<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 July 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 August 4, 1999, was 27,490,052.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RAYOVAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
As of July 4, 1999 and September 30, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
-ASSETS-
July 4, 1999 September 30, 1998
---------------- -------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,384 $ 1,594
Receivables 90,391 101,853
Inventories 66,053 62,762
Prepaid expenses and other 20,046 14,729
----------------- --------------------
Total current assets 177,874 180,938
Property, plant and equipment, net 79,202 71,367
Deferred charges and other 42,481 31,554
----------------- --------------------
Total assets $ 299,557 $ 283,859
----------------- --------------------
----------------- --------------------
-LIABILITIES AND SHAREHOLDERS' EQUITY -
Current liabilities:
Current maturities of long-term debt $ 7,485 $ 3,590
Accounts payable 56,967 62,778
Accrued liabilities:
Wages and benefits and other 24,273 26,124
Recapitalization and other special charges 2,384 6,789
----------------- --------------------
Total current liabilities 91,109 99,281
Long-term debt, net of current maturities 151,660 148,686
Employee benefit obligations, net of current portion 12,279 10,433
Other 3,975 3,585
----------------- --------------------
Total liabilities 259,023 261,985
Shareholders' equity:
Common stock, $.01 par value, authorized 150,000 shares;
issued 56,969 and 56,907 shares respectively;
outstanding 27,490 and 27,471 shares, respectively 570 569
Additional paid-in capital 103,577 103,304
Notes receivable from officers/shareholders (890) (890)
Retained earnings 64,940 45,735
----------------- --------------------
168,197 148,718
Less stock held in trust for deferred compensation
plan, 24 shares - (412)
Less treasury stock, at cost, 29,479 and 29,436
shares, respectively (129,096) (128,472)
Accumulated other comprehensive income (expense):
Foreign currency translation adjustment 1,893 2,500
Minimum pension liability adjustment (460) (460)
----------------- --------------------
Total shareholders' equity 40,534 21,874
----------------- --------------------
Total liabilities and shareholders' equity $ 299,557 $ 283,859
----------------- --------------------
----------------- --------------------
</TABLE>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
1
<PAGE>
RAYOVAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three month and nine month periods ended July 4, 1999 and June 27, 1998
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
------------------------------- -------------------------------
Fiscal 1999 Fiscal 1998 Fiscal 1999 Fiscal 1998
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales $ 120,440 $ 111,054 $ 391,951 $ 357,130
Cost of goods sold 63,367 57,894 203,883 185,857
-------------- ------------- -------------- -------------
Gross profit 57,073 53,160 188,068 171,273
Selling 33,105 31,835 113,148 105,511
General and administrative 8,663 8,563 25,971 24,792
Research and development 2,143 2,089 6,408 6,194
Other special charges 834 985 2,220 5,002
-------------- ------------- -------------- -------------
Total operating expenses 44,745 43,472 147,747 141,499
Income from operations 12,328 9,688 40,321 29,774
Other expense (income):
Interest expense 3,638 3,501 10,778 11,816
Other expense (income) (834) 24 (452) (335)
-------------- ------------- -------------- -------------
2,804 3,525 10,326 11,481
Income before income taxes and extraordinary item 9,524 6,163 29,995 18,293
Income tax expense 3,373 2,314 10,789 6,892
-------------- ------------- -------------- -------------
Income before extraordinary item 6,151 3,849 19,206 11,401
Extraordinary item, loss on early extinguishment of debt,
net of income tax benefit of $1,263 - - - 1,975
-------------- ------------- -------------- -------------
Net income $ 6,151 $ 3,849 $ 19,206 $ 9,426
-------------- ------------- -------------- -------------
-------------- ------------- -------------- -------------
Basic earnings per share
Average shares outstanding 27,488 27,435 27,485 26,136
Income before extraordinary item $ 0.22 $ 0.14 $ 0.70 $ 0.44
Extraordinary item - - - (0.08)
-------------- ------------- -------------- -------------
Net income $ 0.22 $ 0.14 $ 0.70 $ 0.36
-------------- ------------- -------------- -------------
-------------- ------------- -------------- -------------
Diluted earnings per share
Average shares outstanding and common stock equivalents 29,305 29,226 29,262 27,743
Income before extraordinary item $ 0.21 $ 0.13 $ 0.66 $ 0.41
Extraordinary item - - - (0.07)
-------------- ------------- -------------- -------------
Net income $ 0.21 $ 0.13 $ 0.66 $ 0.34
-------------- ------------- -------------- -------------
-------------- ------------- -------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
2
<PAGE>
RAYOVAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine month periods
ended July 4, 1999 and June 27, 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,206 $ 9,426
Non-cash adjustments to net income:
Amortization 1,938 2,331
Depreciation 8,506 8,513
Other non-cash adjustments (220) (2,190)
Net changes in other assets and liabilities,
net of effects from acquisition (18,828) (24,967)
------------- --------------
Net cash provided (used) by operating activities 10,602 (6,887)
Cash flows from investing activities:
Purchases of property, plant and equipment (16,370) (11,666)
Proceeds from sale of property, plant and equipment 26 3,327
Payment for acquisition - (9,224)
------------- --------------
Net cash used by investing activities (16,344) (17,563)
Cash flows from financing activities:
Reduction of debt (5,515) (139,644)
Proceeds from debt financing 11,234 73,959
Proceeds from issuance of common stock - 90,024
Other (200) 625
------------- --------------
Net cash provided by financing activities 5,519 24,964
------------- --------------
Effect of exchange rate changes on cash and cash
equivalents 13 (23)
------------- --------------
Net increase (decrease) in cash and cash equivalents (210) 491
Cash and cash equivalents, beginning of period 1,594 1,133
------------- --------------
Cash and cash equivalents, end of period $ 1,384 $ 1,624
------------- --------------
------------- --------------
</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 July 4, 1999, results
of operations for the three and nine month periods ended July 4, 1999,
and June 27, 1998, and cash flows for the three and nine month periods
ended July 4, 1999, and June 27, 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.
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 a series of interest rate swap
agreements which effectively fix the interest rate on floating rate
debt at a rate of 6.16% for a notional principal amount of $62,500
through October 1999 and at a rate of 6.405% for a notional principal
amount of $25,000 for the period October 1999 through October 2002. The
fair value of the unrealized portion of these contracts at July 4, 1999
was ($192).
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 July 4, 1999 is $3,454. The fair value of the unrealized portion at
July 4, 1999 was ($89).
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 $5,591 of forward exchange contracts at
July 4, 1999. The fair value of the unrealized portion of the contracts
at July 4, 1999 was immaterial.
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 $4,724 of such forward exchange contracts at
July 4, 1999. The fair value of the unrealized portion of the contracts
at July 4, 1999, was $258.
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
4
<PAGE>
to hedge payment obligations denominated in Japanese Yen under a
commitment to purchase certain production equipment from Matsushita.
The Company has $2,529 of such forward exchange contracts
outstanding at July 4, 1999. See related purchase commitment
discussed in the commitments and contingencies note. The fair value
at July 4, 1999 was immaterial.
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 July 4, 1999, the Company had entered into a series of swaps for
zinc with a contract value of $6,489 for the period June 1999 through
September 2000. While the transactions have no carrying value, the fair
value of the unrealized portion of these contracts at July 4, 1999,
approximated the carrying value.
RECLASSIFICATION: Certain prior year amounts have been reclassified to
conform with the current year presentation.
2 INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
July 4, 1999 September 30, 1998
------------ ------------------
<S> <C> <C>
Raw material $22,703 $22,311
Work-in-process 13,248 16,230
Finished goods 30,102 24,221
------- -------
$66,053 $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 nine month periods ended July 4, 1999
and June 27, 1998 are as follows:
5
<PAGE>
<TABLE>
<CAPTION>
Three month periods ended
July 4, 1999 and June 27, 1998
---------------------------------------------------
Fiscal 1999 Fiscal 1998
----------- -----------
<S> <C> <C>
Net income $6,151 $3,849
Other comprehensive income (loss)
foreign currency translation 40 (69)
------ ------
Comprehensive income $6,191 $3,780
------ ------
------ ------
Nine month periods ended
July 4, 1999 and June 27,1998
---------------------------------------------------
Fiscal 1999 Fiscal 1998
----------- -----------
Net income $19,206 $9,426
Other comprehensive income (loss)
foreign currency translation (607) (32)
------ ------
Comprehensive income $18,599 $9,394
------ ------
------ ------
</TABLE>
4 EARNINGS PER SHARE DISCLOSURE
Earnings per share is calculated based upon the following:
<TABLE>
<CAPTION>
Three month period ended July 4, 1999 Three month period ended June 27, 1998
----------------------------------------------- ----------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C>
Income before extraordinary
item $6,151 $3,849
Basic EPS
Income available to common
shareholders $6,151 27,488 $0.22 $3,849 27,435 $0.14
----- -----
----- -----
Effect of Dilutive Securities
Stock Options 1,817 1,791
----- -----
Diluted EPS
Income available to common
shareholders plus assumed
conversion $6,151 29,305 $0.21 $3,849 29,226 $0.13
------ ------ ----- ------ ------ -----
------ ------ ----- ------ ------ -----
Nine month period ended July 4, 1999 Nine month period ended June 27, 1998
----------------------------------------------- ----------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
Income before extraordinary
item $19,206 $11,401
Basic EPS
Income available to common
shareholders $19,206 27,485 $0.70 $11,401 26,136 $0.44
----- -----
----- -----
Effect of Dilutive Securities
Stock Options 1,777 1,607
----- -----
Diluted EPS
Income available to common
shareholders plus assumed
conversion $19,206 29,262 $0.66 $11,401 27,743 $0.41
------- ------ ----- ------- ------ -----
------- ------ ----- ------- ------ -----
</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 committed to purchase $7,500 of
production equipment of which $2,200 remains to be paid in calendar
year 1999. Also there are commitments to purchase $230 of production
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 included $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 included $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 included $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
------ ------- -------
------ ------- -------
Expensed as incurred -- 100 100
Cash expenditures (400) (300) (700)
Non-cash charges -- (300) (300)
------ ------- -------
Balance 7/04/99 $500 $400 $900
------ ------- -------
------ ------- -------
</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 in early fiscal 1998, which included $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
In June 1999, the Company entered into agreements to acquire the
consumer battery business of ROV Limited for approximately $155
million. Privately held, ROV Limited is a leading battery manufacturer
and marketer in Latin America with C1998 sales of $97 million. On
closing of this acquisition, Rayovac will control the Rayovac brand
rights for battery products worldwide, with the exception of Brazil.
The acquisition is expected to be completed by the end of fiscal 1999.
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. Separate financial
statements of the Guarantor Subsidiary are not presented because
management has determined that such financial statements would not be
material to investors.
9
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of July 4, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
-ASSETS-
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------------- ---------------- -------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 1,131 $ 43 $ 210 $ - $ 1,384
Receivables 76,745 650 17,317 (4,321) 90,391
Inventories 55,691 - 10,428 (66) 66,053
Prepaid expenses and other 17,746 342 1,958 - 20,046
------------- ---------------- ---------------- ------------------ --------------
Total current assets 151,313 1,035 29,913 (4,387) 177,874
Property, plant and equipment, net 74,762 - 4,440 - 79,202
Deferred charges and other 41,983 - 4,917 (4,419) 42,481
Investment in subsidiaries 19,789 18,929 - (38,718) -
------------- ---------------- ---------------- ------------------ --------------
Total assets $ 287,847 $ 19,964 $ 39,270 $ (47,524) $ 299,557
------------- ---------------- ---------------- ------------------ --------------
------------- ---------------- ---------------- ------------------ --------------
-LIABILITIES AND SHAREHOLDERS' EQUITY-
Current liabilities:
Current maturities of
long-term debt $ 2,930 $ - $ 5,460 $ (905) $ 7,485
Accounts payable 51,569 - 8,510 (3,112) 56,967
Accrued liabilities:
Wages and benefits
and other 20,420 (55) 3,897 11 24,273
Recapitalization and
other special charges 2,384 - - - 2,384
------------- ---------------- ---------------- ------------------ --------------
Total current liabilities 77,303 (55) 17,867 (4,006) 91,109
Long-term debt, net of current
maturities 152,460 - 2,263 (3,063) 151,660
Employee benefit obligations,
net of current portion 12,279 - - - 12,279
Other 3,534 230 211 - 3,975
------------- ---------------- ---------------- ------------------ --------------
Total liabilities 245,576 175 20,341 (7,069) 259,023
Shareholders' equity :
Common stock 570 - 12,072 (12,072) 570
Additional paid-in capital 103,577 3,525 752 (4,277) 103,577
Notes receivable from
officers/shareholders (890) - - - (890)
Retained earnings 66,677 14,371 4,212 (20,320) 64,940
------------- ---------------- ---------------- ------------------ --------------
169,934 17,896 17,036 (36,669) 168,197
Less treasury stock, at cost (129,096) - - - (129,096)
Accumulated other comprehensive
income (expense):
Foreign currency translation
adjustment 1,893 1,893 1,893 (3,786) 1,893
Minimum pension liability
adjustment (460) - - - (460)
------------- ---------------- ---------------- ------------------ --------------
Total shareholders' equity 42,271 19,789 18,929 (40,455) 40,534
------------- ---------------- ---------------- ------------------ --------------
Total liabilities and
shareholders' equity $ 287,847 $ 19,964 $ 39,270 $ (47,524) $ 299,557
------------- ---------------- ---------------- ------------------ --------------
------------- ---------------- ---------------- ------------------ --------------
</TABLE>
10
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the three month period ended July 4, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
---------------- ---------------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 108,493 $ - $ 16,433 $ (4,486) $ 120,440
Cost of goods sold 59,115 - 8,742 (4,490) 63,367
---------------- ---------------- ------------------ ----------------- -------------------
Gross profit 49,378 - 7,691 4 57,073
Selling 29,342 - 3,763 - 33,105
General and administrative 7,532 (222) 1,371 (18) 8,663
Research and development 2,143 - - - 2,143
Other special charges 675 - 159 - 834
---------------- ---------------- ------------------ ----------------- -------------------
Total operating expenses 39,692 (222) 5,293 (18) 44,745
Income from operations 9,686 222 2,398 22 12,328
Other expense (income):
Interest expense 3,421 - 217 - 3,638
Equity in profit of subsidiary (1,374) (1,245) - 2,619 -
Other expense (income) (880) 8 12 26 (834)
---------------- ---------------- ------------------ ----------------- -------------------
Income before income taxes
and extraordinary item 8,519 1,459 2,169 (2,623) 9,524
Income tax expense 2,364 85 924 - 3,373
---------------- ---------------- ------------------ ----------------- -------------------
Income before
extraordinary item 6,155 1,374 1,245 (2,623) 6,151
Extraordinary item - - - - -
---------------- ---------------- ------------------ ----------------- -------------------
Net income $ 6,155 $ 1,374 $ 1,245 $ (2,623) $ 6,151
---------------- ---------------- ------------------ ----------------- -------------------
---------------- ---------------- ------------------ ----------------- -------------------
</TABLE>
11
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the nine month period ended July 4, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
---------------- ---------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Net sales $ 356,990 $ - $ 55,503 $ (20,542) $ 391,951
Cost of goods sold 193,256 - 31,182 (20,555) 203,883
---------------- ---------------- ------------------ ---------------- -----------------
Gross profit 163,734 - 24,321 13 188,068
Selling 100,343 - 12,805 - 113,148
General and administrative 21,650 (644) 5,019 (54) 25,971
Research and development 6,408 - - - 6,408
Other special charges 1,385 - 835 - 2,220
---------------- ---------------- ------------------ ---------------- -----------------
Total operating expenses 129,786 (644) 18,659 (54) 147,747
Income from operations 33,948 644 5,662 67 40,321
Other expense (income):
Interest expense 10,279 - 499 - 10,778
Equity in profit of subsidiary (3,167) (2,810) - 5,977 -
Other expense (income) (1,072) 34 586 - (452)
---------------- ---------------- ------------------ ---------------- -----------------
6,040 (2,776) 1,085 5,977 10,326
Income before income taxes
and extraordinary item 27,908 3,420 4,577 (5,910) 29,995
Income tax expense 8,769 253 1,767 - 10,789
---------------- ---------------- ------------------ ---------------- -----------------
Income before
extraordinary item 19,139 3,167 2,810 (5,910) 19,206
Extraordinary item - - - - -
---------------- ---------------- ------------------ ---------------- -----------------
Net income $ 19,139 $ 3,167 $ 2,810 $ (5,910) $ 19,206
---------------- ---------------- ------------------ ---------------- -----------------
---------------- ---------------- ------------------ ---------------- -----------------
</TABLE>
12
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the nine month period ended July 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 $ 13,986 $ (1) $ (2,231) $ (1,152) $ 10,602
Cash flows from investing activities:
Purchases of property, plant and equipment (15,947) - (423) - (16,370)
Proceeds from sale of property, plant, and
equip. 26 - - - 26
Payment for acquisitions - - - - -
-------------- ---------------- ---------------- --------------- -----------------
Net cash used by investing activities (15,921) - (423) - (16,344)
Cash flows from financing activities:
Reduction of debt (2,289) - (4,378) 1,152 (5,515)
Proceeds from debt financing 4,200 - 7,034 - 11,234
Other (200) - - - (200)
-------------- ---------------- ---------------- --------------- -----------------
Net cash provided by financing activities 1,711 - 2,656 1,152 5,519
Effect of exchange rate changes on cash and
cash equivalents - - 13 - 13
-------------- ---------------- ---------------- --------------- -----------------
Net increase (decrease) in cash and cash
equivalents (224) (1) 15 - (210)
Cash and cash equivalents, beginning of period 1,355 44 195 - 1,594
-------------- ---------------- ---------------- --------------- -----------------
Cash and cash equivalents, end of period $ 1,131 $ 43 $ 210 $ - $ 1,384
-------------- ---------------- ---------------- --------------- -----------------
-------------- ---------------- ---------------- --------------- -----------------
</TABLE>
13
<PAGE>
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FISCAL QUARTER AND NINE MONTHS ENDED JULY 4, 1999 COMPARED TO
FISCAL QUARTER AND NINE MONTHS ENDED JUNE 27, 1998
RESULTS OF OPERATIONS
NET SALES. Net sales for the three months ended July 4, 1999 (the
"Fiscal 1999 Quarter") increased $9.3 million, or 8.4%, to $120.4 million from
$111.1 million for the three months ended June 27, 1998 (the "Fiscal 1998
Quarter"). The increase was driven by increased sales of alkaline batteries,
lighting products and heavy duty batteries partially offset by a decrease in
hearing aid battery sales.
Alkaline sales increased $10.7 million, or 22%, to $59.4 million from
$48.7 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 decreased $1.6 million, or 8.2%, compared to
the same period a year ago. Sales were impacted by high retail inventory levels
and a large initial shipment into a major U.S. retailer a year ago. Also, in
the UK, our exclusivity with the government has ended.
Heavy duty sales increased $0.5 million, or 6.5%, 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.
Sales of lighting products increased $3.5 million, or 23.5%, to
$18.4 million from $14.9 million in the same period a year ago due primarily to
new product introductions and continued growth in our economy flashlight line.
For the nine months ended July 4, 1999 (the "1999 Nine Months"), sales
increased $34.9 million, or 9.8%, to $392.0 million from $357.1 million for the
nine months ended June 27, 1998 (the "1998 Nine Months"). The increase was
mainly driven by increased sales of alkaline, hearing aid, specialty, and
lighting products partially offset by a decrease in other micropower battery
sales.
Alkaline sales increased $25.1 million, or 14.6%, to $197.4 million
from $172.3 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 $2.1 million, or 3.9%, compared to
the same period a year ago. A significant portion of the gain was in North
America, reflecting improved retail channel distribution and the impact of the
Best Labs acquisition completed during Fiscal 1998.
14
<PAGE>
Specialty battery sales increased $4.1 million to $10.6 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 $6.0 million, or 12.3%, to $54.6
million due primarily to new product launches and expanded distribution in the
Company's industrial lantern battery business.
GROSS PROFIT. Gross profit for the Fiscal 1999 Quarter increased
$3.9 million, or 7.3%, to $57.1 million from $53.2 million in the Fiscal 1998
Quarter. Gross profit margin decreased to 47.4% from 47.9% in the same period
a year ago primarily reflecting the impact of a change to "net pricing" with
a major U.S. retailer.
For the 1999 Nine Months, gross profit increased $16.8 million, or
9.8%, to $188.1 million from $171.3 million in the same period a year ago.
Gross profit margin was flat at 48.0%. Improvements from reduced
manufacturing costs as a result of cost rationalization initiatives were
tempered by the strong volume increases in lower margin specialty and
lighting products and the impact of changing to "net pricing" with a major
U.S. retailer.
SELLING EXPENSE. Selling expense increased $1.3 million, or 4.1%, to
$33.1 million in the Fiscal 1999 Quarter from $31.8 million in the Fiscal
1998 Quarter. As a percentage of sales, selling expense decreased to 27.5%
from 28.6% in the same period a year ago. For the 1999 Nine Months, selling
expense increased $7.6 million, or 7.2%, to $113.1 million from $105.5
million in the same period a year ago. As a percentage of sales, selling
expense decreased to 28.9% from 29.5%. The increase in dollars is due
primarily to increased direct selling 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 and reduced expense resulting from the change to "net
pricing" with a major U.S. retailer.
