UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER: 333-44473
HOLMES PRODUCTS CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2768914
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
233 FORTUNE BOULEVARD, MILFORD, MASSACHUSETTS 01757
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(508) 634-8050
(REGISTRANT'S TELEPHONE NUMBER)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
TITLE OF CLASS: NOT APPLICABLE
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 PRECEEDING 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
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INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. X
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DOCUMENTS INCORPORATED BY REFERENCE: NOT APPLICABLE
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HOLMES PRODUCTS CORP.
FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
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PART I.
ITEM 1. Business.................................................................. 3
ITEM 2. Properties................................................................ 11
ITEM 3. Legal Proceedings......................................................... 12
ITEM 4. Submission of Matters to a Vote of Security Holders....................... 12
PART II.
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters..... 12
ITEM 6. Selected Financial Data................................................... 13
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................. 14
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk................ 19
ITEM 8. Financial Statements and Supplementary Data............................... 20
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................................... 51
PART III.
ITEM 10. Directors and Executive Officers of the Registrant........................ 51
ITEM 11. Executive Compensation.................................................... 52
ITEM 12. Security Ownership of Certain Beneficial Owners and Management............ 55
ITEM 13. Certain Relationships and Related Transactions............................ 56
PART IV.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......... 57
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this
report, are or may be forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Without limiting the foregoing, the words
"believes," "anticipates," "plans," "expects," and similar expressions are
intended to identify forward-looking statements. Various economic and
competitive factors could cause actual results or events to differ materially
from those discussed in such forward-looking statements, including without
limitation, the Company's degree of leverage, its dependence on major customers
and key personnel, the integration of the Rival Acquisition (as defined herein),
competition, risks associated with foreign manufacturing, risks of the retail
industry, potential product liability claims, the cost of labor and raw
materials and the other factors which are described in the Company's
Registration Statement on Form S-4 (file No. 333-44473), its Current Report on
Form 8-K (filed January 26, 1999), and from time to time in the Company's other
periodic reports filed with the Securities and Exchange Commission. Accordingly,
such forward-looking statements do not purport to be predictions of future
events or circumstances and may not be realized.
PART I
ITEM 1. BUSINESS
Except as otherwise noted, the historical financial and other information set
forth herein for the fiscal year ended December 31, 1998 and prior periods
relates only to the business and operations of Holmes Products Corp. and its
subsidiaries prior to the Rival Acquisition (as defined herein), which occurred
on February 5, 1999. The Rival Acquisition will be accounted for as a purchase,
and Rival's results of operations will be included in the Company's financial
information in future periods.
Background of the Company Prior to the Rival Acquisition
Holmes Products Corp. ("Holmes" and, together with its subsidiaries on a
consolidated basis, the "Company") is a leading developer, manufacturer and
marketer of quality, branded home comfort products, including fans, heaters,
humidifiers and air purifiers. Holmes believes that it has the leading U.S.
market share in each of these product categories, which, in the aggregate,
accounted for approximately 93% of Holmes' net sales for the fiscal year ended
December 31, 1998. In addition, Holmes markets and distributes a variety of
decorative and home office lighting products, as well as various replacement
filters and accessories for its products. Holmes believes that its strong market
position and success are attributable to its continuous product innovation,
engineering and manufacturing expertise, close customer partnerships, breadth of
product offerings and reputation for quality. From 1993 to 1998, Holmes' net
sales increased from $61.8 million to $214.5 million, a compound annual growth
rate of 28.3%.
The Company's products are sold to consumers through major retail chains,
including mass merchants, do-it-yourself home centers, warehouse clubs, hardware
stores and national drugstore chains. Major customers in these channels include
Wal-Mart, Kmart, Target, Home Depot, Costco, BJ's Wholesale Club, TruServ
(formerly True Value and ServiStar) and Walgreens. Holmes believes that the
strength, scope and visibility of its retail account base provide a competitive
advantage with respect to brand recognition, access to shelf space and
penetration of the consumer market.
Holmes was founded in 1982 by its current Chief Executive Officer, Jordan A.
Kahn, an innovator in the home comfort market with over 30 years of industry
experience. Holmes opened its first manufacturing facility in China in 1989, and
currently operates two facilities in China where it manufactures its products
and electric motors for use in its products. The Company's vertically integrated
manufacturing facilities provide the Company with control over the production
process and product quality. These facilities also enhance operational
flexibility and allow the Company to quickly respond to changes in consumer
demand and to specialized production needs. The Company maintains offices in
Hong Kong and Taiwan that are responsible for sourcing raw materials, processing
orders and shipping the Company's products. The Company coordinates product
development, marketing, sales and distribution from the Company's Milford,
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Massachusetts headquarters. The Company markets and distributes products
primarily under the Holmes(R) brand name. The principle executive offices of the
Company are located at 233 Fortune Boulevard, Milford, Massachusetts 01757 and
the telephone number is (508) 634-8050.
The Rival Company Acquisition
On December 17, 1998, Holmes entered into a definitive agreement to acquire The
Rival Company ("Rival"). Pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") among Holmes, Moriarty Acquisition Corp., a wholly owned
subsidiary of Holmes ("Merger Sub"), and Rival, Holmes acquired all of Rival's
outstanding shares of common stock for $13.75 per share in cash, or an aggregate
consideration of approximately $129.4 million, including payments to the holders
of certain Rival stock options. Holmes also refinanced $141.5 million of Rival's
outstanding debt.
Rival is a leading designer, manufacturer and marketer of a variety of products
including small kitchen appliances, such as Crock-Pot(R) slow cookers and Rival
can openers; products for the home environment, such as heaters, air purifiers,
showerheads, utility pumps, humidifiers and fans; and building supply and
industrial products, such as household ventilation systems, door chimes, ceiling
fans and industrial fans. Rival markets its products under a variety of well
known brand names, including Rival(R), Crock-Pot(R), Bionaire(R), Pollenex(R),
Patton(R), Simer(R), and White Mountain(R). Holmes believes Rival has the
leading market share for slow cookers and enjoys a leading market share in
several of its other product categories.
On February 5, 1999, Holmes and Merger Sub completed a cash tender offer for all
outstanding shares of common stock of Rival and purchased approximately 98.4% of
Rival's common stock. Immediately following the tender offer, Merger Sub was
merged with and into Rival, with Rival surviving the merger as a wholly owned
subsidiary of Holmes (the "Rival Acquisition").
On January 29, 1999, in connection with the Rival Acquisition, the Company
offered and sold $31.3 million of 9 7/8% Senior Subordinated Notes due in
November 2007 (the "Offering").
In connection with the Rival Acquisition and the Offering, the Company entered
into a $325.0 million Senior Credit Facility with BankBoston N.A. and a
syndicate of other lenders (the "Credit Facility"). In addition, Holmes sold
$50.0 million of common stock to investment funds affiliated with Berkshire
Partners LLC ("Berkshire Partners"), Holmes' majority stockholder, and to
certain other investors (the "Equity Commitment"). The initial borrowings under
the Credit Facility together with the net proceeds of the Equity Commitment and
Offering were used to consummate the Rival Acquisition and refinance Rival's
existing indebtedness. Holmes had no outstanding borrowings under its existing
credit facility at the Acquisition date. The Rival Acquisition, the tender
offer, the merger, the Offering, the Equity Commitment, the entering into and
borrowings under the Credit Facility and the refinancing of existing
indebtedness of Rival are collectively referred to herein as the "Transactions."
The following table sets forth the approximate sources and uses of
funds in connection with the Transactions. ($ in millions)
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Sources of Funds: Uses of funds:
Credit Facility(a) $212.9 Cash purchase price(b) $129.4
Issuance of the Notes 30.0 Refinance Rival indebtedness 141.5
Equity Commitment 50.0 Estimated fees and expenses(c) 22.0
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Total sources of funds $292.9 Total uses of funds $292.9
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(a) Total availability of $325.0 million
(b) $13.75 per share for approximately 9.3 million shares, plus net option
proceeds of $1.6 million.
(c) Includes prepayment premium on Rival debt of approximately $6 million.
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Business Strategy
The Company's strategy is to capitalize on Holmes' and Rival's core strengths to
achieve further growth in net sales, profitability and cash flow by: (1) growing
Rival's core kitchen franchise, (2) consolidating home environment product
lines, (3) penetrating new and existing distribution channels, (4) improving the
Company's overall cost structure and (5) expanding geographically.
Leverage Core Competencies to Strengthen Kitchen Franchise. Holmes has become a
leader in the home comfort appliance market as a result of its successful
product innovations that meet consumer and customer needs, coupled with its
expertise in marketing and distribution. Rival has a long-standing reputation as
a leader in the small kitchen appliance market. Holmes believes that combining
its strengths with Rival's core kitchen franchise will enhance growth in Rival's
existing product lines and the development of new products.
Leverage and Grow Brands. The addition of Rival's home comfort brands allows
Holmes to increasingly differentiate its home comfort offerings among customers
and consumers. Through additional brands, the Company can offer a step-up brand
strategy for increased presence in both mass merchandise and other distribution
channels.
Further Penetrate Existing Distribution Channels. The Company believes that it
can further penetrate its existing distribution channels as a result of
favorable industry dynamics and Holmes' and Rival's strong relationships and
execution with mass merchant retailers. Management believes that mass merchants
will continue to consolidate their vendor base and focus on a smaller number of
sophisticated suppliers that can (1) provide a broad array of differentiated,
quality products, (2) efficiently and consistently fulfill logistical
requirements and volume demands and (3) provide full product support from design
to category management, point-of-sale and after-market service with the
consumer.
Develop New Distribution Channels. The Company continues to develop new channels
of distribution by providing customized product offerings that appeal to the
specific needs of each channel. For example, since 1996, Holmes has marketed
selected products through an arrangement with the QVC electronic retailing
network. Holmes has also partnered with Evenflo to market Holmes' products under
the Evenflo brand name and expand into the juvenile distribution channel.
Pursue Targeted Marketing Opportunities. As part of its strategy, Holmes enters
into strategic alliances in order to promote awareness of its products. For
example, Holmes has established a marketing affiliation with the Allergy and
Asthma Foundation of America and has developed a strategic marketing partnership
with the Brita Products Company, a subsidiary of Clorox Company, to market a
humidifier that integrates the Brita(R) water filter. Holmes also markets
humidifiers and filters with the Microban(R) anti-bacterial technology. In
addition, Holmes has entered into a variety of cross-merchandising relationships
with other manufacturers including Stanley Tools, Toro, Vaseline and Benadryl.
Improve the Overall Cost Structure. Holmes, through its manufacturing facilities
in China and related Far East sourcing capabilities, is a low-cost, high
quality, flexible producer of appliance products. By applying these capabilities
to certain of Rival's products, along with Rival's two recent plant closings,
the Company believes it can reduce overall manufacturing costs.
Expand into New Geographic Regions. The Company believes that the European,
Latin American and Asian home comfort markets are underdeveloped and represent
significant growth opportunities. As a result, Holmes has begun to focus on
marketing its products in these regions. Holmes currently sells its products in
Europe and Asia on a original equipment manufacturer basis and its branded home
comfort products in France. Rival has warehouse and distribution facilities in
Ontario, Canada and the Netherlands, as well as a distribution arrangement in
Mexico. The Company believes that combining Rival's larger international
presence with Holmes' product offerings will accelerate international growth.
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Products
General
Holmes is a leading developer, manufacturer and marketer of quality, branded
home comfort products, including fans, heaters, humidifiers and air purifiers,
which allow consumers to better control aspects of their home environment, such
as temperature and air quality. In addition, Holmes markets and distributes a
variety of decorative and home office lighting products, including table, floor
and wall-mounted lighting products used principally in residential and
commercial settings, as well as various replacement filters and accessories for
its products.
Rival is a leading developer, manufacturer and marketer of small kitchen and
personal care appliances including Crock-Pot(R) slow cookers, toasters, can
openers and massagers. In addition, Rival also develops, manufactures and
markets home comfort products in many of the same product categories as Holmes,
including fans, heaters, humidifiers and air purifiers.
Holmes' and Rival's respective product lines are discussed separately below, as
are certain other aspects of the Company's business. The Rival Acquisition was
consummated less than two months ago, and the Company is in the process of
assessing Rival's products and operations relative to those of Holmes. Among
other things, the Company may determine to combine certain product lines, to
reduce or eliminate certain redundant products, to market products produced by
one company under a brand name of the other, or to rationalize each of the
business lines as part of the combined Company's overall integration strategy.
Holmes
Holmes' product categories are as follows:
Fans. Holmes currently manufactures and markets approximately 60 different fan
models, including table, stand, window, window-to-floor, box, commercial grade,
high velocity and oscillating fans, typically for purchase and use by household
consumers. Retail prices for Holmes' fans range from $5 to $80.
Heaters. Portable electric space heaters are used to heat areas of the house not
adequately reached by central heat and to heat an individual room while that
room is in use. Holmes currently manufactures and markets approximately 50
different heater models, including plastic, ceramic, metal, radiant and
baseboard styles. Retail prices for Holmes' heaters range from $20 to $70. In
recent years, Holmes has expanded its products to cover virtually every segment
and price point in the heater category, and to include innovations with strong
consumer appeal.
Humidifiers. Consumers use humidifiers to provide greater comfort by increasing
moisture in the home environment. Holmes currently manufactures and markets
approximately 33 different humidifiers, including cool mist, warm mist,
ultrasonic and console models that range in moisture output from one to 12
gallons per day. Retail prices for Holmes' humidifiers range between $20 and
$150. Holmes also sells a variety of humidifier accessories, replacement parts
and chemical treatments.
Air Purifiers. Air purifiers circulate a room's air through filters that remove
contaminants from the air. In recent years, high efficiency particulate
arresting ("HEPA") filters have come to dominate the industry. This product
category has experienced tremendous growth as consumers have become more
concerned with their home environment and have learned about the benefits of air
purifiers. Holmes currently manufactures and markets approximately 22 different
air purifier models. Retail prices for Holmes' air purifiers range between $20
and $280. Air purifiers represent one of the fastest growing categories of
Holmes' home comfort product line.
Filters/Accessories. Most humidifiers and air purifiers require accessories
including replacement filters and chemical treatments. Air purifiers
periodically need new replacement filter cartridges and humidifiers need new
replacement wick filters. As the installed base of these products continues to
expand, the
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Company expects that the market for these accessories will grow as well. In
addition, the Company believes that sales of filters and accessories increase
brand awareness and customer loyalty.
Lighting Products. Holmes began marketing portable lighting equipment in 1993,
and currently sells over 90 different lighting models. These products complement
Holmes' traditional home comfort product line, provide an additional
non-seasonal category for the Company, and are distributed through the same
distribution channels as the Company's home comfort appliances. Holmes' lighting
products are manufactured by subcontractors in China and in the United States.
Retail prices for these products range between $5 and $100.
Electric Motors. Holmes' indirect wholly owned subsidiary, Raider Motor
Corporation ("Raider"), has proven strengths in the design and manufacture of a
variety of electric motors for use in home and commercial appliances. In
addition to supplying most of the motors for Holmes' products, Raider has
sufficient manufacturing capacity to supply other manufacturers of appliances
with electric motors. In October, 1998, Holmes entered into a joint venture with
General Electric ("GE") for motor manufacturing, sales and distribution to third
parties. The joint venture entity is owned 49% by Holmes and 51% by GE.
Rival
Rival manages its operations through four business units, divided by product
line and geography as follows:
Kitchen Electrics and Personal Care. Kitchen electric appliances constituted
Rival's primary product line for over sixty years, and continue to account for
approximately 50% of Rival's net sales. The kitchen electrics and personal care
business unit sells products including Crock-Pot(R) slow cookers, toasters, ice
cream freezers, can openers, food slicers, mixers, indoor grills, irons,
potpourri simmerers, fryers, skillets and massagers to retailers and
distributors throughout the United States.
Home Environment. This group sells products including fans, air purifiers,
humidifiers, electric space heaters, sump, well and utility pumps, showerheads,
and household ventilation systems to retail customers throughout the United
States.
Industrial and Building Supply. This group sells products including industrial
fans and drum blowers, household ventilation systems, ceiling fans, door chimes,
electric heaters and household convenience items to electrical and industrial
wholesale distributors throughout the United States.
International. This group sells Rival's products in Canada and Europe from its
sales and distribution facilities in Toronto and the Netherlands. It also ships
products from the United States to distributors in Latin America and Asia.
Rival's future sales growth is expected to be generated primarily from the
introduction of new products and product lines, as well as through geographic
expansion.
Product Development
Holmes has an internal product development team dedicated to new product
development and product enhancements. Holmes maintains its own engineering and
product development department to research new product concepts as well as
activities relating to improving existing products. The product design and
research development team consists of an aggregate of approximately 50 employees
located in both Milford, Massachusetts and in the Far East. Holmes also retains
the services of outside consultants to assist its internal team.
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Holmes utilizes state-of-the-art design technology including advanced CAD design
software and a laser-based stereolithography technique to design and engineer
new products. Management believes this technology allows the company to design
and develop new products quickly thus enabling Holmes to accurately assess the
feasibility, cost and tooling requirements of new products before manufacturing
the products. Management believes this technology gives Holmes a competitive
advantage in the design and development of new products and product line
extensions.
Holmes' expenditures for new product development and tooling totaled
approximately $9.9 million, $9.5 million and $9.4 million for the years ended
December 31, 1996, 1997 and 1998, respectively.
Rival also has an internal product development team dedicated to product line
enhancements and the introduction of new products. As part of this effort, Rival
maintains its own engineering and development department consisting of over 60
people, including engineers, product designers, draftsmen and product managers.
Rival also retains the services of outside engineering and design consultants
from time to time.
Rival's expenditures for product engineering and development (excluding tooling)
were $3.1 million, $4.5 million, and $5.4 million for Rival's fiscal years ended
June 30, 1996, 1997 and 1998, respectively.
Manufacturing
Holmes manufactures most of its products at its manufacturing facilities in
China. These facilities are highly integrated and produce most of the electric
motors, injection molded plastic components and other components used in the
manufacturing and assembly process. The balance of Holmes' products are produced
through subcontracted manufacturers in China and the United States, generally
under the supervision of Holmes employees. The management, coordination and
control of all manufacturing operations are centralized at the Company's
principal offices in Milford, Massachusetts.
Rival's manufacturing plants, all of which are located in the United States,
manufacture and assemble more than 60% of the products Rival sells. Rival's
remaining products are produced to its specifications, primarily in China.
Rival's plants are highly integrated and produce electric motors, injection
molded plastic components, screw machine parts, stampings and stoneware.
Rival operates four manufacturing and assembly facilities in rural Missouri
(Clinton, Sedalia, Sweet Springs and Warrensburg), near Kansas City, which
specialize in the production of kitchen electrics. A facility in Flowood,
Mississippi produces the stoneware for Rival's Crock-Pot(R) slow cookers and
other products.
In July, 1998, Rival announced plans to close its New Haven, Indiana and
Fayetteville, North Carolina manufacturing plants, as well as its Peru, Indiana
warehouse facility, and to expand its current operations in Warrensburg and
Sedalia, Missouri. The New Haven manufacturing facility was closed in December,
1998, and the Fayetteville facility was closed in March, 1999. These facilities
produced home environment and building supply products. The majority of the
products manufactured in these facilities will be moved to Rival's Missouri
plants while some production will be outsourced to overseas suppliers, which may
include Holmes. Concentrating production in fewer facilities will increase
efficiency by more closely aligning capacity with the seasonal nature of Rival's
products, taking advantage of vertical integration in its Missouri plants and
reducing the infrastructure associated with transportation of materials,
production planning and other activities.
The Company believes that it has a cost advantage as a result of its degree of
vertical integration, its purchasing power, and low labor costs at its Chinese
manufacturing facilities. In addition, by operating its own manufacturing
facilities, the Company has control over the quality of its products from design
through final distribution. The Company believes that the addition of Rival's
domestic manufacturing capabilities will improve inventory management and
enhance its flexibility in order to satisfy customers' needs for just-in-time
delivery.
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Marketing and Distribution
Holmes' products are sold in the United States, Canada and Europe to the retail
trade by an internal sales staff consisting of ten sales managers. Holmes relies
on its management's ability to determine the existence and extent of available
markets for its products. The internal sales managers, with assistance from an
internal sales support staff and from regional independent manufacturers
representative organizations, market Holmes' products through all major channels
of distribution including mass merchants, do-it-yourself home centers, warehouse
clubs, hardware stores and national drugstore chains. Holmes' sales managers are
actively involved in servicing all aspects of each retail account.
In order to respond most efficiently to the demands of its retail customers and
ensure timely delivery, Holmes balances direct shipments from its manufacturing
facilities with shipments from its domestic and international warehouses.
Holmes' marketing department consists of 12 individuals who are responsible for
market analysis, new product development, pricing strategy, promotions and
overall category development. Holmes believes that its packaging is one of its
most powerful marketing tools because most consumers typically purchase fans,
heaters and humidifiers without the benefit of knowledgeable retail sales staff.
Holmes' packaging and point-of-purchase support provide written information and
illustrations regarding product features, usage instructions, safety features
and product operation. Holmes has an in-house art department that develops most
of the packaging and marketing materials on state-of-the-art desktop graphics
systems.
Rival's products are sold in the same channels of distribution as Holmes', with
mass merchants representing the largest class of customer. In addition, Rival's
products are sold through department stores, household specialty stores,
military exchanges, mail order companies and premium companies. Rival also sells
industrial and building supply products to electrical and industrial wholesale
distributors. Rival reaches its customers through its sales organization, which
consists of a combination of in-house sales managers, field sales associates and
independent manufacturers' representative firms.
The Company believes that the addition of Rival's extensive domestic
distribution capabilities will further enhance the Company's ability to satisfy
customer demands.
Major Customers
Holmes' three largest retail customers, Wal-Mart (including Sam's Wholesale
Club), Kmart and Target, each accounted for over 10%, and in the aggregate
approximately 48%, of Holmes' net sales during 1998. Rival's largest customer,
Wal-Mart (including Sam's Wholesale Club), accounted for 26% of Rival's net
sales in each of Rival's three fiscal years ended June 30, 1998. Rival's next
five largest customers represented an aggregate of 21% of net sales during
fiscal 1998. Holmes and Rival do not have long-term agreements with their major
customers, and purchases are generally made through the use of individual
purchase orders. A significant reduction in purchases by any of these customers
could have a material adverse effect on the Company's business.
Seasonality
Sales of Holmes' products are highly seasonal, and counter-seasonal weather can
adversely affect the Company's results of operations. In general, Holmes' sales
of fans and dehumidifiers occur predominantly from January through June, and
sales of heaters and humidifiers occur predominantly from July through December.
Although air purifiers, lighting products and accessories generally are used
year-round, the nature of these products tend to draw increased sales during the
winter months when people are indoors and, as a result, sales of these products
tend to be greatest in advance of the winter months from July through December.
In addition to the seasonal fluctuations in sales, Holmes experiences
seasonality in
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gross profit, as margins realized on fan products tend to be lower than those
realized on heater, humidifier, and air purifier products.
Rival's sales are also highly seasonal. A significant percentage of the products
sold by Rival are given as gifts and, as such, sell at larger volumes during the
holiday season. When holiday shipments are combined with seasonal products such
as heaters and humidifiers, Rival's sales during the months of August through
November are generally at a higher level than during the other months of the
year.
Competition
The Company believes that the markets for its products are developed and highly
competitive. Management believes that competition is based on several factors,
including price, access to retail shelf space, product features, product
enhancements, brand names, new product introductions, and marketing support and
distribution systems.
The Company competes with many well-established companies, some of which have
substantially greater facilities, personnel, financial and other resources than
those of the Company. Holmes' major competitors include AdobeAir, Catalina
Lighting, Cheyenne, Fedders, Frigidaire, Honeywell Consumer Products (maker of
Duracraft and Enviracare brands), Kenmore, Norelco, Sunbeam, Tensor and
Windmere. Holmes also competes with importers and foreign manufacturers of
unbranded products.
