<PAGE>
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 April 4, 1999
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
Rayovac Corporation
--------------------------
(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
--------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------
(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 May 17, 1999, was 27,484,780.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RAYOVAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
As of April 4, 1999 and September 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
April 4, 1999 September 30, 1998
------------- ------------------
(Unaudited)
<S> <C> <C>
-ASSETS-
Current assets:
Cash and cash equivalents .............................. $ 880 $ 1,594
Receivables ............................................ 78,207 101,853
Inventories ............................................ 62,717 62,762
Prepaid expenses and other ............................. 18,832 14,729
--------- ---------
Total current assets ............................ 160,636 180,938
Property, plant and equipment, net ............................. 74,651 71,367
Deferred charges and other ..................................... 41,039 31,554
--------- ---------
Total assets ................................... $ 276,326 $ 283,859
--------- ---------
--------- ---------
-LIABILITIES AND SHAREHOLDERS' EQUITY -
Current liabilities:
Current maturities of long-term debt ................... $ 3,149 $ 3,590
Accounts payable ....................................... 50,959 62,317
Accrued liabilities:
Wages and benefits and other ...................... 25,613 26,585
Recapitalization and other special charges ........ 3,231 6,789
--------- ---------
Total current liabilities ....................... 82,952 99,281
Long-term debt, net of current maturities ...................... 143,458 148,686
Employee benefit obligations, net of current portion ........... 11,841 10,433
Other .......................................................... 3,654 3,585
--------- ---------
Total liabilities ............................... 241,905 261,985
Shareholders' equity:
Common stock, $.01 par value, authorized 150,000 shares;
issued 56,959 and 56,907 shares respectively;
outstanding 27,485 and 27,471 shares, respectively ..... 570 569
Additional paid-in capital ..................................... 103,533 103,304
Notes receivable from officers/shareholders .................... (890) (890)
Retained earnings .............................................. 58,790 45,735
--------- ---------
162,003 148,718
Less stock held in trust for deferred compensation
plan, 24 shares at September 30, 1998 ....................... -- (412)
Less treasury stock, at cost, 29,474 and 29,436
shares, respectively ........................................ (128,975) (128,472)
Accumulated other comprehensive income (expense):
Foreign currency translation adjustment ................ 1,853 2,500
Minimum pension liability adjustment ................... (460) (460)
--------- ---------
Total shareholders' equity ...................... 34,421 21,874
--------- ---------
Total liabilities and shareholders' equity ...... $ 276,326 $ 283,859
--------- ---------
--------- ---------
</TABLE>
See accompanying notes which are an integral part of these statements.
<PAGE>
RAYOVAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three month and six month periods
ended April 4, 1999 and March 28, 1998
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
------------ ----------
Fiscal 1999 Fiscal 1998 Fiscal 1999 Fiscal 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ............................................... $ 110,969 $ 96,081 $ 271,511 $ 246,076
Cost of goods sold ...................................... 58,657 50,557 140,516 127,964
--------- --------- --------- ---------
Gross profit ....................................... 52,312 45,524 130,995 118,112
Selling ................................................. 32,454 28,204 80,043 73,676
General and administrative .............................. 8,514 8,550 17,308 16,227
Research and development ................................ 2,184 2,049 4,265 4,106
Other special charges ................................... 738 5,236 1,386 4,017
--------- --------- --------- ---------
Total operating expenses ........................... 43,890 44,039 103,002 98,026
Income from operations .......................... 8,422 1,485 27,993 20,086
Other expense (income):
Interest expense ...................................... 3,484 3,291 7,140 8,315
Other expense (income) ................................ 155 (126) 382 (359)
--------- --------- --------- ---------
3,639 3,165 7,522 7,956
Income (loss) before income taxes and extraordinary item 4,783 (1,680) 20,471 12,130
Income tax expense (benefit) ............................ 1,720 (698) 7,416 4,578
--------- --------- --------- ---------
Income (loss) before extraordinary item ................. 3,063 (982) 13,055 7,552
Extraordinary item, loss on early extinguishment of debt,
net of income tax benefit of $1,263 ................ -- -- -- 1,975
--------- --------- --------- ---------
Net income (loss) ............................... $ 3,063 $ (982) $ 13,055 $ 5,577
--------- --------- --------- ---------
--------- --------- --------- ---------
BASIC EARNINGS PER SHARE
Average shares outstanding .............................. 27,485 27,432 27,484 25,476
Income (loss) before extraordinary item ................. $ 0.11 $ (0.04) $ 0.48 $ 0.30
Extraordinary item ...................................... -- -- -- (0.08)
--------- --------- --------- ---------
Net income (loss) ....................................... $ 0.11 $ (0.04) $ 0.48 $ 0.22
--------- --------- --------- ---------
--------- --------- --------- ---------
DILUTED EARNINGS PER SHARE
Average shares outstanding and common stock equivalents . 29,315 27,432 29,241 27,006
Income (loss) before extraordinary item ................. $ 0.10 $ (0.04) $ 0.45 $ 0.28
Extraordinary item ...................................... -- -- -- (0.07)
--------- --------- --------- ---------
Net income (loss) ....................................... $ 0.10 $ (0.04) $ 0.45 $ 0.21
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes which are an integral part of these statements.
2
<PAGE>
RAYOVAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six month periods ended April 4, 1999 and March 28, 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income ......................................................... $ 13,055 $ 5,577
Non-cash adjustments to net income:
Amortization ............................................... 1,294 1,675
Depreciation ............................................... 5,495 5,811
Other non-cash adjustments ................................. (359) (3,453)
Net changes in other assets and liabilities,
net of effects from acquisition ............................ (5,555) (5,239)
--------- ---------
Net cash provided by operating activities .......... 13,930 4,371
Cash flows from investing activities:
Purchases of property, plant and equipment ......................... (9,025) (6,676)
Proceeds from sale of property, plant and equipment ................ 11 3,292
Payment for acquisitions ........................................... -- (7,508)
--------- ---------
Net cash used by investing activities .............. (9,014) (10,892)
Cash flows from financing activities:
Reduction of debt .................................................. (9,726) (137,987)
Proceeds from debt financing ....................................... 4,263 59,859
Proceeds from issuance of common stock ............................. -- 87,268
Other .............................................................. (173) (73)
--------- ---------
Net cash provided (used) by financing activities ... (5,636) 9,067
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents ........................................................ 6 (7)
--------- ---------
Net increase (decrease) in cash and cash equivalents (714) 2,539
Cash and cash equivalents, beginning of period ............................. 1,594 1,133
--------- ---------
Cash and cash equivalents, end of period ................................... $ 880 $ 3,672
--------- ---------
--------- ---------
</TABLE>
See accompanying notes which are an integral part of these statements.
3
<PAGE>
RAYOVAC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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 April 4, 1999, results of operations for the
three and six month periods ended April 4, 1999, and March 28, 1998, and
cash flows for the three and six month periods ended April 4, 1999, and
March 28, 1998. 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. These condensed consolidated financial
statements should be read in conjunction with the audited financial
statements and notes thereto as of September 30, 1998. Certain prior year
amounts have been reclassified to conform with the current year
presentation.
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 counterparties are
included in accrued liabilities or accounts receivable. The Company has
entered into an interest rate swap agreement which effectively fixes the
interest rate on floating rate debt at a rate of 6.16% for a notional
principal amount of $62,500 through October 1999. The fair value of the
unrealized portion of this contract at April 4, 1999 was ($373).
The Company has entered into an amortizing cross currency interest rate
swap agreement related to financing the acquisition of Brisco. The
agreement effectively fixes the interest and foreign exchange on floating
rate debt denominated in U.S. Dollars at a rate of 5.34% denominated in
German Marks. The unamortized notional principal amount at April 4, 1999 is
$3,701. The fair value of the unrealized portion at April 4, 1999 was
($110).
The Company enters into forward foreign exchange contracts to mitigate the
risk from anticipated settlement in local currencies of intercompany
purchases and sales. These contracts generally require the Company to
exchange foreign currencies for U.S. dollars. The contracts are marked to
market, and the related adjustment is recognized in other expense (income).
The related amounts payable to, or receivable from, the counterparties are
included in accounts payable or accounts receivable. The Company has $2,932
of forward exchange contracts at April 4, 1999. The fair value of the
unrealized portion of the contracts at April 4, 1999, approximated the
contract value.
The Company also enters into forward foreign exchange contracts to hedge
the risk from anticipated settlement in local currencies of trade sales.
These contracts generally require the Company to exchange foreign
currencies for Pounds Sterling. The related amounts receivable from the
trade customers are included in accounts receivable. The Company has
approximately $4,634 of such forward exchange contracts at April 4, 1999.
The fair value of the unrealized portion of the contracts at April 4, 1999,
was $228.
The Company enters into forward foreign exchange contracts to hedge the
risk from settlement in local currencies of trade purchases. These
contracts generally require the Company to exchange foreign currencies for
U.S. Dollars and Pounds Sterling. The Company has entered into foreign
exchange contracts to hedge payment obligations denominated in Japanese Yen
under a commitment to purchase certain
4
<PAGE>
production equipment from Matsushita. The Company has $6,682 of such
forward exchange contracts outstanding at April 4, 1999. See related
purchase commitment discussed in the commitments and contingencies note.
The fair value at April 4, 1999 was $143.
The Company is exposed to risk from fluctuating prices for zinc and silver
commodities used in the manufacturing process. The Company hedges some of
this risk through the use of commodity swaps, calls and puts. The swaps
effectively fix the floating price on a specified quantity of a commodity
through a specified date. Buying calls allows the Company to purchase a
specified quantity of a commodity for a fixed price through a specified
date. Selling puts allows the buyer of the put to sell a specified quantity
of a commodity to the Company for a fixed price through a specific date.
The maturity of, and the quantities covered by, the contracts highly
correlate to the Company's anticipated purchases of the commodities. The
cost of the calls, and the premiums received from the puts, are amortized
over the life of the contracts and are recorded in cost of goods sold,
along with the effects of the swap, put and call contracts.
At April 4, 1999, the Company had entered into a series of swaps for zinc
with a contract value of $3,785 for the period March 1999 through March
2000. At April 4, 1999, the Company had purchased a call with a contract
value of $230 and sold a put with a contract value of $212 for March 1999,
designed to set a ceiling and floor price for zinc. While the transactions
have no carrying value, the fair value of the unrealized portion of these
contracts was ($164) at April 4, 1999.
At April 4, 1999, the Company had entered into a swap for silver with a
contract value of $282 for March 1999. While the transaction has no
carrying value, the fair value of the unrealized portion of the contract at
April 4, 1999 approximated the contract value.
2 INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
April 4, 1999 September 30, 1998
------------- ------------------
<S> <C> <C>
Raw material $21,266 $22,311
Work-in-process 13,377 16,230
Finished goods 28,074 24,221
-------- --------
$62,717 $62,762
======= =======
</TABLE>
3 OTHER COMPREHENSIVE INCOME
Effective October 1, 1998 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income. SFAS
No. 130 requires the reporting of comprehensive income in addition to net
income from operations. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain financial
information that historically has not been recognized in the calculation of
net income.
Comprehensive income (loss) and the components of other comprehensive
income (loss) for the three and six month periods ended April 4, 1999 and
March 28, 1998 are as follows:
5
<PAGE>
<TABLE>
<CAPTION>
Three month periods ended
April 4, 1999 and March 28, 1998
---------------------------------------------------
Fiscal 1999 Fiscal 1998
----------- -----------
<S> <C> <C>
Net income (loss) $3,063 ($982)
Other comprehensive income (loss)
foreign currency translation (551) (569)
------- ------
Comprehensive income (loss) $2,512 ($1,551)
------- ------
------- ------
</TABLE>
<TABLE>
<CAPTION>
Six month periods ended
April 4, 1999 and March 28,1998
---------------------------------------------------
Fiscal 1999 Fiscal 1998
----------- -----------
<S> <C> <C>
Net income (loss) $13,055 $5,577
Other comprehensive income (loss)
foreign currency translation (647) 37
------- ------
Comprehensive income (loss) $12,408 $5,614
------- ------
------- ------
</TABLE>
4 EARNINGS PER SHARE DISCLOSURE
Earnings per share is calculated based upon the following:
<TABLE>
<CAPTION>
Three month period ended April 4, 1999 Three month period ended March 28, 1998
----------------------------------------------- ----------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary
item $3,063 ($982)
BASIC EPS
Income available to common
shareholders $3,063 27,485 $0.11 ($982) 27,432 ($0.04)
----- -------
----- -------
EFFECT OF DILUTIVE SECURITIES
Stock Options 1,830 0
----- ---
DILUTED EPS
Income available to common
shareholders plus assumed
conversion $3,063 29,315 $0.10 ($982) 27,432 ($0.04)
------ ------ ----- ----- ------ ------
------ ------ ----- ----- ------ ------
</TABLE>
The effect of unexercised stock options outstanding for the three month
period ended March 28, 1998 was excluded from the diluted EPS calculations
as their effect was anti-dilutive.
