UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 29, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 333-17895
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Rayovac Corporation
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(Exact name of registrant as specified in its charter)
Wisconsin 22-2423556
----------------------- -------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
601 Rayovac Drive, Madison, Wisconsin 53711
-----------------------------------------
(Address of principal executive offices) (Zip Code)
(608) 275-3340
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(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes ( X ) No ( )
The number of shares outstanding of the Registrant's common stock, $.01 par
value, as of August 12, 1997, the most recent practicable date, was 20,581,431.
<PAGE>
Item 1. Financial Statements
--------------------
RAYOVAC CORPORATION
Condensed Consolidated Balance Sheets
As of June 29, 1997 and September 30, 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
-ASSETS-
June 28, 1997 September 30, 1996
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $4,756 $4,255
Receivables 66,293 66,476
Inventories 52,116 70,121
Prepaid expenses and other 12,975 14,822
-------- --------
Total current assets 136,140 155,674
Property, plant and equipment, net 64,407 69,397
Deferred charges and other 17,493 20,177
-------- --------
Total assets $218,040 $245,248
======== ========
-LIABILITIES AND SHAREHOLDER'S DEFICIT-
Current liabilities:
Current maturities of long-term debt $8,806 $8,818
Accounts payable 37,839 46,921
Accrued liabilities:
Wages, benefits and other 33,294 21,798
Recapitalization and other special charges 5,744 14,942
-------- --------
Total current liabilities 85,683 92,479
Long-term debt, net of current maturities 197,809 224,845
Employee benefit obligations, net of current portion 14,268 12,138
Other 1,497 1,506
Shareholders' deficit
Common stock, $.01 par value, authorized 90,000
shares; issued 50,000 shares; outstanding 20,581
shares and 20,470 shares, respectively 500 500
Additional paid-in capital 15,974 15,970
Foreign currency translation adjustment 2,608 1,689
Note receivable officer/shareholder (715) (500)
Retained earnings 28,455 25,143
-------- --------
46,822 42,802
Less treasury stock, at cost, 29,419 shares and 29,530
shares, respectively (128,039) (128,522)
-------- --------
Total shareholders' deficit (81,217) (85,720)
-------- --------
Total liabilities and shareholders' deficit $218,040 $245,248
======== ========
</TABLE>
See accompanying notes which are an integral part of these
financial statements.
<PAGE>
RAYOVAC CORPORATION
Condensed Consolidated Statements of Operations
For the three month and nine month periods ended June 29, 1997 and June 29, 1996
(Unaudited)
(In thousands, except per share amounts)
THREE MONTHS NINE MONTHS
----------------- ------------------
1997 1996 1997 1996
------- ------- -------- --------
Net sales $89,007 $91,882 $299,151 $298,758
Cost of goods sold 52,217 55,236 178,359 178,615
------- ------- -------- --------
Gross profit 36,790 36,646 120,792 120,143
Selling 19,378 19,165 65,240 69,339
General and administrative 7,332 7,582 22,599 24,388
Research and development 1,351 1,432 4,781 4,081
Other special charges 226 - 4,940 -
------ ------ ------- -------
Total operating expenses 28,287 28,179 97,560 97,808
Income from operations 8,503 8,467 23,232 22,335
Other expense:
Interest expense 5,438 1,911 18,884 6,023
Other expense (income) (107) 115 207 514
------ ------ ------- -------
5,331 2,026 19,091 6,537
Income before income taxes 3,172 6,441 4,141 15,798
Income tax expense 520 2,080 829 5,068
------ ------ ------- -------
Net income $2,652 $4,361 $3,312 $10,730
====== ====== ======= =======
Net income per share $0.13 $0.09 $0.16 $0.22
====== ====== ======= =======
Weighted average shares of
common stock outstanding 20,581 49,500 20,513 49,524
====== ====== ======= =======
See accompanying notes which are an integral part of these
financial statements.
<PAGE>
RAYOVAC CORPORATION
Condensed Consolidated Statements of Cash Flows
For the nine month periods ended June 29, 1997 and June 29, 1996
(Unaudited)
(In thousands, except per share amounts)
NINE MONTHS
---------------------
1997 1996
------- --------
Cash flows from operating activities:
Net income $3,312 $10,730
Non-cash adjustments to net income:
Amortization 3,171 40
Depreciation 8,678 8,744
Net changes in other assets and liabilities 17,465 8,658
-------- --------
Net cash provided by operating
activities 32,626 28,172
Cash flows from investing activities:
Purchases of property, plant and equipment (5,074) (7,151)
Other (165) 298
-------- --------
Net cash used in investing activities (5,239) (6,853)
Cash flows from financing activities:
Reduction of debt (140,624) (87,778)
Proceeds from debt financing 113,573 70,350
Distribution from Rayovac International
Corporation, a domestic international
sales company -- (3,587)
Other 161 (533)
-------- --------
Net cash used in financing activities (26,890) (21,548)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents 4 (12)
-------- --------
Net increase (decrease) in cash and
cash equivalents 501 (241)
Cash and cash equivalents, beginning of period 4,255 2,431
-------- --------
Cash and cash equivalents, end of period $4,756 $2,190
======== ========
See accompanying notes which are an integral part of these
financial statements.
<PAGE>
RAYOVAC CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
1 SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: These financial statements have been prepared by
Rayovac Corporation (the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (the "SEC") and,
in the opinion of the Company, include all adjustments (all of which are
normal and recurring in nature) necessary to present fairly the financial
position of the Company at June 29, 1997, results of operations for the
three month and nine month periods ended June 29, 1997, and June 29, 1996,
and cash flows for the nine month periods ended June 29, 1997, and June 29,
1996. 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 SEC
rules and regulations.
The condensed consolidated balance sheet at September 30, 1996, has been
derived from the annual audited financial statements. These condensed
consolidated financial statements should be read in conjunction with the
audited financial statements and notes thereto as of September 30, 1996,
and interim financial statements filed.
Derivative Financial Instruments: Derivative financial instruments are used
by the Company principally in the management of its interest rate, foreign
currency and raw material price exposures.
The Company uses interest rate swaps to manage its interest rate risk. The
net amounts to be paid or received under interest rate swap agreements
designated as hedges are accrued as interest rates change and are
recognized over the life of the swap agreements, as an adjustment to
interest expense from the underlying debt to which the swap is designated.
The related amounts payable to, or receivable from, the counter-parties are
included in accrued liabilities or accounts receivable.
The Company enters into forward foreign exchange contracts relating to the
anticipated settlement in local currencies of intercompany purchases and
sales. The contracts are marked to market, and the related adjustment is
recognized in other (income) expense. The related amounts payable to, or
receivable from, the counter-parties are included in accounts payable or
accounts receivable.
The Company is exposed to risk from fluctuating prices for commodities used
in the manufacturing process. The Company hedges some of this risk through
the use of commodity calls and puts. The Company is buying calls, which
allow the Company to purchase a specified quantity of zinc through a
specified date for a fixed price, and writing puts, which allow the buyer
to sell to the Company a specified quantity of zinc through a specified
date at a fixed price. The maturity of, and the quantities covered by, the
contracts highly correlate to the Company's anticipated purchases of the
commodity. The cost of the calls, and the premiums received from the puts,
are amortized over the life of the agreements and are recorded in cost of
goods sold, along with the effect of the put and call agreements.
<PAGE>
2 INVENTORIES
Inventories consist of the following (in thousands):
June 29,1997 Sept. 30, 1996
Raw material $16,735 $21,325
Work-in-process 16,627 19,622
Finished goods 18,754 29,174
-------- --------
$52,116 $70,121
======= =======
3 COMMITMENTS AND CONTINGENCIES
The Company has entered into agreements to purchase certain equipment and
to pay annual royalties. In a December 1991 agreement, the Company
committed to pay annual royalties of $1,500,000 for the first five years,
beginning in 1993, plus $500,000 for each year thereafter, as long as the
related equipment patents are enforceable (2012). In a March 1994
agreement, the Company committed to pay annual royalties of $500,000 for
five years beginning in 1995. Additionally, the Company has committed to
purchase tooling of $2,539,000 related to this equipment, $345,000 for
other tooling at unspecified dates in the future, and $200,000 of manganese
ore by March 1998.
The Company has provided for the estimated costs associated with
environmental remediation activities at some of its current and former
manufacturing sites. In addition, the Company, together with other parties,
has been designated a potentially responsible party of various third-party
sites on the United States EPA National Priorities List (Superfund). The
Company provides for the estimated costs of investigation and remediation
of these sites when the amounts can be reasonably estimated. The actual
cost incurred may vary from these estimates due to the inherent
uncertainties involved. The Company believes that any additional liability
in excess of the amounts provided of $1.7 million, which may result from
resolution of these matters, will not have a material adverse effect on the
financial condition, liquidity or cash flows of the Company.
4 OTHER SPECIAL CHARGES
During the previous quarter, the Company recorded a pre-tax charge of
$1,751,000 related to the closing of certain manufacturing and distribution
operations. The charge includes severance, out-placement services, other
employee benefits and the reduction in carrying value of certain equipment.
Additional expenses of $226,000 related to these closings were recognized
in the current quarter.
5 SUBSEQUENT EVENTS
On August 1, 1997, the Company issued 340,819 shares of Common Stock, $0.01
par value for $6.01 per share, to certain members of management pursuant to
the exercise of option granted under the 1997 Stock Option Plan. In
addition, on the same date, the Company funded a rabbi trust under its
Deferred Compensation Plan with an aggregate of 160,049 shares of the $0.01
par value Common Stock. The proceeds of the exercise of the options were
used to redeem a like number of shares from existing shareholders at $6.01
per share.
<PAGE>
6 GUARANTOR SUBSIDIARY
The following condensed consolidating financial data illustrate the
composition of the consolidated financial statements. Investments in
subsidiaries are accounted for by the Company and the Guarantor Subsidiary
using the equity method for purposes of the consolidating presentation.
Earnings of subsidiaries are therefore reflected in the Company's and
Guarantor Subsidiary's investment accounts and earnings. The principal
elimination entries eliminate investments in subsidiaries and inter-company
balances and transactions. Separate financial statements of the Guarantor
Subsidiary are not presented because management has determined that such
financial statements would not be material to investors.
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of June 29, 1997
(Unaudited)
(In thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
-ASSETS-
Current assets:
Cash and cash equivalents $4,111 $49 $596 $ -- $4,756
Receivables 56,874 501 16,324 (7,406) 66,293
Inventories 40,704 -- 12,360 (948) 52,116
Prepaid expenses and other 11,373 179 1,423 -- 12,975
-------- ------- ------- -------- --------
Total current assets 113,062 729 30,703 (8,354) 136,140
Property, plant and equipment, net 59,423 -- 4,984 -- 64,407
Deferred charges and other 18,182 -- 643 (1,332) 17,493
Investment in subsidiaries 15,140 14,785 -- (29,925) --
-------- ------- ------- -------- --------
Total assets $205,807 $15,514 $36,330 $(39,611) $218,040
======== ======= ======= ======== ========
-LIABILITIES AND SHAREHOLDERS' DEFICIT-
Current liabilities:
Current maturities of long-term debt $5,500 $ -- $3,306 $ -- $8,806
Accounts payable 32,139 163 12,877 (7,340) 37,839
Accrued liabilities:
Wages, benefits and other 29,392 5 4,550 (653) 33,294
Recapitalization and other special
charges 5,491 -- 253 -- 5,744
-------- ------- ------- -------- --------
Total current liabilities 72,522 168 20,986 (7,993) 85,683
Long-term debt, net of current maturities 197,250 -- 559 -- 197,809
Employee benefit obligations, net of
current portion 14,268 -- -- -- 14,268
Other 1,291 206 -- -- 1,497
Shareholders' deficit:
Common stock 500 -- 12,072 (12,072) 500
Additional paid-in capital 15,974 3,525 750 (4,275) 15,974
Foreign currency translation adjustment 2,608 2,608 2,608 (5,216) 2,608
Note receivable officer/shareholder (715) -- -- -- (715)
Retained earnings 30,148 9,007 (645) (10,055) 28,455
-------- ------- ------- -------- --------
Less treasury stock (128,039) -- -- -- (128,039)
-------- ------- ------- -------- --------
Total shareholders' deficit (79,524) 15,140 14,785 (31,618) (81,217)
-------- ------- ------- -------- --------
Total liabilities and
shareholders' deficit $205,807 $15,514 $36,330 $(39,611) $218,040
======== ======= ======= ======== ========
</TABLE>
<PAGE>
RAYOVAC CORPORATION
Condensed Consolidated Statements of Operations
For the three-month period ended June 29, 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
Net sales $79,017 $ -- $17,190 $(7,200) $89,007
Cost of goods sold 47,745 -- 11,676 (7,204) 52,217
------- ---- ------- ------- -------
Gross profit 31,272 -- 5,514 4 36,790
Selling 16,178 -- 3,200 -- 19,378
General and administrative 6,279 (188) 1,770 (529) 7,332
Research and development 1,351 -- -- -- 1,351
Other special charges 226 -- -- -- 226
------- ---- ------- ------- -------
Total operating expenses 24,034 (188) 4,970 (529) 28,287
Income from operations 7,238 188 544 533 8,503
Other expense:
Interest expense 5,345 -- 93 -- 5,438
Equity in profit of subsidiary (638) (507) -- 1,145 --
Other expense (124) (14) 31 -- (107)
------- ---- ------- ------- -------
4,583 (521) 124 1,145 5,331
Income before income taxes 2,655 709 420 (612) 3,172
Income taxes 536 71 (87) -- 520
------- ---- ------- ------- -------
Net income $2,119 $638 $507 $(612) $2,652
======= ==== ======= ======= =======
</TABLE>
<PAGE>
RAYOVAC CORPORATION
Condensed Consolidated Statements of Operations
For the nine-month period ended June 29, 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
Net sales $260,666 $ -- $58,246 $(19,761) $299,151
Cost of goods sold 158,306 -- 39,827 (19,774) 178,359
-------- ------ ------- -------- --------
Gross profit 102,360 -- 18,419 13 120,792
Selling 55,302 -- 9,938 -- 65,240
General and administrative 18,320 (595) 3,528 1,346 22,599
Research and development 4,781 -- -- -- 4,781
Other special charges 3,477 -- 1,463 -- 4,940
-------- ------ ------- -------- --------
Total operating expenses 81,880 (595) 14,929 1,346 97,560
Income from operations 20,480 595 3,490 (1,333) 23,232
Other expense:
Interest expense 18,484 -- 400 -- 18,884
Equity in profit of subsidiary (2,166) (1,768) -- 3,934 --
Other expense (651) (17) 875 -- 207
-------- ------ ------- -------- --------
15,667 (1,785) 1,275 3,934 19,091
Income before income taxes 4,813 2,380 2,215 (5,267) 4,141
Income taxes 821 214 447 (653) 829
-------- ------ ------- -------- --------
Net income $3,992 $2,166 $1,768 $(4,614) $3,312
======== ====== ======= ======== ========
</TABLE>
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the nine-month period ended June 29, 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities $31,134 $(8) $1,500 $ -- $32,626
Cash flows from investing activities:
Purchases of property, plant and equipment (4,585) -- (489) -- (5,074)
Other (165) -- -- -- (165)
-------- ---- ------ ----- --------
Net cash used in investing activities (4,750) -- (489) -- (5,239)
Cash flows from financing activities:
Reduction of debt (134,639) -- (5,985) -- (140,624)
Proceeds from debt financing 108,900 -- 4,673 -- 113,573
Other 483 -- (322) -- 161
-------- ---- ------ ----- --------
Net cash used in financing activities (25,256) -- (1,634) -- (26,890)
-------- ---- ------ ----- --------
Effect of exchange rate changes on cash and
cash equivalents -- -- 4 -- 4
-------- ---- ------ ----- --------
Net increase (decrease) in cash and
cash equivalents 1,128 (8) (619) -- 501
Cash and cash equivalents, beginning of period 2,983 57 1,215 -- 4,255
-------- ---- ------ ----- --------
Cash and cash equivalents, end of period $4,111 $49 $596 $ -- $4,756
======== ==== ====== ===== ========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Fiscal Quarter and Nine Months Ended June 29, 1997 Compared to
Fiscal Quarter and Nine Months Ended June 29, 1996
Management's Discussion and Analysis of Financial Condition and Results of
Operations, with the exception of historical matters, contains forward-looking
statements (such as statements including the terms "believe," "expect,"
"anticipate," and similar concepts) which involve risks and uncertainties.
Actual results may differ materially from these statements as a result of
various factors, including those discussed herein.
Net Sales. The net sales of Rayovac Corporation (the "Company") were $89.0
million in the fiscal quarter ended June 29, 1997, (the "1997 Fiscal Quarter"),
a decrease of $2.9 million, or 3.2%, from approximately $91.9 million in the
fiscal quarter ended June 29, 1996 (the "1996 Fiscal Quarter"), primarily due to
decreased sales of general battery products.