Rival's home environment products compete with many of the same companies as
Holmes'. Rival also competes with a number of other companies across its broader
product line. Significant competitors include Sunbeam/Oster, Hamilton
Beach/Proctor Silex, Wayne Home Equipment, Masco, Nortek, Teledyne, National
Presto, Salton/Maxim (Toastmaster) and West Bend. Several of these competitors
each generate higher annual sales of small electric household appliances than
Rival. Smaller manufacturers compete with Rival on a limited basis. A few
European manufacturers, such as Braun, Group SEB and Moulinex, have established
niches in the small electric household appliance market, particularly in the
high-end department store trade.
The Company believes that its most important competitive strengths are the
quality, design and competitive pricing of its products, its attention to
retailer and consumer needs, its access to major channels of distribution, the
development of new products and innovation in existing products, its ability to
provide timely shipment through its manufacturing and distribution facilities
and the capabilities of its management team.
Patents and Trademarks
Holmes holds a number of patents and trademarks registered in the United States,
Canada, and other countries for various products and technologies. Additional
patent applications are pending in the United States, Canada and Mexico. Holmes
also registers trademarks on product names and unique features in the United
States and other countries. The Company believes that none of Holmes' product
lines is dependent upon any single patent, group of patents or other
intellectual property rights.
Rival holds many United States and foreign trademarks, and considers its various
trademarks to be a valuable tool in the marketing of its products. Of particular
importance are the Rival(R), Rival Select(R), Simer(R), Pollenex(R), Patton(R),
Bionaire(R), White Mountain(R) and Crock-Pot(R) trademarks. In the course of its
operations, Rival also files patent applications covering various aspects of the
items produced. While Rival's mechanical and design patents in the aggregate are
considered to be important, the Company believes that Rival's business is not
dependent upon any single patent or group of patents.
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Regulation
The Company is subject to federal, state and local regulations concerning the
environment, occupational safety and health, trade-related issues and consumer
products safety. Most of the Company's products are listed by Underwriters
Laboratories, Inc. ("UL"), the Canadian Underwriters Laboratories, Inc. ("CUL"),
or similar organizations in other markets. UL and CUL are independent,
not-for-profit corporations engaged in the testing of products for compliance
with certain public safety standards. The Company is also regulated by, and
holds ongoing discussions regarding specific products with, the United States
Consumer Products Safety Commission and the Canadian Standards Association. The
Company believes that it is in material compliance with all of the regulations
applicable to it. There can be no assurance, however, that such regulations will
not negatively affect the Company in the future. The Company's operations could
also be adversely affected by other regulations relating to its foreign
operations, including changes in trade laws, increased import duties,
import/export regulations and changes in foreign laws.
Employees
Holmes has approximately 4,300 employees, of which approximately 4,064 were
located at the Company's manufacturing facilities in Dongguan, China,
approximately 60 were located in Hong Kong and Taiwan and 176 were located in
the United States and Canada.
Rival has approximately 2,100 full-time employees, including 250 salaried
personnel. Historically, during August through November, employment increases by
approximately 15%. Approximately 320 hourly employees at Rival's Flowood,
Mississippi plant are represented by a labor organization under a collective
bargaining agreement, which expires in December 2001.
ITEM 2. PROPERTIES
Holmes
The following table sets forth Holmes' principal facilities (all of which are
leased), the primary activity at each of the facilities listed and the
expiration date of the applicable lease.
<TABLE>
<CAPTION>
Location Size Primary Use Lease Expiration
- -------- ---- ----------- ----------------
<S> <C> <C> <C>
Milford, MA 83,000 square feet Headquarters and Distribution 2001
Dongguan, China (1) 466,000 square feet Manufacturing and Assembly 2006
Dongguan, China (1) 269,000 square feet Motor Manufacturing 2006
Clinton, MA 207,000 square feet Distribution 2000
Worcester, MA 156,000 square feet Distribution 2003
Vernon, CA Varies Distribution At will
Mississaugua, Ontario Varies Distribution At will
Hong Kong 10,300 square feet Office 1999
Taipei, Taiwan 1,700 square feet Office 2000
</TABLE>
(1) These facilities are located in Guangdong Province, China, approximately 70
miles from Hong Kong. These facilities include 20 buildings on two separate
campuses that include manufacturing, assembly, warehousing, and employee
dormitory operations. The lease expiration date assumes the exercise of the
Company's options to extend the lease on the primary manufacturing building.
11
<PAGE>
Rival
The following table sets forth information regarding Rival's principal
facilities.
<TABLE>
<CAPTION>
Location Size Primary Use Owned/Leased
- -------- ---- ----------- ------------
<S> <C> <C> <C>
Kansas City, MO 32,000 square feet General Offices Leased
Sedalia, MO 157,000 square feet Manufacturing and Assembly Owned
67,000 square feet Manufacturing and Assembly Leased
216,000 square feet Warehousing and Distribution Owned
Clinton, MO 164,000 square feet Manufacturing and Assembly Owned
279,000 square feet Warehousing and Distribution Owned
Sweet Springs, MO 125,000 square feet Manufacturing/Return Processing Owned
Warrensburg, MO 68,000 square feet Manufacturing and Assembly Owned
Flowood, MS 142,000 square feet Manufacturing Owned
Mississaugua, Ontario 55,000 square feet General Office, Warehousing
and Distribution Leased
Oosterhout, Netherlands 50,000 square feet General Office, Warehousing
and Distribution Leased
New Haven, IN* 302,000 square feet Manufacturing and Distribution Owned
Peru, IN* 172,000 square feet Warehousing Owned
Fayetteville, NC* 282,500 square feet Manufacturing and assembly Owned
</TABLE>
The Warrensburg plant and 67,000 square feet of the Sedalia plant are occupied
under long-term leases, which give Rival the option to purchase the relevant
property at a nominal cost. The general offices are occupied under a lease
through 2005. The Mississauga and Netherlands facilities are each leased through
July 2002.
* Each of these facilities has been closed or is scheduled to be closed during
1999, and Rival plans to sell the properties. The New Haven, Indiana property is
currently under agreement to be sold.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings incident to its normal
business operations, including product liability and patent and trademark
litigation. The Company believes that the outcome of such litigation will not
have a material adverse effect on its business, financial condition or results
of operations. The Company has product liability and general liability insurance
policies in amounts it believes to be reasonable. There can be no assurance,
however, that such insurance will be adequate to cover all potential product or
other liability claims against the Company. The Company also faces exposure to
product recalls in the event that its products are alleged to have manufacturing
or safety defects. The Company does not maintain product recall insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company is privately-owned and there is no public trading market for the
Company's equity securities.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data as of and for the years ended December 31,
1994, 1995, 1996, 1997 and 1998 have been derived from the audited Consolidated
Financial Statements of the Company. The following information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Consolidated Financial Statements,
including the notes thereto, included elsewhere herein.
Year Ended December 31,
(Dollars in thousands)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales .............................. $ 114,509 $ 178,132 $ 194,331 $ 192,153 $ 214,479
Cost of goods sold ..................... 84,672 141,226 145,915 136,740 146,509
--------- --------- --------- --------- ---------
Gross profit ....................... 29,837 36,906 48,416 55,413 67,970
Selling, general and
Administrative expenses .............. 17,522 22,500 27,308 36,530(1) 37,095
Product development expenses ........... 2,742 3,154 5,520 5,463 6,295
--------- --------- --------- --------- ---------
Operating profit ................... 9,573 11,252 15,588 13,420 24,580
Interest expense, net .................. 2,087 5,219 6,491 7,096 13,833
Other (income) expense, net ............ (244) (337) (319) 56 (436)
--------- --------- --------- --------- ---------
Income before income taxes
and minority interest ............ 7,730 6,370 9,416 6,268 11,183
Income tax expense (benefit) ........... 3,214 2,614 2,787 2,196 2,222
--------- --------- --------- --------- ---------
Income before minority interest .... 4,516 3,756 6,629 4,072 8,961
Minority interest in net income
Of majority-owned subsidiaries (2) ... 282 518 408 225 --
--------- --------- --------- --------- ---------
Net income ......................... $ 4,234 $ 3,238 $ 6,221 $ 3,847 $ 8,961
========= ========= ========= ========= =========
Other Data:
EBITDA (3) ............................. $ 12,798 $ 16,098 $ 22,774 $ 20,837 $ 32,265
Ratio of earnings to fixed charges (4) 3.9x 2.1x 2.2x 1.8x 1.7x
Depreciation and amortization .......... 2,981 4,509 6,867 7,473 7,248
Capital expenditures ................... 8,821 9,706 8,594 5,815 4,749
Balance Sheet Data (at end of period):
Cash and cash equivalents .............. $ 1,578 $ 3,368 $ 4,462 $ 5,141 $ 5,379
Working capital (deficit) .............. (5,021) (6,770) (2,883) 78,318 71,089
Total assets ........................... 72,490 118,524 128,286 135,165 131,357
Total long-term debt
Including capital leases ............. -- 217 737 134,294 115,139
Total stockholders' equity (deficit).... 8,249 11,487 17,708 (24,991)(5) (15,389)(5)
</TABLE>
(1) Includes approximately $6.9 million of incremental compensation expense,
which was paid to certain executives in conjunction with Holmes' November,
1997 recapitalization.
(2) In May and June, 1997, Holmes repurchased the shares held by 30% minority
stockholders in one of Holmes' subsidiaries for a total of $900,000.
13
<PAGE>
(3) EBITDA represents income before interest expense, income tax expense,
depreciation and amortization and the minority interest in net income of
majority-owned subsidiaries. EBITDA is presented because it is a widely
accepted measure to provide information regarding a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation or
as a substitute for net income, cash flows from operations or other income
or cash flow data prepared in accordance with generally accepted accounting
principles, or as a measure of a company's profitability or liquidity.
Additionally, Holmes' calculation of EBITDA may differ from that performed
by other companies, and thus the amounts disclosed may not be directly
comparable to those disclosed by other companies.
(4) For purposes of determining the ratio of earnings to fixed charges,
earnings represent income before income taxes and minority interest, plus
fixed charges. Fixed charges consist of interest expense on all
indebtedness plus a portion of rental payments on operating leases that is
considered representative of the interest factor.
(5) Total stockholders' equity (deficit) as of December 31, 1997 and 1998
reflects a reduction attributable to Holmes' 1997 recapitalization. See
Note 8 of Notes to Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Sales of most of Holmes' products follow seasonal patterns that affect the
Company's results of operations. In general, sales of fans and dehumidifiers
occur predominantly from January through June, and sales of heaters and
humidifiers occur predominantly from July through December. Although air
purifiers, lighting products and accessories generally are used year-round,
these products tend to draw increased sales during the winter months when people
are indoors and, as a result, the Company's sales of these products tend to be
greatest in advance of the winter months from July through December. In addition
to the seasonal fluctuations in sales, the Company experiences seasonality in
gross profit, as margins realized on fan products tend to be lower than those
realized on heater, humidifier and air purifier products.
Holmes completed a recapitalization transaction in November, 1997, in which it
issued $105 million of senior subordinated notes due in November, 2007, bearing
interest at 9 7/8%, and entered into a $100 million line of credit facility, of
which approximately $27.5 million was initially drawn. The proceeds of these
borrowings were used to repay all existing indebtedness (primarily a line of
credit and other current debt facilities) and redeem a significant portion of
the previous majority shareholder's common stock (collectively, the "1997
Transactions"). Accordingly, commencing in November, 1997, the Company had a
significantly higher level of borrowing and a corresponding higher level of
interest expense than in the past. The Rival Acquisition and the related
financing transactions consummated on February 5, 1999 further increased the
Company's indebtedness and will further increase interest expense substantially.
RESULTS OF OPERATIONS
The Company's historical results of operations discussed below do not include
Rival's results of operations. The Rival Acquisition will be accounted for as a
purchase, and Rival's results of operations will be included in the Company's
financial information in future periods.
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Net Sales. Net sales for fiscal 1998 were $214.5 million compared to $192.2
million for fiscal 1997, an increase of $22.3 million or 11.6%. This increase
was attributable to an increase in all of the major product categories: fans,
heaters, humidifiers and air purifiers, which resulted from a strong 1998 for
retailers, as well as continued growth in filter and accessory sales due to the
growing installed base of products requiring filters and accessories. The
Company's Far East operations also had a significant increase in external sales
versus 1997.
14
<PAGE>
Gross Profit. Gross profit for fiscal 1998 was $68.0 million compared to $55.4
million for fiscal 1997, an increase of $12.6 million or 22.7%. As a percentage
of net sales, gross profit increased to 31.7% for fiscal 1998 from 28.8% for
fiscal 1997. The increase was primarily due to the above mentioned increases in
net sales in humidifiers, heaters and filters and accessories which are
relatively higher margin contributors, as well as continued reductions in raw
material prices at the Company's manufacturing operations in the Far East.
Selling Expenses. Selling expenses for fiscal 1998 were $20.5 million compared
to $15.6 million for fiscal 1997, an increase of $4.9 million or 31.4%. As a
percentage of net sales, selling expenses increased to 9.6% for fiscal 1998 from
8.1% for fiscal 1997. The increase in selling expenses was primarily due to an
increase in co-operative advertising of higher margin products and new sales
promotions with several major retailers. To a lesser extent, shipping costs
increased as a result of the higher sales level. Also, there were continued
expenses associated with the redesign of some of the Company's product
packaging.
General and Administrative Expenses. General and administrative expenses for
fiscal 1998 were $16.6 million compared to $20.9 million for fiscal 1997, a
decrease of $4.3 million or 20.6%. As a percentage of net sales, general and
administrative expenses decreased to 7.7% for fiscal 1998 from 10.9% for fiscal
1997. The higher amount in 1997 resulted from incremental incentive compensation
expenses paid in connection with the 1997 Transactions. This overall decrease
was offset in part by increased expenditures on management and information
systems support, increases in personnel costs to improve operating efficiencies
at all the Company's locations and on-going expenses associated with the
recapitalization of the Company in November, 1997.
Product Development Expenses. Product development expenses for fiscal 1998 were
$6.3 million compared to $5.5 million for fiscal 1997, an increase of $.8
million or 14.6%. As a percentage of net sales, product development expenses
remained constant at 2.9% for fiscal 1998 and 1997. The increase was primarily
due to increased expenditures for royalties and outside consultants as part of
the Company's continuing effort in developing new technologies for both existing
and new product lines.
Interest and Other Expense, Net. Interest and other expense, net for fiscal 1998
was $13.4 million compared to $7.2 million for fiscal 1997, an increase of $6.2
million or 86.1%. The increase in interest expense was primarily due to the
additional borrowings resulting from the recapitalization of the Company in
November, 1997. The Company's interest expense in future periods will be higher
than 1998 as a result of the Rival Acquisition.
Income Tax Expense. In 1997, the Company recorded a $3.6 million valuation
allowance related to deferred tax assets generated as a result of certain
limitations on the deductibility of interest paid to Pentland. This 1997
non-recurring charge comprises the majority of the 15% change in the Company's
effective tax rate from 35% in 1997 to 20% in 1998.
Net Income. As a result of the foregoing factors, net income for
fiscal 1998 was $9.0 million, compared to net income of $3.8 million in
fiscal 1997.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
Net Sales. Net sales for fiscal 1997 were $192.2 million compared to $194.3
million for fiscal 1996, a decrease of $2.2 million or 1.1%. The decrease in net
sales was primarily due to a reduction in sales of $10.9 million of
dehumidifiers and air conditioners resulting from a strategic management
decision to reduce dehumidifier volume and eliminate the air conditioner
category because of the relatively low profit margins of these product lines. In
addition, an increase in sales of heaters was offset by decreases in sales of
fans, air purifiers and lighting products.
Gross Profit. Gross profit for fiscal 1997 was $55.4 million compared to $48.4
million for fiscal 1996, an increase of $7.0 million or 14.5%. As a percentage
of net sales, gross profit increased to 28.8% for fiscal 1997 from 24.9% for
fiscal 1996. The increase in gross profit is attributable, in large part, to the
factors
15
<PAGE>
described above. In addition, air purifier filter and humidifier filter sales,
which generate relatively high gross profit margins, increased significantly for
the year ended December 31, 1997 as compared to the year ended December 31,
1996.
Selling Expenses. Selling expenses for fiscal 1997 were $15.6 million compared
to $13.2 million for fiscal 1996, an increase of $2.4 million or 18.3%. As a
percentage of net sales, selling expenses increased to 8.1% for fiscal 1997 from
6.8% for fiscal 1996. The increase in selling expenses was primarily due to an
increase in co-operative advertising of higher margin products with a number of
major retailers.
General and Administrative Expenses. General and administrative expenses for
fiscal 1997 were $20.9 million compared to $14.1 million for fiscal 1996, an
increase of $6.8 million or 48.3%. As a percentage of net sales, general and
administrative expenses increased to 10.9% for fiscal 1997 from 7.2% for fiscal
1996. The increase in general and administrative expenses was primarily due to
approximately $6.9 million of incremental incentive compensation expenses paid
in connection with the closing of the 1997 Transactions. These incentive
compensation amounts were deducted from the purchase price of the capital stock
in the 1997 Transactions. In addition, general and administrative expenses
increased due to additional management and information systems support to
improve operating efficiencies at the Company's manufacturing facilities in
China.
Product Development Expenses. Product development expenses for fiscal 1997 were
$5.4 million compared to $5.5 million for fiscal 1996, a decrease of $.1 million
or 0.1%. As a percentage of net sales, product development expenses remained
relatively constant at 2.9% and 2.8% for fiscal 1997 and 1996, respectively.
Interest and Other Expense, Net. Interest and other expense, net for fiscal 1997
was $7.2 million compared to $6.2 million for fiscal 1996, an increase of $1.0
million or 15.9%. The increase in interest expense was primarily due to the
additional borrowings resulting from the 1997 Transactions, which were
outstanding for one month in 1997. On a proforma basis, giving effect to the
1997 Transactions as if they had occurred on January 1, 1997, interest expense
would have been approximately $14.3 million.
Income Tax Expense. The Company's effective tax rate increased to 35.0% of
pre-tax income for fiscal 1997 from 29.6% of pre-tax income for fiscal 1996. The
increase in the effective tax rate was principally a result of limitations
placed on the Company's ability to deduct for tax purposes approximately $3.6
million of interest paid to or guaranteed by the Company's former majority
stockholder, Pentland Group plc ("Pentland") and its affiliates. This was offset
by an increase in profitability of the Company's manufacturing operations in
China, which are taxed at significantly lower rates than the Company's U.S.
operations. While the interest limitation may be carried forward indefinitely,
because of the Company's current highly leveraged structure it is uncertain
whether the Company will be able to deduct this amount in the future. Therefore,
management has recorded a valuation allowance on the entire amount of deferred
tax asset arising from this carryforward, which has the impact of increasing the
effective tax rate. This limitation primarily arose as a result of the incentive
compensation expenses described above. The Company had no such limitation in
previous years, and because interest is no longer paid to foreign affiliates,
this limitation is not expected to be applicable in the future. If the Company
is able to utilize this deduction, it will reduce income tax expense in future
years.
Net Income. As a result of the foregoing factors, net income for
fiscal 1997 was $3.8 million, compared to net income of $6.2 million in
fiscal 1996.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by (used for) operations during fiscal 1998 and 1997 was $24.3
million and $(46.4) million, respectively. Cash provided by operations in fiscal
1998 primarily reflected the Company's net income of $9.0 million and increases
in accrued expenses and accrued income taxes, and decreases in accounts
receivable and inventories, which were partially offset by increases in prepaid
expenses and other current assets and deposits and other assets. The increase in
accrued liabilities was due to the accrued interest on the long-term debt, an
increase in the accrual for advertising costs and increases in commissions and
duties payable. The $2.5 million increase in accrued income taxes payable was
primarily due to the higher profitability of the Company. The decrease in
inventory was mainly due to increased levels of warehouse shipments. The
increase in prepaid expenses and other current assets and deposits and other
assets was due to an increase in advertising credits arising from a transfer of
inventory to be used to purchase advertising media, merchandise or services.
Cash used for operations in 1997 primarily reflected the repayment of trade
acceptance and amounts due to affiliates in connection with the 1997
Transactions.
Cash provided by (used for) financing activities for fiscal 1998 and 1997 was
$(18.8) million and $53.3 million, respectively. Cash used for financing
activities in fiscal 1998 reflected the payback of borrowings under the credit
facility entered into as part of the 1997 Transactions. The cash provided by
financing activities in fiscal 1997 reflected borrowings for working capital
purposes under the previous line of credit from Pentland, the issuance of
long-term debt and common stock and the repurchase of treasury stock associated
with the 1997 Transactions.
The Company's capital expenditures, including assets acquired under capital
leases, for fiscal 1998 and 1997 were $4.7 million and $5.8 million,
respectively, primarily for molds and tooling. The Company is also subject to
certain minimum royalty payment commitments under various license agreements.
See Note 13 of Notes to Consolidated Financial Statements.
The Company issued $105.0 million of 9 7/8% Senior Subordinated Notes due
November, 2007 (the "Notes") in November, 1997, and an additional $31.3 million
of Notes in February, 1999. The Notes are not redeemable at the Company's option
prior to November 15, 2002. Thereafter, the Notes are subject to redemption at
any time at the option of the Company, in whole or in part, at stated redemption
prices. Annual interest payments on the Notes are approximately $13.5 million.
The payment of principal and interest on the Notes is subordinated to the prior
payment in full of all senior debt of the Company, including borrowings under
the Credit Facility.
The Company entered into the Credit Facility in February, 1999. The Credit
Facility amended and restated the Company's prior $100 million credit facility.
The Credit Facility consists of a six-year tranche A term loan of $40.0 million,
an eight-year tranche B term loan of $85.0 million and a $200.0 million,
six-year revolving credit facility. The Credit Facility bears interest at
variable rates based on either the prime rate or LIBOR, at the Company's option,
plus a margin which, in the case of the tranche A term loan and the revolving
credit facility, varies depending upon certain financial ratios of the Company.
The Credit Facility, and the guarantees thereof by the Company's domestic
subsidiaries, are secured by substantially all of the Company's domestic and
certain foreign assets. The Credit Facility and the Notes Indentures include
certain financial and operating covenants, which, among other things, restrict
the ability of the Company to incur additional indebtedness, grant liens, make
investments and take certain other actions. The ability of the Company to meet
its debt service obligations will be dependent upon the future performance of
the Company, which will be impacted by general economic conditions and other
factors. See "Disclosure Regarding Forward-Looking Statements."
Following the closing of the Rival Acquisition and the other Transactions on
February 5, 1999, the Company will fund its liquidity requirements with cash
flows from operations and borrowings under the Credit Facility. The Company's
primary liquidity requirements are for working capital and to service the
Company's indebtedness. The Company believes that existing cash resources, cash
flows from operations and borrowings under the Credit Facility will be
sufficient to meet the Company's liquidity needs for the foreseeable future.
YEAR 2000
The Year 2000 problem relates to computer systems that have time and
date-sensitive programs that were designed to read years beginning with "19",
but may not properly read the Year 2000. If a system used by the Company or by a
third party fails because of the inability to properly read the Year 2000 date,
the results could have a material adverse effect on the Company. As described
below, Holmes and Rival have developed plans to address the possible exposures
related to their computer systems from the Year 2000. However, there can be
assurance that such measures will be sufficient to avoid Year 2000-related
problems.
17
<PAGE>
Holmes
Holmes has identified its Year 2000 risk to be in two general categories:
Information Technology Systems, including Electronic Data Interchange Systems
(EDI), and General Business Systems.
Information Technology Systems Including EDI. Holmes is currently in the process
of implementing a new company wide computer software system. The new system will
be fully Year 2000 compliant, according to the vendor, and the Company
anticipates that it will be operational by the third quarter of 1999. In
addition, all of Holmes' computer hardware has or is in the process of being
tested for Year 2000 compliance. Those systems that fail will be upgraded or
replaced during the second quarter of 1999. As part of its transition to a new
system, Holmes is implementing a new EDI system that will be fully Year 2000
compliant to prevent any interruption of data interchange from the many
customers using this platform. Holmes anticipates that this system will be
completed during the second quarter of 1999. Holmes intends to use both internal
and external resources to test, reprogram or replace the software and hardware
for Year 2000 modifications. The total specific project costs are difficult to
determine as many of the upgrades and new implementations would have been made
regardless of the Year 2000 issue. The majority of project costs, related to the
purchase of hardware and software to meet both Year 2000 and company specific
requirements, will be capitalized. All other remaining project costs will be
expensed during 1999 and 2000.