<TABLE>
<CAPTION>
Six month period ended April 4, 1999 Six month period ended March 28, 1998
----------------------------------------------- ----------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary
item $13,055 $7,552
BASIC EPS
Income available to common
shareholders $13,055 27,484 $0.48 $7,552 25,476 $0.30
----- -----
----- -----
EFFECT OF DILUTIVE SECURITIES
Stock Options 1,757 1,513
----- -----
DILUTED EPS
Income available to common
shareholders plus assumed
conversion $13,055 29,241 $0.45 $7,552 26,989 $0.28
------- ------ ----- ------ ------ -----
------- ------ ----- ------ ------ -----
</TABLE>
6
<PAGE>
5 COMMITMENTS AND CONTINGENCIES
In March 1998, the Company entered into an agreement to purchase certain
equipment and to pay annual royalties. In connection with the 1998
agreement the Company committed to pay royalties of $2,000 in 1998 and
1999, $3,000 in 2000 through 2003, and $500 in each year thereafter, as
long as the related equipment patents are enforceable (2023). Additionally,
the Company has committed to purchase $7,500 of production equipment and
$220 of tooling.
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 such losses are probable and 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 $1,481,
which may result from resolution of these matters, will not have a material
adverse effect on the financial condition, liquidity, or cash flow of the
Company.
The Company has certain other contingent liabilities with respect to
litigation, claims and contractual agreements arising in the ordinary
course of business. In the opinion of management, such contingent
liabilities are not likely to have a material adverse effect on the
financial condition, liquidity or cash flow of the Company.
6 OTHER
During the year ended September 30, 1998, the Company recorded special
charges and credits as follows: (i) a credit of $1,243 related to the
settlement of deferred compensation agreements with certain former
employees, (ii) charges of $5,280 related to (a) the September 1998 closing
of the Company's Newton Aycliffe, United Kingdom, packaging facility, (b)
the phasing out of direct distribution by June 1998 in the United Kingdom,
and (c) the September 1998 closing of one of the Company's German sales
offices, which amounts include $1,771 of employee termination benefits for
73 employees, $1,457 of lease cancellation costs, and $1,032 of equipment
and intangible asset write-offs, and $1,020 of other costs, (iii) charges
of $2,184 related to the closing by April 1999 of the Company's Appleton,
Wisconsin, manufacturing facility, which amount includes $1,449 of employee
termination benefits for 153 employees, $200 of fixed asset write-offs and
$535 of other costs, (iv) charges of $1,963 related to the exit by March
1999 of certain manufacturing operations at the Company's Madison,
Wisconsin, facility, which amount includes $295 of employee termination
benefits for 29 employees, $1,256 of fixed asset write-offs, and $412 of
other costs, (v) a $2,435 gain on the sale of the Company's previously
closed Kinston, North Carolina, facility, (vi) charges of $854 related to
the secondary offering of the Company's common stock, and (vii)
miscellaneous credits of $420. A summary of the 1998 restructuring
activities follows:
7
<PAGE>
1998 RESTRUCTURING SUMMARY
<TABLE>
<CAPTION>
Termination Other
Benefits Costs Total
----------- ------- -------
<S> <C> <C> <C>
Expense accrued .... $ 3,700 $ 3,800 $ 7,500
Change in estimate . (100) 500 400
Expensed as incurred 200 1,300 1,500
Cash expenditures .. (1,500) (1,400) (2,900)
Non-cash charges ... -- (1,600) (1,600)
------- ------- -------
Balance 9/30/98 ...... $ 2,300 $ 2,600 $ 4,900
------- ------- -------
------- ------- -------
Change in estimate . (500) -- (500)
Expensed as incurred 300 800 1,100
Cash expenditures .. (900) (2,100) (3,000)
Non-cash charges ... -- (100) (100)
------- ------- -------
Balance 1/03/99 ...... $ 1,200 $ 1,200 $ 2,400
------- ------- -------
------- ------- -------
Expensed as incurred -- 600 600
Cash expenditures .. (300) (700) (1,000)
Non-cash charges ... -- (200) (200)
------- ------- -------
Balance 4/04/99 ...... $ 900 $ 900 $ 1,800
------- ------- -------
------- ------- -------
</TABLE>
During the year ended September 30, 1997, the Company recorded special
charges as follows: (i) $2,500 of charges related to the exit of certain
manufacturing and distribution operations at the Company's Kinston, North
Carolina facility by early fiscal 1998, which includes $1,100 of employee
termination benefits for 137 employees, (ii) $1,400 of employee termination
benefits for 71 employees related to organizational restructuring in Europe
and the exit of certain manufacturing operations in the Company's Newton
Aycliffe, United Kingdom facility which the Company completed in fiscal
1998, (iii) $2,000 of charges for employee termination benefits for 77
employees related to organizational restructuring in the United States
which the Company completed in fiscal 1998. The number of employees
anticipated to be terminated was approximately equal to the actual numbers
referenced above. The charges were partially offset by a $2,900 million
gain related to the curtailment of the Company's defined benefit pension
plan covering all domestic non-union employees. A summary of the 1997
restructuring activities follows:
8
<PAGE>
1997 RESTRUCTURING SUMMARY
<TABLE>
<CAPTION>
Termination Other
Benefits Costs Total
----------- ------- -------
<S> <C> <C> <C>
Expenses accrued ... $ 4,000 $ 600 $ 4,600
Change in estimate . 500 600 1,100
Expensed as incurred -- 200 200
Expenditures ....... (3,300) (700) (4,000)
------- ------- -------
Balance 9/30/97 ...... $ 1,200 $ 700 $ 1,900
------- ------- -------
------- ------- -------
Expenditures ....... (700) -- (700)
------- ------- -------
Balance 12/27/97 ..... $ 500 $ 700 $ 1,200
------- ------- -------
------- ------- -------
Change in estimate . (100) (400) (500)
Expenditures ....... (200) (200) (400)
------- ------- -------
Balance 3/28/98 ...... $ 200 $ 100 $ 300
------- ------- -------
------- ------- -------
Expenditures ....... -- (100) (100)
------- ------- -------
Balance 6/27/98 ...... $ 200 $ -- $ 200
------- ------- -------
------- ------- -------
Change in estimate . (100) -- (100)
Expenditures ....... (100) -- (100)
------- ------- -------
Balance 9/30/98 ...... $ -- $ -- $ --
------- ------- -------
------- ------- -------
</TABLE>
7 SUBSEQUENT EVENTS
The Company continues to negotiate with ROV Limited the acquisition of its
operating entities that carry on the business of marketing and
manufacturing a line of batteries in many Latin American countries. The
Company expects to enter into a new definitive agreement for this
acquisition to replace the December, 1998 agreement which has been
terminated. There can be no assurance that the Company will successfully
complete this acquisition.
The Company currently expects to finance this acquisition entirely with
additional borrowings under amended senior credit facilities. The Company
currently intends to amend and replace its existing senior credit
facilities with a $250 million five-year revolving credit facility and a
$75 million five-year amortizing term loan. In addition to financing the
acquisition of ROV Limited's operations, the Company plans to use the
proceeds of these planned amended senior credit facilities to refinance the
Company's outstanding senior indebtedness, to finance future acquisitions
and for working capital and general corporate purposes. Indebtedness under
these amended senior credit facilities will be secured.
8 GUARANTOR SUBSIDIARY (ROV HOLDING, INC.)
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.
9
<PAGE>
Separate financial statements of the Guarantor Subsidiary are not presented
because management has determined that such financial statements would not
be material to investors.
10
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
As of April 4, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
-ASSETS-
Current assets:
Cash and cash equivalents ........................ $ 501 $ 43 $ 336 $ -- $ 880
Receivables ...................................... $ 69,438 437 16,275 (7,943) 78,207
Inventories ...................................... 51,047 -- 11,786 (116) 62,717
Prepaid expenses and other ....................... 16,848 342 1,642 -- 18,832
--------- --------- --------- --------- ---------
Total current assets ..................... 137,834 822 30,039 (8,059) 160,636
Property, plant and equipment, net ....................... 70,115 -- 4,536 -- 74,651
Deferred charges and other ............................... 41,739 -- 5,062 (5,762) 41,039
Investment in subsidiaries ............................... 18,375 17,642 -- (36,017) --
--------- --------- --------- --------- ---------
Total assets ..................................... $ 268,063 $ 18,464 $ 39,637 $ (49,838) $ 276,326
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
- -LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)-
Current liabilities:
Current maturities of long-term debt ............. $ 1,950 $ -- $ 2,135 $ (936) $ 3,149
Accounts payable ................................. 44,810 -- 12,613 (6,464) 50,959
Accrued liabilities:
Wages and benefits and other ............. 22,739 (141) 4,329 (1,314) 25,613
Recapitalization and other special charges 3,107 -- 124 -- 3,231
--------- --------- --------- --------- ---------
Total current liabilities ................ 72,606 (141) 19,201 (8,714) 82,952
Long-term debt, net of current maturities ................ 144,258 -- 2,575 (3,375) 143,458
Employee benefit obligations, net of current portion ..... 11,841 -- -- -- 11,841
Other .................................................... 3,205 230 219 -- 3,654
--------- --------- --------- --------- ---------
Total liabilities ................................ 231,910 89 21,995 (12,089) 241,905
Shareholders' equity :
Common stock ..................................... 570 -- 12,072 (12,072) 570
Additional paid-in capital ....................... 103,533 3,525 750 (4,275) 103,533
Notes receivable from officers/shareholders ...... (890) -- -- -- (890)
Retained earnings ................................ 60,522 12,997 2,967 (17,696) 58,790
--------- --------- --------- --------- ---------
163,735 16,522 15,789 (34,043) 162,003
Less treasury stock, at cost ............................. (128,975) -- -- -- (128,975)
Accumulated other comprehensive
income (expense):
Foreign currency translation adjustment ............ 1,853 1,853 1,853 (3,706) 1,853
Minimum pension liability adjustment ............... (460) -- -- -- (460)
--------- --------- --------- --------- ---------
Total shareholders' equity ....................... 36,153 18,375 17,642 (37,749) 34,421
--------- --------- --------- --------- ---------
Total liabilities and shareholders' equity ....... $ 268,063 $ 18,464 $ 39,637 $ (49,838) $ 276,326
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
10
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the three month period ended April 4, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales ........................ $ 99,456 $ -- $19,093 $(7,580) $110,969
Cost of goods sold ............... 55,524 -- 10,718 (7,585) 58,657
-------- ------- ------- ------- --------
Gross profit .................. 43,932 -- 8,375 5 52,312
Selling .......................... 28,452 -- 4,002 -- 32,454
General and administrative ....... 6,960 (176) 1,748 (18) 8,514
Research and development ......... 2,184 -- -- -- 2,184
Other special charges ............ 639 -- 99 -- 738
-------- ------- ------- ------- --------
Total operating expenses ...... 38,235 (176) 5,849 (18) 43,890
Income from operations ........... 5,697 176 2,526 23 8,422
Other expense (income):
Interest expense ............ 3,399 -- 87 (2) 3,484
Equity in profit of subsidiary (1,422) (1,263) -- 2,685 --
Other expense (income) ...... (216) 17 378 (24) 155
-------- ------- ------- ------- --------
Income before income taxes
and extraordinary item ...... 3,936 1,422 2,061 (2,636) 4,783
Income tax expense ............... 922 -- 798 -- 1,720
-------- ------- ------- ------- --------
Income before
extraordinary item .......... 3,014 1,422 1,263 (2,636) 3,063
Extraordinary item ............... -- -- -- -- --
-------- ------- ------- ------- --------
Net income ....................... $ 3,014 $ 1,422 $ 1,263 $(2,636) $ 3,063
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
</TABLE>
11
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the six month period ended April 4, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales ........................ $ 248,497 $ -- $39,070 $(16,056) 271,511
Cost of goods sold ............... 134,141 -- 22,440 (16,065) 140,516
--------- ------- ------- -------- --------
Gross profit .................. 114,356 -- 16,630 9 130,995
Selling .......................... 71,001 -- 9,042 -- 80,043
General and administrative ....... 14,118 (422) 3,648 (36) 17,308
Research and development ......... 4,265 -- -- -- 4,265
Other special charges ............ 710 -- 676 -- 1,386
--------- ------- ------- -------- --------
Total operating expenses ...... 90,094 (422) 13,366 (36) 103,002
Income from operations ........ 24,262 422 3,264 45 27,993
Other expense (income):
Interest expense ............ 6,858 -- 282 -- 7,140
Equity in profit of subsidiary (1,793) (1,565) -- 3,358 --
Other expense (income) ...... (192) 26 574 (26) 382
--------- ------- ------- -------- --------
4,873 (1,539) 856 3,332 7,522
Income before income taxes
and extraordinary item ...... 19,389 1,961 2,408 (3,287) 20,471
Income tax expense ............... 6,405 168 843 -- 7,416
--------- ------- ------- -------- --------
Income before
extraordinary item .......... 12,984 1,793 1,565 (3,287) 13,055
Extraordinary item ............... -- -- -- -- --
--------- ------- ------- -------- --------
Net income .................... $ 12,984 $ 1,793 $ 1,565 $ (3,287) $ 13,055
--------- ------- ------- -------- --------
--------- ------- ------- -------- --------
</TABLE>
12
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the six month period ended April 4, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided (used) by operating activities ........ $ 13,853 $ (1) $ 887 ($809) $ 13,930
Cash flows from investing activities:
Purchases of property, plant and equipment ...... (8,786) -- (239) -- (9,025)
Proceeds from sale of property, plant, and equip 11 -- -- -- 11
Payment for acquisitions ........................ -- -- --
-------- ------- ------- ----- --------
Net cash used by investing activities ................... (8,775) -- (239) -- (9,014)
Cash flows from financing activities:
Reduction of debt ............................... (5,759) -- (4,776) 809 (9,726)
Proceeds from debt financing .................... -- -- 4,263 -- 4,263
Other ........................................... (173) -- -- -- (173)
-------- ------- ------- ----- --------
Net cash provided (used) by financing activities ........ (5,932) -- (513) 809 (5,636)
Effect of exchange rate changes on cash and cash
equivalents ..................................... -- -- 6 -- 6
-------- ------- ------- ----- --------
Net increase (decrease) in cash and cash equivalents .... (854) (1) 141 (0) (714)
Cash and cash equivalents, beginning of period .......... 1,355 44 195 -- 1,594
-------- ------- ------- ----- --------
Cash and cash equivalents, end of period ................ $ 501 $ 43 $ 336 $-- $ 880
-------- ------- ------- ----- --------
-------- ------- ------- ----- --------
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FISCAL QUARTER AND SIX MONTHS ENDED APRIL 4, 1999 COMPARED TO
FISCAL QUARTER AND SIX MONTHS ENDED MARCH 28, 1998
RESULTS OF OPERATIONS
NET SALES. Net sales for the three months ended April 4, 1999 (the "Fiscal
1999 Quarter") increased $14.9 million, or 15.5%, to $111.0 million from $96.1
million for the three months ended March 28, 1998 (the "Fiscal 1998 Quarter").