For the nine months ended June 29, 1997, net sales were approximately $299.2
million, an increase of $0.4 million, or 0.1%, from approximately $298.8 million
for the nine months ended June 29, 1996. Decreases in sales of general battery
products were offset by increased sales of battery powered lighting devices and
specialty battery products.
Gross Profit. Gross profit increased $0.2 million, or 0.5%, to
approximately $36.8 million in the 1997 Fiscal Quarter, from approximately $36.6
million in the 1996 Fiscal Quarter, primarily as a result of increased sales of
hearing aid batteries and a favorable effect on margins from a May price
increase on the alkaline segment of general battery products. Gross profit
increased as a percentage of net sales to 41.3% in the 1997 Fiscal Quarter from
39.9% in the 1996 Fiscal Quarter.
For the nine months ended June 29, 1997, gross profit increased approximately
$0.7 million, or 0.6%, to approximately $120.8 million from approximately $120.1
million for the nine months ended June 29, 1996. Gross profit increased as a
percentage of net sales to 40.4% in the nine months ended 1997 from 40.2% in the
nine months ended 1996, primarily due to improved margins on general battery
products.
Selling Expense. Selling expense increased $0.2 million, or 1.0%, to
approximately $19.4 million in the 1997 Fiscal Quarter from approximately $19.2
million in the 1996 Fiscal Quarter. Selling expense increased as a percent of
net sales to 21.8% in the 1997 Fiscal Quarter from 20.9% in the 1996 Fiscal
Quarter.
<PAGE>
For the nine months ended June 29, 1997, selling expense decreased $4.1 million,
or 5.9%, to approximately $65.2 million from approximately $69.3 million for the
nine months ended June 29, 1996, due primarily to decreased advertising expense
partially offset by increased marketing expense. Selling expense decreased as a
percentage of net sales to 21.8% in the nine months ended 1997 from 23.2% in the
nine months ended 1996.
General and Administrative Expense.General and administrative expense
decreased $0.3 million, or 3.9%, to approximately $7.3 million in the 1997
Fiscal Quarter from approximately $7.6 million in the 1996 Fiscal Quarter,
primarily due to a gain on the sale of excess manufacturing equipment in the
1997 Fiscal Quarter.
For the nine months ended June 29, 1997, general and administrative expense
decreased $1.8 million, or 7.4%, to approximately $22.6 million from
approximately $24.4 million for the nine months ended June 29, 1996. This
decrease occurred primarily as a result of the settlement of a lawsuit for which
the Company had accrued approximately $0.8 million in 1996 and as a result of
the equipment sale mentioned above.
Research and Development Expense. Research and development expense was
approximately $1.4 million in the 1997 Fiscal Quarter approximately equal to the
1996 Fiscal Quarter. For the nine months ended June 29, 1997, research and
development expense increased $0.7 million, or 17.1%, to approximately $4.8
million from approximately $4.1 million for the nine months ended June 29, 1996.
This increase was primarily a result of the assignment of increased development
resources to the development of an on-the-label battery tester which management
has now decided to discontinue.
Other Special Charges. In the 1997 Fiscal Quarter the Company recorded
additional charges of approximately $0.2 million in connection with the
discontinuation of certain manufacturing and distribution operations at its
North Carolina facility. For the nine months ended June 29, 1997, the Company
recorded charges of approximately $4.9 million for organizational restructuring
in the United States, the discontinuation of certain manufacturing operations in
the United Kingdom, and the discontinuation of operations in North Carolina.
Income from Operations. Income from operations was approximately $8.5
million in the 1997 Fiscal Quarter, approximately equal to the 1996 Fiscal
Quarter.
For the nine months ended June 29, 1997, income from operations increased $0.9
million, or 4.0%, to approximately $23.2 million from approximately $22.3
million for the nine months ended June 29, 1996. The Company's increased
<PAGE>
gross profit and lower operating expenses were partially offset by the special
charges discussed under other special charges above.
Interest Expense. Interest expense in the 1997 Fiscal Quarter increased
$3.5 million to approximately $5.4 million from approximately $1.9 million in
the 1996 Fiscal Quarter as a result of increased indebtedness incurred in
connection with the recapitalization of the Company.
For the nine months ended June 29, 1997, interest expense increased $12.9
million to approximately $18.9 million from approximately $6.0 million for the
nine months ended June 29, 1996, due primarily to increased indebtedness
associated with the recapitalization and a write-off of $2.0 million of
unamortized debt issuance costs related to the senior subordinated increasing
rate notes of the Company issued in September 1996 (the "Bridge Notes").
Income before Income Taxes. Income before income taxes decreased $3.2
million, or 50.0%, to approximately $3.2 million in the 1997 Fiscal Quarter from
approximately $6.4 million in the 1996 Fiscal Quarter primarily as a result of
the increased interest expense discussed above.
For the nine months ended June 29, 1997, income before income taxes decreased
$11.7 million to approximately $4.1 million from approximately $15.8 million for
the nine months ended June 29, 1996. Higher interest expense and special charges
were partially offset by increased income from operations.
Net Income. Net income for the 1997 Fiscal Quarter decreased $1.7 million,
or 38.6%, to approximately $2.7 million from approximately $4.4 million in the
1996 Fiscal Quarter while net income per share increased 4 cents per share to 13
cents per share. The Company's effective tax rate for the 1997 Fiscal Quarter
was 16.4% compared to 32.3% for the 1996 Fiscal Quarter due primarily to an
adjustment to the tax provision related to the 1996 tax return.
For the nine months ended June 29, 1997, net income decreased $7.4 million to
approximately $3.3 million, or 16 cents per share, from approximately $10.7
million, or 22 cents per share, for the nine months ended June 29, 1996,
primarily as a result of increased interest expense and special charges
discussed above. The Company's effective tax rate for the nine months ended June
29, 1997 was 20.0% compared to 32.1% for the nine months ended June 29, 1996 due
primarily to the tax provision adjustment discussed above.
Liquidity and Capital Resources
For the nine months ended June 29, 1997, net cash provided by operating
activities increased $4.4 million to approximately $32.6 million from
<PAGE>
approximately $28.2 million for the nine months ended June 29, 1996, primarily
as a result of reductions in working capital.
Capital expenditures during the nine months ended June 29, 1997, were
approximately $5.1 million, reflecting maintenance level spending, which allowed
the Company to use the majority of cash provided by operating activities to
reduce borrowings under its revolving credit facility.
The Company currently expects that capital expenditures for the remainder
of fiscal 1997 will be consistent with historical levels. The Company believes
that cash flow from operating activities and periodic borrowings under its
existing credit facilities will be adequate to meet the Company's short-term and
long-term liquidity requirements prior to the maturity of those credit
facilities, although no assurance can be given in this regard. The Company's
current credit facilities include a revolving credit facility of $65.0 million
of which no amounts were borrowed at June 29, 1997, and approximately $0.6
million was utilized for outstanding letters of credit.
Impact of Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("FAS
130"), which establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
All items that are required to be recognized under accounting standards as
components of comprehensive income are to be reported in a financial statement
that is displayed with the same prominence as other financial statements. FAS
130 requires that an enterprise (a) classify items of other comprehensive income
by their nature in a financial statement and (b) display the accumulated balance
of other comprehensive income separately from retained earnings and additional
paid-in-capital in the equity section of the balance sheet. FAS 130 is effective
for fiscal years beginning after December 15, 1997. Reclassification of
financial statements for earlier periods provided for comparative purposes is
required.
In June 1997, the FASB issued Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("FAS 131"),
which is effective for financial statements for periods beginning after December
15, 1997. FAS 131 establishes standards for the way public business enterprises
are to report information about operating segments in annual financial
statements and requires those enterprises to report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
Exhibit Description
------- -----------
3.1* Restated Articles of Incorporation of the Company
3.2* Restated By-Laws of the Company
4.1* Indenture, dated as of October 22, 1996, by and among the Company,
ROV Holding, Inc. and Marine Midland Bank, as trustee, relating to the
Company's 10-1/4% Senior Subordinated Notes due 2006.
4.2* Registration Rights Agreement, dated as of October 17,
1996, by and among the Company, Donaldson, Lufkin &
Jenrette Securities Corporation and BA Securities, Inc.
4.3* Specimen of the Notes (included as an exhibit to Exhibit 4.1)
4.4* Credit Agreement, dated as of September 12, 1996 by and among the
Company, the lenders party thereto, Bank of America National Trust and
Savings Association ("BofA") and DLJ Capital Funding, Inc. (the "Credit
Agreement").
4.5* Amendment No. 1 to the Credit Agreement dated as of October 23, 1996.
4.6* The Security Agreement dated as of September 12, 1996 by and among
the Company, ROV Holding, Inc. and BofA.
4.7* The Company Pledge Agreement dated as of September 12, 1996 by and
between the Company and BofA.
4.8 Shareholders Agreement dated as of September 12, 1996,
by and among the Company and the shareholders of the
Company referred to therein.
4.9 Amendment to Rayovac Shareholders Agreement dated 1 August 1997 by
and among the Company and the shareholders of the Company referred
to therein.
10.1* Management Agreement, dated as of September 12, 1996, by and
between the Company and Thomas H. Lee Company.
10.2* Confidentiality, Non-Competition and No-Hire Agreement dated as of
September 12, 1996 by and between the Company and Thomas F. Pyle.
10.3* Employment Agreement, dated as of September 12, 1996, by
and between the Company and David A. Jones, including
the Full Recourse Promissory Note, dated September 12,
1996 by David A. Jones in favor of the Company.
10.4* Severance Agreement by and between Company and Trygve Lonnebotn.
10.5* Severance Agreement by and between Company and Kent J. Hussey.
10.6* Severance Agreement by and between Company and Roger F. Warren.
10.7 Severance Agreement by and between Company and Stephen P. Shanesy.
10.8 Severance Agreement by and between Company and Merrell M. Tomlin.
10.9* Technology, License and Service Agreement between Battery
Technologies (International) Limited and the Company,
dated June 1, 1991, as amended April 19, 1993 and
December 31, 1995.
10.10* Building Lease between the Company and SPG Partners,
dated May 14, 1985, as amended June 24, 1986 and June
10, 1987.
10.11 Rayovac Corporation 1996 Stock Option Plan.
10.12 Rayovac Corporation 1997 Stock Option Plan.
27 Financial Data Schedule
<PAGE>
* Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration No. 333-17895) filed with the Securities and
Exchange Commission.
(b) The following reports on Form 8-K were filed during the fiscal quarter
ended June 29, 1997:
Form 8-K regarding change in registrant's certifying accountant filed with
the Securities and Exchange Commission on June 11, 1997.
Form 8-K/A regarding change in registrant's certifying accountant filed
with the Securities and Exchange Commission on June 20, 1997.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: August 13, 1997
RAYOVAC CORPORATION
By /s/ Kent J. Hussey
__________________________
Kent J. Hussey
Chief Financial Officer
By /s/ James A. Broderick
__________________________
James A. Broderick
Vice President
RAYOVAC CORPORATION
SHAREHOLDERS AGREEMENT
Dated as of September 12, 1996
<PAGE>
RAYOVAC CORPORATION
SHAREHOLDERS AGREEMENT
----------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
PREAMBLE............................................................................................1
ARTICLE I Definitions..............................................................2
ARTICLE II Covenants and Conditions.................................................7
Section 2.1 Restrictions on Transfers................................................7
Section 2.2 Call by the Company.....................................................10
Section 2.3 Come Along..............................................................13
Section 2.4 Take Along..............................................................15
Section 2.5 Preemptive Rights.......................................................16
Section 2.6 Restrictions on Other Agreements........................................18
Section 2.7 Synthetic Sales.........................................................18
ARTICLE III Registration Rights.....................................................18
Section 3.1 General.................................................................18
Section 3.2 Demand Registrations....................................................18
Section 3.3 Piggyback Registration..................................................19
Section 3.4 Obligations of the Company..............................................20
Section 3.5 Furnish Information.....................................................24
Section 3.6 Expenses of Registration................................................24
Section 3.7 Underwriting Requirements...............................................25
Section 3.8 Indemnification.........................................................25
Section 3.9 Lock-Up Agreement.......................................................28
Section 3.10 No Inconsistent Agreements..............................................29
Section 3.11 Stock Split and Reverse Stock Split.....................................29
ARTICLE IV Miscellaneous...........................................................30
Section 4.1 Remedies................................................................30
Section 4.2 Entire Agreement; Amendment; Waiver.....................................30
Section 4.3 Severability............................................................31
Section 4.4 Notices.................................................................31
Section 4.5 Binding Effect; Assignment..............................................32
Section 4.6 Governing Law...........................................................32
Section 4.7 Termination.............................................................32
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Section 4.8 Recapitalization, Exchanges, Etc........................................33
Section 4.9 Lee Group Shareholder Representative....................................33
Section 4.10 Action Necessary to Effectuate the Agreement............................34
Section 4.11 Purchase for Investment; Legend on Certificate..........................34
Section 4.12 Effectiveness of Transfers..............................................34
Section 4.13 Additional Shareholders.................................................35
Section 4.14 No Waiver...............................................................35
Section 4.15 Financial Statements....................................................36
Section 4.16 Counterpart.............................................................36
Section 4.17 Headings................................................................36
Section 4.18 Number; Gender..........................................................36
EXHIBIT A Schedule of Shareholders
</TABLE>
ii
<PAGE>
SHAREHOLDERS AGREEMENT
----------------------
This Shareholders Agreement (this "Agreement") is entered into as of
the 12th day of September, 1996, by and among Rayovac Corporation, a Wisconsin
corporation (the "Company"), those persons listed as Lee Group Shareholders on
the signature pages hereof, including Thomas H. Lee Equity Fund III, L.P., a
Delaware limited partnership ("Equity Fund") (collectively, the "Lee Group
Shareholders"), those persons listed as Management Shareholders on the
signatures pages hereof (the "Management Shareholders") and those persons listed
as Non-Management Shareholders on the signatures pages hereof (the
"Non-Management Shareholders"). The Management Shareholders and the
Non-Management Shareholders are sometimes collectively referred to herein as the
"Existing Shareholders". The Lee Group Shareholders and the Existing
Shareholders are sometimes collectively referred to herein as the
"Shareholders".
WHEREAS, upon consummation of the transactions (including a 5 for 1
stock split) contemplated by that certain Stock Purchase and Redemption
Agreement dated as of September 12, 1996 (the "Stock Purchase and Redemption
Agreement"), by and among the Company, the Existing Shareholders and the Lee
Group Shareholders, the Shareholders will own the number of shares of Common
Stock set forth opposite their respective names on Exhibit A hereto; and
WHEREAS, each of the Shareholders desires to enter into this Agreement
for the purpose of regulating certain aspects of the Shareholders' relationships
with regard to the Company and certain restrictions on, and rights and
obligations with respect to, the Common Stock owned by the Shareholders.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
<PAGE>
ARTICLE I
Definitions
-----------
For the purposes of this Agreement, the following terms shall be
defined as follows:
1933 Act. The "1933 Act" shall mean the Securities Act of 1933, as
amended.
1934 Act. The "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
Affiliate. An "Affiliate" of a specified person, corporation or other
entity shall mean a person, corporation or other entity which, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, the corporation or other entity specified and,
when used with respect to the Company or any Subsidiary of the Company, shall
include any holder of at least 5% of the capital stock, or any officer or
director, of the Company.
Anniversary Date. "Anniversary Date" shall mean September 12, 1997.
Associate. "Associate," (a) when used to indicate a relationship with
any Person shall mean, (i) any corporation or organization of which such Person
is an officer or partner or is, directly or indirectly, the beneficial owner of
ten percent (10%) or more of any class of equity securities, (ii) any trust or
other estate in which such Person has a substantial beneficial interest or as to
which such Person serves as a trustee or in a similar fiduciary capacity and
(iii) any relative of such Person who has the same home as such Person, is a
parent, aunt or uncle, sibling, spouse, in-law, child, niece or nephew or
grandchild of such Person, or the spouse of any of them, or (b) when used to
indicate a relationship with the Company, shall also mean a director or officer
of the Company or any Subsidiary. Neither the Company nor any of its
Subsidiaries shall be deemed an Associate of any Shareholder.
Board. The "Board" shall mean the Board of Directors of the Company as
the same shall be constituted from time to time.
2
<PAGE>
Cause. "Cause" shall mean (a) the commission of any fraud, embezzlement
or other material act of dishonesty with respect to the Company or any of its
Affiliates (including the unauthorized disclosure of confidential or proprietary
information of the Company or any of its Affiliates or Subsidiaries), (b) a
conviction of, or plea of guilty or nolo contendere to, a felony or other crime
involving moral turpitude, (c) willful misconduct or (d) willful failure or
refusal to perform one's duties and responsibilities to the Company or any of
its Affiliates which failure or refusal to perform is not remedied within thirty
(30) days after receipt of a written notice from the Company detailing such
failure or refusal to perform.
