       
payment by the Company to AXIA Group, any Restricted Subsidiary or the ESOP,    
or directly by the Company, to be used to repurchase, redeem, acquire or        
retired for value any Equity Interest of the Company pursuant to any            
stockholder's agreement, management equity subscription plan or agreement,      
stock option plan or agreement or employee benefit plan in effect as of the     
Issue Date or such employee plan or agreement or employee benefit plan as may   
be adopted by the Company or the Company from time to time, provided, however,  
that the aggregate price paid for all Equity Interests repurchased, redeemed,   
acquired or retired by the Company or on behalf of AXIA Group or the Company    
shall not exceed $1.5 million in any fiscal year plus the aggregate amount      
unused for such purpose in prior fiscal years; and provided, further, however,  
that such amount, to the extent related to the ESOP, shall be excluded in the   
calculation of Restricted Payments; (ix) a payment to AXIA Group pursuant to    
the Tax Sharing Agreement as the same may be amended from time to time in a     
manner not materially adverse to the Company; (x) any payment to AXIA Group to  
permit AXIA Group to make payments for advisory services owned to Sterling      
pursuant to the Management Agreement and (xi) Restricted Payments not to        
exceed $5.0 million in the aggregate; provided, however, that in the case of    
each of clauses (iii), (viii), (x), and (xi) (except in the case of any         
Restricted Payments consisting of Investments), no Default shall have occurred  
and be continuing or would arise therefrom.                                     

In determining the amount of Restricted Payments permissible under this     
covenant, amounts expended pursuant to clauses (i) and (xi) of the immediately  
preceding paragraph shall be included as Restricted Payments and amounts        
expended pursuant to clauses (ii), (iii), (iv), (v), (vi), (vii), (viii) (to    
the extent set forth in the immediately preceding paragraph), (ix) and (x)      
shall be excluded. The amount of any non-cash Restricted Payment shall be       
deemed to be equal to the Fair Market Value thereof at the date of the making   
of such Restricted Payment.                                                     

87  

S-4/A
89th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 89th
Limitation on Indebtedness. The Company shall not, and shall not cause or   
permit any Restricted Subsidiary to, directly or indirectly, Incur any          
Indebtedness (including Acquired Indebtedness) or issue any Disqualified        
Equity Interests, except for Permitted Indebtedness; provided, however, that    
(i) the Company and any Restricted Subsidiary may Incur Indebtedness            
(including Acquired Indebtedness) and (ii) the Company may issue Disqualified   
Equity Interests if, in any such case, at the time of and immediately after     
giving pro forma effect to such Incurrence of Indebtedness or issuance of       
Disqualified Equity Interests and the application of the proceeds therefrom,    
the Company's Consolidated Coverage Ratio would be greater than (a) 1.75 to     
1.0, if such Incurrence occurs on or prior to July 15, 2000, or (b) 2.0 to      
1.0, if such Incurrence occurs after July 15, 2000.                             

The foregoing limitations will not apply to the Incurrence of any of the    
following (collectively, "Permitted Indebtedness"), each of which shall be      
given independent effect:                                                       

(a) Indebtedness under the Notes issued hereby on the Issue Date, the   
Guarantees and the Indenture;                                               

(b) Existing Indebtedness;                                              

 (c) Indebtedness of the Company, and its Subsidiaries pursuant to (x) the
Term Loan Facilities of the Bank Credit Agreement in an aggregate principal 
amount at any one time outstanding not to exceed $62.0 million and (y) the  
revolving loan facilities of the Bank Credit Agreement in an aggregate      
principal amount at any one time outstanding not to exceed the greater of   
(I) $15.0 million and (II) the sum of (A) 85% of the net book value of the  
accounts receivable of the Company and the Restricted Subsidiaries on a     
consolidated basis in accordance with GAAP and (B) 50% of the net book      
value (determined on a consolidated basis in accordance with GAAP) of (i)   
the inventory of the Company and the Restricted Subsidiaries and (ii) the   
ATF tools owned by the Company and its Restricted Subsidiaries;             

(d) Indebtedness of any Restricted Subsidiary owed to and held by the   
Company or any Restricted Subsidiary and Indebtedness of the Company owed   
to and held by any Restricted Subsidiary, which Indebtedness is unsecured   
and subordinated in right of payment to the payment and performance of the  
Company's obligations under any Senior Indebtedness, the Indenture and the  
Notes; provided, however, that an Incurrence of Indebtedness that is not    
permitted by this clause (d) shall be deemed to have occurred upon (i) any  
sale or other disposition of any Indebtedness of the Company or any         
Restricted Subsidiary referred to in this clause (d) to a Person (other     
than the Company or any Restricted Subsidiary), and (ii) the designation of 
a Restricted Subsidiary which holds Indebtedness of the Company or any      
other Restricted Subsidiary as an Unrestricted Subsidiary;                  

 (e) the Guarantees and guarantees by any Guarantor of Indebtedness of the
Company; provided, however, that if such guarantee is of Subordinated       
Indebtedness, then the Guarantee of such Guarantor shall be senior to such  
Guarantor's guarantee of Subordinated Indebtedness;                         

(f) Hedging Obligations of the Company and the Restricted Subsidiaries; 

(g) Purchase Money Indebtedness and Capitalized Lease Obligations (and  
refinancings thereof) of the Company and the Restricted Subsidiaries which  
do not exceed the greater of (x) $10.0 million in the aggregate or (y) 5%   
of the consolidated tangible net assets of the Company at any one time      
outstanding;                                                                

(h) Guarantees of the Company of Indebtedness incurred by Restricted    
Subsidiaries;                                                               

(i) Indebtedness of the Company or any Restricted Subsidiary consisting 
of guarantees, indemnities or obligations in respect of purchase price      
adjustments in connection with the acquisition or disposition of assets     
permitted under the Indenture;                                              

88  

S-4/A
90th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 90th
(j) Indebtedness of the Company or a Restricted Subsidiary to the extent
representing a replacement, renewal, refinancing or extension               
(collectively, a "refinancing") of outstanding Indebtedness Incurred in     
compliance with the Consolidated Coverage Ratio of the first paragraph of   
this covenant or clause (a) or (b) of this paragraph of this covenant;      
provided, however, that (i) any such refinancing shall not exceed the sum   
of the principal amount (or accreted amount (determined in accordance with  
GAAP), if less) of the Indebtedness or Disqualified Equity Interests being  
refinanced, plus the amount of accrued interest or dividends thereon, plus  
the amount of any prepayment premium necessary to accomplish such           
refinancing and such reasonable fees and expenses incurred in connection    
therewith, (ii) Indebtedness representing a refinancing of Indebtedness     
other than Senior Indebtedness shall have a Weighted Average Life to        
Maturity equal to or greater than the Weighted Average Life to Maturity of  
the Indebtedness being refinanced; (iii) Indebtedness that is pari passu    
with the Notes may only be refinanced with Indebtedness that is made pari   
passu with or subordinate in right of payment to the Notes and Subordinated 
Indebtedness may only be refinanced with Subordinated Indebtedness or       
Disqualified Equity Interests and Disqualified Equity Interests may only be 
refinanced with other Disqualified Equity Interests; and (iv) refinancing   
Indebtedness incurred by a Restricted Subsidiary which is not a Guarantor   
may only be used to refinance Indebtedness of a Restricted Subsidiary which 
is not a Guarantor; and                                                     

(k) in addition to the items referred to in clauses (a) through (j)     
above, Indebtedness of the Company (including any Indebtedness under the    
Bank Credit Agreement that utilizes this subparagraph (k)) having an        
aggregate principal amount not to exceed $15.0 million at any time          
outstanding.                                                                

Limitation on Layering. The Company shall not, directly or indirectly, Incur
any Indebtedness that by its terms would expressly rank senior in right of      
payment to the Notes and expressly rank subordinate in right of payment to any  
other Indebtedness of the Company.                                              

The Company shall not permit any Guarantor to, and no Guarantor shall,      
directly or indirectly, Incur any Indebtedness that by its terms would          
expressly rank senior in right of payment to the Guarantee of such Guarantor    
and expressly rank subordinate in right of payment to any Guarantor Senior      
Indebtedness of such Guarantor.                                                 

Limitation on Dividend and Other Payment Restrictions Affecting Restricted  
Subsidiaries. The Company shall not, and shall not cause or permit any          
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or  
suffer to exist or become effective any encumbrance or restriction on the       
ability of any Restricted Subsidiary to (a) pay dividends or make any other     
distributions to the Company or any other Restricted Subsidiary on its Equity   
Interests or with respect to any other interest or participation in, or         
measured by, its profits, or pay any Indebtedness owed to the Company or any    
other Restricted Subsidiary, (b) make loans or advances to, or guarantee any    
Indebtedness or other obligations of, the Company or any other Restricted       
Subsidiary or (c) transfer any of its properties or assets to the Company or    
any other Restricted Subsidiary, except for such encumbrances or restrictions   
existing under or by reason of (i) the Bank Credit Agreement, or any other      
agreement of the Company or the Restricted Subsidiaries outstanding on the      
Issue Date, in each case as in effect on the Issue Date, and any amendments,    
restatements, renewals, replacements or refinancings thereof; provided,         
however, that any such amendment, restatement, renewal, replacement or          
refinancing is no more restrictive in the aggregate with respect to such        
encumbrances or restrictions than those contained in the agreement being        
amended, restated, renewed, replaced or refinanced; (ii) applicable law; (iii)  
any instrument governing Indebtedness or Equity Interests of an Acquired        
Person acquired by the Company or any Restricted Subsidiary as in effect at     
the time of such acquisition (except to the extent any such Indebtedness or     
Equity Interests were Incurred by such Acquired Person in connection with, as   
a result of or in contemplation of such acquisition); provided, however, that   
such encumbrances and restrictions are not applicable to any Restricted         

89  

S-4/A
91st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 91st
Subsidiary, or the properties or assets of any Restricted Subsidiary, other     
than an Acquired Person; (iv) customary non-assignment provisions in leases     
entered into in the ordinary course of business; (v) Purchase Money             
Indebtedness for property acquired in the ordinary course of business that      
only imposes encumbrances and restrictions on the property so acquired; (vi)    
any agreement for the sale or disposition of the Equity Interests or assets of  
any Restricted Subsidiary; provided, however, that such encumbrances and        
restrictions described in this clause (vi) are only applicable to such          
Restricted Subsidiary or assets, as applicable, and any such sale or            
disposition is made in compliance with "Disposition of Proceeds of Asset        
Sales" below to the extent applicable thereto; (vii) refinancing Indebtedness   
permitted under clause (j) of the second paragraph of "Limitation on            
Indebtedness" above; provided, however, that such encumbrances and              
restrictions contained in the agreements governing such Indebtedness are no     
more restrictive in the aggregate than those contained in the agreements        
governing the Indebtedness being refinanced immediately prior to such           
refinancing; (viii) the Indenture; or (ix) contained in any other indenture     
governing debt securities that are no more restrictive than those contained in  
the Indenture.                                                                  

Designation of Unrestricted Subsidiaries. The Company may designate after   
the Issue Date any Subsidiary of the Company as an "Unrestricted Subsidiary"    
under the Indenture (a "Designation") only if (a) immediately prior to such     
Designation the Subsidiary to be so designated has total assets of $10,000 or   
less or (b):                                                                    

(i) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such Designation;                  

(ii) at the time of and after giving effect to such Designation, the    
Company could Incur $1.00 of additional Indebtedness (other than Permitted  
Indebtedness) under the Consolidated Coverage Ratio of the first paragraph  
of "Limitation on Indebtedness" above; and                                  

(iii) the Company would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the              
effectiveness of such Designation) pursuant to the first paragraph of       
"Limitation on Restricted Payments" above in an amount (the "Designation    
Amount") equal to the Fair Market Value of the Company's aggregate          
Investment in such Subsidiary on such date.                                 

Neither the Company nor any Restricted Subsidiary shall at any time (x)     
provide credit support for, subject any of its property or assets (other than   
the Equity Interests of any Unrestricted Subsidiary) to the satisfaction of,    
or guarantee, any Indebtedness of any Unrestricted Subsidiary (including any    
undertaking, agreement or instrument evidencing such Indebtedness), (y) be      
directly or indirectly liable for any Indebtedness of any Unrestricted          
Subsidiary or (z) be directly or indirectly liable for any Indebtedness which   
provides that the holder thereof may (upon notice, lapse of time or both)       
declare a default thereon or cause the payment thereof to be accelerated or     
payable prior to its final scheduled maturity upon the occurrence of a default  
with respect to any Indebtedness of any Unrestricted Subsidiary, except for     
any non-recourse guarantee given solely to support the pledge by the Company    
or any Restricted Subsidiary of the capital stock of any Unrestricted           
Subsidiary. All Subsidiaries of Unrestricted Subsidiaries shall be              
automatically deemed to be Unrestricted Subsidiaries.                           

The Company may revoke any Designation of a Subsidiary as an Unrestricted   
Subsidiary (a "Revocation") if:                                                 

(i) no Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to such Revocation; and              

(ii) all Liens and Indebtedness of such Unrestricted Subsidiary         
outstanding immediately following such Revocation would, if Incurred at     
such time, have been permitted to be Incurred for all purposes of the       
Indenture.                                                                  

90  

S-4/A
92nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 92nd
All Designations and Revocations must be evidenced by resolutions of the    
Board of Directors of the Company, delivered to the Trustee certifying          
compliance with the foregoing provisions.                                       

Limitation on Liens. The Company shall not, and shall not cause or permit   
any Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist  
any Liens of any kind against or upon any of their respective properties or     
assets now owned or hereafter acquired, or any proceeds therefrom or any        
income or profits therefrom, to secure any Indebtedness unless                  
contemporaneously therewith effective provision is made, in the case of the     
Company, to secure the Notes, and in the case of a Restricted Subsidiary which  
is a Guarantor, to secure such Restricted Subsidiary's Guarantee of the Notes,  
equally and ratably with such Indebtedness (or, in the event that such          
Indebtedness is subordinated in right of payment to the Notes or such           
Guarantor's Guarantee, prior to such Indebtedness) with a Lien on the same      
properties and assets securing such Indebtedness for so long as such            
Indebtedness is secured by such Lien, except for (i) Liens securing any Senior  
Indebtedness or any guarantee of Senior Indebtedness by any Guarantor; (ii)     
Liens securing any Acquired Indebtedness properly incurred under the            
Indenture, provided that any such Lien securing Acquired Indebtedness only      
extends to the assets that were subject to such Lien prior to the related       
acquisition by the Company or its Restricted Subsidiaries and was not created,  
incurred or assumed in connection with or in contemplation of such transaction  
and (iii) Permitted Liens.                                                      

Disposition of Proceeds of Asset Sales. The Company shall not, and shall not
cause or permit any Restricted Subsidiary to, directly or indirectly, make any  
Asset Sale, unless (i) the Company or such Restricted 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 such consideration consists of (A) cash or Cash Equivalents,    
(B) properties and capital assets to be used in the business of the Company,    
or (C) Equity Interests in any Person which thereby becomes a Restricted        
Subsidiary. The amount of any (i) Indebtedness (other than any Subordinated     
Indebtedness) of the Company or any Restricted Subsidiary that is actually      
assumed by the transferee in such Asset Sale and from which the Company and     
the Restricted Subsidiaries are fully released shall be deemed to be cash for   
purposes of determining the percentage of cash consideration received by the    
Company or the Restricted Subsidiaries and (ii) notes or other similar          
obligations received by the Company or the Restricted Subsidiaries from such    
transferee that are immediately converted, sold or exchanged (or are            
converted, sold or exchanged within 90 days of the related Asset Sale) by the   
Company or the Restricted Subsidiaries into cash shall be deemed to be cash,    
in an amount equal to the net cash proceeds realized upon such conversion,      
sale or exchange for purposes of determining the percentage of cash             
consideration received by the Company or the Restricted Subsidiaries.           

The Company or such Restricted Subsidiary, as the case may be, may (i) apply
the Net Cash Proceeds of any Asset Sale within 365 days of receipt thereof to   
repay Senior Indebtedness, (ii) commit in writing within 365 days of receipt    
thereof to acquire, construct or improve properties and capital assets to be    
used in a Related Business (and so apply such Net Cash Proceeds within 180      
days after the commitment thereof) or (iii) apply the Net Cash Proceeds of any  
Asset Sale within 365 days of receipt thereof or repay Pari Passu Debt not      
exceeding the Pari Passu Debt Pro Rata Share.                                   

To the extent all or part of the Net Cash Proceeds of any Asset Sale are not
applied as described in clause (i), (ii) or (iii) of the immediately preceding  
paragraph (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"), the     
Company shall, within 30 days after the expiration of such period, make an      
Offer to Purchase outstanding Notes up to a maximum principal amount            
(expressed as a multiple of $1,000) of Notes equal to such Unutilized Net Cash  
Proceeds, at a purchase price in cash equal to 100% of the principal amount     
thereof, plus accrued and unpaid interest thereon, if any, to the Purchase      
Date; provided, however, that the Offer to Purchase may be deferred until       
there are aggregate Unutilized Net Cash Proceeds equal to or in excess of $5.0  
million, at which time the entire amount of such Unutilized Net Cash Proceeds,  
and not just the amount in excess of $5.0 million, shall be applied as          
required pursuant to this paragraph.                                            

91  

S-4/A
93rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 93rd
After an Offer to Purchase has been made pursuant to the requirements of the
paragraph above, the Company may defer any future Offer to Purchase required    
pursuant to an Asset Sale until there are new aggregate Unutilized Net Cash     
Proceeds equal to or in excess of $5.0 million, at which time the entire        
amount of such Unutilized Net Cash Proceeds and not just the amount in excess   
of $5.0 million, shall be applied as required pursuant the paragraph above.     

With respect to any Offer to Purchase effected pursuant to this covenant, to
the extent the aggregate principal amount of Notes tendered pursuant to such    
Offer to Purchase exceeds the Unutilized Net Cash Proceeds to be applied to     
the repurchase thereof, such Notes shall be purchased pro rata based on the     
aggregate principal amount of such Notes tendered by each Holder. To the        
extent the Unutilized Net Cash Proceeds exceed the aggregate amount of Notes    
tendered by the Holders of the Notes pursuant to such Offer to Purchase, the    
Company may retain and utilize any portion of the Unutilized Net Cash Proceeds  
not applied to repurchase the Notes for any purpose consistent with the other   
terms of the Indenture.                                                         

In the event that the Company makes an Offer to Purchase the Notes, the     
Company shall comply with any applicable securities laws and regulations,       
including any applicable requirements of Section 14(e) of, and Rule 14e-1       
under, the Exchange Act, and any violation of the provisions of the Indenture   
relating to such Offer to Purchase occurring as a result of such compliance     
shall not be deemed an Event of Default or an event that with the passing of    
time or giving of notice, or both, would constitute an Event of Default.        

Each Holder shall be entitled to tender all or any portion of the Notes     
owned by such Holder pursuant to the Offer to Purchase, subject to the          
requirement that any portion of a Note tendered must be tendered in an          
integral multiple of $1,000 principal amount and subject to any proration       
among tendering Holders as described above.                                     

Merger, Sale of Assets, etc. The Company shall not consolidate with or merge
with or into (whether or not the Company is the Surviving Person) any other     
Person and the Company shall not directly or indirectly sell, convey, assign,   
transfer, lease or otherwise dispose of all or substantially all of the         
Company's and the Restricted Subsidiaries' properties and assets (determined    
on a consolidated basis for the Company and the Restricted Subsidiaries) to     
any entity in a single transaction or series of related transactions, unless:   
(i) either (x) the Company shall be the Surviving Person or (y) the Surviving   
Person (if other than the Company) shall be a Person organized and validly      
existing under the laws of the United States of America or any State thereof    
or the District of Columbia, and shall expressly assume by a supplemental       
indenture, the due and punctual payment of the principal of, premium, if any,   
and interest on all the Notes and the performance and observance of every       
covenant of the Indenture and the Registration Rights Agreement to be           
performed or observed on the part of the Company; (ii) immediately thereafter,  
no Default or Event of Default shall have occurred and be continuing; (iii)     
immediately after giving effect to any such transaction including the           
Incurrence by the Company or any Restricted Subsidiary, directly or             
indirectly, of additional Indebtedness (and treating any Indebtedness not       
previously an obligation of the Company or any Restricted Subsidiary in         
connection with or as a result of such transaction as having been Incurred at   
the time of such transaction), the Surviving Person could Incur, on a pro       
forma basis after giving effect to such transaction, at least $1.00 of          
additional Indebtedness (other than Permitted Indebtedness) under the           
Consolidated Coverage Ratio of the first paragraph of "Limitation on            
Indebtedness" above; (iv) immediately after giving effect to such transaction,  
the Surviving Person will have a Consolidated Net Worth in an amount which is   
not less than the Consolidated Net Worth of the Company immediately prior to    
such transaction; and (v) the Company will have delivered to the Trustee an     
Officers' Certificate and an Opinion of Counsel, each stating that such         
consolidation, merger or transfer and such supplemental indenture (if any)      
comply with the Indenture.                                                      

92  

S-4/A
94th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 94th
Notwithstanding the foregoing clauses (iii) and (iv) of the immediately     
preceding paragraph, any Restricted Subsidiary may consolidate with, merge      
into or transfer all or part of its properties and assets to the Company. In    
addition, at any time, and notwithstanding the provisions of the immediately    
preceding paragraph, Acquisition Co. may merge with and into the Company;       
provided, that, immediately prior to such merger, neither corporation has any   
Indebtedness outstanding.                                                       

For purposes of the foregoing, the transfer (by lease, assignment, sale or  
otherwise, in a single transaction or series of transactions) of all or         
substantially all the properties and assets of one or more Restricted           
Subsidiaries the Equity Interests of which constitute all or substantially all  
the properties and assets of the Company shall be deemed to be the transfer of  
all or substantially all the properties and assets of the Company.              

In the event of any transaction (other than a lease) described in and       
complying with the conditions listed in the immediately preceding paragraphs    
in which the Company or a Guarantor, as the case may be, is not the Surviving   
Person and the Surviving Person is to assume all the Obligations of the         
Company under the Notes, the Indenture and the Exchange and Registration        
Rights Agreement or of such Guarantor under its Guarantee, the Indenture and    
the Exchange and Registration Rights Agreement, as the case may be, pursuant    
to a supplemental indenture, such Surviving Person shall succeed to, and be     
substituted for, and may exercise every right and power of, the Company or      
such Guarantor, as the case may be, and the Company shall be automatically and  
unconditionally released and discharged from its Obligations under the          
Indenture and the Notes or such Guarantor shall be automatically and            
unconditionally released and discharged from its Obligations under the          
Indenture and its Guarantee.                                                    

Transactions with Affiliates. The Company shall not, and shall not cause or 
permit any Restricted Subsidiary to, directly or indirectly, conduct any        
business or enter into any transaction (or series of related transactions)      
with or for the benefit of any of their respective Affiliates of the Company    
(each an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on  
terms which are no less favorable to the Company or such Restricted             
Subsidiary, as the case may be, than would be available in a comparable         
transaction with an unaffiliated third party and (ii) if such Affiliate         
Transaction or series of related Affiliate Transactions (other than any such    
Affiliate Transactions between the Company or a Restricted Subsidiary and an    
Unrestricted Subsidiary or an Accounts Receivable Subsidiary in the ordinary    
course of business) involves aggregate payments or other consideration having   
a Fair Market Value in excess of $2.5 million, such Affiliate Transaction is    
in writing and a majority of the disinterested members of the Board of          
Directors of the Company shall have approved such Affiliate Transaction. In     
addition, any Affiliate Transaction (other than an Affiliate Transaction        
between the Company or a Restricted Subsidiary and an Unrestricted Subsidiary   
or an Accounts Receivable Subsidiary in the ordinary course of business)        
involving aggregate payments or other consideration having a Fair Market Value  
in excess of $5.0 million will also require a written opinion from an           
Independent Financial Advisor stating that the terms of such Affiliate          
Transaction are fair, from a financial point of view, to the Company or the     
Restricted Subsidiary involved in such Affiliate Transaction, as the case may   
be.                                                                             

Notwithstanding the foregoing, the restrictions set forth in this covenant  
shall not apply to (i) transactions with or among the Company and any           
Restricted Subsidiary or between or among Restricted Subsidiaries; (ii)         
customary directors' fees, indemnification and similar arrangements,            
consulting fees, employee salaries, bonuses or employment agreements,           
compensation or employee benefit arrangements and incentive arrangements with   
any officer, director or employee of the Company or any Restricted Subsidiary   
entered into in the ordinary course of business (including customary benefits   
thereunder) and payments under any indemnification arrangements permitted by    
applicable law; (iii) payments to AXIA Group to permit AXIA Group to make       
payments to The Sterling Group for advisory services pursuant to the            
Management Agreement; (iv) the issue and sale by the Company to its             
stockholders of Qualified Equity Interests; (v) any Restricted Payments made    
in compliance with "Limitation on Restricted Payments" above; (vii)             
intercompany sales between the                                                  

93  

S-4/A
95th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 95th
Company and any of its Restricted Subsidiaries or exclusively between or among  
such Restricted Subsidiaries provided that such sales are in the ordinary       
course of business and on an arm's--length                                      
basis; (vi) the Incurrence of intercompany Indebtedness permitted pursuant to   
clause (d) of the second paragraph of "Limitation on Indebtedness" above and    
(viii) loans or advances to employees in the ordinary course of business.       

Limitation on the Sale or Issuance of Equity Interests of Restricted        
Subsidiaries. The Company shall not sell any Equity Interest of a Restricted    
Subsidiary, and shall not cause or permit any Restricted Subsidiary, directly   
or indirectly, to issue or sell any Equity Interests, except: (i) to the        
Company or a Wholly Owned Restricted Subsidiary; (ii) if, immediately after     
giving effect to such issuance or sale, such Restricted Subsidiary remains a    
Restricted Subsidiary; or (iii) if all Equity Interests of such Restricted      
Subsidiary are sold or otherwise disposed of. Notwithstanding the foregoing,    
the Company is permitted to sell all the Equity Interests of a Restricted       
Subsidiary as long as the Company is in compliance with the terms of the        
covenant described under "--Disposition of Proceeds of Asset Sales" above.      

Provision of Financial Information. Whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, or any successor provision          
thereto, the Company shall file with the SEC (if permitted by SEC practice and  
applicable law and regulations) the annual reports, quarterly reports and       
other documents which the Company would have been required to file with the     
SEC pursuant to such Section 13(a) or 15(d) (each, an "Exchange Act Report")    
or any successor provision thereto 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. If, at any time prior to    
the consummation of the Exchange Offer when the Company is not subject to such  
Section 13(a) or 15(d), the information which would be required in an Exchange  
Act Report is included in a public filing of the Company under the Securities   
Act at the applicable Required Filing Date, such public filing shall fulfill    
the filing requirement with the SEC with respect to the applicable Exchange     
Act Report. The Company shall also in any event (a) within 15 days of each      
Required Filing Date (whether or not permitted or required to be filed with     
the SEC) (i) transmit (or cause to be transmitted) by mail to all Holders, as   
their names and addresses appear in the Note register, without cost to such     
Holders, and (ii) file with the Trustee, copies of the annual reports,          
quarterly reports and other documents which the Company is required to file     
with the SEC pursuant to this covenant, or, if such filing is not so permitted  
(or, prior to the consummation of the Exchange Offer, when the Company is not   
subject to Section 13(d) or 15(d) of the Exchange Act), information and data    
of a similar nature, and (b) if, notwithstanding the preceding sentence,        
filing such documents by the Company with the SEC is not permitted by SEC       
practice or applicable law or regulations, promptly upon written request        
supply copies of such documents to any Holder. In addition, for so long as any  
Notes remain outstanding, the Company will furnish to the Holders and           
prospective investors, upon their request, the information required to be       
delivered pursuant to Rule 144A(d)(4) under the Securities Act.                 

EVENTS OF DEFAULT                                                               

The occurrence of any of the following is defined as an "Event of Default"  
under the Indenture: (a) failure to pay principal of (or premium, if any, on)   
any Note when due (whether or not prohibited by the provisions of the           
Indenture described under "Subordination of the Notes" above); (b) failure to   
pay any interest on any Note when due, continued for 30 days or more (whether   
or not prohibited by the provisions of the Indenture described under            
"Subordination of the Notes" above); (c) default in the payment of principal    
of or interest on any Note required to be purchased pursuant to any Offer to    
Purchase required by the Indenture when due and payable or failure to pay on    
the Purchase Date the Purchase Price for any Note validly tendered pursuant to  
any Offer to Purchase (whether or not prohibited by the provisions of the       
Indenture described under "Subordination of the Notes" above); (d) failure to   
perform or comply with any of the provisions described under "Certain           
Covenants--                                                                     

94  

S-4/A
96th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 96th
Merger, Sale of Assets, etc." above; (e) failure to comply for 30 days with     
any covenants described under "Offer to Purchase upon Change of Control"        
(other than a failure to purchase Notes), under "--Limitation on Restricted     
Payments," under "--Limitation on Indebtedness," under "--Limitation on         
Layering," under "--Limitation on Dividend and Other Payment Restrictions       
Affecting Restricted Subsidiaries," under "--Designation of Unrestricted        
Subsidiaries," under "--Limitation on Liens," under "--Disposition of Proceeds  
of Asset Sales," under "--Transactions with Affiliates," under "--Limitation    
on the Sale or Issuance of Equity Interests of Restricted Subsidiaries," or     
under "--Provision of Financial Information;" (f) failure for 60 days to        
perform or comply with any other covenant or agreement of the Company under     
the Indenture or in the Notes or of the Guarantors under the Indenture or in    
the Guarantees; (g) default or defaults under the terms of one or more          
instruments evidencing or securing Indebtedness of the Company or any of its    
Significant Restricted Subsidiaries having an outstanding principal amount of   
$5.0 million or more individually or in the aggregate that have resulted in     
the acceleration of the payment of such Indebtedness or failure by the Company  
or any of its Significant Restricted Subsidiaries to pay principal when due at  
the stated maturity of any such Indebtedness; (h) the rendering of a final      
judgment or judgments (not subject to appeal) against the Company or any of     
its Significant Restricted Subsidiaries in an amount of $5.0 million or more    
(net of any amounts covered by reputable and creditworthy insurance companies)  
which remain undischarged or unstayed for a period of 60 days after the date    
on which the right to appeal has expired; (i) certain events of bankruptcy,     
insolvency or reorganization affecting the Company or any of its Significant    
Restricted Subsidiaries; or (j) other than as provided in or pursuant to any    
Guarantee or the Indenture, any Guarantee by any Significant Restricted         
Subsidiary ceases to be in full force and effect or is declared null and void   
and unenforceable or found to be invalid or any Guarantor denies its liability  
under its Guarantee (other than by reason of termination of the Indenture or a  
release of such Guarantor from its Guarantee in accordance with the terms of    
the Indenture and such Guarantee). Subject to the provisions of the Indenture   
relating to the duties of the Trustee, in case an Event of Default shall occur  
and be continuing, the Trustee will be under no obligation to exercise any of   
its rights or powers under the Indenture at the request or direction of any of  
the Holders of Notes, unless such Holders shall have offered to the Trustee     
reasonable indemnity. Subject to such provisions for the indemnification of     
the Trustee, the Holders of a majority in aggregate principal amount of the     
outstanding Notes will have the right to direct the time, method and place of   
conducting any proceeding for any remedy available to the Trustee, or           
exercising any trust or power conferred on such Trustee.                        

If an Event of Default with respect to the Notes (other than an Event of    
Default with respect to the Company described in clause (i) of the preceding    
paragraph) occurs and is continuing, the Trustee or the Holders of at least     
25% in aggregate principal amount of the outstanding Notes, by notice in        
writing to the Company, may declare the unpaid principal of (and premium, if    
any) and accrued interest to the date of acceleration on all the outstanding    
Notes to be due and payable immediately and, upon any such declaration, such    
principal amount (and premium, if any) and accrued interest, notwithstanding    
anything contained in the Indenture or the Notes to the contrary, will become   
immediately due and payable; provided, however, that so long as the Bank        
Credit Agreement shall be in full force and effect, if an Event of Default      
shall have occurred and be continuing (other than an Event of Default with      
respect to the Company described in clause (i) of the preceding paragraph),     
the Notes shall not become due and payable until the earlier to occur of (x)    
five Business Days following delivery of written notice of such acceleration    
of the Notes to the agent under the Bank Credit Agreement and (y) the           
acceleration (ipso facto or otherwise) of any Indebtedness under the Bank       
Credit Agreement. If an Event or Default specified in clause (i) of the         
preceding paragraph with respect to the Company occurs under the Indenture,     
the Notes will ipso facto become immediately due and payable without any        
declaration or other act on the part of the Trustee or any Holder of the        
Notes.                                                                          

Any such declaration with respect to the Notes may be annulled by the       
Holders of a majority in aggregate principal amount of the outstanding Notes    
upon the conditions provided in the Indenture. For information as to waiver of  
defaults, see "Modification and Waiver" below.                                  

95  

S-4/A
97th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 97th
The Indenture provides that the Trustee shall, within 30 days after the     
occurrence of any Default or Event of Default with respect to the Notes         
outstanding, give the Holders of the Notes thereof notice of all uncured        
Defaults or Events of Default thereunder known to it; provided, however, that,  
except in the case of a Default or an Event of Default in payment with respect  
to the Notes or a Default or Event of Default in complying with "Certain        
Covenants--Merger, Sale of Assets, etc." above, the Trustee shall be protected  
in withholding such notice if and so long as a committee of its trust officers  
in good faith determines that the withholding of such notice is in the          
interest of the Holders of the Notes.                                           

No Holder of any Note will have any right to institute any proceeding with  
respect to the Indenture or for any remedy thereunder, unless such Holder       
shall have previously given to the Trustee written notice of a continuing       
Event of Default thereunder and unless the Holders of at least 25% of the       
aggregate principal amount of the outstanding Notes shall have made written     
request, and offered reasonable indemnity, to the Trustee to institute such     
proceeding, and the Trustee shall have not have received from the Holders of a  
majority in aggregate principal amount of such outstanding Notes a direction    
inconsistent with such request and shall have failed to institute such          
proceeding within 60 days. However, such limitations do not apply to a suit     
instituted by a Holder of such a Note for enforcement of payment of the         
principal of and premium, if any, or interest on such Note on or after the      
respective due dates expressed in such Note.                                    