The increase was driven by increased sales of alkaline, hearing aid, heavy duty,
and specialty batteries partially offset by a decrease in rechargeable alkaline
sales.
Alkaline sales increased $10.6 million, or 26.6%, to $50.4 million from
$39.8 million in the same period a year ago. The growth in alkaline was due
primarily to expanded distribution, a 3% price increase in the U.S., and strong
promotional programs in North America partially offset by a decision to exit
certain private label battery business in the United Kingdom.
Hearing aid battery sales increased $2.5 million, or 14.0%, compared to the
same period a year ago. Sales were favorably impacted by strong retail channel
distribution and the introduction of the Company's newest generation of hearing
aid battery products.
Heavy duty sales increased $2.6 million, or 41.3%, compared to the same
period a year ago due primarily to exclusive distribution with a major U.S.
retailer partially offset by a decision to exit certain private label battery
business in the United Kingdom.
Specialty battery sales increased $1.2 million to $3.3 million primarily
attributable to the impact of the Direct Power Plus acquisition completed during
Fiscal 1998 and the introduction of cordless and cellular phone batteries.
Alkaline rechargeable sales decreased $1.8 million, or 27.3%, versus the
same period a year ago primarily due to initial stocking orders with a major
retailer in the Fiscal 1998 Quarter not being repeated in the Fiscal 1999
Quarter.
For the six months ended April 4, 1999 (the "1999 Six Months"), sales
increased $25.4 million, or 10.3%, to $271.5 million from $246.1 million for the
six months ended March 28, 1998 (the "1998 Six Months"). The increase was mainly
driven by increased sales of alkaline, hearing aid, specialty, and lighting
products partially offset by a decrease in watch battery sales.
Alkaline sales increased $14.4 million, or 11.7%, to $138.0 million from
$123.6 million in the same period a year ago. The growth in alkaline was due
primarily to expanded distribution and strong promotional programs in North
America partially offset by a decision to exit certain private label battery
business in the United Kingdom.
Hearing aid battery sales increased $3.8 million, or 10.9%, compared to the
same period a year ago. A significant portion of the gain was in North America,
reflecting improved
14
<PAGE>
retail channel distribution and the impact of the Best Labs acquisition
completed during Fiscal 1998.
Specialty battery sales increased $5.1 million to $7.2 million reflecting
the impact of the Direct Power Plus acquisition completed during Fiscal 1998 and
the introduction of cordless and cellular phone batteries.
Lighting product sales increased $2.6 million, or 7.7%, to $36.2 million
due primarily to new product launches and expanded distribution in the Company's
industrial lantern battery business.
The decrease in watch battery sales was due primarily to pricing pressures
from competitors in North America reflecting industry over-capacity.
GROSS PROFIT. Gross profit for the Fiscal 1999 Quarter increased $6.8
million, or 14.9%, to $52.3 million from $45.5 in the Fiscal 1998 Quarter. Gross
profit margin decreased to 47.1% from 47.3% in the same period a year ago
primarily reflecting the impact of a temporary shutdown of our AA alkaline
production line during the quarter to install new equipment.
For the 1999 Six Months, gross profit increased $12.9 million, or 10.9%, to
$131.0 million from $118.1 in the same period a year ago. Gross profit margin
increased to 48.3% from 48.0%. These improvements were primarily attributable to
sales volume increases and reduced manufacturing costs as a result of cost
rationalization initiatives.
SELLING EXPENSE. Selling expense increased $4.2 million, or 14.9%, to $32.4
million in the Fiscal 1999 Quarter from $28.2 million in the Fiscal 1998
Quarter. As a percentage of sales, selling expense decreased to 29.2% from 29.4%
in the same period a year ago. For the 1999 Six Months, selling expense
increased $6.3 million, or 8.5%, to $80.0 million from $73.7 million in the same
period a year ago. As a percentage of sales, selling expense decreased to 29.5%
from 29.9%. The increase in dollars is due primarily to increased advertising
and promotional spending in support of increased sales and expanded
distribution. The decrease in selling expense as a percentage of sales is
primarily attributable to net sales growing faster than selling expenses.
GENERAL AND ADMINSTRATIVE EXPENSE. General and administrative expense was
$8.5 million in the Fiscal 1999 Quarter approximately equal to the Fiscal 1998
Quarter. For the 1999 Six Months, general and administrative expenses increased
$1.1 million, or 6.8%, to $17.3 million from $16.2 million in the same period a
year ago. The increase was due primarily to information system improvements, and
increased expenses and amortization related to acquisitions. As a percentage of
sales, general and administrative expense decreased from 6.6% to 6.4%.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $2.2
million for the Fiscal 1999 Quarter approximately equal to the Fiscal 1998
Quarter. For the 1999 Six Months, research and development increased $0.2
million, or 4.9%, to $4.3 million from $4.1 million in the same period a year
ago, reflecting increased spending on alkaline and hearing aid battery
technology.
15
<PAGE>
SPECIAL CHARGES AND (INCOME). Special charges of $0.7 million in the Fiscal
1999 Quarter were $4.5 million lower than the Fiscal 1998 Quarter. In March
1998, the Company announced restructuring plans for its Appleton and Madison,
Wisconsin facilities and Newton Aycliffe, United Kingdom facility. Special
charges in the Fiscal 1999 Quarter reflect additional costs associated with the
closing of these facilities.
For the 1999 Six Months, special charges decreased $2.6 million to $1.4
million from $4.0 million in the same period a year ago. Special charges for the
1999 Six Months principally reflect costs associated with the closing of the
Appleton, Wisconsin and Newton Aycliffe, United Kingdom facilities. Special
charges for the 1998 Six Months reflect the restructuring of the Company's
domestic and international operations partially offset by a gain on the sale of
its previously closed North Carolina facility and a gain on the buy-out of
deferred compensation agreements with certain former employees.
INCOME FROM OPERATIONS. For the 1999 Fiscal Quarter, income from operations
increased $6.9 million to $8.4 million from $1.5 million in the Fiscal 1998
Quarter. For the 1999 Six Months, income from operations increased $7.9 million,
or 39.3%, to $28.0 million from $20.1 million in the 1998 Six Months. These
increases were primarily attributable to increased sales, gross profit
improvements and lower special charges partially offset by increased operating
expenses.
INTEREST EXPENSE. Interest expense increased $0.2 million, or 6.1%, to $3.5
million from $3.3 million in the Fiscal 1998 Quarter. The increase was primarily
a result of increased indebtedness due to higher working capital investment to
support growth in the business.
For the 1999 Six Months, interest expense decreased $1.2 million, or 14.5%,
to $7.1 million from $8.3 million in the same period a year ago. The decrease
was primarily a result of decreased indebtedness due to the application of
proceeds of the Company's initial public offering of common stock completed in
November 1997.
OTHER EXPENSE/(INCOME). Foreign exchange losses were partially offset by
interest income and resulted in net expense of $0.2 million in the Fiscal 1999
Quarter. In the Fiscal 1998 Quarter, interest income and foreign exchange gains
resulted in net income of $0.1 million.
For the 1999 Six Months, foreign exchange losses were partially offset by
interest income and resulted in net expense of $0.4 million. In the 1998 Six
Months, interest income and foreign exchange gains resulted in net income of
$0.4 million.
INCOME TAX EXPENSE (BENEFIT). The Company's effective tax rate for the
Fiscal 1999 Quarter was 36.0% compared to 41.6% tax benefit for the Fiscal 1998
Quarter. The change in effective rate is impacted by (i) a lower foreign tax
rate and (ii) the Company's Foreign Sales Corporation ("FSC").
For the 1999 Six Months, the Company's effective tax rate was 36.2%
compared to 37.7% for the same period a year ago. The improved effective rate is
impacted by a lower foreign tax rate as compared to the Company's statutory
rate.
16
<PAGE>
EXTRAORDINARY ITEM. The 1998 Six Months include an extraordinary expense of
$2.0 million, net of income tax, for the premium payment on the redemption of a
portion of the Company's Series B Senior Subordinated Notes.
NET INCOME (LOSS). Net income for the Fiscal 1999 Quarter increased $4.1
million to $3.1 million from a net loss of $1.0 million in the Fiscal 1998
Quarter. The increase reflects the impact of sales growth, improved margins,
lower special charges, and the absence of the extraordinary item. For the 1999
Six Months, net income increased $7.5 million, or 133.9%, to $13.1 million from
$5.6 million in the same period a year ago.
LIQUIDITY AND CAPITAL RESOURCES
For the 1999 Six Months, net cash provided by operating activities
increased $9.5 million to $13.9 million from $4.4 million for the 1998 Six
Months. This increase is mainly due to increased income from operations and
lower interest expense. Cash costs associated with the restructuring activities
announced in Fiscal 1998 have been and are expected to be funded with cash
provided by operations.