General Business Systems. Holmes' general business systems encompass the
following: telecommunications systems, departmental specific application
systems, machinery and equipment, building and utility systems and, finally,
third party vendors and service providers. Holmes has created a Year 2000
committee consisting of one member from each department. The committee is in the
final stages of reviewing all aspects of Holmes' business systems to determine
if they are Year 2000 compliant, and testing systems as necessary. This process
will continue through the second quarter of 1999.
Holmes has sent out a comprehensive questionnaire to all significant customers
and suppliers regarding their Year 2000 compliance. The questionnaires that
Holmes has received back to date have tended to provide only vague assurances
regarding Year 2000 matters, however. While Holmes intends to carefully monitor
its supplier risks, Holmes cannot fully control each supplier, and there can be
no guarantee that a Year 2000 problem that may originate with a supplier will
not materially adversely affect Holmes. Holmes has not designed a specific
contingency plan in the event of a Year 2000 failure caused by a supplier or
other third party, but is working to identify issues as soon as possible.
Finally, Holmes has determined that products that it manufactures and sells have
no exposure related to the Year 2000 issue.
Rival
Information Technology Systems Including EDI. Rival implemented its current
corporate computer system in 1995. The system is Year 2000 compliant, according
to the vendor, as confirmed by full systems testing performed on August 8, 1998.
The testing included rolling the date forward to January 15, 2000 and testing
all function programs. The EDI system installation was completed by September
30, 1998. Rival has used both internal and external resources for testing. EDI
transactions sets have been verified and registered with the National Retailers
Foundation. Rival believes that any additional issues with computers will be
limited to stand alone personal computers. The upgrade of these computers is
expected to be completed by June 30, 1999.
General Business Systems. Rival's business systems encompass the following:
telecommunications systems, machinery and equipment, building and utility
systems and third party vendors and service providers. Rival created a
cross-departmental Year 2000 committee in 1997. The committee reviewed all
aspects of Rival's business systems to determine if they are Year 2000
compliant. Any vendor supplying goods and/or services to Rival was required to
submit a letter stating their Year 2000 status. Rival has determined that
products that it manufactures and sells have no exposure to the Year 2000 issue.
18
<PAGE>
Adoption of Recently Issued Accounting Pronouncements
The Company has adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income." This Statement establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements.
The Company has adopted Statement of Financial Accounting Standard No. 131,
"Disclosure about Segments of an Enterprise and Related Information." This
Statement requires an enterprise to report financial and descriptive information
about its reportable operating income. Operating segments are components that
are evaluated regularly by chief operating decision makers in deciding how to
allocate resources and in assessing performance. This Statement requires a
business enterprise to report a measure of segment profit or loss, certain
specific revenue and expense items (including interest, depreciation, and income
taxes), and segment assets. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The Financial Accounting Standards Board issued Statement No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This Statement requires that
all derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. This Statement is required to be adopted in the Company's fiscal
year ending December 31, 2000. Management anticipates that, due to its limited
use of derivative instruments, the adoption of this Statement will not have a
significant effect on the Company's results of operations or its financial
position.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At December 31, 1998, the carrying value of the Company's debt totaled $115.7
million, which approximated its fair value. This debt includes amounts at both
fixed and variable interest rates. For fixed rate debt, interest rate changes
affect the fair market value but do not impact earnings or cash flows.
Conversely, for variable rate debt, interest rate changes generally do not
affect the fair market value but do impact earnings and cash flows, assuming
other factors are held constant.
At December 31, 1998, the Company had fixed rate debt of $105.7 million
(including capital leases) and variable rate debt of $10.0 million. Holding
other variables constant (such as foreign exchange rates and debt levels), a one
percentage point decrease in interest rates would increase the unrealized fair
market value of fixed rate debt by approximately $6.4 million. Based on the
amounts of variable rate debt outstanding at December 31, 1998, the earnings and
cash flows impact for the next year resulting from a one percentage point
increase in interest rates would be approximately $100,000, holding other
variables constant.
19
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Holmes Products Corp.
<TABLE>
<CAPTION>
Page
<S> <C>
Report of PricewaterhouseCoopers LLP, Independent Accountants ...................................... 21
Consolidated Balance Sheet at December 31, 1997 and 1998 ........................................... 22
Consolidated Statement of Income for the years ended December 31, 1996, 1997 and 1998 .............. 23
Consolidated Statement of Stockholders' Equity (Deficit) for the years ended December 31, 1996,
1997 and 1998 .................................................................................... 24
Consolidated Statement of Comprehensive Income for the years ended December 31, 1996,
1997 and 1998 .................................................................................... 25
Consolidated Statement of Cash Flows for the years ended December 31, 1996, 1997 and 1998 .......... 26
Notes to Consolidated Financial Statements ......................................................... 27
</TABLE>
20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Of Holmes Products Corp.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity (deficit), of
comprehensive income and of cash flows present fairly, in all material respects,
the financial position of Holmes Products Corp. and its subsidiaries (the
"Company") at December 31, 1997 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
March 12, 1999
21
<PAGE>
HOLMES PRODUCTS CORP.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1998
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ............................ $ 5,141 $ 5,379
Accounts receivable, net ............................. 38,102 36,967
Inventories .......................................... 55,550 53,340
Prepaid expenses and other current assets ............ 1,116 2,027
Deferred income taxes ................................ 4,167 4,983
Income taxes receivable .............................. 104 --
--------- ---------
Total current assets ............................... 104,180 102,696
Property and equipment, net .......................... 19,607 15,752
Deferred income taxes ................................ 638 563
Deposits and other assets ............................ 681 3,174
Debt issuance costs, net ............................. 10,059 9,172
--------- ---------
$ 135,165 $ 131,357
========= =========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of capital lease obligations and
other debt ......................................... $ 1,103 $ 604
Accounts payable ..................................... 13,710 15,004
Accrued expenses ..................................... 9,825 12,292
Accrued income taxes ................................. 1,224 3,707
--------- ---------
Total current liabilities .......................... 25,862 31,607
Capital lease obligations ................................ 792 139
Line of credit ........................................... 28,502 10,000
Long-term debt ........................................... 105,000 105,000
Commitments and contingencies
Stockholders' (Deficit):
Common stock, $.001 par value. Authorized 12,500,000
shares; issued and outstanding 10,006,343 shares and
10,200,815 shares at December 31, 1997 and
December 31, 1998, respectively ...................... 10 10
Additional paid in capital ............................. 16,304 16,985
Accumulated other comprehensive income ................. -- (40)
Treasury stock, at cost (18,620,450 shares) ............ (62,058) (62,058)
Retained earnings ...................................... 20,753 29,714
--------- ---------
Total stockholders' (deficit) ..................... (24,991) (15,389)
--------- ---------
$ 135,165 $ 131,357
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
22
<PAGE>
HOLMES PRODUCTS CORP.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
December December December
31, 1996 31, 1997 31, 1998
<S> <C> <C> <C>
Net sales ............................. $194,331 $192,153 $214,479
Cost of goods sold .................... 145,915 136,740 146,509
-------- -------- --------
Gross profit ........................ 48,416 55,413 67,970
-------- -------- --------
Operating expenses:
Selling ............................. 13,225 15,647 20,456
General and administrative .......... 14,083 20,883 16,639
Product development ................. 5,520 5,463 6,295
-------- -------- --------
Total operating expenses .......... 32,828 41,993 43,390
-------- -------- --------
Operating profit .................. 15,588 13,420 24,580
-------- -------- --------
Other income and expense:
Other (income) expense, net .......... (319) 56 (436)
Interest expense, net ............... 6,491 7,096 13,833
-------- -------- --------
6,172 7,152 13,397
-------- -------- --------
Income before income taxes and minority
interest ............................. 9,416 6,268 11,183
Income tax expense .................... 2,787 2,196 2,222
-------- -------- --------
Income before minority interest ....... 6,629 4,072 8,961
Minority interest in net income of
majority-owned subsidiaries .......... 408 225 --
-------- -------- --------
Net income ........................ $ 6,221 $ 3,847 $ 8,961
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
23
<PAGE>
HOLMES PRODUCTS CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
Common Stock,
$.001 par value
Common Stock, -------------------------------
$ 1 par value Additional
------------ Paid in
Shares Amount Shares Par Capital
------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31,1995 ......... 100,000 $100 21,159 $21 $ 681
Net Income .......................... -- -- -- -- --
------- ---- ------ --- ------
Balance at December 31, 1996 ........ 100,000 100 21,159 21 681
Issuance of additional shares in
conjunction with contribution
of Holmes Products (Far East)
Limited (see Note 8) ............... (100,000) (100) 2,750 3 97
Issuance of common stock,
Net of related costs .............. -- -- 4,718 5 15,507
Redemption of common stock .......... -- -- (18,621) (19) 19
Foreign currency translation
adjustments ....................... -- -- -- -- --
Net income .......................... -- -- -- -- --
------- ---- ------ --- ------
Balance at December 31, 1997 ........ -- -- 10,006 10 16,304
Issuance of common stock ............ -- -- 195 -- 681
Foreign currency translation
adjustments ....................... -- -- -- -- --
Net income .......................... -- -- -- -- --
------- ---- ------ --- ------
Balance at December 31, 1998 ........ -- -- 10,201 10 16,985
======= ==== ====== === ======
</TABLE>
<TABLE>
<CAPTION>
Accumulated Total
Other Stockholders'
Comprehensive Treasury Retained Equity
Income Stock Earnings (Deficit)
------------- -------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31,1995 ......... $ -- $ -- $10,685 $11,487
Net Income .......................... -- -- 6,221 6,221
---- ------- ------- -------
Balance at December 31, 1996 ........ -- -- 16,906 17,708
Issuance of additional shares in
conjunction with contribution
of Holmes Products (Far East)
Limited (see Note 8) ............... -- -- -- --
Issuance of common stock,
Net of related costs .............. -- -- -- 15,512
Redemption of common stock .......... -- (62,058) -- (62,058)
Net income .......................... -- -- 3,847 3,847
---- ------- ------- -------
Balance at December 31, 1997 ........ -- (62,058) 20,753 (24,991)
Issuance of common stock ............ -- -- -- 681
Foreign currency translation
adjustments ....................... (40) -- -- (40)
Net income .......................... -- -- 8,961 8,961
---- ------- ------- -------
Balance at December 31, 1998 ........ (40) (62,058) 29,714 (15,389)
==== ======= ======= =======
</TABLE>
24
<PAGE>
HOLMES PRODUCTS CORP.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
-------------------------------------------
December 31, December 31, December 31,
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Net earnings ................................... $6,221 $3,847 $8,961
Other comprehensive income:
Foreign currency translation adjustments ..... -- -- (40)
------ ------ ------
Comprehensive income ........................... $6,221 $3,847 $8,921
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
25
<PAGE>
HOLMES PRODUCTS CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
December December December
31, 1996 31, 1997 31, 1998
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ........................................ $ 6,221 $ 3,847 $ 8,961
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization ................... 6,867 7,473 7,248
Amortization of debt issuance costs ............. -- 98 1,182
Change in allowance for doubtful accounts ....... (381) (654) 260
Loss on disposition of property, plant and
equipment ..................................... -- -- 1,356
Deferred income taxes ........................... (2,674) (715) (741)
Minority interest in net income of majority-owned
subsidiaries ................................... 408 225 --
Changes in operating assets and liabilities:
Accounts receivable ........................... 3,584 (5,776) 875
Inventories ................................... (6,418) 5,702 2,210
Prepaid expenses and other current assets ..... 114 94 (911)
Income taxes receivable ....................... 1,214 (104) 104
Deposits and other assets ..................... (1,594) 3,836 (2,493)
Accounts payable .............................. (8,698) (58,558) 1,254
Accrued expenses .............................. 2,335 (816) 2,467
Accrued income taxes .......................... 1,824 (1,025) 2,483
-------- -------- -------
Net cash provided by (used for) operating
activities .................................... 2,802 (46,373) 24,255
-------- -------- -------
Cash flows from investing activities:
Purchases of property and equipment ............... (8,594) (5,815) (4,749)
Purchase of Minority Interest ..................... -- (451) (451)
-------- -------- -------
Net cash used for investing activities .......... (8,594) (6,266) (5,200)
-------- -------- -------
Cash flows from financing activities:
Borrowings (repayments) on line of credit, net of
issuance costs .................................. -- 27,136 (18,502)
Borrowing of long-term debt, net of issuance
costs ........................................... -- 96,209 --
Issuance of common stock, net of issuance costs ... -- 15,512 681
Net borrowings from (repayments to) affiliate...... 7,000 (23,000) --
Purchase of treasury stock ........................ -- (62,058) --
Debt issuance costs ............................... -- -- (295)
Principal payments on capital lease obligations ... (114) (481) (701)
-------- -------- -------
Net cash provided by (used for) financing
activities .................................... 6,886 53,318 (18,817)
-------- -------- -------
Net increase in cash and cash equivalents ........... 1,094 679 238
Cash and cash equivalents, beginning of period ...... 3,368 4,462 5,141
-------- -------- -------
Cash and cash equivalents, end of period ............ $ 4,462 $ 5,141 $ 5,379
======== ======== =======
Supplemental disclosure of cash flow information:
Cash paid for interest ........................... $ 6,780 $ 7,079 $13,283
Cash paid for income taxes ....................... $ 2,423 $ 4,040 $ 268
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
26
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business
Holmes Products Corp. ("HPC") designs, develops, imports and sells consumer
durable goods, including fans, heaters, humidifiers, air purifiers,
dehumidifiers and lighting products, to retailers throughout the United
States and Canada, and to a lesser extent, Europe.
Holmes Products (Far East) Limited ("HPFEL") and its subsidiaries
manufacture and sell consumer durable goods, including fans, heaters and
humidifiers, mainly to HPC. HPFEL operates facilities in Hong Kong, Taiwan
and The People's Republic of China.
HPFEL is a wholly-owned subsidiary of HPC. Prior to the recapitalization
transaction described in Note 8, HPC and HPFEL (together as "the Company")
were both directly or indirectly 80% owned subsidiaries of Asco Investments
Ltd., a subsidiary of Pentland Group plc ("Pentland").
2. Summary of Significant Accounting Principles
Basis of Consolidation
The accompanying financial statements include the accounts of HPC and its
wholly-owned subsidiaries, HPFEL, Holmes Manufacturing Corp., Holmes Air
(Taiwan) Corp. and Holmes Air (Canada) Corp. The accompanying financial
statements also include the accounts of HPFEL's wholly-owned subsidiaries,
Esteem Industries Ltd., Raider Motor Corp., Dongguan Huixin Electrical
Products Company, Ltd. and Dongguan Raider Motor Corp. Ltd. Prior to the
recapitalization transaction described in Note 8, the financial statements
combined the accounts of HPC and HPFEL on the basis of common ownership.
All significant inter-company balances and transactions have been
eliminated.
Minority Interest
Prior to May 1997, HPFEL owned 70% of Raider Motor Corp., which owns 100%
of Dongguan Raider Motor Corp. Ltd. The minority stockholders' interests in
the net income and net assets of Raider Motor Corp. and Dongguan Raider
Motor Corp. Ltd. were presented separately in the accompanying financial
statements.
In May and June 1997, the Company reached agreements to acquire the capital
stock held by the minority stockholders. The book value of the minority
interest exceeded the repurchase price by approximately $650,000. The
excess of the fair market value of the assets and liabilities of Raider
Motor Corp. on the date of acquisition over the purchase price has been
recorded as a reduction of property and equipment during the year ended
December 31, 1997.
27
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Translation of Foreign Currencies
The functional currency for the Company's foreign operations is the local
currency. Assets and liabilities are translated into U.S. dollars at
exchange rates in effect at the balance sheet date. Income, expense and
cash flow items are translated at average exchange rates for the
period. Adjustments resulting from the translation of foreign functional
currency financial statements into U.S. dollars are recorded in the
accumulated other comprehensive income component of stockholders equity
(deficit). For periods prior to 1998, translation gains and losses were
immaterial and were included in net income. Accordingly, net income
equaled comprehensive income for all periods prior to 1998. Gains and
losses resulting from remeasurement of balances denominated in other than
the local currency are not material and are included in other (income)
expense, net.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method.
Property and equipment
Property and equipment are recorded at cost. Depreciation is computed over
the estimated useful lives of the assets using an accelerated method,
except for mold costs, tooling and plant and machinery, which are
depreciated using the straight-line method. Repairs and maintenance are
expensed as incurred.
Revenue Recognition
Revenue is recognized upon shipment of goods from the Company's warehouses.
Revenue for goods sent directly from HPFEL to a retail customer is
recognized when the customer takes ownership of the goods. Estimates for
returned goods and warranty costs are accrued at the time of shipment.
Product Development
Research, engineering and product development costs are expensed as
incurred.
28
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Statement of Cash Flows
All highly liquid debt instruments with original maturities of three months
or less are considered to be cash equivalents. Such investments consist of
a money market account.
Advertising
Advertising costs are expensed as incurred. In conjunction with transfers
of inventory in 1998 and 1993, the Company received advertising credits
totaling $2,352,000 and $980,000, respectively, to be used for the purchase
of advertising media, merchandise or services, subject to certain
limitations and cash co-payments. The credits expire in February 2003 and
October 1999, respectively. The remaining balance of these credits
approximated $218,000 at December 31, 1997 and $2,352,000 and $209,000 at
December 31, 1998, respectively, which are reported as prepaid expenses and
other current assets and deposits and other assets. Total advertising
expenses in 1996, 1997, and 1998 were approximately $4,446,000, $5,968,000
and $6,564,000, respectively which are included in selling expenses in the
accompanying statement of income.
Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes, as set forth in Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." SFAS 109 requires
recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled.
Joint Venture
In October 1998, the Company signed an agreement with General Electric
creating a limited liability company for a motor manufacturing, sales and
distribution company. The limited liability company, GE Holmes Industries,
is owned 49% by a subsidiary of Holmes Products Corp. The Joint Venture had
no transactions during the year ended December 31, 1998.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingencies at December 31, 1997 and 1998, and the
reported amounts of revenues and expenses during the periods presented.
Actual results could differ from those estimates.
Reclassifications
Certain amounts in the prior year's financial statements have been
reclassified to conform to the current period presentation.
29
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. Related Party Transactions
Prior to the 1997 recapitalization described in Note 8, the Company had
numerous business relationships with Pentland and Asco General Supplies
(Far East) Ltd. ("Asco"), an affiliated entity. These arrangements were
generally terminated in conjunction with the recapitalization of the
Company, and all outstanding amounts were repaid.
Asco provided the Company with letter of credit financing for their
purchases from foreign manufacturers. The Company paid a commission to Asco
for administrative services related to the processing of these trade
acceptances. Total commissions approximated $1,984,000 and $1,834,000 in
1996 and 1997, respectively, which is included in cost of goods sold in the
accompanying statement of income. This arrangement has been terminated in
connection with the completion of the recapitalization transaction
described in Note 8.
HPC had a revolving credit facility agreement with Pentland Management
Services Limited ("PMSL"), an affiliated company, whereby PMSL would
provide short-term loans to HPC. The facility was increased several times
between 1993 and 1997, reaching a peak of $38,000,000. Total borrowings
under the agreement were limited to a defined borrowing base of eligible
accounts receivable and inventory, and were secured by all assets of the
Company. Individual loans under the agreement had maturities which ranged
from one to six months, at HPC's option. Interest rates on individual loans
were at the prime rate as of the inception date of the loan, and were fixed
through the maturity of the loan. Interest was payable at the expiration of
each loan, and totaled approximately $2,385,000 in 1996 and $2,410,000 in
1997. This agreement included certain financial covenants, as well as
restrictions on the incurrence of additional debt. This facility was
terminated in conjunction with the completion of the recapitalization
transaction described in Note 8.
Esteem Industries Ltd. had purchased certain raw materials from an entity
owned by the brother of a former minority stockholder of Raider Motor Corp.
and Dongguan Raider Motor Corp. Ltd. Such purchases totaled $181,000 in
1996 and are included in cost of goods sold in the accompanying statement
of income. There were no such purchases in 1997 or 1998.
HPC pays a sales commission to Jordan Kahn Co. Inc., owned principally by
an officer and stockholder of the Company. Such commissions approximated
$480,000, $367,000 and $368,000 in 1996, 1997 and 1998, respectively, which
are included in selling expenses in the accompanying statement of income.
Asco had advanced HPFEL monies for working capital purposes from time to
time. All advances were repaid during 1997 in conjunction with the
recapitalization of the Company. The interest rate on these advances was
8.5%. Interest expense incurred on amounts due from HPFEL to Asco was
$531,000 in 1996 and $446,000 in 1997.
The salaries and related benefits of certain employees of Dongguan Raider
Motor Corp Ltd. were paid through Asco, which is reimbursed by Raider Motor
Corp. for such costs. These costs amounted to $47,000 and $128,000 in 1996
and 1997, respectively.
HPFEL also paid $78,000 in 1996 and $12,000 in 1997 to Asco for the use of
certain shared computer facilities.
30
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In addition, beginning in March 1995, HPFEL occupied facilities owned by
the spouse of a director of HPFEL. Total rent expense paid on this property
amounted to $452,000 and $475,000 in 1996 and 1997, respectively.
Certain employees of Pentland and Asco have performed various management
and administrative services for HPFEL, for which no amounts have been
charged to HPFEL. Management has estimated such costs, which consist of
allocations of salary and related benefits costs and travel expenses, to be
insignificant in 1996 and 1997. Accordingly, no amounts have been recorded
in the accompanying financial statements for such costs.
As part of the recapitalization transactions described in Note 8, the
Company entered into a consulting agreement with the new majority
stockholder, to provide management, financial, advisory and strategic
support and analysis. The agreement expires in November 2002, or earlier if
the stockholder's ownership percentage declines to less than 40% or less
than the percentage owned by management of the Company, taken as a group.
Fees under this agreement are $400,000 per year and will increase to
$500,000 per year as of February 5, 1999, related to the Rival Acquisition.
4. Inventories
Inventories are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1998
----------- -----------
<S> <C> <C>
Finished goods..................................... $34,305,000 $34,620,000
Raw materials...................................... 8,844,000 7,930,000
Work-in-process.................................... 12,401,000 10,790,000
----------- -----------
$55,550,000 $53,340,000
=========== ===========
</TABLE>
5. Property and Equipment
Property and equipment are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
Depreciable lives 1997 1998
--------------------- ----------- -----------
<S> <C> <C> <C>
Mold costs and tooling.............. 1 1/2 - 5 years $18,363,000 $15,241,000
Plant and machinery................. 7 years 9,805,000 11,283,000
Leasehold improvements.............. life of lease-7 years 4,025,000 4,048,000
Equipment and computer equipment.... 5 years 3,233,000 3,282,000
Furniture and fixtures.............. 5-7 years 2,310,000 2,347,000
Motor vehicles...................... 4 years 323,000 412,000
----------- -----------
38,059,000 36,613,000
Less-accumulated depreciation and amortization 18,452,000 20,861,000
----------- -----------
$19,607,000 $15,752,000
=========== ===========
</TABLE>
31
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Property and equipment recorded under capital leases amounted to
approximately $2,067,000 and $2,055,000 at December 31, 1997 and 1998,
respectively. Total accumulated amortization related to these assets is
approximately $411,000 and $582,000 at December 31, 1997 and 1998,
respectively. Amortization expense for the period is included in
depreciation and amortization in the accompanying statement of cash flows.
As described in Note 2, approximately $650,000 has been recorded as a
reduction of plant and machinery during 1997 in conjunction with the
repurchase of the capital stock held by the former minority stockholders of
Raider Motor Corp.