The Company is required to furnish to the Trustee annually a statement as to
the performance by it of certain of its obligations under the Indenture and as  
to any default in such performance.                                             

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR AND       
STOCKHOLDERS                                                                    

No director, officer, employee, incorporator or stockholder of the Company  
or any of its Affiliates, as such, shall have any liability for any             
obligations of the Company or any of its Affiliates under the Notes or the      
Indenture or for any claim based on, in respect of, or by reason of, such       
obligations or their creation. Each holder of Notes by accepting a Note waives  
and releases all such liability. The waiver and release are part of the         
consideration for issuance of the Notes.                                        

SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE                             

The Company may terminate its and the Guarantors' substantive obligations in
respect of the Notes by delivering all outstanding Notes to the Trustee for     
cancellation and paying all sums payable by it on account of principal of,      
premium, if any, and interest on all Notes or otherwise. In addition to the     
foregoing, the Company may, provided that no Default or Event of Default has    
occurred and is continuing or would arise therefrom (or, with respect to a      
Default or Event of Default specified in clause (i) of "Events of Default"      
above, occurs at any time on or prior to the 91st calendar day after the date   
of such deposit (it being understood that this condition shall not be deemed    
satisfied until after such 91st day)) under the Indenture and provided that no  
default under any Senior Indebtedness would result therefrom, terminate its     
and the Guarantors' substantive obligations in respect of the Notes (except     
for its obligations to pay the principal of (and premium, if any, on) and the   
interest on the Notes and the Guarantors' Guarantee thereof) by (i) depositing  
with the Trustee, under the terms of an irrevocable trust or escrow agreement,  
money or United States Government Obligations or a combination thereof          
sufficient (without reinvestment) to pay all remaining Indebtedness on such     
Notes; (ii) delivering to the Trustee either an Opinion of Counsel or a ruling  
of the Internal Revenue Service to the effect that the Holders of the Notes     
will not recognize income, gain or loss for Federal income tax purposes as a    
result of such deposit and termination of obligations; (iii) delivering to the  
Trustee an Opinion of Counsel to the effect that the Company's exercise of its  
option under this paragraph will not result in any of the Company, the Trustee  
or the trust or escrow created by the Company's deposit of funds pursuant to    
this provision becoming or being deemed to be an                                

96  

S-4/A
98th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 98th
"investment company" under the Investment Company Act of 1940, as amended (the  
"Investment Act"); and (iv) complying with certain other requirements set       
forth in the Indenture (the foregoing being referred to as a "covenant          
defeasance"). In addition, the Company may, provided that no Default or Event   
of Default has occurred and is continuing or would arise therefrom (or, with    
respect to a Default or Event of Default specified in clause (i) of "Events of  
Default" above, occurs at any time on or prior to the 91st calendar day after   
the date of such deposit (it being understood that this condition shall not be  
deemed satisfied until after such 91st day)) under the Indenture and provided   
that no default under any Senior Indebtedness would result therefrom,           
terminate all of its and the Guarantors' substantive obligations in respect of  
the Notes (including its obligations to pay the principal of (and premium, if   
any, on) and interest on the Notes and the Guarantors' Guarantee thereof) by    
(i) depositing with the Trustee, under the terms of an irrevocable trust        
agreement, money or United States Government Obligations or a combination       
thereof sufficient (without reinvestment) to pay all remaining Indebtedness on  
the Notes; (ii) delivering to the Trustee either a ruling of the Internal       
Revenue Service to the effect that the Holders of the Notes will not recognize  
income, gain or loss for Federal income tax purposes as a result of such        
deposit and termination of obligations or an Opinion of Counsel addressed to    
the Trustee based upon such a ruling or based on a change in the applicable     
Federal tax law since the date of the Indenture, to such effect; (iii)          
delivering to the Trustee an Opinion of Counsel to the effect that the          
Company's exercise of its option under this paragraph will not result in any    
of the Company, the Trustee or the trust or escrow created by the Company's     
deposit of funds pursuant to this provision becoming or being deemed to be an   
"investment company" under the Investment Act; and (iv) complying with certain  
other requirements set forth in the Indenture (the foregoing being referred to  
as a "legal defeasance").                                                       

The Company may exercise its legal defeasance option notwithstanding its    
prior exercise of its covenant defeasance option. In the event of either        
covenant defeasance or legal defeasance, payment of the Notes may not be        
accelerated because of an event specified as a Default or an Event of Default.  

The Company may make an irrevocable deposit pursuant to this provision only 
if at such time it is not prohibited from doing so under the subordination      
provisions of the Indenture or certain covenants in the Senior Indebtedness     
and the Company has delivered to the Trustee and any Paying Agent an Officers'  
Certificate to that effect.                                                     

GOVERNING LAW                                                                   

The Indenture, the Notes and the Guarantees are governed by the laws of the 
State of New York without regard to principles of conflicts of laws.            

MODIFICATION AND WAIVER                                                         

Modifications and amendments of the Indenture may be made by the Company,   
the Guarantors, and the Trustee with the consent of the Holders of a majority   
in aggregate principal amount of the outstanding Notes (including consents      
obtained in connection with a tender offer or exchange offer for the Notes);    
provided, however, that no such modification or amendment to the Indenture      
may, without the consent of the Holder of each Note affected thereby, (a)       
change the maturity of the principal of or any installment of interest on any   
such Note or alter the optional redemption or repurchase provisions of any      
such Note or the Indenture in a manner adverse to the Holders of the Notes;     
(b) reduce the principal amount of (or the premium) of any such Note; (c)       
reduce the rate of or extend the time for payment of interest on any such       
Note; (d) change the place or currency of payment of principal of (or premium,  
if any) or interest on any such Note; (e) modify any provisions of the          
Indenture relating to the waiver of past defaults (other than to add sections   
of the Indenture or the Notes subject thereto) or the right of the Holders of   
Notes to institute suit for the enforcement of any payment on or with respect   
to any such Note or any Guarantee in respect thereof or the modification and    
amendment provisions of the Indenture and the Notes (other than to add          
sections                                                                        

97  

S-4/A
99th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 99th
of the Indenture or the Notes which may not be amended, supplemented or waived  
without the consent of each Holder therein affected); (f) reduce the            
percentage of the principal amount of outstanding Notes necessary for           
amendment to or waiver of compliance with any provision of the Indenture or     
the Notes or for waiver of any Default in respect thereof; (g) waive a default  
in the payment of principal of, interest on, or redemption payment with         
respect to, the Notes (except a rescission of acceleration of the Notes by the  
Holders thereof as provided in the Indenture and a waiver of the payment        
default that resulted from such acceleration); (h) modify the ranking or        
priority of any Note or the Guarantee in respect thereof of any Guarantor or    
modify the definition of Senior Indebtedness or Guarantor Senior Indebtedness   
or amend or modify the subordination provisions of the Indenture, in any case   
in any manner adverse to the Holders of the Notes; (i) modify the provisions    
of any covenant (or the related definitions) in the Indenture requiring the     
Company to make an Offer to Purchase following an event or circumstance which   
may give rise to the requirement to make an Offer to Purchase in a manner       
materially adverse to the Holders of Notes affected thereby otherwise than in   
accordance with the Indenture; or (j) release any Guarantor from any of its     
obligations under its Guarantee or the Indenture otherwise than in accordance   
with the Indenture.                                                             

The Holders of a majority in aggregate principal amount of the outstanding  
Notes, on behalf of all Holders of Notes, may waive compliance by the Company   
and the Guarantors with certain restrictive provisions of the Indenture.        
Subject to certain rights of the Trustee, as provided in the Indenture, the     
Holders of a majority in aggregate principal amount of the Notes, on behalf of  
all Holders, may waive any past default under the Indenture (including any      
such waiver obtained in connection with a tender offer or exchange offer for    
the Notes), except a default in the payment of principal, premium, if any, or   
interest or a default arising from failure to purchase any Notes tendered       
pursuant to an Offer to Purchase, or a default in respect of a provision that   
under the Indenture cannot be modified or amended without the consent of the    
Holder of each Note that is affected.                                           

THE TRUSTEE                                                                     

Except during the continuance of a Default, the Trustee will perform only   
such duties as are specifically set forth in the Indenture. During the          
existence of a Default, the Trustee will exercise such rights and powers        
vested in it under the Indenture and use the same degree of care and skill in   
its exercise as a prudent person would exercise under the circumstances in the  
conduct of such person's own affairs.                                           

The Indenture and provisions of the Trust Indenture Act incorporated by     
reference therein contain limitations on the rights of the Trustee, should it   
become a creditor of the Company, any Guarantor or any other obligor upon the   
Notes, to obtain payment of claims in certain cases or to realize on certain    
property received by it in respect of any such claim as security or otherwise.  
The Trustee is permitted to engage in other transactions with the Company or    
an Affiliate of the Company; provided, however, that if it acquires any         
conflicting interest (as defined in the Indenture or in the Trust Indenture     
Act), it must eliminate such conflict or resign.                                

The address of the Trustee is Goodwin Square, 225 Asylum Street, 23rd Floor,
Hartford, Connecticut 06103.                                                    

CERTAIN DEFINITIONS                                                             

Set forth below are certain defined terms used in the Indenture. Reference  
is made to the Indenture for a full definition of all such terms, as well as    
any other capitalized terms used herein for which no definition is provided.    

"Accounts Receivable Subsidiary" means any Subsidiary of the Company that   
is, directly or indirectly, wholly owned by the Company (other than director    
qualifying shares) and organized solely for the purpose of and engaged in (i)   
purchasing, financing and collecting accounts receivable                        

98  

S-4/A
100th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 100th
obligations of customers of the Company or its Subsidiaries, (ii) the sale or   
financing of such accounts receivable or interest therein and (iii) other       
activities incident thereto.                                                    

"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in       
connection with an Acquisition from such Person or (b) existing at the time     
such Person becomes a Restricted Subsidiary or is merged or consolidated with   
or into the Company or any Restricted Subsidiary.                               

"Acquired Person" means, with respect to any specified Person, any other    
Person which merges with or into or becomes a Subsidiary of such specified      
Person.                                                                         

"Acquisition" means (i) any capital contribution (by means of transfers of  
cash or other property to others or payments for property or services for the   
account or use of others, or otherwise) by the Company or any Restricted        
Subsidiary to any other Person, or any acquisition or purchase of Equity        
Interests of any other Person by the Company or any Restricted Subsidiary, in   
either case pursuant to which such Person shall become a Restricted Subsidiary  
or shall be consolidated with or merged into the Company or any Restricted      
Subsidiary or (ii) any acquisition by the Company or any Restricted Subsidiary  
of the assets of any Person which constitute substantially all of an operating  
unit or line of business of such Person or which is otherwise outside of the    
ordinary course of business.                                                    

"Additional Interest" has the meaning provided in Section 4(a) of the       
Registration Rights Agreement.                                                  

"Affiliate" of any specified person means any other Person directly or      
indirectly controlling or controlled by or under direct or indirect common      
control with such specified Person. For purposes of this definition, "control"  
(including, with correlative meanings, the terms "controlling," "controlled     
by" and "under common control with"), as used with respect to any Person,       
shall mean the possession, directly or indirectly, of the power to direct or    
cause the direction of the management or policies of such Person, whether       
through the ownership of voting securities, by agreement or otherwise.          

"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease 
(that has the effect of a disposition, including a sale leaseback transaction)  
or other disposition (including, without limitation, by means of any merger or  
consolidation) to any Person other than the Company or a Wholly Owned           
Restricted Subsidiary, in one transaction or a series of related transactions,  
of (i) any Equity Interest (other than directors' qualifying shares) of any     
Restricted Subsidiary; (ii) any assets of the Company or any Restricted         
Subsidiary which constitute substantially all of an operating unit or line of   
business of the Company or any Restricted Subsidiary; or (iii) any other        
property or asset of the Company or any Restricted Subsidiary outside of the    
ordinary course of business, provided in each case that the aggregate           
consideration for such sale, conveyance, transfer, lease or other disposition   
is equal to $1.5 million or more. For the purposes of this definition, the      
term "Asset Sale" shall not include (a) any transaction consummated in          
compliance with "Certain Covenants--Merger, Sale of Assets, etc." above and     
the creation of any Lien not prohibited by "Certain Covenants--Limitation on    
Liens" above; provided, however, that any transaction consummated in            
compliance with "Certain Covenants--Merger, Sale of Assets, etc." above         
involving a sale, conveyance, assignment, transfer, lease or other disposal of  
less than all of the properties or assets of the Company shall be deemed to be  
an Asset Sale with respect to the properties or assets of the Company and the   
Restricted Subsidiaries that are not so sold, conveyed, assigned, transferred,  
leased or otherwise disposed of in such transaction; (b) sales of property or   
equipment that has become worn out, obsolete or damaged or otherwise            
unsuitable for use in connection with the business of the Company or any        
Restricted Subsidiary; (c) any transaction consummated in compliance with       
"Certain Covenants--Limitation on Restricted Payments" above; (d) sales of      
accounts receivable for cash at fair market value; and (e) any sale,            
conveyance or transfer of accounts receivable in the ordinary course of         
business to an Accounts Receivable Subsidiary or to third parties that are not  
Affiliates of the Company or any Subsidiary of the Company.                     

99  

S-4/A
101st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 101st
"AXIA Group" means AXIA Group, Inc.                                         

"Bank Credit Agreement" means the credit facility between the Company, the  
Guarantors, the lenders named therein, and Paribas, as Administrative Agent,    
including any deferrals, renewals, extensions, substitutions, replacements,     
refinancings or refundings thereof, or amendments, modifications or             
supplements thereto and any agreement providing therefor (including any         
restatements thereof and any increases in the amount of commitments             
thereunder), whether by or with the same or any other lender, creditor, group   
of lenders or group of creditors, and including related notes, guarantee and    
note agreements and other instruments and agreements executed in connection     
therewith.                                                                      

"Board Resolution" means, with respect to any Person, a duly adopted        
resolution of the Board of Directors of such Person.                            

"Capital Lease Obligation" means, at the time any determination thereof is  
to be made, the amount of the liability in respect of a capital lease that      
would at such time be so required to be capitalized on the balance sheet in     
accordance with GAAP.                                                           

"Cash Equivalents" means with respect to the Company and its Restricted     
Subsidiaries: (a) U.S. dollars and any other currency that is convertible into  
U.S. dollars without legal restrictions; (b) securities issued or directly and  
fully guaranteed or insured by the U.S. government or any agency or             
instrumentality thereof; (c) certificates of deposit and time deposits with     
maturities of one year or less from the date of acquisition, bankers'           
acceptances with maturities not exceeding one year and overnight bank           
deposits, in each case with any commercial bank having capital and surplus in   
excess of $250.0 million (or the foreign currency equivalent thereof); (d)      
repurchase obligations with a term of not more than 30 days for underlying      
securities of the types described in clauses (b) and (c) above entered into     
with any financial institution meeting the qualifications specified in clause   
(c) above; (e) commercial paper rated P-1, A-1 or the equivalent thereof by     
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation    
("S&P"), respectively, and in each case maturing within six months after the    
date of acquisition; (f) with respect to any Foreign Subsidiary organized in    
Canada; commercial paper of Canadian companies rated R-1 High or the            
equivalent thereof by Dominion Bond Rating Services with maturities of less     
than one year; and (g) with respect to Foreign Subsidiaries not organized in    
Canada, government obligations of another country whose debt securities are     
rated by S&P and/or Moody's "A-1" or "P-1", or the equivalent thereof (if a     
short-term debt rating is provided by either) or at least "AA" or "AA2", or     
the equivalent thereof (if a long-term unsecured debt rating is provided by     
either), in each case, with maturities of less than 12 months.                  

"Change of Control" means the occurrence of any of the following events     
(whether or not approved by the Board of Directors of the Company): (i) any     
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act,   
including any group acting for the purpose of acquiring, holding or disposing   
of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act),   
other than one or more Permitted Holders, is or becomes the "beneficial owner"  
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a      
Person shall be deemed to have "beneficial ownership" of all shares that any    
such Person has the right to acquire, whether such right is exercisable         
immediately or only after the passage of time, upon the happening of an event   
or otherwise), directly or indirectly, of more than 50% of the total voting     
power of the then outstanding Voting Equity Interests of the Company or, so     
long as AXIA Group owns a majority of the Voting Equity Interests of the        
Company, AXIA Group; (ii) the Company consolidates with, or merges with or      
into, another Person (other than a Guarantor which is a Wholly Owned            
Restricted Subsidiary or a Person that is controlled by the Permitted Holders)  
or the Company directly or indirectly sells, assigns, conveys, transfers,       
leases or otherwise disposes of all or substantially all of the assets of the   
Company and the Restricted Subsidiaries (determined on a consolidated basis)    
to any Person (other than the Company or a Guarantor which is a Wholly Owned    
Restricted Subsidiary or a Person that is controlled by the                     

100 

S-4/A
102nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 102nd
Permitted Holders), in each case other than any such transaction where          
immediately after such transaction the Person or Persons that "beneficially     
owned" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except      
that a Person shall be deemed to have "beneficial ownership" of all securities  
that such Person has the right to acquire, whether such right is exercisable    
immediately or only after the passage of time) immediately prior to such        
transaction, directly or indirectly, the then outstanding Voting Equity         
Interests of the Company "beneficially own" (as so determined), directly or     
indirectly, a majority of the total voting power of the then outstanding        
Voting Equity Interests of the surviving or transferee Person; or (iii)         
following the first public offering of $20.0 million or more of Voting Equity   
Interests of the Company, during any period of two consecutive years,           
individuals who at the beginning of such period constituted the Board of        
Directors of the Company (together with any new directors whose election by     
such Board of Directors or whose nomination for election by the shareholders    
of the Company was approved by a vote of a majority of the directors of the     
Company then still in office who were either directors at the beginning of      
such period or whose election or nomination for election was previously so      
approved) cease for any reason to constitute a majority of the Board of         
Directors of the Company then in office.                                        

"Change of Control Date" has the meaning set forth under "Offer to Purchase 
upon Change of Control" above.                                                  

"Consolidated Coverage Ratio" as of any date of determination means the     
ratio of (i) the aggregate amount of Consolidated EBITDA for the four quarter   
period of the most recent four consecutive fiscal quarters ending prior to the  
date of such determination (the "Four Quarter Period") to (ii) Consolidated     
Interest Expense for such Four Quarter Period; provided, however, that (1) if   
the Company or any Restricted Subsidiary has Incurred any Indebtedness since    
the beginning of such Four Quarter Period that remains outstanding on such      
date of determination or if the transaction giving rise to the need to          
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or  
both, Consolidated EBITDA and Consolidated Interest Expense for such Four       
Quarter Period shall be calculated after giving effect on a pro forma basis to  
such Indebtedness as if such Indebtedness had been Incurred on the first day    
of such Four Quarter Period and the discharge of any other Indebtedness         
repaid, repurchased, defeased or otherwise discharged with the proceeds of      
such new Indebtedness as if such discharge had occurred on the first day of     
such Four Quarter Period, (2) if since the beginning of such Four Quarter       
Period the Company or any Restricted Subsidiary shall have made any Asset       
Sale, the Consolidated EBITDA for such Four Quarter Period shall be reduced by  
an amount equal to the Consolidated EBITDA (if positive) directly attributable  
to the assets that are the subject of such Asset Sale for such Four Quarter     
Period or increased by an amount equal to the Consolidated EBITDA (if           
negative) directly attributable thereto for such Four Quarter Period and        
Consolidated Interest Expense for such Four Quarter Period shall be reduced by  
an amount equal to the Consolidated Interest Expense directly attributable to   
any Indebtedness of the Company or any Restricted Subsidiary repaid,            
repurchased, defeased or otherwise discharged with respect to the Company and   
its continuing Restricted Subsidiaries in connection with such Asset Sale for   
such Four Quarter Period (or, if the Equity Interests of any Restricted         
Subsidiary are sold, the Consolidated Interest Expense for such Four Quarter    
Period directly attributable to the Indebtedness of such Restricted Subsidiary  
to the extent the Company and its continuing Restricted Subsidiaries are no     
longer liable for such Indebtedness after such sale), (3) if since the          
beginning of such Four Quarter Period the Company or any Restricted Subsidiary  
(by merger or otherwise) shall have made an Investment in any Restricted        
Subsidiary (or any Person that becomes a Restricted Subsidiary) or an           
acquisition of assets, including any acquisition of assets occurring in         
connection with a transaction causing a calculation to be made hereunder,       
which constitutes all or substantially all of an operating unit of a business,  
Consolidated EBITDA and Consolidated Interest Expense for such Four Quarter     
Period shall be calculated after giving pro forma effect thereto (including     
the Incurrence of any Indebtedness) as if such Investment or acquisition        
occurred on the first day of such Four Quarter Period and (4) if since the      
beginning of such Four Quarter Period any Person (that subsequently             

101 

S-4/A
103rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 103rd
became a Restricted Subsidiary or was merged with or into the Company or any    
Restricted Subsidiary since the beginning of such Four Quarter Period) shall    
have made any Asset Sale or any Investment or acquisition of assets that would  
have required an adjustment pursuant to clause (2) or (3) above if made by the  
Company or a Restricted Subsidiary during such Four Quarter Period,             
Consolidated EBITDA and Consolidated Interest Expense for such Four Quarter     
Period shall be calculated after giving pro forma effect thereto as if such     
Asset Sale, Investment or acquisition of assets occurred on, with respect to    
any Investment or acquisition, the first day of such Four Quarter Period and,   
with respect to any Asset Sale, the day prior to the first day of such Four     
Quarter Period. For purposes of this definition, whenever pro forma effect is   
to be given to an Asset Sale or Investment or other acquisition of assets       
(including pursuant to the Transactions), the amount of income or earnings and  
any net cost savings relating thereto and the amount of Consolidated Interest   
Expense associated with any Indebtedness Incurred in connection therewith, the  
pro forma calculations shall be determined in accordance with Regulation S-X    
under the Securities Act. If any Indebtedness bears a floating rate of          
interest and is being given pro forma effect, the interest expense on such      
Indebtedness shall be calculated as if the rate in effect on the date of        
determination had been the applicable rate for the entire period (taking into   
account any agreement under which Hedging Obligations relating to interest are  
outstanding applicable to such Indebtedness if such agreement under which such  
Hedging Obligations are outstanding has a remaining term as at the date of      
determination in excess of 12 months).                                          

"Consolidated EBITDA" means, for any period, the Consolidated Net Income for
such period, plus the following to the extent deducted in calculating such      
Consolidated Net Income: (i) Consolidated Income Tax Expense for such period;   
(ii) Consolidated Interest Expense for such period; (iii) depreciation expense  
for such period; (iv) amortization expense for such period; (v) all costs and   
expenses incurred by the Company on or prior to the Issue Date related to the   
Transactions (to the extent such items were incurred during the relevant Four   
Quarter Period); and (vi) all other non-cash items which are not expected by    
the Company to result in any cash expenditures in future periods, minus all     
non-cash items having the effect of increasing Consolidated Net Income during   
the period and which were not deducted in calculating Consolidated Net Income   
for any prior period.                                                           

"Consolidated Income Tax Expense" means, with respect to the Company for any
period, the provision for Federal, state, local and foreign income taxes        
payable by the Company and the Restricted Subsidiaries for such period as       
determined on a consolidated basis in accordance with GAAP.                     

"Consolidated Interest Expense" means, with respect to the Company for any  
period, without duplication, the sum of (i) the interest expense of the         
Company and the Restricted Subsidiaries for such period as determined on a      
consolidated basis in accordance with GAAP, including, without limitation, (a)  
any amortization of debt discount, (b) the net cost under Hedging Obligations   
relating to interest (including any amortization of discounts), (c) all         
commissions, discounts and other fees and charges owed with respect to letters  
of credit and bankers' acceptance financing and (d) all capitalized interest    
and all accrued interest, (ii) the interest component of Capital Lease          
Obligations paid, accrued and/or scheduled to be paid or accrued by the         
Company and the Restricted Subsidiaries during such period as determined on a   
consolidated basis in accordance with GAAP and (iii) dividends and              
distributions in respect of Disqualified Equity Interests of the Company        
during such period as determined on a consolidated basis in accordance with     
GAAP.                                                                           

"Consolidated Net Income" means, for any period, the consolidated net income
(loss) of the Company and its Subsidiaries determined in accordance with GAAP;  
provided, however, that there shall not be included in such Consolidated Net    
Income: (i) any net income (loss) of any Person if such person is not a         
Restricted Subsidiary, except that (A) subject to the limitations contained in  
clause (iv) below, the Company's equity in the net income of any such Person    
for such period shall be included                                               

102 

S-4/A
104th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 104th
in such Consolidated Net Income up to the aggregate amount of cash actually     
distributed by such Person during such period to the Company or a Restricted    
Subsidiary as a dividend or other distribution (subject, in the case of a       
dividend or other distribution to a Restricted Subsidiary, to the limitations   
contained in clause (iii) below) and (B) the Company's equity in a net loss of  
any such Person for such period shall be included in determining such           
Consolidated Net Income to the extent of any Investment made by the Company or  
any Restricted Subsidiary to such Person during such period; (ii) any net       
income (loss) of any person acquired by the Company or a Restricted Subsidiary  
in a pooling of interests transaction for any period prior to the date of such  
acquisition; (iii) any net income (loss) of any Restricted Subsidiary if such   
Restricted Subsidiary is subject to restrictions, directly or indirectly, on    
the payment of dividends or the making of distributions by such Restricted      
Subsidiary, directly or indirectly, to the Company except that (A) subject to   
the exclusion contained in clause (iv) below, the Company's equity in the net   
income of any such Restricted Subsidiary for such period shall be included in   
such Consolidated Net Income up to the aggregate amount of cash that could      
have been distributed by such Restricted Subsidiary during such period to the   
Company or another Restricted Subsidiary as a dividend (subject, in the case    
of a dividend that could have been made to another Restricted Subsidiary, to    
the limitation contained in this clause) and (B) the Company's equity in a net  
loss of any such Restricted Subsidiary for such period shall be included in     
determining such Consolidated Net Income; (iv) any gain or loss realized upon   
the sale or other disposition of any asset of the Company or the Restricted     
Subsidiaries (including pursuant to any sale/leaseback transaction) that is     
not sold or otherwise disposed of in the ordinary course of business and any    
gain or loss realized upon the sale or other disposition of any Equity          
Interests of any Person; (v) any extraordinary gain or loss; and (vi) the       
cumulative effect of a change in accounting principles. Notwithstanding the     
foregoing, for purposes of the covenant described under "--Certain Covenants--  
Limitations on Restricted Payments" only, there shall be excluded from          
Consolidated Net Income any dividends, repayments of loans or advances or       
other transfers of assets from Unrestricted Subsidiaries to the Company or a    
Restricted Subsidiary to the extent such dividends, repayments or transfers     
increase the amount of Restricted Payments permitted under such covenant        
pursuant to clause (c)(4) of the first paragraph thereof.                       

"Consolidated Net Worth" of the Company means the stockholders' equity of   
the Company and the Restricted Subsidiaries determined on a consolidated basis  
in accordance with GAAP, less amounts attributed to Disqualified Equity         
Interests.                                                                      

"Default" means any event that is or with the passage of time or the giving 
of notice or both would be an Event of Default.                                 

"Designated Senior Indebtedness" means (a) any Indebtedness outstanding     
under the Bank Credit Agreement and (b) any other Senior Indebtedness which,    
at the time of determination, has an aggregate principal amount outstanding,    
together with any commitments to lend additional amounts, of at least $25.0     
million, if the instrument governing such Senior Indebtedness expressly states  
that such Indebtedness is "Designated Senior Indebtedness" for purposes of the  
Indenture.                                                                      

"Designation" has the meaning set forth under "Certain Covenants--          
Designation of Unrestricted Subsidiaries" above.                                

"Designation Amount" has the meaning set forth under "Certain Covenants--   
Designation of Unrestricted Subsidiaries" above.                                

"Disposition" means, with respect to any Person, any merger, consolidation  
or other business combination involving such Person (whether or not such        
Person is the Surviving Person) or the sale, assignment, transfer, lease,       
conveyance or other disposition of all or substantially all of such Person's    
assets.                                                                         

103 

S-4/A
105th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 105th
"Disqualified Equity Interest" means any Equity Interest which, by its terms
(or by the terms of any security into which it is convertible or for which it   
is exchangeable at the option of the holder thereof), or upon the happening of  
any event, matures or is mandatorily redeemable, pursuant to a sinking fund     
obligation or otherwise, or redeemable, at the option of the holder thereof,    
in whole or in part on or prior to the Maturity Date, or exchangeable into      
Indebtedness on or prior to the Maturity Date; provided, however, that any      
Equity Interest that would not constitute a Disqualified Equity Interest but    
for provisions thereof giving holders thereof the right to require the issuing  
Person to repurchase or redeem such Equity Interest upon the occurrence of an   
"asset sale" or "change of control" occurring prior to the Maturity Date shall  
not constitute a Disqualified Equity Interest if (i) the "asset sale" or        
"change of control" provisions applicable to such Equity Interest are not more  
favorable to the holders of such Equity Interest than the comparable            
provisions described under "--Certain Covenants--Disposition of Proceeds of     
Asset Sales" and "--Certain Covenants--Change of Control" and (ii) the Company  
shall have complied in full with all of its obligations in respect of such      
covenants prior to any payment in respect of the comparable provisions of such  
Equity Interest.                                                                

"Equity Interest" in any Person means any and all shares, interests, rights 
to purchase, warrants, options, participations or other equivalents of or       
interests in (however designated) corporate stock or other equity               
participations, including partnership interests, whether general or limited,    
in such Person, including any Preferred Equity Interests.                       

"ESOP" means the employee stock ownership plan of the Company as in effect  
on the Issue Date or any subsequent employee stock ownership plan, as defined   
under ERISA, which is adopted by the Company or any Restricted Subsidiary.      

"ESOP Loan" means any loan or advance by the Company or any Restricted      
Subsidiary to the ESOP.                                                         

"Exchange Act" means the Securities Exchange Act of 1934, as amended.       

"Existing Indebtedness" means any Indebtedness (or agreements relating      
thereto) of the Company and its Restricted Subsidiaries in existence on the     
Issue Date.                                                                     

"Expiration Date" has the meaning set forth in the definition of "Offer to  
Purchase" below.                                                                

"Fair Market Value" means, with respect to any asset, the price (after      
taking into account any liabilities relating to such assets) which could be     
negotiated in an arm's-length free market transaction between a willing seller  
and a willing buyer, neither of which is under any compulsion to complete the   
transaction; provided, however, that the Fair Market Value of any such asset    
or assets shall be determined conclusively by the Board of Directors of the     
Company acting in good faith.                                                   

"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in a
jurisdiction other than the United States or a State thereof or the District    
of Columbia.                                                                    

"Four Quarter Period" has the meaning set forth in the definition of        
"Consolidated Coverage Ratio" above.                                            

"GAAP" means, at any date of determination, generally accepted accounting   
principles in effect in the United States which are applicable at the date of   
determination and which are consistently applied for all applicable periods.    

"Guarantor" means (i) each of the Subsidiaries of the Company (excluding    
Unrestricted Subsidiaries and Foreign Subsidiaries) as of the Issue Date and    
their respective successors, and (ii) each other Restricted Subsidiary,         
formed, created or acquired before or after the Issue Date, required to become  
a Guarantor after the Issue Date pursuant to "Guarantees of the Notes" above.   

104 

S-4/A
106th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 106th
"Guarantor Senior Indebtedness" means, with respect to any Guarantor, at any
date, (a) all Obligations of such Guarantor under the Bank Credit Agreement;    
(b) all Hedging Obligations of such Guarantor; (c) all Obligations of such      
Guarantor under stand-by letters of credit; and (d) all other Indebtedness of   
such Guarantor for borrowed money, including principal, premium, if any, and    
interest (including Post-Petition Interest) on such Indebtedness unless the     
instrument under which such Indebtedness of such Guarantor for money borrowed   
is Incurred expressly provides that such                                        
Indebtedness for money borrowed is not senior or superior in right of payment   
to such Guarantor's Guarantee of the Notes, and all renewals, extensions,       
substitutions, modifications, amendments or refinancings thereof.               
Notwithstanding the foregoing, Guarantor Senior Indebtedness shall not include  
(a) to the extent that it may constitute Indebtedness, any Obligation for       
Federal, state, local or other taxes; (b) any Indebtedness among or between     
such Guarantor and any Subsidiary of such Guarantor; (c) to the extent that it  
may constitute Indebtedness, any Obligation in respect of any trade payable     
Incurred for the purchase of goods or materials, or for services obtained, in   
the ordinary course of business; (d) Indebtedness evidenced by such             
Guarantor's Guarantee of the Notes; (e) Indebtedness of such Guarantor that is  
expressly subordinate or junior in right of payment to any other Indebtedness   
of such Guarantor; (f) to the extent that it may constitute Indebtedness, any   
obligation owing under leases (other than Capitalized Lease Obligations) or     
management agreements; and (g) any obligation that by operation of law is       
subordinate to any general unsecured obligations of such Guarantor.             

"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course  
of business), direct or indirect, in any manner, of any part or all of such     
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,  
the practical effect of which is to assure in any way the payment or            
performance (or payment of damages in the event of non-performance) of all or   
any part of such obligation, including, without limiting the foregoing, the     
payment of amounts drawn down by letters of credit. A guarantee shall include,  
without limitation, any agreement to maintain or preserve any other Person's    
financial condition or to cause any other Person to achieve certain levels of   
operating results.                                                              

"Guarantee" means the guarantee of the Notes by each Guarantor under the    
Indenture.                                                                      

"Hedging Obligations" means, with respect to any Person, the Obligations of 
such Person under (i) interest rate swap agreements, interest rate cap          
agreements and interest rate collar agreements, (ii) other agreements or        
arrangements designed to protect such Person against fluctuations in interest   
rates and (iii) foreign currency or commodity hedges, exchange or similar       
protection agreements (agreements referred to in this definition being          
referred to herein as "Hedging Agreements").                                    

"Holder" means the registered holder of any Note.                           

"Incur" means, with respect to any Indebtedness or other obligation of any  
Person, to create, issue, incur (including by conversion, exchange or           
otherwise), assume, guarantee or otherwise become liable in respect of such     
Indebtedness or other obligation or the recording, as required pursuant to      
GAAP or otherwise, of any such Indebtedness or other obligation on the balance  
sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall have   
meanings correlative to the foregoing). Indebtedness of any Acquired Person or  
any of its Subsidiaries existing at the time such Acquired Person becomes a     
Restricted Subsidiary (or is merged into or consolidated with the Company or    
any Restricted Subsidiary), whether or not such Indebtedness was Incurred in    
connection with, as a result of, or in contemplation of, such Acquired Person   
becoming a Restricted Subsidiary (or being merged into or consolidated with     
the Company or any Restricted Subsidiary), shall be deemed Incurred at the      
time any such Acquired Person becomes a Restricted Subsidiary or merges into    
or consolidates with the Company or any Restricted Subsidiary.                  