GENERAL AND ADMINSTRATIVE EXPENSE. General and administrative expense
was $8.7 million in the Fiscal 1999 Quarter approximately equal to the Fiscal
1998 Quarter. For the 1999 Nine Months, general and administrative expenses
increased $1.2 million, or 4.8%, to $26.0 million from $24.8 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 6.9%
to 6.6% for the 1999 Nine Months.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was
$2.1 million for the Fiscal 1999 Quarter approximately equal to the Fiscal 1998
Quarter. For the 1999 Nine Months, research and development increased $0.2
million, or 3.2%, to $6.4 million from $6.2 million in the same period a year
ago, reflecting increased spending on alkaline and hearing aid battery
technology.
SPECIAL CHARGES. Special charges of $0.8 million in the Fiscal 1999
Quarter were $0.2 million lower than the Fiscal 1998 Quarter. Special charges in
the Fiscal 1999 Quarter primarily reflect costs associated with the closing of
the Appleton, Wisconsin facility. The Company recorded $1.0 million of special
charges during the 1998 Fiscal Quarter which included $0.8
15
<PAGE>
million related to the expenses in connection with a secondary offering of the
Company's stock and $0.2 million of costs related to previously announced
restructuring activities.
For the 1999 Nine Months, special charges decreased $2.8 million to
$2.2 million from $5.0 million in the same period a year ago. Special charges
for the 1999 Nine Months principally reflect costs associated with the closing
of the Appleton, Wisconsin and Newton Aycliffe, United Kingdom facilities.
Special charges for the 1998 Nine 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 $2.6 million to $12.3 million from $9.7 million in the
Fiscal 1998 Quarter. For the 1999 Nine Months, income from operations increased
$10.5 million, or 35.2%, to $40.3 million from $29.8 million in the 1998 Nine
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 $0.1 million, or 2.9%, to
$3.6 million from $3.5 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 Nine Months, interest expense decreased $1.0 million, or
8.5%, to $10.8 million from $11.8 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). Interest income of $0.5 million primarily
from settlement of a prior year tax return and foreign exchange gains of $0.3
million across several currencies resulted in other income of $0.8 million in
the Fiscal 1999 Quarter. In the Fiscal 1998 Quarter, interest income of $0.2
million offset foreign exchange losses of the same amount.
For the 1999 Nine Months, interest income was partially offset by
foreign exchange losses and resulted in income of $0.5 million. In the 1998 Nine
Months, interest income was partially offset by foreign exchange losses and
resulted in income of $0.3 million.
INCOME TAX EXPENSE. The Company's effective tax rate for the Fiscal
1999 Quarter was 35.4% compared to 37.5% for the Fiscal 1998 Quarter. The change
in effective rate is caused primarily by Fiscal 1998 Quarter non-deductible
expenses related to the Company's secondary offering offset by a favorable
adjustment based on the finalization of the Company's 1997 tax return.
For the 1999 Nine Months, the Company's effective tax rate was 36.0%
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.
EXTRAORDINARY ITEM. The 1998 Nine 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.
16
<PAGE>
NET INCOME. Net income for the Fiscal 1999 Quarter increased $2.4
million to $6.2 million from $3.8 million in the Fiscal 1998 Quarter. The
increase reflects the impact of sales growth, improved gross profit, lower
special charges, and the absence of the extraordinary item. For the 1999 Nine
Months, net income increased $9.8 million, or 104.3%, to $19.2 million from $9.4
million in the same period a year ago.
LIQUIDITY AND CAPITAL RESOURCES
For the 1999 Nine Months, net cash provided by operating activities
increased $17.5 million to $10.6 million from ($6.9) million for the 1998 Nine
Months. This increase is mainly due to increased income from operations and
improvements in working capital. 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 $1.3 million versus the
prior year period. Capital expenditures for the 1999 Nine Months were
approximately $16.4 million, an increase of $4.7 million from the 1998 Nine
Months reflecting continued spending on the new SAP business enterprise system,
the building expansion at the Company's Portage, Wisconsin manufacturing
facility, and expanded capacity of alkaline AA battery lines. The increase in
capital spending was offset by the absence in 1999 of proceeds from the
disposition of the Company's previously closed North Carolina facility and
acquisition investments. In the 1998 Nine Months, the Company acquired Brisco,
Best Labs 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.
On June 11, 1999, the Company entered into a Share Purchase
Agreement under which it agreed to acquire, for an aggregate purchase price of
$140 million, subject to adjustment, (1) all of the outstanding capital stock of
Ray-O-Vac Overseas Corporation, the wholly-owned subsidiary of ROV Limited which
carries on directly and through its subsidiaries the business of marketing and
manufacturing a line of batteries, including general purpose and heavy duty
batteries, in certain Latin American countries, and (2) the license currently
held by ROV Limited to use the "Rayovac" trade name and trademark in India and
Pakistan, countries in Latin America (other than Brazil), Africa and the Middle
East and selected countries in the Far East. Concurrently, the Company also
entered into agreements to acquire, for an aggregate purchase price of $15
million, the outstanding minority interests in certain of the operating
subsidiaries of Ray-O-Vac Overseas Corporation. The acquisitions described in
this paragraph are collectively referred to as the "ROV Acquisition". The
Company's consummation of the ROV acquisition is subject to the satisfaction or
waiver of certain conditions. While the Company has definitive agreements for
the ROV acquisition and expects to consummate the ROV acquisition by the end of
fiscal 1999, there can be no assurance that the Company will successfully
consummate the ROV acquisition.
The Company currently expects to finance its entire ROV
Acquisition with additional borrowings under amended senior credit facilities.
The Company currently intends to
17
<PAGE>
amend and replace its existing 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 ROV Acquisition, the Company intends to use the
proceeds of these 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 facilities will
be secured.
The Company's current credit facilities include a revolving
credit facility of $90.0 million of which approximately $82.2 million of
senior debt was outstanding at July 4, 1999, with approximately $7.6 million
utilized for outstanding letters of credit. The Company also has $7.0 million
outstanding on its acquisition facility as of July 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 Company
currently is seeking the consent of the holders of these notes to certain
provisions of the Indenture governing these notes to allow the Company
greater flexibility to operate, grow and expand it business, including to
allow the Company to finance its planned ROV Acquisition entirely with senior
secured debt. The Indenture amendments for which the Company is currently
soliciting consent are substantially similar to the Indenture amendments set
forth in the First Supplemental Indenture dated as of February 26, 1999,
among the Company, the Guarantor, and the Trustee, which amendments did not
become effective within the time period stipulated in the First Supplemental
Indenture.
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. North American core business systems are now operating on compliant
hardware and software (SAP) that replaced legacy systems. European core business
systems are now operating on legacy software that has been remediated. Certain
other leased hardware and systems remain to be replaced or remediated by
September 1999 as originally scheduled.
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 $1.3 million for fiscal 1999.
As of July 4, 1999 the Company has spent approximately $6.2 million
of the $7.6 million projected fiscal 1999 cost discussed above.
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.
19
<PAGE>
As of July 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 $0.8 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 $0.1 million.
As of July 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 $1.7 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
July 4, 1999 due to the same change in exchange rates, would be a net loss of
$0.7 million.
As of July 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 $0.6 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 immaterial.
20
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On May 3, 1999, the Company filed an action against Duracell
Incorporated and The Gillette Company (collectively, "Gillette") (RAYOVAC
CORPORATION V. DURACELL INCORPORATED AND THE GILLETTE COMPANY, Case No.
99-C-0272C - United States District Court for the Western District of
Wisconsin) alleging that Gillette has infringed and is infringing two of the
Company's patents. The Company's Complaint, filed on April 26, 1999, seeks an
injunction prohibiting further sales by Gillette of infringing products,
damages as a result of the Gillette's infringement, enhanced damages pursuant
to 35 U.S.C. Section 284, and attorneys' fees and costs. Gillette filed an
Answer on May 28, 1999 denying all material allegations of the Complaint and
seeking a declaration that the two patents are invalid and of
non-infringement by Gillette. On June 15, 1999, the Company made a motion for
leave to file an Amended Complaint to add an additional count of patent
infringement by Gillette with respect to another of the Company's patents.
The Court has not yet ruled on the Company's motion. This action is at a
preliminary discovery stage, with the trial date scheduled for April 3, 2000.
On July 21, 1999, Gillette filed a Complaint against the Company
(THE GILLETTE COMPANY V. RAYOVAC CORPORATION, Case 99-ov-11555-PBS - United
States District Court for the District of Massachusetts) alleging patent
infringement by the Company. In the Complaint, Gillette seeks an injunction
prohibiting further sales by the Company of allegedly infringing products,
damages as a result of the alleged infringement, enhanced damages pursuant to
35 U.S.C. Section 284 and attorneys' fees and costs. Gillette has not yet
served the Company with a copy of this Complaint. If so served, the Company
intends to vigorously defend itself against all claims in this action.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of Shareholders was held on July 22, 1999.
The directors standing for election were elected in an uncontested
election. The directors elected were David A. Jones, Scott A. Schoen, John S.
Lupo, and Joseph W. Deering. The votes for each director standing for election
were: For: 25,699,801; Withheld: 43,800. The terms of the following directors
continued after the meeting: Roger F. Warren, Thomas R. Shepherd, Kent J.
Hussey, and Warren C. Smith, Jr.
In addition to the election of directors, the Company submitted the
ratification of the appointment of KPMG LLP as the Company's independent
auditors to the vote of the shareholders. The vote in favor of ratification was:
For: 25,733,300; Against: 5,241; Withheld: 5,060.
21
<PAGE>
The Company currently is seeking the consent of the holders of its 10
1/4% Series B Senior Subordinated Notes due 2006 to certain provisions of the
Indenture governing these notes to allow the Company greater flexibility to
operate, grow and expand its business, including to allow the Company to finance
its planned ROV Acquisition entirely with senior secured debt. The Indenture
amendments for which the Company is currently soliciting consent are
substantially similar to the Indenture amendments set forth in the First
Supplemental Indenture dated as of February 26, 1999, among the Company, the
Guarantor, and the Trustee, which amendments did not become effective within the
time period stipulated in the First Supplemental Indenture.
22
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
2.1 Share Purchase Agreement made as of June 11,
1999, by and among the Company, Vidor Battery
Company, Rayovac Latin America, Ltd., the
shareholders of ROV Limited, ROV Limited, ESB ROV
Ltd., Duranmas, S.A., certain second-tier
subsidiaries of ROV Limited, Ray-O-Vac Overseas
Corporation, and Alfredo J. Diez and Richard T.
Doyle, Jr., as selling group representatives.
2.2 Form of Stock Purchase Agreement entered into on
or around June 11, 1999 by and among the Company,
Rayovac Latin America, Ltd. and certain persons who
hold minority interests in certain of the operating
subsidiaries of Ray-O-Vac Overseas Corporation.
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.
23
<PAGE>
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.
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.
24
<PAGE>
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>
* 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 Quarterly Report on Form
10-Q for the quarterly period ended April 4, 1999 filed with the Commission on
May 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.
(b) Reports on Form 8-K. The Company filed no reports on Form 8-K
during the Company's quarterly period ended July 4, 1999.
25
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: August 4, 1999
RAYOVAC CORPORATION
By: /s/ Randall J. Steward
---------------------------------------------
Randall J. Steward
Senior Vice President of Finance
and Chief Financial Officer
By: /s/ James A. Broderick
---------------------------------------------
James A. Broderick
Vice President, General Counsel and Secretary
26
<PAGE>
Exhibit 2.1
- --------------------------------------------------------------------------------
SHARE PURCHASE AGREEMENT
BY AND AMONG
RAYOVAC CORPORATION
VIDOR BATTERY COMPANY
RAYOVAC LATIN AMERICA, LTD.
SUBSTANTIALLY ALL OF THE SHAREHOLDERS OF ROV LIMITED
ROV LIMITED
ESB ROV LTD.
DURANMAS, S.A.
CERTAIN SECOND-TIER SUBSIDIARIES OF ROV LIMITED
RAY-O-VAC OVERSEAS CORPORATION
SELLING GROUP REPRESENTATIVES:
ALFREDO J. DIEZ
AND
RICHARD T. DOYLE, JR.
June 11, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
SALE AND PURCHASE OF THE SHARES..........................................................................2
1.1 TRANSFER OF THE SHARES..........................................................................2
1.2 PURCHASE PRICE..................................................................................2
ARTICLE 2
CLOSING..................................................................................................2
2.1 TIME AND PLACE..................................................................................2
2.2 DELIVERY........................................................................................2
2.3 PAYMENT OF PURCHASE PRICE.......................................................................3
2.4 NET BOOK VALUE..................................................................................3
(a) AMOUNT.................................................................................3
(b) CLOSING DATE BALANCE SHEET.............................................................3
(c) PAYMENT................................................................................4
2.5 LICENSE PURCHASE PRICE..........................................................................4
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE MEMBERS OF THE SELLING GROUP.........................................................................4
3.1 ORGANIZATION AND QUALIFICATION..................................................................4
3.2 CAPITALIZATION AND OWNERSHIP OF THE SHARES, ETC.................................................5
(a) CAPITALIZATION OF THE ROV GROUP MEMBERS................................................5
(b) OWNERSHIP..............................................................................5
(c) CAPITALIZATION OF THE COMPANY..........................................................6
3.3 NO CONSENTS REQUIRED; ABSENCE OF VIOLATIONS OR CONFLICTS........................................6
(a) NO CONSENTS REQUIRED...................................................................6
(b) ABSENCE OF VIOLATIONS OR CONFLICTS.....................................................6
3.4 FINANCIAL STATEMENTS............................................................................7
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS............................................................7
3.6 ABSENCE OF UNDISCLOSED LIABILITIES..............................................................8
3.7 LEGAL PROCEEDINGS...............................................................................8
3.8 ENVIRONMENTAL MATTERS...........................................................................8
3.9 GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS.............................................9
3.10 INTELLECTUAL PROPERTY...........................................................................9
3.11 EMPLOYEE PLANS.................................................................................10
3.12 TAX MATTERS....................................................................................10
3.13 TITLE TO PROPERTIES; ADEQUACY..................................................................10
3.14 AUTHORIZATION..................................................................................11
3.15 NO CLAIMS AGAINST THE OPERATING SUBSIDIARIES OR OVERSEAS.......................................12
3.16 BROKERS, FINDERS AND INVESTMENT BANKERS........................................................12
i
<PAGE>
3.17 ACCURACY OF SCHEDULES, CERTIFICATES AND DOCUMENTS..............................................12
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER, VIDOR AND
NEWCO...................................................................................................12
4.1 ORGANIZATION. ................................................................................12
4.2 AUTHORITY......................................................................................12
4.3 NO CONSENTS REQUIRED...........................................................................13
4.4 ABSENCE OF VIOLATIONS OR CONFLICTS.............................................................13
4.5 BROKERS, FINDERS AND INVESTMENT BANKERS........................................................13
4.6 ACCURACY OF SCHEDULES, CERTIFICATES AND DOCUMENTS..............................................13
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS.....................................................................14
5.1 CONDUCT OF BUSINESS PENDING THE CLOSING........................................................14
(a) OPERATION OF OVERSEAS AND THE OPERATING SUBSIDIARIES IN THE ORDINARY
COURSE OF BUSINESS....................................................................14
(b) FORBEARANCES BY THE COMPANY AND ITS SUBSIDIARIES......................................14
(c) INVESTIGATION.........................................................................16
5.2 REASONABLE BEST EFFORTS; FURTHER ASSURANCES; COOPERATION, ETC..................................16
5.3 EXPENSES.......................................................................................17
5.4 NO SOLICITATION OF TRANSACTIONS................................................................17
5.5 PUBLIC ANNOUNCEMENTS...........................................................................18
5.6 NONCOMPETITION; NONDISCLOSURE..................................................................18
(a) SCOPE AND REASONABLENESS OF RESTRICTIONS..............................................18
(b) USE OF NAMES..........................................................................19
(c) NONCOMPETITION........................................................................19
(d) NO INTERFERENCE WITH CUSTOMERS........................................................19
(e) NO INTERFERENCE WITH EMPLOYEES........................................................19
(f) TRADE SECRETS; CONFIDENTIAL INFORMATION...............................................20
(g) REMEDIES..............................................................................21
(h) MODIFICATION..........................................................................21
(i) COVENANTS INDEPENDENT.................................................................21
5.7 FINANCIAL STATEMENTS...........................................................................21
5.8 NO TRANSFERS...................................................................................22
5.9 STOCK TRANSFER POWERS..........................................................................22
5.10 [INTENTIONALLY DELETED.].......................................................................22
5.11 TRANSFER OF MINORITY SHARES....................................................................22
5.12 TAXES..........................................................................................22
5.13 LICENSE PURCHASE...............................................................................23
5.14 TRADEMARK AND TRADENAME RELEASE................................................................23
5.15 RELEASE OF CLAIMS..............................................................................23
(a) RELEASE OF PURCHASER, ETC.............................................................23
(b) RELEASE OF THE SELLING GROUP AND THE UNPURCHASED SUBSIDIARIES.........................23
5.16 ROV-MEXICO SHARE...............................................................................24
ii
<PAGE>
5.17 DISTRIBUTION OR SALE OF HSI....................................................................24
5.18 SALE OR TRANSFER OF ROV-MEXICO.................................................................24
5.19 PAYMENT OF INTERCOMPANY TRANSACTIONS...........................................................24
5.20 OPERATING ASSETS...............................................................................24
5.21 ACCESS TO BOOKS AND RECORDS....................................................................24
5.22 GUARANTEES.....................................................................................24
ARTICLE 6
CONDITIONS PRECEDENT TO THE CLOSING.....................................................................25
6.1 CONDITIONS TO OBLIGATIONS OF PURCHASER, VIDOR AND NEWCO........................................25
(a) CONSENTS, AUTHORIZATIONS, ETC.........................................................25
(b) INJUNCTION, ETC.......................................................................25
(c) REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS..............................25
(d) CERTIFICATES..........................................................................26
(e) DIRECTORS AND CONTROL.................................................................26
(f) ALL SHARES AND MINORITY SHARES TRANSFERRED............................................26
(g) OPERATION OF THE COMPANY AND ITS SUBSIDIARIES.........................................26
(h) OPERATING SUBSIDIARY RESTRUCTURING....................................................26
(i) FINANCIAL STATEMENTS..................................................................26
(j) INTERCOMPANY PAYMENTS.................................................................27
(k) OPERATING ASSETS TRANSFERS............................................................27
6.2 CONDITIONS TO OBLIGATIONS OF THE MEMBERS OF THE SELLING GROUP..................................27
(a) CONSENTS, AUTHORIZATIONS, ETC.........................................................27
(b) INJUNCTION, ETC.......................................................................27
(c) REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS..............................28
(d) CERTIFICATE...........................................................................28
(e) FINANCIAL STATEMENTS..................................................................28
(f) INTERCOMPANY PAYMENTS.................................................................28
ARTICLE 7
ITEMS TO BE DELIVERED AT CLOSING........................................................................28
7.1 TO BE DELIVERED BY THE MEMBERS OF THE SELLING GROUP............................................28
7.2 TO BE DELIVERED BY PURCHASER OR NEWCO TO MEMBERS OF THE SELLING GROUP..........................29
ARTICLE 8
INDEMNIFICATION.........................................................................................29
8.1 INDEMNIFICATION BY THE MEMBERS OF THE SELLING GROUP............................................29
8.2 INDEMNIFICATION BY PURCHASER, VIDOR AND NEWCO..................................................30
8.3 CERTIFICATES...................................................................................30
8.4 CLAIMS FOR INDEMNIFICATION.....................................................................30
8.5 DEFENSE OF CLAIM BY THIRD PARTIES..............................................................30
8.6 THIRD PARTY CLAIM ASSISTANCE...................................................................31
8.7 PAYMENTS BY THE MEMBERS OF THE SELLING GROUP...................................................31
8.8 PAYMENTS BY PURCHASER OR NEWCO.................................................................31
iii
<PAGE>
8.9 RESOLUTION OF RIGHTS...........................................................................32
8.10 INDEMNIFICATION EXCLUSIVE REMEDY...............................................................32
8.11 CERTAIN LIMITATIONS............................................................................32
(a) DEDUCTIBLE............................................................................32
(b) CAP...................................................................................32
8.12 SELLING GROUP REPRESENTATIVES..................................................................33
(a) APPOINTMENT; ACCEPTANCE...............................................................33
(b) AUTHORITY.............................................................................33
(c) ACTIONS...............................................................................33
(d) SUCCESSORS............................................................................34
(e) INDEMNIFICATION OF SELLING GROUP REPRESENTATIVES......................................34
(f) EFFECTIVENESS.........................................................................34
8.13 DURANMAS.......................................................................................34
ARTICLE 9
TERMINATION AND ABANDONMENT.............................................................................35
9.1 TERMINATION AND ABANDONMENT....................................................................35
9.2 SPECIFIC PERFORMANCE...........................................................................35
9.3 RIGHTS AND OBLIGATIONS UPON TERMINATION........................................................36
9.4 EFFECT OF TERMINATION..........................................................................36
ARTICLE 10
GENERAL PROVISIONS......................................................................................36
10.1 NOTICES........................................................................................36
10.2 TABLE OF CONTENTS; HEADINGS....................................................................39
10.3 AMENDMENT......................................................................................39
10.4 SEVERABILITY...................................................................................39
10.5 WAIVER.........................................................................................39
10.6 NO THIRD PARTY BENEFICIARIES; ASSIGNMENT.......................................................40
10.7 TIME OF THE ESSENCE; COMPUTATION OF TIME.......................................................40
10.8 COUNTERPARTS...................................................................................40
10.9 GOVERNING LAW; ARBITRATION; FORUM..............................................................40
10.10 ENTIRE AGREEMENT...............................................................................41
</TABLE>
iv
<PAGE>
DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C>
1998 PURCHASE AGREEMENT..........................................................................................23
ACQUISITION PROPOSAL.............................................................................................18
AFFILIATE........................................................................................................18
AGREEMENT.........................................................................................................1
AUTHORIZATIONS....................................................................................................6
BUSINESS.........................................................................................................18
BUSINESS DAY......................................................................................................3
CLASS G SHARES....................................................................................................6
CLOSING...........................................................................................................2
CLOSING DATE......................................................................................................2
CLOSING DATE BALANCE SHEETS.......................................................................................3
CODE.............................................................................................................10
COMPANY...........................................................................................................1
COMPANY FINANCIAL STATEMENTS.....................................................................................27
COMPANY SHAREHOLDERS..............................................................................................1
CONFIDENTIAL INFORMATION.........................................................................................20
COSTS............................................................................................................29
CUSTOMER.........................................................................................................19
DETERMINATION DATE...............................................................................................32
DISPUTES AUDITOR..................................................................................................3
ENARCO AFFILIATES.................................................................................................6
ENVIRONMENTAL LAWS................................................................................................9
FINANCIAL STATEMENTS.............................................................................................27
GAAP..............................................................................................................3
GOOD STANDING.....................................................................................................5
GOVERNMENTAL ENTITY...............................................................................................6
HOLDING...........................................................................................................1
INDEMNIFIED PARTY................................................................................................30
INDEMNIFYING PARTY...............................................................................................30
INTELLECTUAL PROPERTY.............................................................................................9
INTELLECTUAL PROPERTY AGREEMENTS..................................................................................9
LAWS..............................................................................................................9
LETTERS OF RESIGNATION...........................................................................................26
LIABILITIES.......................................................................................................8
CLASS G SHARESLICENSE AGREEMENT...................................................................................1
LICENSE PURCHASE..................................................................................................1
LICENSE PURCHASE PRICE............................................................................................1
LIENS.............................................................................................................2
MAJORITY COMPANY SHAREHOLDERS....................................................................................33
MAJORITY SELLING GROUP REPRESENTATIVE............................................................................33
MINORITY COMPANY SHAREHOLDER.....................................................................................33
MINORITY SELLING GROUP REPRESENTATIVE............................................................................33
MINORITY SHARES...................................................................................................6
NET BOOK VALUE....................................................................................................3
v
<PAGE>
NEWCO.............................................................................................................1
NONCOMPETE PERIOD................................................................................................19
NOTICE OF CLAIM..................................................................................................30
OPERATING SUBSIDIARIES............................................................................................1
OPERATING SUBSIDIARIES' FINANCIAL STATEMENTS.....................................................................27
OPERATING SUBSIDIARY LICENSES.....................................................................................9
PERSONS...........................................................................................................6
PURCHASE PRICE....................................................................................................2
PURCHASER.........................................................................................................1
PURCHASER DELIVERED AGREEMENTS...................................................................................13
PURCHASER STOCK TRANSFER POWER...................................................................................22
ROV GROUP MEMBER..................................................................................................4
ROV GROUP MEMBER SHARES...........................................................................................5
SEC..............................................................................................................22
CLASS G SHARESSELLING GROUP.......................................................................................4
SELLING GROUP DELIVERED AGREEMENTS...............................................................................11
SELLING GROUP REPRESENTATIVES....................................................................................33
SHARES............................................................................................................1
SUBSIDIARIES......................................................................................................5
SUBSIDIARY........................................................................................................5
TAXES............................................................................................................10
TERRITORY........................................................................................................18
TRADE SECRET.....................................................................................................20
</TABLE>
vi
<PAGE>
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made as of June 11,
1999, by and among Rayovac Corporation, a Wisconsin corporation ("Purchaser"),
Vidor Battery Company, a Wisconsin corporation which is a wholly-owned
subsidiary of Purchaser ("Vidor"), Rayovac Latin America, Ltd., a newly-formed
Cayman Islands company ("Newco") which is a wholly-owned subsidiary of ROV
Holding, Inc., a Delaware corporation and wholly-owned subsidiary of Purchaser,
the shareholders listed on EXHIBIT A hereto (the "Company Shareholders") of ROV
Limited, a Cayman Islands company (the "Company"), the Company, ESB Rov Ltd., a
Cayman Islands company ("ESB"), Duranmas, S.A., a Panama corporation
("Duranmas," and together with ESB, the "Unpurchased First-Tier Subsidiaries");
the second-tier subsidiaries of the Company listed on EXHIBIT B hereto (together
with the Unpurchased First-Tier Subsidiaries, the "Unpurchased Subsidiaries"),
Ray-O-Vac Overseas Corporation, a Panama corporation ("Overseas") and Alfredo J.