6. Accrued Expenses
Accrued expenses are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1997 1998
---------- -----------
<S> <C> <C>
Sales returns and allowances $3,246,000 $ 3,540,000
Payroll and bonuses 1,122,000 1,606,000
Interest payable 1,026,000 1,576,000
Advertising 825,000 1,210,000
Other 3,606,000 4,360,000
---------- -----------
$9,825,000 $12,292,000
========== ===========
</TABLE>
7. Long-Term Debt
Senior Subordinated Notes
In connection with the recapitalization transactions described in Note 8,
HPC issued $105,000,000 in senior subordinated notes, maturing on November
15, 2007 (the "Notes"). The Notes bear interest at 9 7/8%, payable
semi-annually on May 15 and November 15. No principal is due until the
maturity date.
The Notes are subordinated to the Company's other debt, including the Line
of Credit (as defined below) and capital leases. The Notes are guaranteed
by HPC's current and future domestic subsidiaries (see Note 17) on a full,
unconditional and joint and several basis, but are otherwise unsecured.
HPC can, at its option, redeem the Notes at any time after November 15,
2002, subject to a fixed schedule of redemption prices which declines from
104.9% to 100% of the face value. However, HPC may redeem up to $33 million
of the Notes prior to this date at a price of 109.875% of face value upon
issuance of equity securities. Additionally, upon certain sales of stock or
assets or a change of control of HPC, HPC must offer to repurchase all or a
portion of the Notes at a redemption price of 101% of face value.
The Notes contain certain restrictions and covenants, including limitations
(based on certain financial ratios) on HPC's ability to pay dividends,
repurchase stock or incur additional debt (other than borrowings under the
Line of Credit). The Notes and Line of Credit contain cross-default
provisions.
32
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company issued an additional $31.3 million of notes in February 1999
with the same terms as the previous notes in connection with the Rival
Acquisition.
Debt issuance costs of $9,086,000 associated with the Notes are being
amortized over the 10 year life of the Notes.
Line of Credit
The Company entered into a $100,000,000 revolving line of credit with a
bank (the "Line of Credit") as part of the recapitalization transactions
described in Note 8. Of the total amount, up to $15,000,000 can be borrowed
by HPFEL and its subsidiaries, and up to $20,000,000 can be used to secure
letters of credit.
Borrowings under the Line of Credit are due on January 2, 2003 and may
remain outstanding until that time. Accordingly, such amounts are
classified as non-current liabilities on the accompanying consolidated
balance sheet. However, upon certain sales of stock or assets or the
issuance of equity securities, the Company must repay a portion of the
Line of Credit generally equal to the net cash proceeds received. Such
repayment is not required if the proceeds of an equity offering are used to
acquire other companies.
Amounts outstanding under the Line of Credit bear interest at either a
prime rate-based rate or a LIBOR-based rate, at the Company's option, plus
a specified margin. The margin varies from none to 0.75% for prime-based
loans and 1.25% to 2.25% for LIBOR-based loans, depending on a defined
ratio of the Company's financial results (the "Leverage Ratio"). Borrowings
outstanding at December 31, 1997, of which $1,002,000 is outstanding at
HPFEL, bear interest at a weighted average rate of 7.98%. Borrowings
outstanding at December 31, 1998 bear interest at a rate of 7.66%. Interest
is payable no less frequently than quarterly in arrears.
The Company must pay a quarterly commitment fee on the unused portion of
the Line of Credit. The fee varies from 0.375% to 0.5% per annum, depending
on the Leverage Ratio. The Company must also pay a quarterly fee on open
letters of credit which varies from 0.75% to 2.5% of the face amount per
annum, depending on the type of credit issued and the Leverage Ratio.
Borrowings by HPC under the Line of Credit are secured by all assets of HPC
and a pledge of all of the capital stock of domestic subsidiaries and 66%
of the capital stock of foreign subsidiaries. Borrowings by HPFEL are
secured by all assets of HPFEL and certain of its subsidiaries. The Line of
Credit is also guaranteed by HPC's current and future domestic
subsidiaries.
The Line of Credit agreement contains certain restrictions and covenants,
including limitations on the Company's ability to pay dividends, invest in
certain types of securities, repurchase stock or incur additional debt.
However, among other uses, the Company may issue debt which is subordinated
to the Line of Credit, used to finance certain permitted acquisitions of
other companies or used to repurchase shares of stock under the terms of
the stockholders' agreement described in Note 8. The Company is also
required to maintain certain financial ratios. The Notes and Line of Credit
contain cross-default provisions.
Issuance costs of $1,366,000 associated with the Line of Credit are being
amortized over the 5-year life of the Line of Credit.
33
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company entered into an amended and restated Credit Facility agreement
in February, 1999 in connection with the Rival Acquisition. The new Credit
Facility consists of a six-year tranche A term loan of $40.0 million, an
eight-year tranche B term loan of $85.0 million and a $200.0 million,
six-year revolving credit facility. The Credit Facility bears interest at
variable rates based on either the prime rate or LIBOR, at the Company's
option, plus a margin which, in the case of the tranche A term loan and the
revolving credit facility, varies depending upon certain financial ratios
of the Company. The Credit Facility, and the guarantees thereof by the
Company's domestic subsidiaries, are secured by substantially all of the
Company's domestic and certain foreign assets. The Credit Facility and the
Notes Indentures include certain financial and operating covenants, which,
among other things, restrict the ability of the Company to incur additional
indebtedness, grant liens, make investments and take certain other actions.
The ability of the Company to meet its debt service obligations will be
dependent upon the future performance of the Company, which will be
impacted by general economic conditions and other factors.
8. Stockholders' Equity
Recapitalization
On November 26, 1997, the Company and its stockholders consummated an
agreement to perform the following: (i) the stockholders of HPFEL
contributed their shares of common stock, $1 par value, to HPC in exchange
for 2,750,741 shares of HPC's common stock, no par value, (ii) HPC issued
4,718,579 shares of its common stock to outside investors and certain
executive officers of the Company for approximately $15.5 million, net of
related issuance costs, (iii) the Company repaid all amounts outstanding to
Pentland affiliates and repaid all amounts outstanding on the Company's
trade acceptances, including accrued interest, and (iv) HPC redeemed
18,620,450 shares of HPC common stock held by Pentland for approximately
$62.1 million. In connection with these transactions, HPC issued
$105,000,000 of 9 7/8% Senior Subordinated Notes due in November 2007 and
borrowed $27,500,000 under a new Line of Credit facility, both described in
Note 7.
The transactions described above have been accounted for as a leveraged
recapitalization of the Company. The Company has retained its historical
cost basis of accounting, due to the significant minority shareholders
which remained. The shares redeemed from Pentland have been recorded as
treasury stock, at cost.
In connection with certain previous employment agreements, incremental
compensation in the amount of $6,901,000 was paid at the time of closing in
1997, and the related agreements were terminated. These costs have been
recorded in general and administrative expenses in the accompanying
consolidated statement of income.
Stock Option Plan
In connection with the recapitalization transaction described above, HPC's
Board of Directors adopted and the stockholders approved the 1997 Stock
Option Plan (the "Plan"). The Plan provides for the grant of incentive
stock options and non-qualified stock options to employees, officers,
directors, and consultants of the Company's, except that incentive stock
options may not be issued to consultants or non-employee directors. A total
of 1,563,020 shares of HPC's common stock were reserved for issuance under
the Plan. The exercise price and period over which options become
exercisable will be determined by the Board of Directors. However, the
exercise price of incentive stock options will be equal to at least 100% of
the fair market value of HPC's common stock on the date of grant (110% for
34
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
individuals holding more than 10% of HPC's common stock). Options will
expire no later than 10 years after date of grant (5 years for individuals
holding more than 10% of HPC's common stock). The Plan will expire in
November 2006.
The following summarizes stock option activity for 1998:
<TABLE>
<CAPTION>
Exercise
Shares Price Range
--------- -----------
<S> <C> <C>
Outstanding as of December 31, 1997 - -
Granted during 1998 1,474,152 $3.50
Exercised during 1998 - -
Forfeited during 1998 (25,800) $3.50
--------- ------
Outstanding as of December 31, 1998 1,448,352 $3.50
--------- ------
Number of shares exercisable
As of December 31, 1998 86,100 $3.50
Total available for grant as of
December 31, 1998 114,668 $3.50
</TABLE>
Stock-based compensation
The Company accounts for stock-based compensation using the method
prescribed in Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees". Accordingly, no compensation cost has been
recognized for the Company's stock option plan. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation" ("FAS 123"). Had
compensation cost been determined based on fair value at the grant dates
for awards in 1998, consistent with the provisions of FAS 123, the
Company's net income would have been reduced to a pro forma net income of
$8.8 million.
The fair value of options granted at date of grant was estimated using the
Black-Sholes model with an assumed weighted average expected term of 7.30
years and a weighted average interest rate of 5.32%.
The weighted average grant date fair value of options granted during 1998
was $1.17. All outstanding and exercisable options have an exercise price
of $3.50. Options outstanding have a weighted average remaining contractual
life of 8.9 years.
Stock Split
In April 1998, the Company's Board of Directors approved an increase in the
number of authorized shares of common stock from 15,000 with no par value
to 12.5 million with a $.001 par value. The change in par value did not
affect any of the existing rights of shareholders and has been recorded as
an adjustment to additional paid-in capital and common stock. In addition,
the Company's Board of Directors approved a 21,159-for-1 stock split.
Shares outstanding have been adjusted for all periods presented to reflect
post-split amounts.
Warrant
In conjunction with the recapitalization transaction described above, HPC
issued a warrant to Pentland to purchase 24 shares of common stock at an
exercise price of $74,012 per share (pre stock split). This warrant is
exercisable only upon the occurrence of one of the following by November
26, 1999: (a) an initial public offering of equity securities by HPC,
provided that this offering includes or is followed within specified time
periods by sales of shares offered by selling stockholders, (b) a sale of
the Company, (c) a sale by the new majority stockholder and its affiliates
of all or substantially all of their holdings of HPC's common stock or (d)
a further recapitalization of the Company through the issuance of
additional debt. The warrant expires on November 26, 1999. Management has
determined that the value of the warrant is not material to the Company's
consolidated financial statements.
Stockholders' Agreement
All of the holders of HPC's outstanding stock are subject to a
stockholders' agreement. This agreement provides the Company with a right
of first refusal on any proposed sales of stock to outside parties.
Additionally, HPC has certain rights to purchase shares of Common Stock
from employees upon their termination of employment.
35
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. Income Taxes
Deferred income taxes reflect the tax impact of temporary differences
between the amount of assets and liabilities for financial reporting
purposes and such amounts as measured by tax laws and regulations. Under
SFAS 109, the benefit associated with future deductible temporary
differences and operating loss or credit carryforwards is recognized if it
is more likely than not that a benefit will be realized. Deferred tax
expense (benefit) represents the change in the net deferred tax asset or
liability balance.
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal ..... $ 3,888,000 $1,514,000 $1,844,000
State ....... 1,176,000 534,000 366,000
Foreign ..... 397,000 863,000 753,000
----------- ---------- ----------
Total current 5,461,000 2,911,000 2,963,000
----------- ---------- ----------
Deferred:
Federal ..... $(1,943,000) $ (547,000) $ (609,000)
State ....... (594,000) (168,000) (132,000)
Foreign ..... (137,000) -- --
----------- ---------- ----------
Total current (2,674,000) (715,000) (741,000)
----------- ---------- ----------
$ 2,787,000 $2,196,000 $2,222,000
=========== ========== ==========
</TABLE>
Pre-tax income (loss) is summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Domestic $5,842,000 $ (715,000) $ 988,000
Foreign 3,574,000 6,983,000 10,195,000
---------- ---------- -----------
$9,416,000 $6,268,000 $11,183,000
========== ========== ===========
</TABLE>
The two subsidiaries which are incorporated and based in the People's
Republic of China have a two-year tax holiday on the basis that they expect
to operate in China for ten or more years. The tax holiday provides for an
exemption from income tax in the first two profit-making years and for a
50% reduction in the subsequent three years. The first profit-making year
is defined as the year in which the foreign enterprise recognizes profit on
a cumulative basis for the first time, after offsetting prior years'
losses. Losses can be carried forward for a maximum of five years.
Dongguan Raider Motor Corp. Ltd. was profitable in both 1994 and 1995 and
as such is now subject to income tax in China. Dongguan Huixin Electrical
Products Company, Ltd. had previously experienced losses but has become
profitable on a cumulative basis in 1997, and is thus within the tax
holiday. Net operating losses at December 31, 1996 were approximately
$1,952,000, which were fully utilized during the year ended December 31,
1997.
36
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
If not exempt, the statutory tax rate which applies to these companies in
China is 24% (prior to the 50% reduction described above for the first
three years after the exemption expires), as their operations are located
in a region of China where tax incentives are applicable.
The Bahamas registered companies (HPFEL and Raider Motor Corp.) are subject
to tax in Hong Kong at 16.5% only to the extent that their income is deemed
to be onshore Hong Kong.
The Company's effective tax rate varies from the statutory U.S. federal
tax rate as a result of the following:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. federal tax rate................ 35.0% 35.0% 35.0%
State taxes, net of federal tax benefit........ 4.0 .5 1.4
Foreign earnings taxed at different rates...... (9.4) (17.6) (17.1)
Valuation allowance on deferred tax assets..... (.6) 15.6 -
Non-deductible expenses ....................... .3 .5 .3
Other ......................................... .3 1.0 .3
---- ---- ----
Effective tax rate ............................ 29.6% 35.0% 19.9%
==== ==== ====
</TABLE>
Deferred tax assets and deferred tax liabilities are comprised of the
following at December 31, 1997 and 1998:
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1998
----------- ----------
<S> <C> <C>
Deferred tax assets:
Accrued expenses ........................ $ 1,932,000 $2,632,000
Inventory ............................... 2,053,000 2,144,000
Interest limitation carryforward......... 1,447,000 1,367,000
Accounts receivable ..................... 182,000 287,000
Property and equipment .................. 638,000 483,000
----------- ----------
Gross deferred tax assets ............. 6,252,000 6,913,000
Deferred tax asset valuation allowance .. (1,447,000) (1,367,000)
----------- ----------
Net deferred tax assets ............... $ 4,805,000 $5,546,000
=========== ==========
</TABLE>
The deductibility of interest paid to or guaranteed by Pentland and its
affiliates while HPC was a majority-owned subsidiary of Pentland was
subject to certain limitations under the U.S. Internal Revenue Code.
Primarily as a result of the compensation recorded in conjunction with the
recapitalization transaction described in Note 8, approximately $3,600,000
of interest expense incurred by HPC during the year ended December 31, 1997
was not deductible for income tax purposes. Such amounts can be carried
forward indefinitely. However, due to the impact of the Company's current
37
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
debt structure on future operating results and the Internal Revenue Code
limitations, management has provided a valuation allowance of $1,367,000
against the deferred tax asset arising from this carryforward. The
utilization of this carryforward may be further limited as a result of the
change in ownership that occurred as part of the recapitalization of the
Company, although this limitation will primarily impact only the timing
of any possible utilization. If the Company is able to utilize this
deduction, it will reduce income tax expense in future years.
In general, no provision has been recorded for U.S. or additional foreign
taxes on undistributed earnings of foreign subsidiaries, as it is
management's intention that these earnings will continue to be reinvested.
It is not practicable to estimate the amount of additional tax that might
be payable on such earnings. Total undistributed earnings of foreign
subsidiaries as of December 31, 1998 are approximately $ 24,137,000.
10. Leases
In addition to leasing property and equipment under various capital leases
(Note 5), the Company has various noncancellable operating leases for
facilities, vehicles and office equipment which expire at various dates
through 2005. Certain of these leases contain options for renewal or
purchase of the underlying asset. Rent expense was approximately $3,064,000
in 1996, $3,099,000 in 1997 and $3,916,000 in 1998.
At December 31, 1998, future minimum rental payments under noncancellable
lease arrangements are as follows:
<TABLE>
<CAPTION>
Operating Capital
leases leases
----------- ---------
<S> <C> <C>
1999 $ 3,264,000 $639,000
2000 2,302,000 143,000
2001 1,816,000 -
2002 1,675,000 -
2003 and thereafter 4,703,000 -
----------- --------
$13,760,000 $782,000
===========
Less: amount representing interest 39,000
--------
Present value of obligations under
capital leases $743,000
========
Comprised of:
Current portion $604,000
Non-current portion 139,000
--------
$743,000
========
</TABLE>
38
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
11. Employee Benefit Plan
HPC provides its employees with a defined contribution retirement plan
under section 401(k) of the Internal Revenue Code. All employees are
eligible to participate in the plan and contribute up to 15% of their
compensation, which is then invested in one or more investment funds. HPC
matches up to 3% of an employee's contribution.
HPFEL provides its Hong Kong based employees with a defined contribution
retirement plan. All Hong Kong based employees of HPFEL and Esteem
Industries Ltd. may contribute 5% of their compensation, with the Company
contributing an additional 5% to 7 1/2% of an employee's compensation.
The Company's contributions to these plans approximated $223,000, $277,000
and $308,000 in 1996, 1997 and 1998, respectively.
12. Business and Credit Concentrations and Business Segments
Business and Credit Concentrations
HPC sells its products to retailers throughout the United States, Canada and
Europe. Three customers accounted for approximately 18%, 12% and 10%,
respectively of total sales for 1996. These same three customers accounted for
approximately 17%, 11% and 11%, respectively, of total sales in 1997. These same
three customers accounted for approximately 22%, 14% and 12%, respectively, of
total sales in 1998. Accounts receivable due from the single largest customers
amounted to 13% and 27% of total accounts receivable at December 31, 1997 and
1998, respectively. HPC has also entered into an agreement with an insurance
company to purchase HPC's receivables from certain pre-determined customers, up
to specified limits, if the customer defaults on payment. In exchange, HPC pays
a monthly fee.
Certain of HPC's retail customers have filed for bankruptcy protection during
1997 and 1998. Management monitors and evaluates the credit status of its
customers, and adjusts sales terms as appropriate. The Company maintains
reserves for potential credit losses and such losses, in the aggregate, have not
exceeded management's expectations. Management does not believe that the Company
is subject to any other unusual risks beyond the normal credit risk attendant to
operating their business.
Business Segments
The Company adopted SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information" ("SFAS 131"), during 1998. SFAS 131 established
standards for reporting information about business segments in annual financial
statements. It also established standards for related disclosures about products
and services, major customers and geographic areas. Business segments are
defined as components of a business about which separate financial information
is available that is evaluated regularly by the chief operating decision maker,
or decision making group, in deciding how to allocate resources and in assessing
performance. The business segments are managed separately because each segment
represents a strategic business unit whose main business is entirely different.
The adoption of SFAS 131 did not affect the Company's results of operations or
financial position.
The Company manages its operations through two business segments:
o Manufacturing. This business segment is the manufacturing part of the
Company. The manufacturing is performed primarily at HPFEL.
39
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
o Distribution. This segment sells the Company's products throughout the United
States, Canada and Europe. All of the Company's products share common
distribution attributes.
As the Rival Acquisition is integrated, HPC intends to re-evaluate its
characterization of its business segments, and may determine in future periods
to expand or revise its segment presentation. The following table summarizes the
segment information for the fiscal years ended December 31 for the years shown
(in thousands USD's):
<TABLE>
<CAPTION>
Manufacturing Distribution Eliminations Consolidated
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales to customers 1998 $ 5,070 $ 209,409 $ - $ 214,479
1997 2,428 189,725 - 192,153
1996 1,202 193,129 - 194,331
_____________________________________________________________________
Intersegment net sales 1998 106,241 - (106,241) -
1997 83,626 - (83,626) -
1996 85,918 - (85,918) -
_____________________________________________________________________
Depreciation and amortization 1998 4,571 2,777 (100) 7,248
1997 2,077 5,526 (130) 7,473
1996 2,196 4,793 (122) 6,867
_____________________________________________________________________
Net interest expense (income) 1998 (890) 14,741 (18) 13,833
1997 579 6,517 - 7,096
1996 839 5,652 - 6,491
_____________________________________________________________________
Other operating costs 1998 97,261 192,342 (105,166) 184,437
1997 76,616 179,564 (82,443) 173,737
1996 80,523 179,448 (85,219) 174,752
_____________________________________________________________________
Segment income (loss) 1998 10,369 (451) (957) 8,961
1997 6,782 (1,882) (1,053) 3,847
1996 3,562 3,236 (577) 6,221
_____________________________________________________________________
Segment assets 1998 41,734 108,239 (18,616) 131,357
1997 32,621 119,036 (16,492) 135,165
1996 33,980 101,403 (7,097) 128,286
_____________________________________________________________________
Segment capital expenditures 1998 1,963 2,786 - 4,749
1997 1,304 4,511 - 5,815
1996 4,166 4,428 - 8,594
</TABLE>
The accounting policies of the reportable segments are the same as those
described in Note 2 of the Notes to Consolidated Financial Statements. The
results are disaggregated using a management approach, which is consistent with
the manner in which the Company's management internally disaggregates financial
information for the purposes of assisting in making internal operational
decisions.
40
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Other operating costs include: cost of sales, selling, general and
administrative expenses, product development expenses, other (income) expense,
net and income taxes.
The following information is summarized by geographic area:
<TABLE>
<CAPTION>
Consolidated
United States Far East Canada Total
------------- -------- ------ -----
<S> <C> <C> <C> <C>
Net sales:
Year ended December 31, 1996....... $189,943,000 $1,202,000 $3,186,000 $194,331,000
Year ended December 31, 1997....... 184,626,000 2,428,000 5,099,000 192,153,000
Year ended December 31, 1998....... 203,940,000 5,070,000 5,469,000 214,479,000
Identifiable assets:
December 31, 1997.................. 88,519,000 32,621,000 3,966,000 125,106,000
December 31, 1998.................. 83,384,000 33,980,000 4,821,000 122,185,000
Corporate assets at
December 31, 1998.............. 9,172,000
------------
Total assets at
December 31, 1998............. $131,357,000
</TABLE>
Net sales are grouped based on the geographic origin of the transaction. Net
sales in the United States include direct export sales to Europe.
The Company's manufacturing entities in the Far East sell completed products to
HPC in the United States at intercompany transfer prices which reflect
management's estimate of amounts which would be charged by an unrelated third
party. These sales are eliminated in consolidation. The remaining Far East sales
are to unrelated third parties.
Corporate assets at December 31, 1998 represent debt issuance costs associated
with the Company's senior subordinated notes and line of credit facility. As
these borrowings support operations on a worldwide basis, these deferred costs
have been excluded from the individual geographic areas. All of the Company's
other assets are used in the operations of individual entities in the different
geographic areas. Corporate assets at December 31, 1997 were $10,059,000.
13. Commitments and Contingencies
HPC is a party to several agreements to license certain technologies and
products. These license agreements generally provide for royalties based on
sales of the related products by HPC. Such royalties have not been material
to date.
In January 1998, HPC entered into an exclusive license and supply
agreement for certain chemical additives. The agreement provides for a
minimum annual royalty payment by HPC of
41
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
$240,000 that commenced in September 1998. HPC has an annual minimum
purchase obligation under this agreement of $100,000 in 1998 and $110,000
in 1999.
The Company is involved in litigation and is the subject of claims arising
in the normal course of its business. HPFEL has a contingent liability
related to potential withholding taxes (and the surcharges thereon) on rent
paid to the spouse of one of the directors (see Note 3). Although the
individual has accepted responsibility for the payment of these taxes, the
Company would be accountable for these tax payments in the event that the
individual did not fulfill this obligation. These withholdings and
surcharges amounted to $724,000 at December 31, 1997 and 1998. In the
opinion of management, based upon discussions with legal counsel, no
existing litigation or claims will have a materially adverse effect on the
Company's financial position or results of operations and cash flows.
The Company has entered into employment agreements with several
executives, which expire on December 31, 2000, renewable for annual periods
by mutual consent. These agreements provide that if employment is
terminated without cause, the employees will receive severance payments of
their respective salaries for the longer of 12 months or the remainder of
the term, in the case of the Company's president, or for 12 months, in the
case of the other executives.