105 

S-4/A
107th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 107th
"Indebtedness" means (without duplication), with respect to any Person,     
whether recourse is to all or a portion of the assets of such Person and        
whether or not contingent, (a) every obligation of such Person for the          
principal amount of money borrowed; (b) every obligation of such Person         
evidenced by the principal amount of bonds, debentures, notes or other similar  
instruments, including obligations incurred in connection with the acquisition  
of property, assets or businesses; (c) every reimbursement obligation of such   
Person with respect to letters of credit, bankers' acceptances or similar       
facilities issued for the account of such Person (except to the extent not      
drawn on); (d) every obligation of such Person issued or assumed as the         
deferred purchase price of property or services (but excluding (x) earnout or   
other similar obligations until such time as the amount of such obligation is   
capable of being determined, (y) trade accounts payable incurred in the         
ordinary course of business, or (z) other accrued liabilities arising in the    
ordinary course of business); (e) every Capital Lease Obligation of such        
Person; (f) every net obligation under Hedging Agreements of such Person; (g)   
every obligation of the type referred to in clauses (a) through (f) of another  
Person and all dividends of another Person the payment of which, in either      
case, such Person has guaranteed or is responsible or liable for, directly or   
indirectly, as obligor, guarantor or otherwise; and (h) 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 (a) through (g) above. Indebtedness (a) shall never be calculated       
taking into account any cash and Cash Equivalents held by such Person; (b)      
shall not include obligations of any Person (x) arising from the honoring by a  
bank or other financial institution of a check, draft or similar instrument     
inadvertently drawn against insufficient funds in the ordinary course of        
business, provided that such obligations are extinguished within ten Business   
Days of their incurrence, (y) resulting from the endorsement of negotiable      
instruments for collection in the ordinary course of business and (z) under     
stand-by letters of credit to the extent collateralized by cash or Cash         
Equivalents; (c) which provides that an amount less than the principal amount   
thereof shall be due upon any declaration of acceleration thereof shall be      
deemed to be incurred or outstanding in an amount equal to the accreted value   
thereof at the date of determination; (d) shall include the liquidation         
preference and any mandatory redemption payment obligations in respect of any   
Disqualified Equity Interests of the Company or any Restricted Subsidiary; and  
(e) shall not include obligations under performance bonds, performance          
guarantees, surety bonds and appeal bonds, letters of credit or similar         
obligations, incurred in the ordinary course of business. For purposes of       
determining compliance with any U.S. dollar- denominated restriction on the     
Incurrence of Indebtedness denominated in a foreign currency, the U.S. dollar-  
equivalent principal amount of such Indebtedness Incurred pursuant thereto      
shall be calculated based on the relevant currency exchange rate in effect on   
the date that such Indebtedness was Incurred. If such Indebtedness is Incurred  
to refinance other Indebtedness denominated in a foreign currency, and such     
refinancing would cause the applicable U.S. dollar-denominated restriction to   
be exceeded if calculated at the relevant currency exchange rate in effect on   
the date of such refinancing, such U.S. dollar-denominated restriction shall    
be deemed not to have been exceeded so long as the principal amount of such     
refinancing Indebtedness does not exceed the principal amount of such           
Indebtedness being refinanced. The principal amount of any Indebtedness         
Incurred to refinance other Indebtedness, if Incurred in a different currency   
from the Indebtedness being refinanced, shall be calculated based on the        
currency exchange rate applicable to the currencies in which such respective    
Indebtedness is denominated that is in effect on the date of such refinancing.  

"Independent Financial Advisor" means a nationally recognized accounting,   
appraisal, investment banking firm or consultant that is, in the judgment of    
the Company's Board of Directors, qualified to perform the task for which it    
has been engaged (i) which does not, and whose directors, officers and          
employees or Affiliates do not, have a direct or indirect financial interest    
in the Company and (ii) which, in the judgment of the Board of Directors of     
the Company, is otherwise independent and qualified to perform the task for     
which it is to be engaged.                                                      

106 

S-4/A
108th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 108th
"Insolvency or Liquidation Proceeding" means, with respect to any Person,   
any liquidation, dissolution or winding up of such Person, or any bankruptcy,   
reorganization, insolvency, receivership or similar proceeding with respect to  
such Person, whether voluntary or involuntary.                                  

"interest" means, with respect to the Notes, the sum of any cash interest   
and any Additional Interest on the Notes.                                       

"Investment" means, with respect to any Person, any direct or indirect loan,
advance, guarantee or other extension of credit or capital contribution to (by  
means of transfers of cash or other property                                    
or assets to others or payments for property or services for the account or     
use of others, or otherwise, but other than advances to customers in the        
ordinary course of business recorded as an account receivable on the books of   
the Person making the advance), or purchase or acquisition of capital stock,    
bonds, notes, debentures or other securities or evidences of Indebtedness       
issued by, any other Person. The amount of any Investment shall be the          
original cost of such Investment, plus the cost of all additions thereto, and   
minus the amount of any portion of such Investment repaid to such Person in     
cash as a repayment of principal or a return of capital, as the case may be,    
but without any other adjustments for increases or decreases in value, or       
write-ups, write-downs or write-offs with respect to such Investment. In        
determining the amount of any Investment involving a transfer of any property   
or asset other than cash, such property shall be valued at its fair market      
value at the time of such transfer, as determined in good faith by the Board    
of Directors (or comparable body) of the Person making such transfer.           

"Issue Date" means the original issue date of the Notes.                    

"Lien" means any lien, mortgage, charge, security interest, hypothecation,  
assignment for security or encumbrance of any kind (including any conditional   
sale or capital lease or other title retention agreement, any lease in the      
nature thereof).                                                                

"Management Agreement" means the management agreement dated June 23, 1998   
between AXIA Group and Sterling.                                                

"Maturity Date" means July 15, 2008.                                        

"Net Cash Proceeds" means the aggregate proceeds in the form of cash or Cash
Equivalents received by the Company or any Restricted Subsidiary in respect of  
any Asset Sale, including all cash or Cash Equivalents received upon any sale,  
liquidation or other exchange of proceeds of Asset Sales received in a form     
other than cash or Cash Equivalents, net of (a) the direct costs relating to    
such Asset Sale (including, without limitation, legal, accounting and           
investment banking fees and expenses, and sales commissions) and any            
relocation or severance expenses incurred as a result thereof; (b) taxes paid   
or payable as a result thereof (after taking into account any available tax     
credits or deductions and any tax sharing arrangements); (c) amounts required   
to be applied to the repayment of Indebtedness secured by a Lien on the asset   
or assets that were the subject of such Asset Sale; (d) amounts deemed, in      
good faith, appropriate by the Board of Directors of the Company to be          
provided as a reserve, in accordance with GAAP, against any liabilities         
associated with such assets which are the subject of such Asset Sale (provided  
that the amount of any such reserves shall be deemed to constitute Net Cash     
Proceeds at the time such reserves shall have been released or are not          
otherwise required to be retained as a reserve); and (e) with respect to Asset  
Sales by Restricted Subsidiaries, the portion of such cash payments             
attributable to Persons holding a minority interest in such Restricted          
Subsidiary.                                                                     

"Obligations" means any principal, interest (including, without limitation, 
Post-Petition Interest), penalties, fees, indemnifications, reimbursement       
obligations, damages and other liabilities payable under the documentation      
governing any Indebtedness.                                                     

107 

S-4/A
109th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 109th
"Offer" has the meaning set forth in the definition of "Offer to Purchase"  
below.                                                                          

"Offer to Purchase" means a written offer (the "Offer") sent by or on behalf
of the Company by first-class mail, postage prepaid, to each holder at his      
address appearing in the register for the Notes on the date of the Offer        
offering to purchase up to the principal amount of Notes specified in such      
Offer at the purchase price specified in such Offer (as determined pursuant to  
the Indenture). Unless otherwise required by applicable law, the Offer shall    
specify an expiration date (the "Expiration Date") of the Offer to Purchase,    
which shall be not less than 20 Business Days nor more than 60 days after the   
date of such Offer, and a settlement date (the "Purchase Date") for purchase    
of Notes to occur no later than five Business Days after the Expiration Date.   
The Company shall notify the Trustee at least 15 Business Days (or such         
shorter period as is acceptable to the Trustee) prior to the mailing of the     
Offer of the Company's obligation to make an Offer to Purchase, and the Offer   
shall be mailed by the Company or, at the Company's request, by the Trustee in  
the name and at the expense of the Company. The Offer shall contain all the     
information required by applicable law to be included therein. The Offer shall  
also contain information concerning the business of the Company and its         
Subsidiaries which the Company in good faith believes will enable such Holders  
to make an informed decision with respect to the Offer to Purchase (which at a  
minimum will include (i) the most recent annual and quarterly financial         
statements and "Management's Discussion and Analysis of Financial Condition     
and Results of Operations" contained in the documents required to be filed      
with the Trustee pursuant to the Indenture (which requirements may be           
satisfied by delivery of such documents together with the Offer), (ii) a        
description of material developments in the Company's business subsequent to    
the date of the latest of such financial statements referred to in clause (i)   
(including a description of the events requiring the Company to make the Offer  
to Purchase), (iii) if applicable, appropriate pro forma financial information  
concerning the Offer to Purchase and the events requiring the Company to make   
the Offer to Purchase and (iv) any other information required by applicable     
law to be included therein). The Offer shall contain all instructions and       
materials necessary to enable such Holders to tender Notes pursuant to the      
Offer to Purchase. The Offer shall also state: (1) the Section of the           
Indenture pursuant to which the Offer to Purchase is being made; (2) the        
Expiration Date and the Purchase Date; (3) the aggregate principal amount of    
the outstanding Notes offered to be purchased by the Company pursuant to the    
Offer to Purchase (including, if less than 100%, the manner by which such       
amount has been determined pursuant to the Section of the Indenture requiring   
the Offer to Purchase) (the "Purchase Amount"); (4) the purchase price to be    
paid by the Company for each $1,000 aggregate principal amount of Notes         
accepted for payment (as specified pursuant to the Indenture) (the "Purchase    
Price"); (5) that the Holder may tender all or any portion of the Notes         
registered in the name of such Holder and that any portion of a Note tendered   
must be tendered in an integral multiple of $1,000 principal amount; (6) the    
place or places where Notes are to be surrendered for tender pursuant to the    
Offer to Purchase; (7) that interest on any Note not tendered or tendered but   
not purchased by the Company pursuant to the Offer to Purchase will continue    
to accrue; (8) that on the Purchase Date the Purchase Price will become due     
and payable upon each Note being accepted for payment pursuant to the Offer to  
Purchase and that interest thereon shall cease to accrue on and after the       
Purchase Date; (9) that each Holder electing to tender all or any portion of a  
Note pursuant to the Offer to Purchase will be required to surrender such Note  
at the place or places specified in the Offer prior to the close of business    
on the Expiration Date (such Note being, if the Company or the Trustee so       
requires, duly endorsed by, or accompanied by a written instrument of transfer  
in form satisfactory to the Company and the Trustee duly executed by, the       
Holder thereof or his attorney duly authorized in writing); (10) that Holders   
will be entitled to withdraw all or any portion of Notes tendered if the        
Company (or its Paying Agent) receives, not later than the close of business    
on the fifth Business Day next preceding the Expiration Date, a telegram,       
telex, facsimile transmission or letter setting forth the name of the Holder,   
the principal amount of the Note the Holder tendered, the certificate number    
of the Note the Holder tendered and a statement that such Holder is             
withdrawing all or a portion of his tender; (11) that (a) if Notes in an        
aggregate principal amount less than or equal to the Purchase Amount are duly   
tendered and not withdrawn pursuant to the Offer to Purchase, the               

108 

S-4/A
110th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 110th
Company shall purchase all such Notes and (b) if Notes in an aggregate          
principal amount in excess of the Purchase Amount are tendered and not          
withdrawn pursuant to the Offer to Purchase, the Company shall purchase Notes   
having an aggregate principal amount equal to the Purchase Amount on a pro      
rata basis (with such adjustments as may be deemed appropriate so that only     
Notes in denominations of $1,000 principal amount or integral multiples         
thereof shall be purchased); and (12) that in the case of any Holder whose      
Note is purchased only in part, the Company shall execute and the Trustee       
shall authenticate and deliver to the Holder of such Note without service       
charge, a new Note or Notes, of any authorized denomination as requested by     
such Holder, in an aggregate principal amount equal to and in exchange for the  
unpurchased portion of the Note so tendered.                                    

An Offer to Purchase shall be governed by and effected in accordance with   
the provisions above pertaining to any Offer.                                   

"Opinion of Counsel" means a written opinion from legal counsel who is      
reasonably acceptable to the Trustee. The counsel may be an employee of or      
counsel to the Company or the Trustee.                                          

"Pari Passu Debt" means Indebtedness of the Company or any Guarantor that   
neither constitutes Senior Indebtedness or Guarantor Senior Indebtedness, as    
applicable, or Subordinated Indebtedness.                                       

"Pari Passu Debt Pro Rata Share" means the amount of the applicable Net Cash
Proceeds obtained by multiplying the amount of such Net Cash Proceeds by a      
fraction, (i) the numerator of which is the aggregate accreted value and/or     
principal amount, as the case may be, of all Pari Passu Debt outstanding at     
the time of the applicable Asset Sale with respect to which the Company is      
required to use Net Cash Proceeds to repay or make an offer to purchase or      
repay and (ii) the denominator of which is the sum of (a) the aggregate         
principal amount of all Notes outstanding at the time of the applicable Asset   
Sale and (b) the aggregate principal amount or the aggregate accreted value,    
as the case may be, of all Pari Passu Debt outstanding at the time of the       
applicable Offer to Purchase with respect to which the Company is required to   
use the applicable Net Cash Proceeds to offer to repay or make an offer to      
purchase or repay.                                                              

"Permitted Holder" means (i) the purchasers in the Equity Investment, (ii)  
any Person who on the date of issuance of the Notes is an officer, director,    
stockholder, employee or consultant of the Company or Sterling, (iii) any       
Permitted Transferee with respect to any Person covered by the preceding        
clauses (i) and (ii); (iv) the ESOP; (v) any savings or investment plan         
sponsored by the Company or AXIA Group; or (vi) any entity a majority of the    
outstanding Voting Equity Interests of which are owned directly or indirectly   
by Permitted Holders.                                                           

"Permitted Indebtedness" has the meaning set forth in the second paragraph  
of "Certain Covenants--Limitation on Indebtedness" above.                       

"Permitted Investments" means (a) Cash Equivalents; (b) Investments in      
prepaid expenses, negotiable instruments held for collection and lease,         
utility and workers' compensation, performance and other similar deposits; (c)  
Hedging Obligations; (d) bonds, notes, debentures or other securities received  
as a result of Asset Sales permitted under "Certain Covenants--Disposition of   
Proceeds of Asset Sales" above; (e) transactions with officers, directors and   
employees of the Company or any Restricted Subsidiary entered into in the       
ordinary course of business (including compensation or employee benefit         
arrangements with any such director or employee); (f) Investments existing as   
of the Issue Date and any amendment, extension, substitution, renewal or        
modification thereof to the extent that any such amendment, extension,          
substitution, renewal or modification does not require the Company or any       
Restricted Subsidiary to make any additional cash or non-cash payments or       
provide additional services in connection therewith; (g) any Investment to the  
extent that the consideration therefor consists of Qualified Equity Interests   
of the Company or AXIA Group; (h) any Investment consisting of a guarantee by   
a Guarantor of Senior Indebtedness or any guarantee permitted under             

109 

S-4/A
111th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 111th
clause (e) of the second paragraph of "Limitation on Indebtedness" above; (i)   
Investments in an aggregate amount not to exceed the greater of (x) $15.0       
million or (y) 5% of the Company's consolidated tangible net assets at any one  
time outstanding; provided that the Company and/or the Restricted Subsidiaries  
own at least one-third of the outstanding Voting Equity Interests of each such  
Person; (j) Investments in the form of the sale (on a "true sale" non-recourse  
basis) or the servicing of receivables transferred from the Company or any      
Restricted Subsidiary, or transfers of cash, to an Accounts Receivable          
Subsidiary as a capital contribution or in exchange for Indebtedness of such    
Accounts Receivable Subsidiary or cash, in each case in the ordinary course of  
business; (k) loans and advances to employees made in the ordinary course of    
business; (l) payments to AXIA Group or Acquisition Co. to pay the merger       
consideration due, and out-of-pocket expenses related to, the Transactions;     
and (m) the ESOP Loan not to exceed $2.5 million at any one time outstanding.   

"Permitted Junior Securities" means any securities of the Company or any    
other Person that are (i) equity securities without special covenants or (ii)   
subordinated in right of payment to all Senior Indebtedness that may at the     
time be outstanding, to substantially the same extent as, or to a greater       
extent than, the Notes are subordinated as provided in the Indenture, in any    
event pursuant to a court order so providing and as to which (a) the rate of    
interest on such securities shall not exceed the effective rate of interest on  
the Notes on the date of the Indenture, (b) such securities shall not be        
entitled to the benefits of covenants or defaults materially more beneficial    
to the holders of such securities than those in effect with respect to the      
Notes on the date of the Indenture and (c) such securities shall not provide    
for amortization (including sinking fund and mandatory prepayment provisions)   
commencing prior to the date six months following the final scheduled maturity  
date of the Senior Indebtedness (as modified by the plan of reorganization or   
readjustment pursuant to which such securities are issued).                     

"Permitted Liens" means (a) Liens on property of a Person existing at the   
time such Person is merged into or consolidated with the Company or any         
Restricted Subsidiary; provided, however, that such Liens were in existence     
prior to the contemplation of such merger or consolidation and do not secure    
any property or assets of the Company or any Restricted Subsidiary other than   
the property or assets subject to the Liens prior to such merger or             
consolidation; (b) Liens imposed by law such as carriers', warehousemen's and   
mechanics' Liens and other similar Liens arising in the ordinary course of      
business which secure payment of obligations not more than 60 days past due or  
which are being contested in good faith and by appropriate proceedings; (c)     
Liens existing on the Issue Date; (d) Liens securing only the Notes; (e) Liens  
in favor of the Company or any Restricted Subsidiary; (f) Liens for taxes,      
assessments or governmental charges or claims that are not yet delinquent or    
that are being contested in good faith by appropriate proceedings promptly      
instituted and diligently concluded; provided, however, that any reserve or     
other appropriate provision as shall be required in conformity with GAAP shall  
have been made therefor; (g) easements, reservation of rights of way,           
restrictions and other similar easements, licenses, restrictions on the use of  
properties, or minor imperfections of title that in the aggregate are not       
material in amount and do not in any case materially detract from the           
properties subject thereto or interfere with the ordinary conduct of the        
business of the Company and the Restricted Subsidiaries; (h) Liens resulting    
from the deposit of cash or notes in connection with contracts, tenders or      
expropriation proceedings, or to secure workers' compensation, surety or        
appeal bonds, costs of litigation when required by law and public and           
statutory obligations or obligations under franchise arrangements entered into  
in the ordinary course of business; (i) Liens securing Indebtedness under the   
Bank Credit Agreement; (j) Liens securing Indebtedness consisting of            
Capitalized Lease Obligations, Purchase Money Indebtedness, mortgage            
financings, industrial revenue bonds or other monetary obligations, in each     
case incurred solely for the purpose of financing all or any part of the        
purchase price or cost of construction or installation of assets used in the    
business of the Company or the Restricted Subsidiaries, or repairs, additions   
or improvements to such assets, provided, however, that (I) such Liens secure   
Indebtedness in an amount not in excess of the original purchase price or the   
original cost of any such assets or repair, addition or improvement thereto     
(plus an amount equal to the reasonable fees and expenses in connection with    
the incurrence of such Indebtedness), (II) such Liens do not extend to any      
other                                                                           

110 

S-4/A
112th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 112th
assets of the Company or the Restricted Subsidiaries (and, in the case of       
repair, addition or improvements to any such assets, such Lien extends only to  
the assets (and improvements thereto or thereon) repaired, added to or          
improved), (III) the Incurrence of such Indebtedness is permitted by "Certain   
Covenants--Limitation on Indebtedness" above and (IV) such Liens attach within  
90 days of such purchase, construction, installation, repair, addition or       
improvement; (k) Liens to secure any refinancings, renewals, extensions,        
modifications or replacements (collectively, "refinancing") (or successive      
refinancings), in whole or in part, of any Indebtedness secured by Liens        
referred to in the clauses above so long as such Lien does not extend to any    
other property (other than improvements thereto); (l) Liens securing letters    
of credit entered into in the ordinary course of business; and (m) Liens on     
and pledges of the Equity Interests of any Unrestricted Subsidiary securing     
any Indebtedness of such Unrestricted Subsidiary.                               

"Permitted Transferee" means with respect to any Person, (i) in the case of 
an entity, any Affiliate of such Person, and (ii) in the case of any            
individual, any person related by lineal or collateral consanguinity to such    
individual or to the spouse of such individual (adopted persons shall be        
considered the natural born child of their adoptive parents; lineal             
consanguinity is that relationship that exists between persons of whom one is   
descended (or ascended) in a direct line from the other, as between son,        
father, grandfather, great-grandfather; and collateral consanguinity is that    
relationship that exists between persons who have the same ancestors, but who   
do not descend (or ascend) from the other, as between uncle and nephew, or      
cousin and cousin), in each case to whom such Person has transferred Equity     
Interests of the Company.                                                       

"Person" means any individual, corporation, partnership, joint venture,     
association, joint-stock company, limited liability company, limited liability  
limited partnership, trust, unincorporated organization or government or any    
agency or political subdivision thereof.                                        

"Post-Petition Interest" means, with respect to any Indebtedness of any     
Person, all interest accrued or accruing on such Indebtedness after the         
commencement of any Insolvency or Liquidation Proceeding against such Person    
in accordance with and at the contract rate (including, without limitation,     
any rate applicable upon default) specified in the agreement or instrument      
creating, evidencing or governing such Indebtedness, whether or not, pursuant   
to applicable law or otherwise, the claim for such interest is allowed as a     
claim in such Insolvency or Liquidation Proceeding.                             

"Preferred Equity Interest," in any Person, means an Equity Interest of any 
class or classes (however designated) which is preferred as to the payment of   
dividends or distributions, or as to the distribution of assets upon any        
voluntary or involuntary liquidation or dissolution of such Person, over        
Equity Interests of any other class in such Person.                             

"Public Equity Offering" means a primary public offering of $20.0 million or
more of Qualified Equity Interests of the Company or AXIA Group pursuant to an  
effective registration statement filed under the Securities Act of 1933, as     
amended (excluding registration statements filed on Form S-8).                  

"Purchase Amount" has the meaning set forth in the definition of "Offer to  
Purchase" above.                                                                

"Purchase Date" has the meaning set forth in the definition of "Offer to    
Purchase" above.                                                                

"Purchase Money Indebtedness" means Indebtedness of the Company or any      
Restricted Subsidiary Incurred for the purpose of financing all or any part of  
the purchase price or the cost of construction or improvement of any property,  
provided that the aggregate principal amount of such Indebtedness does not      
exceed the lesser of the Fair Market Value of such property or such purchase    
price or cost, including any refinancing of such Indebtedness that does not     
increase the aggregate principal amount (or accreted amount, if less) thereof   
as of the date of refinancing.                                                  

"Purchase Price" has the meaning set forth in the definition of "Offer to   
Purchase" above.                                                                

111 

S-4/A
113th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 113th
"Qualified Equity Interest" in any Person means any Equity Interest in such 
Person other than any Disqualified Equity Interest.                             

"Redemption Date" has the meaning set forth in the third paragraph of       
"Optional Redemption" above.                                                    

"Restricted Subsidiary" means any Subsidiary of the Company that has not    
been designated by the Board of Directors of the Company, by a resolution of    
the Board of Directors of the Company delivered to the Trustee, as an           
Unrestricted Subsidiary pursuant to "Certain Covenants--Designation of          
Unrestricted Subsidiaries" above. Any such designation may be revoked by a      
resolution of the Board of Directors of the Company delivered to the Trustee,   
subject to the provisions of such covenant.                                     

"SEC" means the Securities and Exchange Commission.                         

"Senior Indebtedness" means, at any date, (a) all Obligations of the Company
under the Bank Credit Agreement; (b) all Hedging Obligations of the Company;    
(c) all Obligations of the Company under stand-by letters of credit; and (d)    
all other Indebtedness of the Company for borrowed money, including principal,  
premium, if any, and interest (including Post-Petition Interest) on such        
Indebtedness, unless the instrument under which such Indebtedness of the        
Company for money borrowed is Incurred expressly provides that such             
Indebtedness for money borrowed is not senior or superior in right of payment   
to the Notes, and all renewals, extensions, modifications, amendments or        
refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall  
not include (a) to the extent that it may constitute Indebtedness, any          
Obligation for Federal, state, local or other taxes; (b) any Indebtedness       
among or between the Company and any Subsidiary of the Company, unless and for  
so long as such Indebtedness has been pledged to secure Obligations under the   
Bank Credit Agreement; (c) to the extent that it may constitute Indebtedness,   
any Obligation in respect of any trade payable Incurred for the purchase of     
goods or materials, or for services obtained, in the ordinary course of         
business; (d) Indebtedness evidenced by the Notes; (e) Indebtedness of the      
Company that is expressly subordinate or junior in right of payment to any      
other Indebtedness of the Company; (f) to the extent that it may constitute     
Indebtedness, any obligation owing under leases (other than Capital Lease       
Obligations) or management agreements; and (g) any obligation that by           
operation of law is subordinate to any general unsecured obligations of the     
Company.                                                                        

"Significant Restricted Subsidiary" means, at any date of determination, (a)
any Restricted Subsidiary that, together with its Subsidiaries that constitute  
Restricted Subsidiaries (i) for the most recent fiscal year of the Company      
accounted for more than 10.0% of the consolidated revenues of the Company and   
the Restricted Subsidiaries or (ii) as of the end of such fiscal year, owned    
more than 10.0% of the consolidated assets of the Company and the Restricted    
Subsidiaries, all as set forth on the consolidated financial statements of the  
Company and the Restricted Subsidiaries for such year prepared in conformity    
with GAAP, and (b) any Restricted Subsidiary which, when aggregated with all    
other Restricted Subsidiaries that are not otherwise Significant Restricted     
Subsidiaries and as to which any event described in clause (g), (h) or (i) of   
"Events of Default" above has occurred, would constitute a Significant          
Restricted Subsidiary under clause (a) of this definition.                      

"Stated Maturity," when used with respect to any Note or any installment of 
interest thereon, means the date specified in such Note as the fixed date on    
which the principal of such Note or such installment of interest is due and     
payable.                                                                        

"Subordinated Indebtedness" means, with respect to the Company or any       
Guarantor, any Indebtedness of the Company or such Guarantor, as the case may   
be, which is expressly subordinated in right of payment to the Notes or such    
Guarantor's Guarantee, as the case may be.                                      

112 

S-4/A
114th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 114th
"Subsidiary" means, with respect to any Person, (a) any corporation of which
the outstanding Voting Equity Interests having at least a majority of the       
votes entitled to be cast in the election of directors shall at the time be     
owned, directly or indirectly, by such Person, or (b) any other Person of       
which at least a majority of Voting Equity Interests are at the time, directly  
or indirectly, owned by such first named Person.                                

"Surviving Person" means, with respect to any Person involved in or that    
makes any Disposition, the Person formed by or surviving such Disposition or    
the Person to which such Disposition is made.                                   

"Tax Sharing Agreement" means the tax sharing agreement between the Company 
and AXIA Group.                                                                 

"Term Loan Facilities" means collectively the ESOP Term Loan, the           
acquisition facility and the term loan facility of the Bank Credit Agreement.   

"United States Government Obligations" means direct non-callable obligations
of the United States of America for the payment of which the full faith and     
credit of the United States is pledged.                                         

"Unrestricted Subsidiary" means any Subsidiary of the Company designated as 
such pursuant to "Certain Covenants--Designation of Unrestricted Subsidiaries"  
above. Any such designation may be revoked by a resolution of the Board of      
Directors of the Company delivered to the Trustee, subject to the provisions    
of such covenant.                                                               

"Unutilized Net Cash Proceeds" has the meaning set forth in the third       
paragraph under "Certain Covenants--Disposition of Proceeds of Asset Sales"     
above.                                                                          

"Voting Equity Interests" means Equity Interests in a corporation or other  
Person with voting power under ordinary circumstances entitling the holders     
thereof to elect the Board of Directors or other governing body of such         
corporation or Person.                                                          

"Weighted Average Life to Maturity" means, when applied to any Indebtedness 
at any date, the number of years obtained by dividing (a) the sum of the        
products obtained by multiplying (i) the amount of each then remaining          
installment, sinking fund, serial maturity or other required scheduled payment  
of principal, including payment of final maturity, in respect thereof, by (ii)  
the number of years (calculated to the nearest one-twelfth) that will elapse    
between such date and the making of such payment, by (b) the then outstanding   
aggregate principal amount of such Indebtedness.                                

"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Equity      
Interests of which (other than directors' qualifying shares) is owned by the    
Company or another Wholly Owned Subsidiary; provided, however, that a Foreign   
Subsidiary shall be a Wholly Owned Subsidiary if more than 90% of the Equity    
Interests and Voting Equity Interests thereof is owned by the Company or        
another Wholly Owned Subsidiary.                                                

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS 

The following discussion summarizes certain material United States federal  
income tax consequences relevant to the purchase, ownership and disposition of  
the Notes and reflects the opinion provided by Bracewell & Patterson, L.L.P.,   
counsel to the Company, as to these matters. This discussion is for general     
information only and does not address all aspects of federal income taxation    
that may be relevant to particular investors in light of their personal         
investment circumstances, nor does it address the federal income tax            
consequences which may be relevant to certain types of investors subject to     
special treatment under the federal income tax laws (for example, certain       
financial institutions, insurance companies, tax-exempt entities, broker-       
dealers, and taxpayers subject to the                                           

113 

S-4/A
115th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 115th
alternative minimum tax). In addition, this discussion does not discuss any     
aspects of state, local, or foreign tax laws. This discussion assumes that      
investors will hold their Notes as "capital assets" (generally, property held   
for investment), within the meaning of Section 1221 of the Code, and not as     
part of an integrated transaction (for example, a hedge, straddle or            
conversion transaction).                                                        

No ruling from the Internal Revenue Service (the "IRS") will be requested   
with respect to any of the matters discussed herein. There can be no assurance  
that the IRS will not take a different position concerning the matters          
discussed below and that such positions would not be sustained. BECAUSE         
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF NOTES SHOULD CONSULT HIS    
OR HER OWN TAX ADVISOR WITH RESPECT TO HIS OR HER PARTICULAR TAX SITUATION AND  
AS TO ANY FEDERAL, FOREIGN, STATE, LOCAL OR OTHER TAX CONSIDERATIONS            
(INCLUDING ANY POSSIBLE CHANGES IN TAX LAW) AFFECTING THE PURCHASE, OWNERSHIP   
AND DISPOSITION OF THE NOTES.                                                   

This discussion is based on the provisions of the Code, existing and        
proposed Treasury regulations promulgated thereunder (the "Regulations"),       
judicial authority interpreting the Code, and current administrative rulings    
and pronouncements of the IRS now in effect, all of which are subject to        
change at any time by legislative, judicial or administrative action. Any such  
changes may be retroactively applied in a manner that could result in federal   
income tax consequences different from those discussed below and could          
adversely affect a holder of Notes.                                             

EXCHANGE OF ORIGINAL NOTES FOR EXCHANGE NOTES                                   

The exchange of Original Notes for Exchange Notes should not constitute a   
significant modification of the terms of the Original Notes, and, accordingly,  
will not be treated as a taxable exchange for United States federal income tax  
purposes. Consequently, no gain or loss will be recognized by holders of        
Original Notes upon receipt of the Exchange Notes, and ownership of the         
Exchange Notes will be considered a continuation of ownership of the Original   
Notes. The Company will take this position and intends to report the            
transaction in this manner for federal income tax purposes. For purposes of     
determining gain or loss upon the subsequent sale or exchange of the Exchange   
Notes, a holder will have the same adjusted basis in an Exchange Note as the    
holder had in the Original Note exchanged therefor. In addition, a holder's     
holding period for an Exchange Note will include the holding period for the     
Original Note exchanged therefor.                                               

The remaining summary of federal income considerations relates to owning and
disposing of Exchange Notes, and also applies to holders of Original Notes who  
do not accept the Exchange Offer.                                               

UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS                  

As used herein, the term "United States Holder" means a holder of a Note    
that is for United States federal income tax purposes (i) an individual         
citizen or resident of the United States, (ii) a corporation, partnership or    
other entity created or organized in or under the laws of the United States or  
any political subdivision thereof, (iii) an estate the income of which is       
subject to United States federal income taxation regardless of source, (iv) a   
trust whose administration is subject to the primary supervision of a United    
States court and which has one or more United States persons who have the       
authority to control all substantial decisions of the trust.                    

Stated Interest. Stated interest on the Notes will generally be taxable to a
United States Holder as ordinary income from domestic sources at the time it    
is paid or accrued in accordance with the United States Holder's method of      
accounting for tax purposes.                                                    

Amortizable Bond Premium. If a United States Holder purchases a Note for an 
amount that is greater than the sum of all payments payable on the Note after   
the purchase date, other than qualified stated interest, such United States     
Holder will be considered to have purchased such Note with                      

114 

S-4/A
116th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 116th
"amortizable bond premium" equal in amount to such excess. A United States      
Holder may elect to amortize such bond premium over the remaining term of such  
Note (or if it results in a smaller amount of amortizable bond premium, until   
an earlier call date, and in such case by reference to the amount payable on    
that date).                                                                     

Under new Regulations issued December 30, 1997, if bond premium is          
amortized, the amount of interest on the Note included in the United States     
Holder's income for each accrual period ending on an interest payment date or   
on the stated maturity of the Note, as the case may be, will be reduced by a    
portion of the bond premium allocable to such accrual period based on the       
Note's yield to maturity (or earlier call date, if reference to such call date  
produces a smaller amount of amortizable bond premium). If the amortizable      
bond premium allocable to such accrual period exceeds the amount of interest    
allocable to such accrual period, such excess would be allowed as a deduction   
for such accrual period, but only to the extent of the United States Holder's   
prior inclusion in income of interest payments on the Note. Any excess above    
such prior interest inclusions is generally carried forward to the next         
accrual period. A United States Holder who elects to amortize bond premium      
must reduce such United States Holder's tax basis in the Notes as described     
under "--Disposition of Notes." If such an election to amortize bond premium    
is not made, a United States Holder must include the full amount of each        
interest payment on the Note in income in accordance with its regular method    
of accounting and will receive a tax benefit from the bond premium only in      
computing such United States Holder's gain or loss upon disposition of the      
Note.                                                                           

An election to amortize bond premium will apply to all taxable debt         
obligations then held or subsequently acquired by the electing United States    
Holder on or after the first day of the first taxable year to which the         
election applies and may not be revoked without the consent of the IRS. A       
United States Holder should consult with such United States Holder's tax        
advisor with respect to the general applicability of the amortizable bond       
premium rules of Section 171 of the Code to such United States Holder, and      
whether such United States Holder should make an election under these rules.    