Diez and Richard T. Doyle, Jr., the Selling Group Representatives (defined
below).
BACKGROUND STATEMENT
The Company and Duranmas each own that number, class and percentage of
shares (collectively, the "Shares") in the capital of Overseas as set forth next
to its name on EXHIBIT C hereto. In order to acquire Overseas and the
second-tier operating subsidiaries of the Company listed on EXHIBIT D (the
"Operating Subsidiaries"), Newco wishes to purchase and the Company and Duranmas
wish to sell the Shares upon the terms and conditions set forth in this
Agreement.
In order to insure that Newco will indirectly acquire all of the
outstanding capital stock of each of the Operating Subsidiaries directly or
indirectly owned by the Company (and will not acquire the capital stock of any
other Subsidiary (defined below) directly or indirectly owned by the Company) as
a result of the purchase of the Shares, this Agreement contemplates that prior
to Closing (defined below) the following transactions shall have occurred:
(i) Overseas shall have sold or distributed to the Company all of the capital
stock of Hemisphere Services, Inc., a Delaware corporation ("HSI"); (ii) ESB
shall have sold or transferred to Overseas ESB's 4.45% shareholding in the
issued and outstanding capital stock of Ray-O-Vac de Mexico, S.A., de C.V., a
Mexico corporation ("ROV-Mexico"); and (iii) ROV-Mexico shall have issued one
or more additional shares to one or more subsidiaries of Overseas.
In addition, the following transactions shall occur simultaneously with
the purchase and sale of the Shares: (i) the Company shall sell and assign to
Vidor and Newco (the "License Purchase") the License Agreement dated November
19, 1982, as amended July 1, 1994, by and between Purchaser and the Company (the
"License Agreement"); (ii) Vidor and Newco shall pay the Company a fee for the
License Purchase calculated as provided in Section 5.13 (the "License
Purchase Price"); and (iii) all parties to this Agreement other than Purchaser,
Vidor, Newco and Overseas shall release all rights and claims to the Rayovac
tradename and trademark.
1
<PAGE>
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 TRANSFER OF THE SHARES. On the terms and subject to the conditions
set forth in this Agreement, the Company and Duranmas shall sell, assign,
transfer and deliver to Newco and Newco shall purchase and accept at the Closing
the Shares, free and clear of all liens, claims, options, rights of first
refusal, proxies, charges, pledges, security interests, mortgages, adverse
claims and other encumbrances and similar rights and other transfer restrictions
of any nature whatsoever, including any arising from any pending or threatened
litigation (collectively, "Liens") other than those imposed by or through Newco
and restrictions on transfer imposed by United States federal and state
securities laws.
1.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares and the covenants not to compete set forth in Sections 5.6(c), (d) and
(e) shall be $140,000,000.00, (a) LESS the Net Book Value (defined below) as of
the Closing Date of the Company and the Unpurchased Subsidiaries, (b) LESS the
License Purchase Price and (c) either (i) LESS the amount by which
$31,361,400.00 exceeds the Net Book Value as of the Closing Date of the Company
and its Subsidiaries, or (ii) PLUS the amount by which the Net Book Value as of
the Closing Date of the Company and its Subsidiaries exceeds $31,361,400.00,
whichever is applicable. The portion of the Purchase Price attributable to such
covenants not to compete shall be $100,000.00. All references in this Agreement
to $ and federal funds shall mean United States Dollars.
ARTICLE 2
CLOSING
2.1 TIME AND PLACE. The consummation of the transactions contemplated
by this Agreement (the "Closing") shall take place (a) at the offices of Maples
and Calder, Ugland House, 113 South Church Street, George Town, Grand Cayman,
Cayman Islands at 10:00 a.m., local time (i) on the date which is fifteen (15)
Business Days (defined below) after the conditions specified in Sections 6.1 and
6.2 have been satisfied, or (ii) under certain circumstances, upon the request,
as provided in Section 5.1(c), of either Selling Group Representative (defined
below) up to ten (10) Business Days later, or (b) at such other place and time
as Purchaser and each Selling Group Representative may agree (the "Closing
Date").
2.2 DELIVERY. At the Closing, (a) the Company and Duranmas shall
deliver to Newco (i) new share certificates representing all of the Shares in
the name of Newco and (ii) evidence that the existing share certificates
representing all of the Shares have been duly endorsed for transfer to
2
<PAGE>
Newco and delivered to and canceled by Overseas, and (b) the parties shall
deliver at the Closing the executed agreements and other documents referred to
in Article 7.
2.3 PAYMENT OF PURCHASE PRICE. At the Closing, the parties shall make a
good faith estimate of the Purchase Price, based on the most recent
ascertainable information, and Newco shall wire transfer the appropriate amount
in immediately available federal funds to the Company and Duranmas to an account
or accounts to be specified at least three (3) Business Days prior to the
Closing Date by the Company and Duranmas. The Purchase Price shall be allocated
according to the ownership percentages set forth on EXHIBIT C. As used in this
Agreement, "Business Day" shall mean any day other than (a) Saturday or Sunday
or (b) a day on which banks in New York, New York are authorized or permitted by
law to close.
2.4 NET BOOK VALUE.
(a) AMOUNT. For the purposes of this Agreement, "Net Book
Value" shall be equal to (i) the common stock,(ii) plus the retained earnings,
(iii) less any investments in subsidiaries (not otherwise eliminated in
consolidation or combination) each calculated as of the Closing Date in
accordance with United States generally accepted accounting principles,
consistently applied in accordance with past practices ("GAAP") with respect to
(A) the Company and the Unpurchased Subsidiaries on a combined basis or (B) the
Company and its Subsidiaries on a consolidated basis, as the case may be.
(b) CLOSING DATE BALANCE SHEET. The Company will prepare two
balance sheets (the "Closing Date Balance Sheets"), one of the Company and
its Subsidiaries on a consolidated basis as of the Closing Date and the other
of the Company and the Unpurchased Subsidiaries on a combined basis as of the
Closing Date. The Company will deliver the Closing Date Balance Sheets to
Purchaser within sixty (60) days after the Closing Date together with its
calculations of the respective Net Book Values. Subject to SCHEDULE 2.4, the
Closing Date Balance Sheets will be prepared in accordance with GAAP, except
that no items shall fail to be included therein or excluded therefrom on the
basis of materiality, individually or collectively. The Company and/or its
accountants will meet with Purchaser and/or its accountants periodically upon
request, and make available to Purchaser and/or its accountants all work
papers and other relevant documents. If within thirty (30) days following
delivery of the Closing Date Balance Sheets and the Company's calculations of
the respective Net Book Values, Purchaser has not given the Company notice of
its objection either to one or both of the Closing Date Balance Sheets or to
the Company's calculation of one or both of the Net Book Values (which notice
shall contain a statement of the basis of Purchaser's objection, providing
with reasonable specificity the reasons for objection and identifying the
amounts in dispute), then the Company's calculations of the Net Book Values
will be final, binding and conclusive on the parties. If Purchaser gives such
notice of objection, then the parties will attempt to resolve any
disagreements. If any such disagreements are not resolved by the parties
within thirty (30) days following the receipt by the Company of Purchaser's
notice of objection, then the issues in dispute (and only the issues in
dispute) will be submitted by the parties for resolution to the Miami office
(or such office as handles such matters) of Arthur Andersen LLP (the
"Disputes Auditor") within ten (10) days of the conclusion of such thirty
(30) day period upon the following terms: (i) each party will furnish to the
Disputes Auditor such work papers and other documents and
3
<PAGE>
information relating to the disputed issues as the Disputes Auditor may
request and are available to that party (or its independent public accountants),
and each party will be afforded the opportunity to present to the Disputes
Auditor any material relating to the determination and to discuss the
determination with the Disputes Auditor; (ii) the Disputes Auditor will render
its determination within thirty (30) days of submission of the disputed issues;
(iii) the determination by the Disputes Auditor, as set forth in a notice
delivered to each party by the Disputes Auditor, will be final, binding and
conclusive on the parties; and (iv) the Company will pay that percentage of the
fee of the Disputes Auditor which equals the percentage of the total amount
disputed by Purchaser which is awarded to Purchaser by the Disputes Auditor, and
Purchaser will pay the balance of such fee.
(c) PAYMENT. Within three (3) Business Days following the final
determination of the Closing Date Balance Sheets and the respective Net Book
Values, (i) if the Purchase Price exceeds the amount paid at the Closing, Newco
shall pay, in the manner and to the accounts specified in Section 2.3, the
excess to the Company and Duranmas, or (ii) if the amount paid at the Closing
exceeds the Purchase Price, the Company and Duranmas shall pay the excess to
Purchaser, whichever is applicable. All payments shall be made with interest
payable at the three (3)-month U.S. Treasury bill rates in effect as of the
Closing Date and shall be made in cash or immediately available federal funds.
Payments to Purchaser shall be to an account specified by Purchaser upon final
determination of the Closing Date Balance Sheets.
2.5 LICENSE PURCHASE PRICE. At the Closing, Vidor and Newco each shall
wire transfer its respective portion of the License Purchase Price in the manner
and to the account of the Company specified in Section 2.3.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE MEMBERS OF THE SELLING GROUP
Subject to the limitations on indemnification set forth in Sections
8.1, 8.11 and 8.12(e), the Company Shareholders, Duranmas and the Company
(collectively, the "Selling Group") jointly and severally represent and warrant
to Purchaser and Newco as follows; PROVIDED, HOWEVER, that each Company
Shareholder makes the representations and warranties in Sections 3.2(b)(first
sentence), 3.14, 3.15 and 3.16 severally only, and only with respect to such
Company Shareholder, Duranmas and the Company:
3.1 ORGANIZATION AND QUALIFICATION. Each of the Company, Duranmas,
Overseas and each Operating Subsidiary (the Company, Overseas and each Operating
Subsidiary, a "ROV Group Member") and each Unpurchased Subsidiary is a company
duly organized, validly existing and in Good Standing (defined below) under the
laws of its respective jurisdiction of organization and has the corporate power
and authority to own all of its properties and assets and to carry on its
business as it is now being conducted. Each ROV Group Member's governing and
organizational documents, as amended to date, copies of which have been
delivered to Purchaser, are complete and correct, and such documents, as so
amended, are in full force and effect. As used in this Agreement, the term
4
<PAGE>
"Subsidiary", with respect to any entity, means any corporation or other
organization, whether incorporated or unincorporated, of which at least a
majority of the securities or interests having by the terms thereof voting power
to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is at that time
directly or indirectly owned or controlled by such entity (collectively, the
"Subsidiaries"). Each Subsidiary of a ROV Group Member is either another ROV
Group Member or an Unpurchased Subsidiary. Each ROV Group Member and each
Unpurchased Subsidiary is duly qualified and is in Good Standing to do business
in all jurisdictions in which it is required to be qualified except where the
failure to be so qualified would not, in the aggregate, have a material adverse
effect on such ROV Group Member or Unpurchased Subsidiary. As used in this
Agreement, to be in "Good Standing" in a jurisdiction shall mean that the entity
to which the term is applied has paid its franchise and other similar taxes and
taken all other actions necessary to preclude an involuntary cessation of
existence or the imposition of fines or penalties, or the prohibition against
bringing suit or obtaining a judgment thereon in such jurisdiction.
3.2 CAPITALIZATION AND OWNERSHIP OF THE SHARES, ETC.
(a) CAPITALIZATION OF THE ROV GROUP MEMBERS. The number of
issued and outstanding shares of the capital of each ROV Group Member
(collectively, the "ROV Group Member Shares") is set forth on SCHEDULE 3.2. All
of the ROV Group Member Shares are duly authorized, validly issued, fully paid
and nonassessable, and were not issued in violation of any preemptive rights. No
shares of the capital of any ROV Group Member are treasury shares. There are no
subscriptions, options, convertible securities, calls, rights, warrants or other
agreements, claims or commitments of any nature whatsoever obligating any ROV
Group Member to issue, transfer, register with any securities commission or
other authority, deliver (or sell or cause to be issued, transferred, so
registered, delivered or sold) any additional shares or other securities in the
capital of any ROV Group Member or obligating any ROV Group Member to grant,
extend or enter into any such agreement or commitment. The Shares represent 100%
of the combined issued and outstanding authorized capital of Overseas.
(b) OWNERSHIP. Each Company Shareholder owns all right, title
and interest in and to, free and clear of all Liens, that number, class and
percentage of the combined issued and outstanding authorized capital of the
Company as set forth next to its name on EXHIBIT A (except that 20,612 of the
Company's shares listed on Exhibit A as being owned by AD International Limited
are in the name of Banco de Credito Centroamericano, S.A. to secure a pledge).
The Company and Duranmas each own all right, title and interest in and to that
number, class and percentage of the Shares, free and clear of all Liens, as set
forth next to its name on EXHIBIT C. Overseas owns, all right, title and
interest in and to, free and clear of all Liens, that number, class and
percentage of the combined issued and outstanding authorized capital of each of
the Operating Subsidiaries as set forth next to such Operating Subsidiary's name
on EXHIBIT D under the heading "Currently Owned." Prior to Closing, Overseas
will own all right, title and interest in and to, free and clear of all Liens,
that number, class and percentage of the combined issued and outstanding
authorized capital of each of the Operating Subsidiaries as set forth next to
such Operating Subsidiary's name on EXHIBIT D under the heading "Owned at
Closing." Upon consummation of the transactions contemplated by this Agreement,
Newco shall own all right, title and interest in and to the Shares, free and
clear of all
5
<PAGE>
Liens, and shall have the right to elect all of the directors of Overseas and
the Operating Subsidiaries and the power to control the business and affairs
of Overseas and each of the Operating Subsidiaries. There are no
shareholders' agreements with respect to the Shares. The persons, firms and
entities (collectively, "Persons") listed under the heading "Minority
Shareholder" on EXHIBIT E own all right, title and interest in and to, free
and clear of all Liens, that number and class and percentage of the combined
issued and outstanding authorized capital of each respective Operating
Subsidiary as set forth next to such Person's name (the "Minority Shares").
Upon consummation of the transactions contemplated by this Agreement, Newco,
its designees, Overseas or one of the Operating Subsidiaries shall own all
right, title and interest in and to the Minority Shares free and clear of all
Liens. There are no shareholders' agreements with respect to the Minority
Shares. Upon Closing, Overseas shall own all of the combined issued and
outstanding capital stock of the Operating Subsidiaries other than the
Minority Shares and other than the shares owned by those Persons listed on
EXHIBIT F (the "Enarco Affiliates").
(c) CAPITALIZATION OF THE COMPANY. Included in the issued
and outstanding capital shares of the Company are 91,962 Class G Redeemable
Preferred 6% Shares (the "Class G Shares"). The Class G Shares are redeemable
by the Company for $2,758,860.00, plus the Dividend Preference (as defined in
the Company's Amended and Restated Articles of Association), although the
Company and the Company Shareholders have entered into two agreements with
the holder of the Class G Shares, executed copies of such agreements having
been previously delivered to Purchaser.
3.3 NO CONSENTS REQUIRED; ABSENCE OF VIOLATIONS OR CONFLICTS.
(a) No Consents Required. Except as set forth on SCHEDULE
3.3(a), no consent, authorization, clearance, order or approval, or filing or
registration (collectively, "Authorizations") of or with any executive,
judicial or other public authority, agency, department, bureau, division,
unit or court or other public person or entity (collectively, a "Governmental
Entity") or any other Authorization of or with any other third party, on the
part of the members of the Selling Group, Overseas or the Unpurchased
Subsidiaries is required in connection with the execution and delivery of the
Selling Group Delivered Agreements (defined below) and the consummation by
the members of the Selling Group, Overseas and the Unpurchased Subsidiaries
of the transactions contemplated by, or other compliance with or performance
under, the Selling Group Delivered Agreements. The Company and its
Subsidiaries together hold assets in the United States having an aggregate
book value of less than $15 million and did not make aggregate sales in or
into the United States of $25 million or more in their respective most recent
fiscal year so that no filing is required under the United States
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
(b) ABSENCE OF VIOLATIONS OR CONFLICTS. Except as set forth
on Schedule 3.3(b), the execution and delivery of the Selling Group Delivered
Agreements and the consummation by the members of the Selling Group, Overseas
and the Unpurchased Subsidiaries of the transactions contemplated thereby, or
other compliance with or performance thereunder, do not and will not with the
passing of time or giving of notice or both: (i) constitute a violation of,
be in conflict with, constitute a default or require any payment under,
permit a termination of, or result in the creation or imposition of any Lien
upon any assets of any ROV Group Member or any Unpurchased
6
<PAGE>
Subsidiary under (A) any contract, agreement, commitment, undertaking or
understanding (including rights of first refusal or similar rights or other
transfer restrictions), (B) any judgment, decree or order of any Governmental
Entity, (C) any applicable Laws (defined below) or (D) the governing or
organizational documents of any member of the Selling Group; or (ii) create,
or cause the acceleration of the maturity of, any debt, obligation or
liability or result in any Lien or other claim upon the assets, of any ROV
Group Member.