Beginning July 1, 1997, Hong Kong has been governed by the People's
Republic of China. Management does not believe that this event will
materially affect the Company's financial position or results of
operations and cash flows.
14. Distribution of Profit
Amounts that can be distributed by HPFEL's subsidiaries in China are based
on the financial regulations of China, which differ from accounting
principles generally accepted in the United States. In particular, HPFEL's
two Chinese incorporated subsidiaries, Dongguan Huixin Electrical Products
Company, Ltd. and Dongguan Raider Motor Corp. Ltd., are deemed to be wholly
owned foreign enterprises and, as such, Chinese laws and regulations
require these companies to transfer to separate reserves a certain portion
of after-tax profit each year for specific purposes. These purposes include
enterprise expansion, repair and maintenance of fixed assets and staff
welfare. These reserves are deemed to be non-deductible to the parent
company.
The amount transferred to the reserve fund must be at least 10% of the
after-tax profit each year, determined in accordance with the financial
regulations of China, up to a cumulative maximum of 50% of the entity's
registered capital stock. Transfers to the staff welfare fund can be
determined by management. Management has decided that no transfers are to
be made to the employee staff welfare fund in 1998.
Consistent with standard practice in China, Dongguan Huixin Electrical
Products Company, Ltd. and Dongguan Raider Motor Corp. Ltd. account for
their staff welfare commitments on a monthly basis and the amounts involved
are charged directly to the profit and loss account. Such expenses were not
material in 1996, 1997 and 1998.
The retained earnings (accumulated losses) of these companies, including
earnings attributable to the former minority stockholders, on the basis of
accounting principles generally accepted in the United States, are as
follows:
42
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Dongguan Raider Motor Corp. Ltd.......................... $6,394,000 $8,860,000
Dongguan Huixin Electrical Products Company, Ltd. ....... 554,000 1,997,000
</TABLE>
The currency of China, the reminbi, is not freely convertible and the
ability of these subsidiaries to remit retained earnings to the parent
company is dependent on their ability to generate foreign currency
denominated earnings or to obtain government approval for the purchase of
foreign currency.
15. Financial Instruments
The company enters into various types of financial instruments in the
normal course of business. Fair values are estimated based on assumptions
concerning the amount and timing of estimated future cash flows and assumed
discount rates reflecting varying degrees of perceived risk. Accordingly,
the fair values may not represent actual values of the financial
instruments that could have been realized as of year end or that will be
realized in the future.
Fair values for cash and cash equivalents, accounts receivable, other
receivables, income taxes receivable, accounts payable, accrued expenses,
accrued income taxes and capital lease obligations approximate their
carrying values at December 31, 1997 and 1998, due to their relatively
short maturity. The fair values of the Company's Notes and Line of Credit
approximate their carrying values at December 31, 1998 because the interest
rates on these borrowings approximate current market rates.
16. Subsequent Events
On February 5, 1999, HPC and a wholly owned subsidiary completed a cash
tender offer and a contemporaneous second-step merger for all outstanding
shares of Common Stock of The Rival Company ("Rival") at a price of $13.75
per share. All of Rival's outstanding shares were tendered and accepted for
purchase or acquired in the merger at a total cash purchase price of
approximately $129.4 million (including payments to optionees). The Company
also refinanced approximately $141.5 million of Rival's debt. Rival is now
held as a wholly owned subsidiary of HPC. The Company also issued an
additional $31.3 million of notes and amended and restated its existing
credit facility in February, 1999 in connection with the Rival
Acquisition. See Note 7 for additional information.
This acquisition will be accounted for as a purchase, and therefore the
results of Rival will be included in the Company's Consolidated Financial
Statements as of and for the period beginning February 5, 1999.
Rival is a leading designer, manufacturer and marketer of a variety of
products including small kitchen and personal care appliances such as
Crock-Pot(R) slow cookers, can openers and massagers; products for the home
environment including space heaters, air purifiers, showerheads, utility
pumps, humidifiers and fans; and building supply and industrial products
such as household ventilation, door chimes, ceiling fans and industrial
fans.
43
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
17. Condensed Consolidating Information
The senior subordinated notes described in Note 7 were issued by HPC and
are guaranteed by HPC's domestic subsidiaries, which consisted of Holmes
Manufacturing Corp. ("Manufacturing"), Holmes Air (Taiwan) Corp. ("Taiwan")
and Holmes Motor Corp. ("Motor") as of December 31, 1998, but are not
guaranteed by HPC's other direct subsidiaries, HPFEL and Holmes Air
(Canada) Corp. ("Canada"). The guarantor subsidiaries are wholly-owned by
HPC, and the guarantees are full, unconditional and joint and several. The
following condensed consolidating financial information presents the
financial position, results of operations and cash flows of (i) HPC, as
parent, as if it accounted for its subsidiaries on the equity method, (ii)
Manufacturing, Taiwan, and Motor, the guarantor subsidiaries, and (iii)
HPFEL and Canada, the non-guarantor subsidiaries. There were no
transactions between Manufacturing, Taiwan and Motor, or between HPFEL and
Canada, during any of the periods presented. Separate financial statements
of Manufacturing, Taiwan and Motor are not presented herein as management
does not believe that such statements would be material to investors.
Taiwan had no revenues or operations during the periods presented, and
Manufacturing ceased operations in March 1997. Motor was formed in October,
1998 and engaged in no activities during 1998. As further described in Note
14, certain of HPFEL's subsidiaries in China have restrictions on
distributions to the parent company. Following the Rival Acquisition on
February 5, 1999, the senior subordinated notes are now guaranteed by Rival
and by Rival's domestic subsidiaries.
44
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONSOLIDATING BALANCE SHEET DECEMBER 31, 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents .................. $ 3,741 $ -- $ 1,400 -- $ 5,141
Accounts receivable, net ................... 36,775 -- 1,327 -- 38,102
Inventories ................................ 47,592 -- 11,433 $ (3,475) 55,550
Prepaid expenses and other
current assets ........................... 813 -- 303 -- 1,116
Deferred income taxes ...................... 4,167 -- -- -- 4,167
Income taxes receivable .................... 104 -- -- -- 104
Due from affiliates ........................ 5,426 89 10,605 (16,120) --
--------- ------- -------- --------- ---------
Total current assets ..................... 98,618 89 25,068 (19,595) 104,180
--------- ------- -------- --------- ---------
Property and equipment,net ................... 8,607 -- 11,093 (93) 19,607
Deferred income taxes ........................ 638 -- -- -- 638
Deposits and other assets .................... 10,313 1 426 -- 10,740
Investments in consolidated subsidiaries ..... 10,178 -- -- (10,178) --
--------- ------- -------- --------- ---------
$ 128,354 $ 90 $ 36,587 $ (29,866) $ 135,165
========= ======= ======== ========= =========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of capital lease obligations
and other debt ............................ $ -- $ -- $ 1,103 -- $ 1,103
Accounts payable ........................... 3,253 -- 10,457 -- 13,710
Accrued expenses ........................... 6,898 -- 2,927 -- 9,825
Accrued income taxes ....................... -- -- 1,298 $ (74) 1,224
Due to affiliates .......................... 10,694 -- 5,426 (16,120) --
--------- ------- -------- --------- ---------
Total current liabilities ................ 20,845 -- 21,211 (16,194) 25,862
--------- ------- -------- --------- ---------
Capital lease obligations .................... -- -- 792 -- 792
--------- ------- -------- --------- ---------
Line of credit ............................... 27,500 -- 1,002 -- 28,502
--------- ------- -------- --------- ---------
Long-term debt ............................... 105,000 -- -- -- 105,000
--------- ------- -------- --------- ---------
Stockholders' equity (deficit):
Common stock, $.001 par value .............. 10 1 -- (1) 10
Common stock, $1 par value ................. -- -- 100 (100) --
Additional paid in capital ................. 16,304 -- -- -- 16,304
Treasury stock ............................. (62,058) -- -- -- (62,058)
Retained earnings .......................... 20,753 89 13,482 (13,571) 20,753
--------- ------- -------- --------- ---------
Total stockholders' equity (deficit) ..... (24,991) 90 13,582 (13,672) (24,991)
--------- ------- -------- --------- ---------
$ 128,354 $ 90 $ 36,587 $ (29,866) $ 135,165
========= ======= ======== ========= =========
</TABLE>
45
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONSOLIDATING BALANCE SHEET DECEMBER 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents .................. $ 1,545 $ -- $ 3,834 -- $ 5,379
Accounts receivable, net ................... 35,558 -- 1,409 -- 36,967
Inventories ................................ 44,748 -- 13,142 $ (4,550) 53,340
Prepaid expenses and other current assets .. 869 -- 1,158 -- 2,027
Deferred income taxes ...................... 4,983 -- -- -- 4,983
Income taxes receivable .................... -- -- -- -- --
Due from affiliates ........................ (89) 89 14,066 (14,066) --
--------- ------- -------- --------- ---------
Total current assets ..................... 87,614 89 33,609 (18,616) 102,696
--------- ------- -------- --------- ---------
Property and equipment,net ................... 3,132 -- 12,520 100 15,752
Deferred income taxes ........................ 563 -- -- -- 563
Deposits and other assets .................... 12,020 1 425 (100) 12,346
Investments in consolidated subsidiaries ..... 19,677 -- -- (19,677) --
--------- ------- -------- --------- ---------
$ 123,006 $ 90 $ 46,554 $ (38,293) $ 131,357
========= ======= ======== ========= =========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of capital lease obligations
and other debt ............................ $ -- $ -- $ 604 -- $ 604
Accounts payable ........................... 2,400 -- 12,604 -- 15,004
Accrued expenses ........................... 8,960 -- 3,332 -- 12,292
Accrued income taxes ....................... 1,922 -- 1,785 -- 3,707
Due to affiliates .......................... 10,113 -- 3,953 $ (14,066) --
--------- ------- -------- --------- ---------
Total current liabilities ................ 23,395 -- 22,278 (14,066) 31,607
--------- ------- -------- --------- ---------
Capital lease obligations .................... -- -- 139 -- 139
--------- ------- -------- --------- ---------
Line of credit ............................... 10,000 -- -- -- 10,000
--------- ------- -------- --------- ---------
Long-term debt ............................... 105,000 -- -- -- 105,000
--------- ------- -------- --------- ---------
Stockholders' equity (deficit):
Common stock, $.001 par value .............. 10 1 -- (1) 10
Common stock, $1 par value ................. -- -- 100 (100) --
Additional paid in capital ................. 16,985 -- -- -- 16,985
Accumulated other comprehensive income ..... (40) -- -- -- (40)
Treasury stock ............................. (62,058) -- -- -- (62,058)
Retained earnings .......................... 29,714 89 24,037 (24,126) 29,714
--------- ------- -------- --------- ---------
Total stockholders' equity (deficit) ..... (15,389) 90 24,137 (24,227) (15,389)
--------- ------- -------- --------- ---------
$ 123,006 $ 90 $ 46,554 $ (38,293) $ 131,357
========= ======= ======== ========= =========
</TABLE>
46
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONSOLIDATING INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales ................................... $182,992 $6,951 $ 90,306 $(85,918) $ 194,331
Cost of goods sold .......................... 146,648 6,864 77,778 (85,375) 145,915
-------- ------ -------- -------- ---------
Gross profit .............................. 36,344 87 12,528 (543) 48,416
-------- ------ -------- -------- ---------
Operating expenses:
Selling ................................... 12,735 -- 490 -- 13,225
General and administrative ................ 6,733 72 7,278 -- 14,083
Product development ....................... 5,454 -- 66 -- 5,520
-------- ------ -------- -------- ---------
Total operating expenses ................ 24,922 72 7,834 -- 32,828
-------- ------ -------- -------- ---------
Operating profit ........................ 11,422 15 4,694 (543) 15,588
-------- ------ -------- -------- ---------
Other income and expense:
Other (income) expense, net ............... -- -- (353) 34 (319)
Interest expense, net ..................... 5,595 -- 896 -- 6,491
-------- ------ -------- -------- ---------
Total other income (expense) ............ 5,595 -- 543 34 6,172
-------- ------ -------- -------- ---------
Income (loss) before income taxes, equity in
income of consolidated subsidiaries
and minority interest ..................... 5,827 15 4,151 (577) 9,416
Income tax expense (benefit) ................ 2,497 -- 290 -- 2,787
-------- ------ -------- -------- ---------
Income before equity in income of
consolidated subsidiaries and
minority interest ......................... 3,330 15 3,861 (577) 6,629
Equity in income of consolidated subsidiaries 2,891 -- -- (2,891) --
-------- ------ -------- -------- ---------
Income (loss) before minority interest ...... 6,221 15 3,861 (3,468) 6,629
Minority interest in net income of majority
owned subsidiaries ........................ -- -- 408 -- 408
-------- ------ -------- -------- ---------
Net income (loss) ........................... $ 6,221 $ 15 $ 3,453 $ (3,468) $ 6,221
======== ====== ======== ======== =========
</TABLE>
47
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONSOLIDATING INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales ................................... $ 183,386 $ 1,240 $91,153 $(83,626) $192,153
Cost of goods sold .......................... 143,584 1,244 74,425 (82,513) 136,740
--------- ------- ------- -------- --------
Gross profit .............................. 39,802 (4) 16,728 (1,113) 55,413
--------- ------- ------- -------- --------
Operating expenses:
Selling ................................... 15,317 -- 330 -- 15,647
General and administrative ................ 13,401 15 7,467 -- 20,883
Product development ....................... 5,348 -- 115 -- 5,463
--------- ------- ------- -------- --------
Total operating expenses ................ 34,066 15 7,912 -- 41,993
--------- ------- ------- -------- --------
Operating profit (loss) ................. 5,736 (19) 8,816 (1,113) 13,420
--------- ------- ------- -------- --------
Other income and expense:
Other (income) expense, net ............... -- -- 42 14 56
Interest expense, net ..................... 6,432 -- 664 -- 7,096
--------- ------- ------- -------- --------
Total other income (expense) ............ 6,432 -- 706 14 7,152
--------- ------- ------- -------- --------
Income (loss) before income taxes and equity
in income of consolidated subsidiaries ... (696) (19) 8,110 (1,127) 6,268
Income tax expense (benefit) ................ 1,330 -- 940 (74) 2,196
--------- ------- ------- -------- --------
Income (loss) before equity in income of
consolidated subsidiaries ................ (2,026) (19) 7,170 (1,053) 4,072
Equity in income of consolidated subsidiaries 5,873 -- -- (5,873) --
--------- ------- ------- -------- --------
Income (loss) before minority interest ...... 3,847 (19) 7,170 (6,926) 4,072
Minority interest in net income of majority
owned subsidiaries ........................ -- -- 225 -- 225
--------- ------- ------- -------- --------
Net income (loss) ........................... $ 3,847 $ (19) $ 6,945 $ (6,926) $ 3,847
========= ======= ======= ======== ========
</TABLE>
48
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONSOLIDATING INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales ................................... $ 203,940 $ -- $116,780 $(106,241) $ 214,479
Cost of goods sold .......................... 154,736 -- 97,039 (105,266) 146,509
--------- --------- -------- --------- ---------
Gross profit (loss) ....................... 49,204 -- 19,741 (975) 67,970
--------- --------- -------- --------- ---------
Operating expenses:
Selling ................................... 19,740 -- 716 -- 20,456
General and administrative ................ 8,328 -- 8,311 -- 16,639
Product development ....................... 6,213 -- 82 -- 6,295
--------- --------- -------- --------- ---------
Total operating expenses ................ 34,281 -- 9,109 -- 43,390
--------- --------- -------- --------- ---------
Operating profit (loss) ................. 14,923 -- 10,632 (975) 24,580
--------- --------- -------- --------- ---------
Other income and expense:
Other (income) expense, net ............... (216) -- (220) -- (436)
Interest and other expense, net ........... 14,337 -- (486) (18) 13,833
--------- --------- -------- --------- ---------
Total other (income) expense ............ 14,121 -- (706) (18) 13,397
--------- --------- -------- --------- ---------
Income (loss) before income taxes and equity
in income of consolidated subsidiaries
and minority interest ..................... 802 -- 11,338 (957) 11,183
Income tax expense .......................... 1,439 -- 783 -- 2,222
--------- --------- -------- --------- ---------
Income (loss) before equity in income of
consolidated subsidiaries and minority
interest .................................. (637) -- 10,555 (957) 8,961
Equity in income of consolidated subsidiaries 9,598 -- -- (9,598) --
--------- --------- -------- --------- ---------
Income (loss) before minority interest ...... 8,961 -- 10,555 (10,555) 8,961
Minority interest in net income of majority
owned subsidiaries ........................ -- -- -- -- --
--------- --------- -------- --------- ---------
Net income (loss) ........................... $ 8,961 $ -- $ 10,555 $ (10,555) $ 8,961
========= ========= ======== ========= =========
</TABLE>
49
<PAGE>
HOLMES PRODUCTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Consolidated
-------- ------------ ------------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Year Ended December 31, 1996
Net cash provided by (used for) operating activities ... $ (1,578) $ 386 $ 3,994 $ 2,802
-------- -------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment .................. (4,417) -- (4,177) (8,594)
-------- -------- -------- --------
Cash flows from financing activities:
Net borrowings from affiliate ........................ 7,000 -- -- 7,000
Principal payments on capital lease obligations ...... -- -- (114) (114)
Other net activity with Parent ....................... 181 (386) 205 --
-------- -------- -------- --------
Net cash provided by (used for) financing activities 7,181 (386) 91 6,886
-------- -------- -------- --------
Net increase in cash and cash equivalents .............. 1,186 -- (92) 1,094
Cash and cash equivalents, beginning of period ......... 98 -- 3,270 3,368
-------- -------- -------- --------
Cash and cash equivalents, end of period ............... $ 1,284 $ -- $ 3,178 $ 4,462
======== ======== ======== ========
Year Ended December 31, 1997
Net cash provided by (used for) operating activities ... $(45,543) $ 459 $ (1,289) $(46,373)
-------- -------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment .................. (4,509) -- (1,306) (5,815)
Purchase of minority interest ........................ -- -- (451) (451)
-------- -------- -------- --------
Net cash used for investing activities ............. (4,509) -- (1,757) (6,266)
-------- -------- -------- --------
Cash flows from financing activities:
Borrowings of long-term debt ......................... 96,209 -- -- 96,209
Net borrowing of line of credit ...................... 26,134 -- 1,002 27,136
Net repayments to affiliate .......................... (23,000) -- -- (23,000)
Principal payments on capital lease obligations ...... -- -- (481) (481)
Issuance of common stock ............................. 15,512 -- -- 15,512
Purchase of treasury stock ........................... (62,058) -- -- (62,058)
Other net activity with Parent ....................... (288) (459) 747 --
-------- -------- -------- --------
Net cash provided by (used for) financing activities 52,509 (459) 1,268 53,318
-------- -------- -------- --------
Net increase in cash and cash equivalents .............. 2,457 -- (1,778) 679
Cash and cash equivalents, begining of period .......... 1,284 -- 3,178 4,462
-------- -------- -------- --------
Cash and cash equivalents, end of period ............... $ 3,741 $ -- $ 1,400 $ 5,141
======== ======== ======== ========
Year Ended December 31, 1998
Net cash provided by operating activities .............. $ 18,454 $ -- $ 5,801 $ 24,255
-------- -------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment .................. (2,784) -- (1,965) (4,749)
Purchase of minority interest ........................ -- -- (451) (451)
-------- -------- -------- --------
Net cash used for investing activities.............. (2,784) -- (2,416) (5,200)
-------- -------- -------- --------
Cash flows from financing activities:
Debt issuance costs .................................. (295) -- -- (295)
Net borrowing of line of credit ...................... (17,500) -- (1,002) (18,502)
Principal payments on capital lease obligations ...... -- -- (701) (701)
Issuance of common stock ............................. 681 -- -- 681
Other net activity with Parent ....................... (752) -- 752 --
-------- -------- -------- --------
Net cash used for financing activities ............. (17,866) -- (951) (18,817)
-------- -------- -------- --------
Net increase in cash and cash equivalents .............. (2,196) -- 2,434 238
Cash and cash equivalents, beginning of period ......... 3,741 -- 1,400 5,141
-------- -------- -------- --------
Cash and cash equivalents, end of period ............... $ 1,545 $ -- $ 3,834 $ 5,379
======== ======== ======== ========
</TABLE>
50
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the persons
who are directors and executive officers of the Company. The Company's directors
are elected annually by the stockholders. Pursuant to the terms of a
Stockholders' Agreement entered into in connection with the Transactions, the
Company's stockholders have agreed to vote in favor of the election of the
persons named as directors below.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jordan A. Kahn 56 President, Chief Executive Officer and Director
Stanley Rosenzweig 34 Chief Operating Officer and Director
Gregory F. White 34 Executive Vice President, Sales and Marketing
and Director
Ira B. Morgenstern 45 Senior Vice President - Finance
Fred Adair 48 Senior Vice President, Human Resources
and Organizational Performance
(Tommy) Woon Fai Liu 46 Managing Director of Holmes' Far East operations
David Dusseault 44 Chief Financial Officer
Richard K. Lubin 52 Director
Randy Peeler 34 Director
Thomas K. Manning 57 Director
</TABLE>
Jordan A. Kahn, founder of the Company, has served as President and Chief
Executive Officer and a director since its organization in 1982. Since 1968, Mr.
Kahn has also been President of Jordan Kahn Co., Inc. a manufacturer's
representative representing small electric personal appliance manufacturers,
including the Company, to retailers across the Northeast.
Stanley Rosenzweig has served the Company since 1991, initially as Vice
President - Operations, and since 1993 as Chief Operating Officer and a
director. From 1987 to 1988, Mr. Rosenzweig served as a management consultant
with Bain & Company, and from 1988 to 1989 as a sales manager with Jolson
Corporation, a Canadian appliance company.
Gregory F. White has served as Executive Vice President, Sales and Marketing
since 1995, and from 1993 to 1995 as Vice President Marketing. He became a
director of the Company in 1997. Mr. White served as Account Supervisor at
Ammirati & Puris, an advertising agency, from 1992 to 1993 and as Account
Manager at the advertising agency D'Arcy, Masius, Benton & Bowles from 1991 to
1992.
Ira B. Morgenstern joined the Company as Senior Vice President Finance in
August, 1998 from Diageo, PLC, a combination of the food and beverage businesses
of Grand Metropolitan PLC and Guinness PLC, where he spent over six years in a
number of financial management positions in the U.S. and London, including Vice
President of Strategic Marketing Finance in the U.S. drinks division. Prior to
Diageo, Mr. Morgenstern served as Vice President of Ditri Associates, Inc., a
leveraged acquisition firm, consultant for Touche Ross, and internal auditor
with Atlantic Richfield.
51
<PAGE>
Fred Adair joined Holmes as Senior Vice President, Human Resources and
Organizational Performance in May, 1998 following a 17-year career at Mercer
Management Consulting. Mr. Adair was Vice President and Partner in charge of
Mercer's reengineering and organization change practice from 1992 to 1996, and
built a significant practice focused on the organizational performance
challenges of growth companies.
(Tommy) Woon Fai Liu became Managing Director of the Company's Far East
operations upon the closing of the 1997 Transactions. From 1993 to 1997, Mr. Liu
served as Chief Financial Officer and Executive Director of Asco General
Supplies Far East Limited, a subsidiary of Pentland, as well as Executive
Director of Holmes Far East since 1994. From 1989 to 1993, Mr. Liu was Finance
Director for Johnson & Johnson Hong Kong.
David Dusseault has served as Chief Financial Officer of the Company since 1992
and from 1988 to 1992 as Controller of the Company. From 1981 to 1987, Mr.
Dusseault served as Controller at Leach and Garner Refining.