Common Stock. "Common Stock" shall mean the Company's common stock,
$.01 par value, that the Company may be authorized to issue from time to time,
any other securities of the Company into which such Common Stock may hereafter
be changed or for which such Common Stock may be exchanged after giving effect
to the terms of such change or exchange (by way of reorganization,
recapitalization, merger, consolidation or otherwise) and shall also include any
common stock of the Company hereafter authorized and any capital stock of the
Company of any other class hereafter authorized which is not preferred as to
dividends or distribution of assets in liquidation over any other class of
capital stock of the Company and which has ordinary voting power for the
election of directors of the Company.
The Company. The "Company" shall mean Rayovac Corporation, a Wisconsin
corporation, and its successors and assigns.
Lee Group Shareholder Representative. "Lee Group Shareholder
Representative" shall have the meaning set forth in Section 4.9 hereof.
Permitted Transfer. A "Permitted Transfer" shall mean:
(a) a Transfer of Shares by any Shareholder who is a natural
person to such Shareholder's spouse, children, grandchildren, parents or
siblings or a trust for the benefit of any of them;
3
<PAGE>
(b) a bona fide pledge of Shares by a Shareholder to a bank,
financial institution or other lender;
(c) a Transfer of Shares between any Shareholder who is a
natural person and such Shareholder's guardian or conservator;
(d) a bona fide gift of Shares by a Shareholder to a
charitable institution as defined in Section 501(c) of the Internal Revenue Code
of 1986, as amended, provided such Transfer is reasonably acceptable to the
Company;
(e) a Transfer of Shares from any Shareholder which is a
partnership to its partners, provided such Transfer is reasonably acceptable to
the Company;
(f) a Transfer of Shares from any Shareholder which is a
corporation or partnership to any Affiliate of such Shareholder, provided such
Transfer is reasonably acceptable to the Company; or
(g) a Transfer of Shares by a Lee Group Shareholder to another
Lee Group Shareholder or other employee of Thomas H. Lee Company, or by a
Non-Management Shareholder to another Non-Management Shareholder.
No Permitted Transfer shall be effective unless and until the transferee of the
Shares so transferred, if such transferee is not already a party to this
Agreement, executes and delivers to the Company an executed counterpart of this
Agreement in accordance with the terms of Section 4.13 hereof. No Permitted
Transfer shall conflict with or result in any violation of a judgment, order,
decree, statute, law, ordinance, rule or regulation.
Permitted Transferee. A "Permitted Transferee" shall mean any Person
who shall have acquired and who shall hold Shares pursuant to a Permitted
Transfer described above.
Person. "Person" shall mean an individual, corporation, partnership,
trust, or unincorporated association, or a government or any agency or political
subdivision thereof.
4
<PAGE>
Prior Shareholders Agreement. "Prior Shareholders Agreement" shall
mean, collectively, the Amended and Restated Shareholder's Agreements, dated as
of December 1991, entered into by the Company, Thomas F. Pyle and certain
shareholders of the Company.
Public Offering. A "Public Offering" shall mean the completion of a
sale of Common Stock, resulting in gross cash proceeds of not less than $20
million, pursuant to a registration statement which has become effective under
the 1933 Act, excluding registration statements on Form S-4, S-8 or similar
limited purpose forms and also excluding the registration of any equity security
issued to non-Affiliates of the Company as part of a bona fide debt offering of
units comprised of such equity security and a debt security of the Company.
Registrable Securities. "Registrable Securities" shall mean all shares
of Common Stock held from time to time by any party hereto and any other
securities of the Company or any of its Subsidiaries issued in exchange for,
upon a reclassification of, or in a distribution with respect to, such Common
Stock. As to any particular Registrable Securities, such securities shall cease
to be Registrable Securities when (a) a registration statement with respect to
the sale of such securities shall have become effective under the 1933 Act and
such securities shall have been disposed of in accordance with such registration
statement, (b) such securities shall have been sold under a Rule 144 Transaction
or (c) such securities shall have ceased to be outstanding.
Rule 144 Transaction. "Rule 144 Transaction" shall mean a transfer of
Shares (a) complying with Rule 144 under the 1933 Act as such Rule or a
successor thereto is in effect on the date of such transfer (but only a sale
pursuant to a "brokers transaction" as defined in clauses (i) and (ii) of
paragraph (g) of Rule 144 as in effect on the date hereof) and (b) occurring at
a time when Shares are registered pursuant to Section 12 of the 1934 Act.
Schedule. "Schedule" shall refer to the Schedule of Shareholders
attached hereto as Exhibit A.
Shares. "Shares" shall mean (a) all shares of Common Stock held by
Shareholders from time to time, (b)
5
<PAGE>
all shares of Common Stock subsequently held by Permitted Transferees who
acquire them in one or more Permitted Transfers and (c) securities of the
Company issued in exchange for, upon reclassification of, or as a distribution
in respect of, any of the foregoing.
Shareholder. "Shareholder" shall have the meaning set forth in the
first paragraph of this Agreement.
Stock Purchase and Redemption Agreement. "Stock Purchase and Redemption
Agreement" shall have the meaning set forth in the recitals set forth on the
first page of this Agreement.
Subsidiary. "Subsidiary," with respect to any entity (the "parent"),
shall mean any corporation, firm, association or trust of which such parent, at
the time in respect of which such term is used, (a) owns directly or indirectly
more than fifty percent (50%) of the equity or beneficial interest, on a
consolidated basis, and (b) owns directly or controls with power to vote,
indirectly through one or more Subsidiaries, shares of capital stock or
beneficial interest having the power to cast a majority of the votes entitled to
be cast for the election of directors, trustees, managers or other officials
having powers analogous to that of directors of a corporation. Unless otherwise
specifically indicated, when used herein the term Subsidiary shall refer to a
direct or indirect Subsidiary of the Company.
Synthetic Sale. "Synthetic Sale" shall mean any hedge, sale or purchase
of any derivative security or other action (other than Transfers expressly
permitted by the terms hereof) having the effect of reducing a Shareholder's
economic interest in Shares or reducing a Shareholder's exposure to a decrease
in fair market value of Shares.
Third Party. "Third Party" shall mean any Person other than the
Company.
Transaction Price. "Transaction Price" shall mean $4.39 per Share (as
equitably adjusted for stock dividends, stock splits, reverse stock splits and
other similar reclassifications), which is the price originally paid for each
Share by the Lee Group Shareholders at the time of initial purchase thereof and
giving effect to the
6
<PAGE>
5 for 1 stock split referred to in the first preamble to this Agreement.
Transfer. "Transfer" shall mean to transfer, sell, assign, pledge,
hypothecate, give, create a security interest in or lien on, place in trust
(voting or otherwise), assign or in any other way encumber or dispose of,
directly or indirectly and whether or not by operation of law or for value, any
Shares.
ARTICLE II
Covenants and Conditions
------------------------
Section 2.1 Restrictions on Transfers. No Shareholder may Transfer all
or any part of the Shares owned by such Shareholder other than a Transfer of
Shares which is (i) a Permitted Transfer, (ii) pursuant to a Public Offering,
(iii) for any Lee Group Shareholder or Management Shareholder, made after a
Public Offering, pursuant to a Rule 144 Transaction; provided that no Management
Shareholder shall Transfer, pursuant to any Rule 144 Transaction, an aggregate
number of Shares that, together with all prior Transfers by such Management
Shareholder pursuant to one or more Rule 144 Transactions and Public Offerings,
represents more than (A) the aggregate number of Shares Transferred by the Lee
Group Shareholders other than pursuant to a Permitted Transfer multiplied by (B)
such Management Shareholders' Proportionate Equity Interest, (iv) for any
Non-Management Shareholder, made after a Public Offering, (v) a Transfer by a
Management Shareholder to another Management Shareholder (a "Management
Transfer"); provided that each Management Transfer shall be made in accordance
with the procedures set forth in Sections 2.1(a)-(f), or (vi) pursuant to
another section of this Article II. For purposes of this Section 2.1,
"Proportionate Equity Interest" shall mean the number of Shares set forth on the
Schedule opposite the Management Shareholder's name plus the number of Shares
underlying options granted to such Management Shareholder on the date hereof (to
the extent exercisable) divided by the aggregate number of Shares set forth on
the Schedule opposite the names of the Lee Group Shareholders, in each case as
equitably adjusted to account for stock dividends, stock splits, reverse stock
splits or other similar reclassifications.
7
<PAGE>
(a) If, at any time after the Anniversary Date, a Management
Shareholder (each, an "Offeror") desires to Transfer Shares to another
Management Shareholder, such Offeror shall give notice of such offer (the
"Transfer Notice") to the Company. The Transfer Notice shall state the terms and
conditions of such offer, including the name of the prospective purchaser, the
proposed purchase price per share of such Shares (the "Offer Price"), payment
terms (including a description of any proposed non-cash consideration), the type
of disposition and the number of such Shares to be transferred ("Offered
Shares"). The Transfer Notice shall further state (i) that the Company may
acquire, in accordance with the provisions of this Agreement, any of the Offered
Shares for the price and upon the other terms and conditions, including deferred
payment (if applicable), set forth therein, and (ii) that the Company may not
purchase any of such Offered Shares unless the Company purchases all of such
Offered Shares.
(b) For a period of thirty (30) business days after receipt of
the Transfer Notice (the "Option Period"), the Company may, by notice in writing
to the Offeror delivering such Transfer Notice, elect in writing to purchase
all, but not less than all, of the Offered Shares at the Offer Price. The
closing of the purchase of Offered Shares pursuant to Section 2.1(b) or Section
2.1(c), as the case may be, shall take place at the principal office of the
Company on the tenth (10th) day after the expiration of the Option Period. At
such Closing, the Company shall deliver to the Offeror, against delivery of
certificates duly endorsed and stock powers representing the Offered Shares
being acquired by the Company, the Offer Price, on the same terms as set forth
in the Transfer Notice (including any non-cash consideration described therein),
payable in respect of the Offered Shares being purchased by the Company. All of
the foregoing deliveries will be deemed to be made simultaneously, and none
shall be deemed completed until all have been completed.
(c) Notwithstanding anything set forth in this Section 2.1 to
the contrary, prior to the termination of the Option Period, the Board of
Directors of the Company (the "Board") may, in its sole discretion, elect to
assign the Company's right to purchase all, but not less than all, of the
Offered Shares pursuant to this
8
<PAGE>
Section 2.1 to the Lee Group Shareholders. If the Board so elects, the Company
shall give notice of such assignment to each Lee Group Shareholder (the
"Assignment Notice"), indicating the number of Shares each Lee Group Shareholder
is entitled to purchase (including the right to over-allotment of Offered
Shares, if any), the Offer Price of such Shares, and any other relevant payment
terms. Within five (5) business days of the Assignment Notice, those Lee Group
Shareholders who intend to purchase the Offered Shares pursuant to this Section
2.1(c) (the "Offered Shares Electing Shareholders") shall notify the Company in
writing of such intention, indicating the number of Offered Shares (including
over-allotments, if any) they intend to purchase. The right to purchase such
Offered Shares shall be allocated to the Lee Group Shareholders pro rata (based
on the number of Shares each Lee Group Shareholder (together with each such Lee
Group Shareholder's Permitted Transferees) owns in relation to the total number
of Shares owned by all of the Lee Group Shareholders); provided, however, that
if any Lee Group Shareholder does not elect to purchase the number of Offered
Shares which such Lee Group Shareholder (and its Permitted Transferees) may
purchase pursuant to this Section 2.1(c), then the Offered Shares Electing
Shareholders (and their Permitted Transferees) may elect to purchase the
remaining Offered Shares. The right to purchase the remaining Offered Shares
shall be allocated to the Offered Shares Electing Shareholders pro rata (based
on the number of Shares each Offered Shares Electing Shareholder (together with
their Permitted Transferees) owns in relation to the total number of Shares
owned by all of the Offered Shares Electing Shareholders).
(d) If the Company or the Lee Group Shareholders, as the case
may be, do not elect to purchase all of the Offered Shares, all, but not less
than all, of the Offered Shares may be Transferred, but only in accordance with
Sections 2.1(e) and 2.1(f) and the terms of the Transfer Notice, within sixty
(60) days after expiration of the Option Period, after which, if the Offered
Shares have not been Transferred, all restrictions contained herein shall again
be in full force and effect.
(e) Five (5) days prior to the closing of the purchase of any
Offered Shares pursuant to Section 2.1(d) hereof (the "Closing"), the Offeror
shall notify
9
<PAGE>
the Company of the disposition of the Offered Shares, including the name of each
purchaser and the number of Shares bought by each purchaser. The Closing shall
take place no later than sixty (60) days after the expiration of the Option
Period. At such Closing, each purchaser of Offered Shares shall deliver to the
Offeror, against delivery of certificates duly endorsed and stock powers
representing the Offered Shares being acquired by such purchaser, the Offer
Price, on the same terms as set forth in the Transfer Notice (including any
non-cash consideration described therein), payable in respect of the Offered
Shares being purchased by such purchaser. All of the foregoing deliveries will
be deemed to be made simultaneously, and none shall be deemed completed until
all have been completed.
(f) Any Transfer of Shares pursuant to this Section 2.1 (other
than pursuant to Sections 2.1 (ii), (iii) and (iv)) shall remain subject to the
Transfer restrictions of this Agreement, and each intended transferee pursuant
to this Section shall execute and deliver to the Company a counterpart of this
Agreement, which shall evidence such transferee's agreement that the Shares
intended to be Transferred shall continue to be subject to this Agreement and
that as to such Shares the transferee shall be bound by the restrictions of this
Agreement as a Shareholder hereunder.
Section 2.2 Call by the Company.
(a) If the employment of a Management Shareholder by the
Company or any of its Subsidiaries shall terminate (a "Call Event") prior to the
completion of the Company's initial Public Offering, the Company shall have the
right to purchase (the "Call Option"), by delivery of a written notice (the
"Call Notice") to such terminated Management Shareholder no later than ninety
(90) days after the date of such Call Event, and such Management Shareholder and
such Management Shareholder's Permitted Transferees (the "Call Group") shall be
required to sell all (but not less than all) of the Shares which are owned by
the members of the Call Group on the date of such Call Event (collectively, the
"Call Securities") at a price per share equal to the Call Price (as defined in
Section 2.2(c) below) applicable to such Shares.
10
<PAGE>
(b) Notwithstanding anything set forth in this Section 2.2 to
the contrary, prior to the exercise of the Call Option by the Company, the Board
may, in its sole discretion, elect to assign the Company's right to exercise the
Call Option to purchase all, but not less than all, of the Call Securities to
the Lee Group Shareholders. If the Board so elects, the Company shall give
notice of such assignment to each Lee Group Shareholder (the "Call Assignment
Notice"), indicating the number of Call Securities each Lee Group Shareholder is
entitled to purchase (including the right to over-allotment of Call Securities,
if any), the Call Price applicable to such Shares and the date of the closing of
such purchase under this Section 2.2. Within five (5) business days of the Call
Assignment Notice, those Lee Group Shareholders who intend to purchase Call
Securities pursuant to this Section 2.2(b) (the "Call Securities Electing
Shareholders") shall notify the Company in writing of such intention, indicating
the number of Call Securities (including over-allotments, if any) they intend to
purchase; provided that, with respect to any Call Assignment Notice given by the
Company to the Lee Group Shareholders on or prior to the Anniversary Date, the
Lee Group Shareholders shall notify the Company of such intention to purchase
Call Securities no later than five (5) business days after the Anniversary Date.
The right to purchase such Call Securities shall be allocated to the Lee Group
Shareholders pro rata (based on the number of Shares each Lee Group Shareholder
(together with each such Lee Group Shareholder's Permitted Transferees) owns in
relation to the total number of Shares owned by all of the Lee Group
Shareholders); provided, however, that if any Lee Group Shareholder does not
elect to purchase the number of Call Securities which such Lee Group Shareholder
(and its Permitted Transferees) may purchase pursuant to this Section 2.2(b),
then the Call Securities Electing Shareholders (and their Permitted Transferees)
may elect to purchase the remaining Call Securities. The right to purchase the
remaining Call Securities shall be allocated to the Call Securities Electing
Shareholders pro rata (based on the number of Shares each Call Securities
Electing Shareholder (together with their Permitted Transferees) owns in
relation to the total number of Shares owned by all of the Call Securities
Electing Shareholders).