3.4 FINANCIAL STATEMENTS. One of the Selling Group Representatives
and/or the Company has previously furnished Purchaser with true and complete
copies of the audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1996 and December 31, 1997 and the related
combined statements of operations, shareholders' equity and cash flows for
the respective years then ended, including the notes thereto, together with
the unqualified audit reports thereon of Price Waterhouse LLP, independent
certified public accountants, and have furnished Purchaser with a true and
complete copy of the unaudited consolidated balance sheet and related
combined statement of operations of the Company and its Subsidiaries for the
period from January 1, 1999 through March 26, 1999. Except as set forth on
SCHEDULE 3.4 with respect to the financial statements described above or
delivered pursuant to Section 5.7, the Financial Statements (defined below)
have been prepared from, and are in accordance with, the books and records of
the entities to which they relate and present fairly, in all material
respects, the financial position and results of operations of the entities to
which they relate as of the dates and for the periods indicated, and the
Financial Statements are in conformity with GAAP and include all adjustments
that are necessary for the fair presentation in all material respects of the
financial position of the entities to which they relate and the results of
operations and cash flows, and except that Financial Statements other than
the audited year-end financial statements are generally in conformity with
GAAP, are prepared for management purposes, are unaudited, do not include
footnotes and do not reflect the effect of normal year-end adjustments.
3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
SCHEDULE 3.5 or contemplated by Sections 5.16, 5.17 or 5.18 of this Agreement,
since March 26, 1999, there has not been: (a) any material adverse change in the
assets, liabilities, business, financial condition, results of operations or
prospects of Overseas or any Operating Subsidiary; (b) any material damage,
destruction, loss or casualty to property or assets of Overseas or any Operating
Subsidiary, whether or not covered by insurance; (c) any strike, work stoppage
or slowdown or other labor trouble; (d) any declaration, setting aside or
payment of any dividend or distribution (whether in cash, capital shares or
property) with respect to the shares in the capital of Overseas or any Operating
Subsidiary; (e) any redemption or other acquisition by Overseas or any Operating
Subsidiary of any of the shares in the capital of Overseas or any Operating
Subsidiary; (f) any split, combination, reclassification or other similar change
in the outstanding shares in the capital of Overseas or any Operating
Subsidiary; (g) any transaction entered into by Overseas or any Operating
Subsidiary other than in the ordinary course of business; or (h) any agreement
to do any of the foregoing. Since March 26, 1999, there has not been any
issuance by Overseas or any Operating Subsidiary of any shares, or options,
calls or commitments relating to capital shares, or any securities or
obligations convertible into or exchangeable for, or giving any person any right
to acquire from it, any of its capital shares.
7
<PAGE>
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. For purposes of this Agreement,
the term "Liabilities" shall include Overseas' or any Operating Subsidiary's
debts, liabilities or obligations of any kind whatsoever, whether accrued,
absolute, contingent or otherwise and whether due or to become due in the future
(collectively, "Liabilities"). Except as set forth in SCHEDULE 3.6 or in the
Financial Statements for the quarterly period ended March 26, 1999, Overseas and
each Operating Subsidiary: (a) as of March 26, 1999, did not have any material
Liabilities; (b) since March 26, 1999, have not incurred any material
Liabilities (other than liabilities or obligations incurred in the ordinary and
usual course of business after March 26, 1999); and (c) since March 26, 1999,
have not conducted their business otherwise than in the ordinary and usual
course. Neither Overseas nor any Operating Subsidiary is in default under any of
its material contracts or agreements and, to the knowledge of any member of the
Selling Group, no other party to such material contracts or agreements is in
default thereunder. No action or event has occurred which with notice or lapse
of time or both would constitute a default under any material contract or
agreement of Overseas or any Operating Subsidiary.
3.7 LEGAL PROCEEDINGS. Except as set forth on SCHEDULE 3.7: (a)
there is no claim, action, suit or proceeding pending or, to the knowledge of
any member of the Selling Group, threatened against any ROV Group Member or
any of its respective properties or assets (or any of their officers or
directors in connection with the business of any ROV Group Member) or any
Company Shareholder before any arbitrator or Governmental Entity, domestic or
foreign, which in the event of a final adverse determination, considered
individually or in the aggregate with all other such claims, actions, suits
or proceedings, would materially adversely affect the assets, liabilities,
financial condition, results of operations or business of any ROV Group
Member, or which seeks damages in connection with any of the transactions
contemplated by this Agreement or seeks to prohibit, restrict or delay
consummation of the transactions contemplated hereby or any of the conditions
to consummation of the transactions contemplated hereby or to limit the right
of Newco to control Overseas and, indirectly, each Operating Subsidiary or
any aspect of the business of Overseas or any Operating Subsidiary after the
Closing, nor is there any judgment, decree, injunction, ruling or order of
any Governmental Entity, arbitrator or any other person outstanding against
any ROV Group Member having any such effect, nor has any ROV Group Member
received notice of any investigation by any Governmental Entity, arbitrator
or any other person against any ROV Group Member which would have such
effect; and (b) no ROV Group Member is a party to or bound by any judgment,
decree, injunction, ruling or order of any Governmental Entity, arbitrator or
any other person against any ROV Group Member that, when considered
individually or in the aggregate with all other such judgments, decrees,
injunctions, rulings or orders, materially adversely affects the assets,
liabilities, financial condition, results of operations or business of any
ROV Group Member.
3.8 Environmental Matters. Except as set forth on SCHEDULE 3.8:
(a) Overseas and each Operating Subsidiary has obtained all
Authorizations (defined below), kept all records and made all filings required
by applicable Environmental Laws (defined below) for the kinds of businesses and
operations conducted by Overseas and each Operating Subsidiary with respect to
emissions or discharges into the environment and the proper disposal of any
hazardous wastes, hazardous substances, or other hazardous or toxic materials as
defined in the
8
<PAGE>
Environmental Laws. Overseas and each Operating Subsidiary has
conducted its operations and will consummate the transactions contemplated by
this Agreement in compliance in all material respects with all Environmental
Laws and all Authorizations obtained pursuant thereto for the kinds of
businesses and operations conducted by Overseas and each Operating Subsidiary.
(b) The term "Environmental Laws" shall mean all Laws relating
to pollution or protection of the environment, as applicable in each of the
respective jurisdictions in which Overseas or any Operating Subsidiary has or
has had operations or conduct or has conducted business.
3.9 GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS. Except as
set forth on SCHEDULE 3.9, Overseas and each Operating Subsidiary has been
and is in material compliance with all laws, ordinances, regulations,
policies, orders or rules (collectively "Laws") of all Governmental Entities
applicable to Overseas and each Operating Subsidiary or its businesses,
properties or assets and has not been and is not in violation of its
organizational or governing documents. Overseas and each Operating Subsidiary
holds all licenses, permits, certificates, franchises, registrations,
consents, Authorizations or other rights filed with, granted, issued by, or
entered by any Governmental Entity that are required for the conduct of its
business as now being conducted (collectively, "Operating Subsidiary
Licenses"). The Operating Subsidiary Licenses are valid and in full force and
effect, and the terms of the Operating Subsidiary Licenses are not subject to
any restrictions or conditions that limit or would limit the operations of
the business of Overseas and each Operating Subsidiary as presently
conducted, other than restrictions or conditions generally applicable to
licenses of that type. There are no proceedings pending or, to the knowledge
of Overseas and each Operating Subsidiary, complaints or petitions by others,
or threatened proceedings, before any Governmental Entity relating to the
business or operations of Overseas and each Operating Subsidiary or the
Operating Subsidiary Licenses.
3.10 INTELLECTUAL PROPERTY. Except (a) as set forth on SCHEDULE 3.10,
(b) for any sublicense or license granted to Overseas or any Operating
Subsidiary pursuant to the License Agreement and (c) for licenses of
generally available computer programs, Overseas and each Operating Subsidiary
owns, or owned during all periods of use, all patents, trademarks, service
marks, tradenames, copyrights or applications for the foregoing, and all
computer programs, firmware and documentation relating thereto, and trade
secrets and other intellectual properties (collectively, the "Intellectual
Property") that are or were used in the conduct of the business of Overseas
and each Operating Subsidiary. Except as set forth on SCHEDULE 3.10, Overseas
and each Operating Subsidiary has and has had the unrestricted right to
produce, market, license and sell all of the products and services produced,
marketed and licensed by it and the consummation of the transactions
contemplated by this Agreement will not alter or impair any such rights.
SCHEDULE 3.10 lists all of the Intellectual Property other than trade
secrets, which have been separately disclosed to Purchaser, and lists all
licenses or other agreements (other than licenses of generally available
computer programs) pursuant to which Overseas or any Operating Subsidiary has
any right to use or enjoy any Intellectual Property that is owned by others
or pursuant to which Overseas or any Operating Subsidiary is under a duty of
confidentiality with respect to any Intellectual Property owned by others
(the "Intellectual Property Agreements"). All of the Intellectual Property is
owned free and clear of all assignments, licenses, sublicenses, and Liens,
including claims of employees, former employees or independent contractors of
Overseas or any Operating Subsidiary, and neither
9
<PAGE>
Overseas nor any Operating Subsidiary has received notice that the use of any
of the Intellectual Property in the business of Overseas or any Operating
Subsidiary, any of the products or services of Overseas or any Operating
Subsidiary or any products held for future sale or license by Overseas or any
Operating Subsidiary violates or infringes upon the claimed rights of others
and, to the knowledge of any member of the Selling Group, there is no valid
basis for such a claim. As to the Intellectual Property Agreements, except as
set forth on SCHEDULE 3.10: (a) all are in full force and effect; (b) neither
Overseas nor any Operating Subsidiary is, nor, to the knowledge of any member
of the Selling Group, is any other party thereto, in default under any
Intellectual Property Agreement; (c) neither Overseas nor any Operating
Subsidiary is obligated to make any royalty, transfer or similar payments
under any Intellectual Property Agreement; (d) the rights of Overseas or any
Operating Subsidiary under the Intellectual Property Agreements will not be
affected by the consummation of the transactions provided for herein; and (e)
to the best knowledge of any member of the Selling Group, the exercise by
Overseas or any Operating Subsidiary of its rights under any Intellectual
Property Agreement will not infringe upon the rights of others.
3.11 EMPLOYEE PLANS. All plans or arrangements (including but not
limited to any retirement, health, life, shares, bonus, compensation,
incentive or fringe benefit plans) whether formal or informal, providing
benefits for, or the welfare of, any or all of the current or former
employees, agents or directors of Overseas or any Operating Subsidiary or any
or their Affiliates (defined below) (including but not limited to any entity
which together with Overseas or any Operating Subsidiary is treated as a
single employer pursuant to Section 414 of the Internal Revenue Code of 1986,
as amended (the "Code") or the beneficiaries or dependents thereof) have
fully complied with the requirements of all Laws and all documents evidencing
the terms and intent of such plans both in form and in operation.
3.12 TAX MATTERS. Except as disclosed on SCHEDULE 3.12, all taxes
arising under any Law in the foreign jurisdictions in which Overseas or any
Operating Subsidiary conducts business, including, without limitation, any
income, profits, employment, sales, use, value-added occupations, excise,
real property, personal property or ad valorem tax or any license or
franchise fee or tax and all penalties and interest related thereto
(collectively, "Taxes") due and payable by Overseas and the Operating
Subsidiaries have been paid or provided for in the Financial Statements and
are not delinquent, and all Taxes not yet due have been fully accrued on the
books of Overseas and the Operating Subsidiaries and set forth in the
Financial Statements in accordance with GAAP and adequate reserves have been
established therefor. Except as set forth on SCHEDULE 3.12, there are no
pending claims asserted for Taxes against Overseas or any Operating
Subsidiary or outstanding agreements or waivers extending the statutory
period of limitation applicable to any tax return of Overseas or any
Operating Subsidiary for any period, and Overseas and the Operating
Subsidiaries have timely filed all tax returns required to be filed under the
Laws of the foreign jurisdictions in which they conducted business and all
other returns required to be filed with respect to Taxes taking into account
any extensions for the filing thereof.
3.13 TITLE TO PROPERTIES; ADEQUACY. Overseas and each of the
Operating Subsidiaries has good and clear (in the case of real property) or
valid (in the case of personal property) title to or valid leasehold
interests in all of its respective properties and assets reflected in the
Financial Statements for the quarterly period ended March 26, 1999 (or
acquired after March 26, 1999 by Overseas or the
10
<PAGE>
Operating Subsidiaries), or not reflected on the Financial Statements but
used by Overseas or the Operating Subsidiaries, free and clear of any title
defects or Liens, except (a) Liens securing debt reflected as liabilities on
the latest balance sheet included in the Financial Statements, (b) Liens for
current Taxes and assessments not in default, (c) mechanics', carriers',
workers', repair persons', statutory or common law Liens either not
delinquent or being contested in good faith and (d) Liens, covenants,
rights-of-way, building or use restrictions, easements, exceptions,
variances, reservations and other matters or limitations of any kind, if any,
which do not have an adverse effect on Overseas' or such Operating
Subsidiaries' use of any of its respective real property for the purposes
currently used. No person other than Overseas or an Operating Subsidiary is
currently entitled to possession of any of the properties of Overseas or the
Operating Subsidiaries, whether owned or leased by Overseas or the Operating
Subsidiary. So far as is known to any member of the Selling Group, the
buildings, structures and improvements owned or leased by Overseas and each
of the Operating Subsidiaries conform in all material respects to all
applicable Laws, including zoning regulations, none of which would upon
consummation of the transactions contemplated hereby adversely interfere with
the use of such properties, buildings, structures or improvements for the
purposes for which they are now utilized. Except as disclosed on SCHEDULE
3.13, the properties and assets owned or leased by Overseas and each of the
Operating Subsidiaries (including any assets to be transferred pursuant to
Section 5.20) are adequate for the conduct of its business as presently
conducted, are adequately insured, and are in good repair and operating
condition, normal wear and tear excepted.
3.14 AUTHORIZATION. With respect to this Agreement and any other
agreements, instruments and documents executed and delivered by the members
of the Selling Group, Overseas and the Unpurchased Subsidiaries pursuant to
this Agreement (this Agreement and such other agreements, instruments and
documents are collectively referred to as the "Selling Group Delivered
Agreements"): (a) each member of the Selling Group, Overseas and each of the
Unpurchased Subsidiaries has the right, power and authority to enter into the
Selling Group Delivered Agreements executed and delivered by it and to
consummate the transactions contemplated thereby, and otherwise to comply
with and perform its obligations thereunder; (b) the execution and delivery
by each member of the Selling Group, Overseas and each of the Unpurchased
Subsidiaries of the Selling Group Delivered Agreements and the consummation
by each member of the Selling Group, Overseas and each of the Unpurchased
Subsidiaries of the transactions contemplated on its part thereby has been
duly authorized by the Board of Directors or other governing body of such
member of the Selling Group, Overseas or such Unpurchased Subsidiary and the
shareholders of the Company and the shareholders of any other Subsidiaries of
the Company, where required; (c) no other action on the part of any member of
the Selling Group, Overseas or any Unpurchased Subsidiary is necessary to
authorize the execution and delivery of the Selling Group Delivered
Agreements by such member of the Selling Group, Overseas or such Unpurchased
Subsidiary or the consummation by such member of the Selling Group, Overseas
or such Unpurchased Subsidiary of the transactions contemplated thereby; and
(d) the Selling Group Delivered Agreements will, when executed and delivered
by such member of the Selling Group, Overseas or such Unpurchased Subsidiary,
constitute such member of the Selling Group's, Overseas' or such Unpurchased
Subsidiary's valid and binding obligations enforceable against such member of
the Selling Group, Overseas or such Unpurchased Subsidiary in accordance with
their terms, except (i) as such enforcement may be limited by bankruptcy,
reorganization, insolvency or other Laws and court decisions relating to or
affecting the enforcement of creditors' rights generally (including but not
11
<PAGE>
limited to statutory or other Laws regarding fraudulent transfers), and (ii) as
to the availability of specific performance or other equitable remedies.
3.15 NO CLAIMS AGAINST THE OPERATING SUBSIDIARIES OR OVERSEAS. Neither
any member of the Selling Group nor any Unpurchased Subsidiary has any claim
against Overseas or the Operating Subsidiaries, except for accounts receivable
and/or payable incurred in the ordinary course of business of the Company or the
Unpurchased Subsidiaries and included in the books of the Company or the
Unpurchased Subsidiaries, and except as otherwise specifically provided in this
Agreement.
3.16 BROKERS, FINDERS AND INVESTMENT BANKERS. Except for RTD
International, Inc., which will receive a commission from certain Company
Shareholders in connection with the transactions contemplated by this
Agreement, no member of the Selling Group or any of their respective
officers, directors, shareholders or employees has employed any broker,
finder or investment banker or incurred any liability for any investment
banking fees, financial advisory fees, brokerage fees or finders' or similar
fees in connection with the transactions contemplated by this Agreement.
3.17 ACCURACY OF SCHEDULES, CERTIFICATES AND DOCUMENTS. All information
concerning the Company and its Subsidiaries contained in this Agreement, in any
certificate furnished to Purchaser, Vidor or Newco pursuant hereto and in each
schedule hereto is both complete (in that, except as otherwise stated therein,
it represents all the information called for and does not omit to state any
material fact necessary to make the statements contained therein not misleading)
and accurate in all material respects; and all documents furnished to Purchaser,
Vidor or Newco pursuant to this Agreement as being documents described in this
Agreement or in any schedule hereto are true and correct copies of the documents
which they purport to represent.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER, VIDOR AND NEWCO
Purchaser, Vidor and Newco jointly and severally represent and warrant
to the members of the Selling Group as follows:
4.1 ORGANIZATION. Purchaser, Vidor and Newco are corporations duly
organized, validly existing and in Good Standing under the laws of their
respective jurisdictions of organization and have the corporate power and
authority to own all of their properties and assets and to carry on their
businesses as they are now being conducted, and are duly qualified to conduct
such business as is currently being conducted and are in Good Standing in all
jurisdictions in which they are required to be qualified and in which the
failure to be so qualified would materially and adversely affect the financial
condition, business or results of operations of Purchaser, Vidor or Newco.
4.2 AUTHORITY. Purchaser, Vidor and Newco have the corporate power and
authority to execute and deliver this Agreement and any other agreements,
instruments and documents executed and delivered by Purchaser, Vidor or Newco
pursuant to this Agreement (this Agreement and such
12
<PAGE>
other agreements, instruments and documents are collectively referred to as
the "Purchaser Delivered Agreements") and to consummate the transactions
contemplated on the part of Purchaser or Newco thereby. The execution and
delivery by Purchaser, Vidor and Newco of the Purchaser Delivered Agreements
and the consummation by Purchaser, Vidor and Newco of the transactions
contemplated on their part thereby have been duly authorized by their
respective Boards of Directors. No other corporate action on the part of
Purchaser, Vidor or Newco is necessary to authorize the execution and
delivery of the Purchaser Delivered Agreements by Purchaser, Vidor or Newco
or the consummation by Purchaser, Vidor or Newco of the transactions
contemplated thereby. The Purchaser Delivered Agreements will, when executed
and delivered by Purchaser, Vidor and Newco, constitute Purchaser's, Vidor's
and Newco's valid and binding obligations enforceable against Purchaser,
Vidor and Newco in accordance with their terms, except (a) as such
enforcement may be limited by bankruptcy, reorganization, insolvency or other
Laws and court decisions relating to or affecting the enforcement of
creditors' rights generally (including but not limited to statutory or other
Law regarding fraudulent transfers), and (b) as to the availability of
specific performance or other equitable remedies.
4.3 NO CONSENTS REQUIRED. Except for Authorizations as may be
required under the Laws of any foreign country in which Overseas or any
Operating Subsidiary conducts any business or owns any property or assets, no
Authorization of or with any Governmental Entity is required in connection
with the execution and delivery of the Purchaser Delivered Agreements by
Purchaser, Vidor and Newco or the consummation by Purchaser, Vidor and Newco
of the transactions contemplated thereby, or other compliance with or
performance under, the Purchaser Delivered Agreements, where the failure to
make or obtain such Authorization would have a material and adverse effect on
the ability of Purchaser, Vidor and Newco to consummate the transactions
contemplated by the Purchaser Delivered Agreements.
4.4 ABSENCE OF VIOLATIONS OR CONFLICTS. The execution and delivery
of the Purchaser Delivered Agreements by Purchaser, Vidor and Newco do not
and the consummation by Purchaser, Vidor and Newco of the transactions
contemplated thereby does not and will not (a) violate or conflict with any
provision of the organizational and governing documents of Purchaser, Vidor
or Newco or (b) violate or conflict with, or result (with the giving of
notice or the lapse of time or both) in a violation of or constitute a
default under, any injunction, judgment, decree or order of any Government
Entity to which Purchaser, Vidor or Newco is a party or by which Purchaser,
Vidor or Newco or their assets or properties is bound or any applicable Laws.
4.5 BROKERS, FINDERS AND INVESTMENT BANKERS. Neither Purchaser,
Vidor, Newco nor any of their respective officers, directors or employees has
employed any broker, finder or investment banker or incurred any liability
for any investment banking fees, financial advisory fees, brokerage fees or
finders' or similar fees in connection with the transactions contemplated by
this Agreement.
4.6 ACCURACY OF SCHEDULES, CERTIFICATES AND DOCUMENTS. All
information concerning Purchaser, Vidor or Newco contained in this Agreement
or in any schedule, certificate or document furnished to either Selling Group
Representative pursuant hereto is both complete (in that, except as otherwise
stated therein, it represents all the information called for and does not
omit to state any material fact necessary to make the statements contained
therein not misleading) and accurate in all
13
<PAGE>
material respects; and all documents furnished to either Selling Group
Representative pursuant to this Agreement as being documents described in
this Agreement or in any schedule hereto are true and correct copies of the
documents which they purport to represent.