Richard K. Lubin is a Managing Director of Berkshire Partners, which he
co-founded in 1986. He became a director of Holmes in 1997, and has been a
director of many of Berkshire's manufacturing, retailing and transportation
investments, including, among others, InteSys Technologies, Inc. and English
Welsh & Scottish Railway, Ltd. In addition, Mr. Lubin is Treasurer of the
Dana-Farber Cancer Institute and a Trustee of Beth Israel Deaconess Medical
Center.
Randy Peeler is a Vice President of Berkshire Partners, where he has been
employed since 1996. From 1994 to 1996, he was responsible for new business
ventures at Health Advances, a healthcare industry consulting firm. From 1993 to
1994, he served as Chief of Staff to the Assistant Secretary for Economic Policy
at the U.S. Department of the Treasury. Prior to that, he was a consultant with
Cannon Associates. Mr. Peeler became a director of Holmes in 1997, and also
serves as a director of Miami Cruisline Services, B.V., Charrette Corporation
and Weigh-Tronix, Inc.
Thomas K. Manning became a director of the Company in February, 1999 upon the
closing of the Rival Acquisition. He was Chairman of the Board and Chief
Executive Officer of Rival, and has served with Rival for over 20 years.
ITEM 11. EXECUTIVE COMPENSATION
Summary
The following Summary Compensation Table sets forth information concerning the
compensation paid or accrued by the Company with respect to the Company's Chief
Executive Officer and certain other persons who served as executive officers of
the Company during the fiscal year ended December 31, 1998.
52
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------------
Other Annual Stock Option All Other
Salary Bonus Compensation(1) Shares Compensation
------ -------- --------------- ------------ ------------
Name and Principal Position
- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Jordan A. Kahn 1998 $402,776 $200,000 $ 23,400 297,717 $ -
President and Chief 1997 311,905 770,000 31,200 - 3,964,000(2)
Executive Officer 1996 300,000 825,000 31,200 - -
Stanley Rosenzweig 1998 253,960 125,000 15,600 297,717 4,800(6)
Chief Operating Officer 1997 228,859 296,000 15,600 - 1,984,324(3)
1996 200,000 225,000 15,600 - 632,892(4)
Gregory F. White 1998 205,054 100,000 10,200 297,717 4,800(6)
Executive Vice President, 1997 173,800 148,000 10,200 - 509,237(5)
Sales and Marketing 1996 150,000 112,500 10,200 - 4,673(6)
(Tommy) Woon Fai Liu 1998 200,000 100,000 43,701 60,000 -
Managing Director of 1997 270,513(7) 66,667(8) 2,083 - -
Holmes Far East 1996 200,000(7) 25,000(8) - - -
David Dusseault (9) 1998 109,739 25,000 - 14,100 4,073(6)
Chief Financial Officer 1997 90,803 50,000 - - 4,552(6)
</TABLE>
(1) Primarily represents automobile allowance, annual living expense allowance
or annual lease payments on automobile provided by the Company.
(2) Represents bonuses paid in connection with the 1997 Transactions pursuant
to a previous employment agreement with the Company.
(3) Includes $9,500 representing the Company's matching contribution under its
401(k) plan, $20,824 paid in 1997 on account of a previous employment
agreement with the Company and $1,954,000 which was paid in connection
with the 1997 Transactions.
(4) Includes $9,500 representing the Company's matching contribution under its
401 (k) plan, $77,392 paid in 1996 on account of a previous employment
agreement with the Company and $546,000 accrued for 1996 which was paid in
connection with the 1997 Transactions.
(5) Includes $9,237 representing the Company's matching contribution under its
401(k) plan and $500,000 which was paid in connection with the 1997
Transactions.
(6) Represents the Company's matching contribution under its 401(k)
plan.
(7) Includes compensation paid to Mr. Liu by the Company and by an affiliate
of Pentland.
(8) Does not include any amounts paid by affiliates of Pentland for services
rendered to such affiliates.
(9) Mr. Dusseault did not earn in excess of $100,000 in 1996.
53
<PAGE>
Option Grants in Last Fiscal Year
The following table describes stock options granted during 1998 to the executive
officers set forth in the Summary Compensation Table above.
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Number of Percent of Annual Rate of
Securities Total Stock Price
Underlying Options Appreciation for
Options Granted to Exercise Option Term ($) (2)
Granted Employees Price Expiration -------------------
Name (#) (1) in 1997 ($/Sh) Date 5% 10%
---- ------- -------- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Jordan A. Kahn 297,717 20.2% 3.50 11-26-07 574,489 1,414,994
Stanley Rosenzweig 297,717 20.2% 3.50 11-26-07 574,489 1,414,994
Gregory F. White 297,717 20.2% 3.50 11-26-07 574,489 1,414,994
(Tommy) Woon Fai Liu 60,000 4.1% 3.50 11-26-07 115,779 285,169
David Dusseault 14,100 1.0% 3.50 11-26-07 59,858 147,432
</TABLE>
(1) These options to purchase the Company's common stock were granted under
the Company's 1997 Stock Option Plan. Approximately one-half of each
option grant consists of "incentive stock options" (except for Mr. Kahn,
who received only non-qualified options), vesting over a five-year period.
The remaining options are non-qualified options whose vesting is tied to
specific Company performance measures.
(2) Net gains from potential stock option exercises are estimated based on
assumed rates of stock price appreciation over the options' terms, as set
forth in rules promulgated by the Securities and Exchange Commission, and
are not intended to forecast future appreciation of the Company's common
stock. The actual net gains, if any, are dependent on the actual future
performance of the common stock, for which there is currently no public
market.
Aggregated Option Exercises and Fiscal Year End Values
The following table sets forth certain information concerning the number and
value of unexercised options to purchase the Company's common stock at February
5, 1999, the date the Rival Acquisition was consummated.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Shares In-the-Money
Underlying Unexercised Options
Shares Options at Year-End (#) ($) (1)
Acquired on Value ----------------------- -------
Name Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ------------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jordan A. Kahn - - 28,700 269,017 44,198 414,286
Stanley Rosenzweig - - 28,700 269,017 44,198 414,286
Gregory F. White - - 28,700 269,017 44,198 414,286
(Tommy) Woon Fai Liu - - - 60,000 - 92,400
David Dusseault - - - 14,100 - 21,714
</TABLE>
(1) Represents the assumed value of shares of the Company's common stock
covered by outstanding options, less the aggregate option exercise price.
There is currently no public market for the Company's common stock, and no
valuation of such common stock existed as of December 31, 1998. The price
of the common stock, valued on February 5, 1999, the date of the Rival
Acquisition closing, was $5.04 per share.
54
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock. Except as indicated in the footnotes to
this table, the Company believes that the persons named in this table have sole
voting and investment power with respect to all shares of common stock
indicated.
<TABLE>
<CAPTION>
Name and Address of No. of Percent of
Beneficial Owner (1) Shares Outstanding Shares (2)
-------------------- ------ ----------------------
<S> <C> <C>
Berkshire Fund IV, Limited Partnership (3) 15,052,594 74.2%
Berkshire Fund V, Limited Partnership
c/o Berkshire Partners LLC
One Boston Place
Boston, MA 02108
Jordan A. Kahn (4) 2,621,330 12.9
Bain Securities, Inc. (5) 928,992 4.6
C/o Bain Capital, Inc.
2 Copley Place
Boston, MA 02116
Stanley Rosenzweig (4) 314,596 1.6
Gregory F. White (4) 200,238 *
(Tommy) Woon Fai Liu (4) 139,987 *
David Dusseault (4) 14,359 *
Richard Lubin (6) 15,052,594 74.2
Thomas K. Manning 100,000 *
Randy Peeler (6) 15,052,594 74.2
All directors and executive
officers as a group
(10 persons) (7) (8) 18,531,711 91.0
* Less than 1.0%
</TABLE>
(1) Unless otherwise specified, the address of each person is c/o Holmes
Products Corp., 233 Fortune Boulevard, Milford, MA 01757.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and reflects general voting power and/or investment power with
respect to securities. Shares of common stock subject to options or
warrants currently exercisable are deemed outstanding.
(3) Includes shares beneficially owned by certain other affiliates of
Berkshire Partners.
(4) Includes shares which may be held by family members or affiliates and
shares subject to stock options. With respect to Mr. Kahn, includes
194,472 shares held in trust for employees of the Company as to which Mr.
Kahn is voting trustee. Mr. Kahn disclaims beneficial ownership of such
shares.
(5) Includes shares beneficially owned by an affiliated investment entity.
(6) This person is affiliated with Berkshire Partners and may be deemed to
have a beneficial interest in certain of the shares held by its
affiliates. This person disclaims beneficial ownership of such shares.
(7) Includes shares referred to in Note 6.
(8) Includes the following shares subject to stock options that are
exercisable: 28,700 option shares held by each of Messrs. Kahn, Rosenzweig
and White, 5,784 option shares held by Mr. Liu and 1,359 option shares
held by Mr. Dusseault.
55
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a letter agreement dated December 10, 1998 with two investment funds
affiliated with Berkshire Partners (the "Letter Agreement"), Berkshire Partners
received a fee of $2.0 million from the Company as of the closing of the Rival
Acquisition. Pursuant to a Management Agreement (the "Management Agreement"),
entered into in November, 1997 in connection with the 1997 Transactions,
Berkshire Partners received a $1.5 million fee from the Company and an annual
fee of $400,000 per year for the provision of management and advisory services
to the Company. The Letter Agreement increases the annual management fee to
$500,000 following the closing of the Rival Acquisition. The Management
Agreement will be in effect until November, 2002, provided that the Management
Agreement will terminate on the later of the first date that (i) Berkshire
Partners owns less than 40.0% of the Company's common stock on a fully diluted
basis, and (ii) Berkshire Partners owns fewer common shares than the members of
the Company's management, taken as a group, or fewer shares than any other
single stockholder. Berkshire Partners is also entitled to designate two of the
Company's directors and has the right, at its election, to increase the size of
the Board of Directors and the number of directors designated by it by an
additional two directors. From time to time, the Company may pay additional
consulting or other fees to Berkshire Partners.
Since its inception in 1982, the Company has retained Jordan Kahn Co., Inc.
("JKC"), a corporation owned by Jordan A. Kahn, to serve as a sales
representative for the Company in the northeastern United States. Pursuant to a
representation agreement between the Company and JKC, the Company has agreed to
pay to JKC a commission on net sales to JKC's customers in its territory, which
fee is the same fee paid by the Company to other unaffiliated sales
representatives organizations representing the Company in other territories
throughout the United States. Pursuant to this arrangement, the Company paid a
total of $480,000, $367,000 and $368,000 to JKC for the years ended December 31,
1996, 1997 and 1998, respectively.
In connection with the 1997 Transactions, the Company purchased a portion of the
shares of common stock of Holmes beneficially owned by an affiliate of Pentland,
the Company's former majority stockholder, and issued to the Pentland affiliate
a warrant to purchase shares of the Company's common stock under certain
circumstances. In addition, the Company entered into new employment agreements
with Messrs. Kahn, Rosenzweig, White and Liu, and made certain payments to
Messrs. Kahn, Rosenzweig and White in connection with the 1997 Transactions.
During 1993, the Company entered into a revolving credit facility with an
affiliate of Pentland, pursuant to which such affiliate provided short-term
loans to the Company. Another affiliate of Pentland provided the Company with
trade acceptance and letter of credit financing for its purchases from foreign
manufacturers. The Company paid a commission for administrative services related
to the processing of these trade acceptances. In conjunction with the 1997
Transactions, all of the financing facilities provided by Pentland and its
affiliates were terminated and paid in full. In addition, a net payable of $10.0
million due to affiliates of Pentland was repaid in connection with the 1997
Transactions. See Note 3 of Notes to Consolidated Financial Statements.
In connection with the Transactions, the Company retained an affiliate of Bain
Securities, Inc., a stockholder of the Company, to perform acquisition
consulting services, for which the Company paid approximately $300,000 during
1998.
56
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report.
1. Financial Statements are listed in the Index to Consolidated
Financial Statements contained in Item 8 of this Report.
2. Financial Statement Schedules, to the extent required, are
listed in the Index to Consolidated Financial Statements
contained in Item 8 of this Report.
3. Exhibits are listed in subsection (c) below.
(b) Reports on Form 8-K:
1. Current Report on Form 8-K dated December 17, 1998 reporting under Item
5, Other Events the signing of the Merger Agreement with Rival.
2. Current Report on Form 8-K dated January 25, 1999 reporting under Item
5, Other Events disclosing certain information contained in an offering
memorandum in connection with the Company's private placement of notes.
3. Current Report on Form 8-K dated February 5, 1999 reporting under Item
2, Acquisition or Disposition of Assets the Company's acquisition of Rival.
(c) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1 Articles of Organization (as amended) of Holmes Products Corp. (1)
3.2 Articles of Organization of Holmes Manufacturing Corp. (1)
3.3 Articles of Organization of Holmes Air (Taiwan) Corp. (1)
3.4 Certificate of Incorporation of Holmes Motor Corp. (4)
3.5 Restated Certificate of Incorporation (as amended) of The Rival Company
(4)
3.6 Certificate of Incorporation (as amended) of Patton Electric Company,
Inc. (4)
3.7 Certificate of Incorporation (as amended) of Patton Building Products,
Inc. (4)
3.8 Certificate of Incorporation (as amended) of Rival Consumer Sales
Corporation (4)
3.9 Bylaws (as amended) of Holmes Products Corp. (1)
3.10 By-laws of Holmes Manufacturing Corp. (1)
3.11 By-laws of Holmes Air (Taiwan) Corp. (1)
3.12 By-laws of Holmes Motor Corp. (4)
57
<PAGE>
3.13 By-laws of The Rival Company (4)
3.14 By-laws of Patton Electric Company, Inc. (4)
3.15 By-laws of Patton Building Products, Inc. (4)
3.16 By-laws of Rival Consumer Sales Corporation (4)
4.1 Stockholders' Agreement dated November 26, 1997 among Holmes Products
Corp. and certain stockholders thereof (1)
4.2 Registration Rights Agreement dated November 26, 1997 among Holmes
Products Corp. and certain stockholders thereof (1)
4.3 Registration Rights Agreement dated November 26, 1997 among Holmes
Products Corp., Holmes Manufacturing Corp., Holmes Air (Taiwan) Corp.,
BancBoston Securities Inc. and Lehman Brothers Inc. (1)
4.4 Indenture dated November 26, 1997 among Holmes Products Corp., Holmes
Manufacturing Corp., Holmes Air (Taiwan) Corp. and State Street Bank
and Trust Company (1)
4.5 Form of Notes - (Included in Exhibit 4.4) (1)
4.6 Form of Guaranty - (Included in Exhibit 4.4) (1)
4.7 First Supplemental Indenture and Guarantee dated October 14, 1998 among
Holmes Products Corp., Holmes Manufacturing Corp., Holmes Air (Taiwan)
Corp., Holmes Motor Corp. and State Street Bank and Trust Company (4)
4.8 Registration Rights Agreement dated February 5, 1999 among Holmes
Products Corp., Holmes Manufacturing Corp., Holmes Air (Taiwan) Corp.,
Holmes Motor Corp., The Rival Company, Patton Electric Company, Inc.,
Patton Building Products, Inc., Rival Consumer Sales Corporation,
BancBoston Robertson Stephens Inc. and Lehman Brothers Inc. (3)
4.9 Indenture dated February 5, 1999 among Holmes Products Corp., Holmes
Manufacturing Corp., Holmes Air (Taiwan) Corp. , Holmes Motor Corp.,
The Rival Company, Patton Electric Company, Inc., Patton Building
Products, Inc., Rival Consumer Sales Corporation and State Street Bank
and Trust Company (3)
4.10 First Amendment to Registration Rights Agreement dated February 5, 1999
among Holmes Products Corp. and certain stockholders thereof (4)
4.11 First Amendment to Stockholders' Agreement dated February 5, 1999 among
Holmes Products Corp. and certain stockholders thereof (4)
4.12 Second Supplemental Indenture and Guarantee dated February 5, 1999
among Holmes Products Corp., Holmes Manufacturing Corp., Holmes Air
(Taiwan) Corp., Holmes Motor Corp., Moriarty Acquisition Corp., The
Rival Company, Patton Electric Company,
58
<PAGE>
Inc., Patton Building Products, Inc., Rival Consumer Sales Corporation
and State Street Bank and Trust Company (4)
10.1 Stock Purchase and Redemption Agreement dated as of October 27, 1997,
as amended as of November 25, 1997, among Asco Investments Ltd., Jordan
A. Kahn, Holmes Products Corp., Holmes Products (Far East) Limited and
Holmes Acquisition LLC (1)
10.2 Stock Purchase Agreement dated as of October 27, 1997 among Jordan A.
Kahn and Holmes Acquisition LLC (1)
10.3 Executive Employment and Non-Competition Agreement dated November 26,
1997 among Holmes Products Corp. and Jordan A. Kahn (1)
10.4 Executive Employment and Non-Competition Agreement dated November 26,
1997 among Holmes Products Corp. and Stanley Rosenzweig (1)
10.5 Executive Employment and Non-Competition Agreement dated November 26,
1997 among Holmes Products Corp. and Gregory F. White (1)
10.6 Employment Agreement dated November 16, 1997 among Holmes Products (Far
East) Limited and (Tommy) Woon Fai Liu (1)
10.7 Holmes Products Corp. Amended and Restated 1997 Stock Option Plan (4)
10.8 Non-transferable Common Stock Purchase Warrant dated November 26, 1997
issued to Pentland Group plc (1)
10.9 Holmes Products Corp. Employee Stock Purchase Plan (4)
10.10 Agreement and Plan of Merger dated December 17, 1998, by and among
Holmes Products Corp., Moriarty Acquisition Corp. and The Rival Company
(2)
10.11 Tender and Voting Agreement dated December 17, 1998, by and among
Holmes Products Corp., Moriarty Acquisition Corp. and the directors and
certain executive officers of The Rival Company (2)
10.12 Confidentiality Agreement dated October 1, 1998, by and between Holmes
Products Corp. and BancAmerica Securities, Inc., on behalf of Holmes
Products Corp (2)
10.13 Purchase Agreement dated as of January 29, 1999 among Holmes Products
Corp., BancBoston Robertson Stephens Inc. and Lehman Brothers Inc (2)
10.14 Investors Subscription Agreement dated February 5, 1999 by and among
Holmes Products Corp. and certain investors (3)
10.15 Amended and Restated Revolving Credit and Term Loan Agreement dated as
of February 5, 1999 among Holmes Products Corp., Moriarty Acquisition
Corp., The Rival Company, Holmes Products (Far East) Limited, Esteem
Industries Limited, Raider Motor Corporation, Holmes Products (Europe)
Limited, Bionaire International B.V., Patton Electric Hong Kong,
Limited, and The Rival Company of Canada, Ltd., BankBoston, and the
other lending institutions party thereto, BankBoston, N.A. as
Administrative Agent
59
<PAGE>
and Lehman Commercial Paper Inc. as Documentation Agent, with
BancBoston Robertson Stephens Inc. as Syndication Agent and Arranger
and Lehman Brothers Inc. as Co-Arranger (3)
21.1 Subsidiaries of Registrant (4)
27.1 Financial Data Schedule (4)
</TABLE>
- ------------------
(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-4, as amended (Registration No. 333-44473).
(2) Incorporated by reference to the Registrant's Tender Offer Statement on
Schedule 14D-1 dated December 23, 1998, as amended.
(3) Incorporated by reference to the Registrant's Current Report on Form 8-K
dated February 5, 1999.
(4) Filed herewith.
60
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
HOLMES PRODUCTS CORP.
Dated: March 31, 1999 By: /s/ Jordan A. Kahn
------------------
Jordan A. Kahn, President,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
March 31, 1999 /s/ Jordan A. Kahn
------------------
Jordan A. Kahn, President,
Chief Executive Officer and Director
(Principal Executive Officer)
March 31, 1999 /s/ Ira B. Morgenstern
----------------------
Ira B. Morgenstern,
Senior Vice President of Finance
(Principal Financial and Accounting Officer)
March 31, 1999 /s/ Stanley Rosenzweig
----------------------
Stanley Rosenzweig,
Chief Operating Officer and Director
March 31, 1999 /s/ Gregory F. White
--------------------
Gregory F. White,
Executive Vice President
Sales and Marketing and Director
March 31, 1999 /s/ Richard Lubin
-----------------
Richard Lubin,
Director
March 31, 1999 /s/ Randy Peeler
----------------
Randy Peeler,
Director
March 31, 1999 /s/ Thomas K. Manning
---------------------
Thomas K. Manning,
Director
CERTIFICATE OF INCORPORATION
OF
HOLMES MOTOR CORPORATION
FIRST: The name of the corporation (hereinafter called the
"Corporation") is Holmes Motor Corporation.
SECOND: The address, including street, number, city, and county,
of the registered office of the Corporation in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New
Castle; and the name of the registered agent of the Corporation in the State of
Delaware at such address is The Corporation Trust Company.
THIRD: The nature of the business or the purpose to be conducted
or promoted by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH: The aggregate number of shares of all classes of capital
stock which the Corporation has authority to issue is 3,000 shares of common
stock, par value $0.01 per share.
FIFTH: The name and the mailing address of the incorporator are
as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
Donald H. Siegel, P.C. Posternak, Blankstein & Lund, L.L.P.
100 Charles River Plaza
Boston, MA 02114
</TABLE>
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: For the management of the business and for the conduct
of the affairs of the Corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. No election of directors need be by written ballot
unless so provided in the By-Laws of the Corporation.
2. Whenever the Corporation shall be authorized to issue
only one class of stock, each outstanding share shall entitle the
holder thereof to notice of, and the right to vote at, any
meeting of stockholders. Whenever the Corporation shall be
authorized to issue more than one class of stock, no outstanding
share of any class of stock which is denied voting power under
the provisions of the
<PAGE>
Certificate of Incorporation shall entitle the holder thereof to
the right to vote at any meeting of stockholders except as the
provisions of the General Corporation Law of the State of
Delaware shall otherwise require; provided, that no share of any
such class which is otherwise denied voting power shall entitle
the holder thereof to vote upon the increase or decrease in the
number of authorized shares of said class.
EIGHTH: Liability of Directors. No director shall be personally
liable to the Corporation or its stockholders for monetary damages for breach of
a fiduciary duty as a director; provided, however, that to the extent required
by the provisions of Section 102(b)(7) of the General Corporation Law of the
State of Delaware or any successor statute, or any other laws of the State of
Delaware, this provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware, (iv) for
any transaction from which the director derived an improper personal benefit, or
(v) for any act or omission occurring prior to the date when the provision
becomes effective. If the General Corporation Law of the State of Delaware
hereafter is amended to authorize the further elimination or limitation on
personal liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended General
Corporation Law of the State of Delaware. Any repeal or modification of this
Article EIGHTH by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
NINTH: Indemnification and Advancement of Expenses.
9.1 Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director, officer or employee
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, shall be indemnified by the Corporation to the fullest extent
permitted by the General Corporation Law of the State of Delaware. Expenses
(including attorneys' fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding may
be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the corporation as authorized by
the General Corporation Law of the State of Delaware. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
9.2 Nonexclusivity. The rights of indemnification provided in
this Article NINTH shall be in addition to any rights to which any person may
otherwise be entitled by law or under any By-law, agreement, vote of
stockholders or disinterested directors, or otherwise. Such rights shall
continue as to any person who has ceased to be a director, officer or employee
and
12
<PAGE>
shall inure to the benefit of his heirs, executors and administrators, and
shall be applied to proceedings commenced after the adoption hereof, whether
arising from acts or omissions occurring before or after the adoption hereof.
9.3 Insurance. The Corporation may purchase and maintain
insurance to protect any persons against any liability or expense asserted
against or incurred by such person in connection with any proceeding, whether or
not the Corporation would have the power to indemnify such person against such
liability or expense by law or under this Article NINTH or otherwise. The
Corporation may create a trust fund, grant a security interest or use other
means (including, without limitation, a letter of credit) to insure the payment
of such sums as may become necessary to effect indemnification as provided
herein.