Market Discount. If a United States Holder purchases a Note for an amount   
that is less than its stated redemption price at maturity (i.e., the sum of     
all payments on the Note other than stated interest payments), the amount of    
the difference will be treated as "market discount" for federal income tax      
purposes, unless such difference is less than a de minimis amount as specified  
by the Code. Under the market discount rules, a United States Holder will be    
required to treat any principal payment on, or any gain on the sale, exchange,  
retirement or other disposition of a Note as ordinary income to the extent of   
the market discount which has not previously been included in income and is     
treated as having accrued on such Note at the time of such payment or           
disposition. In addition, the United States Holder may be required to defer,    
until maturity of the Note or its earlier disposition in a taxable              
transaction, the deduction of all or a portion of the interest expense on any   
indebtedness incurred or maintained to purchase or carry such Note.             

The Notes provide for optional redemption and (in the case of a Change in   
Control) mandatory offers to purchase, in whole or in part, prior to maturity.  
If the Notes were redeemed, a United States Holder generally would be required  
to include in gross income as ordinary income the portion of the gain           
recognized on the redemption attributable to accrued market discount, if any.   

Any market discount will be considered to accrue ratably during the period  
from the date of acquisition to the maturity date of the Notes, unless the      
United States Holder elects to accrue market discount on a constant interest    
method. A United States Holder of a Note may elect to include market discount   
in income currently as it accrues (under either a ratable or constant interest  
method). This election to include currently, once made, applies to all market   
discount obligations acquired in or after the first taxable year to which the   
election applies and may not be revoked without the consent of the IRS. If a    
United States Holder of Notes makes such an election, the foregoing rules with  
respect                                                                         

115 

S-4/A
117th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 117th
to the recognition of ordinary income on sales and other dispositions of        
instruments, and with respect to the deferral of interest deductions incurred   
or maintained to purchase or carry such Notes, would not apply.                 

Disposition of Notes. Upon the sale, exchange, retirement, redemption or    
other disposition of a Note, a United States Holder will recognize taxable      
gain or loss equal to the difference between (i) the amount of cash and the     
fair market value of property received in exchange therefor (except to the      
extent such amount is attributable to accrued but unpaid interest, which        
amount will generally be taxable as ordinary income) and (ii) the United        
States Holder's adjusted tax basis in the Note. A United States Holder's        
adjusted tax basis in a Note will generally equal the United States Holder's    
purchase price for such Note, increased by any market discount previously       
included in income by the United States Holder and decreased by any principal   
payments received by the United States Holder, and any amortizable bond         
premium deducted over the term of the Note. Any gain or loss recognized on the  
sale, exchange, retirement or other disposition of a Note will generally be     
capital gain or loss (except to the extent of any accrued market discount).     
Under recently enacted legislation, capital gains of individuals derived in     
respect of capital assets held for more than one year are eligible for reduced  
rates of taxation which may vary depending upon the holding period of such      
capital assets. The deduction of capital losses is subject to certain           
limitations. A United States Holder should consult such United States Holder's  
tax advisor regarding the treatment of capital gains or losses.                 

Backup Withholding. Certain non-corporate United States Holders of Notes may
be subject to backup withholding at the rate of 31% with respect to interest    
payments on the Notes and cash payments received in certain circumstances upon  
the disposition of such Notes. Generally, backup withholding is applied only    
when the taxpayer (i) fails to furnish or certify its correct taxpayer          
identification number to the payor in the manner required, (ii) is notified by  
the IRS that it has failed to report payments of interest and dividends         
properly, or (iii) under certain circumstances, fails to certify that it has    
not been notified by the IRS that it is subject to backup withholding for       
failure to report interest and dividend payments. Any amounts withheld under    
the backup withholding rules will be allowed as a refund or credit against a    
United States Holder's United States federal income tax liability, provided     
that such United States Holder furnished the required information to the IRS.   

UNITED STATES FEDERAL INCOME TAXATION OF NON-UNITED STATES HOLDERS              

This section discusses certain special rules applicable to a holder of Notes
that is a Non-United States Holder. For purposes of this discussion, a "Non-    
United States Holder" means a holder of Notes that is not (i) an individual     
citizen or resident of the United States, (ii) a corporation, partnership or    
other entity created or organized in or under the laws of the United States or  
any political subdivision thereof, (iii) an estate the income of which is       
subject to United States federal income taxation regardless of source, or (iv)  
a trust whose administration is subject to the primary supervision of a United  
States court and which has one or more United States persons who have the       
authority to control all substantial decisions of the trust.                    

Receipt of Stated Interest by Non-United States Holder. Subject to the      
discussion of backup withholding set forth below, payments of interest          
(including original issue discount) to a Non-United States Holder who is the    
beneficial owner of a Note generally will not be subject to the 30% U.S.        
withholding tax under the portfolio interest exemption of the Code; provided,   
that (i) beneficial owner of the Note does not actually or constructively own   
10% or more of the total combined voting power of all classes of stock of the   
Company entitled to vote within the meaning of Section 871(h)(3) of the Code    
and the Regulations thereunder; (ii) such beneficial owner is not a controlled  
foreign corporation that is related to the Company through stock ownership;     
(iii) such beneficial owner is not a bank whose receipt of interest on a Note   
is described in Section 881(c)(3)(A) of the Code; and (iv) such beneficial      
owner satisfies the certification requirement (described generally below) set   
forth in Section                                                                

116 

S-4/A
118th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 118th
871(h) (in the case of individuals) or Section 881(c) (in the case of foreign   
corporations) of the Code and the Regulations thereunder.                       

To satisfy the certification requirement referred to in (iv) above, the     
beneficial owner of a Note, or a financial institution holding the Note on      
behalf of such owner, must provide, in accordance with specified procedures,    
the Company or its paying agent, as the case may be, with a statement to the    
effect that the beneficial owner is a Non-United States Holder. Such            
requirement generally will be met if (1) the beneficial owner provides such     
beneficial owner's name and address, signs under penalties of perjury, and      
certifies that such beneficial owner is a Non-United States Holder (which       
certification may be made on IRS Form W-8 (or substitute Form W-8)) or (2) a    
securities clearing organization, a bank or other financial institution         
holding the Note on behalf of the beneficial owner certifies, under penalties   
of perjury, that such statement has been received by it and furnishes the       
Company or its paying agent, as the case may be, with a copy thereof.           

Recently issued Regulations that will be effective with respect to payments 
made after December 31, 1999, will provide alternative methods for satisfying   
the certification requirement described above. The Regulations also would       
require, in the case of Notes held by a foreign partnership, that (i) the       
certification be provided by the partners rather than by the foreign            
partnership, and (ii) the partnership provide certain information, including a  
United States taxpayer identification number. Non-United States Holders are     
advised to consult their own tax advisors to discuss the effect of these        
Regulations in light of such Non-United States Holders' situation.              

If the Non-United States Holder cannot satisfy the requirements of the      
"portfolio interest" exception described above, payments of premium, if any,    
and interest made to Non-United States Holders with respect to the Notes will   
be subject to a 30% United States withholding tax unless the beneficial owner   
of a Note provides the Company or its paying agent, as the case may be, with,   
and keeps current (i) a properly executed IRS Form 1001 (or successor form)     
claiming an exemption from United States withholding tax under a United States  
income tax treaty, or (ii) a properly executed IRS Form 4224 (or successor      
form) claiming such premium and/or interest is exempt from United States        
withholding tax because such premium and/or interest is effectively connected   
with the conduct of a United States trade or business by the Non-United States  
Holder, in which case the premium and/or interest will be subject to the        
United States federal income tax on net income at the rates applicable to       
United States persons generally (and with respect to corporate holders and      
under certain circumstances, the 30% branch profits tax).                       

Gain on Disposition of Notes. A Non-United States Holder will generally not 
be subject to United States federal income tax with respect to gain recognized  
on disposition of the Notes unless (i) the gain is effectively connected with   
a trade or business of the Non-United States Holder in the United States, (ii)  
in the case of a Non-United States Holder that is an individual, such holder    
is present in the United States for 183 or more days in the taxable year of     
the disposition and certain other requirements are met, or (iii) the Non-       
United States Holder is subject to tax pursuant to provisions of the United     
States federal income tax law applicable to certain United States expatriates.  

Information Reporting and Backup Withholding. In general, no United States  
information reporting or backup withholding tax will be required with respect   
to payments of principal or interest made by the Company to Non-United States   
Holders if the certification described above in (iv) under "--Receipt of        
Stated Interest by Non-United States Holder" has been received and the payor    
does not have actual knowledge that the beneficial owner is a United States     
person.                                                                         

Payments of principal or interest to the beneficial owner of a Note by a    
United States office of a custodian, nominee or agent, or the payment by a      
United States office of a broker of the proceeds of a sale of the Note, is      
subject to both backup withholding and information reporting unless the         
beneficial owner certifies under penalties of perjury that such owner is a      
Non-United States Holder or otherwise establishes an exemption.                 

117 

S-4/A
119th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 119th
In general, backup withholding and information reporting will not apply if  
payments on a Note are paid or collected by a foreign office of a custodian,    
nominee, or other foreign agent on behalf of the beneficial owner of such       
Note, or if a foreign office of a broker (as defined in applicable              
Regulations) pays the proceeds of the sale of a Note to the owner thereof. If,  
however, such nominee, custodian, agent or broker is, for United States         
federal income tax purposes, a United States person, or a controlled foreign    
corporation, or a foreign person 50% or more of whose gross income for certain  
periods is derived from activities that are effectively connected with the      
conduct of a trade or business in the United States, or, for taxable years      
beginning after December 31, 1999, a foreign partnership, in which one or more  
United States persons, in the aggregate, own more than 50% of the income or     
capital interests in the partnership or which is engaged in a trade or          
business in the United States, such payments will not be subject to backup      
withholding, but will be subject to information reporting unless (i) such       
nominee, custodian, agent or broker has documentary evidence in its records     
that the beneficial owner is a Non-United States Holder and certain other       
conditions are met, or (ii) the beneficial owner otherwise establishes an       
exemption, provided such broker does not have actual knowledge that the payee   
is a United States person. Non-United States Holders should consult their tax   
advisors regarding the application of these rules to their particular           
situations, the availability of an exemption therefrom and the procedure for    
obtaining such an exemption, if available.                                      

The Treasury Department has issued final Regulations regarding the backup   
withholding and information reporting rules discussed above. In general, the    
final Regulations, which are generally effective for payments made after        
December 31, 1999, subject to certain transition rules, do not alter the        
substantive withholding and information reporting requirements but instead      
unify current forms and procedures.                                             

Any amounts withheld under backup withholding will be allowed as a credit   
against such Non-United States Holder's United States federal income tax        
liability and may entitle such holder to a refund, provided the required        
information is furnished to the IRS.                                            

LEGAL MATTERS 

Certain legal matters with respect to the issuance and sale of the Notes    
offered hereby will be passed upon for the Company by Bracewell & Patterson,    
L.L.P., Houston, Texas. Certain members of Bracewell & Patterson, L.L.P. own    
less than 1.0% of the outstanding Common Stock of AXIA Group.                   

EXPERTS 

The consolidated financial statements of the Company and Subsidiaries as of 
December 31, 1997 and 1996, and for each of the three years in the period       
ended December 31, 1997, included in this Registration Statement, have been     
audited by Arthur Andersen LLP, independent public accountants, as stated in    
their report appearing herein.                                                  

The balance sheet of Finance Co. as of June 19, 1998 included in this       
Registration Statement has been audited by Deloitte & Touche LLP, independent   
auditors, as stated in their report appearing herein.                           

118 

S-4/A
120th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 120th
INDEX TO FINANCIAL STATEMENTS 

                                                                [Download Table]
                                                                              
AXIA Incorporated and Subsidiaries--Audited Consolidated Financial            
 Statements as of December 31, 1997 and 1996 and for each of the three        
 years in the period ended December 31, 1997                                  
  Report of Independent Public Accountants...............................  F-2
  Consolidated Balance Sheets............................................  F-3
  Consolidated Statements of Stockholder's Equity........................  F-4
  Consolidated Statements of Income......................................  F-5
  Consolidated Statements of Cash Flows..................................  F-6
  Notes to the Consolidated Financial Statements.........................  F-7
AXIA Incorporated and Subsidiaries--Unaudited Interim Consolidated            
 Financial Statements as of June 30, 1998 and December 31, 1997 and for       
 the six months ended June 30, 1998 and 1997                                  
  Consolidated Balance Sheets............................................ F-32
  Consolidated Statements of Income...................................... F-33
  Consolidated Statements of Stockholder's Equity........................ F-34
  Consolidated Statements of Cash Flows.................................. F-35
  Notes to the Unaudited Interim Consolidated Financial Statements....... F-36
AXIA Finance Corp.                                                            
  Independent Auditors' Report........................................... F-46
  Balance Sheet as of June 19, 1998...................................... F-47

F-1 

S-4/A
121st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 121st
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS  

To the Stockholders and Board of                                                
Directors of AXIA Incorporated:                                                 

We have audited the accompanying consolidated balance sheets of AXIA        
INCORPORATED (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1997  
and 1996, and the related consolidated statements of income, stockholder's      
equity and cash flows for each of the three years in the period ended December  
31, 1997. These financial statements are the responsibility of the Company's    
management. Our responsibility is to express an opinion on these financial      
statements based on our audits.                                                 

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

In our opinion, the financial statements referred to above present fairly,  
in all material respects, the financial position of AXIA INCORPORATED AND       
SUBSIDIARIES as of December 31, 1997 and 1996, and the results of their         
operations and their cash flows for each of the three years in the period       
ended December 31, 1997, in conformity with generally accepted accounting       
principles.                                                                     

                           /s/ Arthur Andersen LLP
                       ARTHUR ANDERSEN LLP

Chicago, Illinois                                                               
February 25, 1998                                                               
(except with respect to the matters discussed in                                
Note 18, as to which the date is July 22, 1998)                                 

F-2 

S-4/A
122nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 122nd
AXIA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

AS OF DECEMBER 31, 1997 AND DECEMBER 31, 1996 
(DOLLARS IN THOUSANDS)

                                                                [Download Table]

                            ASSETS                              1997     1996  
                            ------                             -------  -------
                                                                               
CURRENT ASSETS:                                                                
  Cash and cash equivalents................................... $ 1,310  $ 1,716
  Accounts receivable, net....................................  12,759   10,687
  Inventories.................................................   9,155    9,086
  Prepaid income taxes and other current assets...............     436    1,695
  Deferred income tax assets..................................   2,593    3,027
                                                               -------  -------
    Total Current Assets...................................... $26,253  $26,211
                                                               -------  -------
PLANT AND EQUIPMENT, AT COST:                                                  
  Land........................................................ $   508  $   521
  Buildings and improvements..................................   6,620    6,509
  Machinery and equipment.....................................  24,741   23,149
  Equipment leased to others..................................   7,139    6,040
                                                               -------  -------
                                                               $39,008  $36,219
  Less: Accumulated depreciation..............................  14,938   11,346
                                                               -------  -------
    Net Plant and Equipment................................... $24,070  $24,873
                                                               -------  -------
OTHER ASSETS:                                                                  
  Goodwill, net............................................... $33,505  $34,679
  Intangible assets, net......................................     703      377
  Deferred charges, net.......................................  12,182   12,213
  Investment in affiliate.....................................      --      900
  Other assets................................................      60       78
                                                               -------  -------
    Total Other Assets........................................ $46,450  $48,247
                                                               -------  -------
TOTAL ASSETS.................................................. $96,773  $99,331
                                                               =======  =======

             LIABILITIES AND STOCKHOLDER'S EQUITY                              
             ------------------------------------                              
                                                                               
CURRENT LIABILITIES:                                                           
  Current maturities of long-term debt........................ $10,925  $ 6,647
  Accounts payable............................................   4,021    3,655
  Accrued liabilities.........................................   7,219    8,547
  Accrued income taxes........................................     264       --
                                                               -------  -------
    Total Current Liabilities................................. $22,429  $18,849
                                                               -------  -------
NON-CURRENT LIABILITIES:                                                       
  Long-term debt, less current maturities..................... $20,439  $34,548
  Other non-current liabilities...............................  10,883   11,050
  Deferred income taxes.......................................   2,955    2,766
                                                               -------  -------
    Total Non-Current Liabilities............................. $34,277  $48,364
                                                               -------  -------
STOCKHOLDER'S EQUITY:                                                          
  Common stock, $.01 par value 100 shares issued and                           
   outstanding................................................ $    --  $    --
  Additional paid-in capital..................................  16,723   16,723
  Retained earnings...........................................  23,818   15,395
  Accumulated Other Comprehensive Income......................    (474)      --
                                                               -------  -------
    Total Stockholder's Equity................................ $40,067  $32,118
                                                               -------  -------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.................... $96,773  $99,331
                                                               =======  =======

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

F-3 

S-4/A
123rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 123rd
AXIA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY 

FOR THE PERIODS ENDED DEC. 31, 1997, DEC. 31, 1996, AND DEC. 31, 1995 
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                              OTHER COMPREHENSIVE INCOME                   
                                                          -----------------------------------              
                                                                                 ACCUMULATED               
                                      ADDITIONAL           MINIMUM  CUMULATIVE      OTHER                  
                         COMMON STOCK  PAID-IN   RETAINED  PENSION  TRANSLATION COMPREHENSIVE COMPREHENSIVE
                             PAR       CAPITAL   EARNINGS LIABILITY ADJUSTMENTS    INCOME        INCOME    
                         ------------ ---------- -------- --------- ----------- ------------- -------------
                                                                                                           
BALANCE, DEC. 31, 1994..   $    --     $16,848   $ 3,644    $  --      $ 304        $ 304                  
                           =======     =======   =======    =====      =====        =====                  
 Net income.............        --          --     4,889       --         --           --        $4,889    
 Cumulative translation                                                                                    
  adjustment............        --          --        --       --        322          322           322    
 Other..................        --          --        --      (54)        --          (54)          (54)   
                                                                                                 ------    
 Comprehensive income...                                                                         $5,157    
                                                                                                 ======    
 Stock repurchase.......        --        (125)       --       --         --           --                  
                           -------     -------   -------    -----      -----        -----                  
BALANCE, DEC. 31, 1995..   $    --     $16,723   $ 8,533    $ (54)     $ 626        $ 572                  
                           =======     =======   =======    =====      =====        =====                  
 Net income.............        --          --     6,862       --         --           --        $6,862    
 Cumulative translation                                                                                    
  adjustment............        --          --        --       --       (302)        (302)         (302)   
 Other..................        --          --        --     (270)                   (270)         (270)   
                                                                                                 ------    
 Comprehensive income...                                                                         $6,290    
                           -------     -------   -------    -----      -----        -----        ======    
BALANCE, DEC. 31, 1996..   $    --     $16,723   $15,395    $(324)     $ 324        $  --                  
                           =======     =======   =======    =====      =====        =====                  
 Net income.............        --          --     8,423       --         --           --        $8,423    
 Cumulative translation                                                                                    
  adjustment............        --          --        --       --       (616)        (616)         (616)   
 Other..................        --          --        --      142         --          142           142    
                                                                                                 ------    
 Comprehensive income...                                                                          7,949    
                           -------     -------   -------    -----      -----        -----        ======    
BALANCE, DEC. 31, 1997..   $    --     $16,723   $23,818    $(182)     $(292)       $(474)                 
                           =======     =======   =======    =====      =====        =====                  

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

F-4 

S-4/A
124th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 124th
AXIA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME 

FOR THE PERIODS ENDED DEC. 31, 1997, DEC. 31, 1996, AND DEC. 31, 1995 
(DOLLARS IN THOUSANDS)

                                                                [Download Table]

                                          YEAR ENDED   YEAR ENDED   YEAR ENDED 
                                         DECEMBER 31, DECEMBER 31, DECEMBER 31,
                                             1997         1996         1995    
                                         ------------ ------------ ------------
                                                                               
  Net sales.............................   $ 77,418     $ 79,771     $ 81,914  
  Net rentals...........................     27,382       25,016       22,412  
                                           --------     --------     --------  
NET REVENUES............................   $104,800     $104,787     $104,326  
  Cost of sales.........................     50,518       52,434       55,171  
  Cost of rentals.......................      9,626        8,860        9,658  
  Selling, general and administrative                                          
   expenses.............................     25,302       25,146       24,181  
                                           --------     --------     --------  
INCOME FROM OPERATIONS..................   $ 19,354     $ 18,347     $ 15,316  
  Interest expense......................      3,710        5,123        6,596  
  Interest income.......................       (367)         (39)         (44) 
  Other expense (income), net...........        404           57          537  
                                           --------     --------     --------  
INCOME BEFORE INCOME TAXES AND                                                 
 EXTRAORDINARY ITEM.....................   $ 15,607     $ 13,206     $  8,227  
  Provision for income taxes............      6,412        5,730        3,338  
                                           --------     --------     --------  
INCOME BEFORE EXTRAORDINARY ITEM........   $  9,195     $  7,476     $  4,889  

EXTRAORDINARY ITEM:                                                            
  Loss on early extinguishment of debt,                                        
   net of income taxes of $479 and $410,                                       
   respectively (see Notes 5 and 7).....        772          614           --  
                                           --------     --------     --------  
NET INCOME..............................   $  8,423     $  6,862     $  4,889  
                                           ========     ========     ========  

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

F-5 

S-4/A
125th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 125th
AXIA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

FOR THE PERIODS ENDED DEC. 31, 1997, DEC. 31, 1996, AND DEC. 31, 1995 
(DOLLARS IN THOUSANDS)

                                                                [Download Table]

                                       JAN. 1, 1997  JAN. 1, 1996  JAN. 1, 1995 
                                            TO            TO            TO      
                                       DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1995
                                       ------------- ------------- -------------
                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES:                                           
Net income...........................    $  8,423       $ 6,862       $ 4,889   
Adjustments to reconcile net income                                             
 to net cash provided by (used in)                                              
 operating activities:                                                          
  Depreciation and amortization......       5,099         6,716         6,380   
  Extraordinary item-write off of                                               
   deferred financing costs and                                                 
   original issue discount...........         826         1,024            --   
  Deferred income tax provision                                                 
   (benefit).........................         623           398           753   
  Loss (gain) on disposal of fixed                                              
   assets............................         159            14           184   
  Gain on sale of investment.........        (559)           --            --   
  Provision for losses on accounts                                              
   receivable........................       2,169         1,499         1,049   
  Provision for obsolescence of                                                 
   inventories.......................          79           592           (20)  
  Credit to pension expense..........        (231)         (275)         (166)  
  Changes in assets and liabilities:                                            
   Accounts receivable...............      (4,557)          (15)       (1,291)  
   Inventories.......................        (426)         (501)       (1,146)  
   Accounts payable..................         442          (433)          651   
   Accrued liabilities...............      (1,244)         (437)         (308)  
   Other current assets..............         (14)          270          (706)  
   Income taxes payable..............       1,532          (151)          569   
   Other non-current assets..........        (642)         (176)         (408)  
   Other non-current liabilities.....          51            25          (479)  
                                         --------       -------       -------   
     Net Cash Provided by Operating                                             
      Activities.....................    $ 11,730       $15,412       $ 9,951   

CASH FLOWS FROM INVESTING ACTIVITIES:                                           
  Cash used for capital expenditures.      (3,475)       (3,862)       (3,853)  
  Proceeds from sale of fixed assets.         357            55           281   
  Proceeds from sale of investment...       1,459            --            --   
                                         --------       -------       -------   
     Net Cash (Used in) Investing                                               
      Activities.....................    $ (1,659)      $(3,807)      $(3,572)  

CASH FLOWS FROM FINANCING ACTIVITIES:                                           
  Proceeds from other long-term debt.         944        25,411           296   
  Payments of other long-term debt...     (15,931)      (34,566)       (7,374)  
  Net increase in Revolving Credit                                              
   Loan..............................       4,500            --            --   
  Payments of deferred financing                                                
   costs.............................          --          (426)           --   
  Other equity transactions..........          37          (301)         (166)  
                                         --------       -------       -------   
     Net Cash (Used in) Financing                                               
      Activities.....................    $(10,450)      $(9,882)      $(7,244)  

EFFECT OF EXCHANGE RATE CHANGES ON                                              
 CASH................................         (27)          (52)           38   

NET INCREASE (DECREASE) IN CASH AND                                             
 CASH EQUIVALENTS....................    $   (406)      $ 1,671       $  (827)  

CASH AND CASH EQUIVALENTS AT                                                    
 BEGINNING OF PERIOD.................       1,716            45           872   
                                         --------       -------       -------   
CASH AND CASH EQUIVALENTS AT END OF                                             
 PERIOD..............................    $  1,310       $ 1,716       $    45   
                                         ========       =======       =======   

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

F-6 

S-4/A
126th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 126th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 1                                                                          

Nature of Business                                                            

AXIA Incorporated, the "Company," is a diversified manufacturer and marketer
of (i) formed and coated wire products, material handling and storage           
equipment, (ii) specialized packaging machinery, and (iii) tools and other      
products for finishing drywall in new, manufactured, and renovated housing and  
commercial construction.                                                        

On March 15, 1994, AXIA Incorporated (the "Predecessor Company") was        
acquired as part of a merger with a newly-formed company, AXIA Acquisition      
Corp. ("Acquisition"), a Delaware corporation, with the surviving corporation   
continuing under the name AXIA Incorporated (the "Company", including           
reference to the Predecessor Company where appropriate). The Company is 100%    
owned by AXIA Holdings Corporation ("Holdings"). Due to the substantial change  
in controlling interest in the Company, the Company reflected a complete        
change in its accounting basis of its assets and liabilities from Predecessor   
Company historical cost to estimated fair value as of March 15, 1994.           

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES                                         

Estimates and Assumptions                                                     

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

Principles of Consolidation                                                   

The Consolidated Financial Statements include AXIA INCORPORATED AND         
SUBSIDIARIES (the "Company"). All significant intercompany items are            
eliminated in consolidation.                                                    

Foreign Currency Translation                                                  

Assets and liabilities of foreign subsidiaries are translated at the current
rate of exchange at the balance sheet date. Revenues and expenses are           
translated at the average exchange rate for the period. Translation             
adjustments have been excluded from the results of operations and are reported  
as a separate component of Stockholder's Equity. Gains and losses resulting     
from foreign currency transactions, which are not material, are included in     
the Consolidated Statements of Income.                                          

Cash and Cash Equivalents                                                     

Cash equivalents are carried at cost, which approximates market. The Company
considers all highly liquid investments with a maturity of three months or      
less when purchased to be cash equivalents.                                     

Inventories                                                                   

Inventories are stated at the lower of first-in, first-out (FIFO) cost or   
market.                                                                         

F-7 

S-4/A
127th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 127th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)                            

Plant and Equipment                                                           

Depreciation is provided over the following useful lives:                   

                                                                [Download Table]
                                                                          
Buildings and improvements..................................... 2-30 years
Machinery and equipment........................................ 3-12 years
Equipment leased to others.....................................  5-7 years

Depreciation on plant and equipment is provided on the straight-line method 
over the estimated useful lives of the assets for financial reporting           
purposes. Accelerated methods and lives are used for income tax purposes.       
Expenditures for maintenance and repairs are charged to expense when incurred.  
Expenditures for renewals and betterments are capitalized and depreciated over  
the estimated remaining useful lives of the assets.                             

The original cost and related accumulated depreciation of assets sold or    
retired are removed from the applicable accounts, with any gain or loss         
resulting from the transaction included in income.                              

Income Taxes                                                                  

Income tax provisions are made for the estimated amount of income taxes on  
reported earnings which are payable currently and in the future.                

As required by Statement of Financial Accounting Standards No. 109,         
"Accounting for Income Taxes" ("SFAS No. 109"), the deferred tax provision is   
determined using the liability method. Under this method, deferred tax assets   
and liabilities are recognized based on differences between the financial       
statements and the tax basis of assets and liabilities as determined using      
presently enacted tax laws and the appropriate tax rates.                       

Deferred Charges, Intangible Assets and Goodwill                              

Amortizable loan costs, organization costs, patents, customer lists, and    
other intangible assets and deferred charges are stated in the accompanying     
Consolidated Balance Sheets net of amortization and are amortized over their    
estimated useful lives, which range from 2 to 16 years.                         

Goodwill represents the excess purchase price paid over the estimated fair  
value of the net assets acquired in the March 15, 1994 merger discussed Note    
1. Goodwill is stated net of amortization and is being amortized on a           
straight-line basis for a period of not more than 40 years (see Note 5).        
Subsequent to its acquisition, the Company continually evaluates whether later  
events and circumstances have occurred that indicate the remaining estimated    
useful life of goodwill may warrant revision or that the remaining balance of   
goodwill may not be recoverable. When factors indicate that goodwill should be  
evaluated for possible impairment, the Company uses an estimate of the related  
business segment's undiscounted operating income (before goodwill               
amortization) over the remaining life of the goodwill in measuring whether the  
goodwill is recoverable.                                                        

New Accounting Pronouncements                                                 

In 1996, the Company adopted Statement of Financial Accounting Standards No.
121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for    
Long-Lived Assets to Be Disposed Of." The adoption of SFAS 121 did not have a   
material impact on the financial position or results of operations of the       
Company.                                                                        

F-8 

S-4/A
128th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 128th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)                            

In 1997, the Financial Accounting Standards Board issued two new disclosure 
standards. Results of operations and financial position will be unaffected by   
implementation of these new standards.                                          

Statement of Financial Accounting Standards No. 130, "Reporting             
Comprehensive Income," ("SFAS No. 130") establishes standards for reporting     
and display of comprehensive income, its components, and accumulated balances.  
Comprehensive income is defined to include all changes in equity except those   
resulting from investments by owners and distributions to owners. Among other   
disclosures, SFAS No. 130 requires that all items that are required to be       
recognized under current accounting standards as components of comprehensive    
income be reported in a financial statement that is displayed with the same     
prominence as other financial statements. See subsequent event discussion in    
Note 18.                                                                        

Statement of Financial Accounting Standards No. 131, "Disclosure about      
Segments of an Enterprise and Related Information" ("SFAS No. 131"), which      
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business         
Enterprise," establishes standards for the way that public enterprises report   
information about operating segments in annual financial statements and         
requires reporting of selected information about operating segments in interim  
financial statements issued to the public. It also establishes standards for    
disclosures regarding products and services, geographic areas, and major        
customers. SFAS No. 131 defines operating segments as components of an          
enterprise about which separate financial information is available that is      
evaluated regularly by the chief operating decision maker in deciding how to    
allocate resources and in assessing performance. Due to the recent issuance of  
this standard, management has been unable to fully evaluate the impact, if      
any, it may have on future financial statement disclosures.                     

Both of these new standards are effective for financial statements for      
periods beginning after December 15, 1997, and require comparative information  
for earlier years to be restated.                                               

NOTE 3--ACCOUNTS RECEIVABLE                                                     

Trade accounts receivable are stated net of allowance for doubtful accounts.
Transactions affecting the allowance for doubtful accounts are shown in the     
following table (in thousands):                                                 

                                                                [Download Table]

                                   DECEMBER 31, DECEMBER 31, DECEMBER 31,
                                       1997         1996         1995    
                                   ------------ ------------ ------------
                                                                         
Balance, beginning of period......    $1,491       $1,140       $  942   
Additions, charged to income......     2,169        1,499        1,049   
Deductions, write-off of                                                 
 uncollectible accounts, net of                                          
 recoveries.......................    (1,814)      (1,148)        (851)  
                                      ------       ------       ------   
Balance, end of period............    $1,846       $1,491       $1,140   
                                      ======       ======       ======   

The Company is a diversified distributor, marketer and manufacturer of a    
wide range of high quality products used in the construction industry and       
agricultural and durable goods businesses. As such, its customers range from    
individual entrepreneurs to large corporations.                                 

F-9 

S-4/A
129th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 129th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 4--INVENTORIES                                                             

Inventories are stated at the lower of first-in, first-out (FIFO) cost or   
market. The cost elements included in inventories are material, labor and       
factory overhead.                                                               

Inventories, net of reserves of $528,000 and $546,000 as of December 31,    
1997 and 1996, respectively, consist of (in thousands):                         

                                                                [Download Table]

                                                 DECEMBER 31, DECEMBER 31,
                                                     1997         1996    
                                                 ------------ ------------
                                                                          
Raw materials...................................    $4,146       $4,653   
Work in process.................................     1,058          854   
Finished goods..................................     3,951        3,579   
                                                    ------       ------   
    Total inventories...........................    $9,155       $9,086   
                                                    ======       ======   

NOTE 5--GOODWILL, INTANGIBLE ASSETS AND DEFERRED CHARGES                        

Goodwill, intangible assets and deferred charges consist of the following   
(in thousands):                                                                 

                                                                [Download Table]

                                                 DECEMBER 31, DECEMBER 31,
                                                     1997         1996    
                                                 ------------ ------------
                                                                          
Goodwill........................................   $37,072      $37,380   
Less amortization...............................     3,567        2,701   
                                                   -------      -------   
  Goodwill, net.................................   $33,505      $34,679   
                                                   =======      =======   
Patents.........................................   $   496      $   529   
Customer lists..................................       223          223   
Computer software...............................       711          310   
Other intangibles...............................       340          301   
                                                   -------      -------   
  Subtotal......................................   $ 1,770      $ 1,363   
Less amortization...............................     1,067          986   
                                                   -------      -------   
  Intangible assets, net........................   $   703      $   377   
                                                   =======      =======   
Prepaid pension costs...........................   $ 8,049      $ 7,690   
Life insurance deposits.........................     3,467        3,297   
Deferred financing costs........................     1,040        1,632   
Other deferred charges..........................       161          147   
                                                   -------      -------   
  Subtotal......................................   $12,717      $12,766   
Less amortization...............................       535          553   
                                                   -------      -------   
  Deferred charges, net.........................   $12,182      $12,213   
                                                   =======      =======   

Total amortization expense related to the above assets was $1,236,000,      
$1,842,000 and $2,113,000 for the periods ended December 31, 1997, 1996, and    
1995, respectively. As a result of the early extinguishment of debt as          
discussed in Note 7, the Company wrote off $314,000 and $1,024,000 of           
unamortized deferred financing costs in 1997 and 1996, respectively.            