ARTICLE 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 CONDUCT OF BUSINESS PENDING THE CLOSING. During the period from the
date hereof to the Closing Date (except as required by Law or as contemplated by
this Agreement):
(a) OPERATION OF OVERSEAS AND THE OPERATING SUBSIDIARIES IN THE
ORDINARY COURSE OF BUSINESS. Each member of the Selling Group and Overseas shall
use its best efforts to cause Overseas and each of the Operating Subsidiaries to
conduct their operations according to their ordinary and usual course of
business in substantially the same manner as heretofore conducted and use their
reasonable best efforts to preserve intact their business organization, to keep
their properties adequately insured, to keep available the services of their
officers and employees and to maintain satisfactory relationships with
suppliers, distributors, customers and others having business relationships with
Overseas and the Operating Subsidiaries.
(b) FORBEARANCES BY THE COMPANY AND ITS SUBSIDIARIES. Except as
set forth on Schedule 5.1(b), without the prior written consent of Purchaser,
which consent shall not be unreasonably withheld, each member of the Selling
Group shall use its best efforts not to allow Overseas or the Operating
Subsidiaries, and in the case of Sections 5.1(b)(ix), (x), (xii) and (xiii)
(with respect to (ix), (x) and (xii)), the Company or any of its Subsidiaries,
to:
(i) except as otherwise permitted pursuant to clause
(viii) below, incur any Liability other than current
Liabilities incurred in the ordinary and usual course of
business, or fail to pay any Liability when due or take or fail
to take any action, the taking of which, or the failure to take
of which, would permit any Liability to be accelerated;
(ii) assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, firm
or corporation, other than endorsements of negotiable
instruments in the ordinary course of business, or make any
loans or advances to any individual, firm or corporation;
(iii) declare, set aside or pay any dividend in cash or
property with respect to its capital shares or declare or make
any distribution in cash or property on, redeem, or purchase or
otherwise acquire any ROV Group Member Shares, or split,
combine or otherwise similarly change the outstanding ROV Group
Member Shares, or authorize the creation or issuance of or
issue or sell any capital shares or any securities or
obligations convertible into or exchangeable for, or giving any
person any right to acquire from it, any of its capital shares,
or agree to take any such action;
14
<PAGE>
(iv) mortgage, pledge or otherwise encumber any property
or asset, except in the ordinary and usual course of business;
(v) sell, lease, transfer or dispose of any of its
properties or assets, waive or release any rights or cancel,
compromise, release or assign any indebtedness owed to it or
any claims held by it, except for sales of products in the
ordinary and usual course of business and except as
contemplated by this Agreement;
(vi) make any investments of a capital nature either by
purchase of shares or securities, contributions to capital,
property transfers or otherwise, or by the purchase of any
property or assets of any other individual, firm or
corporation, except in the ordinary and usual course of
business;
(vii) fail to perform its material obligations under
material contracts (except those being contested in good faith)
or enter into, assume or amend in any material respect any
material contract or commitment other than contracts to
purchase or sell goods or provide services entered into in the
ordinary and usual course of business;
(viii) except for regularly scheduled increases in
accordance, both as to timing and amount, with normal prior
practice, increase in any manner the compensation or fringe
benefits of any of its officers or employees or pay or agree to
pay any pension or retirement allowance not required by any
existing plan or agreement to any such officers or employees,
or commit itself to or enter into any employment agreement or
any incentive compensation, deferred compensation, profit
sharing, stock option, share purchase, savings, consulting,
retirement, pension or other "fringe benefit" plan, award or
arrangement with or for the benefit of any officer, employee or
other person;
(ix) permit any insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or
terminated or any of the coverage thereunder to lapse, unless
it makes reasonable efforts to obtain simultaneously with such
termination or cancellation replacement policies providing
substantially the same coverage on commercially reasonable
terms and, if so available, such policies are in full force and
effect;
(x) amend its governing or organizational documents;
(xi) enter into any union, collective bargaining or
similar agreement;
(xii) consolidate or merge with any corporation or other
entity; or
(xiii) enter into an agreement to take any of the
actions described in clauses (i) through (xii).
15
<PAGE>
In connection with the continued operation of the business of Overseas
and the Operating Subsidiaries between the date of this Agreement and
the Closing Date, the Company shall, and the Company shall cause the
ROV Group Members to, confer in good faith on a regular basis with one
or more representatives of Purchaser or Newco designated in writing to
receive reports on operational matters of materiality and the general
status of ongoing operations. The members of the Selling Group
acknowledge that neither Purchaser, Vidor nor Newco thereby waives any
rights it may have under this Agreement as a result of this covenant to
engage in consultations nor shall Purchaser, Vidor or Newco be
responsible for any decisions made by the Company's or any of its
Subsidiaries' officers and directors with respect to matters which are
the subject of such consultation.
(c) INVESTIGATION. While the parties acknowledge that
Purchaser's, Vidor's and Newco's due diligence investigation has been
substantially completed, after the date of this Agreement, the Company shall
cause Overseas and the Operating Subsidiaries to permit Purchaser, Vidor and
Newco to make or cause to be made such investigation of the business and
properties of Overseas and the Operating Subsidiaries and their financial and
legal condition as Purchaser, Vidor and Newco deem necessary or advisable to
familiarize themselves therewith and to update their previous due diligence
investigation, provided that such investigations shall not unreasonably
interfere with normal operations of the Company and its Subsidiaries and shall
comply with the following. With the prior consent of the Company which will not
be unreasonably withheld, Purchaser, Vidor and Newco and its authorized
representatives shall have full access to the premises, books and records of
Overseas and the Operating Subsidiaries with reasonable prior notice and at
reasonable hours, and Overseas and the Operating Subsidiaries shall furnish
Purchaser, Vidor and Newco with such financial and operating data and other
information with respect to Overseas and the Operating Subsidiaries as
Purchaser, Vidor and Newco may from time to time reasonably request. No
investigation by Purchaser, Vidor or Newco heretofore or hereafter made shall
affect the representations and warranties of the members of the Selling Group or
Purchaser's, Vidor's or Newco's rights to indemnification for breaches of
representations and warranties under Article 8, and each such representation and
warranty shall survive any such investigation subject to Article 8.
Notwithstanding the foregoing, Purchaser shall notify promptly the Company of
any information or fact discovered by Purchaser, Vidor or Newco in its due
diligence investigation of Overseas and the Operating Subsidiaries prior to the
Closing (and not already known to Overseas, the Operating Subsidiaries or any
member of the Selling Group) that Purchaser believes may constitute a breach of
a representation or warranty of the members of the Selling Group in this
Agreement. Unless such information or fact was already known to Overseas, the
Operating Subsidiaries or any of the members of the Selling Group, upon the
request of either Selling Group Representative, Purchaser, Vidor or Newco shall
allow the members of the Selling Group ten (10) Business Days to cure such
breach, if curable, prior to the Closing, and the Closing Date shall be delayed
accordingly.
5.2 REASONABLE BEST EFFORTS; FURTHER ASSURANCES; COOPERATION, ETC.
Subject to the other provisions of this Agreement, the parties hereto shall in
good faith perform their obligations under this Agreement and shall each use
their reasonable best efforts to do, or cause to be done, all things necessary,
proper or advisable under applicable Law to obtain all Authorizations and
satisfy all conditions to the obligations of the parties under this Agreement
and to cause the transactions contemplated by this Agreement to be carried out
promptly in accordance with the terms hereof and
16
<PAGE>
shall cooperate fully with each other and their respective officers,
directors, employees, agents, counsel, accountants and other designees in
connection with any steps required to be taken as part of their respective
obligations under this Agreement. Upon the execution of this Agreement and
thereafter, each party shall take such actions and execute and deliver such
documents as may be reasonably requested by the other parties hereto in order
to consummate more effectively the transactions contemplated by this
Agreement. The Company shall reasonably cooperate with and cause Overseas and
the Operating Subsidiaries and each Selling Group Representative to cooperate
with Purchaser, Vidor and Newco and their representatives to facilitate any
financing by Purchaser, Vidor and Newco; PROVIDED, HOWEVER, it being
expressly understood by Purchaser, Vidor and Newco that receipt by Purchaser,
Vidor and Newco of any such financing shall not be a condition to
Purchaser's, Vidor's and Newco's obligation to consummate the transactions
contemplated by this Agreement. Purchaser, Vidor and Newco may disclose
information concerning Overseas and the Operating Subsidiaries or the
transactions contemplated by this Agreement, including, without limitation,
(a) in connection with any such financing, (b) in any filings with the
Securities and Exchange Commission or other Governmental Entities; PROVIDED,
HOWEVER, that any filings made with the Securities and Exchange Commission
shall not include schedules or exhibits to this Agreement unless required
under applicable Law or specifically requested by such agency, (c) as
required by applicable Law, or (d) in any press releases, statements or
communications deemed necessary or appropriate by Purchaser, Vidor or Newco
under applicable Law or securities regulations. The Company shall cause the
Company's and its Subsidiaries' accountants to cooperate with Purchaser,
Vidor and Newco in the preparation of and filing, in accordance with
applicable law, with the Securities and Exchange Commission and filing with
other Governmental Entities of required reports of the Purchaser with respect
to such financial statements and historical pro forma financial information
of Overseas and the Operating Subsidiaries, on the one hand, or the Company
and its Subsidiaries, on the other hand, as may be required pursuant to the
requirements of the United States Securities and Exchange Commission ("SEC")
for filing under Form 8-K. Notwithstanding the foregoing, Purchaser, Vidor
and Newco acknowledge that the Company and its Subsidiaries are private
companies and in connection with any financing, Purchaser, Vidor and Newco
will limit disclosure of Confidential Information (defined below) or Trade
Secrets (defined below) of the Company and its Subsidiaries to what is
reasonably necessary or appropriate in connection with the particular
financing and will seek and use reasonable efforts to obtain appropriate
confidentiality agreements from recipients of such Confidential Information
and Trade Secrets.
5.3 EXPENSES. Except as otherwise provided in this Agreement, whether
or not the transactions contemplated hereby are consummated, all costs and
expenses (including any brokerage commissions or any finder's or investment
banker's fees and including attorney's and accountant's fees) incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses; PROVIDED, HOWEVER, that the costs and
expenses reasonably incurred by the Company and the Unpurchased Subsidiaries
after the Closing in the performance of their obligations under Section 5.2 or
otherwise upon the request of Purchaser shall be paid by Purchaser.
5.4 NO SOLICITATION OF TRANSACTIONS. Prior to the termination and
abandonment of this Agreement, none of the members of the Selling Group: will,
or will allow the ROV Group Members or their Affiliates, officers, directors, or
representatives to: (a) solicit, initiate or encourage
17
<PAGE>
submission of proposals or offers from any person other than Purchaser, Vidor
or Newco relating to any acquisition or purchase of all or a material part of
the stock or assets of, or any merger, consolidation, share exchange or
business combination with, or any recapitalization, restructuring or issuance
or offering of debt or equity securities of, Overseas or the Operating
Subsidiaries (an "Acquisition Proposal"); or (b) participate in any
discussions or negotiations regarding, or furnish to any person other than
Purchaser, Vidor and Newco and their representatives, any information with
respect to, or otherwise cooperate in any way with or assist, facilitate or
encourage, any Acquisition Proposal by any person other than Purchaser, Vidor
or Newco. The members of the Selling Group will immediately cease and cause
to be terminated any existing activity, discussions or negotiations with any
person other than Purchaser, Vidor or Newco and their representatives
conducted prior to the execution and delivery of this Agreement with respect
to any Acquisition Proposal. If, notwithstanding the foregoing, any of the
members of the Selling Group or any of their Affiliates or representatives,
Overseas or the Operating Subsidiaries should receive any Acquisition
Proposal or any inquiry regarding any such proposal from a third party, the
person or entity receiving such a proposal (or in the case of an Acquisition
Proposal made to Overseas or the Operating Subsidiaries, each Selling Group
Representative) shall promptly inform Purchaser, Vidor and Newco. For
purposes of this Agreement, the term "Affiliate" shall have the meaning given
that term in Rule 405 of Regulation C promulgated under the Securities Act of
1933, as amended.
5.5 PUBLIC ANNOUNCEMENTS. Prior to the Closing, all notices, releases,
statements and communications to the news media or press relating to this
Agreement or the transactions contemplated hereby shall be made in such manner
as determined by Purchaser, subject to the approval of each Selling Group
Representative, which approval will not be unreasonably withheld or delayed.
5.6 NONCOMPETITION; NONDISCLOSURE. Except as set forth on SCHEDULE 5.6
and on a several basis only as regards the Company Shareholders among each
other:
(a) SCOPE AND REASONABLENESS OF RESTRICTIONS. Each of the
members of the Selling Group and the Unpurchased Subsidiaries acknowledges that
Overseas and the Operating Subsidiaries are engaged in the business of
designing, developing, manufacturing and selling (i) dry cells and batteries of
the zinc-carbon type having an anode of zinc, a cathode consisting of carbon and
manganese dioxide, and an immobilized electrolyte of which ammonium chloride
and/or zinc chloride are the principal constituents, (ii) dry cells and
batteries of the alkaline-manganese type having an anode of zinc, a cathode of
manganese dioxide, and an immobilized electrolyte of which potassium hydroxide
is the principal constituent and (iii) lighting devices similar to those
marketed in the Territory (defined below) on the date hereof (the "Business")
and that Overseas and the Operating Subsidiaries conduct the Business throughout
all countries of the world except those identified on SCHEDULE 5.6 (the
"Territory") and that Newco would not purchase the Shares without the assurance
that each of the members of the Selling Group and each of the Unpurchased
Subsidiaries will not engage in the activities prohibited by this Section 5.6
for the periods set forth herein, and to induce Newco to consummate the purchase
of the Shares, each of the members of the Selling Group and each of the
Unpurchased Subsidiaries agrees to restrict its actions and those of its
Affiliates throughout the Territory and otherwise as provided in this Section
5.6. Each of the members of the Selling Group and each of the Unpurchased
Subsidiaries acknowledges that such
18
<PAGE>
restrictions are reasonable in light of the business of Purchaser, Vidor and
Newco and the benefits of the transactions contemplated by this Agreement to
the members of the Selling Group and the Unpurchased Subsidiaries; provided,
however, that such restrictions shall not apply to any activities undertaken
by such individuals after the Closing solely in their capacities as
employees, consultants or distributors of Overseas or the Operating
Subsidiaries, Newco, Vidor or Purchaser, if such individuals are in fact so
employed, engaged or authorized by Overseas, the Operating Subsidiaries,
Newco, Vidor or Purchaser after the Closing. For purposes of this Section
5.6, Purchaser's, Vidor's and Newco's Affiliates shall include, without
limitation, Overseas and the Operating Subsidiaries.
(b) USE OF NAMES. Each of the members of the Selling Group and
each of the Unpurchased Subsidiaries agrees that from and after the Closing
neither such member of the Selling Group, such Unpurchased Subsidiary nor any of
their Affiliates will, either individually or jointly, manage, operate, join,
control or participate in the ownership, management or control of any business
under the name or style of the Company or any of its Subsidiaries, or any name
or style incorporating any such name or style or any name or style confusingly
similar to such name or style. At the Closing or as soon as practicable
thereafter, but in any event within three (3) months after the Closing, the
Company and each of the Unpurchased Subsidiaries will change its name (and will
cause each of its respective Affiliates to change its name) to one not including
the acronym "ROV," the word "Rayovac" or "Ray-O-Vac" or any other similar
acronym, word or phrase.
(c) NONCOMPETITION. During the period commencing on the Closing
Date and terminating on the third anniversary thereof (the "Noncompete Period"),
except as set forth on SCHEDULE 5.6, neither any of the members of the Selling
Group, any of the Unpurchased Subsidiaries nor any of their Affiliates shall
either engage directly in the Business within the Territory, or act as
consultant, advisor, independent contractor, officer, manager, employee,
principal, agent, trustee of any corporation, partnership, association or agent
or agency, or directly or indirectly own more than twenty-five percent of the
outstanding capital stock of any corporation, or be a member or employee of any
partnership or any owner or employee of any other business, any of which is
engaged in the Business in the Territory during the Noncompete Period.
(d) NO INTERFERENCE WITH CUSTOMERS. During the Noncompete
Period, neither any of the members of the Selling Group, any of the Unpurchased
Subsidiaries nor any of their Affiliates shall induce a Customer (defined
below): (i) to buy from any business entity engaged in the Business in the
Territory (other than Purchaser, Vidor, Newco or an Affiliate thereof); or (ii)
to withdraw, curtail or cancel such Customer's business with Purchaser, Vidor,
Newco or its Affiliates. As used in this Section 5.6, "Customer" means any
actual customer of Purchaser, Vidor, Newco or their Affiliates, or any potential
customer of Purchaser, Vidor, Newco or their Affiliates, served or actually
solicited by Purchaser, Vidor, Newco or the Company or its Subsidiaries within
the twelve-month period prior to the Closing Date.
(e) NO INTERFERENCE WITH EMPLOYEES. Except with respect to
employees identified on SCHEDULE 5.6 and except with the consent of Purchaser,
such consent not to be unreasonably withheld, with respect to employees
terminated by Purchaser, Vidor or Newco and with respect to employees who
terminate their employment "for cause" as such term is described in the Change
of Control Severance Agreements (as defined in SCHEDULE 3.3(b)), each member of
the Selling Group
19
<PAGE>
and each Unpurchased Subsidiary agrees that, during the Noncompete Period,
neither any of the members of the Selling Group, any of the Unpurchased
Subsidiary nor any of their Affiliates will directly or indirectly request or
induce any employee to terminate his employment with Purchaser, Vidor, Newco
or their Affiliates and accept employment with another business entity
engaged in the Business in the Territory, or hire during the Noncompete
Period, any employee within twelve months after termination of such
employee's employment with Purchaser, Vidor, Newco or any of their Affiliates.
(f) TRADE SECRETS; CONFIDENTIAL INFORMATION.
(i) Each of the members of the Selling Group and the
Unpurchased Subsidiaries recognizes and acknowledges that it
has had access to certain highly sensitive, special, unique
information of Overseas and the Operating Subsidiaries that is
confidential or proprietary. Except as set forth on SCHEDULE
5.6, each of the members of the Selling Group and the
Unpurchased Subsidiaries hereby covenants and agrees that each
member of the Selling Group, the Unpurchased Subsidiaries and
any of their Affiliates will not (A) as to Trade Secrets, as
long as they remain Trade Secrets, and (B) as to Confidential
Information, during the Noncompete Period, use or disclose any
Trade Secrets or Confidential Information, except for
disclosures to authorized representatives of the Operating
Subsidiaries, Newco, Vidor or Purchaser; provided, however,
that the foregoing restrictions shall not apply to (1) items
that have entered the public domain other than by an
unauthorized disclosure by any member of the Selling Group, any
Unpurchased Subsidiary or any of their Affiliates, (2) any
items required to be disclosed by a Governmental Entity or
under applicable Laws, or (3) Confidential Information received
subsequently from third parties not known by such member of the
Selling Group or such Unpurchased Subsidiary to be subject to
confidentiality restrictions.
(ii) For purposes of this Agreement, (A) "Trade Secret"
means any information, including, but not limited to, technical
or non-technical data, a formula, a pattern, a compilation, a
program, a device, a method, a technique, a set of guidelines,
a procedure, a drawing, a process, financial data, financial
plans, product plans, or a list of actual or potential
customers or suppliers of Overseas or the Operating
Subsidiaries, whether currently existing or hereafter developed
or acquired by Overseas or the Operating Subsidiaries, that
derives economic value, actual or potential, from not being
generally known to and not being readily ascertainable by
proper means by other persons who can obtain economic value
from its disclosure or use and is the subject of efforts that
are reasonable under the circumstances to maintain its secrecy
or otherwise constitutes a trade secret under applicable Law;
and (B) "Confidential Information" is any data or information
of Overseas or the Operating Subsidiaries other than Trade
Secrets, whether currently existing or hereafter developed or
acquired, which is competitively sensitive and not generally
known to the public.
20
<PAGE>
(iii) Each of the members of the Selling Group and the
Unpurchased Subsidiaries acknowledges that all Trade Secrets
and Confidential Information are and shall remain the sole,
exclusive and valuable property of Overseas and the Operating
Subsidiaries, Newco, Vidor or Purchaser, and that each member
of the Selling Group, the Unpurchased Subsidiaries and any of
their Affiliates do not have and shall acquire no right, title
or interest therein. Any and all printed, typed, written or
other material that any member of the Selling Group and the
Unpurchased Subsidiaries or any of their Affiliates may have or
obtain with respect to Trade Secrets or Confidential
Information (including all copyrights therein) shall be and
remain the exclusive property of Overseas, the Operating
Subsidiaries, Newco, Vidor or Purchaser, and any and all such
material (including any copies) shall, upon request of
Purchaser, Vidor or Newco, be promptly delivered by such member
of the Selling Group and the Unpurchased Subsidiaries or any of
their Affiliates to the party identified in such request.