9.4 Amendment. No amendment to or repeal of this Article NINTH
shall apply to or have any effect on the rights of any individual referred to in
this Article NINTH for or with respect to acts or omissions of such individual
occurring prior to such amendment or repeal.
TENTH: The power to amend, alter, or repeal the Bylaws of the
Corporation and to adopt new Bylaws may be exercised by the vote of a majority
of the stock outstanding and entitled to vote.
ELEVENTH: From time to time any of the provisions of this
Certificate of Incorporation may be amended, altered, or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this Certificate of Incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on October 14, 1998
/s/ Donald H. Siegel
---------------------------------
Donald H. Siegel, P.C., Incorporator
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE RIVAL COMPANY
- --------------------------------------------------------------------------------
Pursuant to Section 245 of the General Corporation
Law of the State of Delaware
- --------------------------------------------------------------------------------
The undersigned, being the President of The Rival Company, a Delaware
corporation (the "Corporation"), in order to restate in its entirety the
Corporation's Certificate of Incorporation (as heretofore amended), hereby
certifies as follows:
1. The present name of the Corporation is The Rival Company, and the
name under which the Corporation was incorporated was Rival Manufacturing
Company;
2. The Certificate of Incorporation of the Corporation was filed in the
office of the Secretary of State of the State of Delaware on the 7th day of
April, 1986 under the name of Rival Manufacturing Company. A Certificate of
Ownership and Merger merging Rival Manufacturing Company, a Missouri
corporation, with and into the Corporation was filed in the office of the
Secretary of State of the State of Delaware on the 16th day of April, 1986. A
Certificate of Amendment to the Certificate of Incorporation of the Corporation
was filed in the Office of the Secretary of State of the State of Delaware on
the 9th day of November, 1987. A Certificate of Change of Registered Agent and
Registered Office was filed in the Office of the Secretary of State of the state
of Delaware on February 10, 1989. A Certificate of Ownership and Merger merging
The Rival Company (formerly, Rival Holdings, Inc.), a Delaware corporation and
the parent company of the Corporation, with and into the Corporation and further
amending the Certificate of Incorporation of the Corporation to, among other
things, change the Corporation's name to The Rival Company and to change the
authorized capital stock of the Corporation, was filed in the office of the
Secretary of state of the State of Delaware on the 2nd day of June, 1992.
3. The Board of Directors of the Corporation, by unanimous written
consent, duly adopted this Restated Certificate of Incorporation in accordance
with Section 245 of the General Corporation Law of the State of Delaware. Since
this Restated Certificate of Incorporation only restates and integrates and does
not further amend the provisions of the Corporation's Certificate of
Incorporation as heretofore amended, and there is not discrepancy between those
provisions of the Certificate of Incorporation and the provisions of this
Restated Certificate of Incorporation, the Board of Directors duly adopted this
Restated Certificate of Incorporation without a vote of the Corporation's
stockholders.
<PAGE>
4. The Certificate of Incorporation of the Corporation is hereby
restated to read in its entirety as follows:
"1. The name of the Corporation is The Rival Company.
2. The address of the registered office of the Corporation in Delaware
is 1290 Orange Street, in the City of Wilmington, County of New Castle, and the
name of the registered agent at such address is The Corporation Trust Company.
3. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The total number of shares of stock which the Corporation is
authorized to issue is 15,000,000 shares of Common Stock, par value $.01 per
share.
5. Except as required in the By-Laws, no election of directors need be
by written ballot.
6. The Board of Directors shall have the power to make, alter, or
repeal By-Laws subject to the power of the stockholders to alter or repeal the
By-Laws made or altered by the Board of Directors.
7. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation Law
as the same exists or may hereafter be amended. Any repeal or modification of
this Article 7 by the stockholders of the Corporation shall not adversely affect
any right existing at the time of such repeal or modification.
8. The Corporation shall indemnify its officers, directors, employees
and agents to the fullest extent permitted by the Delaware General Corporation
Law as the same exists or may hereafter be amended. Expenses incurred by an
officer or director in defending a civil or criminal action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount of it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation. Such
expenses incurred by other employees and agents may be so paid upon such terms
and conditions, if any, as the Board of Directors deems appropriate. Any repeal
or modification of this Article 8 by the stockholders of the Corporation shall
not adversely affect any right or protection of an officer, director, employee
or agent of the Corporation existing at the time of such repeal or modification.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be executed by Thomas K. Manning, its President,
and attested by Stanley D. Biggs, its Secretary, this 18th day of June, 1992.
THE RIVAL COMPANY
By: /s/ Thomas K. Manning
-----------------------------
Thomas K. Manning
President
ATTEST
By: /s/ Stanley D. Biggs
-----------------------------------
Stanley D. Biggs
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THE RESTATED CERTIFICATE OF INCORPORATION
OF
THE RIVAL COMPANY
* * * * *
The Rival Company, a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of The Rival Company, Inc., (the
"Corporation") by the unanimous written consent of its members, filed with the
minutes of the Board, duly adopted a resolution proposing and declaring
advisable the following amendment to the Restated Certificate of Incorporation
of said corporation:
RESOLVED, that the Restated Certificate of Incorporation of the Corporation
be amended by changing the Fourth Article of Section Four thereof so that,
as amended, said Article shall be and read as follows:
"The total number of shares of stock which the corporation shall have
authority to issue is three thousand (3,000) shares of common stock,
$.01 par value per share. "
SECOND: That in lieu of a meeting and vote of stockholders, the stockholders
have given unanimous written consent to said amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, The Rival company has caused this certificate to be signed
by Jordan A. Kahn, its Chief Executive Officer, this 15th day of March, 1999.
THE RIVAL COMPANY
By: /s/ Jordan A. Kahn
---------------------------------------
Jordan A. Kahn, Chief Executive Officer
ARTICLES OF INCORPORATION
OF
RIVAL ACQUISITION COMPANY
I, the undersigned, being a natural person of the age of eighteen (18)
years or more, for the purpose of forming a Corporation under The Indiana
Business Corporation Law, do hereby adopt the following Articles of
Incorporation.
ARTICLE I
The name of the Corporation is RIVAL ACQUISITION COMPANY.
ARTICLE II
The address of its initial Registered Office in the State of Indiana is
1 North Capital Avenue, Indianapolis, Indiana 46204, and the name of its initial
Registered Agent at such address is CT Corporation System.
ARTICLE III
The aggregate number of shares which the Corporation shall have
authority to issue shall be Thirty Thousand (30,000) shares of Common Stock of
the par value of One Dollar ($1.00) per share, amounting in the aggregate to
Thirty Thousand Dollars ($30,000), and there shall be no preferences,
qualifications, limitations or restrictions whatsoever, nor any special or
relative rights in respect to the shares.
ARTICLE IV
No holder of common shares of this Corporation shall be entitled as of
right to subscribe for, purchase, or receive any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of any
bonds, debentures, or other securities convertible into stock of any class; and
all such additional shares of stock, bonds, debentures or other securities
convertible into stock may be issued and disposed of by the Board of Directors
to such person or persons and on such terms and for such consideration (so far
as may be permitted by law) as the Board of Directors, in their absolute
discretion, may deem advisable.
ARTICLE V
The name and residence of the incorporator is Timothy J. Feathers, 9312
Dearborn, Overland Park, Kansas 66207.
<PAGE>
ARTICLE VI
The number of Directors to constitute the initial Board of Directors is
three (3). Thereafter, the number of Directors shall be fixed by, or in the
manner provided in the By-Laws of the Corporation.
ARTICLE VII
The duration of the Corporation is perpetual.
ARTICLE VIII
The corporation is organized for the purpose of engaging in any lawful
act or activity for which a corporation may be organized under the Indiana
Business Corporation Law.
IN WITNESS WHEREOF, these Articles of Incorporation have been signed
this 23rd day of March, 1995.
/s/ Timothy J. Feathers
------------------------------
Timothy J. Feathers
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
On this 23rd day of March, 1995, before me personally appeared Timothy
J. Feathers, being first duly sworn and to me known to be the person described
in and who executed the foregoing Articles of Incorporation, and stated that he
executed the same as his own free act and deed as incorporator, and that the
statements contained therein are true.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal, the day and year last above mentioned.
/s/ Kathryn A. Brinser
------------------------------
Notary Public
My commission expires:
Nov. 18, 1998
- ----------------------
<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
RIVAL ACQUISITION COMPANY
It is hereby certified that:
1. The name of the corporation is Rival Acquisition Company
(hereinafter referred to as the "Company").
2. Article I of the Articles of Incorporation of the Company is
hereby amended to read as follows:
The name of the Corporation is PATTON ELECTRIC
COMPANY, INC.
3. The amendment to the Articles of Incorporation of the Company
herein certified was duly adopted by the Board of Directors
and the sole shareholder of the Company effective April 11,
1995.
4. The Company has 1,000 shares of Common Stock outstanding, and
each of such 1,000 shares was entitled to one vote per share
on said amendment. The holder of the 1,000 shares of common
stock executed a written consent of sole shareholder adopting
said amendment.
IN WITNESS WHEREOF, the Company has caused these Articles of Amendment
to be signed by Thomas K. Manning, its President, this 11 day of April, 1995.
RIVAL ACQUISITION COMPANY
By: /s/ Thomas K. Manning
-------------------------------
Thomas K. Manning
President
<PAGE>
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
ARTICLES OF AMENDMENT
To Whom These Presents Come, Greeting:
WHEREAS, there has been presented to me at this office, Articles of Amendment
for:
RIVAL ACQUISITION COMPANY
and said Articles of Amendment have been prepared and signed in accordance with
the provisions of the Indiana Business Corporation Law, as amended.
The name of the corporation is amended as follows:
PATTON ELECTRIC COMPANY, INC.
NOW, THEREFORE, I, SUE ANNE GILROY, Secretary of State of Indiana, hereby
certify that I have this day filed said articles in this office.
The effective date of these Articles of Amendment is April 21, 1995.
In Witness Whereof, I have hereunto
set my hand and affixed the seal of
the State of Indiana, at the City of
Indianapolis, this Twenty-first day
of April, 1995.
------
Deputy
CERTIFICATE OF INCORPORATION
OF
FASCO CONSUMER PRODUCTS, INC.
FIRST: The name of the corporation (the "Corporation") is Fasco
Consumer Products, Inc.
SECOND: The registered office of the Corporation in Delaware is The
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH: The total number of shares which the Corporation shall have
authority to issue is 10,000, all of which are to be common stock with a par
value of $1.00 each.
FIFTH: The name and mailing address of the incorporator is Ella H.
Weber, 33 Riverside Avenue, Westport, Connecticut 06880.
SIXTH: In furtherance and not in limitation of the powers conferred by
the General Corporation Law of the State of Delaware, the Board of Directors of
the Corporation is expressly authorized to adopt, amend or repeal the bylaws of
the Corporation in any manner not inconsistent with law or this Certificate of
Incorporation; provided, however, that the stockholders of the Corporation
entitled to vote shall retain the power to adopt additional bylaws and may alter
or repeal any bylaw of the Corporation whether adopted by them or otherwise.
SEVENTH: The books and records of the Corporation may be kept, subject
to any provision of the laws of the State of Delaware, outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors of the Corporation or in the bylaws of the Corporation.
Elections of directors need not be by written ballot unless the bylaws of the
Corporation so provide.
EIGHTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing, a director shall be
liable to the extent provided by applicable law (i) for breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for any matter in respect of which such director shall
be liable under Section 174 of Title 8 of the
<PAGE>
Delaware Code or any amendment or successor provision thereto, or (iv) for any
transaction from which such director derived an improper personal benefit.
Neither the amendment nor repeal of this Article, nor the adoption of any
provision of the Certificate of Incorporation of the Corporation inconsistent
with this Article shall eliminate or reduce the effect of this Article in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this Article, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation or any
amendment hereof in the manner now or hereafter prescribed by law, and all
rights of the stockholders are subject to this reservation.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, makes this Certificate, hereby declaring and certifying
that this is her act and deed and the facts herein stated are true, and
accordingly, has hereunto set her hand this 24th day of June, 1992.
/s/ Ella H. Weber
----------------------------
Ella H. Weber
Sole Incorporator
<PAGE>
State of DELAWARE/Domestic for Profit CORP.
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
FASCO CONSUMER PRODUCTS, INC., a corporation organized and existing under and by
virtue of The General Corporation Law of the state of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of said corporation, by unanimous written
consent filed with the minutes of the Board, adopted a resolution proposing and
declaring advisable the following amendment to the Certificate of Incorporation;
RESOLVED, that the Certificate of Incorporation of this
corporation be amended by changing the Article thereof numbered "FIRST"
so that, as amended, said Article shall be and read as follows:
"FIRST. The name of the corporation ("the
Corporation") is PATTON BUILDING PRODUCTS, INC."
SECOND: That in lieu of a meeting and vote of stockholders, the holders of all
of the outstanding stock of the corporation have given written consent to said
amendment in accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the provisions of
Section 242 and 228 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, said FASCO CONSUMER PRODUCTS, INC., has caused this
certificate to be signed by Thomas K. Manning, President of the corporation,
this 19 of December, 1997.
FASCO CONSUMER PRODUCTS, INC.
By: /s/ Thomas K. Manning
--------------------------------
Thomas K. Manning, President
<PAGE>
State of Missouri )
) ss.
County of Jackson
------------- )
Be it remembered that before me, a Notary Public in and for the
aforesaid county and state, personally appeared Thomas K. Manning, President of
the corporation named in this document, who is known to me to be the same person
who executed the foregoing certificate and duly acknowledged its execution of
the same this 19 day of December 1997.
(Seal)
/s/ Jennifer S. Jackson
---------------------------
Notary Public
My appointment or commission expires
March 4, 2000.
ARTICLES OF INCORPORATION
OF
POLLENEX CORPORATION
I, the undersigned, being a natural person of the age of eighteen (18)
years or more, for the purpose of forming a Corporation under The General and
Business Corporation Law of Missouri, do hereby adopt the following Articles of
Incorporation.
ARTICLE I
The name of the Corporation is POLLENEX CORPORATION.
ARTICLE II
The address of its initial Registered Office in the State of Missouri
is 2420 Pershing Road, Suite 400, Kansas City, Missouri 64108, and the name of
its initial Registered Agent at such address is H B Service Corp.
ARTICLE III
The aggregate number of shares which the Corporation shall have
authority to issue shall be Thirty Thousand (30,000) shares of Common Stock of
the par value of One Dollar ($1.00) per share, amounting in the aggregate to
Thirty Thousand Dollars ($30,000), and there shall be no preferences,
qualifications, limitations or restrictions whatsoever, nor any special or
relative rights in respect to the shares.
ARTICLE IV
No holder of common shares of this Corporation shall be entitled as of
right to subscribe for, purchase, or receive any part of any new or additional
issue of stock of any class, whether now or hereafter authorized, or of any
bonds, debentures, or other securities convertible into stock of any class; and
all such additional shares of stock, bonds, debentures or other securities
convertible into stock may be issued and disposed of by the Board of Directors
to such person or persons and on such terms and for such consideration (so far
as may be permitted by law) as the Board of Directors, in their absolute
discretion, may deem advisable.
ARTICLE V
The name and residence of the incorporator is Timothy J. Feathers, 9312
Dearborn, Overland Park, Kansas 66207.
<PAGE>
ARTICLE VI
The number of Directors to constitute the initial Board of Directors is
three (3). Thereafter, the number of Directors shall be fixed by, or in the
manner provided in the By-Laws of the Corporation, and any changes made shall be
reported to the Secretary of State of Missouri within thirty (30) days of such
change.
ARTICLE VII
The duration of the Corporation is perpetual.
ARTICLE VIII
The Corporation is formed for the following purposes:
A. To operate a general business for the manufacture, sale and
distribution of any and all kinds of appliances, and to conduct any and all
other business operations in connection therewith or related thereto.
B. To buy, utilize, lease, rent, import, export, franchise, operate,
manufacture, produce, design, prepare, assemble, fabricate, improve, develop,
sell, lease, mortgage, pledge, hypothecate, distribute and otherwise deal in, at
wholesale, retail or otherwise, and as principal, agent or otherwise, all
commodities, goods, wares, merchandise, devices, apparatus, equipment and all
other personal property, whether tangible or intangible, of every kind, without
limitation as to description, location or amount.
C. To apply for, obtain, purchase, lease, take licenses in respect of
or otherwise acquire, and to hold, own, use, operate, enjoy, turn to account,
grant franchises or licenses in respect of, manufacture under, introduce, sell,
assign, mortgage, pledge or otherwise dispose of:
(1) Any and all inventions, devices, methods, processes and
formulae and any improvements and modifications thereof;
(2) Any and all letters patent of the United States or of any
other country, state or locality, and all rights connected therewith or
appertaining thereto;
(3) Any and all copyrights, granted by the United States or
any other country, state or locality; and
(4) Any and all trademarks, trade names, trade symbols and
other indications of origin and ownership granted by or recognized
under the laws of the United States
<PAGE>
or of any other country, state or locality; and to conduct and carry on
its business in any or all of its various branches under any trade name
or trade names.
D. To engage in, carry on and conduct research, experiments,
investigations, analyses, studies and laboratory work, for the purpose of
discovering new products or to improve products or services.
E. To buy, lease, rent or otherwise acquire, own, hold, use, divide,
partition, develop, improve, operate and sell, lease, mortgage or otherwise
dispose of, deal in and turn to account, real estate, leaseholds and any and all
interests or estates appertaining thereto.
F. To enter into any lawful contract or contracts with persons, firms,
corporations, other entities, governments or any agencies or subdivisions
thereof, including guaranteeing the performance of any contract or any
obligation of any person, firm, corporation or other entity.
G. To purchase and acquire, as a going concern or otherwise, and to
carry on, maintain and operate all or any part of the property or business of
any corporation, firm, association, entity, syndicate or persons whatsoever,
deemed to be of benefit to the Corporation, or of use in any manner in
connection with any of its purposes; and to dispose thereof upon such terms as
may seem advisable to the Corporation.
H. To invest, lend and deal with monies of the Corporation in any
lawful manner, and to acquire by purchase, by the exchange of stock or other
securities of the Corporation, by subscription or otherwise, and to invest in,
to hold for investment or for any other purpose, and to use, sell, pledge or
otherwise dispose of, and in general to deal in any interest concerning, or
enter into any transaction with respect to (including "long" and "short" sales
of), any stocks, bonds, notes, debentures, certificates, receipts and other
securities and obligations of any government, state, municipality, corporation,
association or other entity, including individuals and partnerships and, while
owner thereof, to exercise all of the rights, powers and privileges of ownership
including, among other things, the right to vote thereon for any and all
purposes and to give consents with respect thereto.
I. To borrow or raise money for any purpose of the Corporation and to
secure any loan, indebtedness or obligation of the Corporation and the interest
accruing thereon, and for that or any other purpose, to mortgage, pledge,
hypothecate or change all or any part of the present or hereafter acquired
property, rights and franchises of the Corporation, real, personal, mixed or of
any character whatever, subject only to limitations specifically imposed by law.
J. To do any or all of the things herein above enumerated, alone for
its own account, or for the account of others, or as the agent for others, or in
association with others or by or through others, and to enter into all lawful
contracts and undertakings in respect thereof.
<PAGE>
K. To have one or more offices, to conduct its business, carry on its
operations and promote its objectives within and without the State of Missouri,
in other states, the District of Columbia, the territories, colonies and
dependencies of the United states, in foreign countries and anywhere in the
world, without restriction as to place, manner or amount, but subject to the
laws applicable thereto; and to do any or all of the things herein set forth to
the same extent as a natural person might or could do and in any part of the
world, either alone or in company with others.
L. In general, to carry on any other business in connection with each
and all of the foregoing or incidental thereto, and to carry on, transact and
engage in any and every lawful business or other lawful thing calculated to be
of gain, profit or benefit to the Corporation, as fully and freely as a natural
person might do, to the extent and in the manner, and anywhere within and
without the State of Missouri, as it may from time to time determine; and to
have and exercise each and all of the powers and privileges, either direct or
incidental, which are given and provided by or are available under the laws of
the State of Missouri in respect of general and business corporations organized
for profit thereunder; provided, however, that the Corporation shall not engage
in any activity for which a corporation may not be formed under the laws of the
State of Missouri.
M. It is intended that each of the purposes and powers specified in
each of the paragraphs of this ARTICLE VIII shall be in no way limited or
restricted by reference to or inference from the terms of any other paragraph,,
but that the purposes and powers specified in each of the paragraphs of this
ARTICLE VIII shall be regarded as independent purposes and powers. The
enumeration of specific purposes and powers in this ARTICLE VIII shall not be
construed to restrict in any manner the general purposes and powers of this
Corporation, nor shall the expression of one thing be deemed to exclude another,
although it be of like nature. The enumeration of purposes and powers herein
shall not be deemed to exclude or in any way limit by inference any purposes or
powers which this Corporation has power to exercise, whether expressly by the
laws of the State of Missouri, now or hereafter in effect, or implied by any
reasonable construction of such laws.
ARTICLE IX
The Board of Directors of the Corporation shall have the power to make,
alter, amend or repeal By-Laws for the Corporation from time to time.
IN WITNESS WHEREOF, these Articles of Incorporation have been signed
this 19th day of April 1993.
/s/ Timothy J. Feathers
---------------------
Timothy J. Feathers
<PAGE>
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
On this 19th day of April, 1993, before me personally appeared Timothy
J. Feathers, being first duly sworn and to me known to be the person described
in and who executed the foregoing Articles of Incorporation, and stated that he
executed the same as his own free act and deed as incorporator, and that the
statements contained therein are true.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
notarial seal, the day and year last above mentioned.
/s/ Karen S. Miller
------------------------
Notary Public
My commission expires:
March 23, 1994
<PAGE>
AMENDMENT OF ARTICLES OF INCORPORATION
OF
POLLENEX CORPORATION
Pursuant to the provisions of The General and Business Corporation Law
of Missouri, the undersigned Corporation certifies the following:
(1) The name of the Corporation is POLLENEX CORPORATION. The name under
which it was originally organized was POLLENEX CORPORATION.
(2) An amendment to the Corporation's Articles of Incorporation was
adopted by the Shareholders on June 27, 1996.
(3) Article I is amended to read as follows:
The name of the Corporation is RIVAL CONSUMER SALES CORPORATION.
(4) Of the 30,000 shares outstanding, 30,000 of such shares were
entitled to vote on such amendment. The number of outstanding
shares of any class entitled to vote thereon as a class were
as follows:
<TABLE>
<CAPTION>
Number of
Class Outstanding Shares
----- ------------------
<S> <C>
Common 30,000
</TABLE>
(5) 30,000 shares voted "for" and no shares voted "against" the
amendment.
(6) The effective date of this Amendment shall be 12:00 A.M. on
July 1, 1996.
IN WITNESS WHEREOF, the undersigned President has executed this
instrument and its Secretary has affixed its corporate seal hereto and Attested
said seal on the 7th day of June, 1996.
<PAGE>
POLLENEX CORPORATION
By: /s/ Thomas K. Manning
------------------------------
Thomas K. Manning, President
ATTEST
/s/ Stanley D. Biggs
- ----------------------------------
Stanley D. Biggs, Secretary
STATE OF Missouri
-------------------- )
) ss.
COUNTY OF Jackson
------------------- )
I, Doris L. Jones, a Notary Public do hereby certify that on
this 27 day of June, 1996, personally appeared before me Thomas K. Manning who,
being by me first sworn, declared that he is the President of POLLENEX
CORPORATION, that he signed the foregoing document as President of the
Corporation, and that the statements therein contained are true.
/s/ Doris L. Jones
------------------------------
Notary Public
My Commission Expires:
March 23, 1999
BY-LAWS
OF
HOLMES MOTOR CORPORATION
ARTICLE I
LAW, CERTIFICATE OF INCORPORATION AND BY-LAWS
Section 1.1. These By-Laws are subject to the Certificate of
Incorporation of the Corporation. In these By-Laws, references to law, the
Certificate of Incorporation and By-Laws mean the General Corporation Law of the
State of Delaware, and other applicable law, the provisions of the Certificate
of Incorporation and the By-Laws as are from time to time in effect.