(c) For purposes of this Section 2.2, the term "Call Price"
shall mean (i) if the employment of the
11
<PAGE>
Management Shareholder is terminated for Cause (A) within one (1) year of the
date of this Agreement, the Transaction Price, and (B) subsequent to the date
which is one (1) year from the date of this Agreement, the lower of the
Transaction Price and the fair market value (as determined by the Board) of each
Share; and (ii) if the employment of the Management Shareholder is terminated
other than for Cause or the Management Shareholder voluntarily terminates his or
her employment with the Company or one of its Subsidiaries (A) within one (1)
year of the date of this Agreement, the Transaction Price, and (B) subsequent to
the date which is one (1) year from the date of this Agreement, the fair market
value (as determined by the Board) of each Share. Notwithstanding the foregoing,
in the event that a Management Shareholder who owns at least 91,116 Shares on
the date hereof is entitled to receive the Call Price for his Shares pursuant to
clause (i)(B) or (ii)(B) of this Section 2.2(c) and such Management Shareholder
disputes the Board's determination of fair market value, such Management
Shareholder shall be entitled to have the fair market value of such Shares
determined by an independent appraiser selected by the Company and reasonably
acceptable to such Management Shareholder. Fair market value of Shares shall be
determined in each case without deduction for the fact that the Shares represent
a minority interest in the Company. All costs of any appraisal under this
Section 2.2(c) shall be paid equally by the Company and such Management
Shareholder.
(d) The closing of any purchase of Call Securities pursuant to
Section 2.2(a) or 2.2(b) shall take place at the principal office of the Company
(i) with respect to purchases by the Company or a Designated Employee (as
defined below), on the tenth (10th) business day after the date of the Call
Notice and (ii) with respect to any Lee Group Shareholder, on the tenth (10th)
business day after notifying the Company in writing of its intention to exercise
its right to purchase pursuant to Section 2.2(b). At such closing, the Company,
the Lee Group Shareholders or the Designated Employee, as the case may be, shall
deliver to the Call Group, against delivery of certificates duly endorsed and
stock powers representing the Call Securities, a certified check or checks
payable to the Management Shareholder and/or the Permitted Transferees, as the
case may be, in an amount equal to the aggregate Call Price payable in respect
of such Call Securities. All of the foregoing deliveries
12
<PAGE>
will be deemed to be made simultaneously and none shall be deemed completed
until all have been completed.
(e) Notwithstanding anything set forth in this Section 2.2 to
the contrary, prior to the exercise by the Company of its Call Option to
purchase Call Securities pursuant to this Section 2.2, one or more new or
existing employees of the Company or any of its Subsidiaries may, in the sole
discretion of the Board, be designated by the Board (individually a "Designated
Employee" and collectively, "Designated Employees") who shall have the right,
but not the obligation, to exercise the Call Option and to acquire, in lieu of
the Company, some or all (as determined by the Company) of the Call Securities
that the Company is entitled to purchase from the Call Group hereunder, for cash
and on the same terms and conditions as set forth in Section 2.2(d) which apply
to the repurchase of Call Securities by the Company. Concurrently with any such
purchase of Call Securities by any such Designated Employee, such Designated
Employee who is not already a Management Shareholder shall execute a counterpart
of this Agreement whereupon such Designated Employee shall be deemed a
"Management Shareholder" and shall have the same rights and be bound by the same
obligations as a Management Shareholder hereunder.
(f) Subject to Section 2.2(b), if neither the Company nor any
Designated Employee elect to exercise the Call Option and deliver a Call Notice
within ninety (90) days of a Call Event, then the Call Option provided in this
Section 2.2 shall terminate, but the Management Shareholder or his Permitted
Transferees shall continue to hold such Call Securities pursuant to all of the
other provisions of this Agreement.
Section 2.3 Come Along. Except as provided in Section 2.3(c) hereof,
the Lee Group Shareholders shall not Transfer Shares to a Third Party who is not
a Permitted Transferee without complying with the terms and conditions set forth
in Sections 2.3(a) and 2.3(b) below.
(a) Any Lee Group Shareholder, when desiring to Transfer
Shares (the "Transferor"), shall give not less than seven (7) days prior written
notice of such intended Transfer to each other Shareholder and to the Company.
Such notice (the "Participation Notice") shall set forth the terms and
conditions of such proposed Transfer, including the name of the prospective
transferee,
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the number of Shares proposed to be transferred (the "Participation Securities")
by the Transferor, the purchase price per Share proposed to be paid therefor and
the payment terms and type of transfer to be effectuated. Within five (5) days
following the delivery of the Participation Notice by the Transferor to each
other Shareholder and to the Company, each Shareholder desiring to participate
in such proposed Transfer (each, a "Participating Offeree") shall, by notice in
writing to the Transferor and to the Company, have the opportunity and right to
sell to the purchasers in such proposed Transfer (upon the same terms and
conditions as the Transferor) up to that number of Shares owned by such
Participating Offeree as shall equal the product of (i) a fraction, the
numerator of which is the number of Shares owned by such Participating Offeree
as of the date of such proposed Transfer and the denominator of which is the
aggregate number of Shares actually owned as of the date of such Participation
Notice by the Transferor and by all Participating Offerees, multiplied by (ii)
the number of Participation Securities. The amount of Participation Securities
to be sold by the Transferor shall be reduced to the extent necessary to provide
for such sales of Shares by Participating Offerees.
(b) At the closing of any proposed Transfer in respect of
which a Participation Notice has been delivered, the Transferor, together with
all Participating Offerees, shall deliver to the proposed transferee
certificates evidencing the Shares to be sold thereto duly endorsed with stock
powers and shall receive in exchange therefor the consideration to be paid or
delivered by the proposed transferee in respect of such Shares as described in
the Participation Notice.
(c) The provisions of this Section 2.3 shall not apply to (i)
any Permitted Transfer, (ii) any Transfer pursuant to or following a Public
Offering or (iii) any Transfer pursuant to Section 2.2 or 2.4.
(d) The provisions of this Section 2.3 shall be construed in
accordance with Section 14(e) of the Warrant Agreement dated as of the date
hereof among the Company, RC Funding, Inc. and Bank of America National Trust
and Savings Association (the "Warrant Agreement").
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Section 2.4 Take Along.
(a) If a Lee Group Shareholder or group of Lee Group
Shareholders holding more than 50% of the then outstanding Shares (the "Take
Along Group") determine to sell or exchange (in a business combination or
otherwise), in one or a series of bona fide arms-length transactions to a Third
Party who is not an Affiliate of the Take Along Group, 50% or more of the
aggregate number of Shares owned by the Lee Group Shareholders on the date
hereof (as equitably adjusted to account for stock dividends, stock splits,
reverse stock splits or other similar reclassifications), then, upon five (5)
days written notice by the Take Along Group to each other Shareholder, which
notice shall include reasonable details of the proposed sale or exchange
including the proposed time and place of closing and the consideration to be
received by the Take Along Group (such notice being referred to as the "Sale
Request"), each other Shareholder (each, a "Seller") shall be obligated to, and
shall sell, transfer and deliver, or cause to be sold, transferred and
delivered, to such Third Party on the same terms as the Take Along Group, that
number of Shares owned by such Seller as shall equal the product of (A) a
fraction, the numerator of which is the number of Shares proposed to be
transferred by the Take Along Group as of the date of such Sale Request and the
denominator of which is the aggregate number of Shares actually owned as of the
date of such Sale Request by the Take Along Group, multiplied by (B) the number
of Shares actually owned as of the date of such Sale Request by such Seller.
Each Seller shall (i) deliver certificates for all of its Shares at the closing
of the proposed Transfer, free and clear of all claims, liens and encumbrances
and (ii) if shareholder approval of the transaction is required, vote his or its
Shares in favor thereof.
(b) The provisions of this Section 2.4 shall not apply to (i)
any Transfer pursuant to or following a Public Offering or (ii) a Permitted
Transfer.
(c) The provisions of this Section 2.4 shall be construed in
accordance with Section 14(f) of the Warrant Agreement.
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Section 2.5 Preemptive Rights.
(a) Preemptive Rights. The Company hereby grants to each
Shareholder so long as it shall own any Shares or, if sooner, until a Public
Offering, the right to purchase up to a pro rata portion of New Securities (as
defined in paragraph (b) below) which the Company, from time to time, proposes
to sell or issue following the date hereof. A Shareholder's pro rata portion,
for purposes of this Section 2.5, is the product of (i) a fraction, the
numerator of which is the number of outstanding Shares which such Shareholder
then owns and the denominator of which is the total number of Shares of Common
Stock then actually outstanding on a fully diluted basis after giving effect to
the exercise of all options, warrants and the like and the conversion of all
securities convertible into or exchangeable for Common Stock, multiplied by (ii)
the number of New Securities the Company proposes to sell or issue.
(b) Definition of New Securities. "New Securities" shall mean
any Common Stock of the Company, whether now authorized or not, any rights,
options or warrants to purchase Common Stock and any indebtedness or preferred
stock of the Company which is convertible into Common Stock (or which is
convertible into a security which is, in turn, convertible into Common Stock);
provided that the term "New Securities" does not include (i) indebtedness of the
Company; (ii) Common Stock issued as a stock dividend to all holders of Common
Stock pro rata or upon any subdivision or combination of shares of Common Stock;
(iii) the issuance and sale of securities of the Company pursuant to a Public
Offering or merger, consolidation or similar share exchange; (iv) any director,
officer, employee or consultant stock options approved by the Board of Directors
of the Company; (v) the issuance of any Common Stock upon the exercise or
conversion of any rights, options or warrants to purchase Common Stock; (vi) the
issuance and sale of up to an aggregate of 227,791 shares of Common Stock (as
equitably adjusted for stock dividends, stock splits, reverse stock splits and
other similar reclassifications) on or prior to the Anniversary Date to newly
hired officers (but not the chief executive officer) or employees of the Company
for a per share price no less than the Transaction Price; provided that such
officers or employees shall execute a counterpart of this Agreement as
Management Shareholders;
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or (vii) the issuance of any equity security issued to non-Affiliates of the
Company as part of a bona fide debt offering of investment units comprised of
such equity security and a debt security of the Company or the issuance of
Common Stock upon the conversion of such equity security pursuant to its terms.
(c) Notice from the Company. In the event the Company proposes
to issue New Securities, the Company shall give each Shareholder who has a
preemptive right under this Section 2.5 written notice of such proposal,
describing the type of New Securities and the price and the terms upon which the
Company proposes to issue the same. For a period of five (5) days following the
delivery of such notice by the Company, the Company shall be deemed to have
irrevocably offered to sell to each Shareholder its pro rata share of such New
Securities for the price and upon the terms specified in the notice. Each
Shareholder may exercise its preemptive rights hereunder by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased.
(d) Sale by the Company. In the event any Shareholder who has
a preemptive right under this Section 2.5 fails to exercise in full its
preemptive right within said five (5) day period, the Company shall have one (1)
year thereafter to sell the New Securities with respect to which the preemptive
right was not exercised, at a price and upon terms no more favorable to the
purchasers thereof than specified in the Company's notice given pursuant to
Section 2.5(c).
(e) Closing. The closing for any such issuance shall take
place as proposed by the Company with respect to the Shares to be issued, at
which closing the Company shall deliver certificates for the shares in the
respective names of the purchasing Shareholders against receipt of payment
therefor.
Section 2.6 Restrictions on Other Agreements. Until the completion
of a Public Offering by the Company, no Shareholder shall grant any proxy or
enter into or agree to be bound by any voting trust with respect to the Shares,
nor shall any Shareholder enter into any shareholders agreements or arrangements
of any kind with any person with respect to the Shares on terms which conflict
with the provisions of this Agreement (whether
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or not such agreements and arrangements are with other Shareholders), including,
but not limited to, agreements or arrangements with respect to the acquisition,
disposition or voting of Shares inconsistent herewith.
Section 2.7 Synthetic Sales. Any Synthetic Sales by a Management
Shareholder then employed by the Company or any of its Subsidiaries shall
require the prior written approval of the Board.
ARTICLE III
Registration Rights
-------------------
Section 3.1 General. For purposes of Article III: (a) the terms
"register", "registered" and "registration" refer to a registration effected by
preparing and filing a registration statement in compliance with the 1933 Act
and the declaration or ordering of effectiveness of such registration statement;
and (b) the term "Holder" means any Shareholder or Permitted Transferee thereof.
Section 3.2 Demand Registrations.
(a) If the Company shall receive a written request (specifying
that it is being made pursuant to this Section 3.2) from the Lee Group
Shareholders, made at a time when the Lee Group Shareholders and their Permitted
Transferees own in the aggregate at least 10% of the Purchased Shares (as that
term is defined in the Stock Purchase and Redemption Agreement), that the
Company file a registration statement under the 1933 Act, or a similar document
pursuant to any other statute then in effect corresponding to the 1933 Act,
covering the registration of Common Stock, then the Company shall, not later
than ninety (90) days after receipt by the Company of a written request for a
demand registration pursuant to this Section 3.2, file a registration statement
with the Securities and Exchange Commission (the "SEC") relating to such
Registrable Securities as to which such request for a demand registration
relates (the "Requested Shares"), and the Company shall use its best efforts to
cause the offering of such Requested Shares to be registered under the 1933 Act.
The Company shall be obligated to effect only three (3) registrations of
Registrable Securities pursuant to this Section 3.2; provided, however, that if
the Lee Group Shareholders and their Permit-
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ted Transferees own at least 10%, but not more than 25%, of the Purchased
Shares, then the Company shall be obligated to effect only one (1) such
registration of Registrable Securities.
(b) If, pursuant to Section 3.3, the total amount of
securities that all Holders and all other holders of securities which have
applicable registration rights request to be included in an offering made
pursuant to this Section 3.2 exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of the offering,
then the Company will include in such registration only the number of securities
which, in the good faith opinion of such underwriters, can be sold, selected
from the securities requested to be included by all Holders and such other
holders pro rata based on the number of securities which each of them owns.
Section 3.3 Piggyback Registration. If, at any time, the Company
determines to register, whether for its own account or pursuant to a request by
the Lee Group Shareholders pursuant to Section 3.2, any of its equity securities
(including securities convertible into equity securities, but excluding equity
securities being registered pursuant to a registration statement on Form S-8 and
equity securities issued in connection with mezzanine debt or senior bank
financing of the Company, whether pursuant to the Stock Purchase and Redemption
Agreement or placed or sold in the future, or equity securities issued upon
conversion or exchange thereof), for its own account or for the account of
others under the 1933 Act in connection with the public offering of such
securities (other than the first Public Offering), the Company shall, at each
such time, promptly give each Holder written notice of such determination no
later than ten (10) days before the effective date of any such registration.
Upon the written request of any Holder received by the Company within five (5)
days after the giving of any such notice by the Company, the Company shall use
its best efforts to cause to be registered under the 1933 Act all of the
Registrable Shares of each Holder that such Holder has requested be registered.
If the total amount of securities that are to be included by either the Company
(or other person (including any Shareholder) for whose account the registration
is made) for its own account and at the request of Holders pursuant to this
Section 3.3 and all other holders of securities which
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have applicable registration rights exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of the offering,
then the Company will include in such registration only the number of securities
which in the opinion of such underwriters can be sold, selected from the
securities requested to be included by all Holders and all such other holders
pro rata based on the number of securities which each of them owns. The rights
afforded to the Holders pursuant to this Section 3.3 are subject to the
provisions of Section 14(b) of the Warrant Agreement.
Section 3.4 Obligations of the Company.
(a) Whenever required under Section 3.2 or 3.3 hereof to use
its best efforts to effect the registration of any Registrable Securities, the
Company shall:
(1) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use
its best efforts to cause such registration statement to
become and remain effective, including, without limitation,
filing of post-effective amendments and supplements to any
registration statement or prospectus necessary to keep the
registration statement current; provided, however, that if
such registration statement does not become effective, then
any demand registration pursuant to Section 3.2 prompting such
undertaking by the Company shall be deemed to be rescinded and
retracted and shall not be counted as, or deemed or considered
to be or to have been, a demand registration pursuant to
Section 3.2 for any purpose;
(2) as expeditiously as reasonably possible, prepare
and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply
with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration
statement and to keep each registration and qualification
under this Agreement effective (and in compliance with the
1933 Act)
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by such actions as may be necessary or appropriate for a
period of up to 180 days (if, in the reasonable discretion of
the Holders owning securities covered by such registration
statement, such period of time is necessary for the successful
completion of the offering of such securities) after the
effective date of such registration statement, all as
requested by such Holders;
(3) as expeditiously as reasonably possible, furnish
to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they
may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them;
(4) as expeditiously as reasonably possible, use its
best efforts to register and qualify the securities covered by
such registration statement under such securities or "blue
sky" laws of such jurisdictions as shall be reasonably
appropriate for the distribution of the securities covered by
the registration statement, provided that the Company shall
not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent
to service of process in any such jurisdiction, and further
provided that (anything in this Agreement to the contrary
notwithstanding with respect to the bearing of expenses) if
any jurisdiction in which the securities shall be qualified
shall require that expenses incurred in connection with the
qualification of the securities in that jurisdiction be borne
by selling shareholders, then such expenses shall be payable
by selling shareholders pro rata to the extent required by
such jurisdiction;
(5) use its best efforts to cause all Registrable
Securities covered by such registration statement to be
registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the
seller or sellers thereof to consum-
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mate the disposition or such Registrable Securities;
(6) notify each seller of Registrable Securities
covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under
the 1933 Act, upon discovery that, or upon the happening of
any event as a result of which, the prospectus included in
such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request
of any such seller or Holders promptly prepare to furnish to
such seller or Holders a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made;
(7) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at
least twelve (12) months, but not more than eighteen (18)
months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
1933 Act, and will furnish to each such seller at least two
(2) business days prior to the filing thereof a copy of any
post-effective amendment or supplement to such registration
statement or prospectus and shall not file any thereof to
which any such seller shall have reasonably objected, except
to the extent required by law, on the grounds that such
amendment or supplement does
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not comply in all material respects with the requirements of
the 1933 Act or of the rules or regulations thereunder;
(8) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by
such registration statement from and after a date not later
than the effective date of such registration statement; and
(9) use its best efforts to list all Registrable
Securities covered by such registration statement on any
securities exchange on which any class of Registrable
Securities is then listed.