(g) REMEDIES. Each of the members of the Selling Group and the
Unpurchased Subsidiaries acknowledges that any violation of the provisions of
this Section 5.6 may cause irreparable harm to Overseas, the Operating
Subsidiaries, Purchaser, Vidor or Newco and that damages are not an adequate
remedy. Each member of the Selling Group and each of the Unpurchased
Subsidiaries therefore agrees that Overseas, the Operating Subsidiaries, Newco,
Vidor and Purchaser shall be entitled to an injunction by an appropriate court
in the appropriate jurisdiction, enjoining, prohibiting and restraining any
member of the Selling Group or its Affiliates from the continuance of any such
violation, in addition to any monetary damages that might occur by reason of the
violation of this Section 5.6. The remedies provided in this Section 5.6 are
cumulative and shall not exclude any other remedies to which either party to
this Agreement may be entitled under this Agreement or applicable Law, and the
exercise of a remedy shall not be deemed an election excluding any other remedy
(any such claim by any other party to this Agreement being hereby waived).
(h) MODIFICATION. The parties agree that should any portion,
provision or clause of this Section 5.6 be deemed too broad to permit
enforcement to its full extent, then it shall be enforced to the maximum extent
permitted by Law, and each member of the Selling Group and the Unpurchased
Subsidiaries hereby consent and agree that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
(i) COVENANTS INDEPENDENT. The covenants and agreements set
forth in this Section 5.6 shall be deemed and shall be construed as separate and
independent covenants and agreements, and, should any portion of such covenants
and agreements be held invalid, void or unenforceable by any court of competent
jurisdiction, such invalidity, voidness, or unenforceability shall in no way
render invalid, void or unenforceable any other portion thereof or any separate
covenant not declared invalid, void or unenforceable; and this Section 5.6 shall
in that case be construed as if the void, invalid or unenforceable portions were
omitted.
5.7 FINANCIAL STATEMENTS. As soon as reasonably practicable after the
end of every month and prior to the Closing Date (but in no event later than the
twentieth day of the following month)
21
<PAGE>
beginning with the month in which this Agreement is signed, the Company shall
deliver or shall cause Overseas and the Operating Subsidiaries to deliver to
Purchaser an unaudited combined balance sheet of Overseas and the Operating
Subsidiaries or consolidated balance sheet of the Company and its
Subsidiaries (whichever is required pursuant to the requirements of the SEC
for filing under Form 8-K) as of the applicable scheduled end of such month,
and a related combined or consolidated statement of operations for such month,
which meet the standard for Financial Statements set forth in Section 3.4.
5.8 NO TRANSFERS. Except as required under Sections 5.16, 5.17 and
5.18, after the date of this Agreement, neither any member of the Selling Group
nor any ROV Group Member shall sell, pledge, encumber or otherwise transfer any
or all of the Shares or the shares in any ROV Group Member or any interest
therein.
5.9 STOCK TRANSFER POWERS. In order to facilitate the redelivery to the
Company of the Shares represented by the new share certificate issued in the
name of Newco if the Closing does not occur after such certificate is prepared,
Newco shall deliver to the Majority Selling Group Representative a blank stock
transfer power covering the Shares represented by the new share certificate (the
"Purchaser Stock Transfer Power"). The Company shall return the Purchaser Stock
Transfer Power to Newco at the Closing.
5.10 [INTENTIONALLY DELETED.]
5.11 TRANSFER OF MINORITY SHARES. Overseas shall cause the owners of
the Minority Shares (except to the extent such shares are owned by Overseas or
any Operating Subsidiary) to deliver at the Closing to Newco (a) new share
certificates representing all of the Minority Shares in the name of Newco or its
designees, (b) evidence that the existing share certificates representing the
Minority Shares have been duly endorsed for transfer to Newco or its designees
and delivered to, canceled and reissued to Newco or its designees.
5.12 TAXES. Neither any member of the Selling Group nor any Unpurchased
Subsidiary (collectively, the "Seller Tax Group"), on the one hand, nor
Purchaser, Vidor, Newco and, after the Closing, Overseas or any Operating
Subsidiary (collectively, the "Buyer Tax Group," and either the Seller Tax Group
or the Buyer Tax Group, a "Group"), on the other hand, shall take any position
with respect to Taxes in a written submission to any taxing authority in any
jurisdiction if that position would materially increase the likelihood that a
member of the other Group would incur or be subject to additional Taxes in any
jurisdiction without first reasonably consulting with the other Group and
without reasonably cooperating with the other Group; provided, however, that
nothing in this Section 5.12 shall be construed as placing any limit on the
right of a member of either Group to have complete control over any submission
to a taxing authority with respect to Taxes relating to that member. Following
the Closing, Purchaser, Vidor and Newco will cause Overseas and the Operating
Subsidiaries to provide to each of the members of the Selling Group any
information (including copies of any documents) regarding Overseas and the
Operating Subsidiaries as the member of the Selling Group reasonably may request
in connection with the determination of any Tax liability of the members of the
Selling Group or any of their direct or indirect beneficial owners for the
taxable year that includes the Closing Date or any prior taxable year.
22
<PAGE>
5.13 LICENSE PURCHASE. In exchange for the payment of the License
Purchase Price of $90,000,000 from Vidor and Newco, the Company and the
Unpurchased Subsidiaries hereby (a) assign, effective only as of the Closing
Date, (i) to Newco the rights under the License Agreement that relate to sales
of existing product lines (other than alkaline products) in those geographic
areas of Latin America where such products are currently being sold by the
Company or its Subsidiaries and (ii) to Vidor all other rights under the License
Agreement and (b) unconditionally and irrevocably hereby forever waive and
release, effective only as of the Closing Date, all rights to use the Rayovac
tradename and trademark and disclaim any ownership thereof. All rights and
obligations under the License Agreement transferred, waived, released and
disclaimed by the Company and the Unpurchased Subsidiaries pursuant to Sections
5.13 and 5.14 with respect to the geographic locations to which their respective
payments relate shall inure, after the Closing Date, to Vidor and Newco and
their respective successors and assigns.
5.14 TRADEMARK AND TRADENAME RELEASE. As a condition to the other
transactions contemplated by this Agreement, all parties to this Agreement other
than Purchaser, Vidor, Newco and Overseas hereby, effective only as of the
Closing, unconditionally and irrevocably forever waive and release all rights to
use the Rayovac tradename and trademark and disclaim any ownership thereof.
5.15 RELEASE OF CLAIMS.
(a) RELEASE OF PURCHASER, ETC.. Except for those matters set
forth on SCHEDULE 5.15(a), effective as of the Closing Date, for good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the members of the Selling Group and the Unpurchased
Subsidiaries do hereby unconditionally and irrevocably forever release and
discharge Purchaser, Vidor, Newco and the Operating Subsidiaries, and the
directors, officers, successors, assigns, legal representatives, executors,
Affiliates and administrators of each of them from all obligations and
liabilities to such parties, all agreements and understandings involving such
parties other than this Agreement and the Selling Group Delivered Agreements,
and all claims and causes of action (whether at law or in equity) of such
parties against Purchaser, Vidor, Newco and the Operating Subsidiaries, and the
directors, officers, successors, assigns, legal representatives, executors,
Affiliates and administrators of each of them, arising prior to the execution of
this Agreement, including but not limited to all claims arising out of the Share
Purchase Agreement dated December 23, 1998, by and among Purchaser and the
Company Shareholders and the other parties thereto (the "1998 Purchase
Agreement").
(b) RELEASE OF THE SELLING GROUP AND THE UNPURCHASED
SUBSIDIARIES. Except for those matters set forth on SCHEDULE 5.15(b), effective
as of the Closing Date, for good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, Purchaser, Vidor and
Newco do hereby unconditionally and irrevocably forever release and discharge
the members of the Selling Group and the Unpurchased Subsidiaries and the
directors, officers, successors, assigns, legal representatives, executors,
Affiliates and administrators of each of them from all obligations and
liabilities to such parties, all agreements and understandings involving such
parties other than this Agreement and the Purchaser Delivered Agreements, and
all claims and causes of action (whether at law or in equity) of such parties
against the members of the Selling Group and
23
<PAGE>
the Unpurchased Subsidiaries arising prior to the execution of this Agreement,
including but not limited to all claims arising out of the 1998 Purchase
Agreement.
5.16 ROV-MEXICO SHARE. ROV-Mexico shall have issued one or more
additional shares to one or more subsidiaries of Overseas.
5.17 DISTRIBUTION OR SALE OF HSI. Prior to Closing, Overseas shall
distribute or sell to the Company all of the issued and outstanding authorized
capital shares of HSI held by Overseas.
5.18 SALE OR TRANSFER OF ROV-MEXICO. Prior to the Closing Date, ESB
shall sell or transfer to Overseas the 4.45% shareholding of the issued and
outstanding capital shares of ROV-Mexico owned by ESB.
5.19 PAYMENT OF INTERCOMPANY TRANSACTIONS. Prior to the Closing Date,
the Company and the Unpurchased Subsidiaries, on the one hand, and Purchaser and
its Subsidiaries, on the other hand, shall, where practicable, pay any amounts
due and owing the other.
5.20 OPERATING ASSETS. At or prior to the Closing Date, the Company and
the Unpurchased Subsidiaries shall transfer to the party designated on SCHEDULE
5.20 those assets listed or described on SCHEDULE 5.20 and after the Closing
Date, the Company and the Unpurchased Subsidiaries shall cease to engage in the
Business.
5.21 ACCESS TO BOOKS AND RECORDS. In order to ensure continued access
to all books and records of the Company and its Subsidiaries ("Books and
Records") after the Closing Date, the party in possession of any Books and
Records: (a) shall provide copies of such Books and Records to the other party
within ten (10) Business Days from the other party's written request therefor or
provide access to such Books and Records as well as make available such
knowledgeable employees, if any, as may be reasonably requested; (b) without the
other party's written consent, which shall not be unreasonably withheld, shall
not fail to preserve such Books and Records for the longer of (i) five (5) years
after the Closing Date or (ii) the duration of any tax audit or controversy
involving any party hereto and related to tax years preceding the Closing Date
(or in respect of any period for which information relating to any period prior
to the Closing Date is relevant) involving any party; and (c) shall give prior
written notice to the other party of its intent to dispose of such Books and
Records, and shall permit the other party to make copies thereof, within a
period of ten (10) Business Days after the giving of such written notice. For
purposes of this Section 5.21, a "party" shall include each member of the
Selling Group, each Unpurchased Subsidiary and each direct or indirect
beneficial owner thereof (as well as any transferee or successor thereto).
5.22 GUARANTEES. Purchaser shall execute customary guarantees on behalf
of Overseas or any Operating Subsidiary with respect to Overseas' or any
Operating Subsidiaries' purchases of raw materials where such purchases are
currently being guaranteed by the Company and use reasonable best efforts to
have the Company released from such guarantees. The Company's current raw
materials guarantees are listed on SCHEDULE 5.22.
24
<PAGE>
ARTICLE 6
CONDITIONS PRECEDENT TO THE CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF PURCHASER, VIDOR AND NEWCO. Newco's
obligation to consummate the purchase of the Shares as provided for by this
Agreement and the other transactions contemplated hereby and Vidor's and Newco's
obligation to pay the License Purchase Price is subject to the fulfillment to
the reasonable satisfaction of Vidor and Newco, prior to or at the Closing, of
each of the following conditions (any or all of which may be waived by Vidor and
Newco):
(a) CONSENTS, AUTHORIZATIONS, ETC. The Authorizations of or
with any Governmental Entity and the Authorizations of any nongovernmental third
party which are required for, or in connection with, (i) the execution and
delivery of this Agreement by the members of the Selling Group, Overseas and the
Unpurchased Subsidiaries and the consummation by the members of the Selling
Group, Overseas and the Unpurchased Subsidiaries of the transactions
contemplated hereby and (ii) the consummation by Purchaser, Vidor and Newco of
the transactions contemplated hereby with respect to Authorizations relating to
foreign countries, shall have been obtained or made, except where the failure to
obtain any such Authorization or Authorizations would not have a material
adverse effect on any of Purchaser, its Subsidiaries, Overseas, the Operating
Subsidiaries, Vidor or Newco or the ability of them to consummate the
transactions contemplated hereby.
(b) INJUNCTION, ETC. The consummation of the transactions
contemplated hereby will not violate the provisions of any injunction, judgment,
decree, order or Law applicable or effective with respect to Purchaser, Vidor or
Newco or their respective officers and directors. No suit or proceeding shall
have been instituted by any person, firm or entity or, to the knowledge of
Purchaser, Vidor or Newco, shall have been threatened by any Governmental
Entity, which has not been withdrawn, dismissed or otherwise eliminated, and
which seeks (i) to prohibit, restrict or delay consummation of the transactions
contemplated hereby or to limit in any material respect the right of Purchaser,
Vidor or Newco to control any material aspect of the business of Purchaser or
its Affiliates, Vidor, Newco, Overseas or Operating Subsidiaries after the
Closing Date, or (ii) to subject Purchaser, Vidor, Newco or their respective
directors or officers to material liability on the ground that it or they have
violated any Law or otherwise acted improperly in relation to the transactions
contemplated by this Agreement.
(c) REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS.
The representations and warranties of the members of the Selling Group contained
in this Agreement shall have been true and correct at the date hereof and,
except for changes contemplated in this Agreement, shall also be true and
correct in all material respects at and as of the Closing Date, with the same
force and effect as if made at and as of the Closing Date, and the members of
the Selling Group, Overseas and the Unpurchased Subsidiaries shall have
performed or complied (or cured any noncompliance) with all agreements and
covenants required by this Agreement to be performed or complied with by them at
or prior to the Closing Date.
25
<PAGE>
(d) CERTIFICATES. The Majority Selling Group Representative
(defined below) shall have delivered to Purchaser, Vidor and Newco the following
certificates: (i) a certificate, dated as of the Closing Date and executed by
the Majority Selling Group Representative to the effect that the conditions
specified in Sections 6.1(a) with respect to all of the members of the Selling
Group (other than the Minority Company Shareholders (defined below)), Overseas
and the Operating Subsidiaries, 6.1(b) with respect to all of the members of the
Selling Group (other than the Minority Company Shareholders), Overseas and the
Operating Subsidiaries, 6.1(c) with respect to all of the members of the Selling
Group (other than the Minority Company Shareholders), Overseas and the Operating
Subsidiaries, 6.1(g) and 6.1(i), have been satisfied; and (ii) a certificate,
dated as of the Closing Date and executed by the Minority Selling Group
Representative (defined below) to the effect that the conditions specified in
Sections 6.1(a) with respect to all of the members of the Selling Group (other
than the Majority Company Shareholders (defined below)), Overseas and the
Operating Subsidiaries, 6.1(b) with respect to all of the members of the Selling
Group (other than the Majority Company Shareholders), Overseas and the Operating
Subsidiaries, 6.1(c) with respect to all of the members of the Selling Group
(other than the Majority Company Shareholders), Overseas and the Operating
Subsidiaries, 6.1(g) and 6.1(i), have been satisfied.
(e) DIRECTORS AND CONTROL.
(i) Each of the directors of Overseas and each of the
Operating Subsidiaries shall have delivered to Newco
resignations as directors (the "Letters of Resignation") which
shall be effective upon the Closing Date; and
(ii) Newco shall have determined that after giving
effect to the transactions contemplated by this Agreement it
will have the right to control Overseas and each of the
Operating Subsidiaries.
(f) ALL SHARES AND MINORITY SHARES TRANSFERRED. It shall be a
condition to Newco's obligation to purchase any of the Shares that all of the
Shares are purchased by Newco and that all of the Minority Shares have been
transferred to Newco or its designees or owned by Overseas or any Operating
Subsidiary.
(g) OPERATION OF THE COMPANY AND ITS SUBSIDIARIES. During the
period from the date hereof to the Closing Date, the Company and its
Subsidiaries shall have acted in accordance with Section 5.1(a) and, except as
required by Law or as otherwise provided in this Agreement, shall not have taken
any action described in Section 5.1(b).
(h) OPERATING SUBSIDIARY RESTRUCTURING. The restructurings
contemplated by Sections 5.16, 5.17 and 5.18 shall have been consummated.
(i) FINANCIAL STATEMENTS. Purchaser shall have received either,
whichever is determined to be required pursuant to the requirements of the SEC
for filings under Form 8-K, (i) (A) true and complete copies of the audited
combined balance sheets of Overseas and the Operating Subsidiaries as of
December 31, 1996, December 31, 1997 and December 31, 1998 and the related
combined statements of operations, shareholders' equity and cash flows for the
respective years then
26
<PAGE>
ended, including the notes thereto, together with the unqualified audit
reports thereon of PricewaterhouseCoopers LLP, independent certified public
accountants; and (B) a true and complete copy of the unaudited combined
balance sheet and related combined statements of operations and cash flows of
Overseas and the Operating Subsidiaries for each quarterly period in 1999
ending at least 45 days prior to the Closing and the comparable periods for
the prior year; (collectively, the "Operating Subsidiaries' Financial
Statements"); or (ii) (A) true and complete copies of the audited
consolidated balance sheets of the Company and its Subsidiaries as of
December 31, 1996, December 31, 1997 and December 31, 1998 and the related
consolidated statements of operations, shareholders' equity and cash flows
for the respective years then ended, including the notes thereto, together
with the unqualified audit reports thereon of PricewaterhouseCoopers LLP,
independent certified public accountants; and (B) a true and complete copy of
the unaudited consolidated balance sheet and related consolidated statements
of operations and cash flows of the Company and its Subsidiaries for each
quarterly period in 1999 ending at least 45 days prior to the Closing and the
comparable period for the prior year (collectively, together with those items
whose delivery is referenced in Section 3.4, the "Company Financial
Statements," and whichever of the Company Financial Statements or the
Operating Subsidiaries' Financial Statements are determined to be required
pursuant to the requirements of the SEC for filing under Form 8-K, the
"Financial Statements"). The Financial Statements shall be reasonably
satisfactory to Purchaser and Purchaser shall have determined that the
Financial Statements are satisfactory for filing under Form 8-K.
(j) INTERCOMPANY PAYMENTS. All payments contemplated by Section
5.19 on the part of the Company and the Unpurchased Subsidiaries shall have been
made, where practicable.
(k) OPERATING ASSETS TRANSFERS. All asset transfers
contemplated by Section 5.20 shall have been completed.
6.2 CONDITIONS TO OBLIGATIONS OF THE MEMBERS OF THE SELLING GROUP. The
obligation of the members of the Selling Group to consummate the sale of the
Shares as provided for by this Agreement and the other transactions contemplated
hereby is subject to the fulfillment to the reasonable satisfaction of each
Selling Group Representative and the Company, prior to or at the Closing, of
each of the following conditions (any or all of which may be waived by both of
the Selling Group Representatives and the Company):
(a) CONSENTS, AUTHORIZATIONS, ETC. The Authorizations of or
with any Governmental Entity and the Authorizations of any nongovernmental third
party which are required for, or in connection with, the execution and delivery
of this Agreement by Purchaser, Vidor and Newco and the consummation by
Purchaser, Vidor and Newco of the transactions contemplated hereby shall have
been obtained or made, except where the failure to obtain any such Authorization
or Authorizations would not have a material adverse effect on Purchaser's,
Vidor's or Newco's ability to consummate the transactions contemplated hereby.
(b) INJUNCTION, ETC. The consummation of the transactions
contemplated hereby will not violate the provisions of any injunction, judgment,
decree, order or Law applicable or
27
<PAGE>
effective with respect to any of the members of the Selling Group. No suit or
proceeding shall have been instituted by any Governmental Entity or, to the
knowledge of any of the members of the Selling Group, threatened by any
Governmental Entity which has not been withdrawn, dismissed or otherwise
eliminated, and which seeks (i) to prohibit, restrict or delay consummation
of the transactions contemplated hereby or (ii) to subject the members of the
Selling Group or any Affiliate to material liability on the ground that they
have violated any Law or otherwise acted improperly in relation to the
transactions contemplated by this Agreement.
(c) REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS.
The representations and warranties of Purchaser, Vidor and Newco contained in
this Agreement shall have been true and correct at the date hereof and, except
for changes contemplated in this Agreement, shall also be true and correct in
all material respects at and as of the Closing Date, with the same force and
effect as if made at and as of the Closing Date, and Purchaser, Vidor and Newco
shall have performed or complied (or cured any noncompliance) with all
agreements and covenants required by this Agreement to be performed or complied
with by them at or prior to the Closing Date.
(d) CERTIFICATE. Purchaser, Vidor and Newco shall have
delivered to the Majority Selling Group Representative and the Minority Selling
Group Representative a certificate, dated as of the Closing Date, executed on
behalf of Purchaser by an officer of Purchaser and executed on behalf of Newco
by an officer of Newco to the effect that the conditions specified in this
Section 6.2 have been satisfied.
(e) FINANCIAL STATEMENTS. The Financial Statements for the
fiscal year ended December 31, 1998 shall be reasonably satisfactory to the
Company.
(f) INTERCOMPANY PAYMENTS. All payments contemplated by Section
5.19 on the part of Purchaser and its Subsidiaries shall have been made, where
practicable.
ARTICLE 7
ITEMS TO BE DELIVERED AT CLOSING
7.1 TO BE DELIVERED BY THE MEMBERS OF THE SELLING GROUP. At the
Closing, the members of the Selling Group shall deliver, or cause to be
delivered, to Purchaser, Vidor and Newco the following:
(a) The certificates referred to in Section 6.1(d).
(b) The Letters of Resignation.
(c) New share certificates representing all of the Shares in
the name of Newco and evidence that the existing share certificates
representing all of the Shares have been duly endorsed for transfer to
Newco and canceled by Overseas.
28
<PAGE>
(d) The Newco Stock Transfer Power.
(e) New share certificates and cancellations of share
certificates evidencing the consummation of the transactions contemplated by
Sections 5.16, 5.17 and 5.18.