F-10  

S-4/A
130th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 130th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 6--ACCRUED LIABILITIES                                                     

Accrued liabilities consist of the following (in thousands):                

                                                                [Download Table]

                                                DECEMBER 31, DECEMBER 31,
                                                    1997         1996    
                                                ------------ ------------
                                                                         
Salaries, wages, vacations and payroll taxes...    $2,588       $2,445   
Insurance......................................     1,546        1,509   
Other current liabilities......................     3,085        4,593   
                                                   ------       ------   
    Total accrued liabilities..................    $7,219       $8,547   
                                                   ======       ======   

NOTE 7--LONG-TERM DEBT                                                          

Long-term debt, inclusive of capitalized lease obligations which are not    
material, is as follows (in thousands):                                         

                                                                [Download Table]

                                                 DECEMBER 31, DECEMBER 31,
                                                     1997         1996    
                                                 ------------ ------------
                                                                          
11.00% Senior Subordinated Notes................   $ 9,749      $18,343   
Term Loan.......................................    15,732       22,222   
Revolving Credit Loan...........................     4,500           --   
Other...........................................     1,383          630   
                                                   -------      -------   
  Total Debt....................................    31,364       41,195   
Less: Current maturities........................    10,925        6,647   
                                                   -------      -------   
    Total Long-Term Debt........................   $20,439      $34,548   
                                                   =======      =======   

The Senior Subordinated Notes above are stated net of unamortized discounts 
of $501,000 and $1,157,000 as of December 31, 1997 and 1996, respectively. The  
carrying amount of the Term Loan approximates its fair value as the term notes  
bear interest at floating rates. The fair value of the Senior Subordinated      
Notes at December 31, 1997 was $10,701,000 as determined by market quotations.  
Other debt consists of a revolving line of credit for the Company's European    
operations and capitalized lease financing.                                     

Bank Credit Agreement                                                         

On June 27, 1996, the Company and its domestic subsidiaries entered into a  
credit agreement (the "Bank Credit Agreement") which included a term loan       
("Term Loan") with an original principal amount of $25,000,000 and a non-       
amortizing revolving credit loan ("Revolving Credit Loan") of up to             
$15,000,000, including up to $1,000,000 of letters of credit. The Company       
recorded a pre-tax charge of $1,024,000 representing the writeoff of            
unamortized deferred loan costs from its previous bank financing agreement.     
This charge, net of tax, is reflected as an extraordinary item in the           
accompanying Consolidated Statements of Income for the period ended December    
31, 1996. The Bank Credit Agreement was amended in March 1997 to increase the   
Revolving Credit Loan availability to $20,000,000.                              

Under the Bank Credit Agreement, the loans may, at the option of the        
Company, be either Base Rate borrowings, Eurodollar borrowings or a             
combination thereof. Base Rate borrowings bear interest at the prime rate or    
the Federal Funds rate plus 1.00%, whichever is higher, and Eurodollar          
borrowings bear interest at a rate of LIBOR plus 1.50%. In certain events       
defined in the agreement, the Eurodollar borrowing interest rate may be         
increased to LIBOR plus 1.75%. The Company pays a                               

F-11  

S-4/A
131st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 131st
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 7--LONG-TERM DEBT--(CONTINUED)                                             

fee of .38% per annum on the unused balance of the line of credit. The Company  
can repay any borrowings at any time without penalty. The weighted average      
interest rates on all amounts outstanding under the Bank Credit Agreement as    
of December 31, 1997 was 7.56%. Substantially all of the assets of the          
Company, ATTS, and TapeTech act as collateral under the Bank Credit Agreement.  

Subsequent to a scheduled mandatory Term Loan payment of $210,000 in        
February 1998 due to an asset sale, the Term Loan will have scheduled           
maturities of $1,294,000 quarterly, maturing with a final payment of            
$1,288,000 on December 31, 2000. The Revolving Credit Loan also terminates on   
December 31, 2000. Interest payments are generally due quarterly. The Company   
is required to prepay portions of the Term Loan in the event of a major asset   
sale, as defined in the Bank Credit Agreement.                                  

11.00% Senior Subordinated Notes                                              

The 11.00% Senior Subordinated Notes were issued pursuant to a trust        
indenture (the "Indenture") between the Company, certain guarantors and a       
trustee bank and were sold to a group of private investors. Interest on the     
notes is payable semi-annually and the notes mature on March 15, 2001. The      
notes may be redeemed, at the Company's option, in full or in part, at a        
decreasing premium rate of 104.4% declining to 102.2% at March 15, 1998. A      
change of control of the Company, as defined, would require the Company to      
offer to redeem all notes at a 101% premium.                                    

In July 1994, the Company filed a Registration Statement with the Securities
and Exchange Commission to register the Senior Subordinated Notes under the     
Securities Act of 1933. The Notes are guaranteed by all of the Company's        
domestic subsidiaries. See Note 17 for further information regarding these      
guarantees.                                                                     

In May 1997, the Company exercised its option to redeem and extinguish      
$9,250,000 of its Senior Subordinated Notes. The Company recorded a pretax      
charge of $1,251,000 representing the aforementioned redemption premium, the    
writeoff of capitalized financing costs associated with the original issuance   
of the notes, the applicable original issue discount, and legal expenses,       
agent fees, and other costs of the transaction. The charge, net of tax, is      
reflected as an extraordinary item in the accompanying Consolidated Statement   
of Income for the period ended December 31, 1997.                               

Restrictive Loan Covenants                                                    

The Bank Credit Agreement and the Indenture contain certain covenants which,
among other things and all as defined in the applicable agreement, require the  
Company to maintain a minimum net worth, current ratio, interest coverage       
ratio, and fixed charge coverage ratio, and maximum leverage ratio of           
indebtedness to net worth. In addition, the Company may not create or incur     
certain types of additional debt or liens, declare dividends except as          
defined, or make capital expenditures or other restricted payments, as          
defined, during the term of the agreements in excess of varying amounts, as     
defined. The Company was in compliance with its loan covenants as of December   
31, 1997.                                                                       

F-12  

S-4/A
132nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 132nd
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 7--LONG-TERM DEBT--(CONTINUED)                                             

Scheduled Principal Payments                                                  

Scheduled payments of principal of long-term debt outstanding at December   
31, 1997, including capitalized lease obligations, are (in thousands):          

                                                                [Download Table]

                                           DECEMBER 31, 1997              
                                     ------------------------------       
                                             REVOLVING    SENIOR          
                                      TERM    CREDIT   SUBORDINATED       
                                      LOAN     LOAN       NOTES     OTHER 
                                     ------- --------- ------------ ------
                                                                          
1998................................ $ 5,386  $4,500      $   --    $1,039
1999................................   5,176      --          --       139
2000................................   5,170      --          --       135
2001................................      --      --       9,749        70
                                     -------  ------      ------    ------
    Total........................... $15,732  $4,500      $9,749    $1,383
                                     =======  ======      ======    ======

The scheduled maturities above include a prepayment in 1998 of $210,000     
related to the sale of assets as required in the Bank Credit Agreement. The     
amounts outstanding under revolving credit agreements are recorded as current   
maturities in the accompanying Consolidated Balance Sheets.                     

The Company made the following interest payments for the periods ended      
December 31, 1997, December 31, 1996, and December 31, 1995 (in thousands):     

                                                                [Download Table]

                                    DECEMBER 31, DECEMBER 31, DECEMBER 31,
                                        1997         1996         1995    
                                    ------------ ------------ ------------
                                                                          
Interest payments..................    $3,551       $4,399       $5,780   

NOTE 8--CAPITAL STOCK                                                           

Subsequent to the merger and acquisition on March 15, 1994, the Company has 
100 shares of common stock, par value $.01 per share, authorized, issued and    
outstanding, all of which are owned by Holdings.                                

F-13  

S-4/A
133rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 133rd
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 9--INCOME TAXES                                                            

Deferred income taxes reflect the net tax effects of temporary differences  
between the carrying amount of assets and liabilities presented in the          
financial statements and the amounts used for income tax purposes. Deferred     
tax assets and liabilities were composed of the following (in thousands):       

                                                                [Download Table]

DEFERRED INCOME TAX ASSETS                          DECEMBER 31, DECEMBER 31,
CURRENT ASSETS                                          1997         1996    
--------------------------                          ------------ ------------
                                                                             
Inventory valuation................................   $   601      $   652   
Bad debt reserves..................................       706          570   
Insurance accruals.................................       466          464   
Rental tool repair.................................       203          168   
Environmental accrual..............................         6          209   
Facility realignment...............................        --          239   
Tax accruals.......................................        50           76   
Other, net.........................................       561          649   
                                                      -------      -------   
Total deferred tax asset...........................   $ 2,593      $ 3,027   
                                                      =======      =======   

DEFERRED INCOME TAX ASSETS (LIABILITIES)            DECEMBER 31, DECEMBER 31,
NONCURRENT ASSETS (LIABILITIES)                         1997         1996    
----------------------------------------            ------------ ------------
                                                                             
Depreciation & amortization........................   $(3,890)     $(3,666)  
Pension plans......................................    (2,879)      (2,661)  
Insurance accruals.................................       382          420   
Tax accruals.......................................       212           76   
Post-retirement benefits (ex. pensions)............     1,548        1,464   
Environmental accrual..............................     1,415        1,339   
Other, net.........................................       257          262   
                                                      -------      -------   
Total deferred tax (liability), net................   $(2,955)     $(2,766)  
                                                      =======      =======   

The components of the income tax provision, excluding the amount            
attributable to the extraordinary item, are as follows (in thousands):          

                                                                [Download Table]

                                       DECEMBER 31, DECEMBER 31, DECEMBER 31,
                                           1997         1996         1995    
                                       ------------ ------------ ------------
                                                                             
U.S. and state taxes payable..........    $5,013       $4,700       $1,899   
Foreign taxes payable.................       776          632          686   
                                          ------       ------       ------   
  Taxes currently payable.............    $5,789       $5,332       $2,585   
Deferred taxes, net...................       623          398          753   
                                          ------       ------       ------   
    Total provision...................    $6,412       $5,730       $3,338   
                                          ======       ======       ======   

F-14  

S-4/A
134th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 134th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 9--INCOME TAXES--(CONTINUED)                                               

A reconciliation between the statutory and the effective income tax rates,  
excluding the amount attributable to the extraordinary item, is as follows:     

                                                                [Download Table]

                                      DECEMBER 31, DECEMBER 31, DECEMBER 31,
                                          1997         1996         1995    
                                      ------------ ------------ ------------
                                                                            
Statutory income tax rate............     34.0%        34.0%        34.0%   
Non-deductible amortization..........      3.5          3.7          4.0    
State income taxes, net of federal                                          
 income tax benefit..................      2.5          3.1          2.2    
Other, net...........................      1.1          2.6           .4    
                                          ----         ----         ----    
Effective income tax rate............     41.1%        43.4%        40.6%   
                                          ====         ====         ====    

The Company made the following income tax payments, net of refunds, during  
the periods ended December 31, 1997, December 31, 1996, and December 31, 1995   
(in thousands):                                                                 

                                                                [Download Table]

                                       DECEMBER 31, DECEMBER 31, DECEMBER 31,
                                           1997         1996         1995    
                                       ------------ ------------ ------------
                                                                             
Income taxes paid (refunded)..........    $3,795       $4,691       $2,561   

The Company does not record deferred income taxes applicable to             
undistributed earnings of foreign subsidiaries. The Company considers these     
earnings to be invested for an indefinite period. If such earnings were         
distributed, the U.S. income taxes payable would not be material as the         
resulting liability would be substantially offset by foreign tax credits.       

NOTE 10--PENSION PLANS                                                          

The Company's pension plans provide benefits for substantially all          
employees. A majority of plan assets are invested in cash, bonds, domestic and  
international equities and real estate. Pension costs are funded by the         
Company at a rate necessary to maintain the plans on an actuarially sound       
basis.                                                                          

The components of pension expense (credits) are as follows (in thousands):  

                                                                [Download Table]

                                      DECEMBER 31, DECEMBER 31, DECEMBER 31,
                                          1997         1996         1995    
                                      ------------ ------------ ------------
                                                                            
Normal cost..........................    $1,127       $  983       $  799   
Interest on beginning of period                                             
 projected benefit obligation........     1,726        1,679        1,680   
Return on fund assets................    (3,095)      (2,944)      (2,581)  
Net amortization and deferrals.......        11            7           (4)  
Effect of curtailment................        --           --          (60)  
                                         ------       ------       ------   
Total credit to pension expense......    $ (231)      $ (275)      $ (166)  
                                         ======       ======       ======   

In 1995, the Company recorded a gain of $60,000 on the curtailment of an    
hourly pension plan as a result of the closure of a production facility.        

F-15  

S-4/A
135th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 135th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 10--PENSION PLANS--(CONTINUED)                                             

A summary of the benefit obligations and plan assets is shown in the table  
below (in thousands):                                                           

                                                                [Download Table]

                                            DECEMBER 31,     DECEMBER 31,   
                                                1997             1996       
                                           ---------------  --------------- 
                                             (A)     (B)      (A)     (B)   
                                           -------  ------  -------  ------ 
                                                                            
Actuarial present value of benefit                                          
 obligations:                                                               
Vested benefits........................... $23,071  $3,910  $19,380  $3,644 
Nonvested benefits........................     917      54      782      22 
                                           -------  ------  -------  ------ 
Accumulated benefit obligation............ $23,988  $3,964  $20,162  $3,666 
Effect of projected future compensation                                     
 levels...................................   1,227      --    1,382      -- 
                                           -------  ------  -------  ------ 
Projected benefit obligation.............. $25,215  $3,964  $21,544  $3,666 
Less: Plan assets at fair value........... (33,460) (3,536) (29,077) (3,067)
                                           -------  ------  -------  ------ 
Plan assets (in excess)/less than                                           
 projected benefit obligation............. $(8,245)    428  $(7,533) $  599 
Unrecognized prior service cost...........      --     (32)      --     (35)
Unrecognized net actuarial (loss) gain....     288    (295)     (47)   (524)
Adjustment required to recognize minimum                                    
 liability................................      --     327       --     559 
                                           -------  ------  -------  ------ 
Net (asset) liability..................... $(7,957) $  428  $(7,580) $  599 
                                           =======  ======  =======  ====== 

--------                                                                        
(A) Plans with Assets in excess of Accumulated Benefits                         
(B) Plans with Accumulated Benefits in excess of Assets                         

At December 31, 1997, the Company has recorded pension assets of $8,049,000 
and liabilities of $520,000 in the Consolidated Balance Sheets. Calculations    
of 1997, 1996 and 1995 pension expense under the provisions of SFAS No. 87      
assumed a settlement rate of 7.00%, 7.25% and 7.25%, respectively, and a long-  
term rate of return on plan assets of 10.0% for all years.                      

F-16  

S-4/A
136th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 136th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 11--POST-RETIREMENT BENEFITS OTHER THAN PENSIONS                           

The Company sponsors three defined benefit post-retirement plans. The       
Company entered into employment agreements with executive employees which       
provide for death benefits to the executive's estate upon the executive's       
death. A second plan provides prescription drug benefits to nonsalaried         
employees at one of its plants, and the other provides life insurance benefits  
to selected salaried and nonsalaried employees. All plans are noncontributory   
and unfunded. The following table sets forth the plans' combined status         
reconciled with the amount shown in the Company's Consolidated Balance Sheets   
as of December 31, 1997 and 1996 (in thousands):                                

                                                                [Download Table]

                                                   DECEMBER 31, DECEMBER 31,
                                                       1997         1996    
                                                   ------------ ------------
                                                                            
Accumulated post-retirement benefit obligation:                             
  Retirees.......................................    $(3,353)     $(3,231)  
  Fully eligible active plan participants........       (488)        (421)  
  Other active plan participants.................       (262)        (233)  
                                                     -------      -------   
Total post-retirement benefit obligation.........    $(4,103)     $(3,885)  
Plan assets at fair value........................         --           --   
Accumulated post-retirement benefit obligation in                           
 excess of plan assets...........................    $(4,103)     $(3,885)  
                                                     -------      -------   
Accrued post-retirement benefit cost.............    $(4,103)     $(3,885)  
                                                     =======      =======   
Net periodic post-retirement benefit cost                                   
 included the following components:                                         
Service cost--benefits attributed to service                                
 during the period...............................    $    85      $  (104)  
Interest cost on accumulated post-retirement                                
 benefit obligation..............................        224          265   
                                                     -------      -------   
Net periodic post-retirement benefit cost........    $   309      $   161   
                                                     =======      =======   

The Company entered into Salary Continuation Agreements with certain key    
executive employees which provide a death benefit, contingent upon employment   
or service as a consultant with the Company until retirement or death.          
Pursuant to the agreement with each such executive, upon the executive's        
death, the Company will pay to the respective designated beneficiary, annually  
for a period of ten years, an amount equal to 40% of the executives current     
salary or salary at the date of retirement. The total post-retirement benefit   
obligation of this benefit program included in the table above is $3,544,000    
and $3,398,000 at December 31, 1997 and 1996, respectively. The Company has     
purchased life insurance policies on the lives of the executives, naming the    
Company as the sole beneficiary. The amount of such coverage is designed to     
provide to the Company a source of funds to satisfy its obligations under the   
program.                                                                        

The Company, in accordance with a union contract, provides prescription drug
benefits at one of its plants. For measurement purposes, a 7 percent annual     
rate of increase in the per capita cost of covered prescription drug benefits   
was assumed for 1997 and 1996 and for each year thereafter. The prescription    
drug cost trend rate assumption has an effect on the amounts reported. To       
illustrate, increasing the assumed health care cost trend rates by 1            
percentage point in each year would increase the accumulated post-retirement    
benefit obligation as of December 31, 1997 by approximately $78,000 and the     
aggregate of the service and interest cost components of net periodic post-     
retirement benefit cost for the year then ended by approximately $7,900. The    
discount rate used in determining the accumulated post-retirement benefit       
obligation was 8.5% in 1997 and 1996.                                           

F-17  

S-4/A
137th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 137th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 12--LEASES                                                                 

Minimum rental commitments of the Company under noncancellable operating    
leases (primarily real estate) with initial terms of one year or more are as    
follows (in thousands):                                                         

                                                                [Download Table]

                                                              DECEMBER 31,
                                                                  1997    
                                                              ------------
                                                                          
1998.........................................................    $1,983   
1999.........................................................     1,293   
2000.........................................................       891   
2001.........................................................       644   
2002.........................................................       537   
Subsequent years.............................................     1,185   
                                                                 ------   
    Total....................................................    $6,533   
                                                                 ======   

The Company incurred the following expense for operating leases for the     
periods ended December 31, 1997, December 31, 1996, and December 31, 1995 (in   
thousands):                                                                     

                                                                [Download Table]

                                    DECEMBER 31, DECEMBER 31, DECEMBER 31,
                                        1997         1996         1995    
                                    ------------ ------------ ------------
                                                                          
Lease expense......................    $2,369       $2,339       $2,298   

NOTE 13--BUSINESS SEGMENTS                                                      

The Company is a designer, manufacturer, distributor and marketer of a      
diverse range of products in several niche markets including productivity       
enhancing construction tools, formed wire products and industrial bag closing   
equipment and systems, and conveyor handling systems.                           

Ames ("Ames") is the designer, manufacturer, distributor and marketer of    
automatic taping and finishing tools, which are rented or sold to interior      
finishing contractors to finish drywall joints prior to painting, wallpapering  
and other forms of final treatment. In addition, Ames sells a variety of other  
drywall tools, finishing accessories, and supplies through its network of       
Company-owned stores.                                                           

Nestaway ("Nestaway") is a manufacturer of formed wire products which are   
used for a variety of commercial and consumer product applications. Nestaway    
manufactures coated wire dishwasher racks and components which are sold to      
dishwasher appliance manufacturers. Nestaway also manufactures, on a contract   
basis, other close tolerance, formed, welded and coated formed wire products    
such as dish drainers, sink protectors, shower caddies, dryer racks, golf cart  
baskets, bucket bails, medical baskets and small gauge axles.                   

Fischbein ("Fischbein") is a worldwide manufacturer of industrial bag       
closing equipment and systems, and a manufacturer of flexible conveyor          
handling systems and stackable storage equipment. Bag closing equipment and     
systems include: (i) portable and stationary industrial sewing heads and        
sewing systems for paper, textile and woven polypropylene bags; (ii)            
industrial heat sealing and bag handling systems for paper and plastic bags     
and (iii) consumables, including thread, tape and service parts. Fischbein      
manufacturers extendable, flexible, gravity and motorized conveyors and         
portable, nestable and stackable warehouse storage racks.                       

One of Nestaway's dishrack customers accounted for 20%, 19% and 20% of the  
Company's revenues for 1997, 1996 and 1995, respectively. Dishrack customers,   
as a group, accounted for 23%, 27% and 32% of the Company's revenues for 1997,  
1996 and 1995, respectively. Another customer of Nestaway who purchases         
dishdrainers and other products accounted for 10%, 11% and 8% of the Company's  
revenues for 1997, 1996 and 1995, respectively.                                 

F-18  

S-4/A
138th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 138th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 13--BUSINESS SEGMENTS--(CONTINUED)                                         

Nestaway competes directly with the dishwasher manufacturer's in-house      
manufacturing capability. Frigidaire, General Electric and Whirlpool, major     
dishwasher manufacturers, have dishrack manufacturing capability. Because       
Nestaway is competing against the self-manufacture of its product by larger     
companies with more extensive financial resources, Nestaway competes on         
quality, flexibility and innovation. As a result of dishrack sourcing           
decisions made by its customers, in 1996 Nestaway shut down a leased            
production facility in Canal Winchester, Ohio, and temporarily idled a second   
plant in Clinton, North Carolina. The Clinton facility resumed operations in    
1997 when the Company was awarded a contract for dishracks by a new customer.   
Nestaway's Beaver Dam, Kentucky plant, shut down in 1994 due to a customer's    
decision to utilize an alternative source of supply, was reopened in 1996 to    
produce dishrack components, lower volume dishracks, and other formed and       
coated wire products. During 1997 and 1996, Nestaway charged $624,000 and       
$980,000, respectively, of the costs incurred against a facility realignment    
reserve established in prior periods. Nestaway has no further reserves for the  
realignment of its production capacities as of December 31, 1997, and           
management believes its current manufacturing operations are properly           
positioned to service current and future customers.                             

A summary of segment data for the periods ended December 31, 1997, 1996, and
1995 is as follows (in thousands):                                              

                                                                [Download Table]

                                                       CORPORATE               
                                                          AND                  
                           NESTAWAY FISCHBEIN  AMES   ELIMINATIONS CONSOLIDATED
                           -------- --------- ------- ------------ ------------
                                                                               
Period ended December 31,                                                      
 1997:                                                                         
  Net revenues............ $35,268   $27,104  $42,428   $    --      $104,800  
  Income from operations..   6,575     3,838   11,693    (2,752)       19,354  
  Identifiable assets.....  38,873    18,141   27,969    11,790        96,773  
  Depreciation and                                                             
   amortization...........   2,077       746    1,860       416         5,099  
  Capital expenditures....   1,340       319    1,813         3         3,475  
                           =======   =======  =======   =======      ========  
Period ended December 31,                                                      
 1996:                                                                         
  Net revenues............ $39,655   $27,117  $38,015   $    --      $104,787  
  Income from operations..   8,069     3,263   10,157    (3,142)       18,347  
  Identifiable assets.....  38,986    18,282   26,476    15,587        99,331  
  Depreciation and                                                             
   amortization...........   3,484       693    1,789       750         6,716  
  Capital expenditures....     250       724    2,807        81         3,862  
                           =======   =======  =======   =======      ========  
Period ended December 31,                                                      
 1995:                                                                         
  Net revenues............ $42,649   $27,823  $33,854   $    --      $104,326  
  Income from operations..   8,172     2,851    7,569    (3,276)       15,316  
  Identifiable assets.....  45,084    18,283   24,071    15,850       103,288  
  Depreciation and                                                             
   amortization...........   3,306       542    1,484     1,048         6,380  
  Capital expenditures....   2,042       513    1,297         1         3,853  
                           =======   =======  =======   =======      ========  

The Company has restated its segment data to reflect divisional organization
rather than similarity of product lines. As a result, the storage rack and      
conveyor product lines, formerly included in the Metal Products Segment, are    
now combined with the Fischbein business segment. These products represented    
less than 20% of the total revenues of Fischbein in 1997 and less than 5% of    
the Company's total revenues.                                                   

F-19  

S-4/A
139th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 139th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 14--GEOGRAPHICAL DATA                                                      

The Company conducts the majority of its business within the United States. 
The Packaging Products Segment has operations in various other countries,       
primarily in Europe and Singapore. The Construction Tool Segment also conducts  
business in Canada. Activity in any single country or area outside of the       
United States is not material. Export sales outside of the United States to     
unaffiliated customers are less than 10% of sales.                              

A summary of geographical data for the periods ended December 31, 1997,     
1996, and 1995 is as follows (in thousands):                                    

                                                                [Download Table]

                                                     CORPORATE               
                                                        AND                  
                                   DOMESTIC FOREIGN ELIMINATIONS CONSOLIDATED
                                   -------- ------- ------------ ------------
                                                                             
Period ended December 31, 1997:                                              
  Net revenues.................... $92,265  $12,535   $    --      $104,800  
  Income from operations..........  20,387    1,719    (2,752)       19,354  
  Identifiable assets.............  79,327    5,656    11,790        96,773  
  Depreciation and amortization...   4,610       73       416         5,099  
  Capital expenditures............   3,323      149   $     3      $  3,475  
                                   =======  =======   =======      ========  
Period ended December 31, 1996:                                              
  Net revenues.................... $91,307  $13,480   $    --      $104,787  
  Income from operations..........  19,877    1,612    (3,142)       18,347  
  Identifiable assets.............  77,775    5,969    15,587        99,331  
  Depreciation and amortization...   5,896       70       750         6,716  
  Capital expenditures............   3,697       84        81         3,862  
                                   =======  =======   =======      ========  
Period ended December 31, 1995:                                              
  Net revenues.................... $89,613  $14,713   $    --      $104,326  
  Income from operations..........  16,458    2,134    (3,276)       15,316  
  Identifiable assets.............  81,053    6,385    15,850       103,288  
  Depreciation and amortization...   5,258       74     1,048         6,380  
  Capital expenditures............   3,790       62         1         3,853  
                                   =======  =======   =======      ========  

NOTE 15--CONTINGENCY                                                            

The Company is subject to various federal, state and local laws and         
regulations governing the use, discharge and disposal of hazardous materials.   
Including the item discussed below, compliance with current laws and            
regulations has not had, and is not expected to have, a material adverse        
effect on the Company's financial condition or operating results.               

In 1991, the New York State Department of Environmental Conservation (the   
"NYSDEC") sent a notice letter to the Company alleging that it had documented   
the release and/or threatened release of "hazardous substances" and/or the      
presence of "hazardous wastes" at a property located in Buffalo, New York,      
formerly owned by Bliss and Laughlin Steel Company, a predecessor of the        
Company.                                                                        

A feasibility study, prepared in 1994 by environmental consultants engaged  
by the Company, established a range of estimated remediation costs of $.7       
million to $2.9 million, plus or minus 30% of those costs, with the most        
probable method of remediation being at the high end of the range. The Company  
established an accrual of $3.9 million for the costs of remediation.            

F-20  

S-4/A
140th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 140th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 15--CONTINGENCY--(CONTINUED)                                               

In 1997, the Company entered into an agreement with the party responsible   
for an adjoining site who also have been in the process of addressing concerns  
raised by NYSDEC which will transfer responsibility to remediate the formerly-  
owned property to the party remediating the adjoining site. The Company paid    
the $520,000 payable under the agreement and has an exposure of up to an        
additional $120,000 if pond sediment contamination is higher than estimated by  
the Company's environmental consultants. In the event the party responsible     
for the remediation of the adjoining site is unable to consummate an agreement  
with NYSDEC within one year of its agreement with the Company, the Company has  
the option of the return of its contribution to the remediation of the sites    
and pursuing its own remediation plan. Should NYSDEC not approve the joint      
remediation plan for both sites, the agreement can be nullified and funds       
returned to the Company. The Company has maintained its accruals pending        
finalization of the remediation plan of the adjoining site. The Company is      
pursuing contributions from directors and officers of other users of the        
previously owned property. No estimate can be given as to possible recovery.    

NOTE 16--RELATED PARTY TRANSACTIONS                                             

The Company is wholly-owned by Holdings. The Company has entered into an    
agreement with beneficial owners of Holdings shares as described herein. The    
Company believes that the services provided are on terms at least as favorable  
to the Company as it could obtain from unaffiliated third parties.              

The Company has entered into a Management Agreement (the "Management        
Agreement") with Cortec Capital Corporation ("CCC"), a beneficial owner of      
59.1% of Holdings, for certain management and financial services. Pursuant to   
the Management Agreement, CCC will provide the Company with professional and    
administrative advice in areas relating to the Company's business, including    
finance, budgeting, risk management, business planning, manufacturing, sales,   
marketing, staffing levels and acquisitions. CCC will receive a quarterly fee   
of 1% of the Company's net sales, not to exceed $125,000. The Management        
Agreement continues until March 31, 2001, and thereafter for successive one     
year periods unless terminated by either party. Total fees and reimbursed       
expenses for these services were $500,551, $504,959 and $458,662 in 1997, 1996  
and 1995, respectively, and are included in selling, general and                
administrative expenses in the Consolidated Statements of Income.               

NOTE 17--SUBSIDIARY GUARANTEES                                                  

The Company's payment obligations under the Subordinated Notes are fully and
unconditionally guaranteed on a joint and several basis (collectively, the      
"Subsidiary Guarantees") by Ames Taping Tool Systems, Inc., and TapeTech Tool   
Co., Inc., each a wholly-owned subsidiary of the Company and each a             
"Guarantor." These subsidiaries, together with the operating divisions of the   
Company, represent all of the operations of the Company conducted in the        
United States. The remaining subsidiaries of the Company are foreign            
subsidiaries.                                                                   

The Company's payment obligations under the Bank Credit Agreement are fully 
and unconditionally guaranteed on a joint and several basis by the Company and  
each Guarantor. The obligations of each Guarantor under its Subsidiary          
Guarantee are subordinated to all senior indebtedness of such Guarantor,        
including the guarantee by such Guarantor of the Company's borrowings under     
the Bank Credit Agreement.                                                      

F-21  

S-4/A
141st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 141st
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 17--SUBSIDIARY GUARANTEES--(CONTINUED)                                     

With the intent that the Subsidiary Guarantees not constitute fraudulent    
transfers or conveyances under applicable state or federal law, the obligation  
of each Guarantor under its Subsidiary Guarantee is also limited to the         
maximum amount as will, after giving effect to such maximum amount and all      
other liabilities (contingent or otherwise) of such Guarantor that are          
relevant under such laws, and after giving effect to any rights to              
contribution of such Guarantor pursuant to any agreement providing for an       
equitable contribution among such Guarantor and other affiliates of the         
Company of payments made by guarantees by such parties, result in the           
obligations of such Guarantor in respect of such maximum amount not             
constituting a fraudulent conveyance.                                           

The following consolidating condensed financial data illustrates the        
composition of the combined Guarantors. Management believes separate complete   
financial statements of the respective Guarantors would not provide additional  
material information which would be useful in assessing the financial           
composition of the Guarantors. No single Guarantor has any significant legal    
restrictions on the ability of investors or creditors to obtain access to its   
assets in event of default on the Subsidiary Guarantee other than its           
subordination to senior indebtedness described above.                           

Investments in subsidiaries are accounted for by the parent on the equity   
method for purposes of the supplemental consolidating presentation. Earnings    
of subsidiaries are therefore reflected in the parent's investment accounts     
and earnings. The principal elimination entries eliminate investments in        
subsidiaries and intercompany balances and transactions.                        