(b) The Company will furnish to each Holder on whose behalf
Registrable Securities have been registered pursuant to this Agreement a signed
counterpart, addressed to such Holder, of an opinion of counsel for the Company
dated the effective date of such registration statement, and such opinion of
counsel shall cover those matters which are customarily covered in opinions of
issuer's counsel delivered to underwriters in connection with underwritten
public offerings of securities.
(c) Except as otherwise set forth in Section 3.3, if the
Company at any time proposes to register any of its securities under the 1933
Act, whether or not for sale for its own account, and such securities are to be
distributed by or through one or more underwriters, then the Company will make
reasonable efforts, if requested by any Holder of Registrable Securities who
requests registration of Registrable Securities in connection therewith pursuant
to Section 3.2 or 3.3 hereof, to arrange for such underwriters to include such
Registrable Securities among the securities to be distributed by or through such
underwriters.
(d) In connection with the preparation and filing of each
registration statement registering Registrable Securities under this Agreement,
the Company will give the Holders of Registrable Securities on whose behalf such
Registrable Securities are to be so registered and their underwriters, if any,
and their respective counsel and accountants, the opportunity to partici-
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<PAGE>
pate in the preparation of such registration statement, each prospectus included
therein or filed with the SEC, and each amendment thereof or supplement thereto,
and will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers, its
counsel and the independent public accountants who have certified its financial
statements, as shall be necessary, in the opinion of such Holders or such
underwriters or their respective counsel, in order to conduct a reasonable and
diligent investigation within the meaning of the 1933 Act.
Section 3.5 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to Article III that
the Holders shall furnish to the Company such information regarding them, the
Registrable Securities held by them, and the intended method of disposition of
such securities as the Company shall reasonably request and as shall be required
in connection with the action to be taken by the Company.
Section 3.6 Expenses of Registration. All expenses incurred in
connection with a registration pursuant to Section 3.2 or 3.3 hereof (excluding
underwriters' discounts and commissions, which shall be borne by the sellers),
including without limitation all registration and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holders (which
counsel shall be selected by a majority in interest of such Holders) shall be
borne by the Company.
Section 3.7 Underwriting Requirements. In connection with any
registration of Registrable Securities under this Agreement, the Company will,
if requested by the underwriters for any Registrable Securities included in such
registration, enter into an underwriting agreement with such underwriters for
such offering, such agreement to contain such representations and warranties by
the Company, and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, provisions relating to indemnification and contribution. The
Holders on whose behalf Registrable Securities are to be distributed by such
underwriters shall be parties to any such underwrit-
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ing agreement, and the representations and warranties by the Company and the
other agreements on the part of the Company to and for the benefit of such
underwriters shall be also made to and for the benefit of such Holders of
Registrable Securities. The Company shall use its reasonable best efforts to
cause the underwriting agreement to comply with Section 3.8. Such underwriters
shall be selected (i) by the Company, in the case of a registration pursuant to
Section 3.3, or (ii) by the Holders requesting a demand registration, in the
case of a registration pursuant to Section 3.2.
Section 3.8 Indemnification. In the event any Registrable Securities
are included in a registration statement under Article III:
(a) To the fullest extent permitted by law, the Company will
indemnify and hold harmless each Holder requesting or joining in a registration,
any underwriter (as defined in the 1933 Act) for it, and each person, if any,
who controls such Holder or such underwriter within the meaning of the 1933 Act,
from and against any losses, claims, damages, expenses (including reasonable
attorneys' fees and expenses and reasonable costs of investigation) or
liabilities, joint or several, to which they or any of them may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages,
expenses or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based on any untrue or
alleged untrue statement of any material fact contained in such registration
statement including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or arise out of any alleged violation by the Company of any rule or
regulation promulgated under the 1933 Act applicable to the Company and relating
to action or inaction required of the Company in connection with any such
registration; provided, however, that the indemnity agreement contained in this
Section 3.8(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable to anyone for any such loss claim,
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damage, liability or action to the extent that it arises out of or is based upon
an untrue statement or omission made in connection with such registration
statement, preliminary prospectus, final prospectus or amendments or supplements
thereto in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder,
underwriter or control person. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Holder,
underwriter or control person and shall survive the transfer of such securities
by such Holder.
(b) To the fullest extent permitted by law, each Holder
requesting or joining in a registration will indemnify and hold harmless the
Company, as the case may be, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the 1933 Act, and each agent and any underwriter for the
Company and any person who controls any such agent or underwriter and each other
Holder and any person who controls such Holder (within the meaning of the 1933
Act) against any losses, claims, damages or liabilities to which the Company or
any such director, officer, control person, agent, underwriter, or other Holder
may become subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or
are based upon an untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or arise out of or
are based upon the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
omission was made in such registration statement, preliminary or final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by such Holder with respect to
such Holder expressly for use in connection with such registration; and such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, control person, agent, underwriter, or
other Holder in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity obligation
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<PAGE>
of each such Holder hereunder shall be limited to and shall not exceed the
proceeds actually received by such Holder upon a sale of Registrable Securities
pursuant to a registration statement hereunder; and provided, further, that the
indemnity agreement contained in this Section 3.8(b) shall not apply to amounts
paid in settlements effected without the consent of such Holder (which consent
shall not be unreasonably withheld). Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any such director, officer, Holder, underwriter or control person and shall
survive the transfer of such securities by such Holder.
(c) Any person seeking indemnification under this Section 3.8
will (i) give prompt notice to the indemnifying party of any claim with respect
to which it seeks indemnification (but the failure to give such notice will not
affect the right to indemnification hereunder, unless the indemnifying party is
materially prejudiced by such failure) and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest may exist between such
indemnified and indemnifying parties with respect to such claim, permit such
indemnifying party, and other indemnifying parties similarly situated, jointly
to assume the defense of such claim with counsel reasonably satisfactory to the
parties. In the event that the indemnifying parties cannot mutually agree as to
the selection of counsel, each indemnifying party may retain separate counsel to
act on its behalf and at its expense. The indemnified party shall in all events
be entitled to participate in such defense at its expense through its own
counsel. If such defense is not assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation. An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
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between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the reasonable fees and expenses of such additional counsel.
(d) If for any reason the foregoing indemnification is
unavailable to any party or insufficient to hold it harmless as and to the
extent contemplated by the preceding paragraphs of this Section 3.8, then each
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage, expense or liability
in such proportion as is appropriate to reflect the relative benefits received
by the Company, on the one hand, and the applicable indemnified party, as the
case may be, on the other hand, and also the relative fault of the Company and
any applicable indemnified party, as the case may be, as well as any other
relevant equitable considerations.
Section 3.9 Lock-Up Agreement. If required by the underwriter, each
Shareholder agrees not to sell or otherwise transfer or dispose of any Common
Stock (or other securities) of the Company held by such Shareholder (other than
securities included in the applicable registration statement or shares purchased
in the public market after the effective date of registration) or any interest
or future interest therein during such period (not to exceed 180 days) as is
acceptable to the underwriter following the effective date of each registration
statement of the Company filed under the 1933 Act which includes securities to
be sold to the public in an underwritten offering. The Company may impose stop
transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said period.
Section 3.10 No Inconsistent Agreements. The Company agrees that it
has not entered into, and it will not hereafter enter into, any agreement with
respect to the registration of its securities that is inconsistent with (or
superior to) the rights granted to the Holders of Registrable Securities in this
Agreement.
28
<PAGE>
Section 3.11 Stock Split and Reverse Stock Split. If, on or after the
receipt by the Company of a request for registration of a public offering
pursuant to Section 3.2 hereof, the proposed managing underwriter or
underwriters of such offering reasonably believes that the number of shares to
be registered is not the number necessary for the success of such offering, the
Company shall use its best efforts to cause each share of its outstanding Common
Stock to be converted into such number of shares of such Common Stock so that
the number of shares of Registrable Securities to be registered is equal to the
number which such managing underwriter or underwriters reasonably believes is
necessary for the success of such offering. If necessary in connection
therewith, the Company shall use its best efforts to cause to be recommended,
approved and adopted by its Board of Directors and approved and adopted by its
shareholders, and, if so approved and adopted, file and cause to become
effective, an amendment to its articles of incorporation increasing the number
of shares of Common Stock which the Company is authorized to issue. Each
Shareholder, together with its Permitted Transferees, hereby agrees to vote the
Shares held by it in favor of adopting such amendment.
29
<PAGE>
ARTICLE IV
Miscellaneous
-------------
Section 4.1 Remedies. The parties to this Agreement acknowledge and
agree that the covenants of the Company and the Shareholders set forth in this
Agreement may be enforced in equity by a decree requiring specific performance.
In the event of a breach of any material provision of this Agreement, the
aggrieved party will be entitled to institute and prosecute proceedings in any
court of competent jurisdiction to enforce specific performance of such
provision, as well as to obtain damages for breach of this Agreement. Without
limiting the foregoing, if any dispute arises concerning the sale or other
disposition of any of the Shares subject to this Agreement or concerning any
other provisions hereof or the obligations of the parties hereunder, the parties
to this Agreement agree that an injunction may be issued in connection therewith
(including, without limitation, restraining the sale or other disposition of
such Shares or rescinding any such sale or other disposition). Such remedies
shall be cumulative and non-exclusive and shall be in addition to any other
rights and remedies the parties may have under this Agreement or otherwise.
Section 4.2 Entire Agreement; Amendment; Waiver. This Agreement,
together with the Schedule hereto, sets forth the entire understanding of the
parties, and as of the closing contemplated by the Stock Purchase and Redemption
Agreement supersedes all prior agreements and all other arrangements and
communications, whether oral or written, with respect to the subject matter
hereof, including, without limitation, the rights and obligations of the
Existing Shareholders under the Prior Shareholders Agreement, and each Existing
Shareholder hereby waives all of its rights under the Prior Shareholders
Agreement and hereby cancels the Prior Shareholders Agreement. The Schedule may
be amended to reflect changes in the composition of the Shareholders and changes
in stock ownership that may occur from time to time as a result of Permitted
Transfers or Transfers permitted under Article II hereof. Amendments to the
Schedule reflecting Permitted Transfers or Transfers permitted under Article II
hereof shall become effective when a copy of this Agreement, as executed by any
new transferee, is filed with the Company, except as other-
30
<PAGE>
wise provided in Section 4.13 hereof. Any other amendments to, or the
termination of, this Agreement shall require the prior written consent of a
majority in interest of the Shareholders. Notwithstanding the preceding
sentence, no amendment may adversely affect the Lee Group Shareholders, the
Non-Management Shareholders or the Management Shareholders at any time, unless
consented to in writing by a majority in interest of such adversely affected
group. Notwithstanding any provisions to the contrary contained herein, any
party may waive any rights with respect to which such party is entitled to the
benefits under this Agreement. No waiver of or consent to any departure from any
provision of this Agreement shall be effective unless signed in writing by the
party entitled to the benefit thereof.
Section 4.3 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if the invalid
or unenforceable provision were omitted.
Section 4.4 Notices. All notices and other communications necessary or
contemplated under this Agreement shall be in writing and shall be delivered in
the manner specified herein or, in the absence of such specification, shall be
deemed to have been duly given three (3) business days after mailing by
certified mail, when delivered by hand, upon confirmation of receipt by
telecopy, or one (1) day after sending by overnight delivery service, to the
respective addresses of the parties set forth below:
(a) For notices and communications to the Existing
Shareholders, to the respective addresses set forth in the Schedule;
(b) for notices and communications to the Company:
Rayovac Corporation
601 Rayovac Drive
Madison, Wisconsin 53711-2497
Attn: President
Facsimile No.: (608) 278-6666
31
<PAGE>
(c) for notices and communications to the Lee Group
Shareholders, to the respective addresses set forth in the Schedule, with a copy
to:
Skadden, Arps, Slate,
Meagher & Flom
One Beacon Street
Boston, MA 02108
Attention: Louis A. Goodman, Esq.
Facsimile No.: (617) 573-4822
By notice complying with the foregoing provisions of this Section 4.4, each
party shall have the right to change the mailing address for future notices and
communications to such party.
Section 4.5 Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and to their
respective transferees, successors and assigns; provided, however, that the
rights under this Agreement may not be assigned except as expressly provided
herein, it being understood that the Company's rights hereunder may be assigned
by the Company to any corporation which is the surviving entity in a merger,
consolidation or like event involving the Company. No such assignment shall
relieve an assignor of its obligations hereunder.
Section 4.6 Governing Law. This Agreement shall be governed by the
laws of the Commonwealth of Massachusetts (regardless of the laws that might
otherwise govern under applicable Massachusetts principles of conflicts of law)
as to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies.
Section 4.7 Termination. Without affecting any other provision of this
Agreement requiring termination of any rights in favor of any Shareholder,
Permitted Transferee or any other transferee of Shares, the provisions of
Articles II and III of this Agreement shall terminate as to such Shareholder,
Permitted Transferee or other transferee, when, pursuant to and in accordance
with this Agreement such Shareholder, Permitted Transferee or other transferee
as the case may be, no longer own any Shares; provided that termination pursuant
to this Section 4.7 shall only occur in respect of a Shareholder after all
Permitted Transferees in respect thereof also
32
<PAGE>
no longer own any Shares. As provided above, the provisions of Sections 2.3,
2.4, 2.5 and 2.6 shall not apply to the Shares owned by Shareholders following a
Public Offering.
Section 4.8 Recapitalization, Exchanges, Etc. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to
Shares, to any and all shares of capital stock of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of the Shares, by reason of a stock dividend, stock split, stock
issuance, reverse stock split, combination, recapitalization, reclassification,
merger, consolidation or otherwise.
Section 4.9 Lee Group Shareholder Representative. Each Lee Group
Shareholder hereby designates and appoints (and each Permitted Transferee of
each such Lee Group Shareholder is hereby deemed to have so designated and
appointed) each of Scott A. Schoen and Warren C. Smith, Jr., as his
attorney-in-fact with full power of substitution for each of them (the "Lee
Group Shareholder Representative"), to serve as the representative of each such
person to perform all such acts as are required, authorized or contemplated by
this Agreement to be performed by such person and hereby acknowledges that the
Lee Group Shareholder Representative shall be the only person authorized to take
any action so required, authorized or contemplated by this Agreement by each
such person. Each such person further acknowledges that the foregoing
appointment and designation shall be deemed to be coupled with an interest and
shall survive the death or incapacity of such person. Each such person hereby
authorizes (and each such Permitted Transferee shall be deemed to have
authorized) the other parties hereby to disregard any notice or other action
taken by such person pursuant to this Agreement except for the Lee Group
Shareholder Representative. The other parties hereto are and will be entitled to
rely on any action so taken or any notice given by the Lee Group Shareholder
Representative and are and will be entitled and authorized to give notices only
to the Lee Group Shareholder Representative for any notice contemplated by this
Agreement to be given to any such person. A successor to the Lee Group
Shareholder Representative may be chosen by a majority in interest of the Lee
Group Shareholders, provided that
33
<PAGE>
notice thereof is given by the new Lee Group Shareholder Representative to the
Company and to each other Shareholder.
Section 4.10 Action Necessary to Effectuate the Agreement. The parties
hereto agree to take or cause to be taken all such corporate and other action as
may be necessary to effect the intent and purposes of this Agreement.
Section 4.11 Purchase for Investment; Legend on Certificate. Each of
the parties acknowledges that all of the Shares held by such party are being (or
have been) acquired for investment and not with a view to the distribution
thereof and that no Transfer of Shares may be made except in compliance with
applicable federal and state securities laws. Each of the certificates of Shares
of the Company which are now or hereafter owned by the Shareholders and which
are subject to the terms of this Agreement shall have endorsed in writing,
stamped or printed, thereon the following legend:
"The shares represented by this stock certificate are subject to the
terms and conditions, including restrictions on transfer, of a Shareholders
Agreement dated as of September 12, 1996, as amended from time to time. A copy
of the Shareholders Agreement is on file with the Secretary of the Company and
will be mailed to any properly interested person without charge upon the
Company's receipt of a written request therefor. Any sale or transfer in
violation of said Agreement shall be null and void."