(f) To the extent such shares are not otherwise owned by
Overseas or any Operating Subsidiary, new share certificates representing all of
the Minority Shares issued in the name of Newco or its designees and evidence
that the existing share certificates representing all of the Minority Shares
have been duly endorsed for transfer to Newco or its designees and canceled by
the respective Operating Subsidiary, duly endorsed for transfer to Newco or its
designees and canceled by the respective Operating Subsidiary.
(g) Such other documents as Purchaser or Newco may reasonably
request.
7.2 TO BE DELIVERED BY PURCHASER OR NEWCO TO MEMBERS OF THE SELLING
GROUP. At the Closing:
(a) Newco shall deliver to the Company and Duranmas the
Purchase Price.
(b) Purchaser and Newco shall deliver to the Shareholders Group
Representatives the certificate referred to in Section 6.2(d).
(c) Vidor and Newco shall deliver to the Company the License
Purchase Price.
(d) Purchaser, Vidor and Newco shall deliver to the
Shareholders Group Representatives such other documents as either Selling Group
Representative may reasonably request.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY THE MEMBERS OF THE SELLING GROUP. Subject to the
limitations in Section 8.11, the members of the Selling Group shall jointly and
severally defend, indemnify and hold harmless Purchaser, Vidor, Newco, Overseas
and the Operating Subsidiaries in respect of any and all claims, losses,
damages, liabilities, demands, assessments, judgments, costs and expenses
(including, without limitation, settlement costs and any legal or other expenses
for investigating, bringing or defending any actions or threatened actions)
reasonably incurred by Purchaser, Vidor, Newco, Overseas or the Operating
Subsidiaries (collectively, the "Costs") resulting from any breach
of any representation, warranty, covenant or agreement made by the members of
the Selling Group, Overseas or the Unpurchased Subsidiaries under the Selling
Group Delivered Agreements; PROVIDED, HOWEVER, that notwithstanding anything
else in this Agreement, no Company Shareholder shall be personally liable for
more than such Company Shareholder's pro rata portion of any Cost, determined by
multiplying the Cost by a fraction, the numerator of which is the number of
shares of common stock in the Company owned by such Company Shareholder
immediately prior to the
29
<PAGE>
Closing Date and the denominator of which is the number of shares of common
stock in the Company owned by all the Company Shareholders immediately prior
to the Closing Date.
8.2 INDEMNIFICATION BY PURCHASER, VIDOR AND NEWCO. Purchaser, Vidor
and Newco shall defend, indemnify and hold harmless the members of the
Selling Group in respect of any and all Costs reasonably incurred by the
members of the Selling Group resulting from any breach of any representation,
warranty, covenant or agreement made by Purchaser, Vidor or Newco under the
Purchaser Delivered Agreements.
8.3 CERTIFICATES. Any claim based, in whole or in part, upon any untrue
or incorrect statement set forth in the certificates delivered pursuant to
Section 6.1(d) or the certificate delivered pursuant to Section 6.2(d) shall be
deemed to be a claim for breach of representation, warranty, covenant or
agreement under this Agreement.
8.4 CLAIMS FOR INDEMNIFICATION. The representations, warranties,
covenants and agreements in this Agreement shall survive the Closing subject to
the limitations set forth herein and shall not be affected by any investigation
made by the parties hereto prior to the date hereof or the Closing Date. The
party seeking indemnification (the "Indemnified Party") shall give the party
from whom indemnification is sought (the "Indemnifying Party") a written notice
("Notice of Claim") within sixty (60) days of the discovery of any Cost in
respect of which the right to indemnification contained in this Article 8 may be
claimed; PROVIDED, HOWEVER, that the failure to give such notice within such
sixty (60) day period shall not result in the waiver or loss of any right to
bring such claim hereunder after such period unless, and only to the extent
that, the Indemnifying Party is actually prejudiced by such failure. A party
shall have no liability under this Article 8 for a breach of any representation
or warranty unless a Notice of Claim therefor is delivered by the Indemnified
Party prior to the date that is twelve (12) months after the Closing Date. Any
Notice of Claim shall set forth the representations, warranties, covenants and
agreements with respect to which the claim is made, the specific facts giving
rise to an alleged basis for the claim and the amount of Cost asserted or
anticipated to be asserted by reason of the claim. For purposes of this
Agreement, (a) a Notice of Claim given to the Majority Selling Group
Representative shall be deemed to be given to all of the Majority Company
Shareholders, (b) a Notice of Claim given to the Minority Company Shareholders
shall be deemed given to all of the Minority Company Shareholders, (c) a Notice
of Claim given to both the Minority Selling Group Representative and the
Minority Selling Group Representative shall be deemed given to all the members
of the Selling Group and (d) a Notice of Claim given to any of Purchaser, Vidor
or Newco shall be deemed given to all such entities, and may be given by either
Selling Group Representative or the Company.
8.5 DEFENSE OF CLAIM BY THIRD PARTIES. If any claim is made by a third
party against a party to this Agreement that, if sustained, would give rise to a
liability of another party or parties under this Agreement, the party against
whom the claim is made shall promptly cause a Notice of Claim to be delivered to
the other party or parties and shall afford the other party or parties and its
or their counsel, at the other party's sole expense, the opportunity to defend
or settle the claim and to control the defense and settlement thereof. The
failure to provide such notice will not relieve the Indemnifying Party of
liability under this Agreement unless, and only to the extent that, the
Indemnifying Party is actually prejudiced by such failure. If any such claim is
compromised or
30
<PAGE>
settled without the consent of the Indemnifying Party, which consent will not
be unreasonably withheld, no liability shall be imposed upon the Indemnifying
Party by reason of the claim.
8.6 THIRD PARTY CLAIM ASSISTANCE. From time to time after the Closing,
Purchaser, Vidor, Newco and the members of the Selling Group shall provide or
cause their appropriate employees or representatives to provide the other party
with information or data in connection with the handling and defense of any
third party claim or litigation (including counterclaims filed by the parties)
in respect to which a party may be required to indemnify another party under
this Agreement. The party receiving such information or data shall reimburse the
other party for all of its costs and expenses in providing these services,
including, without limitation, (a) all out-of-pocket, travel and similar
expenses incurred by its personnel in rendering these services; and (b) all fees
and expenses for services performed by third parties engaged by or at the
request of such other party.
8.7 PAYMENTS BY THE MEMBERS OF THE SELLING GROUP. If Purchaser, Vidor,
Newco, Overseas or an Operating Subsidiary gives a Notice of Claim pursuant to
Section 8.4, each Selling Group Representative (on behalf of the members of the
Selling Group that he represents) or the Company on behalf of itself, within
thirty (30) days following receipt of such Notice of Claim, shall either (a)
give Purchaser, Vidor, Newco, Overseas or such Operating Subsidiary, as the case
may be, a counternotice with respect to such Notice of Claim (in which case the
members of the Selling Group represented by such Selling Group Representative,
or the Company, as the case may be, shall be under no obligation to make an
indemnification payment until the Determination Date (defined below) as provided
in Section 8.9) or (b) the members of the Selling Group represented by such
Selling Group Representative, or the Company, as the case may be, shall each pay
the appropriate portion of the amount specified in the Notice of Claim;
PROVIDED, HOWEVER, that if a counternotice given by a Selling Group
Representative or the Company alleges that a Notice of Claim is only partially
invalid, the members of the Selling Group represented by such Selling Group
Representative, or the Company, as the case may be, within thirty (30) days of
receipt of such Notice of Claim, shall pay their appropriate portion of the
amount specified in the Notice of Claim as to which no objection is made. All
payments made hereunder shall be by wire transfer to an account designated by
Purchaser, Vidor, Newco, Overseas or such Operating Subsidiary.
8.8 PAYMENTS BY PURCHASER OR NEWCO. If either Selling Group
Representative or the Company gives a Notice of Claim pursuant to Section 8.4,
Purchaser, Vidor or Newco, within thirty (30) days following receipt of such
Notice of Claim, shall either (a) give such Selling Group Representative or the
Company a counternotice with respect to such Notice of Claim (in which case
Purchaser or Newco, as the case may be, shall be under no obligation to make an
indemnification payment until the Determination Date as provided in Section 8.9)
or (b) pay the amount of the Notice of Claim; PROVIDED, HOWEVER, that if a
counternotice given by Purchaser or Newco alleges that a Notice of Claim is only
partially invalid, Purchaser, Vidor or Newco, within thirty (30) days of receipt
of such Notice of Claim, shall pay that portion of the amount specified in the
Notice of Claim as to which no objection is made. All payments made hereunder
shall be by wire transfer to accounts designated by the Selling Group
Representative for the respective members of the Selling Group represented, or
the Company, as the case may be.
31
<PAGE>
8.9 RESOLUTION OF RIGHTS. If within thirty (30) days after the receipt
of counternotice by Purchaser, Newco, Vidor, Overseas, an Operating Subsidiary,
the Company or a Selling Group Representative, as the case may be, the relevant
parties shall not have reached agreement as to the claim in question, subject to
Section 10.9, then the claim of indemnification may be settled by litigation
brought in federal court in the Southern District of New York. To the extent the
decision of the court or arbitrator is that a party shall be indemnified
hereunder, the amount shall be satisfied as provided in Section 8.7 or 8.8, as
applicable. The date the court decision or arbitrator's decision becomes final
and binding or the date a claim otherwise becomes payable pursuant to this
Section 8.9 is referred to as the "Determination Date."
8.10 INDEMNIFICATION EXCLUSIVE REMEDY. Except as otherwise specifically
provided herein and in the absence of fraud perpetrated on Purchaser, Newco,
Vidor, Overseas, the Operating Subsidiaries or the members of the Selling Group,
if the Closing occurs, indemnification pursuant to the provisions of this
Article 8 shall be the sole and exclusive remedy of the parties for any breach
of any representation, warranty, covenant or agreement contained in this
Agreement.
8.11 CERTAIN LIMITATIONS. In the absence of fraud, the foregoing
indemnification obligations are subject to the following:
(a) DEDUCTIBLE. The members of the Selling Group shall not have
any liability for (i) indemnification for breaches of representations and
warranties pursuant to this Article 8 unless and until, and only to the extent
that, the total Costs for which the members of the Selling Group would otherwise
be liable exceed $1,000,000.00 in the aggregate, and (ii) indemnification for
breaches of any representations and warranties of which Purchaser, Vidor or
Newco is notified after the date of this Agreement and prior to the Closing Date
by either of the Selling Group Representatives or as to which Purchaser has
notified the Selling Group Representatives prior to the Closing Date pursuant to
Section 5.1(c) and in either case which were not intentionally withheld by the
members of the Selling Group; PROVIDED, HOWEVER, that the foregoing shall not
apply to any Costs with respect to a breach of a representation or warranty in
Section 3.2 or Section 3.14.
(b) CAP. The liability of the members of the Selling Group for
indemnification for breaches of representations and warranties pursuant to this
Article 8 shall not exceed $5,000,000.00; PROVIDED, HOWEVER, that
notwithstanding anything else in this Agreement, no Company Shareholder shall be
personally liable for more than such Company Shareholder's pro rata portion of
the liability cap, determined by multiplying $5,000,000.00 (less any amounts
paid by the Company) by a fraction, the numerator of which is the number of
shares of common stock in the Company owned by such Company Shareholder
immediately prior to the Closing Date and the denominator of which is the number
of shares of common stock in the Company owned by all the Company Shareholders
immediately prior to the Closing Date; PROVIDED FURTHER, however, that the
foregoing limitations shall not apply to any Costs with respect to a breach of a
representation or warranty in Section 3.2 or Section 3.14, but each Company
Shareholder's liability shall be limited to a pro rata portion, determined by
multiplying the Costs by a fraction, the numerator of which is the number of
shares of common stock in the Company owned by such Company Shareholder
immediately prior to the Closing Date and the denominator of which is the number
of shares of common stock in the Company owned by all the Company Shareholders
immediately prior to the Closing Date.
32
<PAGE>
8.12 SELLING GROUP REPRESENTATIVES.
(a) APPOINTMENT; ACCEPTANCE. By executing this Agreement,
(i) each of the Company Shareholders other than R.L. Acco, Ltd. hereby
irrevocably constitutes and appoints Richard T. Doyle, Jr. (the "Majority
Selling Group Representative") and (ii) R.L. Acco, Ltd. (the "Minority
Company Shareholder," and such Company Shareholders other than the Minority
Company Shareholder being the "Majority Company Shareholders") hereby
irrevocably constitutes and appoints Alfredo J. Diez (the "Minority Selling
Group Representative") (each of the Majority Selling Group Representative and
the Minority Selling Group Representative being a "Selling Group
Representative"), and their respective successors, acting as hereinafter
provided, as its respective attorney-in-fact and agent in its respective
name, place and stead in connection with the transactions and agreements
contemplated by the Selling Group Delivered Agreements with respect to
matters prior to the Closing Date, as specified herein, and matters
subsequent to the Closing Date, and acknowledges that such appointment is
coupled with an interest. By executing this Agreement under the heading
"Selling Group Representatives," each of Richard T. Doyle, Jr. and Alfredo J.
Diez hereby (A) accepts his appointment and authorization to act as Selling
Group Representative as attorney-in-fact and agent on behalf of the
respective members of the Selling Group in accordance with the terms of the
Selling Group Delivered Agreements, and (B) agrees to perform his obligations
under, and otherwise comply with, this Section 8.12.
(b) AUTHORITY. Without limiting the generality of Section 8.12,
each member of the Selling Group by this Agreement fully and completely, hereby:
(a) authorizes its respective Selling Group Representative (i) to agree in his
discretion with Purchaser, Vidor or Newco to amend any of the Selling Group
Delivered Agreements from time to time, (ii) to waive on behalf of the members
of the Selling Group any condition of or in the Selling Group Delivered
Agreements, (iii) to deliver on behalf of the Company to Newco as provided in
this Agreement the Shares and to deliver all of the Selling Group Delivered
Agreements, (iv) to dispute or to refrain from disputing any claim made by
Purchaser, Vidor, Newco, Overseas or the Operating Subsidiaries under the
Selling Group Delivered Agreements, (v) to negotiate and compromise any dispute
which may arise under, and to exercise or refrain from exercising remedies
available under the Selling Group Delivered Agreements and to sign any release
or other document with respect to such dispute or remedy, (vi) to give such
instructions and to do such other things and refrain from doing such other
things as its Selling Group Representative shall deem necessary or appropriate
to carry out the provisions of the Selling Group Delivered Agreements; and (b)
agrees to be bound by all agreements and determinations made by and documents
executed and delivered by its Selling Group Representative under the Selling
Group Delivered Agreements.
(c) ACTIONS. Each of the members of the Selling Group hereby
expressly acknowledges and agrees that its respective Selling Group
Representative is authorized to act on its behalf, notwithstanding any dispute
or disagreement between or among the members of the Selling Group or the Selling
Group Representatives, and that Purchaser and any other person or entity shall
be entitled to rely on any and all actions taken by its respective Selling Group
Representative under the Selling Group Delivered Agreements without any
liability to, or obligation to inquire of, any of the members of the Selling
Group. Purchaser and any other person or entity is hereby expressly
33
<PAGE>
authorized to rely on the genuineness of the signature of the Selling Group
Representatives, and upon receipt of any writing which reasonably appears to
have been signed by either or both of the Selling Group Representatives,
Purchaser and any other person or entity may act upon the same without any
further duty of inquiry as to the genuineness of the writing.
(d) SUCCESSORS. If Richard T. Doyle, Jr. ceases to function in
his capacity as the Majority Selling Group Representative for any reason
whatsoever, then Paul Aliferis shall be appointed as his successor, and if Paul
Aliferis ceases to function in such capacity for any reason whatsoever, then the
Majority Company Shareholders, by action of the Majority Company Shareholders
(i.e., those holding a majority of the common stock of the Company immediately
prior to the Closing) shall have the right to appoint his successor; PROVIDED,
HOWEVER, that if for any reason no successor has been appointed pursuant to the
foregoing within thirty (30) days, then Purchaser or Newco shall have the right
to appoint a successor. If Alfredo J. Diez ceases to function in his capacity as
the Minority Selling Group Representative for any reason whatsoever, then
Terrance J. Mullin shall be appointed as his successor, and if Terrance J.
Mullin ceases to function in such capacity for any reason whatsoever, then the
Minority Company Shareholder shall have the right to appoint his successor;
PROVIDED, HOWEVER, that if for any reason no successor has been appointed
pursuant to the foregoing within thirty (30) days, then Purchaser or Newco shall
have the right to appoint a successor.
(e) INDEMNIFICATION OF SELLING GROUP REPRESENTATIVES. Each of
the members of the Selling Group shall defend, indemnify and hold harmless its
respective Selling Group Representative against any loss, liability, expense
(including, without limitation, reasonable attorney's fees and expenses), claim
or demand arising out of or in connection with the performance of his
obligations under this Agreement, unless due to the gross negligence, fraud or
willful misconduct of its respective Selling Group Representative PROVIDED,
HOWEVER, that notwithstanding anything else in this Agreement, no Company
Shareholder shall be personally liable for more than such Company Shareholders'
pro rata portion of any indemnification under this Section 8.12(e), determined
by multiplying the indemnified amount by a fraction, the numerator of which is
the number of shares of common stock in the Company owned by such Company
Shareholder immediately prior to the Closing Date and the denominator of which
is the number of shares of common stock in the Company owned by all the Company
Shareholders immediately prior to the Closing Date.
(f) EFFECTIVENESS. The authorizations of each Selling Group
Representative shall be effective until his rights and obligations under this
Agreement terminate by virtue of the termination of any and all obligations of
the respective members of the Selling Group to Purchaser, Vidor and Newco and of
Purchaser, Vidor and Newco to the respective members of the Selling Group under
this Agreement.
8.13 DURANMAS. Duranmas hereby appoints the Company to act on
its behalf with respect to all matters under this Agreement. Notices given to
the Company shall also be deemed given to Duranmas.
34
<PAGE>
ARTICLE 9
TERMINATION AND ABANDONMENT
9.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated and
abandoned at any time prior to the Closing Date:
(a) By mutual written consent of both Selling Group
Representatives and Purchaser;
(b) By Purchaser:
(i) if any event shall have occurred as a result of
which any condition set forth in Section 6.1 is no longer
capable of being satisfied; or
(ii) if there has been a material breach by the members
of the Selling Group of any representation or warranty
contained in this Agreement or of any of the covenants or
agreements set forth in this Agreement, in each case which
breach is not curable, or, if curable, is not cured within ten
(10) Business Days after written notice of such breach is given
by Purchaser, Vidor or Newco to both Selling Group
Representatives; or
(c) By either Selling Group Representative;
(i) if any event shall have occurred as a result of
which any condition set forth in Section 6.2 is no longer
capable of being satisfied; or
(ii) if there has been a material breach by Purchaser of
any representation or warranty contained in this Agreement or
of any of the covenants or agreements set forth in this
Agreement, in each case which breach is not curable or, if
curable, is not cured within ten (10) Business Days after
written notice of such breach is given by either Selling Group
Representative to Purchaser.
(d) By Purchaser or either Selling Group Representative if the
Closing shall not have occurred by August 31, 1999, provided that a party whose
breach of this Agreement has resulted in the Closing not having occurred on or
before said date shall not have the right to terminate this Agreement pursuant
to this Section 9.1(d) and provided further that such date may be extended at
the request of either Selling Group Representative for up to ten (10) Business
Days under certain circumstances as set forth in Section 5.1(c).
9.2 SPECIFIC PERFORMANCE. The parties acknowledge that the rights of
each party to consummate the transactions contemplated hereby are special,
unique, and of extraordinary character, and that, in the event that any party
violates, fails or refuses to perform any covenant made by it herein, the other
party or parties will be without adequate remedy at law. Each party agrees,
therefore, that, in the event that it violates, fails or refuses to perform any
covenant made by it herein, the other party or parties so long as it or they are
not in breach hereof, may, in addition to any
35
<PAGE>
remedies at law, institute and prosecute an action in federal court in the
Southern District of New York to enforce specific performance of such covenant
or seek any other equitable relief available to them.
9.3 RIGHTS AND OBLIGATIONS UPON TERMINATION. If this Agreement is not
consummated for any reason, each party will redeliver all documents, work
papers, and other materials of any party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party furnishing the same, except to the extent previously delivered to
third parties in connection with the transactions contemplated hereby, and all
information received by any party hereto with respect to the business of any
other party shall not at any time be used for the advantage of, or disclosed to
third parties by, such party to the detriment of the party furnishing such
information; PROVIDED, HOWEVER, that this Section 9.3 shall not apply to any
documents, work papers, material or information which is a matter of public
knowledge or which heretofore has been or hereafter is published in any
publication for public distribution or filed as public information with any
Governmental Entity.
9.4 EFFECT OF TERMINATION. Except for the provisions of Sections 5.3,
5.5, 8.12(e), 9.3, 9.4, 10.1 and 10.9 which shall survive any termination of
this Agreement, in the event of the termination and abandonment of this
Agreement pursuant to Article 9, this Agreement shall forthwith become void and
have no further effect, without any liability on the part of any party hereto or
its respective officers, directors or stockholders; provided, however, that
nothing in this Section 9.4 shall relieve any party from liability for the
knowing and intentional breach of its respective representations, warranties,
covenants or agreements as set forth in this Agreement.