Net cash used in investing activities decreased $1.9 million versus the
prior year period. Capital expenditures for the 1999 Six Months were
approximately $9.0 million, an increase of $2.3 million from the 1998 Six Months
reflecting continued spending on the new SAP business enterprise system and the
building expansion at the Company's Portage, Wisconsin manufacturing facility.
The increase in capital spending was offset by the absence of acquisition
investments in 1998. In the 1998 Six Months, the Company acquired Brisco and
DPP.
The Company continues to expect capital spending for fiscal 1999 for its
current operations to be approximately $24 million. Alkaline capacity expansion,
building expansion at the Company's Portage, Wisconsin facility and the SAP
computer system are the major projects underway in addition to normal
maintenance level spending.
The Company continues to negotiate with ROV Limited the acquisition of its
operating entities that carry on the business of marketing and manufacturing a
line of batteries in many Latin American countries. The Company expects to enter
into a new definitive agreement for this acquisition. There can be no assurance
that the Company will successfully complete this acquisition.
The Company currently expects to finance this acquisition entirely with
additional borrowings under amended senior credit facilities. The Company
currently intends to amend and replace its existing senior credit facilities
with a $250 million five-year revolving credit facility and a $75 million
five-year amortizing term loan. In addition to financing the acquisition of ROV
Limited's operations, the Company plans to use the proceeds of these planned
amended senior credit facilities to refinance the Company's outstanding senior
indebtedness, to finance future acquisitions and for working capital and general
corporate purposes. Indebtedness under these amended senior credit facilities
will be secured.
The Company's current credit facilities include a revolving credit facility
of $90.0 million of which $72.2 million was outstanding as of April 4, 1999,
with approximately $5.4 million
17
<PAGE>
utilized for outstanding letters of credit. The Company also has $7.4 million
outstanding on its acquisition facility as of April 4, 1999. The Company's
ability to borrow is limited by the terms of its senior credit facilities and
outstanding 10 1/4% Series B Senior Subordinated Notes due 2006 (the "Notes").
The Company currently intends to seek the consent of the holders of the Notes to
certain amendments to the indenture governing the Notes to facilitate the
acquisition of ROV Limited's operations and the Company's planned financing
thereof.
The Company believes that cash flow from operating activities and periodic
borrowings under its planned amended senior 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 guarantee can be given in
this regard.
18
<PAGE>
Year 2000
The following should be read in conjunction with ITEM 7. MANAGEMENT
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS in the
Form 10-K as of September 30, 1998.
STATE OF READINESS. The Company's Year 2000 Project is continuing on
schedule with remediation and/or replacement of legacy systems scheduled for
mid-1999.
COSTS TO ADDRESS YEAR 2000 ISSUES. Expenditures directly related to
identification, evaluation and remediation of Year 2000 exposures are currently
projected to be $0.8 million for fiscal 1999.
Capital expenditures for projects undertaken for other reasons but which
address Year 2000 issues (primarily SAP) are currently projected to be $5.5
million for fiscal 1999. Other expenditures associated with these capital
expenditures are currently projected to be $1.6 million for fiscal 1999.
Forward Looking Statements
Certain statements contained in this Form 10-Q are forward-looking
statements which involve risks and uncertainties. Actual results may differ
materially from those set forth in such forward-looking statements. Important
factors that could cause the Company's actual results to differ materially are
set forth in the Company's most recent Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK FACTORS
The Company has market risk exposure from changes in interest rates,
foreign currency exchange rates and commodity prices. Derivative financial
instruments are used by the Company, for purposes other than trading purposes,
to mitigate the risk from such exposures.
A discussion of the Company's accounting policies for derivative financial
instruments is included in Note 1 "Significant Accounting Policies" in Notes to
Condensed Consolidated Financial Statements.
SENSITIVITY ANALYSIS
The analysis below is hypothetical and should not be considered a
projection of future risks. Earnings projections are before tax.
As of April 4, 1999, the potential change in fair value of outstanding
interest rate derivative instruments, assuming a 1% unfavorable shift in the
underlying interest rates would be a loss of $0.4 million. The net impact on
reported earnings, after also including the reduction in one year's interest
expense on the related debt due to the same shift in interest rates, would be a
net gain of $0.4 million.
19
<PAGE>
As of April 4, 1999, the potential change in fair value of outstanding
foreign exchange rate derivative instruments, assuming a 10% unfavorable
change in the underlying foreign exchange rates would be a loss of $1.8
million. The net impact on future cash flows, after also including the gain
in value on the related accounts receivable and contractual payment
obligations outstanding at April 4, 1999 due to the same change in exchange
rates, would be a net loss of $0.2 million.
As of April 4, 1999, the potential change in fair value of outstanding
commodity price derivative instruments, assuming a 10% unfavorable change in
the underlying commodity prices would be a loss of $0.5 million. The net
impact on reported earnings, after also including the reduction in cost of
one year's purchases of the related commodities due to the same change in
commodity prices, would be a net gain of $0.1 million.
20
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On May 3, 1999, the Company filed an action in the United Sates District
Court for the Western District of Wisconsin against Duracell, Incorporated
("Duracell") alleging that Duracell has infringed and is infringing two of the
Company's patents relating to zinc-air batteries, which are used primarily for
hearing aids. Duracell has not yet answered the complaint. The Company seeks
damages and an injunction against further infringements.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Pursuant to an amended Consent Solicitation Statement, dated February 19,
1999 (the "Prior Consent Solicitation Statement"), the Company obtained the
consent of the holders of 99.8% of the aggregate principal amount of its
outstanding $65,000,000 10 1/4% Series B Senior Subordinated Notes due 2006 (the
"Notes") to certain amendments (the "Acquisition Amendments") to the indenture
(the "Indenture") dated as of October 22, 1996, among the Company, ROV Holding,
Inc., as guarantor (the "Guarantor"), and HSBC Bank USA (formerly known as
Marine Midland Bank), as trustee (the "Trustee") governing the Notes. The
Acquisition Amendments were to facilitate the Company's acquisition of the
operations of ROV Limited, a Cayman Islands corporation and marketer and
manufacturer of a line of batteries in certain Latin American countries, and
would, among other things, increase the aggregate maximum principal amount of
senior secured debt that the Company can have outstanding, provide that foreign
subsidiaries of the Company need not become guarantors under the Indenture,
except in certain limited circumstances, and increase the aggregate maximum
principal amount of indebtedness that foreign subsidiaries of the Company can
incur. In order to make the Acquisition Amendments effective, the Prior Consent
Solicitation Statement and the First Supplemental Indenture, dated as of
February 26, 1999, among the Company, the Guarantor, and the Trustee, each
provided that the Company was required to deliver to the Trustee by April 30,
1999 written notice "of the Company's decision to consummate an acquisition of
the business of marketing, manufacturing, selling and distributing batteries and
related products carried on by ROV Limited." As the Company did not, by April
30, 1999, have definitive agreements for this acquisition, it did not deliver
this notice to the Trustee within the required time. Accordingly, the
Acquisition Amendments did not become effective.
The Company continues to negotiate the terms of its acquisition of ROV
Limited's operations. The Company expects to enter into a new definitive
agreement for this acquisition in the near future, however, there can be no
assurance that the Company will successfully complete this acquisition. The
Company currently intends to commence a new solicitation of consents to
amendments to the Indenture to facilitate the acquisition of ROV Limited's
operations. The Company expects that the Indenture amendments for which the
Company will solicit consent will be substantially the same as those set forth
in the First Supplemental Indenture, with the time period for delivery of the
required notice to the Trustee extended to a later date.
21
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
3.1+ Amended and Restated Articles of Incorporation of the Company.
3.2 Amended and Restated By-laws of the Company, as amended through
May 17, 1999
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 First Supplemental Indenture, dated as of February 26, 1999, by
and among the Company, ROV Holding, Inc. and HSBC Bank USA
(formerly known as Marine Midland Bank) as trustee, relating to
the Company's 10 1/4% Senior Subordinated Notes due 2006.
4.3** Specimen of the Notes (included as an exhibit to Exhibit 4.1)
4.4**** Amended and Restated Credit Agreement, dated as of December 30,
1997, by and among the Company, the lenders party thereto and
Bank of America National Trust and Savings Association
("BofA"), as Administrative Agent.
4.5** The Security Agreement, dated as of September 12, 1996, by and
among the Company, ROV Holding, Inc. and BofA.
4.6** The Company Pledge Agreement, dated as of September 12, 1996,
by and between the Company and BofA.
4.7*** Shareholders Agreement, dated as of September 12, 1996, by and
among the Company and the shareholders of the Company referred
to therein.
4.8*** Amendment No. 1 to Rayovac Shareholders Agreement, dated August
1, 1997, by and among the Company and the shareholders of the
Company referred to therein.
4.9***** Amendment No. 2 to Rayovac Shareholders Agreement, dated as of
January 8, 1999, by and among the Company and the Shareholders
of the Company referred to therein.
4.10* Specimen certificate representing the Common Stock.
10.1** Management Agreement, dated as of September 12, 1996, by and
between the Company and Thomas H. Lee Company.
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
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++ Amended and Restated Employment Agreement, dated as of April
27, 1998, by and between the Company and David A. Jones.
10.4++ Employment Agreement, dated as of April 27, 1998, by and
between the Company and Kent J. Hussey
10.5++++ Amendment to Employment Agreement, dated as of October 1, 1998,
by and between the Company and Kent J. Hussey.
10.6++++ Severance Agreement by and between the Company and Randall J.
Steward.
10.7++++ Severance Agreement by and between the Company and Roger F.
Warren.
10.8++++ Severance Agreement by and between the Company and Stephen P.
Shanesy.
10.9++++ Severance Agreement by and between the Company and Merrell M.
Tomlin.
10.10** 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.
10.11** Building Lease between the Company and SPG Partners, dated May
14, 1985, as amended June 24, 1986 and June 10, 1987.
10.12***** Amendment, dated December 31, 1998, between the Company and SPG
Partners, to the Building Lease, between the Company and SPG
Partners, dated May 14, 1985.
10.13*** Rayovac Corporation 1996 Stock Option Plan.
10.14* 1997 Rayovac Incentive Plan.
10.15* Rayovac Profit Sharing and Savings Plan.
10.16+++ Technical Collaboration, Sale and Supply Agreement, dated as of
March 5, 1998, by and among the Company. Matsushita Battery
Industrial Co., Ltd. and Matsushita Electric Industrial Co.,
Ltd.
27 Financial Data Schedule
</TABLE>
23
<PAGE>
* Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration No. 333-35181) filed with the Commission.
** Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration No. 333-17895) filed with the Commission.
*** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 29, 1997 filed with the
Commission on August 13, 1997.
**** Incorporated by reference to the Company's Registration Statement on
Form S-3 (Registration No. 333-49281) filed with the Commission.
***** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended January 3, 1999 filed with the
Commission on February 17, 1999.
+ Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1997 filed with the Commission
on December 23, 1997.
++ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the Quarterly period ended June 27, 1998 filed with the
Commission on August 4, 1998.
+++ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 28, 1998 filed with the
Commission on May 5, 1998.
++++ Incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1998 filed with the Commission
on December 24, 1998.
[Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended January 3, 1999 filed with the
Commission on February 17, 1999.]
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K
during the Company's quarterly period ended April 4, 1999.
24
<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: May 17, 1999
RAYOVAC CORPORATION
By: __________________________
Randall J. Steward
Senior Vice President of Finance
and Chief Financial Officer
By: __________________________
James A. Broderick
Vice President, General Counsel and
Secretary
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Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
OF
RAYOVAC CORPORATION
(hereinafter called the "Corporation")
ARTICLE I. OFFICES
1.1 PRINCIPAL AND BUSINESS OFFICES. The Corporation may have
such principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
1.2 REGISTERED OFFICE. The registered office of the
Corporation required by the Wisconsin Business Corporation Law to be maintained
in the State of Wisconsin may be, but need not be, identical with the principal
office in the State of Wisconsin, and the address of the registered office may
be changed from time to time by the Board of Directors or by the registered
agent. The business office of the registered agent of the Corporation shall be
identical to such registered office.