All certificates of Shares shall also bear all legends required by
federal and state securities laws.
Section 4.12 Effectiveness of Transfers. All Shares Transferred by a
Shareholder (other than pursuant to an effective registration statement under
the 1933 Act or pursuant to a Rule 144 Transaction) shall, except as otherwise
expressly stated herein, be held by the transferee thereof pursuant to this
Agreement. Such transferee shall, except as otherwise expressly stated herein,
have all the rights and be subject to all of the obligations of a Shareholder
under this Agreement (as through such party had so agreed pursuant to Section
4.13 hereof) automatically and without requiring any further act by such
transferee or by any parties to this Agreement.
34
<PAGE>
Without affecting the preceding sentence, if such transferee is not a
Shareholder on the date of such Transfer, then such transferee, as a condition
to such Transfer, shall confirm such transferee's obligations hereunder in
accordance with Section 4.13 hereof. No Shares shall be Transferred on the
Company's books and records, and no Transfer of Shares shall be otherwise
effective, unless any such Transfer is made in accordance with the terms and
conditions of this Agreement, and the Company is hereby authorized by all of the
Shareholders to enter appropriate stop transfer notations and its transfer
records to give effect to this Agreement.
Section 4.13 Additional Shareholders. Subject to the restrictions on
Transfers of Shares contained herein, any Person who is not already a
Shareholder acquiring Shares (except for transferees acquiring Shares in an
offering registered under the 1933 Act or in a Rule 144 Transaction and except
as otherwise permitted by the Board), shall, on or before the Transfer or
issuance to it of Shares, sign a counterpart signature page hereto in form
reasonably satisfactory to the Company and shall thereby become a party to this
Agreement to be bound hereunder as (a) a Management Shareholder if a Permitted
Transferee or an employee of the Company or any of its Subsidiaries, (b) a Lee
Group Shareholder if a Permitted Transferee or an employee or affiliate of
Thomas H. Lee Company or Equity Fund or (c) a Non-Management Shareholder if such
person or entity does not fall within either (i) or (ii) above; provided that a
transferee which is a Permitted Transferee under clause (b) of the definition of
Permitted Transferee shall not be obligated to so agree until foreclosure on its
pledge.
Section 4.14 No Waiver. No course of dealing and no delay on the part
of any party hereto in exercising any right, power or remedy conferred by this
Agreement shall operate as waiver thereof or otherwise prejudice such party's
rights, powers and remedies. No single or partial exercise of any rights, powers
or remedies conferred by this Agreement shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
Section 4.15 Financial Statements. The Company will provide Thomas F.
Pyle, Jr. with a copy of the regularly prepared monthly financial statements of
the Company provided to the Company's principal lender at
35
<PAGE>
the time provided to such lender and a copy of the quarterly and annual
financial statements of the Company at the time filed with the SEC. The
provisions of this Section 4.15 shall not apply (i) after a Public Offering or
(ii) when Thomas F. Pyle, Jr. and his Associates cease to own 50% of the Shares
owned by them on the date hereof (as equitably adjusted to account for stock
dividends, stock splits, reverse stock splits or other similar
reclassifications), whichever first occurs.
Section 4.16 Counterpart. This Agreement may be executed in two or
more counterparts each of which shall be deemed an original but all of which
together shall constitute one and the same instrument, and all signatures need
not appear on any one counterpart.
Section 4.17 Headings. All headings and captions in this Agreement are
for purposes of reference only and shall not be construed to limit or affect the
substance of this Agreement.
Section 4.18 Number; Gender. When the context so requires, the
singular shall include the plural and the plural shall include the singular and
the gender of any pronoun shall include the other gender.
36
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the date and year first above written.
RAYOVAC CORPORATION
By: /s/ David A. Jones
--------------------------
Name: David A. Jones
Title: Director
37
<PAGE>
Lee Group Shareholders:
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL EQUITY ADVISORS III
LIMITED PARTNERSHIP,
as General Partner
By: THL EQUITY TRUST III,
as General Partner
By: /s/ Warren C. Smith, Jr.
-----------------------------
Name: Warren C. Smith, Jr.
Title: Trustee
THOMAS H. LEE FOREIGN FUND III, L.P.
By: THL EQUITY ADVISORS
III LIMITED PARTNERSHIP,
as General Partner
By: THL EQUITY TRUST III,
as General Partner
By: /s/ Warren C. Smith, Jr.
----------------------------
Name: Warren C. Smith, Jr.
Title: Trustee
38
<PAGE>
Lee Group Shareholders (continued):
THL-CCI LIMITED PARTNERSHIP
By: /s/ Warren C. Smith, Jr.
----------------------------
Warren C. Smith, Jr., as
agent and attorney-in-fact
under Purchaser Appoint-
ment of Agent and Power of
Attorney dated September
3, 1996 of THL-CCI Limited
Partnership
39
<PAGE>
Management Shareholders:
Roger F. Warren
Trygve Lonnebotn
James A. Broderick
Gary E. Wilson
Kenneth V. Biller
Dale R. Tetzlaff
Russell E. Lefevre
Raymond L. Balfour
Arthur Homa
By: /s/ Thomas F. Pyle, Jr.
----------------------------
Thomas F. Pyle, Jr., as
agent and attorney-in-fact
under Shareholder Appoint-
ment of Agent and Power of
Attorney dated March 1,
1996 executed by each of
the Redemption Sharehold-
ers (as defined in the
Stock Purchase and Redemp-
tion Agreement), and not
in his individual capacity
40
<PAGE>
Management Shareholders (continued):
/s/ David A. Jones
--------------------------------
David A. Jones
41
<PAGE>
Non-Management Shareholders:
Thomas F. Pyle, Jr.
Marvin G. Siegert
Robert W. Zimmerman
By: /s/ Marvin G. Siegert
----------------------------
Marvin G. Siegert, as
agent and attorney-in-fact
under Shareholder Appoint-
ment of Agent and Power of
Attorney dated March 1,
1996 executed by each of
the Redemption Sharehold-
ers (as defined in the
Stock Purchase and Redemp-
tion Agreement), and not
in his individual capacity
42
<PAGE>
SCHEDULE OF SHAREHOLDERS
<TABLE>
<CAPTION>
==========================================================================================================
Number of Shares of
Shareholder Common Stock Owned
==========================================================================================================
<S> <C>
Thomas H. Lee Equity Fund III, L.P. 13,864,135
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
==========================================================================================================
Thomas H. Lee Foreign Fund III, L.P. 858,950
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
==========================================================================================================
THL-CCI Limited Partnership 1,457,405
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
==========================================================================================================
David A. Jones 227,895
2910 Coles Way
Atlanta, GA 30350
==========================================================================================================
Roger F. Warren 569,735
505 Summit Road
Madison, WI 53704
==========================================================================================================
Marvin G. Siegert 205,105
7518 Red Fox Trail
Madison, WI 53717
==========================================================================================================
Trygve Lonnebotn 410,210
1157 Amherst Drive
Madison, WI 53705
==========================================================================================================
James A. Broderick 205,105
102 Glen Thistle Road
Madison, WI 53705
==========================================================================================================
Gary E. Wilson 113,945
W12035 Baltic Avenue
Merrimac, WI 53561
==========================================================================================================
Robert W. Zimmerman 45,580
N2747 Brown Lane
Waupaca, WI 54981
==========================================================================================================
Kenneth V. Biller 91,160
7318 Old Sauk Road
Middleton, WI 53562
==========================================================================================================
Dale R. Tetzlaff 102,550
941 Lori Lane
Sun Prairie, WI 53590
==========================================================================================================
Russell E. Lefevre 170,920
5826 Schumann Drive
Madison, WI 53711
43
<PAGE>
==========================================================================================================
Raymond L. Balfour 125,000
29 Blue Ridge Court
Madison, WI 53705
==========================================================================================================
Arthur Homa 40,000
18 Madeline Island
Madison, WI 53719
==========================================================================================================
Thomas F. Pyle, Jr. 2,022,785
3500 Corbin Court
Madison, WI 53704
with a copy to:
Benjamin F. Garmer, III
Foley & Lardner
Firstar Center
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
==========================================================================================================
</TABLE>
44
AMENDMENT TO
RAYOVAC SHAREHOLDERS AGREEMENT
This Amendment (this "Amendment") to the Shareholders Agreement dated as of
September 12, 1996, by and among Rayovac Corporation, a Wisconsin corporation
(the "Company"), and the shareholders of the Company referred to therein (the
"Initial Agreement") is entered into as of 1 August 1997 by and among the
Company, those persons listed as Lee Group Shareholders on the signature pages
hereof, those persons listed as Management Shareholders on the signature pages
hereof, and those persons listed as Non-Management Shareholders on the signature
pages hereof. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Initial Agreement.
Whereas, Thomas F. Pyle, Jr. ("Pyle") and Marvin G. Siegert, Judith A. Siegert,
Kimberly A. Waterfield, Amy J. Carroll, and Kristen M. Siegert (collectively,
the "Siegerts"), who are Non-Management Shareholders, may wish to sell some or
all of their shares of Common Stock; and
Whereas, the Lee Group Shareholders or the Company may wish to purchase some or
all of Pyle's and the Siegerts' shares of Common Stock; and
Whereas, the Initial Agreement does not permit such a transaction or
transactions; and
Whereas, pursuant to Section 4.2 of the Initial Agreement, the Initital
Agreement may be amended by a written instrument duly executed by a majority in
interest of each of the Lee Group Shareholders, Management Shareholders, and
Non-Management Shareholders; and
Whereas, the signatories hereto represent a majority in interest of each of the
Lee Group Shareholders, Management Shareholders, and Non-Management
Shareholders;
<PAGE>
-2-
Now, therefore, in consideration of the foregoing, the Initial Agreement is
hereby amended as follows:
1. Article I, Definition of "Permitted Transfer" is hereby amended by adding
the following clause after clause (g):
(h) A Transfer of Shares by each of Thomas F. Pyle, Jr., Marvin G.
Siegert, Judith A. Siegert, Kimberly A. Waterfield, Amy J. Carroll,
and Kristen M. Siegert to one or more Lee Group Shareholders or the
Company.
2. Article I, Definition of "Transaction Price" is hereby restated to read as
follows:
Transaction Price. "Transaction Price" shall mean $4.39 per Share (as
equitably adjusted for stock dividends, stock splits, reverse stock splits
and other similar reclassifications), which is the price originally paid
for each Share by the Lee Group Shareholders at the time of initial
purchase thereof and giving effect to the 5 for 1 stock split referred to
in the first preamble to the this Agreement; provided that as to any Shares
that are issued to a Management Shareholder pursuant to the Company's 1997
Stock Option Plan, "Transaction Price" shall mean $6.01 per Share (as
equitably adjusted for stock dividends, stock splits, reverse stock splits
and other similar reclassifications).
3. Section 2.1 of the Initial Agreement is hereby amended by adding the
following clause immediately after clause (f):
(g) Notwithstanding anything set forth in this Agreement to the contrary,
no Shareholder may Transfer all or any part of the Shares owned by
such Shareholder if such Transfer of Shares constitutes a Prohibited
Transaction. A "Prohibited Transaction" is any transaction which
would, in the reasonable opinion of the Company or the Company's
independent accountants, jeopardize the Company's ability to account
for the transactions contemplated by the Recapitalization Agreement as
a leveraged recapitalization.
4. Except as amended herein, the Initial Agreement shall remain in full force
and effect.
<PAGE>
-3-
In witness whereof, the parties hereto have executed this Amendment as of the
date first written above.
Rayovac Corporation Lee Group Shareholders:
THOMAS H. LEE EQUITY FUND III, L.P.
By:
---------------------------- By:
--------------------------------------
THOMAS H. LEE FOREIGN FUND III, L.P.
By:
--------------------------------------
THL-CCI INVESTORS LIMITED PARTNERSHIP
By:
--------------------------------------
Management Shareholders
- --------------------------------- ------------------------------------
David A. Jones Dale R. Tetzlaff
- --------------------------------- ------------------------------------
Roger F. Warren Russell E. Lefevre
- --------------------------------- ------------------------------------
Trygve Lonnebotn Raymond L. Balfour
- --------------------------------- ------------------------------------
James A. Broderick Arthur S. Homa
- --------------------------------- ------------------------------------
Gary E. Wilson Kenneth V. Biller
- --------------------------------- ------------------------------------
Kent J. Hussey Merrell M. Tomlin
- --------------------------------
Stephen P. Shanesy
<PAGE>
-4-
Non-Management Shareholders
- --------------------------------- ------------------------------------
Thomas F. Pyle, Jr. Marvin G. Siegert
- ---------------------------------
Robert W. Zimmermann
SEVERANCE AGREEMENT
This Agreement, dated 15 January 1997, is made by and between Rayovac
Corporation (the "Company"), a Wisconsin corporation with its principal business
address at 601 Rayovac Drive, Madison, Wisconsin 53711, and Stephen P. Shanesy,
an individual residing at 7866 Black River Road, Verona, Wisconsin 53593 (the
"Executive").
BACKGROUND
The Company considers it essential to the best interests of its shareholders to
foster the continued employment of key managers.
The basic terms of the Executive's employment were set forth in an offer of
employment from the Company's President, David A. Jones, dated 18 November 1996,
a copy of which is attached as Exhibit A, which offer was accepted by the
Executive on 21 November 1996.
The Executive and the Company wish to execute this Agreement to formalize
additional terms of the Executive's employment.
UNDERTAKINGS
Now therefore, the parties agree:
1. Term of Agreement. The term of this Agreement (the "Term") shall commence
on the date hereof and shall continue in effect through 14 January 1998;
provided, however, that commencing on 15 January 1998 and each year
thereafter, the Term shall automatically extend one
<PAGE>
-2-
additional year unless, not later than 30 days prior to the end of the
preceding Term, the Company or the Executive shall give notice not to
extend the Term.
2. Severance Payments.
2.1 If the Executive's employment is terminated during the Term (a) by the
Company without Cause (as defined below) or (b) by reason of death or
Disability (as defined below), then the Company shall pay the
Executive the amounts, and provide the Executive the benefits,
described in Section 2.2 (the "Severance Payments").
2.2 (a) The Company shall pay to the Executive as severance, an amount in
cash equal to the sum of (i) the Executive's base salary as in
effect for the fiscal year ending immediately prior to the fiscal
year in which such termination occurs, and (ii) the annual bonus
(if any) earned by the Executive pursuant to any annual bonus or
incentive plan maintained by the Company in respect of the fiscal
year ending immediately prior to the fiscal year in which the
termination occurs, such cash amount to be paid to the Executive
ratably monthly in arrears over the Non-Competition Period (as
defined below).
(b) For the 12-month period immediately following such termination,
the Company shall arrange to provide the Executive and his
dependents insurance benefits substantially similar to those
provided to the Executive and his dependents immediately prior to
the date of termination, at no greater cost to the Executive than
the cost to the Executive immediately prior to such date.
Benefits otherwise receivable by the Executive pursuant to this
<PAGE>
-3-
Section 2.2(b) shall cease immediately upon the discovery by the
Company of the Executive's breach of the covenants contained in
Sections 5 or 6 hereof. In addition, benefits otherwise
receivable by the Executive pursuant to this Section 2.2(b) shall
be reduced to the extent benefits of the same type are received
by or made available to the Executive during the 12-month period
following the Executive's termination of employment (and any such
benefits received by or made available to the Executive shall be
reported to the Company by the Executive); provided, however,
that the Company shall reimburse the Executive for the excess, if
any, of the cost of such benefits to the Executive over such cost
immediately prior to the date of termination.
2.3 Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state, or local law and
any additional withholding to which the Executive has agreed.
2.4 If the Executive's employment with the Company terminates during the
Term, the Executive shall not be required to seek other employment or
to attempt in any way to reduce any amounts payable to the Executive
by the Company pursuant to this Section 2.
3. Termination Procedures. During the Term, any purported termination of the
Executive's employment (other than by reason of death) shall be
communicated by written notice of termination from one party to the other
in accordance with Section 9 hereof. The notice of termination shall
indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
<PAGE>
-4-
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated.
4. No Rights to Employment. This Agreement shall not be construed as creating
an express or implied contract of employment, and except as otherwise
agreed in writing between the Executive and the Company and authorized by
the Board of Directors of the Company, the Executive shall not have any
right to be retained in the employ of the Company.
5. Executive's Covenant Not to Compete.
5.1 During the Non-Competition Period, the Executive will not, directly or
indirectly, in any capacity, either separately, jointly, or in
association with others, as an officer, director, consultant, agent,
employee, owner, principal, partner, or stockholder of any business,
or in any other capacity, engage or have a financial interest in any
business which is involved in the design, manufacturing, marketing, or
sale of batteries or battery operated lighting devices (excepting only
the ownership of not more than 5% of the outstanding securities of an
class listed on an exchange or the Nasdaq Stock Market). For purposes
of this Agreement, the "Non-Competition Period" means the period
beginning on the date hereof and continuing until the date which is
the one-year anniversary of the later to occur of (a) the end of the
Term and (b) the date of termination.