F-22  

S-4/A
142nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 142nd
AXIA INCORPORATED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995

CONSOLIDATING BALANCE SHEET 

AS OF DECEMBER 31, 1997 
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                           PARENT                    NON-                              
                           AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
         ASSETS           DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
         ------           --------- ------------ ------------ ------------ ------------
                                                                                       
CURRENT ASSETS:                                                                        
 Cash and cash                                                                         
  equivalents...........   $   (88)   $   925       $  420      $     53     $ 1,310   
 Accounts receivable,                                                                  
  net...................     5,121      5,018        3,110          (490)     12,759   
 Inventories............     6,175      1,641        1,789          (450)      9,155   
 Prepaid income taxes                                                                  
  and other current                                                                    
  assets................       208        144           84            --         436   
 Deferred income tax                                                                   
  assets................     2,593         --           --            --       2,593   
                           -------    -------       ------      --------     -------   
 Total Current Assets...   $14,009    $ 7,728       $5,403      $   (887)    $26,253   
                           -------    -------       ------      --------     -------   
PLANT AND EQUIPMENT, AT                                                                
 COST:                                                                                 
 Land...................   $   508    $    --       $   --      $     --     $   508   
 Buildings and                                                                         
  improvements..........     6,293         18          309            --       6,620   
 Machinery and                                                                         
  equipment.............    23,703        571          467            --      24,741   
 Equipment leased to                                                                   
  others................     7,128         --           11            --       7,139   
                           -------    -------       ------      --------     -------   
                           $37,632    $   589       $  787      $     --     $39,008   
 Less: Accumulated                                                                     
  depreciation..........    13,994        395          549            --      14,938   
                           -------    -------       ------      --------     -------   
 Net Plant and                                                                         
  Equipment.............   $23,638    $   194       $  238      $     --     $24,070   
                           -------    -------       ------      --------     -------   
OTHER ASSETS:                                                                          
 Goodwill, net..........   $30,922    $ 2,571       $   12      $     --     $33,505   
 Intangible assets, net.       678         25           --            --         703   
 Deferred charges, net..    11,187        992            3            --      12,182   
 Investment in wholly-                                                                 
  owned subsidiaries....    16,038         --           --       (16,038)         --   
 Investment in                                                                         
  affiliates............        --         --           --            --          --   
 Other assets...........        60         --           --            --          60   
                           -------    -------       ------      --------     -------   
 Total Other Assets.....   $58,885    $ 3,588       $   15      $(16,038)    $46,450   
                           -------    -------       ------      --------     -------   
TOTAL ASSETS............   $96,532    $11,510       $5,656      $(16,925)    $96,773   
                           =======    =======       ======      ========     =======   

     LIABILITIES AND                                                                   
  STOCKHOLDER'S EQUITY                                                                 
  --------------------                                                                 
                                                                                       
CURRENT LIABILITIES:                                                                   
 Current maturities of                                                                 
  long-term debt........   $10,565    $    36       $  324      $     --     $10,925   
 Accounts payable.......     3,124        410          924          (437)      4,021   
 Accrued liabilities....     5,920        950          349            --       7,219   
 Accrued income taxes...       138         --          126            --         264   
 Advance account........     1,726       (937)        (789)           --          --   
                           -------    -------       ------      --------     -------   
 Total Current                                                                         
  Liabilities...........   $21,473    $   459       $  934      $   (437)    $22,429   
                           -------    -------       ------      --------     -------   
NON-CURRENT LIABILITIES:                                                               
 Long-term debt, less                                                                  
  current maturities....   $20,414    $    25       $   --      $     --     $20,439   
 Other non-current                                                                     
  liabilities...........    10,883         --           --            --      10,883   
 Deferred income taxes..     2,955         --           --            --       2,955   
                           -------    -------       ------      --------     -------   
 Total Non-Current                                                                     
  Liabilities...........   $34,252    $    25       $   --      $     --     $34,277   
                           -------    -------       ------      --------     -------   
STOCKHOLDER'S EQUITY                                                                   
 (DEFICIT):                                                                            
 Common stock and                                                                      
  additional paid-in                                                                   
  capital...............   $16,723    $ 5,098       $1,770      $ (6,868)    $16,723   
 Retained earnings......    24,266      5,928        3,244        (9,620)     23,818   
 Accumulated other                                                                     
  comprehensive income..      (182)        --         (292)           --        (474)  
                           -------    -------       ------      --------     -------   
 Total Stockholder's                                                                   
  Equity (Deficit)......   $40,807    $11,026       $4,722      $(16,488)    $40,067   
                           -------    -------       ------      --------     -------   
 TOTAL LIABILITIES AND                                                                 
  STOCKHOLDER'S EQUITY                                                                 
  (DEFICIT).............   $96,532    $11,510       $5,656      $(16,925)    $96,773   
                           =======    =======       ======      ========     =======   

F-23

S-4/A
143rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 143rd
AXIA INCORPORATED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995

CONSOLIDATING STATEMENT OF INCOME 

FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                          PARENT                    NON-                              
                          AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
                         DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
                         --------- ------------ ------------ ------------ ------------
                                                                                      
Net sales...............  $57,366    $14,837      $11,549      $ (6,334)    $ 77,418  
Net rentals.............   15,063     26,379          986       (15,046)      27,382  
                          -------    -------      -------      --------     --------  
Net revenues............  $72,429    $41,216      $12,535      $(21,380)    $104,800  
  Cost of sales.........  $40,916    $ 8,683      $ 7,300      $ (6,381)    $ 50,518  
  Cost of rentals.......    3,156     20,895          621       (15,046)       9,626  
  Selling, general and                                                                
   administrative                                                                     
   expenses.............   14,344      8,063        2,895            --       25,302  
                          -------    -------      -------      --------     --------  
Income from operations..  $14,013    $ 3,575      $ 1,719      $     47     $ 19,354  
  Interest expense......    3,695          9            6            --        3,710  
  Intercompany interest                                                               
   expense (income).....       (7)         7           --            --           --  
  Other expense                                                                       
   (income), net........   (3,381)       205          391         2,822           37  
                          -------    -------      -------      --------     --------  
Income before income                                                                  
 taxes..................  $13,706    $ 3,354      $ 1,322      $ (2,775)    $ 15,607  
  Provision for income                                                                
   taxes................    4,558      1,295          559            --        6,412  
                          -------    -------      -------      --------     --------  
Income before                                                                         
 extraordinary item.....  $ 9,148    $ 2,059      $   763      $ (2,775)    $  9,195  
                          =======    =======      =======      ========     ========  

F-24

S-4/A
144th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 144th
AXIA INCORPORATED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995

CONSOLIDATING STATEMENT OF CASH FLOWS 

FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                          PARENT                    NON-                              
                          AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
                         DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
                         --------- ------------ ------------ ------------ ------------
                                                                                      
CASH FLOWS FROM                                                                       
 OPERATING ACTIVITIES..   $ 9,530    $ 1,899       $ 301         $--        $ 11,730  
CASH FLOW FROM                                                                        
 INVESTING ACTIVITIES:                                                                
  Cash used for capital                                                               
   expenditures........    (3,255)       (71)       (149)         --          (3,475) 
  Proceeds from sale of                                                               
   investment..........     1,459         --          --          --           1,459  
  Proceeds from sale of                                                               
   fixed assets........       357         --          --          --             357  
                          -------    -------       -----         ---        --------  
    Net Cash Used In                                                                  
     Investing                                                                        
     Activities........   $(1,439)   $   (71)      $(149)        $--        $ (1,659) 
CASH FLOWS FROM                                                                       
 FINANCING ACTIVITIES:                                                                
  Net increase in                                                                     
   Revolving Credit                                                                   
   Loan................     4,500         --          --          --           4,500  
  Proceeds from other                                                                 
   long-term debt......       620         --         324          --             944  
  Payments of other                                                                   
   long-term debt......   (15,907)       (24)         --          --         (15,931) 
  Dividends received                                                                  
   from (paid by)                                                                     
   subsidiaries........       638         --        (638)         --              --  
  Net increase                                                                        
   (decrease) in                                                                      
   advance account.....     1,471     (1,386)        (85)         --              --  
  Other equity                                                                        
   transactions........       145         --        (108)         --              37  
                          -------    -------       -----         ---        --------  
    Net Cash Used In                                                                  
     Financing                                                                        
     Activities........   $(8,533)   $(1,410)      $(507)        $--        $(10,450) 
EFFECT OF EXCHANGE RATE                                                               
 CHANGES ON CASH.......        --         --         (27)         --             (27) 
                          -------    -------       -----         ---        --------  
NET (DECREASE) INCREASE                                                               
 IN CASH AND CASH                                                                     
 EQUIVALENTS...........   $  (442)   $   418       $(382)        $--        $   (406) 
CASH AND CASH                                                                         
 EQUIVALENTS AT                                                                       
 BEGINNING OF YEAR.....       407        507         802          --           1,716  
                          -------    -------       -----         ---        --------  
CASH AND CASH                                                                         
 EQUIVALENTS AT END OF                                                                
 YEAR..................   $   (35)   $   925       $ 420         $--        $  1,310  
                          =======    =======       =====         ===        ========  

F-25

S-4/A
145th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 145th
AXIA INCORPORATED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995

CONSOLIDATING BALANCE SHEET 

AS OF DECEMBER 31, 1996 
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                           PARENT                    NON-                              
                           AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
         ASSETS           DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
         ------           --------- ------------ ------------ ------------ ------------
                                                                                       
CURRENT ASSETS:                                                                        
 Cash and cash                                                                         
  equivalents...........   $   407    $   507       $  802      $     --     $ 1,716   
 Accounts receivable,                                                                  
  net...................     3,681      4,673        2,472          (139)     10,687   
 Inventories............     5,892      1,422        2,268          (496)      9,086   
 Prepaid income taxes                                                                  
  and other current                                                                    
  assets................     1,513        127           55            --       1,695   
 Deferred income tax                                                                   
  assets................     3,027         --           --            --       3,027   
                           -------    -------       ------      --------     -------   
   Total Current Assets.   $14,520    $ 6,729       $5,597      $   (635)    $26,211   
                           -------    -------       ------      --------     -------   
PLANT AND EQUIPMENT, AT                                                                
 COST:                                                                                 
 Land...................   $   521    $    --       $   --      $     --     $   521   
 Buildings and                                                                         
  improvements..........     6,200         18          291            --       6,509   
 Machinery and                                                                         
  equipment.............    22,419        500          230            --      23,149   
 Equipment leased to                                                                   
  others................     6,026         --           14            --       6,040   
                           -------    -------       ------      --------     -------   
                           $35,166    $   518       $  535      $     --     $36,219   
 Less: Accumulated                                                                     
  depreciation..........    10,860        305          181            --      11,346   
                           -------    -------       ------      --------     -------   
 Net Plant and                                                                         
  Equipment.............   $24,306    $   213       $  354      $     --     $24,873   
                           -------    -------       ------      --------     -------   
OTHER ASSETS:                                                                          
 Goodwill, net..........   $32,037    $ 2,642       $   --      $     --     $34,679   
 Intangible assets,                                                                    
  net...................       330         47           --            --         377   
 Deferred charges, net..    11,271        924           18            --      12,213   
 Investment in wholly-                                                                 
  owned subsidiaries....    13,829         --           --       (13,829)         --   
 Investment in                                                                         
  affiliates............       900         --           --            --         900   
 Other assets...........        78         --           --            --          78   
                           -------    -------       ------      --------     -------   
   Total Other Assets...   $58,445    $ 3,613       $   18      $(13,829)    $48,247   
                           -------    -------       ------      --------     -------   
TOTAL ASSETS............   $97,271    $10,555       $5,969      $(14,464)    $99,331   
                           =======    =======       ======      ========     =======   

    LIABILITIES AND                                                                    
  STOCKHOLDER'S EQUITY                                                                 
  --------------------                                                                 
                                                                                       
CURRENT LIABILITIES:                                                                   
 Current maturities of                                                                 
  long-term debt........   $ 6,606    $    41       $   --      $     --     $ 6,647   
 Accounts payable.......     2,610        466          718          (139)      3,655   
 Accrued liabilities....     7,250        588          709            --       8,547   
 Accrued income taxes...       (30)        --           30            --          --   
 Advance account........       255        449         (704)           --          --   
                           -------    -------       ------      --------     -------   
   Total Current                                                                       
    Liabilities.........   $16,691    $ 1,544       $  753      $   (139)    $18,849   
                           -------    -------       ------      --------     -------   
NON-CURRENT LIABILITIES:                                                               
 Long-term debt, less                                                                  
  current maturities....   $34,504    $    44       $   --      $     --     $34,548   
 Other non-current                                                                     
  liabilities...........    11,050         --           --            --      11,050   
 Deferred income taxes..     2,766         --           --            --       2,766   
                           -------    -------       ------      --------     -------   
   Total Non-Current                                                                   
    Liabilities.........   $48,320    $    44       $   --      $     --     $48,364   
                           -------    -------       ------      --------     -------   
STOCKHOLDER'S EQUITY                                                                   
 (DEFICIT):                                                                            
 Common stock and                                                                      
  additional paid-in                                                                   
  capital...............   $16,723    $ 5,098       $2,000      $ (7,098)    $16,723   
 Retained earnings......    15,861      3,869        2,892        (7,227)     15,395   
 Accumulated other                                                                     
  comprehensive income..      (324)        --          324            --          --   
                           -------    -------       ------      --------     -------   
   Total Stockholder's                                                                 
    Equity (Deficit)....   $32,260    $ 8,967       $5,216      $(14,325)    $32,118   
                           -------    -------       ------      --------     -------   
TOTAL LIABILITIES AND                                                                  
 STOCKHOLDER'S EQUITY                                                                  
 (DEFICIT)..............   $97,271    $10,555       $5,969      $(14,464)    $99,331   
                           =======    =======       ======      ========     =======   

F-26

S-4/A
146th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 146th
AXIA INCORPORATED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995

CONSOLIDATING STATEMENT OF INCOME 

FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                          PARENT                    NON-                              
                          AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
                         DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
                         --------- ------------ ------------ ------------ ------------
                                                                                      
Net sales...............  $61,031    $12,995      $12,523      $ (6,778)    $ 79,771  
Net rentals.............   13,768     24,037          957       (13,746)      25,016  
                          -------    -------      -------      --------     --------  
Net revenues............  $74,799    $37,032      $13,480      $(20,524)    $104,787  
  Cost of sales.........  $43,560    $ 7,860      $ 7,729      $ (6,715)    $ 52,434  
  Cost of rentals.......    2,589     19,404          613       (13,746)       8,860  
  Selling, general and                                                                
   administrative                                                                     
   expenses.............   14,602      7,018        3,526            --       25,146  
                          -------    -------      -------      --------     --------  
Income from operations..  $14,048    $ 2,750      $ 1,612      $    (63)    $ 18,347  
  Interest expense......    5,100          9           14            --        5,123  
  Intercompany interest                                                               
   expense (income).....      (80)        80           --            --           --  
  Other expense                                                                       
   (income), net........   (2,598)        41          224         2,351           18  
                          -------    -------      -------      --------     --------  
Income before income                                                                  
 taxes..................  $11,626    $ 2,620      $ 1,374      $ (2,414)    $ 13,206  
  Provision for income                                                                
   taxes................    3,955      1,210          565            --        5,730  
                          -------    -------      -------      --------     --------  
Income before                                                                         
 extraordinary item.....  $ 7,671    $ 1,410      $   809      $ (2,414)    $  7,476  
                          =======    =======      =======      ========     ========  

F-27

S-4/A
147th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 147th
AXIA INCORPORATED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995

CONSOLIDATING STATEMENT OF CASH FLOWS 

FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                          PARENT                    NON-                              
                          AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
                         DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
                         --------- ------------ ------------ ------------ ------------
                                                                                      
CASH FLOWS FROM                                                                       
 OPERATING ACTIVITIES..   $14,036     $1,034       $ 342         $--        $15,412   
CASH FLOW FROM                                                                        
 INVESTING ACTIVITIES:                                                                
  Cash used for capital                                                               
   expenditures........    (3,675)      (103)        (84)         --         (3,862)  
  Proceeds from sale of                                                               
   fixed assets........        55         --          --          --             55   
                          -------     ------       -----         ---        -------   
    Net Cash Used In                                                                  
     Investing                                                                        
     Activities........   $(3,620)    $ (103)      $ (84)        $--        $(3,807)  
CASH FLOWS FROM                                                                       
 FINANCING ACTIVITIES:                                                                
  Net decrease in                                                                     
   Revolving Credit                                                                   
   Loan................        --         --          --          --             --   
  Proceeds from other                                                                 
   long-term debt......    25,375         36          --          --         25,411   
  Payments of other                                                                   
   long-term debt......   (34,532)       (34)         --          --        (34,566)  
  Dividends received                                                                  
   from (paid by)                                                                     
   subsidiaries........       191         --        (191)         --             --   
  Payments of deferred                                                                
   financing costs.....      (426)        --          --          --           (426)  
  Net increase                                                                        
   (decrease) in                                                                      
   advance account.....       673       (680)          7          --             --   
  Other equity                                                                        
   transactions........      (300)        --          (1)         --           (301)  
                          -------     ------       -----         ---        -------   
    Net Cash Used In                                                                  
     Financing                                                                        
     Activities........   $(9,019)    $ (678)      $(185)        $--        $(9,882)  
EFFECT OF EXCHANGE RATE                                                               
 CHANGES ON CASH.......        --         --         (52)         --            (52)  
                          -------     ------       -----         ---        -------   
NET (DECREASE) INCREASE                                                               
 IN CASH AND CASH                                                                     
 EQUIVALENTS...........   $ 1,397     $  253       $  21         $--        $ 1,671   
CASH AND CASH                                                                         
 EQUIVALENTS AT                                                                       
 BEGINNING OF YEAR.....      (990)       254         781          --             45   
                          -------     ------       -----         ---        -------   
CASH AND CASH                                                                         
 EQUIVALENTS AT END OF                                                                
 YEAR..................   $   407     $  507       $ 802         $--        $ 1,716   
                          =======     ======       =====         ===        =======   

F-28

S-4/A
148th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 148th
AXIA INCORPORATED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995

CONSOLIDATING STATEMENT OF INCOME 

FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                          PARENT                    NON-                              
                          AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
                         DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
                         --------- ------------ ------------ ------------ ------------
                                                                                      
Net sales...............  $62,211    $11,840      $13,736      $ (5,873)    $ 81,914  
Net rentals.............   12,179     21,394          977       (12,138)      22,412  
                          -------    -------      -------      --------     --------  
Net revenues............  $74,390    $33,234      $14,713      $(18,011)    $104,326  
  Cost of sales.........  $45,780    $ 6,985      $ 8,395      $ (5,989)    $ 55,171  
  Cost of rentals.......    3,488     17,843          465       (12,138)       9,658  
  Selling, general and                                                                
   administrative                                                                     
   expenses.............   14,410      6,052        3,719            --       24,181  
                          -------    -------      -------      --------     --------  
Income from operations..  $10,712    $ 2,354      $ 2,134      $    116     $ 15,316  
  Interest expense......    6,556          9           31            --        6,596  
  Intercompany interest                                                               
   expense (income).....     (145)       145           --            --           --  
  Other expense                                                                       
   (income), net........   (2,149)       182          394         2,066          493  
                          -------    -------      -------      --------     --------  
Income before income                                                                  
 taxes..................  $ 6,450    $ 2,018      $ 1,709      $ (1,950)    $  8,227  
  Provision for income                                                                
   taxes................    1,677        975          686            --        3,338  
                          -------    -------      -------      --------     --------  
Net income..............  $ 4,773    $ 1,043      $ 1,023      $ (1,950)    $  4,889  
                          =======    =======      =======      ========     ========  

F-29

S-4/A
149th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 149th
AXIA INCORPORATED AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995

CONSOLIDATING STATEMENT OF CASH FLOWS 

FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                           PARENT                    NON-                              
                           AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
                          DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
                          --------- ------------ ------------ ------------ ------------
                                                                                       
CASH FLOWS FROM                                                                        
 OPERATING ACTIVITIES...   $ 7,741     $  546      $ 1,664        $--        $ 9,951   
CASH FLOW FROM INVESTING                                                               
 ACTIVITIES:                                                                           
  Cash used for capital                                                                
   expenditures.........    (3,560)      (234)         (59)        --         (3,853)  
  Proceeds from sale of                                                                
   fixed assets.........       243         38           --         --            281   
                           -------     ------      -------        ---        -------   
  Net Cash Used In                                                                     
   Investing Activities.   $(3,317)    $ (196)     $   (59)       $--        $(3,572)  
CASH FLOWS FROM                                                                        
 FINANCING ACTIVITIES:                                                                 
  Net decrease in                                                                      
   Revolving Credit                                                                    
   Loan.................        --         --           --         --             --   
  Proceeds from other                                                                  
   long-term debt.......       213         83           --         --            296   
  Payments of other                                                                    
   long-term debt.......    (7,374)        --           --         --         (7,374)  
  Dividends received                                                                   
   from (paid by)                                                                      
   subsidiaries.........     4,195     (3,171)      (1,024)        --             --   
  Net increase                                                                         
   (decrease) in advance                                                               
   account..............    (2,316)     2,488         (172)        --             --   
  Other equity                                                                         
   transactions.........      (201)        23           12         --           (166)  
                           -------     ------      -------        ---        -------   
  Net Cash Used In                                                                     
   Financing Activities.   $(5,483)    $ (577)     $(1,184)       $--        $(7,244)  
EFFECT OF EXCHANGE RATE                                                                
 CHANGES ON CASH........        --         --           38         --             38   
                           -------     ------      -------        ---        -------   
NET (DECREASE) INCREASE                                                                
 IN CASH AND CASH                                                                      
 EQUIVALENTS............   $(1,059)    $ (227)     $   459        $--        $  (827)  
CASH AND CASH                                                                          
 EQUIVALENTS AT                                                                        
 BEGINNING OF YEAR......        69        481          322         --            872   
                           -------     ------      -------        ---        -------   
CASH AND CASH                                                                          
 EQUIVALENTS AT END OF                                                                 
 YEAR...................   $  (990)    $  254      $   781        $--        $    45   
                           =======     ======      =======        ===        =======   

F-30

S-4/A
150th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 150th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

DECEMBER 31, 1997, 1996 AND 1995  

NOTE 18--SUBSEQUENT EVENTS                                                      

On June 17, 1998, Holdings entered into an Agreement and Plan of Merger with
AXIA Acquisition Corp. ("Acquisition Co."), a newly formed company and a        
wholly owned subsidiary of AXIA Group, Inc. ("AXIA Group"), to be acquired for  
a purchase price of $155,250,000, plus adjustments, including the repayment of  
indebtedness. Pursuant to the Merger Agreement, Holdings and the Company will   
become direct and indirect subsidiaries of AXIA Group. These transactions were  
consummated on July 22, 1998.                                                   

In 1998, the Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS No. 130"), "Reporting Comprehensive Income," which requires          
companies to report all changes in equity during a period, except those         
resulting from investment by owners and distribution to owners, in a financial  
statement for the period in which they are recognized. The Company has chosen   
to disclose Comprehensive Income, which encompasses net income, minimum         
pension liability and foreign currency translation adjustments, in the          
Consolidated Statements of Stockholder's Equity. Prior periods have been        
restated to conform with SFAS No. 130 requirements.                             

F-31  

S-4/A
151st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 151st
AXIA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

AS OF JUNE 30, 1998 AND DECEMBER 31, 1997 
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                                [Download Table]

                                                         JUNE 30,   DECEMBER 31,
                                                           1998         1997    
                                                        ----------  ------------
                        ASSETS                          (UNAUDITED)             
                                                                                
CURRENT ASSETS:                                                                 
  Cash and cash equivalents...........................   $   490      $ 1,310   
  Accounts receivable, net............................    14,643       12,759   
  Inventories, net....................................     9,714        9,155   
  Prepaid income taxes and other current assets.......       503          436   
  Deferred income tax benefits........................     2,847        2,593   
                                                         -------      -------   
   Total Current Assets...............................   $28,197      $26,253   
                                                         -------      -------   
PLANT AND EQUIPMENT, AT COST:                                                   
  Land................................................   $   508      $   508   
  Buildings and improvements..........................     6,674        6,620   
  Machinery and equipment.............................    26,316       24,741   
  Equipment leased to others..........................     8,221        7,139   
                                                         -------      -------   
                                                         $41,719      $39,008   
  Less: Accumulated depreciation......................    16,554       14,938   
                                                         -------      -------   
   Net Plant and Equipment............................   $25,165      $24,070   
                                                         -------      -------   
OTHER ASSETS:                                                                   
  Goodwill, net.......................................   $33,055      $33,505   
  Intangible assets, net..............................       841          703   
  Deferred charges, net...............................    12,348       12,182   
  Other assets........................................        37           60   
                                                         -------      -------   
   Total Other Assets.................................   $46,281      $46,450   
                                                         -------      -------   
TOTAL ASSETS..........................................   $99,643      $96,773   
                                                         =======      =======   
         LIABILITIES AND STOCKHOLDER'S EQUITY                                   
CURRENT LIABILITIES:                                                            
  Current maturities of long-term debt................   $13,757      $10,925   
  Accounts payable....................................     4,653        4,021   
  Accrued liabilities.................................     6,679        7,219   
  Accrued income taxes................................     1,871          264   
                                                         -------      -------   
   Total Current Liabilities..........................   $26,960      $22,429   
                                                         -------      -------   
NON-CURRENT LIABILITIES:                                                        
  Long-term debt, less current maturities.............   $12,867      $20,439   
  Other non-current liabilities.......................    11,006       10,883   
  Deferred income taxes...............................     3,104        2,955   
                                                         -------      -------   
   Total Non-Current Liabilities......................   $26,977      $34,277   
                                                         -------      -------   
STOCKHOLDER'S EQUITY:                                                           
  Common stock ($.01 par value; 100 shares authorized,                          
   issued and outstanding)............................   $    --      $    --   
  Additional paid-in capital..........................    16,723       16,723   
  Retained earnings...................................    29,508       23,818   
  Accumulated other comprehensive income..............      (525)        (474)  
                                                         -------      -------   
   Total Stockholder's Equity.........................   $45,706      $40,067   
                                                         -------      -------   
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............   $99,643      $96,773   
                                                         =======      =======   

The accompanying Notes to the Unaudited Interim Consolidated Financial
Statements are an integral part of these balance sheets.  

F-32

S-4/A
152nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 152nd
AXIA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME 

FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS)

                                                                [Download Table]

                                                JANUARY 1, 1998 JANUARY 1, 1997
                                                    TO JUNE         TO JUNE    
                                                   30, 1998        30, 1997    
                                                --------------- ---------------
                                                  (UNAUDITED)     (UNAUDITED)  
                                                                               
Net sales......................................     $41,725         $38,476    
Net rentals....................................      14,475          13,232    
                                                    -------         -------    
NET REVENUES...................................      56,200         $51,708    
  Cost of sales................................      26,259          24,685    
  Cost of rentals..............................       5,146           4,696    
  Selling, general and administrative expenses.      13,294          12,843    
                                                    -------         -------    
INCOME FROM OPERATIONS.........................     $11,501         $ 9,484    
  Interest expense.............................       1,393           2,029    
  Interest income..............................          (7)            (14)   
  Other expense (income), net..................         171            (395)   
                                                    -------         -------    
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY                                   
 ITEM..........................................     $ 9,944         $ 7,864    
  Provision for income taxes...................       3,954           3,375    
                                                    -------         -------    
INCOME BEFORE EXTRAORDINARY ITEM...............     $ 5,990         $ 4,489    
                                                    =======         =======    
Extraordinary item.............................         300             772    
                                                    -------         -------    
Net Income.....................................     $ 5,690         $ 3,717    
                                                    =======         =======    

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

F-33

S-4/A
153rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 153rd
AXIA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY 

FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                           OTHER COMPREHENSIVE INCOME                   
                                                       -----------------------------------              
                                                                              ACCUMULATED               
                          COMMON   ADDITIONAL           MINIMUM  CUMULATIVE      OTHER                  
                           STOCK    PAID-IN   RETAINED  PENSION  TRANSLATION COMPREHENSIVE COMPREHENSIVE
                         PAR VALUE  CAPITAL   EARNINGS LIABILITY ADJUSTMENTS    INCOME        INCOME    
                         --------- ---------- -------- --------- ----------- ------------- -------------
                                                                                                        
BALANCE,                                                                                                
 DECEMBER 31, 1996......   $  --    $16,723   $15,395    $(324)     $ 324        $  --        $   --    
 Net income.............      --         --     3,717       --         --           --         3,717    
 Cumulative translation                                                                                 
  adjustment............      --         --        --       --       (472)        (472)         (472)   
                           -----    -------   -------    -----      -----        -----        ------    
BALANCE,                                                                                                
 JUNE 30, 1997                                                                                          
 (unaudited)............   $  --    $16,723   $19,112    $(324)     $(148)       $(472)       $3,245    
                           =====    =======   =======    =====      =====        =====        ======    
BALANCE,                                                                                                
 DECEMBER 31, 1997......   $  --    $16,723   $23,818    $(182)     $(292)       $(474)       $   --    
 Net income.............      --         --     5,690       --         --           --         5,690    
 Cumulative translation                                                                                 
  adjustment............      --         --        --       --        (51)         (51)          (51)   
                           -----    -------   -------    -----      -----        -----        ------    
BALANCE,                                                                                                
 JUNE 30, 1998                                                                                          
 (unaudited)............   $  --    $16,723   $29,508    $(182)     $(343)       $(525)       $5,639    
                           =====    =======   =======    =====      =====        =====        ======    

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

F-34

S-4/A
154th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 154th
AXIA INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS)

                                                                [Download Table]

                                                 JANUARY 1, 1998 JANUARY 1, 1997
                                                       TO              TO       
                                                  JUNE 30, 1998   JUNE 30, 1997 
                                                 --------------- ---------------
                                                   (UNAUDITED)     (UNAUDITED)  
                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES:                                           
  Net income...................................      $ 5,690        $  3,717    
Adjustments to reconcile net income to net cash                                 
 provided by (used in) operating activities:                                    
  Depreciation and amortization................        2,523           2,486    
  Extraordinary item--writeoff of capitalized                                   
   financing costs.............................          361             826    
  Deferred income tax provision (benefit)......         (105)             36    
  Loss (gain) on disposal of fixed assets......           54              79    
  Gain on sale of investment...................           --            (500)   
  Provision for losses on accounts receivable..          898           1,187    
  Provision for obsolescence of inventories....         (176)            (85)   
  Credit to pension expense....................         (169)             20    
  Changes in assets and liabilities:                                            
   Accounts receivable.........................       (2,789)         (2,499)   
   Inventories.................................         (385)           (128)   
   Accounts payable............................          634             330    
   Accrued liabilities.........................         (540)         (1,789)   
   Other current assets........................          (67)            (96)   
   Income taxes payable........................        1,608            (690)   
   Other non-current assets....................         (353)           (279)   
   Other non-current liabilities...............           86             423    
                                                     -------        --------    
     Net Cash Provided by Operating Activities.      $ 7,270        $  3,038    

CASH FLOWS FROM INVESTING ACTIVITIES:                                           
  Cash used for capital expenditures...........      $(3,011)       $ (1,699)   
  Proceeds from sale of fixed assets...........           --               8    
  Proceeds from sale of investment.............           --           1,400    
                                                     -------        --------    
     Net Cash Provided by (Used in) Investing                                   
      Activities...............................      $(3,011)       $   (291)   

CASH FLOWS FROM FINANCING ACTIVITIES:                                           
  Net increase (decrease) in Revolving Credit                                   
   Loan........................................      $ 3,200        $  9,200    
  Payments of other long-term debt.............       (8,232)        (13,165)   
  Other equity transactions....................          (34)            (16)   
                                                     -------        --------    
     Net Cash (Used in) Financing Activities...      $(5,066)       $ (3,981)   

EFFECT OF EXCHANGE RATE CHANGES ON CASH........      $   (13)       $    (56)   

NET INCREASE (DECREASE) IN CASH AND CASH                                        
 EQUIVALENTS...................................      $  (820)       $ (1,290)   

CASH AND CASH EQUIVALENTS AT BEGINNING OF                                       
 PERIOD........................................        1,310           1,716    
                                                     -------        --------    
CASH AND CASH EQUIVALENTS AT END OF PERIOD.....      $   490        $    426    
                                                     =======        ========    

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

F-35

S-4/A
155th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 155th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED 
FINANCIAL STATEMENTS  

JUNE 30, 1998 

NOTE 1--FINANCIAL STATEMENTS                                                    

The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the            
Securities and Exchange Commission. Certain information and footnote            
disclosures normally included in financial statements prepared in accordance    
with generally accepted accounting principles have been condensed or omitted    
pursuant to such rules and regulations, although the Company believes that the  
disclosures are adequate to make the information presented not misleading.      
These financial statements should be read in conjunction with the financial     
statements and notes thereto included elsewhere herein for the year ended       
December 31, 1997. In the opinion of management, these statements contain all   
adjustments, consisting of only normal recurring adjustments, necessary to      
present fairly the financial position as of June 30, 1998 and December 31,      
1997, results of operations for the six month periods ended June 30, 1998 and   
June 30, 1997, and cash flows for the six month periods ended June 30, 1998     
and June 30, 1997. The 1998 interim results reported herein may not             
necessarily be indicative of the results of operations for the full year 1998.  

In 1998, the Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), "Reporting Comprehensive Income," which requires companies    
to report all changes in equity during a period, except those resulting from    
investment by owners and distribution to owners, in a financial statement for   
the period in which they are recognized. The Company has chosen to disclose     
Comprehensive Income, which encompasses net income, minimum pension liability   
and foreign currency translation adjustments, in the Consolidated Statements    
of Stockholder's Equity. The prior period has been restated to conform with     
SFAS 130 requirements.                                                          

NOTE 2--INVENTORIES                                                             

Inventories are stated at the lower of first-in, first-out (FIFO) cost or   
market. The cost elements included in inventories are material, labor and       
factory overhead.                                                               

Inventories consist of the following (in thousands):                        

                                                                [Download Table]

                                                     JUNE 30, DECEMBER 31,
                                                       1998       1997    
                                                     -------- ------------
                                                                          
Raw materials.......................................  $4,094     $4,146   
Work in process.....................................   1,147      1,058   
Finished goods......................................   4,473      3,951   
                                                      ------     ------   
Total inventories...................................  $9,714     $9,155   
                                                      ======     ======   

F-36  

S-4/A
156th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 156th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED 
FINANCIAL STATEMENTS--(CONTINUED) 

JUNE 30, 1998 

NOTE 3--LONG-TERM DEBT                                                          

Long-term debt, inclusive of capital lease obligations which are not        
material, consists of the following (in thousands):                             

                                                                [Download Table]

                                                    JUNE 30,  DECEMBER 31,
                                                      1998        1997    
                                                    --------  ------------
                                                                          
11.00% Senior Subordinated Notes................... $ 4,791     $ 9,749   
Term Loan..........................................  12,934      15,732   
Revolving Credit Loan..............................   7,700       4,500   
Other..............................................   1,199       1,383   
                                                    -------     -------   
  Total Debt....................................... $26,624     $31,364   
Less Current Maturities............................ (13,757)    (10,925)  
                                                    -------     -------   
    Total Long-Term Debt........................... $12,867     $20,439   
                                                    =======     =======   

The Senior Subordinated Notes above are stated net of unamortized discounts 
of $209,000 and $501,000 at June 30, 1998, and December 31, 1997,               
respectively.                                                                   

Current maturities of long-term debt as of June 30, 1998 consisted of the   
following (in thousands):                                                       

                                                                [Download Table]

                                               SCHEDULED PAYMENT         
                                                      DATE        AMOUNT 
                                               ------------------ -------
                                                                         
Term Loan.....................................      June 30, 1998 $ 1,294
Term Loan..................................... September 30, 1998   1,294
Term Loan.....................................  December 31, 1998   1,294
Term Loan.....................................     March 31, 1999   1,294
Revolving Credit Loan.........................                      7,700
Other.........................................            Various     881
                                                                  -------
    Total Current Maturities..................                    $13,757
                                                                  =======

Bank Credit Agreement                                                         

On June 27, 1996, the Company and its domestic subsidiaries entered into a  
credit agreement (the "Bank Credit Agreement") which included a term loan       
("Term Loan") with an original principal amount of $25,000,000 and a non-       
amortizing revolving credit loan ("Revolving Credit Loan") of up to             
$15,000,000, including up to $1,000,000 of letters of credit. The Bank Credit   
Agreement was amended in March 1997 to increase the Revolving Credit Loan       
availability to $20,000,000.                                                    

Under the Bank Credit Agreement, the loans may, at the option of the        
Company, be either Base Rate borrowings, Eurodollar borrowings or a             
combination thereof. Base Rate borrowings bear interest at the prime rate or    
the Federal Funds rate plus 1.00%, whichever is higher, and Eurodollar          
borrowings bear interest at a rate of LIBOR plus 1.50%. Upon certain events     
defined in the agreement, the Eurodollar borrowing interest rate may be         
increased to LIBOR plus 1.75%. The Company pays a fee of .38% per annum on the  
unused balance of the line of credit. The Company can repay any borrowings at   
any time without penalty. The weighted average interest rates on all amounts    
outstanding under the Bank Credit Agreement as of June 30, 1998 was 7.27%.      
Substantially all of the assets of the Company and its domestic subsidiaries,   
Ames Taping Tool Systems, Inc. and TapeTech Tool Co., Inc., act as collateral   
under the Bank Credit Agreement.                                                

F-37  

S-4/A
157th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 157th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED 
FINANCIAL STATEMENTS--(CONTINUED) 

JUNE 30, 1998 

NOTE 3--LONG-TERM DEBT--(CONTINUED)                                             

The Term Loan has scheduled maturities, subject to adjustment for any       
prepayments, of $1,294,000 quarterly, maturing with a final payment of          
$1,288,000 on December 31, 2000. The Revolving Credit Loan also terminates on   
December 31, 2000. The amount outstanding on the Revolving Credit Loan is       
classified within current maturities in the accompanying Consolidated Balance   
Sheets. Interest payments are generally due quarterly. The Company is required  
to prepay portions of the Term Loan in the event of a major asset sale as       
defined in the Bank Credit Agreement.                                           

11.00% Senior Subordinated Notes                                              

The 11.00% Senior Subordinated Notes were issued pursuant to a trust        
indenture (the "Indenture") between the Company, certain guarantors and a       
trustee bank and were sold to a group of private investors. Interest on the     
notes is payable semi-annually and the notes mature on March 15, 2001. The      
notes may be redeemed, at the Company's option, in full or in part, at a        
decreasing premium rate of 102.2% at March 15, 1998. A change of control of     
the Company, as defined, would require the Company to offer to redeem all       
notes at a 101% premium.                                                        

In July 1994, the Company filed a Registration Statement with the Securities
and Exchange Commission to register the Senior Subordinated Notes under the     
Securities Act of 1933. The Notes are guaranteed by all of the Company's        
domestic subsidiaries. See Note 5 for further information regarding these       
guarantees.                                                                     

In May 1998, the Company exercised its option to redeem and extinguish      
$5,250,000 of its Senior Subordinated Notes. The Company recorded an            
extraordinary charge for the early extinguishment of debt of $300,000, net of   
income taxes, as shown on the accompanying Consolidated Statements of Income    
for the six month period ended June 30, 1998. The charge included the           
aforementioned redemption premium, the writeoff of capitalized financing costs  
associated with the original issuance of the notes, the applicable original     
issue discount, and legal expenses, agent fees, and other costs of the          
transaction.                                                                    

Restrictive Loan Covenants                                                    

The Bank Credit Agreement and the Indenture contain certain covenants which,
among other things and all as defined in the applicable agreement, require the  
Company to maintain a minimum net worth, current ratio, interest coverage       
ratio, and fixed charge coverage ratio, and maximum leverage ratio of           
indebtedness to net worth. In addition, the Company may not create or incur     
certain types of additional debt or liens, declare dividends except as          
defined, or make capital expenditures or other restricted payments, as          
defined, during the term of the agreements in excess of varying amounts, as     
defined. The Company was in compliance with its loan covenants as of June 30,   
1998.                                                                           

NOTE 4--STOCKHOLDER'S EQUITY                                                    

The Company has 100 shares of common stock, par value $.01 per share,       
authorized, issued and outstanding, all of which are owned by Holdings.         