ARTICLE II. SHAREHOLDERS
2.1 ANNUAL MEETING. The annual meeting of shareholders shall
be held on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, at which
meeting the shareholders shall elect directors, and transact such other business
as may properly be brought before the meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
shareholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
2.2 SPECIAL MEETING. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by statute or the
Articles of Incorpora-
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tion, may be called only by (i) the Chairman of the Board of Directors, if there
be one, (ii) the President, (iii) any Vice President, if there be one, (iv) the
Secretary or (v) any Assistant Secretary, if there be one, and shall be called
by any such officer at the request in writing of a majority of the Board of
Directors. Shareholders shall not be entitled to call a Special Meeting of the
shareholders, nor to require the Board of Directors to call such a special
meeting. Special meetings of the shareholders may be held on any date, at any
time and at any place within or without the State of Wisconsin as shall be
determined by the Board of Directors. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten nor more than sixty
days before the date of the meeting to each shareholder entitled to vote at such
meeting.
2.3 PLACE OF MEETING. The Board of Directors may designate
any place, either within or without the State of Wisconsin, as the place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of
Wisconsin, as the place for the holding of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall be
the principal business office of the Corporation in the State of Wisconsin or
such other suitable place in the county of such principal office as may be
designated by the person calling such meeting, but any meeting may be adjourned
to reconvene at any place designated by the holders of a majority of the votes
represented thereat.
2.4 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For
the purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, fifty days. If the stock transfer books shall be closed for
the purpose of determining shareholders entitled to notice of or to
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vote at a meeting of shareholders, such books shall be closed for at least ten
days immediately preceding such meeting. In lieu of closing the stock transfer
books, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than fifty days and, in case of a meeting of shareholders, not less than ten
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the close of business on the date on
which notice of the meeting is mailed or on the date on which the resolution of
the Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this section, such determination shall be applied
to any adjournment thereof except where the determination has been made through
the closing of the stock transfer books and the stated period of closing has
expired.
2.5 VOTING RECORDS. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to vote at
such meeting, or any adjournment thereof, arranged in alphabetical order, and
indicating the address of each shareholder, the number of shares of each class
of capital stock of the Corporation entitled to vote registered in the name of
such shareholder and the total number of votes to which each shareholder is
entitled. Such record shall be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting for any purpose germane to the meeting. The original
stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such record or transfer books or to vote at any
meeting of shareholders. Failure to comply with the requirements of this section
shall not affect the validity of any action taken at such meeting.
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2.6 QUORUM. Except as otherwise provided in the Articles of
Incorporation, a quorum shall exist at a meeting of shareholders if shares of
the Corporation holding a majority of the votes entitled to be cast at such
meeting are represented in person or by proxy at such meeting of shareholders,
but in no event shall a quorum consist of less than one-third of the shares
entitled to vote at the meeting. If a quorum is present, the affirmative vote of
the holders of a majority of the votes represented at the meeting in person or
by proxy voting together as a single class shall be the act of the shareholders,
unless the vote of a greater number or voting by classes is required by law or
the Articles of Incorporation. If a quorum shall fail to attend any meeting, the
presiding officer at the meeting may adjourn the meeting to another place, date
or time. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
2.7 CONDUCT OF MEETING. The Chairman of the Board, and in his
absence, the President, and in their absence, any person chosen by the
shareholders present shall call the meeting of the shareholders to order and
shall act as chairman of the meeting, and the Secretary of the Corporation shall
act as secretary of all meetings of the shareholders, but, in the absence of the
Secretary, the presiding officer may appoint any other person to act as
secretary of the meeting.
2.8 PROXIES. At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by proxy appointed in writing by the
shareholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the Secretary of the Corporation before or at the time of the
meeting. Unless otherwise provided in the proxy, a proxy may be revoked at any
time before it is voted, either by written notice filed with the Secretary or
the acting secretary of the meeting or by oral notice given by the shareholder
to the presiding officer during the meeting. The presence of a shareholder who
has filed his proxy shall not of itself constitute a revocation. No proxy shall
be valid after eleven months from the date of its execution, unless otherwise
provided in the proxy. The Board of Directors shall have the
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power and authority to make rules establishing presumptions as to the validity
and sufficiency of proxies.
2.9 VOTING OF SHARES. Each outstanding share shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders, except to the extent that voting rights of the shares of any class
or classes are enlarged, limited or denied by the Articles of Incorporation.
2.10 VOTING OF SHARES BY CERTAIN HOLDERS.
(a) OTHER CORPORATIONS. Shares standing in the name
of another corporation may be voted either in person or by proxy, by the
president of such corporation or any other officer appointed by such president.
A proxy executed by any principal officer of such other corporation or assistant
thereto shall be conclusive evidence of the signer's authority to act, in the
absence of express notice to this Corporation, given in writing to the Secretary
of this Corporation, of the designation of some other person by the board of
directors or the bylaws of such other corporation.
(b) LEGAL REPRESENTATIVES AND FIDUCIARIES. Shares
held by any administrator, executor, guardian, conservator, trustee in
bankruptcy, receiver, or assignee for creditors may be voted by him, either in
person or by proxy, without a transfer of such shares into his name provided
that there is filed with the Secretary before or at the time of meeting proper
evidence of his incumbency and the number of shares held. Shares standing in the
name of a fiduciary may be voted by him, either in person or by proxy. A proxy
executed by a fiduciary, shall be conclusive evidence of the signer's authority
to act, in the absence of express notice to this Corporation, given in writing
to the Secretary of this Corporation, that such manner of voting is expressly
prohibited or otherwise directed by the document creating the fiduciary
relationship.
(c) PLEDGEES. A shareholder whose shares are pledged
shall be entitled to vote such shares until the shares have been transferred
into the name of the pledgee, and thereafter the pledgee shall be entitled to
vote the shares so transferred.
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(d) TREASURY STOCK AND SUBSIDIARIES. Neither treasury
shares, nor shares held by another corporation if a majority of the shares
entitled to vote for the election of directors of such other corporation is held
by this Corporation, shall be voted at any meeting or counted in determining the
total number of votes represented at such a meeting, but shares of its own issue
held by this Corporation in a fiduciary capacity, or held by such other
corporation in a fiduciary capacity, may be voted and shall be counted in
determining the total number of votes represented at such a meeting.
(e) MINORS. Shares held by a minor may be voted by
such minor in person or by proxy and no such vote shall be subject to
disaffirmance or avoidance, unless prior to such vote the Secretary of the
Corporation has received written notice or has actual knowledge that such
shareholder is a minor.
(f) INCOMPETENTS AND SPENDTHRIFTS. Shares held by an
incompetent or spendthrift may be voted by such incompetent or spendthrift in
person or by proxy and no such vote shall be subject to disaffirmance or
avoidance, unless prior to such vote the Secretary of the Corporation has actual
knowledge that such shareholder has been adjudicated an incompetent or
spendthrift or actual knowledge of filing of judicial proceedings for
appointment of a guardian.
(g) JOINT TENANTS. Shares registered in the names of
two or more individuals who are named in the registration as joint tenants may
be voted in person or by proxy signed by any one or more of such individuals if
either (i) no other such individual or his legal representative is present and
claims the right to participate in the voting of such shares or prior to the
vote files with the Secretary of the Corporation a contrary written voting
authorization or direction or written denial of authority of the individual
present or signing the proxy proposed to be voted or (ii) all such other
individuals are deceased and the Secretary of the Corporation has no actual
knowledge that the survivor has been adjudicated not to be the successor to the
interests of those deceased.
2.11 WAIVER OF NOTICE BY SHAREHOLDERS. Whenever any notice
whatsoever is required to be given to any
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shareholder of the Corporation under the Articles of Incorporation or By-Laws or
any provision of law, a waiver thereof in writing, signed at any time, whether
before or after the time of the meeting, by the shareholder entitled to such
notice, shall be deemed equivalent to the giving of such notice; provided that
such waiver in respect to any matter of which notice is required under any
provision of the Wisconsin Business Corporation Law, shall contain the same
information as would have been required to be included in such notice, except
the time and place of meeting.
2.12 NO ACTION BY CONSENT OF SHAREHOLDERS IN LIEU OF MEETING.
Any action required or permitted to be taken by the shareholders of the
Corporation must be effected at a duly constituted annual or special meeting of
such shareholders and may not be effected by any consent in writing by such
shareholders.
2.13 NOMINATION OF DIRECTORS. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors of the Corporation. Nominations of persons for election as directors
of the Corporation may be made at a meeting of shareholders only (i) by or at
the direction of the Board of Directors, (ii) by any nominating committee or
person appointed by the Board of Directors or (iii) by any shareholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 2.13. Such
nominations, other than those made by or at the direction of the Board of
Directors or by any nominating committee or person appointed by the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 50 days nor more than 75 days prior to the meeting at which directors
will be elected; provided, however, that in the event that less than 65 days'
notice or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever
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first occurs. Such shareholder's notice to the Secretary shall set forth (a) as
to each person whom the shareholder proposes to nominate for election or
re-election as a director, (i) the name, business address and residence of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of the Corporation that are
beneficially owned by the person and (iv) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Rule 14a under the Securities Exchange Act of
1934, as now or hereafter amended; and (b) as to the shareholder giving the
notice, (i) the name and record address of such shareholder and (ii) the class
and number of shares of capital stock of the Corporation that are beneficially
owned by such shareholder. The Corporation may require any proposed nominee to
furnish such other information as may reasonably be required by the Corporation
to determine the eligibility of such proposed nominee to serve as a director of
the Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth herein.
The presiding officer at the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedures, and if he should so determine, he
shall so declare to the meeting and such nomination shall be disregarded.
2.14 OTHER BUSINESS. To be properly brought before a meeting
of shareholders, business must be either (a) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors or (c) otherwise properly brought before the
meeting by a shareholder. In addition to any other applicable requirements, for
business to be properly brought before a meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than 50 days nor more than 75 days prior to the meeting; provided, however,
that in the event that less than 65 days'
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notice or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever first occurs. A shareholder's notice to the Secretary shall set forth
with respect to each matter the shareholder proposes to bring before the
meeting, (i) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting, (ii)
the name and record address of the shareholder proposing such business, (iii)
the class and number of shares of capital stock of the Corporation that are
beneficially owned by such shareholder and others known by such shareholder to
support the proposal of such business and (iv) any material interest of such
shareholder and other supporters referred to in the preceding clause (iii) in
such proposed business.
Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at any meeting except in accordance with the
procedures set forth in this Section 2.14, provided, however, that nothing in
this Section 2.14 shall be deemed to preclude discussion by any shareholder of
any business properly brought before any meeting.
The presiding officer at the meeting shall, if the facts
warrant, determine and declare to the meeting that the business was not properly
brought before the meeting in accordance with the provisions of this Section
2.14, and if he should so determine, he shall so declare to the meeting, and any
such business not properly brought before the meeting shall not be transacted.
ARTICLE III. BOARD OF DIRECTORS
3.1 GENERAL POWERS AND NUMBER. The business and affairs of
the Corporation shall be managed by its Board of Directors. The number of
directors of the Corporation shall be nine (9).
3.2 TENURE AND QUALIFICATIONS. Each director shall serve for
a term ending on the date of the third annual meeting of shareholders following
the annual meeting at which such director was elected and until his
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successor is duly elected and duly qualified, or until his prior death,
resignation or removal from office. A director may be removed from office as a
director, but only for cause, by the affirmative vote of holders of at least
two-thirds (66 2/3%) of the voting power of shares entitled to vote at an
election of directors. A director may resign at any time by filing his written
resignation with the Secretary of the Corporation. Directors need not be
residents of the State of Wisconsin or shareholders of the Corporation. A
director, other than the Chairman of the Board, who is an officer of the
Corporation and who shall retire or otherwise terminate employment as such
officer shall automatically be retired as a director of the Corporation and
thereafter shall not be eligible for re-election as a director.
3.3 MEETINGS. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Wisconsin. Regular meetings of the Board of Directors may be held at such time
and at such place as may from time to time be determined by the Board of
Directors and, unless required by resolution of the Board of Directors, without
notice. Special meetings of the Board of Directors may be called by the Chairman
of the Board of Directors, the Vice Chairman, if there be one, or a majority of
the directors then in office. Notice thereof stating the place, date and hour of
the meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone, facsimile
or telegram on twenty-four (24) hours' notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or appropriate in the
circumstances.
3.4 QUORUM. Except as otherwise provided by law or by the
Articles of Incorporation or these By-Laws, a majority of the directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but a majority of the directors present (though less than such
quorum) may adjourn the meeting from time to time without further notice.
3.5 MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors,
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unless the act of a greater number is required by law or by the Articles of
Incorporation or these By-Laws.