ARTICLE 10
GENERAL PROVISIONS
10.1 NOTICES. All notices and other communications under this Agreement
shall be in writing and may be given by any of the following methods:
(a) personal delivery; (b) facsimile transmission; (c) registered or certified
mail, postage prepaid, return receipt requested; or (d) overnight or other
delivery service requiring acknowledgment of receipt. Any such notice or
communication shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such party
as shall be specified by notice given hereunder):
If to Purchaser or Vidor to:
Rayovac Corporation
601 Rayovac Drive
Madison, WI 53711-2497
Fax No. (608) 275-6666
Attention: Kent Hussey
36
<PAGE>
with a copy to:
Sutherland, Asbill & Brennan LLP
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Fax No. (404) 853-8806
Attention: Mark D. Kaufman
If to Newco, to:
Maples and Calder
P.O. Box 309
Ugland House
113 South Church Street
George Town, Grand Cayman, Cayman Islands
British West Indies
Fax No. (345) 949-8080
Attention: Henry Smith/Jon Fowler
with a copy to:
Sutherland, Asbill & Brennan LLP
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Fax No. (404) 853-8806
Attention: Mark D. Kaufman
If to the Majority Selling Group Representative:
Richard T. Doyle, Jr.
c/o RTD International, Inc.
Architects Building
117 S. 17th Street, Suite 1100
Philadelphia, PA 19103-5025
Fax No. (215) 988-1829
with a copy to:
Fox, Horan & Camerini LLP
One Broadway
New York, New York 10004
Fax No. (212) 709-0248
Attention: Rafael Urquia II
37
<PAGE>
If to the Minority Selling Group Representative prior to the Closing:
Alfredo Jose Diez
c/o Hemisphere Services, Inc.
5757 Blue Lagoon Drive
Suite 360
Miami, Florida 33126
Fax No. (305) 264-8673
with a copy to:
Jamerson Sutter Surlas & Mullin
Penthouse II Gables International Plaza
2655 LeJeune Road
Miami, Florida 33134
Fax No. (305) 446-5236
Attention: Terrance J. Mullin
and
Greenberg Traurig
1221 Brickell Avenue
Miami, Florida 33131
Fax No. (305) 579-0717
Attention: Robert L. Grossman
If to the Minority Selling Group Representative after the Closing:
Jamerson Sutter Surlas & Mullin
Penthouse II Gables International Plaza
2655 LeJeune Road
Miami, Florida 33134
Fax No. (305) 446-5236
Attention: Terrance J. Mullin
and
Greenberg Traurig
1221 Brickell Avenue
Miami, Florida 33131
Fax No. (305) 579-0717
Attention: Robert L. Grossman
38
<PAGE>
If to the Company to:
ROV Limited
c/o Hemisphere Services
5757 Blue Lagoon Drive
Suite 360
Miami, Florida 33126
Fax No. (305) 264-8673
with a copy to:
Greenberg Traurig
1221 Brickell Avenue
Miami, Florida 33131
Fax No. (305) 579-0717
Attention: Robert L. Grossman
All such notices and communications shall be deemed received upon (a) actual
receipt thereof by the addressee, (b) actual delivery thereof to the appropriate
address as evidenced by an acknowledged receipt, or (c) in the case of a
facsimile transmission, upon transmission thereof by the sender and confirmation
of receipt. In the case of notices or communications sent by facsimile
transmission, the sender shall contemporaneously mail a copy of the notice or
communication to the addressee at the address provided for above. However, such
mailing shall in no way alter the time at which the facsimile notice or
communication is deemed received.
10.2 TABLE OF CONTENTS; HEADINGS. The Table of Contents and headings
contained herein are for convenience of reference only, do not constitute a part
of this Agreement, and shall not be deemed to limit or affect any of the
provisions hereof.
10.3 AMENDMENT. No amendment, modification or discharge of this
Agreement shall be valid or binding unless set forth in writing and executed by
each of the parties hereto, or by Purchaser and each Selling Group
Representative as authorized by Section 8.12.
10.4 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
10.5 WAIVER. The failure of any party hereto at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition, or the breach of
any term, provision, warranty, representation, agreement or
39
<PAGE>
covenant contained in the Selling Group Delivered Agreements or Purchaser
Delivered Agreements, or whether by conduct or otherwise, in any one or more
instances shall be deemed or construed as a further or continuing waiver of any
such condition or breach or a waiver of any other condition or of the breach of
any other term, provision, warranty, representation, agreement or covenant
herein or therein contained.
10.6 NO THIRD PARTY BENEFICIARIES; ASSIGNMENT. This Agreement shall be
binding on the parties and their respective successors and assigns and shall
inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity. Except for (a) any
assignment to a wholly-owned Subsidiary of Purchaser, in which event Newco,
Vidor and Purchaser shall remain liable for the performance of this Agreement if
such Subsidiary fails to perform, and (b) any transfer or assignment after the
Closing by Purchaser, Vidor or Newco in connection with the sale or transfer of
all or substantially all the business or assets of Purchaser, Vidor, Newco,
Overseas or the Operating Subsidiaries, whether by sale of stock, sale of
assets, merger or otherwise (any of which transfers or assignments described in
Section 10.6(a) or (b) maybe made without consent), no transfer or assignment of
this Agreement or of any rights or obligations under this Agreement may be made
by any party without the prior written consent of Purchaser or each Selling
Group Representative, as the case may be (which consent shall not be withheld
unreasonably) and any attempted transfer or assignment without that required
consent shall be void.
10.7 TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the essence
of each and every provision of this Agreement. Whenever the last day for the
exercise of any right or the discharge of any duty under this Agreement shall
fall upon other than a Business Day, the party having such right or duty shall
have until 5:00 p.m. New York, New York time on the next succeeding Business Day
to exercise such right or to discharge such duty.
10.8 COUNTERPARTS. This Agreement may be executed by each party upon a
separate copy, and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signatures of all of the parties. This
Agreement may be executed in two or more counterparts, each of which shall be an
original, and each of which shall constitute one and the same agreement. Any
party may deliver an executed copy of this Agreement and of any documents
contemplated hereby (other than the share certificate described in Section
7.1(e)) by facsimile transmission to another party and such delivery shall have
the same force and effect as any other delivery of a manually signed copy of
this Agreement or of such other documents.
10.9 GOVERNING LAW; ARBITRATION; FORUM. This Agreement shall be
governed by and construed in accordance with the substantive laws of the State
of New York, United States of America. The federal court in the Southern
District of New York shall be the exclusive venue for any litigation under this
Agreement. Each party hereby irrevocably submits to personal jurisdiction in any
federal court in the Southern District of New York and waives any and all
objections as to venue, inconvenient forum and the like. The decision of such
court of competent jurisdiction that is either not subject to appeal or not
appealed within ninety (90) days of any judgment shall be final and binding as
to any matter submitted under this Agreement. Notwithstanding anything to the
contrary in this Agreement, at the option of Purchaser or Newco any controversy
or claim arising
40
<PAGE>
out of or relating to this Agreement shall be determined by arbitration in
accordance with the International Arbitration Rules of the American
Arbitration Association. The place of arbitration shall be New York, New York.
10.10 ENTIRE AGREEMENT. This Agreement (with its Schedules and
Exhibits) together with any Selling Group Delivered Agreements or Purchaser
Delivered Agreements, contains, and is intended as, a complete statement of
all the terms of the arrangements among the parties with respect to the
matters provided for, supersedes any previous agreements and understandings
among the parties with respect to those matters and cannot be changed or
terminated orally. The parties make no representations or warranties to each
other, except as contained in this Agreement or the other agreements
contemplated hereby, and all prior representations and warranties made by a
party or its representatives, whether verbally or in writing, are deemed to
have merged into this Agreement, it being intended that no such prior
representations or warranties shall survive the execution and delivery of
this Agreement.
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
PURCHASER:
RAYOVAC CORPORATION
By: /s/ Kent J. Hussey
------------------------------------
Name: Kent J. Hussey
----------------------------------
Title: Pres., C.O.O.
---------------------------------
VIDOR:
VIDOR BATTERY COMPANY
By: /s/ Kent J. Hussey
------------------------------------
Name: Kent J. Hussey
----------------------------------
Title: Vice President
---------------------------------
NEWCO:
RAYOVAC LATIN AMERICA, LTD.
By: /s/ Kent J. Hussey
------------------------------------
Name: Kent J. Hussey
----------------------------------
Title: Chairman
---------------------------------
COMPANY:
ROV LIMITED
By: /s/ A.J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: CEO
---------------------------------
UNPURCHASED FIRST-TIER SUBSIDIARIES:
ESB ROV LTD.
By: /s/ A.J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: President
---------------------------------
42
<PAGE>
DURANMAS, S.A.
By: /s/ A.J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: President
---------------------------------
COMPANY SHAREHOLDERS:
AD INTERNATIONAL LIMITED
By: /s/ Raymond J. Kenny
------------------------------------
Name: Raymond J. Kenny
----------------------------------
Title: Chairman
---------------------------------
R.L. ACCO, LTD.
By: /s/ TJ Mullin
------------------------------------
Name: TJ Mullin
----------------------------------
Title: Attorney in Fact
---------------------------------
Z.C. INTERNATIONAL, LTD.
By: /s/ Richard T. Doyle, Jr.
------------------------------------
Name: Richard T. Doyle, Jr.
----------------------------------
Title: President
---------------------------------
BERMINI INTERNATIONAL COMPANY LTD.
By: /s/ Jose Tagle
------------------------------------
Name: Jose Tagle
----------------------------------
Title: President
---------------------------------
VALMAI HOLDINGS, S.A.
By: /s/ Cesar La Cayo
------------------------------------
Name: Cesar La Cayo
----------------------------------
Title: Attorney in Fact
---------------------------------
43
<PAGE>
UNIMEX HOLDINGS, INC.
By: /s/ Hamid Bartchordar
------------------------------------
Name: Hamid Bartchordar
----------------------------------
Title: Attorney in Fact
---------------------------------
ENARCO, S.A.
By: /s/ Antonio Arzu
------------------------------------
Name: Antonio Arzu
----------------------------------
Title:
---------------------------------
44
<PAGE>
UNPURCHASED OPERATING SUBSIDIARIES:
HEMISPHERE SERVICES, INC.
By: /s/ A.J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: Chairman
---------------------------------
PILATECA INTERNACIONAL, S.A.
By: /s/ A.J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: President
---------------------------------
ROV INTERNATIONAL CORPORATION
By: /s/ A.J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: President
---------------------------------
ROV TRADING CORPORATION
By: /s/ A.J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: President
---------------------------------
COMPANIA LATINOAMERICANA
DE PILAS S.A.
By: /s/ A.J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: President
---------------------------------
PRODUCTOS Y SUMINISTROS, S.A.
By: /s/ A.J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: President
---------------------------------
PRODUCTOS MERCANTILES, S.A.
By: /s/ A.J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: President
---------------------------------
45
<PAGE>
OVERSEAS:
RAY-O-VAC OVERSEAS CORPORATION
By: /s/ Alfredo J. Diez
------------------------------------
Name: Alfredo J. Diez
----------------------------------
Title: President
---------------------------------
SELLING GROUP REPRESENTATIVES:
MAJORITY SELLING GROUP REPRESENTATIVE:
/s/ Richard T. Doyle, Jr.
---------------------------------------
Richard T. Doyle, Jr.
MINORITY SELLING GROUP REPRESENTATIVE:
/s/ Alfredo Jose Diez
---------------------------------------
Alfredo Jose Diez
46
<PAGE>
Exhibit 2.2
[FORM OF MINORITY AGREEMENT]
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") made and entered into
this 11th day of June, 1999, by and among Rayovac Corporation, a Wisconsin
corporation ("Purchaser"), Rayovac Latin America, Ltd., a Cayman Islands company
which is a wholly-owned subsidiary of Rayovac ("Newco"), and _____________, a
__________ resident (hereinafter referred to as "Selling Shareholder").
BACKGROUND STATEMENT
Selling Shareholder owns that number, class and percentage of shares as
set forth on EXHIBIT A hereto (the "Shares") in the capital of certain
corporations (the "Corporations"). Selling Shareholder desires to sell, and
Newco desires to purchase the Shares, subject to the terms and conditions
contained herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
ARTICLE 1
SALE AND PURCHASE OF SHARES
1.1 TRANSFER OF SHARES. On the terms and subject to the conditions set
forth herein, Selling Shareholder shall sell, assign, transfer and deliver to
Newco and Newco shall purchase and accept at the Closing (defined below) the
Shares, free and clear of all liens, claims, options, rights of first refusal,
proxies, charges, pledges, security interests, mortgages, adverse claims and
other encumbrances and similar rights and other transfer restrictions of any
nature whatsoever, including any arising from any pending or threatened
litigation (collectively, "Liens"). Notwithstanding anything to the contrary in
this Agreement, the consummation of the transactions contemplated by this
Agreement shall be contingent upon and shall occur simultaneously with the
consummation of the purchase by Newco of all of the common shares in Ray-O-Vac
Overseas Corporation and the consummation of the other transactions contemplated
by the Share Purchase Agreement made as of June 11, 1999, by and among
Purchaser, Newco, certain shareholders of ROV Limited, and the other parties
thereto, as the same may be amended from time to time (the "Share Purchase
Agreement").
1.2 PURCHASE PRICE. The aggregate purchase price ("Purchase Price") to
be paid to Selling Shareholder for the Shares is set forth on EXHIBIT A. All
references in this Agreement to $ and federal funds shall mean United States
Dollars and funds.
1.3 NO TRANSFERS. After the date of this Agreement, Selling Shareholder
shall not
<PAGE>
sell, pledge, encumber or otherwise transfer any or all of the Shares
or any interest therein except to Newco in accordance with this Agreement.
ARTICLE 2
CLOSING
2.1 TIME AND PLACE. The consummation of the transactions contemplated
by this Agreement (the "Closing") shall take place (a) at the offices of Maples
& Calder, South Church Street, Georgetown, Grand Cayman, Cayman Islands, British
West Indies at 10:00 a.m., local time on the same date as the Closing Date under
the Share Purchase Agreement or (b) at such other place and time as Newco and
Selling Shareholder may agree (the "Closing Date").
2.2 DELIVERY. To effect the transfer of the Shares referred to in
Article 1 at the Closing, Selling Shareholder shall deliver, the existing share
certificates representing all the Shares duly endorsed for transfer to Newco.
2.3 PAYMENT OF PURCHASE PRICE. At the Closing, Newco shall wire
transfer the Purchase Price in immediately available federal funds to Selling
Shareholder to an account to be specified by Selling Shareholder.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SELLING SHAREHOLDER. Selling
Shareholder hereby represents and warrants to Newco that: (a) Selling
Shareholder owns all right, title and interest in and to the Shares free and
clear of any and all Liens, in the amounts set forth in EXHIBIT A; (b) Selling
Shareholder has the power and authority to sell the Shares to Newco pursuant to
this Agreement and otherwise to carry out the terms and conditions of this
Agreement; (c) this Agreement has been duly executed and delivered by Selling
Shareholder, and constitutes the legal, valid and binding obligation of Selling
Shareholder enforceable in accordance with its terms; (d) the sale of the Shares
pursuant to this Agreement and the carrying out of the other terms and
conditions of this Agreement are in compliance with and are not (and would not
be upon the giving of notice or the passage of time or both) be restricted by or
in violation of (I) any applicable law to which Selling Shareholder is subject
or bound, or (ii) any agreement, commitment, order, ruling or proceeding to
which Selling Shareholder is a party, subject or bound, and would not result in
the creation of any Lien upon the Shares; (e) no consent, authorization,
clearance, order or approval, or filing or registration (collectively,
"Authorizations") of or with any executive, judicial or other public authority,
agency, department, bureau, division, unit or court or other public person or
entity or other third party is required for or in connection with the
execution and delivery of this Agreement by Selling Shareholder or the
consummation by such Selling Shareholder of the transactions contemplated
hereby; and (f) Selling Shareholder has no claims against the Corporations.
<PAGE>
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 FURTHER ASSURANCES. Upon the execution of this Agreement and
thereafter, each party shall take such actions and execute and deliver such
documents as may be reasonably requested by the other parties hereto in order to
consummate more effectively the transactions contemplated by this Agreement.
ARTICLE 5
TERMINATION AND ABANDONMENT
5.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated and
abandoned at any time prior to the Closing Date:
(a) By mutual written consent of Selling Shareholder and Newco;
(b) By Newco: if there has been a material breach by Selling
Shareholder of any representation or warranty contained in this
Agreement or of any of the covenants or agreements set forth in this
Agreement, in each case which breach is not curable, or, if curable, is
not cured within two business days after written notice of such breach
is given by Newco to Selling Shareholder;
(c) By Selling Shareholder if there has been a material breach
by Newco of any of the covenants or agreements set forth in this
Agreement, in each case which breach is not curable or, if curable, is
not cured within two business days after written notice of such breach
is given by Selling Shareholder to Newco; or
(d) By Newco or Selling Shareholder if the Closing shall not
have occurred by August 31, 1999.
5.2 SPECIFIC PERFORMANCE. The parties acknowledge that the rights of
each party to consummate the transactions contemplated hereby are special,
unique, and of extraordinary character, and that, in the event that any party
violates or fails and refuses to perform any covenant made by it herein, the
other party or parties will be without adequate remedy at law. Each party
agrees, therefore, that, in the event that it violates, fails or refuses to
perform any covenant made by it herein, the other party or parties so long as it
or they are not in breach hereof, may, in addition to any remedies at law,
institute and prosecute an action in federal court in the Southern District of
New York to enforce specific performance of such covenant or seek
any other equitable relief.
<PAGE>
ARTICLE 6
GENERAL PROVISIONS
6.1 LITIGATION; ARBITRATION. All disputes arising out of this Agreement
may be settled by litigation brought in federal court in the Southern District
of New York, which shall be the exclusive venue for any litigation under this
Agreement. Each party hereby irrevocably submits to personal jurisdiction in any
federal court in the Southern District of New York and waives any and all
objections as to venue, inconvenient forum and the like. The decision of such
court of competent jurisdiction that is either not subject to appeal or not
appealed within ninety (90) days of any judgment shall be final and binding as
to any matter submitted under this Agreement. Notwithstanding the foregoing, at
the option of either party any controversy or claim arising out of or relating
to this Agreement shall be determined by arbitration in accordance with the
International Arbitration Rules of the American Arbitration Association. The
place of arbitration shall be New York, New York.
6.2 NOTICES. All notices and other communications under this Agreement
shall be in writing and may be given by overnight or other delivery service
requiring acknowledgment of receipt. Any such notice or communication shall be
sent to the appropriate party at its address given below (or at such other
address for such party as shall be specified by notice given hereunder):
If to Newco or Purchaser, to:
Rayovac Corporation
601 Rayovac Drive
Madison, WI 53711-2497
Fax No. (608) 275-6666
Attention: Kent Hussey
If to Selling Shareholder:
Name:
-----------------
Address:
-----------------
-----------------
All such notices and communications shall be deemed received upon actual receipt
thereof by the addressee.
6.3 NO THIRD PARTY BENEFICIARIES; ASSIGNMENT; ETC. This Agreement
shall be binding on the parties and their respective successors and assigns and
shall inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity. No
<PAGE>
transfer or assignment of this Agreement or of any rights or obligations under
this Agreement may be made by Selling Shareholder without the prior written
consent of Newco and any attempted transfer or assignment without that required
consent shall be void.
6.4 ENTIRE AGREEMENT, ETC. This Agreement and the documents referred to
herein and to be delivered pursuant hereto constitute the entire agreement among
the parties pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions of the
parties, whether oral or written. No amendment, modification, waiver or
termination of this Agreement shall be binding unless it is in writing and is
executed by the party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision of this Agreement, whether or not similar, nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided. If any term
or provision of this Agreement shall be determined to be illegal, invalid or
unenforceable, such term or provision shall be deemed ineffective and severed
herefrom and shall not affect or render illegal, invalid or unenforceable the
remaining terms and provisions of this Agreement.
6.5 GOVERNING LAW. This Agreement shall be construed and
interpreted according to the laws of the State of New York.
6.6 SURVIVAL. The representations, warranties, covenants and agreements
contained in this Agreement shall survive the purchase and sale of the Shares
pursuant to this Agreement, and the remedies of Purchaser and Newco for the
breach of any representation, warranty, covenant or agreement shall not be
affected by any investigation by, or knowledge of, Purchaser or Newco.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.
[SIGNATURES BEGIN ON NEXT PAGE]
<PAGE>
PURCHASER:
RAYOVAC CORPORATION
By:________________________
Name:______________________
Title:_____________________
NEWCO:
RAYOVAC LATIN AMERICA LTD.
By:________________________
Name:______________________
Title:_____________________
SELLING SHAREHOLDER:
---------------------------
[Name]
<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
JULY 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> APR-05-1999
<PERIOD-END> JUL-04-1999
<CASH> 1,384
<SECURITIES> 0
<RECEIVABLES> 91,490
<ALLOWANCES> 1,099
<INVENTORY> 66,053
<CURRENT-ASSETS> 177,874
<PP&E> 170,935
<DEPRECIATION> 91,733
<TOTAL-ASSETS> 299,557
<CURRENT-LIABILITIES> 91,109
<BONDS> 159,145
0
0
<COMMON> 570
<OTHER-SE> 39,964
<TOTAL-LIABILITY-AND-EQUITY> 299,557
<SALES> 120,440
<TOTAL-REVENUES> 120,440
<CGS> 63,367
<TOTAL-COSTS> 63,367
<OTHER-EXPENSES> 43,750
<LOSS-PROVISION> 161
<INTEREST-EXPENSE> 3,638
<INCOME-PRETAX> 9,524
<INCOME-TAX> 3,373
<INCOME-CONTINUING> 6,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,151
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.21
</TABLE>