5.2 Without limiting the generality of Section 5.1 above, during the
Non-Competition Period the Executive will not, directly or indirectly,
in any capacity, either separately, jointly, or in association with
others, solicit or otherwise contact any of the Company's customers or
prospects that were customers or prospects of the Company at any time
during
<PAGE>
-5-
the Non- Competition Period if such solicitation or contact is
for the general purpose of selling products that satisfy the same
general needs as any products that the Company had available for sale
to its customers or prospects during the Non-Competition Period.
5.3 During the Non-Competition Period, the Executive shall not, other than
in connection with employment for the Company, solicit the employment
or services of any employee of the Company who is or was an employee
of the Company at any time during the Non-Competition Period. During
the Non-Competition Period, the Executive shall not hire any employee
of Company for any other business.
5.4 If a court determines that the foregoing restrictions are too broad or
otherwise unreasonable under applicable law, including with respect to
time or space, the court is hereby requested and authorized by the
parties to revise the foregoing restrictions to include the maximum
restrictions allowed under the applicable law.
5.5 For purposes of this Section 5 and Section 6, the "Company" refers to
the Company and any incorporated or unincorporated affiliates of the
Company.
6. Secret Processes and Confidential Information.
6.1 The Executive will hold in strict confidence and, except as the
Company may authorize or direct, not disclose to any person or use
(except in the performance of his services hereunder) any confidential
information or materials received by the Executive from the Company or
any confidential information or materials of other
<PAGE>
-6-
parties received by the Executive in connection with the performance
of his duties hereunder. For purposes of this Section 6.1,
confidential information or materials shall include existing and
potential customer information, existing and potential supplier
information, product information, design and construction information,
pricing and profitability information, financial information, sales
and marketing strategies and techniques, and business ideas or
practices. The restriction on the Executive's use or disclosure of the
confidential information or materials shall remain in force until such
information is of general knowledge in the industry through no fault
of the Executive or any agent of the Executive. The Executive also
will return to the Company promptly upon its request any Company
information or materials in the Executive's possession or under the
Executive's control.
6.2 The Executive will promptly disclose to the Company and to no other
person, firm or entity all inventions, discoveries, improvements,
trade secrets, formulas, techniques, processes, know-how and similar
matters, whether or not patentable and whether or not reduced to
practice, which are conceived or learned by the Executive during the
period of the Executive's employment with the Company, either alone or
with others, which relate to or result from the actual or anticipated
business or research of the Company or which result, to any extent,
from the Executive's use of the Company's premises or property
(collectively called the "Inventions"). The Executive acknowledges and
agrees that all Inventions shall be the sole
<PAGE>
-7-
property of the Company, and the Executive hereby assigns to the
Company all of the Executive's rights and interests in and to all of
the Inventions, it being acknowledged and agreed by the Executive that
all the Inventions are works made for hire. The Company shall be the
sole owner of all domestic and foreign rights and interests in the
Inventions. The Executive will assist the Company at the Company's
expense to obtain and from time to time enforce patents and copyrights
on the Inventions.
6.3 Upon the request of, and, in any event, upon termination of the
Executive's employment with the Company, the Executive shall promptly
deliver to the Company all documents, data, records, notes, drawings,
manuals, and all other tangible information in whatever form which
pertains to the Company, and the Executive will not retain any such
information or any reproduction or excerpt thereof.
7. Successors; Binding Agreement
7.1 In addition to any obligations imposed by law upon any successor to
the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to the Severance Payments,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date
of termination. For purposes of this Agreement, "Company" shall mean
Rayovac Corporation, a Wisconsin corporation, and shall include any
successor to its business or assets
<PAGE>
-8-
which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
7.2 This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be
payable to the Executive hereunder (other than amounts which, by their
terms, terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the
Executive's estate.
8. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given (a) when delivered personally, (b) upon
confirmation of receipt when such notice or other communication is sent by
facsimile or telex, (c) one day after delivery to an overnight delivery
courier, or (d) on the fifth day following the date of deposit in the
United States mail if sent first class, postage prepaid, by registered or
certified mail.
9. Survival. The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without
limitation, those under Sections 2, 5 and 6 hereof) shall survive such
expiration.
10. Amendment; Waiver. This Agreement may be amended, modified, superseded, or
canceled, and the terms hereof may be waived, only by a written instrument
<PAGE>
-9-
executed by all of the parties hereto or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the
right at a later time to enforce the same. No waiver by any party of the
breach of any term or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this
Agreement.
11. Equitable Relief. Breach of any provision of Sections 5 or 6 of this
Agreement would result in irreparable injuries to the Company, the remedy
at law for any such breach will be inadequate, and upon breach of such
provisions, the Company, in addition to all other available remedies, shall
be entitled as a matter of right to injunctive relief in any court of
competent jurisdiction without the necessity of proving the actual damage
to the Company.
12. Entire Agreement. This Agreement constitutes the entire understanding of
the parties hereto with respect to the subject matter hereof and supersedes
all prior negotiations, discussions, writings, and agreements between them.
13. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in two counterparts, each of
which shall be deemed to be an original but both of which together will
constitute one and the same instrument.
<PAGE>
-10-
15. Definitions. For purposes of this Agreement, the following terms shall have
the meanings indicated below:
(a) "Cause" for termination by the Company of the Executive's employment
shall mean (i) the commission by the Executive of any fraud,
embezzlement or other material act of dishonesty with respect to the
Company or any of its affiliates (including the unauthorized
disclosure of confidential or proprietary information of the Company
or any of its affiliates or subsidiaries); (ii) Executive's conviction
of, or plea of guilty or nolo contendere to, a felony or other crime
involving moral turpitude; (iii) Executive's willful misconduct; (iv)
willful failure or refusal by Executive to perform his duties and
responsibilities to the Company or any of its affiliates which failure
or refusal to perform is not remedied within 30 days after receipt of
a written notice from the Company detailing such failure or refusal to
perform; or (v) Executive's breach of any of the terms of this
Agreement or any other agreement between Executive and the Company
which breach is not cured within 30 days subsequent to notice from the
Company to Executive of such breach.
(b) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the
Executive's inability to perform his duties by reason of any mental,
physical or other disability for a period of at least 6 consecutive
months (for purposes hereof, "disability" has the same meaning as in
the Company's disability policy), the Company shall have given the
Executive a notice of termination for Disability, and, within 30 days
after such notice of termination is given, the Executive shall not
have returned to the full-time performance of the Executive's duties.
<PAGE>
-11-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RAYOVAC CORPORATION EXECUTIVE
By:
-------------------------------- ---------------------------------
Kent J. Hussey Stephen P. Shanesy
Executive Vice President
SEVERANCE AGREEMENT
This Agreement, dated 20 December 1996, is made by and between Rayovac
Corporation (the "Company"), a Wisconsin corporation with its principal business
address at 601 Rayovac Drive, Madison, Wisconsin 53711, and Merrell M. Tomlin,
an individual residing at 332 Greenwich Street, Belvidere, New Jersey 07823 (the
"Executive").
BACKGROUND
The Company considers it essential to the best interests of its shareholders to
foster the continued employment of key managers.
Pursuant to authority invested in him by the Board of Directors of the Company,
David A. Jones, the President and Chief Executive Officer of the Company,
negotiated with the Executive the terms of the Executive's employment with the
Company, subject to the execution of a more formal agreement embodying those
terms at a mutually convenient time.
The basic terms of the Executive's employment were set forth in an offer of
employment from the Company's General Counsel, James A. Broderick, dated 1
October 1996, a copy of which is attached as Exhibit A.
The Executive and the Company wish to execute this Agreement to formalize
additional terms of the Executive's employment.
<PAGE>
-2-
UNDERTAKINGS
Now therefore, the parties agree:
1. Term of Agreement. The term of this Agreement (the "Term") shall commence
on the date hereof and shall continue in effect through 19 December 1997;
provided, however, that commencing on 20 December 1997 and each year
thereafter, the Term shall automatically extend one additional year unless,
not later than 30 days prior to the end of the preceding Term, the Company
or the Executive shall give notice not to extend the Term.
2. Severance Payments.
2.1 If the Executive's employment is terminated during the Term (a) by the
Company without Cause (as defined below) or (b) by reason of death or
Disability (as defined below), then the Company shall pay the
Executive the amounts, and provide the Executive the benefits,
described in Section 2.2 (the "Severance Payments").
2.2 (a) The Company shall pay to the Executive as severance, an amount in
cash equal to the sum of (i) the Executive's base salary as in
effect for the fiscal year ending immediately prior to the fiscal
year in which such termination occurs, and (ii) the annual bonus
(if any) earned by the Executive pursuant to any annual bonus or
incentive plan maintained by the Company in respect of the fiscal
year ending immediately prior to the fiscal year in which the
termination occurs, such cash amount to be paid to the Executive
ratably monthly in arrears over the Non-Competition Period (as
defined below).
<PAGE>
-3-
(b) For the 12-month period immediately following such termination,
the Company shall arrange to provide the Executive and his
dependents insurance benefits substantially similar to those
provided to the Executive and his dependents immediately prior to
the date of termination, at no greater cost to the Executive than
the cost to the Executive immediately prior to such date.
Benefits otherwise receivable by the Executive pursuant to this
Section 2.2(b) shall cease immediately upon the discovery by the
Company of the Executive's breach of the covenants contained in
Sections 5 or 6 hereof. In addition, benefits otherwise
receivable by the Executive pursuant to this Section 2.2(b) shall
be reduced to the extent benefits of the same type are received
by or made available to the Executive during the 12-month period
following the Executive's termination of employment (and any such
benefits received by or made available to the Executive shall be
reported to the Company by the Executive); provided, however,
that the Company shall reimburse the Executive for the excess, if
any, of the cost of such benefits to the Executive over such cost
immediately prior to the date of termination.
2.3 Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state, or local law and
any additional withholding to which the Executive has agreed.
2.4 If the Executive's employment with the Company terminates during the
Term, the Executive shall not be required to seek other employment or
to attempt in any way to reduce any amounts payable to the Executive
by the Company pursuant to this Section 2.
<PAGE>
-4-
3. Termination Procedures. During the Term, any purported termination of the
Executive's employment (other than by reason of death) shall be
communicated by written notice of termination from one party to the other
in accordance with Section 9 hereof. The notice of termination shall
indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated.
4. No Rights to Employment. This Agreement shall not be construed as creating
an express or implied contract of employment, and except as otherwise
agreed in writing between the Executive and the Company and authorized by
the Board of Directors of the Company, the Executive shall not have any
right to be retained in the employ of the Company.
5. Executive's Covenant Not to Compete.
5.1 During the Non-Competition Period, the Executive will not, directly or
indirectly, in any capacity, either separately, jointly, or in
association with others, as an officer, director, consultant, agent,
employee, owner, principal, partner, or stockholder of any business,
or in any other capacity, engage or have a financial interest in any
business which is involved in the design, manufacturing, marketing, or
sale of batteries or battery operated lighting devices (excepting only
the ownership of not more than 5% of the outstanding securities of an
class listed on an exchange or the Nasdaq Stock Market). For purposes
of this Agreement, the "Non-Competition Period" means the period
beginning on the date hereof and continuing until the date
<PAGE>
-5-
which is the one-year anniversary of the later to occur of (a) the end
of the Term and (b) the date of termination.
5.2 Without limiting the generality of Section 5.1 above, during the
Non-Competition Period the Executive will not, directly or indirectly,
in any capacity, either separately, jointly, or in association with
others, solicit or otherwise contact any of the Company's customers or
prospects that were customers or prospects of the Company at any time
during the Non- Competition Period if such solicitation or contact is
for the general purpose of selling products that satisfy the same
general needs as any products that the Company had available for sale
to its customers or prospects during the Non-Competition Period.
5.3 During the Non-Competition Period, the Executive shall not, other than
in connection with employment for the Company, solicit the employment
or services of any employee of the Company who is or was an employee
of the Company at any time during the Non-Competition Period. During
the Non-Competition Period, the Executive shall not hire any employee
of Company for any other business.
5.4 If a court determines that the foregoing restrictions are too broad or
otherwise unreasonable under applicable law, including with respect to
time or space, the court is hereby requested and authorized by the
parties to revise the foregoing restrictions to include the maximum
restrictions allowed under the applicable law.
5.5 For purposes of this Section 5 and Section 6, the "Company" refers to
the Company and any incorporated or unincorporated affiliates of the
Company.
<PAGE>
-6-
6. Secret Processes and Confidential Information.
6.1 The Executive will hold in strict confidence and, except as the
Company may authorize or direct, not disclose to any person or use
(except in the performance of his services hereunder) any confidential
information or materials received by the Executive from the Company or
any confidential information or materials of other parties received by
the Executive in connection with the performance of his duties
hereunder. For purposes of this Section 6.1, confidential information
or materials shall include existing and potential customer
information, existing and potential supplier information, product
information, design and construction information, pricing and
profitability information, financial information, sales and marketing
strategies and techniques, and business ideas or practices. The
restriction on the Executive's use or disclosure of the confidential
information or materials shall remain in force until such information
is of general knowledge in the industry through no fault of the
Executive or any agent of the Executive. The Executive also will
return to the Company promptly upon its request any Company
information or materials in the Executive's possession or under the
Executive's control.
6.2 The Executive will promptly disclose to the Company and to no other
person, firm or entity all inventions, discoveries, improvements,
trade secrets, formulas, techniques, processes, know-how and similar
matters, whether or not patentable and whether or not reduced to
practice, which are conceived or learned by the Executive during the
period of the Executive's employment with the Company, either alone or
with others, which relate to or result from the actual or anticipated
<PAGE>
-7-
business or research of the Company or which result, to any extent,
from the Executive's use of the Company's premises or property
(collectively called the "Inventions"). The Executive acknowledges and
agrees that all Inventions shall be the sole property of the Company,
and the Executive hereby assigns to the Company all of the Executive's
rights and interests in and to all of the Inventions, it being
acknowledged and agreed by the Executive that all the Inventions are
works made for hire. The Company shall be the sole owner of all
domestic and foreign rights and interests in the Inventions. The
Executive will assist the Company at the Company's expense to obtain
and from time to time enforce patents and copyrights on the
Inventions.
6.3 Upon the request of, and, in any event, upon termination of the
Executive's employment with the Company, the Executive shall promptly
deliver to the Company all documents, data, records, notes, drawings,
manuals, and all other tangible information in whatever form which
pertains to the Company, and the Executive will not retain any such
information or any reproduction or excerpt thereof.
7. Successors; Binding Agreement
7.1 In addition to any obligations imposed by law upon any successor to
the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the
<PAGE>
-8-
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to the Severance Payments,
except that, for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date
of termination. For purposes of this Agreement, "Company" shall mean
Rayovac Corporation, a Wisconsin corporation, and shall include any
successor to its business or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
7.2 This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If the Executive shall die while any amount would still be
payable to the Executive hereunder (other than amounts which, by their
terms, terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the
Executive's estate.
8. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given (a) when delivered personally, (b) upon
confirmation of receipt when such notice or other communication is sent by
facsimile or telex, (c) one day after delivery to an overnight delivery
courier, or (d) on the fifth day following the date of deposit in the
United States mail if sent first class, postage prepaid, by registered or
certified mail.
<PAGE>
-9-
9. Survival. The obligations of the Company and the Executive under this
Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without
limitation, those under Sections 2, 5 and 6 hereof) shall survive such
expiration.
10. Amendment; Waiver. This Agreement may be amended, modified, superseded, or
canceled, and the terms hereof may be waived, only by a written instrument
executed by all of the parties hereto or, in the case of a waiver, by the
party waiving compliance. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the
right at a later time to enforce the same. No waiver by any party of the
breach of any term or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such breach, or a
waiver of the breach of any other term or covenant contained in this
Agreement.
11. Equitable Relief. Breach of any provision of Sections 5 or 6 of this
Agreement would result in irreparable injuries to the Company, the remedy
at law for any such breach will be inadequate, and upon breach of such
provisions, the Company, in addition to all other available remedies, shall
be entitled as a matter of right to injunctive relief in any court of
competent jurisdiction without the necessity of proving the actual damage
to the Company.
12. Entire Agreement. This Agreement constitutes the entire understanding of
the parties hereto with respect to the subject matter hereof and supersedes
all prior negotiations, discussions, writings, and agreements between them.
<PAGE>
-10-
13. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in two counterparts, each of
which shall be deemed to be an original but both of which together will
constitute one and the same instrument.