3.6 CONDUCT OF MEETINGS. The Chairman of the Board, and in
his absence, any director chosen by the directors present, shall call meetings
of the Board of Directors to order and shall act as chairman of the meeting. The
Secretary of the Corporation shall act as secretary of all meetings of the Board
of Directors but in the absence of the Secretary, the presiding officer may
appoint any Assistant Secretary or any director or other persons present to act
as secretary of the meeting.
3.7 VACANCIES. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his term expires and until
his successor shall be duly elected and shall duly qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from office.
Any vacancy on the Board of Directors that results from an increase in the
number of directors may be filled by a majority of the directors then in office,
provided that a quorum is present, and any other vacancy occurring in the Board
of Directors may be filled by a majority of the directors then in office, even
if less than a quorum, or by a sole remaining director; provided that in case of
a vacancy created by the removal of a director by vote of the shareholders, the
shareholders shall have the right to fill such vacancy at the same meeting or
any adjournment thereof in accordance with the Articles of Incorporation.
3.8 COMPENSATION. The Board of Directors, by affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, may establish reasonable compensation
of all directors for services to the Corporation as directors, officers or
otherwise, or may delegate such authority to an appropriate committee. The Board
of Directors
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also shall have authority to provide for or delegate authority to an appropriate
committee to provide for reasonable pensions, disability or death benefits, and
other benefits or payments, to directors, officers and employees and to their
estates, families, dependents or beneficiaries on account of prior services
rendered by such directors, officers and employees to the Corporation.
3.9 PRESUMPTION OF ASSENT. A director of the Corporation who
is present at a meeting of the Board of Directors or a committee thereof of
which he is a member at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the Secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
3.10 COMMITTEES. The Board of Directors by resolution
adopted by the affirmative vote of a majority of the number of directors then in
office may designate one or more committees, each committee to consist of three
or more directors elected by the Board of Directors, which, to the extent
provided in said resolution as initially adopted, and as thereafter supplemented
or amended by further resolution adopted by a like vote, shall have and may
exercise, when the Board of Directors is not in session, the powers of the Board
of Directors in the management of the business and affairs of the Corporation,
except action in respect to dividends to shareholders, election of the principal
officers or the filling of vacancies in the Board of Directors or committees
created pursuant to this section. The Board of Directors may elect one or more
of its members as alternate members of any such committee who may take the place
of any absent member or members at any meeting of such committee, upon request
by the Chairman of the Board or upon request by the chairman of such meeting.
Each such committee shall fix its own rules governing the conduct of its
activities and shall make such reports to the Board of Directors of its
activities as the Board of Directors may request.
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3.11 UNANIMOUS CONSENT WITHOUT MEETING. Any action required
or permitted by the Articles of Incorporation or By-Laws or any provision of law
to be taken by the Board of Directors at a meeting or by resolution may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors then in office.
3.12 TELEPHONIC MEETINGS. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, members of the Board of Directors
of the Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee by means of
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 3.14 shall constitute presence in person at
such meeting.
ARTICLE IV. OFFICERS
4.1 NUMBER. The principal officers of the Corporation shall
be a Chairman of the Board, a President, a number of Vice Presidents as shall be
determined by the Board of Directors from time to time, a Secretary, and a
Treasurer, each of whom shall be elected by the Board of Directors. The Board of
Directors may from time to time elect or appoint such officers and assistant
officers as may be deemed necessary. Any number of offices may be held by the
same person.
4.2 ELECTION AND TERM OF OFFICE. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the shareholders. If the election of officers shall not
be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall be
duly elected or until his prior death, resignation or removal. Any officer may
resign at any time upon written notice to the Corporation. Failure to elect
officers shall not dissolve or otherwise affect the Corporation.
4.3 REMOVAL. Any officer or agent may be removed by the Board
of Directors at any time by the
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affirmative vote of a majority of the Board of Directors, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment shall not of itself create contract rights.
4.4 VACANCIES. A vacancy in any principal office because of
death, resignation, removal, disqualification or otherwise, shall be filled by
the Board of Directors for the unexpired portion of the term.
4.5 CHAIRMAN OF THE BOARD. The Chairman of the Board shall be
elected or appointed by, and from the membership of the Board of Directors. He
shall, when present, preside at all meetings of the shareholders and of the
Board of Directors. He shall perform such other duties and functions as shall be
assigned to him from time to time by the Board of Directors or in these By-Laws.
Except where by law the signature of the President of the Corporation is
required, the Chairman of the Board shall possess the same power and authority
to sign, execute and acknowledge, on behalf of the Corporation, all deeds,
mortgages, bonds, stock certificates, contracts, leases, reports and all other
documents or instruments necessary or proper to be executed in the course of the
Corporation's regular business, or which shall be authorized by resolution of
the Board of Directors; and except as otherwise provided by law or by the Board
of Directors, he may authorize the President or any Vice President or other
officer or agent of the Corporation to sign, execute and acknowledge such
documents or instruments in his place and stead. During the absence or
disability of the President, or while that office is vacant, the Chairman of the
Board shall exercise all of the powers and discharge all of the duties of the
President.
4.6 PRESIDENT. The President shall be the chief executive
officer and chief operations officer of the Corporation and, subject to the
control of the Board of Directors, shall in general determine the direction and
goals of the Corporation and supervise and control all of the business,
operations and affairs of the Corporation. He shall have authority, subject to
such rules as may be prescribed by the Board of Directors, to appoint such
agents and employees of the Corporation as he may deem necessary, to prescribe
their powers, duties and
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compensation, and to delegate authority to them. Such agents and employees shall
hold office at the discretion of the President. He shall have authority,
co-equal with the Chairman of the Board, to sign, execute and acknowledge, on
behalf of the Corporation, all deeds, mortgages, bonds, stock certificates,
contracts, leases, reports and all other documents or instruments necessary or
proper to be executed in the course of the Corporation's regular business, or
which shall be authorized by resolution of the Board of Directors; and, except
as otherwise provided by law or by the Board of Directors, he may authorize any
Vice President or any other officer or agent of the Corporation to sign, execute
and acknowledge such documents or instruments in his place and stead. In
general, he shall perform all duties incident to the office of chief executive
officer, chief operating officer and President and such other duties as may be
prescribed by the Board of Directors from time to time.
4.7 VICE PRESIDENTS. In the absence of the Chairman of the
Board and the President or in the event of their deaths, inability or refusal to
act, or in the event for any reason it shall be impracticable for the Chairman
of the Board or President to act personally, the Vice President (or in the event
thereby more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election) shall perform the duties of the Chairman of the
Board and/or President (as the case may be), and when so acting, shall have all
the powers of and be subject to all the restrictions upon the Chairman of the
Board or President (as the case may be). Any Vice President may sign, with the
Secretary or Assistant Secretary, certificates for shares of the Corporation;
and shall perform such other duties and have such authority as from time to time
may be delegated or assigned to him by the Chairman of the Board, President or
Board of Directors. The execution of any instrument of the Corporation by any
Vice President shall be conclusive evidence, as to third parties, of his
authority to act in the stead of the Chairman of the Board and/or the President.
4.8 SECRETARY. The Secretary shall: (a) keep the minutes of
the meeting of the shareholders and the Board of Directors in one or more books
provided for that purpose; (b) attest instruments to be filed with the
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Secretary of State; (c) see that all notices are duly given in accordance with
the provisions of these By-Laws or as required by law; (d) be custodian of the
corporate records; (e) keep or arrange for the keeping of a register of the post
office address of each shareholder which shall be furnished to the Secretary by
such shareholders; (f) sign with the Chairman of the Board or the President,
certificates for shares of the Corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (g) have general charge
of the stock transfer books of the Corporation; and (h) in general perform all
duties incident to the office of the Secretary and have such other duties and
exercise such authority as from time to time may be delegated or assigned to him
by the Chairman of the Board, the President or by the Board of Directors.
4.9 TREASURER. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the Corporation;
(b) receive and give receipts from moneys due and payable to the Corporation
from any source whatsoever, and deposit all such moneys in the name of the
Corporation in such banks, trust companies or other depositories as shall be
selected by the Corporation; and (c) in general perform all of the duties and
exercise such other authority as from time to time may be delegated or assigned
to him by the Chairman of the Board, the Vice Chairman of the Board or the
President or by the Board of Directors. If required by the Board of Directors,
the Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board of Directors shall determine.
4.10 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. There
shall be such number of Assistant Secretaries and Assistant Treasurers as the
Board of Directors may from time to time authorize. The Assistant Secretaries
may sign with the Chairman of the Board or the President certificates for shares
of the Corporation the issuance of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Treasurers shall
respectively, if required by the Board of Directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the Board of
Directors shall determine. The Assistant Secretaries and Assistant Treasurers,
in general, shall
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perform such duties and have such authority as shall from time to time be
delegated or assigned to them by the Secretary or the Treasurer, respectively,
or by the Chairman of the Board, the President or by the Board of Directors.
4.11 OTHER ASSISTANTS; ACTING OFFICERS; OTHER OFFICERS. The
Board of Directors shall have the power to appoint any person to act as
assistant to any officer, or as agent for the Corporation in his stead, or to
perform the duties of such officer whenever for any reason it is impracticable
for such officer to act personally, and such assistant or acting officer or
other agent so appointed by the Board of Directors shall have the power to
perform all the duties of the office to which he is so appointed to be an
assistant, or as to which he is so appointed to act, except as such power may be
otherwise defined or restricted by the Board of Directors. Such other officers
as the Board of Directors may choose shall perform such duties and have such
powers as from time to time may be assigned to them by the Board of Directors.
The Board of Directors may delegate to any other officer of the Corporation the
power to choose such other officers and to prescribe their respective duties and
powers.
4.12 SALARIES. The salaries of the principal officers shall
be fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that he is also a director of the Corporation.
ARTICLE V. CONTRACTS; SPECIAL CORPORATE ACTS
5.1 CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute or
deliver any instrument in the name of and on behalf of the Corporation, and such
authorization may be general or confined to specific instances. In the absence
of other designation, all deeds, mortgages and instruments of assignment or
pledge made by the Corporation shall be executed in the name of the Corporation
by the Chairman of the Board or the President or one of the Vice Presidents and
by the Secretary, an Assistant Secretary, the Treasurer or an Assistant
Treasurer; and when so executed no other party to
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such instrument or any third party shall be required to make any inquiry into
the authority of the signing officer of officers.
5.2 VOTING OF SECURITIES OWNED BY THIS CORPORATION. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 CERTIFICATES FOR SHARES. Certificates representing shares
of the Corporation shall be in such form, consistent with law, as shall be
determined by the Board of Directors. Such certificates shall be signed by the
Chairman of the Board and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the Corporation. All certificates surrendered to the
Corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except as provided in Section 6.6.
6.2 FACSIMILE SIGNATURES AND SEAL. The signature of the
Chairman of the Board and the Secretary or Assistant Secretary upon a
certificate may be facsimiles if the certificate is manually signed on behalf of
a transfer agent, or a registrar, other than the Corporation itself or an
employee of the Corporation. The Corporation shall have a corporate seal.
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6.3 SIGNATURE BY FORMER OFFICERS. In case any officer, who
has signed or whose facsimile signature has been placed upon any certificate for
shares, shall have ceased to be such officer before such certificate is issued,
it may be issued by the Corporation with the same effect as if he were such
officer at the date of its issue.
6.4 TRANSFER OF SHARES. Prior to due presentment of a
certificate for shares for registration of transfer, the Corporation may treat
the registered owner of such shares as the person exclusively entitled to vote,
to receive notifications and otherwise to have and exercise all the rights and
powers of an owner. Where a certificate for shares is presented to the
Corporation with a request to register for transfer, the Corporation shall not
be liable to the owner or any other person suffering loss as a result of such
registration of transfer if (a) there were on or with the certificate the
necessary endorsements, and (b) the Corporation had no duty to inquire into
adverse claims or has discharged any such duty. The Corporation may require
reasonable assurance that said endorsements are genuine and effective and in
compliance with such other regulations as may be prescribed by or under the
authority of the Board of Directors.
6.5 LOST, DESTROYED OR STOLEN CERTIFICATES. Where the owner
claims that his certificate for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a) so
requests before the Corporation has notice that such shares have been acquired
by a bona fide purchaser, and (b) files with the Corporation a sufficient
indemnity bond, and (c) satisfies such other reasonable requirements as may be
prescribed by or under the authority of the Board of Directors.