F-38  

S-4/A
158th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 158th
AXIA INCORPORATED AND SUBSIDIARIES  

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED 
FINANCIAL STATEMENTS--(CONTINUED) 

JUNE 30, 1998 

NOTE 5--SUBSIDIARY GUARANTEES                                                   

The Company's payment obligations under the Subordinated Notes are fully and
unconditionally guaranteed on a joint and several basis (collectively, the      
"Subsidiary Guarantees") by Ames Taping Tool Systems, Inc., and TapeTech Tool   
Co., Inc., each a wholly-owned subsidiary of the Company and each a             
"Guarantor." These subsidiaries, together with the operating divisions of the   
Company, represent all of the operations of the Company conducted in the        
United States. The remaining subsidiaries of the Company are foreign            
subsidiaries.                                                                   

The Company's payment obligations under the Bank Credit Agreement are fully 
and unconditionally guaranteed on a joint and several basis by the Company and  
each Guarantor. The obligations of each Guarantor under its Subsidiary          
Guarantee are subordinated to all senior indebtedness of such Guarantor,        
including the guarantee by such Guarantor of the Company's borrowings under     
the Bank Credit Agreement.                                                      

With the intent that the Subsidiary Guarantees not constitute fraudulent    
transfers or conveyances under applicable state or federal law, the obligation  
of each Guarantor under its Subsidiary Guarantee is also limited to the         
maximum amount as will, after giving effect to such maximum amount and all      
other liabilities (contingent or otherwise) of such Guarantor that are          
relevant under such laws, and after giving effect to any rights to              
contribution of such Guarantor pursuant to any agreement providing for an       
equitable contribution amount such Guarantor and other affiliates of the        
Company of payments made by guarantees by such parties, result in the           
obligations of such Guarantor in respect of such maximum amount not             
constituting a fraudulent conveyance.                                           

The following consolidating condensed financial data illustrates the        
composition of the combined Guarantors. Management believes separate complete   
financial statements of the respective Guarantors would not provide additional  
material information which would be useful in assessing the financial           
composition of the Guarantors. No single Guarantor has any significant legal    
restrictions on the ability of investors or creditors to obtain access to its   
assets in event of default on the Subsidiary Guarantee other than its           
subordination to senior indebtedness described above.                           

Investments in subsidiaries are accounted for by the parent on the equity   
method for purposes of the supplemental consolidating presentation. Earnings    
of subsidiaries are therefore reflected in the parent's investment accounts     
and earnings. The principal elimination entries eliminate investments in        
subsidiaries and intercompany balances and transactions.                        

F-39  

S-4/A
159th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 159th
CONSOLIDATING BALANCE SHEET 

AS OF JUNE 30, 1998 
(DOLLARS IN THOUSANDS)
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                           PARENT                     NON-                              
                           AND ITS    GUARANTOR    GUARANTOR                CONSOLIDATED
         ASSETS           DIVISIONS  SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
         ------           ---------  ------------ ------------ ------------ ------------
                                                                                        
CURRENT ASSETS:                                                                         
  Cash and cash                                                                         
   equivalents..........  $   (619)    $   728       $  381      $     --     $   490   
  Accounts receivable,                                                                  
   net..................     7,260       5,539        3,161        (1,317)     14,643   
  Inventories, net......     6,173       1,943        2,057          (459)      9,714   
  Prepaid income taxes                                                                  
   and other current                                                                    
   assets...............       243         132          128            --         503   
  Deferred income tax                                                                   
   benefits.............     2,847          --           --            --       2,847   
                          --------     -------       ------      --------     -------   
   Total Current Assets.  $ 15,904     $ 8,342       $5,727      $ (1,776)    $28,197   
PLANT AND EQUIPMENT, AT                                                                 
 COST:                                                                                  
  Land..................  $    508     $    --       $   --      $     --     $   508   
  Buildings and                                                                         
   improvements.........     6,342          20          312            --       6,674   
  Machinery and                                                                         
   equipment............    25,163         685          468            --      26,316   
  Equipment leased to                                                                   
   others...............     8,210          --           11            --       8,221   
                          --------     -------       ------      --------     -------   
                          $ 40,223     $   705       $  791      $     --     $41,719   
  Less: Accumulated                                                                     
   depreciation.........    15,554         445          555            --      16,554   
                          --------     -------       ------      --------     -------   
   Net Plant and                                                                        
    Equipment...........  $ 24,669     $   260       $  236      $     --     $25,165   
                          --------     -------       ------      --------     -------   
OTHER ASSETS:                                                                           
  Goodwill, net.........  $ 30,508     $ 2,535       $   12      $     --     $33,055   
  Intangible assets,                                                                    
   net..................       827          14           --            --         841   
  Deferred charges, net.    11,310       1,037            1            --      12,348   
  Investment in wholly-                                                                 
   owned subsidiaries...    16,925          --           --       (16,925)         --   
  Other assets..........        37          --           --            --          37   
                          --------     -------       ------      --------     -------   
   Total Other Assets...  $ 59,607     $ 3,586       $   13      $(16,925)    $46,281   
                          --------     -------       ------      --------     -------   
TOTAL ASSETS............  $100,180     $12,188       $5,976      $(18,701)    $99,643   
                          ========     =======       ======      ========     =======   

     LIABILITIES AND                                                                    
  STOCKHOLDER'S EQUITY                                                                  
  --------------------                                                                  
                                                                                        
CURRENT LIABILITIES:                                                                    
  Current maturities of                                                                 
   long-term debt.......  $ 13,728     $    29       $   --      $     --     $13,757   
  Accounts payable......     3,362         768        1,840        (1,317)      4,653   
  Accrued liabilities...     5,414         766          667          (168)      6,679   
  Accrued income taxes..     1,733          --          138            --       1,871   
  Advance account.......     2,487      (1,627)        (860)           --          --   
                          --------     -------       ------      --------     -------   
   Total Current                                                                        
    Liabilities.........  $ 26,724     $   (64)      $1,785      $ (1,485)    $26,960   
                          --------     -------       ------      --------     -------   
NON-CURRENT LIABILITIES:                                                                
  Long-term debt, less                                                                  
   current maturities...  $ 12,839     $    28       $   --      $     --     $12,867   
  Other non-current                                                                     
   liabilities..........    11,006          --           --            --      11,006   
  Deferred income taxes.     3,104          --           --            --       3,104   
                          --------     -------       ------      --------     -------   
   Total Non-Current                                                                    
    Liabilities.........  $ 26,949     $    28       $   --      $     --     $26,977   
                          --------     -------       ------      --------     -------   
STOCKHOLDER'S EQUITY:                                                                   
  Common stock and                                                                      
   additional paid-in                                                                   
   capital..............  $ 16,723     $ 5,098       $1,770      $ (6,868)    $16,723   
  Retained earnings.....    29,966       7,126        2,764       (10,348)     29,508   
  Accumulated other                                                                     
   comprehensive income.      (182)         --         (343)           --        (525)  
                          --------     -------       ------      --------     -------   
   Total Stockholder's                                                                  
    Equity..............  $ 46,507     $12,224       $4,191      $(17,216)    $45,706   
                          --------     -------       ------      --------     -------   
TOTAL LIABILITIES AND                                                                   
 STOCKHOLDER'S EQUITY...  $100,180     $12,188       $5,976      $(18,701)    $99,643   
                          ========     =======       ======      ========     =======   

F-40

S-4/A
160th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 160th
CONSOLIDATING STATEMENT OF INCOME 

FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                           PARENT                     NON-                              
                           AND ITS    GUARANTOR    GUARANTOR                CONSOLIDATED
                          DIVISIONS  SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
                          ---------  ------------ ------------ ------------ ------------
                                                                                        
Net sales...............  $ 31,576     $ 8,433       $5,561      $ (3,845)    $41,725   
Net rentals.............     7,963      14,013          458        (7,959)     14,475   
                          --------     -------       ------      --------     -------   
Net revenues............  $ 39,539     $22,446       $6,019      $(11,804)    $56,200   
  Cost of sales.........  $ 21,348     $ 4,999       $3,747      $ (3,835)    $26,259   
  Cost of rentals.......     1,636      11,188          281        (7,959)      5,146   
  Selling, general and                                                                  
   administrative                                                                       
   expenses.............     7,503       4,327        1,464            --     $13,294   
                          --------     -------       ------      --------     -------   
Income from operations..  $  9,052     $ 1,932       $  527      $    (10)    $11,501   
  Interest expense......  $  1,386     $     4       $    3      $     --     $ 1,393   
  Intercompany interest                                                                 
   expense (income).....        48         (48)          --            --          --   
  Other expense                                                                         
   (income), net........    (1,421)         26          172         1,387         164   
                          --------     -------       ------      --------     -------   
Income before income                                                                    
 taxes and extraordinary                                                                
 item...................  $  9,039     $ 1,950       $  352      $ (1,397)    $ 9,944   
  Provision for income                                                                  
   taxes................     3,039         752          163            --       3,954   
                          --------     -------       ------      --------     -------   
Income before                                                                           
 extraordinary item.....  $  6,000     $ 1,198       $  189      $ (1,397)    $ 5,990   
                          ========     =======       ======      ========     =======   

F-41

S-4/A
161st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 161st
CONSOLIDATING STATEMENT OF CASH FLOWS 

FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                           PARENT                    NON-                              
                           AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
                          DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
                          --------- ------------ ------------ ------------ ------------
                                                                                       
CASH FLOWS FROM                                                                        
 OPERATING ACTIVITIES...   $ 5,622     $ 546       $ 1,102        $--        $ 7,270   
CASH FLOW FROM INVESTING                                                               
 ACTIVITIES:                                                                           
  Cash used for capital                                                                
   expenditures.........    (2,932)      (49)          (30)        --         (3,011)  
  Proceeds from sale of                                                                
   fixed assets.........        --        --            --         --             --   
                           -------     -----       -------        ---        -------   
    Net Cash Provided by                                                               
     (Used In) Investing                                                               
     Activities.........   $(2,932)    $ (49)      $   (30)       $--        $(3,011)  
CASH FLOWS FROM                                                                        
 FINANCING ACTIVITIES:                                                                 
  Net increase                                                                         
   (decrease) in                                                                       
   Revolving Credit                                                                    
   Loan.................   $ 3,200     $  --       $    --        $--        $ 3,200   
  Payments of other                                                                    
   long-term debt.......    (7,904)       (4)         (324)        --         (8,232)  
  Net increase                                                                         
   (decrease) in advance                                                               
   account..............       761      (690)          (71)        --             --   
  Intercompany                                                                         
   dividends............       669        --          (669)        --             --   
  Other equity                                                                         
   transactions.........        --        --           (34)        --            (34)  
                           -------     -----       -------        ---        -------   
    Net Cash Provided by                                                               
     (Used In) Financing                                                               
     Activities.........   $(3,274)    $(694)      $(1,098)       $--        $(5,066)  
EFFECT OF EXCHANGE RATE                                                                
 CHANGES ON CASH........   $    --     $  --       $   (13)       $--        $   (13)  
                           -------     -----       -------        ---        -------   
NET INCREASE (DECREASE)                                                                
 IN CASH AND CASH                                                                      
 EQUIVALENTS............      (584)     (197)          (39)        --           (820)  
CASH AND CASH                                                                          
 EQUIVALENTS AT                                                                        
 BEGINNING OF PERIOD....       (35)      925           420         --          1,310   
                           -------     -----       -------        ---        -------   
CASH AND CASH                                                                          
 EQUIVALENTS AT END OF                                                                 
 PERIOD.................   $  (619)    $ 728       $   381        $--        $   490   
                           =======     =====       =======        ===        =======   

F-42

S-4/A
162nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 162nd
CONSOLIDATING BALANCE SHEET 

AS OF DECEMBER 31, 1997 
(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                           PARENT                    NON-                              
                           AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
         ASSETS           DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
         ------           --------- ------------ ------------ ------------ ------------
                                                                                       
CURRENT ASSETS:                                                                        
 Cash and cash                                                                         
  equivalents...........   $   (88)   $   925       $  420      $     53     $ 1,310   
 Accounts receivable,                                                                  
  net...................     5,121      5,018        3,110          (490)     12,759   
 Inventories............     6,175      1,641        1,789          (450)      9,155   
 Prepaid income taxes                                                                  
  and other current                                                                    
  assets................       208        144           84            --         436   
 Deferred income tax                                                                   
  assets................     2,593         --           --            --       2,593   
                           -------    -------       ------      --------     -------   
   Total Current Assets.   $14,009    $ 7,728       $5,403      $   (887)    $26,253   
                           -------    -------       ------      --------     -------   
PLANT AND EQUIPMENT, AT                                                                
 COST:                                                                                 
 Land...................   $   508    $    --       $   --      $     --     $   508   
 Buildings and                                                                         
  improvements..........     6,293         18          309            --       6,620   
 Machinery and                                                                         
  equipment.............    23,703        571          467            --      24,741   
 Equipment leased to                                                                   
  others................     7,128         --           11            --       7,139   
                           -------    -------       ------      --------     -------   
                           $37,632    $   589       $  787      $     --     $39,008   
 Less: Accumulated                                                                     
  depreciation..........    13,994        395          549            --      14,938   
                           -------    -------       ------      --------     -------   
   Net Plant and                                                                       
    Equipment...........   $23,638    $   194       $  238      $     --     $24,070   
                           -------    -------       ------      --------     -------   
OTHER ASSETS:                                                                          
 Goodwill, net..........   $30,922    $ 2,571       $   12      $     --     $33,505   
 Intangible assets,                                                                    
  net...................       678         25           --            --         703   
 Deferred charges, net..    11,187        992            3            --      12,182   
 Investment in wholly-                                                                 
  owned subsidiaries....    16,038         --           --       (16,038)         --   
 Investment in                                                                         
  affiliates............        --         --           --            --          --   
 Other assets...........        60         --           --            --          60   
                           -------    -------       ------      --------     -------   
   Total Other Assets...   $58,885    $ 3,588       $   15      $(16,038)    $46,450   
                           -------    -------       ------      --------     -------   
TOTAL ASSETS............   $96,532    $11,510       $5,656      $(16,925)    $96,773   
                           =======    =======       ======      ========     =======   

    LIABILITIES AND                                                                    
  STOCKHOLDER'S EQUITY                                                                 
  --------------------                                                                 
                                                                                       
CURRENT LIABILITIES:                                                                   
 Current maturities of                                                                 
  long-term debt........   $10,565    $    36       $  324      $     --     $10,925   
 Accounts payable.......     3,124        410          924          (437)      4,021   
 Accrued liabilities....     5,920        950          349            --       7,219   
 Accrued income taxes...       138         --          126            --         264   
 Advance account........     1,726       (937)        (789)           --          --   
                           -------    -------       ------      --------     -------   
   Total Current                                                                       
    Liabilities.........   $21,473    $   459       $  934      $   (437)    $22,429   
                           -------    -------       ------      --------     -------   
NON-CURRENT LIABILITIES:                                                               
 Long-term debt, less                                                                  
  current maturities....   $20,414    $    25       $   --      $     --     $20,439   
 Other non-current                                                                     
  liabilities...........    10,883         --           --            --      10,883   
 Deferred income taxes..     2,955         --           --            --       2,955   
                           -------    -------       ------      --------     -------   
   Total Non-Current                                                                   
    Liabilities.........   $34,252    $    25       $   --      $     --     $34,277   
                           -------    -------       ------      --------     -------   
STOCKHOLDER'S EQUITY                                                                   
 (DEFICIT):                                                                            
 Common stock and                                                                      
  additional paid-in                                                                   
  capital...............   $16,723    $ 5,098       $1,770      $ (6,868)    $16,723   
 Retained earnings......    24,266      5,928        3,244        (9,620)     23,818   
 Accumulated other                                                                     
  comprehensive income..      (182)        --         (292)           --        (474)  
                           -------    -------       ------      --------     -------   
   Total Stockholder's                                                                 
    Equity (Deficit)....   $40,807    $11,026       $4,722      $(16,488)    $40,067   
                           -------    -------       ------      --------     -------   
TOTAL LIABILITIES AND                                                                  
 STOCKHOLDER'S EQUITY                                                                  
 (DEFICIT)..............   $96,532    $11,510       $5,656      $(16,925)    $96,773   
                           =======    =======       ======      ========     =======   

F-43

S-4/A
163rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 163rd
CONSOLIDATING STATEMENT OF INCOME 

FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                           PARENT                    NON-                              
                           AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
                          DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
                          --------- ------------ ------------ ------------ ------------
                                                                                       
Net sales...............   $28,534    $ 7,453       $5,571      $ (3,082)    $38,476   
Net rentals.............     7,283     12,747          472        (7,270)     13,232   
                           -------    -------       ------      --------     -------   
Net revenues............   $35,817    $20,200       $6,043      $(10,352)    $51,708   
  Cost of sales.........   $19,943    $ 4,475       $3,421      $ (3,154)    $24,685   
  Cost of rentals.......     1,478     10,187          301        (7,270)      4,696   
  Selling, general and                                                                 
   administrative                                                                      
   expenses.............     7,373      4,021        1,449            --      12,843   
                           -------    -------       ------      --------     -------   
Income from operations..   $ 7,023    $ 1,517       $  872      $     72     $ 9,484   
  Interest expense......   $ 2,018    $     5       $    6      $     --     $ 2,029   
  Intercompany interest                                                                
   expense (income).....       (26)        26           --            --          --   
  Other expense                                                                        
   (income), net........    (1,748)        24          102         1,213        (409)  
                           -------    -------       ------      --------     -------   
Income before income                                                                   
 taxes and extraordinary                                                               
 item...................   $ 6,779    $ 1,462       $  764      $ (1,141)    $ 7,864   
  Provision for income                                                                 
   taxes................     2,362        651          362            --       3,375   
                           -------    -------       ------      --------     -------   
Income before                                                                          
 extraordinary item.....   $ 4,417    $   811       $  402      $ (1,141)    $ 4,489   
                           =======    =======       ======      ========     =======   

F-44

S-4/A
164th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 164th
CONSOLIDATING STATEMENT OF CASH FLOWS 

FOR THE SIX MONTHS ENDED JUNE 30, 1997  
(DOLLARS IN THOUSANDS)  
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                           PARENT                    NON-                              
                           AND ITS   GUARANTOR    GUARANTOR                CONSOLIDATED
                          DIVISIONS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS    TOTALS   
                          --------- ------------ ------------ ------------ ------------
                                                                                       
CASH FLOWS FROM                                                                        
 OPERATING ACTIVITIES...   $ 2,094     $ 791        $ 153         $--        $ 3,038   
CASH FLOW FROM INVESTING                                                               
 ACTIVITIES:                                                                           
  Cash used for capital                                                                
   expenditures.........    (1,640)      (29)         (30)         --         (1,699)  
  Proceeds from sale of                                                                
   fixed assets.........         8        --           --          --              8   
  Proceeds from sale of                                                                
   investment...........     1,400        --           --          --          1,400   
                           -------     -----        -----         ---        -------   
    Net Cash Provided by                                                               
     (Used In) Investing                                                               
     Activities.........   $  (232)    $ (29)       $ (30)        $--        $  (291)  
CASH FLOWS FROM                                                                        
 FINANCING ACTIVITIES:                                                                 
  Net increase                                                                         
   (decrease) in                                                                       
   Revolving Credit                                                                    
   Loan.................   $ 9,200     $  --        $  --         $--        $ 9,200   
  Payments of other                                                                    
   long-term debt.......   (13,162)       (3)          --          --        (13,165)  
  Net increase                                                                         
   (decrease) in advance                                                               
   account..............       700      (628)         (72)         --             --   
  Intercompany                                                                         
   dividends............       477        --         (477)         --             --   
  Other equity                                                                         
   transactions.........        --        --          (16)         --            (16)  
                           -------     -----        -----         ---        -------   
    Net Cash Provided by                                                               
     (Used In) Financing                                                               
     Activities.........   $(2,785)    $(631)       $(565)        $--        $(3,981)  
EFFECT OF EXCHANGE RATE                                                                
 CHANGES ON CASH........        --        --          (56)         --            (56)  
                           -------     -----        -----         ---        -------   
NET INCREASE (DECREASE)                                                                
 IN CASH AND CASH                                                                      
 EQUIVALENTS............   $  (923)    $ 131        $(498)        $--        $(1,290)  
CASH AND CASH                                                                          
 EQUIVALENTS AT                                                                        
 BEGINNING OF PERIOD....       407       507          802          --          1,716   
                           -------     -----        -----         ---        -------   
CASH AND CASH                                                                          
 EQUIVALENTS AT END OF                                                                 
 PERIOD.................   $  (516)    $ 638        $ 304         $--        $   426   
                           =======     =====        =====         ===        =======   

NOTE 6--SUBSEQUENT EVENT                                                        

On June 17, 1998, Holdings entered into an Agreement and Plan of Merger with
AXIA Acquisition Corp. ("Acquisition Co."), a newly formed company and a        
wholly owned subsidiary of AXIA Group, Inc. ("AXIA Group"), to be acquired for  
a purchase price of $155,250,000, plus adjustments, including the repayment of  
indebtedness. Pursuant to the Merger Agreement, Holdings and the Company will   
become direct and indirect subsidiaries of AXIA Group. These transactions were  
consummated on July 22, 1998.                                                   

F-45  

S-4/A
165th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 165th
INDEPENDENT AUDITORS' REPORT  

To the Board of Directors and Stockholder                                       
AXIA Finance Corp.                                                            

We have audited the accompanying balance sheet of AXIA Finance Corp. (a     
wholly owned subsidiary of AXIA Acquisition Corp.) as of June 19, 1998. This    
balance sheet is the responsibility of the company's management. Our            
responsibility is to express an opinion on the balance sheet based on our       
audit.                                                                          

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

In our opinion, such balance sheet presents fairly, in all material         
respects, the financial position of AXIA Finance Corp. as of June 19, 1998 in   
conformity with generally accepted accounting principles.                       

DELOITTE & TOUCHE LLP                                                           

Houston, Texas                                                                  
June 23, 1998                                                                   

F-46  

S-4/A
166th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 166th
AXIA FINANCE CORP.  
(A WHOLLY OWNED SUBSIDIARY OF AXIA ACQUISITION CORP.) 

BALANCE SHEET 

JUNE 19, 1998 

                                                                [Download Table]
                                                                               
Assets--Cash............................................................ $1,000
                                                                         ======
Stockholder's Equity                                                           
  Common stock, $.01 par value; 1,000 shares authorized, issued and            
   outstanding.......................................................... $   10
  Additional paid-in capital............................................    990
                                                                         ------
Total Stockholder's Equity.............................................. $1,000
                                                                         ======

NOTE:                                                                           

AXIA Finance Corp. ("Finance"), incorporated in Delaware in June 1998, is a 
wholly owned subsidiary of AXIA Acquisition Corp. ("AXIA Acquisition"). AXIA    
Acquisition was formed to effect the merger of AXIA Acquisition with and into   
AXIA Holding Corp. (the "Company"). Concurrently with the merger, Finance will  
become a wholly owned subsidiary of the Company and all operating assets and    
related liabilities of the Company will be conveyed to and assumed by Finance.  

F-47  

S-4/A
167th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 167th
ANNEX A 

AXIA INCORPORATED 
LETTER OF TRANSMITTAL 

S-4/A
168th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 168th
LETTER OF TRANSMITTAL 

TO TENDER FOR EXCHANGE  

10 3/4% SENIOR SUBORDINATED NOTES DUE 2008  

OF  

AXIA INCORPORATED 

PURSUANT TO THE PROSPECTUS DATED OCTOBER 15, 1998       

THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON NOVEMBER 16,      
1998, UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (THE "EXPIRATION  
DATE"). TENDERS OF NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE            
EXPIRATION DATE.                                                              

THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: 

STATE STREET BANK & TRUST COMPANY 

                                                        [Enlarge/Download Table]

           By Mail:                   By Facsimile:                   By Hand:              
                                                                                            
State Street Bank & Trust Company    (617) 664-5395       State Street Bank & Trust Company 
   Corporate Trust Department                                Corporate Trust Department     
         P.O. Box 778              Confirm by Telephone:  Two International Place, 4th Floor
Boston, Massachusetts 02102-0078                           Boston, Massachusetts 02110      
    Attention: Kellie Mullen         (617) 664-5587           Attention: Kellie Mullen      

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH    
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS   
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.                              

HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES PURSUANT TO THE   
EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR ORIGINAL NOTES TO   
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.                          

This Letter of Transmittal is to be used by holders ("Holders") of 10 3/4%  
Senior Subordinated Notes due 2008 (the "Original Notes") of AXIA Incorporated  
(the "Company") if: (i) certificates representing Original Notes are to be      
physically delivered to the Exchange Agent herewith by such Holders; (ii)       
tender of Original Notes is to be made by book-entry transfer to the Exchange   
Agent's account at The Depository Trust Company ("DTC") pursuant to the         
procedures set forth under the caption "The Exchange Offer--Procedures for      
Tendering Original Notes--Book-Entry Delivery Procedures" in the Prospectus     
dated October 15, 1998 (the "Prospectus"); or (iii) tender of Original Notes    
is to be made according to the guaranteed delivery procedures set forth under   
the caption "The Exchange Offer--Procedures for Tendering Original Notes--      
Guaranteed Delivery" in the Prospectus, and, in each case, instructions are     
not being transmitted through the DTC Automated Tender Offer Program ("ATOP").  
The undersigned hereby acknowledges receipt of the Prospectus. All capitalized  
terms used herein and not defined shall have the meanings ascribed to them in   
the Prospectus.                                                                 

Holders of Original Notes that are tendering by book-entry transfer to the  
Exchange Agent's account at DTC can execute the tender through ATOP, for which  
the transaction will be eligible. DTC participants that are accepting the       
exchange offer as set forth in the Prospectus and this Letter of Transmittal    
(together, the "Exchange Offer") must transmit their acceptance to DTC which    
will edit and verify the acceptance and execute a book-entry delivery to the    
Exchange Agent's account at DTC. DTC will then send an Agent's Message to the   
Exchange Agent for its acceptance. Delivery of                                  

A-1 

S-4/A
169th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 169th
the Agent's Message by DTC will satisfy the terms of the Offer as to execution  
and delivery of a Letter of Transmittal by the participant identified in the    
Agent's Message. DTC participants may also accept the Exchange Offer by         
submitting a notice of guaranteed delivery through ATOP.                        

DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE   
AGENT.                                                                          

If a Holder desires to tender Original Notes pursuant to the Exchange Offer 
and time will not permit this Letter of Transmittal, certificates representing  
such Original Notes and all other required documents to reach the Exchange      
Agent, or the procedures for book-entry transfer cannot be completed, on or     
prior to the Expiration Date, then such Holder must tender such Original Notes  
according to the guaranteed delivery procedures set forth under the caption     
"The Exchange Offer--Procedures for Tendering Original Notes--Guaranteed        
Delivery" in the Prospectus. See Instruction 2.                                 

The undersigned should complete, execute and deliver this Letter of         
Transmittal to indicate the action the undersigned desires to take with         
respect to the Exchange Offer.                                                  

TENDER OF ORIGINAL NOTES  
------------------------------------------------------------------------------- 

[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.              

[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY   
    TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:                                               

Name of Tendering Institution:_______________________________________________ 

Account Number:______________________________________________________________ 

Transaction Code Number:_____________________________________________________ 

[_] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A   
 NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:                                               

Name(s) of Registered Holder(s):_____________________________________________ 

Window Ticket Number (if any):_______________________________________________ 

Date of Execution of Notice of Guaranteed Delivery:__________________________ 

Name of Eligible Institution that Guaranteed Delivery:_______________________ 

A-2 

S-4/A
170th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 170th
List below the Original Notes to which this Letter of Transmittal relates.  
The name(s) and address(es) of the registered Holder(s) should be printed, if   
not already printed below, exactly as they appear on the Original Notes         
tendered hereby. The Original Notes and the principal amount of Original Notes  
that the undersigned wishes to tender would be indicated in the appropriate     
boxes. If the space provided is inadequate, list the certificate number(s) and  
principal amount(s) on a separately executed schedule and affix the schedule    
to this Letter of Transmittal.                                                  

DESCRIPTION OF ORIGINAL NOTES 

                                                                [Download Table]
------------------------------------------------------

  NAME(S) AND                                         
  ADDRESS(ES)                                         
      OF                                              
  REGISTERED                                          
   HOLDER(S)                                          
    (PLEASE                                           
  FILL IN IF                   AGGREGATE              
  BLANK) SEE                   PRINCIPAL    PRINCIPAL 
  INSTRUCTION   CERTIFICATE     AMOUNT        AMOUNT  
      3.         NUMBER(S)*  REPRESENTED**  TENDERED**
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
                                                      
                TOTAL                                 
                PRINCIPAL                             
                AMOUNT OF                             
                ORIGINAL                              
                NOTES                                 
------------------------------------------------------

* Need not be completed by Holders tendering by book-entry transfer.        
** Unless otherwise specified, the entire aggregate principal amount          
represented by the Original Notes described above will be deemed to be  
tendered. See Instruction 4.                                            

A-3 

S-4/A
171st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 171st
NOTE: SIGNATURES MUST BE PROVIDED BELOW.  
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.  

Ladies and Gentlemen:                                                           

The undersigned hereby tenders to AXIA Incorporated (the "Company"), upon   
the terms and subject to the conditions set forth in its Prospectus dated       
October 15, 1998 (the "Prospectus"), receipt of which is hereby acknowledged,   
and in accordance with this Letter of Transmittal (which together constitute    
the "Exchange Offer"), the principal amount of Original Notes indicated in the  
foregoing table entitled "Description of Original Notes" under the column       
heading "Principal Amount Tendered." The undersigned represents that it is      
duly authorized to tender all of the Original Notes tendered hereby which it    
holds for the account of beneficial owners of such Original Notes ("Beneficial  
Owner(s)") and to make the representations and statements set forth herein on   
behalf of such Beneficial Owner(s).                                             

Subject to, and effective upon, the acceptance for purchase of the principal
amount of Original Notes tendered herewith in accordance with the terms and     
subject to the conditions of the Exchange Offer, the undersigned hereby sells,  
assigns and transfers to, or upon the order of, the Company, all right, title   
and interest in and to all of the Original Notes tendered hereby. The           
undersigned hereby irrevocably constitutes and appoints the Exchange Agent the  
true and lawful agent and attorney-in-fact of the undersigned (with full        
knowledge that the Exchange Agent also acts as the agent of the Company) with   
respect to such Original Notes, with full powers of substitution and            
revocation (such power of attorney being deemed to be an irrevocable power      
coupled with an interest) to (i) present such Original Notes and all evidences  
of transfer and authenticity to, or transfer ownership of, such Original Notes  
on the account books maintained by DTC to, or upon the order of, the Company,   
(ii) present such Original Notes for transfer of ownership on the books of the  
Company, and (iii) receive all benefits and otherwise exercise all rights of    
beneficial ownership of such Original Notes, all in accordance with the terms   
and conditions of the Exchange Offer as described in the Prospectus.            

By accepting the Exchange Offer, the undersigned hereby represents and      
warrants that (i) the Exchange Notes to be acquired by the undersigned and any  
Beneficial Owner(s) in connection with the Exchange Offer are being acquired    
by the undersigned and any Beneficial Owner(s) in the ordinary course of        
business of the undersigned and any Beneficial Owner(s), (ii) the undersigned   
and each Beneficial Owner are not participating, do not intend to participate,  
and have no arrangement or understanding with any person to participate, in     
the distribution of the Exchange Notes, (iii) except as indicated below,        
neither the undersigned nor any Beneficial Owner is an "affiliate," as defined  
in Rule 405 under the Securities Act of 1933, as amended (together with the     
rules and regulations promulgated thereunder, the "Securities Act"), of the     
Company and (iv) the undersigned and each Beneficial Owner acknowledge and      
agree that (x) any person participating in the Exchange Offer with the          
intention or for the purpose of distributing the Exchange Notes must comply     
with the registration and prospectus delivery requirements of the Securities    
Act in connection with a secondary resale of the Exchange Notes acquired by     
such person with a registration statement containing the selling                
securityholder information required by Item 507 of Regulation S-K of the        
Securities and Exchange Commission (the "Commission") and cannot rely on the    
interpretation of the Staff of the Commission set forth in the no-action        
letters that are noted in the section of the Prospectus entitled "The Exchange  
Offer--Registration Rights" and (y) any broker-dealer that pursuant to the      
Exchange Offer receives Exchange Notes for its own account in exchange for      
Original Notes which it acquired for its own account as a result of market-     
making activities or other trading activities must deliver a prospectus         
meeting the requirements of the Securities Act in connection with any resale    
of such Exchange Notes. If the undersigned is a broker-dealer that will         
receive Exchange Notes for its own account in exchange for Original Notes that  
were acquired as the result of market-making activities or other trading        
activities, it acknowledges that it will deliver a prospectus in connection     
with any                                                                        

A-4 

S-4/A
172nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 172nd
resale of such Exchange Notes. By so acknowledging and by delivering a          
prospectus, a broker-dealer shall not be deemed to admit that it is an          
"underwriter" within the meaning of the Securities Act.                         