15. Definitions. For purposes of this Agreement, the following terms shall have
the meanings indicated below:
(a) "Cause" for termination by the Company of the Executive's employment
shall mean (i) the commission by the Executive of any fraud,
embezzlement or other material act of dishonesty with respect to the
Company or any of its affiliates (including the unauthorized
disclosure of confidential or proprietary information of the Company
or any of its affiliates or subsidiaries); (ii) Executive's conviction
of, or plea of guilty or nolo contendere to, a felony or other crime
involving moral turpitude; (iii) Executive's willful misconduct; (iv)
willful failure or refusal by Executive to perform his duties and
responsibilities to the Company or any of its affiliates which failure
or refusal to perform is not remedied within 30 days after receipt of
a written notice from the Company detailing such failure or refusal to
perform; or (v) Executive's breach of any of the terms of this
Agreement or any other agreement between Executive and the Company
which breach is not cured within 30 days subsequent to notice from the
Company to Executive of such breach.
(b) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the
<PAGE>
-11-
Executive's inability to perform his duties by reason of any mental,
physical or other disability for a period of at least 6 consecutive
months (for purposes hereof, "disability" has the same meaning as in
the Company's disability policy), the Company shall have given the
Executive a notice of termination for Disability, and, within 30 days
after such notice of termination is given, the Executive shall not
have returned to the full-time performance of the Executive's duties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RAYOVAC CORPORATION EXECUTIVE
By:
--------------------------------- ---------------------------------
David A. Jones Merrell M. Tomlin
President
Exhibit 10.11
RAYOVAC CORPORATION
1996 STOCK OPTION PLAN
1. Purpose: Restrictions on Amount Available under the Plan.
This Rayovac Corporation, 1996 Stock Option Plan ("Plan") is intended
to afford an incentive to selected employees and directors of Rayovac
Corporation ("Rayovac") or any Subsidiary (as defined in Section 2(l) hereof)
(collectively referred to as the "Company"), to acquire a proprietary interest
in the Company, to continue to perform services for the Company, to increase
their efforts on behalf of the Company and to promote the success of the
Company's business.
2. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Board" shall mean the Board of Directors of
Rayovac.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Disability" shall mean a Participant's disability within
the meaning of Section 22(e)(3) of the Code, or any successor
provision.
(d) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(e) "Fair Market Value" per share as of a particular date
shall mean (i) the closing sales price per share of Common Stock (as
defined in Section 5 hereof) on the New York Stock Exchange for the
last preceding date on which there was a sale of such Common Stock on
such exchange, or (ii) if the shares of Common Stock are not then
admitted for trading on the New York Stock Exchange, the closing price
for the shares of Common Stock in such other national securities
exchange or interdealer quotation system on which Common Stock is then
traded for the last preceding date on which there was a sale of such
Common Stock in such market, or (iii) if the shares of Common Stock are
not then listed on a national securities exchange or interdealer
quotation system, such value as the Committee in good faith may
determine.
(f) "Option" shall mean the right, granted pursuant to this
Plan, of a holder to purchase shares of Common Stock at a price and
upon the terms to be specified by the Committee.
<PAGE>
(g) "Option Agreement" shall mean any written agreement,
contract, or other instrument or document between the Company and a
Participant evidencing an Option.
(h) "Participant" shall mean an officer, employee or director
of the Company who is, pursuant to Section 4 of the Plan, selected to
participate herein.
(i) "Subsidiary" shall mean any corporation (other than
Rayovac) in an unbroken chain of corporations beginning with Rayovac
if, at the time of granting an Option, each of such corporations other
than the last corporation in the unbroken chain owns stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
3. Administration.
Unless otherwise determined by the Board, the Plan shall be
administered by a committee of the Board ("Compensation Committee"), which shall
consist of two or more members of the Board. Following such time that Common
Stock is registered pursuant to Section 12 of the Exchange Act, members of the
Compensation Committee shall be "non-employee directors" as defined in Rule 16b-
3 under the Exchange Act. The Compensation Committee may, in its discretion,
delegate to a subcommittee its duties hereunder, including the grant of Options.
The full Board shall also have the authority, in its discretion, to grant
Options under the Plan and to administer the Plan. For all purposes under the
Plan, any entity which performs the duties described herein, shall be referred
to as the "Committee."
The Committee shall have the authority in its discretion, subject to
and not inconsistent with the express provisions of the Plan, to administer the
Plan and to exercise all the powers and authorities either specifically granted
to it under the Plan or necessary or advisable in the administration of the
Plan, including, without limitation, the authority to grant Options; to
determine the persons to whom and the time or times at which Options shall be
granted; to determine the type and number of Options to be granted, the number
of shares of Common Stock to which an Option may relate and the terms,
conditions and restrictions relating to any Option; to determine whether, to
what extent, and under what circumstances an Option may be settled, cancelled,
forfeited, exchanged, or surrendered; to construe and interpret the Plan and any
Option; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of Option Agreements; and to make
all other determinations deemed necessary or advisable for the administration of
the Plan.
2
<PAGE>
No member of the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Option granted
hereunder.
4. Eligibility.
Options may be granted to employees and directors of the Company or a
Subsidiary. In determining the persons to whom Options shall be granted and the
number of shares to be covered by each Option, the Committee shall take into
account the duties of the respective persons, their present and potential
contributions to the success of the Company and such other factors as the
Committee shall deem relevant in connection with accomplishing the purpose of
the Plan.
5. Stock.
The stock subject to Options hereunder shall be shares of Rayovac
common stock, par value $0.01 per share ("Common Stock"). Such shares may, in
whole or in part, be authorized but unissued shares or shares that shall have
been or that may be reacquired by the Company. The aggregate number of shares of
Common Stock as to which Options may be granted from time to time under the Plan
shall not exceed [________].(1) No person may be granted Options under the Plan
during any calendar year representing an aggregate of more than [_________]
shares of Common Stock. The limitations established by the preceding two
sentences shall be subject to adjustment as provided in Section 7 hereof.
6. Stock Options.
The Committee shall have authority to grant Options to Participants on
the following terms and conditions:
(a) Number of Shares. Each Option Agreement shall state the
number of shares of Common Stock to which the Option relates.
(b) Type of Option. No Option granted pursuant to this Plan
shall be an incentive stock option within the meaning of Section 422 of the
Code.
(c) Exercise Price. Each Option Agreement shall state the
Exercise Price. The Exercise Price per share of Common Stock purchasable under
an Option shall be determined by the Committee. The date as of which the
Committee adopts a resolution expressly granting an Option shall be considered
the day on which such Option is granted.
- ----------------
(1) The number shall equal 10% of the outstanding capital stock of Rayovac (on
a fully diluted basis) immediately after the transactions contemplated by
the Stock Purchase and Redemption Agreement.
3
<PAGE>
(d) Method and Time of Payment. The Exercise Price shall be
paid in full, at the time of exercise, in cash or in shares of Common Stock
having a Fair Market Value equal to such Exercise Price or in a combination of
cash and Common Stock or, in the sole discretion of the Committee, through a
cashless exercise procedure.
(e) Term and Exercisability of Options. Options shall be
exercisable over the exercise period (which, with respect to Incentive Stock
Options, shall not exceed ten years from the date of grant), at such times and
upon such conditions as the Committee may determine, as reflected in the Option
Agreement; provided that, the Committee shall have the authority to accelerate
the exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. An Option may be
exercised, as to any or all full shares of Common Stock as to which the Option
has become exercisable, by written notice delivered in person or by mail to the
Compensation Committee or as it shall direct, specifying the number of shares of
Common Stock with respect to which the Option is being exercised. The exercise
period shall be subject to earlier termination as provided in Section 6(f)
hereof. At the time any Option granted under the Plan is exercised, the Company
shall be entitled to legend the certificates representing the shares of Common
Stock purchased pursuant to the Option to clearly identify them as representing
shares purchased upon exercise of an Option.
(f) Termination. If a Participant's employment by, or service
as a director with, the Company terminates:
(i) Unless provided otherwise in the applicable
Option Agreement, upon a Participant's termination of
employment or service as a director with the Company or a
Subsidiary by reason of death or Disability or by the Company
without cause, all Options that are not then exercisable shall
immediately terminate and all Options that are then
exercisable shall remain exercisable for a period of one year
following such termination and shall terminate thereafter;
(ii) Unless provided otherwise in the applicable
Option Agreement, if a Participant's employment or service as
a director with the Company is terminated by the Company for
cause, all Options shall immediately terminate.
(iii) Unless provided otherwise in the applicable
Option Agreement upon any termination of Participant's
employment or service as a director with the Company other
than for cause, without cause or by reason of death or
Disability, all Options that are not then exercisable
4
<PAGE>
shall immediately terminate and all Options that are then
exercisable shall remain exercisable for a period of thirty
days from the date of such termination and shall terminate
thereafter.
(g) Other Provisions. Options may be subject to such other
conditions including, but not limited to, restrictions on transferability of the
shares acquired upon exercise of such Options, as the Committee may prescribe in
the Option Agreement in its discretion.
7. Effect of Certain Changes.
If there is any change in the number of outstanding shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination, exchange of shares, merger, consolidation, liquidation, split-up,
spin-off or other similar change in capitalization, any distribution to common
shareholders, including a rights offering, other than cash dividends, or any
like change, then the number of shares of Common Stock available for Options,
the number of such shares covered by outstanding Options, and the Exercise Price
of such Options shall be proportionately adjusted by the Committee to reflect
such change or distribution; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated. In the event of a change in
the Common Stock of the Company as presently constituted, which is limited to a
change of all of its authorized shares with par value into the same number of
shares with a different par value or without par value, the shares resulting
from any such change shall be deemed to be the Common Stock within the meaning
of the Plan. To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive,
provided that each Incentive Stock Option granted pursuant to this Plan shall
not be adjusted in a manner that causes such Option to fail to continue to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
8. General Provisions.
(a) Restrictions on Delivery and Sale of Shares. Each Option
granted under the Plan is subject to the condition that if at any time the
Committee, in its discretion, shall determine that the listing, registration or
qualification of the shares covered by such Option upon any securities exchange
or under any state or federal law is necessary or desirable as a condition of or
in connection with the granting of such Option or the purchase or delivery of
shares thereunder, the delivery of any or all shares pursuant to such Option may
be withheld unless and until such listing, registration or qualification shall
have been effected. If a
5
<PAGE>
registration statement is not in effect under the Securities Act of 1933, as
amended (the "Act"), or any applicable state securities laws with respect to the
shares of Stock purchasable or otherwise deliverable under Options then
outstanding, the Committee may require, as a condition of exercise of any
Option, that the Option holder or other recipient of an Option represent, in
writing, that the shares received pursuant to the Option are being acquired for
investment and not with a view to distribution and agree that the shares will
not be disposed of except pursuant to an effective registration statement,
unless the Company shall have received an opinion of counsel that such
disposition is exempt from such requirement under the Act and any applicable
state securities laws. The Company may endorse on certificates representing
shares delivered pursuant to an Option such legends referring to the foregoing
representation or restrictions or any other applicable restrictions on resale as
the Company, in its discretion, shall deem appropriate.
(b) Nontransferability. Except to the extent provided
otherwise in the applicable Option Agreement, Options shall not be transferable
by a Participant except by will or the laws of descent and distribution and
shall be exercisable during the lifetime of a Participant only by such
Participant or his guardian or legal representative.
(c) No Right To Continued Employment. Nothing in the Plan or
in any Option granted or any Option Agreement or other agreement entered into
pursuant hereto shall confer upon any Participant the right to continue in the
employ of the Company or to be entitled to any remuneration or benefits not set
forth in the Plan or such Option Agreement or other agreement or to interfere
with or limit in any way the right of the Company to terminate such
Participant's employment.
(d) Withholding Taxes. Where a Participant or other person is
entitled to receive shares of Common Stock pursuant to an Option hereunder, the
Company shall have the right to require the Participant or such other person to
pay to the Company the amount of any taxes which the Company may be required to
withhold before delivery to such Participant or other person of cash or a
certificate or certificates representing such shares. Unless otherwise
prohibited by applicable law, a Participant may satisfy any such withholding tax
obligation by either of the following methods, or by a combination of such
methods: (a) tendering a cash payment; or (b) delivering to the Company
previously acquired shares of Common Stock having an aggregate Fair Market
Value, determined as of the date the withholding tax obligation arises, less
than or equal to the amount of the total withholding tax obligation.
6
<PAGE>
(e) Amendment and Termination of the Plan. The Board or the
Committee may at any time and from time to time alter, amend, suspend, or
terminate the Plan in whole or in part; provided that, no amendment which
requires stockholder approval under applicable law or in order for the Plan to
continue to comply with Code Section 162(m) shall be effective unless the same
shall be approved by the requisite vote of the stockholders of the Company.
Notwithstanding the foregoing, no amendment shall affect adversely any of the
rights of any Participant, without such Participant's consent, under any Option
theretofore granted under the Plan. The power to grant Options under the Plan
will automatically terminate ten years after the adoption of the Plan by the
Board. If the Plan is terminated, any unexercised Option shall continue to be
exercisable in accordance with its terms and the terms of the Plan in effect
immediately prior to such termination.
(f) Participant Rights. No Participant shall have any claim to
be granted any Option under the Plan, and there is no obligation for uniformity
of treatment for Participants. Except as provided specifically herein, a
Participant or a transferee of an Option shall have no rights as a stockholder
with respect to any shares covered by any Option until the date of the issuance
of a stock certificate to him for such shares.
(g) No Fractional Shares. No fractional shares of Common Stock
shall be issued or delivered pursuant to the Plan or any Option. The Committee
shall determine whether cash, other Options, or other property shall be issued
or paid in lieu of such fractional shares or whether such fractional shares or
any rights thereto shall be forfeited or otherwise eliminated.
(h) Governing Law. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the State of
Wisconsin without giving effect to the conflict of laws principles thereof.
(i) Headings. The section and subsection headings contained
herein are for convenience only and shall not affect the construction hereof.
9. Effectiveness.
The Plan shall take effect upon its adoption by the Board.
7
RAYOVAC CORPORATION
1997 STOCK OPTION PLAN
----------------------
Rayovac Corporation (the "Company") hereby adopts the Rayovac
Corporation 1997 Stock Option Plan (the "Plan") as set forth herein. The purpose
of the Plan is to provide an incentive to employees of the Company at the
Director level and above to remain in such employ and to increase their efforts
for the success of the Company by offering them an opportunity to increase their
proprietary interest in the Company. The Plan shall be administered by David A.
Jones (the "Administrator").
Pursuant to the Plan, the Company may offer to those of its employees
at the Director level and above who are selected by the Administrator (each
employee so selected, a "Participant") the right (the "Option") to purchase
authorized but unissued shares of the Company's common stock, par value $.01 per
share ("Common Stock").
The exercise price of an Option under the Plan shall be $6.01 per
share. The Administrator may prescribe the minimum and maximum numbers of shares
of Common Stock for which a Participant may exercise an Option, the expiration
date of such Option and such other terms and conditions as the Administrator
shall deem appropriate; provided, however, that the maximum aggregate number of
shares of Common Stock with respect to which Options may be granted under the
Plan shall be 665,000; and provided further that the Plan and each Option
granted hereunder shall expire no later than November 30, 1997, 1997. Without
limiting the generality of the foregoing, the Administrator may cause the
Company to lend to a Participant the amount of cash necessary to exercise the
Option granted to such Participant; provided, however, that no such loan shall
be made unless such Participant simultaneously executes a promissory note in
substantially the form annexed hereto.
The Administrator may permit a Participant to surrender an Option held
by such Participant and elect instead to have a portion of the amounts credited
to such Participant's account under the Company's Deferred Compensation Plan
credited as deferred stock units, each economically equivalent to a share of
Common Stock. The maximum amount which a Participant may elect to have so
credited shall be equal to the aggregate purchase price of the shares of Common
Stock subject to the Option (or portion thereof) so surrendered.
<PAGE>
Any Participant not otherwise a signatory to the Shareholders Agreement
dated as of September 12, 1996 by and among the Company and the shareholders of
the Company referred to therein, as amended (as so amended, the "Shareholders
Agreement") shall be required to execute the Shareholders Agreement as a
condition to the exercise by such Participant of any Option granted to such
Participant under the Plan.
2
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<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-29-1997
<EXCHANGE-RATE> 1
<CASH> 4,756
<SECURITIES> 0
<RECEIVABLES> 67,471
<ALLOWANCES> 1,178
<INVENTORY> 52,116
<CURRENT-ASSETS> 136,140
<PP&E> 142,912
<DEPRECIATION> 78,505
<TOTAL-ASSETS> 218,040
<CURRENT-LIABILITIES> 85,683
<BONDS> 206,615
0
0
<COMMON> 500
<OTHER-SE> (81,717)
<TOTAL-LIABILITY-AND-EQUITY> (218,040)
<SALES> 89,007
<TOTAL-REVENUES> 89,007
<CGS> 0
<TOTAL-COSTS> 52,217
<OTHER-EXPENSES> 27,973
<LOSS-PROVISION> 207
<INTEREST-EXPENSE> 5,438
<INCOME-PRETAX> 3,172
<INCOME-TAX> 520
<INCOME-CONTINUING> 2,652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,652
<EPS-PRIMARY> 0.13
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</TABLE>