6.6 CONSIDERATION FOR SHARES. The shares of the Corporation
may be issued for such consideration as shall be fixed from time to time by the
Board of Directors, provided that any shares having a par value shall not be
issued for a consideration less than the par value thereof. The consideration to
be paid for shares may be paid in whole or in part, in money, in other property,
tangible or intangible, or in labor or services actually performed for the
Corporation. When payment of the
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consideration for which shares are to be issued shall have been received by the
Corporation, such shares shall be deemed to be fully paid and nonassessable by
the Corporation. No certificate shall be issued for any share until such share
is fully paid.
6.7 STOCK REGULATIONS. The Board of Directors shall have the
power and authority to make all such further rules and regulations not
inconsistent with the statutes of the State of Wisconsin as it may deem
expedient concerning the issue, transfer and registration of certificates
representing shares of the Corporation.
ARTICLE VII. AMENDMENTS
7.1 BY SHAREHOLDERS. Except as otherwise provided in the
Articles of Incorporation, these By-Laws may be altered, amended or repealed and
new By-Laws may be adopted by the shareholders by affirmative vote of not less
than a majority of the votes represented in person or by proxy entitled to be
cast therefor at any annual or special meeting of the shareholders at which a
quorum is in attendance.
7.2 BY DIRECTORS. Except as otherwise provided in the
Articles of Incorporation, these By-Laws may also be altered, amended or
repealed and new By-Laws may be adopted by the Board of Directors by affirmative
vote of a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no By-Law adopted by the shareholders shall be
amended or repealed by the Board of Directors if the By-Law so adopted so
provides.
7.3 IMPLIED AMENDMENTS. Any action taken or authorized by
the shareholders or by the Board of Directors, which would be inconsistent with
the By-Laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to amend the
By-Laws so that the By-Laws would be consistent with such action, shall be given
the same effect as though the By-Laws had been temporarily amended or suspended
so far, but only so far, as is necessary to permit the specific action so taken
or authorized.
ARTICLE VIII. INDEMNIFICATION
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8.1 CERTAIN DEFINITIONS. All capitalized terms used in this
Article VIII and not otherwise hereinafter defined in this Section 8.1 shall
have the meaning set forth in Section 180.042 of the Statute. The following
capitalized terms (including any plural forms thereof) used in this Article VIII
shall be defined as follows:
(a) "Affiliate" shall include, without limitation,
any corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise that directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the Corporation.
(b) "Authority" shall mean the entity selected by the
Director or Officer to determine his or her right to indemnification pursuant to
Section 8.4.
(c) "Board" shall mean the entire then elected and
serving board of directors of the Corporation, including all members thereof who
are Parties to the subject Proceeding or any related Proceeding.
(d) "Breach of Duty" shall mean the Director or
Officer breached or failed to perform his or her duties to the Corporation and
his or her breach of or failure to perform those duties is determined, in
accordance with Section 8.4, to constitute misconduct under Section
180.044(2)(a) 1, 2, 3 or 4 of the Statute.
(e) "Corporation" as used herein and as defined in
the Statute and incorporated by reference into the definitions of certain other
capitalized terms used herein, shall mean this Corporation, including, without
limitation, any successor corporation or entity to this Corporation by way of
merger, consolidation or acquisition of all or substantially all of the capital
stock or assets of this Corporation.
(f) "Director or Officer" shall have the meaning set
forth in the Statute; provided, that, for purposes of this Article VIII, it
shall be conclusively presumed that any Director or Officer serving as a
director, officer, partner, trustee, member of any governing or decision-making
committee, employee or agent of an
21
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Affiliate shall be so serving at the request of the Corporation.
(g) "Disinterested Quorum" shall mean a quorum of the
Board who are not Parties to the subject Proceeding or any related Proceeding.
(h) "Party" shall have the meaning set forth in the
Statute; provided, that, for purposes of this Article VIII, the term "Party"
shall also include any Director or Officer who is or was a witness in a
Proceeding at a time when he or she has not otherwise been formally named a
Party thereto.
(i) "Proceeding" shall have the meaning set forth in
the Statute; provided, that, for purposes of this Article VIII, the term
"Proceeding" shall also include all Proceedings (i) brought under (in whole or
in part) the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, their respective state counterparts, and/or any rule or
regulation promulgated under any of the foregoing; (ii) brought before an
Authority or otherwise to enforce rights hereunder; (iii) any appeal from a
Proceeding; and (iv) any Proceeding in which the Director or Officer is a
plaintiff or petitioner because he or she is a Director or Officer; provided,
however, that such Proceeding is authorized by a majority vote of a
Disinterested Quorum.
(j) "Statute" shall mean Sections 180.042 through
180.059, inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of
the Wisconsin Statutes, as the same shall then be in effect, including any
amendments thereto, but, in the case of any such amendment, only to the extent
such amendment permits or requires the Corporation to provide broader
indemnification rights than the Statute permitted or required the Corporation to
provide prior to such amendment.
8.2 MANDATORY INDEMNIFICATION. To the fullest extent
permitted or required by the Statute, the Corporation shall indemnify a Director
or Officer against all Liabilities incurred by or on behalf of such Director or
Officer in connection with a Proceeding in which the Director or Officer is a
Party because he or she is a Director or Officer.
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8.3 PROCEDURAL REQUIREMENTS.
(a) A Director or Officer who seeks indemnification
under Section 8.2 shall make a written request therefor to the Corporation.
Subject to Section 8.3(b), within sixty days of the Corporation's receipt of
such request, the Corporation shall pay or reimburse the Director or Officer for
the entire amount of Liabilities incurred by the Director or Officer in
connection with the subject Proceeding (net of any Expenses previously advanced
pursuant to Section 8.5).
(b) No indemnification shall be required to be paid
by the Corporation pursuant to Section 8.2 if, within such sixty-day period, (i)
a Disinterested Quorum, by a majority vote thereof, determines that the Director
or Officer requesting indemnification engaged in misconduct constituting a
Breach of Duty or (ii) a Disinterested Quorum cannot be obtained.
(c) In either case of nonpayment pursuant to Section
8.3(b), the Board shall immediately authorize by resolution that an Authority,
as provided in Section 8.4, determine whether the Director's or Officer's
conduct constituted a Breach of Duty and, therefore, whether indemnification
should be denied hereunder.
(d) (i) If the Board does not authorize an Authority
to determine the Director's or Officer's right to indemnification hereunder
within such sixty-day period and/or (ii) if indemnification of the requested
amount of Liabilities is paid by the Corporation, then it shall be conclusively
presumed for all purposes that a Disinterested Quorum has determined that the
Director or Officer did not engage in misconduct constituting a Breach of Duty
and, in the case of subsection (i) above (but not subsection (ii)),
indemnification by the Corporation of the requested amount of Liabilities shall
be paid to the Director or Officer immediately.
8.4 DETERMINATION OF INDEMNIFICATION.
(a) If the Board authorizes an Authority to determine
a Director's or Officer's right to indemnification pursuant to Section 8.3, then
the Director or Officer requesting indemnification shall have the abso-
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lute discretionary authority to select one of the following as such Authority:
(i) An independent legal counsel; provided,
that such counsel shall be mutually selected by such Director or
Officer and by a majority vote of a Disinterested Quorum or, if a
Disinterested Quorum cannot be obtained, then by a majority vote of the
Board;
(ii) A panel of three arbitrators selected
from the panels of arbitrators of the American Arbitration Association
in Madison, Wisconsin; provided, that (A) one arbitrator shall be
selected by such Director or Officer, the second arbitrator shall be
selected by a majority vote of a Disinterested Quorum or, if a
Disinterested Quorum cannot be obtained, then by a majority vote of the
Board, and the third arbitrator shall be selected by the two previously
selected arbitrators, and (B) in all other respects, such panel shall
be governed by the American Arbitration Association's then existing
Commercial Arbitration Rules; or
(iii) A court pursuant to and in accordance
with Section 180.051 of the Statute.
(b) In any such determination by the selected
Authority there shall exist a rebuttable presumption that the Director's or
Officer's conduct did not constitute a Breach of Duty and that indemnification
against the requested amount of Liabilities is required. The burden of rebutting
such a presumption by clear and convincing evidence shall be on the Corporation
or such other party asserting that such indemnification should not be allowed.
(c) The Authority shall make its determination within
sixty days of being selected and shall submit a written opinion of its
conclusion simultaneously to both the Corporation and the Director or Officer.
(d) If the Authority determines that indemnification
is required hereunder, the Corpora-
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tion shall pay the entire requested amount of Liabilities (net of any Expenses
previously advanced pursuant to Section 8.5), including interest thereon at a
reasonable rate, as determined by the Authority, within ten days of receipt of
the Authority's opinion; provided, that, if it is determined by the Authority
that a Director or Officer is entitled to indemnification as to some claims,
issues or matters, but not as to other claims, issues or matters, involved in
the subject Proceeding, the Corporation shall be required to pay (as set forth
above) only the amount of such requested Liabilities as the Authority shall deem
appropriate in light of all of the circumstances of such Proceeding.
(e) The determination by the Authority that
indemnification is required hereunder shall be binding upon the Corporation
regardless of any prior determination that the Director or Officer engaged in a
Breach of Duty.
(f) All Expenses incurred in the determination
process under this Section 8.4 by either the Corporation or the Director or
Officer, including, without limitation, all Expenses of the selected Authority,
shall be paid by the Corporation.
8.5 MANDATORY ALLOWANCE OF EXPENSES.
(a) The Corporation shall pay or reimburse, within
ten days after the receipt of the Director's or Officer's written request
therefor, the reasonable Expenses of the Director or Officer as such Expenses
are incurred; provided, the following conditions are satisfied:
(i) The Director or Officer furnishes to the
Corporation an executed written certificate affirming his or her good
faith belief that he or she has not engaged in misconduct which
constitutes a Breach of Duty; and
(ii) The Director or Officer furnishes to
the Corporation an unsecured executed written agreement to repay any
advances made under this Section 8.5 if it is ultimately determined by
an Authority that he or she is
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not entitled to be indemnified by the Corporation for such Expenses
pursuant to Section 8.4.
(b) If the Director or Officer must repay any
previously advanced Expenses pursuant to this Section 8.5, such Director or
Officer shall not be required to pay interest on such amounts.
8.6 INDEMNIFICATION AND ALLOWANCE OF EXPENSES OF CERTAIN
OTHERS.
(a) The Corporation shall indemnify a director or
officer of an Affiliate (who is not otherwise serving as a Director or Officer)
against all Liabilities, and shall advance the reasonable Expenses, incurred by
such director or officer in a Proceeding to the same extent hereunder as if such
director or officer incurred such Liabilities because he or she was a Director
or Officer, if such director or officer is a Party thereto because he or she is
or was a director or officer of the Affiliate.
(b) The Board may, in its sole and absolute
discretion as it deems appropriate, pursuant to a majority vote thereof,
indemnify against Liabilities incurred by, and/or provide for the allowance of
reasonable Expenses of, an employee or authorized agent of the Corporation
acting within the scope of his or her duties as such and who is not otherwise a
Director or Officer.
8.7 INSURANCE. The Corporation may purchase and maintain
insurance on behalf of a Director or Officer or any individual who is or was an
employee or authorized agent of the Corporation against any Liability asserted
against or incurred by such individual in his or her capacity as such or arising
from his or her status as such, regardless of whether the Corporation is
required or permitted to indemnify against any such Liability under this Article
VIII.
8.8 NOTICE TO THE CORPORATION. A Director or Officer shall
promptly notify the Corporation in writing when he or she has actual knowledge
of a Proceeding which may result in a claim of indemnification against
Liabilities or allowance of Expenses hereunder, but the failure to do so shall
not relieve the Corporation of any liability to the Director or Officer
hereunder unless the
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Corporation shall have been irreparably prejudiced by such failure (as
determined by an Authority selected pursuant to Section 8.4(a)).
8.9 SEVERABILITY. If any provision of this Article VIII
shall be deemed invalid or inoperative, or if a court of competent jurisdiction
determines that any of the provisions of this Article VIII contravene public
policy, this Article VIII shall be construed so that the remaining provisions
shall not be affected, but shall remain in full force and effect, and any such
provisions which are invalid or inoperative or which contravene public policy
shall be deemed, without further action or deed by or on behalf of the
Corporation, to be modified, amended and/or limited, but only to the extent
necessary to render the same valid and enforceable.