The undersigned understands that tenders of Original Notes may be withdrawn 
by written notice of withdrawal received by the Exchange Agent at any time      
prior to the Expiration Date in accordance with the Prospectus. In the event    
of a termination of the Exchange Offer, the Original Notes tendered pursuant    
to the Exchange Offer will be returned to the tendering Holders promptly (or,   
in the case of Original Notes tendered by book-entry transfer, such Original    
Notes will be credited to the account maintained at DTC from which such         
Original Notes were delivered). If the Company makes a material change in the   
terms of the Exchange Offer or the information concerning the Exchange Offer    
or waives a material condition of such Exchange Offer, the Company will         
disseminate additional Exchange Offer materials and extend such Exchange        
Offer, if and to the extent required by law.                                    

The undersigned understands that the tender of Original notes pursuant to   
any of the procedures set forth in the Prospectus and in the instructions       
hereto will constitute the undersigned's acceptance of the terms and            
conditions of the Exchange Offer. The Company's acceptance for exchange of      
Original Notes tendered pursuant to any of the procedures described in the      
Prospectus will constitute a binding agreement between the undersigned and the  
Company in accordance with the terms and subject to the conditions of the       
Exchange Offer. For purposes of the Exchange Offer, the undersigned             
understands that validly tendered Original Notes (or defectively tendered       
Original Notes with respect to which the Company has, or has caused to be,      
waived such defect) will be deemed to have been accepted by the Company if, as  
and when the Company gives oral or written notice thereof to the Exchange       
Agent.                                                                          

The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Original Notes     
tendered hereby, and that when such tendered Original Notes are accepted for    
purchase by the Company, the Company will acquire good title thereto, free and  
clear of all liens, restrictions, charges and encumbrances and not subject to   
any adverse claim or right. The undersigned and each Beneficial Owner will,     
upon request, execute and deliver any additional documents deemed by the        
Exchange Agent or by the Company to be necessary or desirable to complete the   
sale, assignment and transfer of the Original Notes tendered hereby.            

All authority conferred or agreed to be conferred by this Letter of         
Transmittal shall not be affected by, and shall survive the death or            
incapacity of the undersigned and any Beneficial Owner(s), and any obligation   
of the undersigned or any Beneficial Owner(s) hereunder shall be binding upon   
the heirs, executors, administrators, trustees in bankruptcy, personal and      
legal representatives, successors and assigns of the undersigned and such       
Beneficial Owner(s).                                                            

The undersigned understands that the delivery and surrender of any Original 
Notes is not effective, and the risk of loss of the Original Notes does not     
pass to the Exchange Agent, until receipt by the Exchange Agent of this Letter  
of Transmittal, or a manually signed facsimile hereof, properly completed and   
duly executed, together with all accompanying evidences of authority and any    
other required documents in form satisfactory to the Company. All questions as  
to form of all documents and the validity (including time of receipt) and       
acceptance of tenders and withdrawals of Original Notes will be determined by   
the Company, in its sole discretion, which determination shall be full and      
binding.                                                                        

Unless otherwise indicated herein under "Special Issuance Instructions," the
undersigned hereby requests that any Original Notes representing principal      
amounts not tendered or not accepted for exchange be issued in the name(s) of   
the undersigned (and in the case of Original Notes tendered by book-entry       
transfer, by credit to the account of DTC), and Exchange Notes issued in        
exchange for Original Notes pursuant to the Exchange Offer be issued to the     
undersigned. Similarly, unless                                                  

A-5 

S-4/A
173rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 173rd
otherwise indicated herein under "Special Delivery Instructions," the           
undersigned hereby requests that any Original Notes representing principal      
amounts not tendered or not accepted for exchange and Exchange Notes issued in  
exchange for Original Notes pursuant to the Exchange Offer be delivered to the  
undersigned at the address shown below the undersigned's signature(s). In the   
event that the "Special Issuance Instructions" box or the "Special Delivery     
Instructions" box is, or both are, completed, the undersigned hereby requests   
that any Original Notes representing principal amounts not tendered or not      
accepted for purchase be issued in the name(s) of, certificates for such        
Original Notes be delivered to, and Exchange Notes issued in exchange for       
Original Notes pursuant to the Exchange Offer be issued in the name(s) of, and  
be delivered to, the person(s) at the address(es) so indicated, as applicable.  
The undersigned recognizes that the Company has no obligation pursuant to the   
"Special Issuance Instructions" box or "Special Delivery Instructions" box to   
transfer any Original Notes from the name of the registered Holder(s) thereof   
if the Company does not accept for exchange any of the principal amount of      
such Original Notes so tendered.                                                

[_] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU HOLD ORIGINAL NOTES  
IS AN AFFILIATE OF THE COMPANY.                                         

[_] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU HOLD ORIGINAL NOTES  
    TENDERED HEREBY IS A BROKER-DEALER WHO ACQUIRED SUCH NOTES DIRECTLY FROM THE
COMPANY OR AN AFFILIATE OF THE COMPANY.                                 

[_] CHECK HERE AND COMPLETE THE LINES BELOW IF YOU OR ANY BENEFICIAL OWNER FOR  
    WHOM YOU HOLD ORIGINAL NOTES TENDERED HEREBY IS A BROKER-DEALER WHO ACQUIRED
SUCH NOTES IN MARKET-MAKING OR OTHER TRADING ACTIVITIES. IF THIS BOX IS 
    CHECKED, THE COMPANY WILL SEND 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10
 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO TO YOU OR SUCH BENEFICIAL
OWNER AT THE ADDRESS SPECIFIED IN THE FOLLOWING LINES.                  

Name:    ______________________________________________________________________ 

Address: ______________________________________________________________________ 

        ______________________________________________________________________

A-6 

S-4/A
174th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 174th
SPECIAL ISSUANCE INSTRUCTIONS                                               
(SEE INSTRUCTIONS 1, 5, 6 AND 7)                                              

To be completed ONLY if Original                                          
Notes in a principal amount not                                               
tendered or not accepted for                                                  
exchange are to be issued in the                                              
name of, or Exchange Notes are to                                             
be issued in the name of, someone                                             
other than the person(s) whose                                                
signature(s) appear(s) within this                                            
Letter of Transmittal or issued to                                            
an address different from that                                                
shown in the box entitled                                                     
"Description of Original Notes"                                               
within this Letter of Transmittal.                                            

Issue:[_] Original Notes                                                      
[_] Exchange Notes                                                
(check as applicable)                                     

Name_______________________________                                           
(PLEASE PRINT)                                            
Address____________________________                                           
(PLEASE PRINT)                                            
-----------------------------------                                           
(ZIP CODE)                                            
-----------------------------------                                           
(TAX IDENTIFICATION OR SOCIAL                                           
SECURITY NUMBER)                                            
(SEE SUBSTITUTE FORM W-9 HEREIN)                                            

SPECIAL DELIVERY INSTRUCTIONS                                               
(SEE INSTRUCTIONS 1, 5, 6 AND 7)                                              

To be completed ONLY if Original                                          
Notes in a principal amount not                                               
tendered or not accepted for                                                  
exchange or Exchange Notes are to                                             
be sent to someone other than the                                             
person(s) whose signature(s)                                                  
appear(s) within this Letter of                                               
Transmittal or to an address                                                  
different from that shown in the                                              
box entitled "Description of                                                  
Original Notes" within this Letter                                            
of Transmittal.                                                               

Issue:[_] Original Notes                                                      
[_] Exchange Notes                                                
(check as applicable)                                     

Name_______________________________                                           
(PLEASE PRINT)                                            
Address____________________________                                           
(PLEASE PRINT)                                            
-----------------------------------                                           
(ZIP CODE)                                            
-----------------------------------                                           
(TAX IDENTIFICATION OR SOCIAL                                           
SECURITY NUMBER)                                            
(SEE SUBSTITUTE FORM W-9 HEREIN)                                            

A-7 

S-4/A
175th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 175th
PLEASE SIGN HERE

(TO BE COMPLETED BY ALL TENDERING HOLDERS OF ORIGINAL NOTES 
REGARDLESS OF WHETHER ORIGINAL NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH) 

This Letter of Transmittal must be signed by the registered Holder(s)         
exactly as name(s) appear(s) on certificate(s) for Original Notes or, if      
tendered by a participant in DTC exactly as such participant's name appears   
on a security position listing as owner of Original Notes, or by the          
person(s) authorized to become registered Holder(s) by endorsements and       
documents transmitted herewith. If signature is by trustees, executors,       
administrators, guardians, attorneys-in-fact, officers of corporations or     
others acting in a fiduciary or representative capacity, please set forth     
full title and see Instruction 5.                                             

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

----------------------------------------------------------------------------- 
Signature(s) of Registered Holder(s) or Authorized Signatory
(See guarantee requirement below) 

Dated: ________________________________________________________________, 1998 

Name(s):_____________________________________________________________________ 

----------------------------------------------------------------------------- 
(Please Print)

Capacity (Full Title)________________________________________________________ 

Address:_____________________________________________________________________ 

----------------------------------------------------------------------------- 
(Including Zip Code)

Area Code and Telephone Number:______________________________________________ 

Tax Identification or Social Security Number:________________________________ 
(Complete Accompanying Substitute Form W-9) 

SIGNATURE GUARANTEE 
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) 

Authorized Signature_________________________________________________________ 

Name of Firm_________________________________________________________________ 

[PLACE SEAL HERE] 

A-8 

S-4/A
176th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 176th
INSTRUCTIONS  

FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER  

1. Signature Guarantees. Signatures of this Letter of Transmittal must be   
guaranteed by a recognized member of the Medallion Signature Guarantee Program  
or by any other "eligible guarantor institution," as such term is defined in    
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an      
"Eligible Institution"), unless the Original Notes tendered hereby are          
tendered (i) by a registered Holder of Original Notes (or by a participant in   
DTC whose name appears on a security position listing as the owner of such      
Original Notes) that has not completed either the box entitled "Special         
Issuance Instructions" or the box entitled "Special Delivery Instructions" on   
this Letter of Transmittal, or (ii) for the account of an Eligible              
Institution. If the Original Notes are registered in the name of a person       
other than the signer of this Letter of Transmittal, if Original Notes not      
accepted for exchange or not tendered are to be returned to a person other      
than the registered Holder or if Exchange Notes are to be issued in the name    
of or sent to a person other than the registered Holder, then the signatures    
on this Letter of Transmittal accompanying the tendered Original Notes must be  
guaranteed by an Eligible Institution as described above. See Instruction 5.    

2. Delivery of Letter of Transmittal and Original Notes. This Letter of     
Transmittal is to be completed by Holders if (i) certificates representing      
Original Notes are to be physically delivered to the Exchange Agent herewith    
by such Holders; (ii) tender of Original Notes is to be made by book-entry      
transfer to the Exchange Agent's account at DTC pursuant to the procedures set  
forth under the caption "The Exchange Offer--Procedures for Tendering Original  
Notes--Book-Entry Delivery Procedures" in the Prospectus; or (iii) tender of    
Original Notes is to be made according to the guaranteed delivery procedures    
set forth under the caption "The Exchange Offer--Procedures for Tendering       
Original Notes--Guaranteed Delivery" in the Prospectus. All physically          
delivered Original Notes, or a confirmation of a book-entry transfer into the   
Exchange Agent's account at DTC of all Original Notes delivered                 
electronically, as well as a properly completed and duly executed Letter of     
Transmittal (or manually signed facsimile thereof), any required signature      
guarantees and any other documents required by this Letter of Transmittal,      
must be received by the Exchange Agent at one of its addresses set forth on     
the cover page hereto on or prior to the Expiration Date, or the tendering      
Holder must comply with the guaranteed delivery procedures set forth below.     
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE       
AGENT.                                                                          

If a Holder desires to tender Original Notes pursuant to the Exchange Offer 
and time will not permit this Letter of Transmittal, certificates representing  
such Original Notes and all other required documents to reach the Exchange      
Agent, or the procedures for book-entry transfer cannot be completed, on or     
prior to the Expiration Date, such Holder must tender such Original Notes       
pursuant to the guaranteed delivery procedures set forth under the caption      
"The Exchange Offer--Procedures for Tendering Original Notes--Guaranteed        
Delivery" in the Prospectus. Pursuant to such procedures, (i) such tender must  
be made by or through an Eligible Institution; (ii) a properly completed and    
duly executed Notice of Guaranteed Delivery, substantially in the form          
provided by the Company, or an Agent's Message with respect to guaranteed       
delivery that is accepted by the Company, must be received by the Exchange      
Agent, either by hand delivery, mail, telegram, or facsimile transmission, on   
or prior to the Expiration Date; and (iii) the certificates for all tendered    
Original Notes, in proper form for transfer (or confirmation of a book-entry    
transfer or all Original Notes delivered electronically into the Exchange       
Agent's account at DTC pursuant to the procedures for such transfer set forth   
in the Prospectus), together with a properly completed and duly executed        
Letter of Transmittal (or manually signed facsimile thereof) and any other      
documents required by this Letter of Transmittal, or in the case of a book-     
entry transfer, a properly transmitted Agent's Message, must be received by     
the Exchange Agent within two business days after the date of the execution of  
the Notice of Guaranteed Delivery.                                              

A-9 

S-4/A
177th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 177th
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE ORIGINAL NOTES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC AND ANY            
ACCEPTANCE OR AGENT'S MESSAGE DELIVERED THROUGH ATOP, IS AT THE ELECTION AND    
RISK OF THE TENDERING HOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS          
INSTRUCTION 2, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE  
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE     
PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND THAT THE   
MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT        
DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE.                              

No alternative, conditional or contingent tenders will be accepted. All     
tendering Holders, by execution of this Letter of Transmittal (or a facsimile   
thereof), waive any right to receive any notice of the acceptance of their      
Original Notes for exchange.                                                    

3. Inadequate Space. If the spare provided herein is inadequate, the        
certificate numbers and/or the principal amount represented by Original Notes   
should be listed on a separate signed schedule attached hereto.                 

4. Partial Tenders. (Not applicable to Holders who tender by book-entry     
transfer). If Holders wish to tender less than the entire principal amount      
evidenced by any Original Note submitted, such Holders must fill in the         
principal amount that is to be tendered in the column entitled "Principal       
Amount Tendered." The minimum permitted tender is $1,000 in principal amount    
of Original Notes. All other tenders must be in integral multiples of $1,000    
in principal amount. In the case of a partial tender of Original Notes, as      
soon as practicable after the Expiration Date, new certificates for the         
remainder of the Original Notes that were evidenced by such Holder's old        
certificates will be sent to such Holder, unless otherwise provided in the      
appropriate box on this Letter of Transmittal. The entire principal amount      
that is represented by Original Notes delivered to the Exchange Agent will be   
deemed to have been tendered, unless otherwise indicated.                       

5. Signatures on Letter of Transmittal, Instruments of Transfer and         
Endorsements. If this Letter of Transmittal is signed by the registered         
Holder(s) of the Original Notes tendered hereby, the signatures must            
correspond with the name(s) as written on the face of the certificate(s)        
without alteration, enlargement or any change whatsoever. If this Letter of     
Transmittal is signed by a participant in DTC whose name is shown as the owner  
of the Original Notes tendered hereby, the signature must correspond with the   
name shown on the security position listing as the owner of the Original        
Notes.                                                                          

If any of the Original Notes tendered hereby are registered in the name of  
two or more Holders, all such Holders must sign this Letter of Transmittal. If  
any of the Original Notes tendered hereby are registered in different names on  
several certificates, it will be necessary to complete, sign and submit as      
many separate Letters of Transmittal as there are different registrations of    
certificates.                                                                   

If this Letter of Transmittal or any Original Note or instrument of transfer
is signed by a trustee, executor, administrator, guardian, attorney-in-fact,    
agent, officer of a corporation or other person acting in a fiduciary or        
representative capacity, such person should so indicate when signing, and       
proper evidence satisfactory to the Company of such person's authority to so    
act must be submitted.                                                          

When this Letter of Transmittal is signed by the registered Holder(s) of the
Original Notes listed herein and transmitted hereby, no endorsements of         
Original Notes or separate instruments of transfer are required unless          
Exchange Notes are to be issued, or Original Notes not tendered or exchanged    
are to be issued, to a person other than the registered Holder(s), in which     
case signatures on such Original Notes or instruments of transfer must be       
guaranteed by an Eligible Institution.                                          

IF THIS LETTER OF TRANSMITTAL IS SIGNED OTHER THAN BY THE REGISTERED        
HOLDER(S) OF THE ORIGINAL NOTES LISTED HEREIN, THE ORIGINAL NOTES MUST BE       
ENDORSED OR ACCOMPANIED BY APPROPRIATE INSTRUMENTS OF TRANSFER, IN EITHER CASE  
SIGNED EXACTLY AS THE NAME(S) OF THE REGISTERED HOLDER(S)                       

A-10  

S-4/A
178th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 178th
APPEAR ON THE ORIGINAL NOTES AND SIGNATURES ON SUCH ORIGINAL NOTES OR           
INSTRUMENTS OF TRANSFER ARE REQUIRED AND MUST BE GUARANTEED BY AN ELIGIBLE      
INSTITUTION, UNLESS THE SIGNATURE IS THAT OF AN ELIGIBLE INSTITUTION.           

6. Special Issuance and Delivery Instructions. If certificates for Exchange 
Notes or unexchanged or untendered Original Notes are to be issued in the name  
of a person other than the signer of this Letter of Transmittal, or if          
Exchange Notes or such Original Notes are to be sent to someone other than the  
signer of this Letter of Transmittal or to an address other than that shown     
herein, the appropriate boxes on this Letter of Transmittal should be           
completed. All Original Notes tendered by book-entry transfer and not accepted  
for payment will be returned by crediting the account at DTC designated herein  
as the account for which such Original Notes were delivered.                    

7. Transfer Taxes. Except as set forth in this Instruction 7, the Company   
will pay or cause to be paid any transfer taxes with respect to the transfer    
and sale of Original Notes to it, or to its order, pursuant to the Exchange     
Offer. If Exchange Notes, or Original Notes not tendered or exchanged are to    
be registered in the name of any persons other than the registered owners, of   
if tendered Original Notes are registered in the name of any persons other      
than the persons signing this Letter of Transmittal, the amount of any          
transfer taxes (whether imposed on the registered Holder or such other person)  
payable on account of the transfer to such other person must be paid to the     
Company or the Exchange Agent (unless satisfactory evidence of the payment of   
such taxes or exemption therefrom is submitted) before the Exchange Notes will  
be issued.                                                                      

8. Waiver of Conditions. The conditions of the Exchange Offer may be amended
or waived by the Company, in whole or in part, at any time and from time to     
time in the Company's sole discretion, in the case of any Original Notes        
tendered.                                                                       

9. Substitute Form W-9. Each tendering owner of a Note (or other payee) is  
required to provide the Exchange Agent with a correct taxpayer identification   
number ("TIN"), generally the owner's social security or federal employer       
identification number, and with certain other information, on Substitute Form   
W-9, which is provided hereafter under "Important Tax Information," and to      
certify that the owner (or other payee) is not subject to backup withholding.   
Failure to provide the information on the Substitute Form W-9 may subject the   
tendering owner (or other payee) to a $50 penalty imposed by the Internal       
Revenue Service and 31% federal income tax withholding on the payment of the    
Purchase Price. The box in Part 3 of the Substitute Form W-9 may be checked if  
the tendering owner (or other payee) has not been issued a TIN and has applied  
for a TIN or intends to apply for a TIN in the near future. If the box in Part  
3 is checked and the Exchange Agent is not provided with a TIN by the time of   
payment, the Exchange Agent will withhold 31% on all such payments of the       
Purchase Price until a TIN is provided to the Exchange Agent.                   

10. Broker-dealers Participating in the Exchange Offer. If no broker-dealer 
checks the last box on page 7 of this Letter of Transmittal, the Company has    
no obligation under the Registration Rights Agreement to allow the use of the   
Prospectus for resales of the Exchange Notes by broker-dealers or to maintain   
the effectiveness of the Registration Statement of which the Prospectus is a    
part after the consummation of the Exchange Offer.                              

11. Requests for Assistance or Additional Copies. Any questions or requests 
for assistance or additional copies of the Prospectus, this Letter of           
Transmittal or the Notice of Guaranteed Delivery may be directed to the         
Exchange Agent at the telephone numbers and location listed above. A Holder or  
owner may also contact such Holder's or owner's broker, dealer, commercial      
bank or trust company or nominee for assistance concerning the Exchange Offer.  

IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER WITH
CERTIFICATES REPRESENTING THE ORIGINAL NOTES AND ALL OTHER REQUIRED DOCUMENTS   
OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE EXCHANGE AGENT    
ON OR PRIOR TO THE EXPIRATION DATE.                                             

A-11  

S-4/A
179th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 179th
IMPORTANT TAX INFORMATION 

Under federal income tax law, an owner of Original Notes whose tendered     
Original Notes are accepted for exchange is required to provide the Exchange    
Agent with such owner's current TIN on Substitute Form W-9 below. If such       
owner is an individual, the TIN is his or her social security number. If the    
Exchange Agent is not provided with the correct TIN, the owner or other         
recipient of Exchange Notes may be subject to a $50 penalty imposed by the      
Internal Revenue Service. In addition, any interest on Exchange Notes paid to   
such owner or other recipient may be subject to 31% backup withholding tax.     

Certain owners of Notes (including, among others, all corporations and      
certain foreign individuals) are not subject to these backup withholding and    
reporting requirements. In order for a foreign individual to qualify as an      
exempt recipient, that owner must submit to the Exchange Agent a properly       
completed Internal Revenue Service Form W-8 (a "Form W-8"), signed under        
penalties of perjury, attesting to that individual's exempt status. A Form W-8  
can be obtained from the Exchange Agent. See the enclosed "Guidelines for       
Certification of Taxpayer Identification Number on Substitute Form W-9" for     
additional instructions.                                                        

Backup withholding is not an additional tax. Rather, the federal income tax 
liability of persons subject to backup withholding will be reduced by the       
amount of tax withheld. If withholding results in an overpayment of taxes, a    
refund may be obtained from the Internal Revenue Service.                       

PURPOSE OF SUBSTITUTE FORM W-9                                                  

To prevent backup withholding, the owner is required to notify the Exchange 
Agent of the owner's current TIN (or the TIN of any other payee) by completing  
the following form, certifying that the TIN provided on Substitute Form W-9 is  
correct (or that such owner is awaiting a TIN), and that (i) the owner has not  
been notified by the Internal Revenue Service that the owner is subject to      
backup withholding as a result of failure to report all interest or dividends   
or (ii) the Internal Revenue Service has notified the owner that the owner is   
no longer subject to backup withholding.                                        

WHAT NUMBER TO GIVE THE EXCHANGE AGENT                                          

The Holder is required to give the Exchange Agent the TIN (e.g., social     
security number or employer identification number) of the owner of the          
Original Notes. If the Original Notes are registered in more than one name or   
are not registered in the name of the actual owner, consult the enclosed        
"Guidelines for Certification of Taxpayer Identification Number on Substitute   
Form W-9," for additional guidance on which number to report.                   

A-12  

S-4/A
180th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 180th
PAYER'S NAME:           
--------------------------------------------------------------------------------
                        PART 1--PLEASE PROVIDE YOUR    Social security number(s)
                TIN IN THE BOX AT RIGHT AND          or Employer
                        CERTIFY BY SIGNING AND          Identification Number(s)
DATING BELOW.                   
SUBSTITUTE                                             ---------------------- 
                      --------------------------------------------------------
FORM W-9               PART 2--Certifications--Under penalties of perjury, I  
certify that:                   

DEPARTMENT OF THE                                                             
TREASURY               (1) The number shown on this form is my correct        
INTERNAL REVENUE           taxpayer identification number (or I am waiting    
SERVICE                    for a number to be issued to me), and              

PAYOR'S REQUEST FOR    (2) I am not subject to backup withholding because:    
TAXPAYER                   (a) I am exempt from backup withholding, or (b)    
IDENTIFICATION             I have not been notified by the Internal Revenue   
NUMBER ("TIN")             Service (IRS) that I am subject to backup          
                      withholding as a result of a failure to report
                     all interest or dividends, or (c) the IRS has
                  notified me that I am no longer subject to
backup withholding.     

                      CERTIFICATION INSTRUCTIONS--You must cross out
                       item (2) above if you have been notified by the
                    IRS that you are currently subject to backup
                       withholding because of under reporting interest
        or dividends on your tax return.
                      --------------------------------------------------------

                                                    PART 3--
SIGNATURE                       
           -------------------------
                      DATE                                  Awaiting TIN [_]
      ------------------------------

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY      
  IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31%.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER 
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

 YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.                                      

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalties of perjury that a taxpayer identification number    
has not been issued to me, and either (1) I have mailed or delivered an       
application to receive a taxpayer identification number to the appropriate    
Internal Revenue Service Center or Social Security Administration Office or   
(2) I intend to mail or deliver an application in the near future. I          
understand that if I do not provide a taxpayer identification number by the   
time of payment, 31% of all reportable cash payments made to me will be       
withheld until I provide a taxpayer identification number.                    

Signature                                               Date                  
        ----------------------------------------------     -----------------

A-13

S-4/A
181st Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 181st
------------------------------------------------------------------------------- 
------------------------------------------------------------------------------- 

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-   
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF   
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS    
HAVING BEEN AUTHORIZED BY THE COMPANY OR AXIA GROUP. THIS PROSPECTUS DOES NOT   
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE     
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UN-   
LAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS    
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE   
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY      
TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AF-  
FAIRS OF THE COMPANY OR AXIA GROUP SINCE SUCH DATE.                             

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

TABLE OF CONTENTS 

                                                                [Download Table]

                                                                            PAGE
                                                                            ----
                                                                                
Available Information.....................................................    3 
Prospectus Summary........................................................    4 
Risk Factors..............................................................   16 
The Transactions..........................................................   24 
The Exchange Offer........................................................   26 
Use of Proceeds...........................................................   36 
Capitalization............................................................   37 
Unaudited Pro Forma Financial Information.................................   38 
Selected Historical Financial Data........................................   45 
Management's Discussion and Analysis of Financial Condition and Results of      
 Operations...............................................................   47 
Industry..................................................................   54 
Business..................................................................   56 
Management................................................................   67 
Related Transactions......................................................   75 
Beneficial Ownership......................................................   76 
Description of the Bank Credit Agreement..................................   77 
Description of the Notes..................................................   80 
Certain Federal Income Tax Considerations.................................  113 
Legal Matters.............................................................  118 
Experts...................................................................  118 
Index to Combined Financial Statements....................................  F-1 
Annex A--AXIA Incorporated Letter of Transmittal..........................  A-1 

Until January 16, 1999 (90 days after the date of this Prospectus), all     
dealers effecting transactions in the registered securities, whether or not     
participating in this distribution, may be required to deliver a Prospectus.    
This requirement is in addition to the obligation of dealers to deliver a Pro-  
spectus when acting as underwriters and with respect to their unsold allot-     
ments or subscriptions.                                                         

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

AXIA INCORPORATED 

PROSPECTUS  

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

S-4/A
182nd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 182nd
PART II 

INFORMATION NOT REQUIRED IN PROSPECTUS  

ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.                             

The Company's Certificate of Incorporation, as amended, provides that the   
directors and officers of the Company shall be indemnified to the full extent   
permitted by the provisions of the Delaware General Corporation Law ("DGCL").   
The DGCL provides for indemnification of directors and officers of a            
corporation against expenses, judgments, fines, settlements and other amounts   
actually and reasonably incurred in connection with any proceeding arising by   
reason of the fact that such person is or was an officer or director of the     
corporation or is or was serving at the request of the corporation as a         
director, officer or employee of another corporation, partnership, joint        
venture, trust, employee benefit plan or other enterprise.                      

Section 145 of the DGCL provides generally that a person sued as a director,
officer, employee or agent of a corporation may be indemnified by the           
corporation for reasonable expenses, including attorneys' fees, if in the case  
of other than derivative suits such person has acted in good faith and in a     
manner such person reasonably believed to be in or not opposed to the best      
interests of the corporation (and, in the case of a criminal proceeding, had    
no reasonable cause to believe that such person's conduct was unlawful). In     
the case of a derivative suit, an officer, employee or agent of the             
corporation which is not protected by the Certificate of Incorporation may be   
indemnified by the corporation for reasonable expenses, including attorneys'    
fees, if such person has acted in good faith and in a manner such person        
reasonably believed to be in or not opposed to the best interests of the        
corporation, except that no indemnification shall be made in the case of a      
derivative suit in respect of any claim as to which an officer, employee or     
agent has been adjudged to be liable to the corporation unless that person is   
fairly and reasonable entitled to indemnity for proper expenses.                
Indemnification is mandatory in the case of a director, officer, employee, or   
agent who is successful on the merits in defense of a suit against such         
person.                                                                         

The Company has entered into Indemnity Agreements with its directors and    
certain key officers pursuant to which the Company generally is obligated to    
indemnify its directors and such officers to the full extent permitted by the   
DGCL as described above.                                                        

The Company has purchased liability insurance policies covering directors   
and officers in certain circumstances.                                          

II-1  

S-4/A
183rd Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 183rd
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.                            

(a) Exhibits                                                                

                                                                [Download Table]
                                                                              
        3.1   -- Certificate of Incorporation of the Company, as amended      
        3.2   -- Bylaws of the Company                                        
        4.1   -- Indenture, as supplemented, dated as of July 22, 1998 by and 
                 between the Company and State Street Bank & Trust Company    
                 National Bank, as Trustee, with respect to the 10 3/4% Senior
                 Subordinated Notes due 2008, including the form of the Note  
        4.2   -- Registration Rights Agreement by and between the Company,    
                 Chase Securities Inc. and NationsBanc Montgomery Securities  
                 LLC, effective as of July 22, 1998                           
        5*    -- Opinion of Bracewell & Patterson, L.L.P. as to the validity  
                 of the Exchange Notes being offered                          
        8*    -- Opinion of Bracewell & Patterson, L.L.P. as to certain       
                 federal income tax matters                                   
       10.1   -- Axia Group, Inc. 1998 Stock Awards Plan                      
       10.2   -- Axia Finance Corp. Employee Stock Ownership Plan and 401(k)  
                 Plan to be renamed Axia Incorporated Employee Stock Ownership
                 and 401(k) Plan                                              
       10.3   -- Axia Finance Corp. Employee Stock Ownership and 401(k) Plan  
                 Trust Agreement to be renamed Axia Incorporated Employee     
                 Stock Ownership and 401(k) Plan Trust Agreement              
       10.8   -- Credit Agreement dated as of July 22, 1998 among Axia Finance
                 Corp., Axia Incorporated, Ames Taping Tool Systems, Inc.,    
                 Tape Tech Tool Co., Inc. and Paribas                         
       10.9   -- Security Agreement dated as of July 22, 1998 by and between  
                 Axia Finance Corp., Axia Incorporated, Paribas and the       
                 Lenders named therein                                        
       10.10  -- Pledge Agreement dated as of July 22, 1998 by and between    
                 Axia Incorporated, Paribas and the Lenders named therein     
       10.11  -- Letter Agreement dated June 23, 1998, by and among The       
                 Sterling Group, Inc., Axia Group, Inc., Axia Acquisition     
                 Corp. and each of their subsidiaries                         
       10.12  -- Form of Indemnity Agreement between Axia Incorporated and    
                 each of its officers and directors                           
       10.13  -- Form of Tax Sharing Agreement among Axia Group Inc., Axia    
                 Holdings Corp., Axia Incorporated, Ames Taping Tool Systems, 
                 Inc. and Tape Tech Tool Co., Inc.                            
       12     -- Statement re Computation of Ratio of Earnings to Fixed       
                 Charges                                                      
       21     -- Subsidiaries of the Registrant                               
       23.1   -- Consent of Arthur Andersen LLP                               
       23.2   -- Consent of Deloitte & Touche LLP                             
       23.3*  -- Consents of Bracewell & Patterson, L.L.P. (included in their 
                 opinions filed as Exhibits 5 and 8 hereto)                   
       24     -- Powers of Attorney                                           
       25     -- Statement of Eligibility and Qualification on Form T-1 of    
                 State Street Bank & Trust Company as Trustee under the       
                 Indenture                                                    

--------                                                                        

* Filed herewith.                                                               

(b) Financial Statement Schedules                                           

None.                                                                       

II-2

S-4/A
184th Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 184th
ITEM 22. UNDERTAKINGS.                                                          

(a) The undersigned Company 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. Notwithstanding the foregoing, any       
increase or decrease in volume of securities offered (if the total      
dollar value of securities offered would not exceed that which was      
registered) and any deviation from the low or high end of the estimated 
maximum offering range may be reflected in the form of prospectus filed 
with the Commission pursuant to Rule 424(b) if, in the aggregate, the   
changes in volume and price represent no more than a 20% change in the  
maximum aggregate offering price set forth in the "Calculation of       
Registration Fee" table in the effective registration statement.        

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

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

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

(b) 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 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 of 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.                                           

(c) The undersigned registrant hereby undertakes to respond to requests for 
information that is incorporated by reference into the prospectus pursuant to   
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of    
such request, and to send the incorporated documents by first class mail or     
other equally prompt means. This includes information contained in documents    
filed subsequent to the effective date of the registration statement through    
the date of responding to the request.                                          

(d) The undersigned registrant hereby undertakes to supply by means of a    
post-effective amendment all information concerning a transaction, and the      
company being acquired involved therein, that was not the subject of and        
included in the registration statement when it became effective.                

II-3  

S-4/A
Last Page of 185
TOC
1st
Previous
Next
↓Bottom
Just 185th
SIGNATURES  

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AXIA            
INCORPORATED HAS DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT THERETO   
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN    
THE CITY OF HOUSTON, STATE OF TEXAS, ON OCTOBER 13, 1998.                       

                     AXIA INCORPORATED

                                     /s/ GARY L. ROSENTHAL
                                         By:__________________________________
                                         Gary L. Rosenthal
                                         Chairman of the Board

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS            
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BELOW BY THE        
FOLLOWING PERSONS IN THE INDICATED CAPACITIES ON OCTOBER 13, 1998.              

                                                                [Download Table]
        

SIGNATURE                                TITLE      

/s/   GARY L. ROSENTHAL                Chairman of the Board              
-----------------------------------       (principal executive officer)         
Gary L. Rosenthal                                             

/s/     LYLE J. FEYE                   Chief Financial Officer            
-----------------------------------       (principal financial and              
Lyle J. Feye                   accounting officer)        

/s/   SUSAN O. RHENEY*                 Director                           
-----------------------------------                                             
Susan O. Rheney                                             

/s/  DENNIS W. SHEEHAN*                Director                           
-----------------------------------                                             
Dennis W. Sheehan                                             

*By: /s/ GARY L. ROSENTHAL                                                      
--------------------------------                                            
Gary L. Rosenthal                                             
(Attorney-in-fact for persons                                             
indicated)                                              

II-4