8.10 NONEXCLUSIVITY OF ARTICLE VIII. The rights of a
Director or Officer (or any other person) granted under this Article VIII shall
not be deemed exclusive of any other rights to indemnification against
Liabilities or advancement of Expenses which the Director or Officer (or such
other person) may be entitled to under any written agreement, Board resolution,
vote of shareholders of the Corporation or otherwise, including, without
limitation, under the Statute. Nothing contained in this Article VIII shall be
deemed to limit the Corporation's obligations to indemnify against Liabilities
or advance Expenses to a Director or Officer under the Statute.
8.11 CONTRACTUAL NATURE OF ARTICLE VIII; REPEAL OR
LIMITATION OF RIGHTS. This Article VIII shall be deemed to be a contract between
the Corporation and each Director and Officer and any repeal or other limitation
of this Article VIII or any repeal or limitation of the Statute or any other
applicable law shall not limit any rights of indemnification against Liabilities
or allowance of Expenses then existing or arising out of events, acts or
omissions occurring prior to such repeal or limitation, including, without
limitation, the right to indemnification against Liabilities or allowance of
Expenses for Proceedings commenced after such repeal or limitation to enforce
this Article VIII with regard to acts, omissions or events arising prior to such
repeal or limitation.
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Exhibit 4.2
RAYOVAC CORPORATION,
THE COMPANY
ROV HOLDING, INC.,
A GUARANTOR,
AND
MARINE MIDLAND BANK,
THE TRUSTEE
-------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of February 26, 1999
Supplemental to the Indenture dated as of October 22, 1996
-------------------
$65,000,000
10 1/4% Series B Senior Subordinated Notes due 2006
-----------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of February 26, 1999,
between Rayovac Corporation, a Wisconsin corporation (the "Company"), ROV
Holding, Inc., a Delaware corporation, (a "Guarantor"), and Marine Midland Bank,
as Trustee (the "Trustee"), under the Indenture dated as of October 22, 1996
(the "Indenture"), this First Supplemental Indenture being supplemental thereto.
RECITALS OF THE COMPANY
The Indenture was authorized, executed and delivered by the
Company to provide for the issuance, by the Company and the guarantee by ROV
Holding, Inc. of the Company's 10 1/4% Series B Senior Subordinated Notes Due
2006 (the "Notes").
Pursuant to an Action by Written Consent of the Company dated
January 21, 1999 and of ROV Holding, Inc. dated January 21, 1999, each of the
Company and ROV Holding, Inc. has duly authorized the execution and delivery of
this First Supplemental Indenture to amend the Indenture as set forth herein
pursuant to Article 9 of the Indenture; and all acts necessary to make this
First Supplemental Indenture a valid agreement of the Company and ROV Holding,
Inc. have been performed.
In accordance with Article 9 of the Indenture, the Company
issued Solicitations of Consents to Amend Certain Provisions of the Indenture,
each dated February 19, 1999, and obtained the consent of Holders (as defined in
the Indenture) of at least a majority in aggregate principal amount of the
outstanding Notes to amend the Indenture as set forth herein.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH,
that, in consideration of the premises, it is mutually agreed, for the benefit
of each other and for the equal and proportionate benefit of all Holders of the
Notes, as follows:
2
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ARTICLE ONE
AMENDMENT OF INDENTURE
SECTION 101. DEFINITIONS; RULES OF CONSTRUCTION.
Terms defined in the Indenture and used without other
definition herein have the respective meanings ascribed to them in the
Indenture. The rules of construction set forth in the Indenture likewise govern
this First Supplemental Indenture.
SECTION 102. AMENDMENTS TO SECTION 1.01 OF THE INDENTURE.
Section 1.01 of the Indenture is hereby amended by:
(1) revising the definition of "Senior Bank Debt" to read as
follows:
""SENIOR BANK DEBT" means all Obligations outstanding under or
in connection with the Credit Agreement as such agreement may be
restated, further amended, supplemented or otherwise modified or
replaced from time to time hereafter, together with any refunding or
replacement of such Indebtedness, up to an aggregate maximum principal
amount outstanding or available at any time of $225.0 million.";
(2) revising clause (i) of the definition of "Permitted
Investments" to read as follows:
"(i) any Investments in the Company or in a Restricted
Subsidiary of the Company which, with respect to any such Restricted
Subsidiary, has a fair market value which does not exceed $1.0 million
in the aggregate, or any Investments in a Restricted Subsidiary that
(A) is a Guarantor or (B) is not a Guarantor but is a Foreign
Subsidiary;";
(3) revising clause (iii) of the definition of "Permitted
Investments" to read as follows:
"(iii) Investments by the Company or any Restricted Subsidiary
of the Company in a Person, if as a result of such Investment (A) such
Person becomes a Restricted Subsidiary of the Company that (x) is a
Guarantor or
3
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(y) is not a Guarantor but is a Foreign Subsidiary or (B) such Person
is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the
Company or a Restricted Subsidiary of the Company that (x) is a
Guarantor or (y) is not a Guarantor but is a Foreign Subsidiary;";
(4) revising clause (ii) of the definition of "Permitted Liens" to
read as follows:
"(ii) any Lien securing obligations under the Credit Agreement
and any Guarantee thereof, which obligations or Guarantee are permitted
by the terms hereof to be incurred and outstanding;"; and
(5) revising clause (xvii) of the definition of "Permitted Liens"
to read as follows:
"(xvii) Liens securing other Indebtedness of the Company and
its Subsidiaries not expressly permitted by clauses (i) through (xvi)
above; PROVIDED that the aggregate amount of the Indebtedness of the
Company and its Subsidiaries, that are not Foreign Subsidiaries,
secured by Liens permitted pursuant to this clause (xvii) does not
exceed $3.0 million in the aggregate and that the aggregate amount of
the Indebtedness of the Company's Foreign Subsidiaries secured by Liens
permitted pursuant to this clause (xvii) does not exceed $20.0 million
in the aggregate."
SECTION 103. AMENDMENT TO SECTION 4.09 OF THE INDENTURE.
Section 4.09 of the Indenture is hereby amended by revising
clause (vii) thereof to read as follows:
"(vii) the incurrence by any Foreign Subsidiary of
Indebtedness (including Acquired Debt), which when aggregated with the
principal amount of Indebtedness of all Foreign Subsidiaries then
outstanding and incurred pursuant to this clause (vii), does not exceed
$20.0 million (or the equivalent thereof in any other currency) at any
one time outstanding;".
4
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SECTION 104. AMENDMENT TO SECTION 4.17 OF THE INDENTURE.
Section 4.17 of the Indenture is hereby by amended by revising
the last sentence of the first paragraph to read as follows:
"Notwithstanding the foregoing, the Company or any of its
Restricted Subsidiaries may take any of the foregoing actions with
respect to a Restricted Subsidiary, without compliance with this
Section 4.17, if such action is (A) a Permitted Investment or (B) a
Restricted Investment, provided that, in the case of clause (B), the
fair market value of such Investment, without duplication, is or is
deemed a Restricted Payment at the time of such Restricted Investment
that is permitted by, and reduces the amount available for Restricted
Payments under, the first paragraph of Section 4.07 hereof."
SECTION 105. AMENDMENT TO SECTION 9.04 OF THE INDENTURE.
Section 9.04 of the Indenture is hereby amended by:
(1) inserting a new second paragraph to read as follows:
"The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to give their
consent or take any other action described above or required or
permitted to be taken pursuant to this Indenture. If a record date is
fixed, then notwithstanding the provisions of the immediately preceding
paragraph, those Persons who were Holders at such record date (or their
duly designated proxies), and only those Persons, shall be entitled to
give such consent or to revoke any consent previously given or to take
any such action, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for
more than 120 days afer such record date."; and
(2) inserting a new sentence at the end of the first paragraph to
read as follows:
"Notwithstanding anything to the contrary in this Section
9.04, no consent to any amendment, supplement or waiver delivered by a
Holder of a Note or any proxy thereof in connection with the Consent
Solicitation of the Company described in the Company's Amended Consent
Solicitation
5
<PAGE>
Statement dated February 19, 1999, as amended, may be revoked by such
Holder or any subsequent Holder or proxy thereof.".
SECTION 106. EFFECTIVENESS OF AMENDMENTS.
Upon execution and delivery by the Company, ROV Holding, Inc.
and the Trustee, this First Supplemental Indenture shall become operative and
the amendment of Section 9.04 of the Indenture pursuant to Section 105(2) of
this First Supplemental Indenture shall immediately become effective, but the
amendments to the Indenture pursuant to Sections 102, 103, 104 and 105(1) of
this First Supplemental Indenture shall not become effective until the Company
delivers to the Trustee a written notice executed by an Officer of the Company
(the "Notice") of the Company's decision to consummate an acquisition of the
business of marketing, manufacturing, selling and distributing batteries and
related products carried on by ROV Limited, a Cayman Islands corporation, and
the property and assets used in such business, PROVIDED that the amendments to
the Indenture pursuant to Sections 102, 103, 104 and 105(1) of this First
Supplemental Indenture shall not become effective if the Notice is not delivered
to the Trustee on or before April 30, 1999.
ARTICLE TWO
MISCELLANEOUS
SECTION 201. SEVERABILITY.
In case any provision in this First Supplemental Indenture
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 202. GOVERNING LAW.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS FIRST SUPPLEMENTAL
INDENTURE.
6
<PAGE>
SECTION 203. RATIFICATION.
This First Supplemental Indenture is a supplement to the
Indenture. As supplemented by this First Supplemental Indenture, the Indenture
is in all respects ratified, approved and confirmed and the Indenture and this
First Supplemental Indenture shall together constitute one and the same
instrument.
SECTION 204. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this First
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
SECTION 205. THE TRUSTEE.
The Trustee shall not be responsible in any matter whatsoever
for or in respect of the validity or sufficiency of this First Supplemental
Indenture or for or in respect of the Recitals contained herein, all of which
are made solely by the Company.
IN WITNESS WHEREOF, each of RAYOVAC CORPORATION and ROV
HOLDING, INC. have caused this First Supplemental Indenture to be signed in its
corporate name and acknowledged by one of its duly authorized officers; and
MARINE MIDLAND BANK, as Trustee, has caused this Indenture to be signed and
acknowledged by one of its duly authorized signatories, and its seal to be
affixed hereunto or impressed hereon, duly attested, as of the day and year
first above written.
[Signatures on following page]
7
<PAGE>
Dated as of February 26, 1999 RAYOVAC CORPORATION
By:
/S/ JAMES A. BRODERICK
-------------------------------
Name: James A. Broderick
Title: Vice President
Attest:
/S/ LORRIE RYAN
- ----------------------------------
Dated as of February 26, 1999 ROV HOLDING, INC.
By:
/S/ ROGER F. WARREN
-------------------------------
Name: Roger F. Warren
Title: Vice President
Attest:
/S/ LORRIE RYAN
- ----------------------------------
Dated as of February 26, 1999 MARINE MIDLAND BANK, as Trustee
By:
/S/ FRANK J. GODINO
-------------------------------
Name: Frank J. Godino
(SEAL) Title: Vice President
- ----------------------------------
Attest:
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS AS OF AND FOR THE THREE
MONTHS ENDED APRIL 4, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> JAN-04-1999
<PERIOD-END> APR-04-1999
<CASH> 880
<SECURITIES> 0
<RECEIVABLES> 79,310
<ALLOWANCES> 1,103
<INVENTORY> 62,717
<CURRENT-ASSETS> 160,636
<PP&E> 163,865
<DEPRECIATION> 89,214
<TOTAL-ASSETS> 276,326
<CURRENT-LIABILITIES> 82,952
<BONDS> 146,607
0
0
<COMMON> 570
<OTHER-SE> 33,851
<TOTAL-LIABILITY-AND-EQUITY> 276,326
<SALES> 110,969
<TOTAL-REVENUES> 110,969
<CGS> 58,657
<TOTAL-COSTS> 58,657
<OTHER-EXPENSES> 43,884
<LOSS-PROVISION> 161
<INTEREST-EXPENSE> 3,484
<INCOME-PRETAX> 4,783
<INCOME-TAX> 1,720
<INCOME-CONTINUING> 3,063
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,063
<EPS-PRIMARY> .11
<EPS-DILUTED> .10
</TABLE>