ARTICLE II
OFFICES
Section 2.1. Registered Office. The registered office of the Corporation
within the State of Delaware shall be located at the principal place of business
of the Corporation in the State of Delaware or of the person acting as the
Corporation's registered agent in the State of Delaware.
Section 2.2. Other Offices. The Corporation may also have offices and
places of business at such other places both within and without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE III
MEETINGS OF THE STOCKHOLDERS
Section 3.1. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at such place
within or without the State of Delaware as may be determined from time to time
by the Chairman of the Board of Directors, the President, the Chief Executive
Officer or the Board of Directors. Any adjourned session of any meeting of the
stockholders shall be held at the place designated in the vote of adjournment.
Section 3.2. Annual Meetings. The annual meeting of stockholders shall
be held at 10:00 a.m. on the second Thursday of April in each year, unless that
day is a legal holiday at the place where the meeting is to be held, in which
case the meeting shall be held at the same hour on the next succeeding day not a
legal holiday, or at such other date and time as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting, at
which they shall elect a Board of Directors and transact such other business as
may be required by law or these by-laws or as may properly come before the
meeting.
<PAGE>
Section 3.3. Special Meetings. Special meetings of stockholders, for any
purpose or purposes, may be called at any time by the Chairman of the Board of
Directors, the President, the Chief Executive Officer, or the Board of
Directors. A special meeting of the stockholders shall be called by the
Secretary, or in the case of the death, absence, incapacity or refusal of the
Secretary, by an Assistant Secretary or some other officer, upon application of
a majority of the directors. Any such application shall state the purpose or
purposes of the proposed meeting. Any such call shall state the place, date,
hour, and purposes of the meeting.
Section 3.4. Notice of Meetings. Written notice of every meeting of
stockholders, stating the place, date and hour thereof and, in the case of a
special meeting of stockholders, the purpose or purposes thereof and the person
or persons by whom or at whose direction such meeting has been called and such
notice is being issued, shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by mail, to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
stock transfer books of the Corporation. Such notice shall be given by the
Secretary, or by an officer or person designated by the Board of Directors, or
in the case of a special meeting by the officer calling the meeting.
Section 3.5. Action Without a Meeting. Any action required by the
General Corporation Law of the State of Delaware to be taken at any annual or
special meeting of the stockholders of the Corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Section 3.6. Quorum. Except as otherwise provided in these By-Laws or
the Certificate of Incorporation, the holders of a majority of the issued and
outstanding shares of stock of the Corporation entitled to vote, represented in
person or by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at any meeting of stockholders; provided, however, that
when a specific item of business is required by law or by the Certificate of
Incorporation to be voted on separately by a class or series, a majority of the
outstanding shares in such class or series must in addition be represented,
either in person or by proxy, to constitute a quorum for the transaction of such
items of business. If, however, such quorum shall not be present or represented
at any meeting of stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. Notwithstanding the foregoing, if after any such adjournment, the Board
of Directors shall fix a new record date for the adjourned meeting, or the
adjournment is for more than thirty (30) days, a notice of such adjourned
meeting shall be given as provided in Section 3.4 of these By-Laws.
Section 3.7. Voting. Except as otherwise required by law, the
Certificate of Incorporation or these By-Laws, a majority of the votes cast at a
meeting by those shares entitled to vote on the subject matter shall be
sufficient to authorize any corporate action. Each share of common stock of the
Corporation issued and outstanding shall entitle the stockholder of record to
one vote per share.
2
<PAGE>
Section 3.8. Proxies. Every stockholder entitled to vote at a meeting,
or by consent with a meeting, may authorize another person or persons to act for
him by proxy. Each proxy shall be in writing executed by the stockholder giving
the proxy or by his duly authorized attorney. No proxy shall be valid after the
expiration of three (3) years from its date, unless a longer period is provided
for in the proxy. Unless and until voted, every proxy shall be revocable at the
pleasure of the person who executed it, or his legal representatives or assigns,
except in those cases where an irrevocable proxy permitted by statute has been
given.
Section 3.9. Stock Records. The Secretary or agent having charge of the
stock transfer books shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order and showing
the address of and the number and class and series, if any, of shares held by
each stockholder. Such list, for a period of ten (10) days prior to such
meeting, shall be kept at the principal place of business of the Corporation or
at the office of the transfer agent or registrar of the Corporation and such
other places as required by statute and shall be subject to inspection by any
stockholder at any time during the meeting.
Section 3.10. Conduct of Meeting. The Chairman of the Board of Directors
shall preside at all meetings of the stockholders. In the absence of the
Chairman of the Board of Directors, the President shall preside at all such
meetings. In the absence of the Chairman of the Board of Directors and the
President, the Chief Executive Officer shall preside at all such meetings. If
neither the Chairman of the Board of Directors, the President nor the Chief
Executive Officer are present, then any other director chosen by the directors
in attendance shall preside. The Secretary of the Corporation, or, in his or her
absence, an Assistant Secretary, if any, shall act as Secretary of every
meeting, but if neither the Secretary nor an Assistant Secretary is present, the
person presiding at the meeting shall appoint a Secretary of the meeting.
Section 3.11. Inspectors and Judges. The directors, in advance of any
meeting, may, but need not, appoint one or more inspectors of election or judges
of the vote, as the case may be, to act at the meeting or any adjournment
thereof. If an inspector or inspectors or judge or judges are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors or judges. In case any person who may be appointed as an inspector or
judge fails to appear or act, the vacancy may be filled by appointment made by
the person presiding at the meeting. Each inspector or judge, if any, before
entering upon the discharge of his duties, shall take and sign an oath to
faithfully execute the duties of inspector or judge at such meeting with strict
impartiality and according to the best of his ability. The inspectors or judges,
if any, shall determine the number of shares of stock outstanding and the voting
power of each class and series, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors or judge or
judges, if any, shall make a report in writing on any challenge, question or
matter determined by him or her or them and execute a certificate of any fact
found by him or her or them.
Section 3.12. Stockholder Proposals. At any annual meeting of the
stockholders, only such business shall be conducted as shall have been brought
before the meeting (a) by or at the direction of the Board of Directors or (b)
by any stockholder of the Corporation who is a stockholder of record at the time
of giving of the notice provided for in this Section 3.12, who shall be entitled
to vote at such meeting and who complies with the procedures set forth below.
For business to be properly brought before an annual meeting of stockholders,
the stockholder
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must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
sixty (60) days nor more than ninety (90) days prior to the anniversary date of
the immediately preceding annual meeting; provided, however, that in the event
that the annual meeting with respect to which such notice is to be tendered is
not held within thirty (30) days before or after such anniversary date, notice
by the stockholder to be timely must be received no later than the close of
business on the tenth (10th) day following the day on which notice of the date
of the meeting or public disclosure thereof was given or made. Such
stockholder's notice shall set forth as to each matter the stockholder proposes
to bring before the meeting (a) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business at
the meeting, (b) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business, (c) the class and the number
of shares of stock of the Corporation which are beneficially owned by the
stockholder and (d) a description of all arrangements or understandings between
such stockholder and any other person or persons (including their names) in
connection with such business and any material interest of the stockholder in
such business. Notwithstanding anything in these By-laws to the contrary, no
business shall be conducted at a stockholders meeting except in accordance with
the procedures set forth in this Section 3.12. If the Board of Directors shall
determine, based on the facts, that business was not properly brought before the
meeting in accordance with the procedures set forth in this Section 3.12, the
Chairman of the Board of Directors or the person presiding at such meeting shall
so declare to the meeting and any such business not properly brought before such
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 3.12, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder with respect to the matters set forth in this Section
3.12. Notwithstanding the foregoing provisions of this Section 3.12, stockholder
nominations of persons for election to the Board of Directors shall be governed
by the Certificate of Incorporation.
ARTICLE IV
DIRECTORS
Section 4.1. General Powers and Number. The business and affairs of the
Corporation shall be under the direction of its Board of Directors. The Board of
Directors may elect a Chairman of the Board from among its members. The number
of directors which shall initially constitute the whole board shall be one.
Directors need not be stockholders. The number of directors may be changed from
time to time by the directors or by action of holders of a majority of the
outstanding voting stock of the Corporation.
Section 4.2. Tenure. Except as otherwise provided by law, by the
Certificate of Incorporation or by these By-Laws, each director shall hold
office until the next annual meeting and until his successor is elected and
qualified, or until he sooner dies, resigns, is removed or becomes disqualified.
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Section 4.3. Vacancies. Vacancies and any newly created directorships
resulting from any increase in the number of directors may be filled by vote of
the stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board, effective at a
future date, a majority of the directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies, the vote or
action by writing thereon to take effect when such resignation or resignations
shall become effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies in their number,
subject to any requirements of law or of the Certificate of Incorporation or of
these By-Laws as to the number of directors required for a quorum or for any
vote or other actions.
Section 4.4. Powers and Duties. Subject to the applicable provisions of
law, these By-Laws or the Certificate of Incorporation, but in furtherance and
not in limitation of any rights therein conferred, the Board of Directors shall
have the control and management of the business and affairs of the Corporation
and shall exercise all such powers of the Corporation and do all such lawful
acts and things as may be exercised by the Corporation.
Section 4.5. Place of Meeting. All meetings of the Board of Directors
may be held within or without the State of Delaware.
Section 4.6. Regular Meetings. The directors shall meet annually
immediately following, and at the same place as, the annual meeting of the
stockholders, and quarterly at times determined by the Board of Directors;
provided that the failure to hold the annual or quarterly meetings shall not
work a forfeiture or otherwise effect valid corporate acts and that notice of
the first regular meeting following any such determination shall be given to
absent directors. Other meetings of the Board of Directors may be held upon such
notice or without notice, and at such time and at such place as shall from time
to time be determined by the Board of Directors.
Section 4.7. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President or the Chief
Executive Officer and shall be called promptly by the Chairman of the Board, the
President, the Chief Executive Officer or the Secretary upon the written request
of any two members of the Board of Directors specifying the special purpose
thereof, on not less than two (2) days' notice to each director. Such request
shall state the date, time and place of the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 4.8. Notice of Meetings. Notice of each special meeting of the
Board of Directors (and each regular meeting for which notice shall be required)
shall be given by the Secretary or an Assistant Secretary and shall state the
place, date and time of the meeting. Notice of each such meeting shall be given
by any of the following ("Contact Means"): orally or by telecopy, telegraph,
electronic mail or express mail or by courier delivery for next day delivery.
Each director shall provide in writing to the Corporation and to the other
directors a list indicating, in order of preference, the Contact Means and
addresses or other necessary information for providing notice of meetings to
such director. This list may from time to time be amended in writing by the
director. The Secretary or Assistant Secretary shall give notice in order of
each director's listed Contact Means. Notice shall be deemed given hereunder to
each director upon the earlier of (a) obtaining verification from such director
that the notice has been actually received by such director and (b) all Contact
Means have been made, as certified by the Secretary or Assistant Secretary.
Notice of any adjourned meeting, including the place, date and
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time of the new meeting, shall be given to all directors, not present at the
time of the adjournment, as well as to the other directors unless the place,
date and time of the new meeting is announced at the adjourned meeting.
Section 4.9. Quorum and Voting. At all meetings of the Board of
Directors, a majority of the entire Board of Directors shall be necessary to and
shall constitute a quorum for the transaction of business, unless otherwise
provided by any applicable provision of law, by these By-Laws or by the
Certificate of Incorporation. The act of a majority of the directors present at
the time of the vote, if a quorum is present at such time, shall be the act of
the Board of Directors, unless otherwise provided by any applicable provision of
law, by these By-Laws or by the Certificate of Incorporation. If a quorum shall
not be present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, until a quorum shall be
present.
Section 4.10. Books and Records. The directors may keep the books of the
Corporation, except such as are required by law to be kept within the State of
Delaware, outside of the State of Delaware, at such place or places as they may
from time to time determine.
Section 4.11. Action Without a Meeting. Any action required or permitted
to be taken by the Board of Directors, or by a committee of the Board of
Directors, may be taken without a meeting if all members of the Board of
Directors or the committee, as the case may be, consent in writing to the
adoption of a resolution authorizing the action. Any such resolution and the
written consents thereto by the members of the Board of Directors or committee
shall be filed with the minutes of the proceedings of the Board of Directors or
committee.
Section 4.12. Telephone Participation. Any one or more members of the
Board of Directors, or any committee of the Board of Directors, may participate
in a meeting of the Board of Directors or committee by means of a conference
telephone call or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
Section 4.13. Committees.
(a) The Board of Directors may, by vote of a majority of the
whole Board, (i) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of one or more of the
directors; (ii) designate one or more directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
the committee; and (iii) determine the extent to which each such committee shall
have and may exercise the powers of the Board of Directors in the management of
the business and affairs of the Corporation, including the power to authorize
the seal of the Corporation to be affixed to all papers which require it and the
power and authority to declare dividends or to authorize the issuance of stock;
excepting, however, such powers which by law, by the certificate of
incorporation or by these by-laws they are prohibited from so delegating. In the
absence or disqualification of any member of such committee and his alternate,
if any, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Except as the Board of
Directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the Board or such rules, its
business shall be conducted as nearly as may be in the same manner as is
provided by these by-laws for the conduct of business by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors upon request.
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(b) Unless the Board of Directors otherwise provides, each
committee designated by the Board of Directors may make, alter and repeal rules
for the holding of its meetings and the conduct of its business, subject to the
following: a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business; the vote of
a majority of the members present at a meeting at the time of a vote if a quorum
is then present shall be the act of such committee.
Section 4.14. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and the
non-employee directors may be paid a fixed sum or receive stock options or other
securities of the Corporation for attendance at each meeting of the Board of
Directors or may be paid a stated salary or receive a stated number of stock
options or other securities of the Corporation as a director. No such payment
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor. Non-employee members of special or standing
committees may be allowed like compensation for attending committee meetings.
Section 4.15. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any matter
is taken shall be presumed to have assented to the action taken unless his or
her dissent or abstention shall be entered in the minutes of the meeting or
unless he or she shall file a written dissent to such action with the person
acting as the Secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the Secretary of the Corporation
within five (5) days after the date a copy of the minutes of the meeting is
received. Such right to dissent shall not apply to a director who voted in favor
of such action.
Section 4.16. Interested Directors and Officers.
(a) No contract or transaction between the Corporation and one or more
of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of the Corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(1) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders.
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(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
ARTICLE V
WAIVER
Section 5.1. Waiver. Whenever a notice is required to be given by any
provision of law, by these By-Laws, or by the Certificate of Incorporation, a
waiver thereof in writing, whether before or after the time stated therein,
shall be deemed equivalent to such notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when the person
attends a meeting for the express purpose of objecting at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the stockholders, directors, or members of
a committee of directors need be specified in any written waiver of notice
unless so required by the certificate of incorporation or the bylaws.
ARTICLE VI
OFFICERS
Section 6.1. Number. The principal officers of the Corporation shall be
a President, a Treasurer and a Secretary. In addition, there may be such other
officers as the Board of Directors may deem necessary. Any two or more offices
may be held by the same person.
Section 6.2. Term of Office. The principal officers shall be chosen
annually by the Board of Directors at the regular annual meeting of the Board of
Directors. Other officers may be elected from time to time. Each officer shall
serve until his successor shall have been chosen and qualified, or until his
death, resignation or removal. In case of the absence or disability of any
officer of the Corporation and of any person hereby authorized to act in his
place during such period of absence or disability, the Board of Directors may
from time to time delegate the powers and duties of such officer to any other
officer, or any director, or any other person whom it may select.
Section 6.3. Removal. Any officer may be removed from office, at any
time by the affirmative vote of a majority of the total number of directors then
in office whenever it be judged that the best interests of the Corporation will
be served thereby. Said removal shall not prejudice the contract rights, if any,
of the person so removed.
Section 6.4. Vacancies. Any vacancy in an office from any cause may be
filled for the unexpired portion of the term by the Board of Directors.
Section 6.5. Chairman of the Board. The Chairman of the Board of
Directors shall be a member of the Board of Directors and shall preside at all
meetings of stockholders and of the Board of Directors. He may delegate his
authority to preside at such meetings to any other director or to an office of
the Corporation. The Chairman of the Board of Directors shall have the power to
sign and deliver agreements, certificates and other instruments on behalf of the
Corporation subject to the prior approval or direction of the Board of Directors
or the Chief Executive Officer and shall have an exercise all such other duties
that are incident to this office or that are from time to time assigned to him
by the Board of Directors or the Chief Executive Officer. In addition, the
Chairman of the Board of Directors shall carry out the duties and functions of
the Chief Executive Officer in the event of the disability of the Chief
Executive Officer or at the direction of the Chief Executive Officer subject to
the direction of the Board of Directors.
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Section 6.6. All Other Officers. The other officers of the Corporation
shall have such powers and perform such duties as the Board of Directors may
from time to time authorize or determine. In the absence of action by the Board
of Directors, the officers shall have such powers as the Chief Executive Officer
may from time to time authorize. In the absence of action by the Board of
Directors or the Chief Executive Officer, the officers shall have such powers as
generally pertain to their respective offices.
Section 6.7. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
an on behalf of the Corporation by the Chief Executive Officer, or President or
any Vice President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
ARTICLE VII
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 7.1. Form and Signature. The shares of the Corporation shall be
represented by certificates signed by the Chairman of the Board or Vice-chairman
or President or any Vice President and by the Secretary or any Assistant
Secretary or the Treasurer or any Assistant Treasurer, and shall bear the seal
of the Corporation or a facsimile thereof. Each certificate representing shares
shall state upon its face (a) that the Corporation is formed under the laws of
the State of Delaware, (b) the name of the person or persons to whom it is
issued, (c) the number of shares which such certificate represents and (d) the
par value, if any, of each share represented by such certificate.
Section 7.2. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares of stock to receive dividends or other distributions, and to
vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares of stock, and shall not be bound
to recognize any equitable or legal claim to or interest in such shares on the
part of any other person, except as required by law.
Section 7.3. Transfer of Stock. Upon surrender to the Corporation or the
appropriate transfer agent, if any, of the Corporation of a certificate
representing shares of stock duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer and accompanied by any necessary
stock transfer tax stamps, and, in the event that the certificate refers to any
agreement restricting transfer of the shares which is represents, proper
evidence of compliance with such agreement, a new certificate shall be issued to
the person entitled thereto, and the old certificate cancelled and the
transaction recorded upon the books of the Corporation.
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Section 7.4. Lost Certificates, Etc. The Corporation may issue a new
certificate for shares in place of any certificate theretofore issued by it,
alleged to have been lost, mutilated, stolen or destroyed certificate, or his
legal representatives, to make an affidavit of that fact and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation on account of the alleged loss,
mutilation, theft or destruction of any such certificate or the issuance of any
such new certificate.
Section 7.5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten (10) days before the date of such
meeting. If no such record date is fixed by the Board of Directors, the record
date for determining the stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
In order that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
such record date has been fixed by the Board of Directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the General Corporation Law of the State of Delaware, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation by delivery to its registered office in
Delaware by hand or certified or registered mail, return receipt requested, to
its principal place of business or to an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. If no record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by the General Corporation Law of
the State of Delaware, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action.
In order that the Corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors may
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty days prior to such payment, exercise or other action. If no such
record date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
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Section 7.6. Regulations. Except as otherwise provided by law, the Board
of Directors may make such additional rules and regulations, not inconsistent
with these By-Laws, as it may deem expedient, concerning the issue, transfer and
registration of certificates for the securities of the Corporation. The Board of
Directors may appoint, or authorize any officer or officers to appoint, one or
more transfer agents and one or more registrars and may require all certificates
for shares of capital stock to bear the signature or signatures of any of them.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. Dividends and Distributions. Dividends and other
distributions upon or with respect to outstanding shares of stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, property, or in stock of the Corporation. The
Board of Directors shall have full power and discretion, subject to the
provisions of the Certificate of Incorporation or the terms of any other
corporate document or instrument binding upon the Corporation to determine what,
if any, dividends or distributions shall be declared and paid or made.
Section 8.2. Checks, Etc. All checks or demands for money and notes or
other instruments evidencing, indebtedness or obligations of the Corporation
shall be signed by such officer or officers or other person or persons as may
from time to time be designated by the Board of Directors.
Section 8.3. Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
Section 8.4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 8.5. General and Special Bank Accounts. The Board may authorize
from time to time the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board of Directors
may designate or as may be designated by any officer or officers of the
Corporation to whom such power of designation may be delegated by the Board of
Directors from time to time. The Board of Directors may make such special rules
and regulations with respect to such bank accounts, not inconsistent with the
provisions of these By-Laws, as it may deem expedient.
ARTICLE IX
AMENDMENTS
Section 9.1. Power to Amend. Subject to the provisions of the
Certificate of Incorporation and the provisions of the General Corporation Law
of the State of Delaware, the power to amend, alter, or repeal these Bylaws and
to adopt new Bylaws may be exercised by the vote of a majority of the stock
outstanding and entitled to vote.
BY-LAWS
of
THE RIVAL COMPANY
(A Delaware Corporation)
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the corporation
shall be located at such place in the State of Delaware as the Board of
Directors may from time to time authorize by duly adopted resolution.
Section 2. Other Offices. The corporation may also have offices at such
other places, either within or without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
Stockholders
Section 1. Place of Meetings. Meetings of stockholders shall be held at
such place, either within or without the state of Delaware, as shall be
designated from time to time by the Board of Directors and stated in the notice
of meeting.
Section 2. Annual Meetings. Annual meetings of stockholders shall be
held once each year on such date and at such time as shall be designated from
time to time by the Board of Directors. At each annual meeting the stockholders
shall elect a Board of Directors and transact such other business as may be
properly brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders may
be called only by the Board of Directors.
Section 4. Notice of Meetings. Except as otherwise provided by law or
in the certificate of incorporation, written notice of each meeting of the
stockholders stating the place, date and hour of the meeting and, in the case of
a special meeting, the purpose or purposes for which the meeting is called,
shall be given not less than tan or more than sixty days before the date of the
meeting, either personally or by mail, by or at the direction of the Board of
Directors,
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the President or the Secretary, to each stockholder of record entitled to vote
at such meeting. If mailed, notice of a stockholders meeting shall be deemed
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
corporation.
Section 5. List of Stockholders. At least ten (10) days before each
meeting of stockholders, the Secretary shall prepare a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of meeting or, if not so specified, at the place where
the meeting is to be held. Such list shall also be produced and kept open at the
time and place of the meeting and shall be subject to inspection by any
stockholder during the whole time of the meeting.
Section 6. Quorum; Adjournment of Meetings. Except as otherwise
provided by law or in the certificate of incorporation, the holders of a
majority of the stock issued and outstanding and entitled to vote at a meeting
of stockholders present in person or represented by proxy, shall constitute a
quorum at such meeting for the transaction of business. If, however, such quorum
shall not be present or represented at any such meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting to another time and place,
without notice other than announcement at the meeting of such other time and
place. At the adjourned meeting at which a quorum shall be present or
represented by proxy, any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 7. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for such
stockholder by proxy, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period, and then
only within the period specified.
Section 8. Voting. Except as otherwise provided by law or in the
certificate of incorporation, every registered owner of shares entitled to vote
at any meeting of the stockholders shall have one vote for each such share
standing in his or her name on the books of the corporation. Except as otherwise
required by law or in the certificate of incorporation, all matters, other than
the election of directors, brought before any meeting of the stockholders shall
be decided by a vote of the holders of a majority of the voting power of the
issued and outstanding shares of stock of the corporation present in person or
by proxy at such meeting and voting thereon.
<PAGE>
Section 9. Inspectors of Election. The Board of Directors, the Chairman
of the Board or the President shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at the meeting and make a written report
thereof, and may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of stockholders, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of such inspector's duties, shall take and sign an
oath faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. At the meeting, the inspector or
inspectors shall: (a) ascertain the number of shares outstanding and the voting
power of each, (b) determine the shares represented at the meeting and the
validity of proxies and ballots, (c) count all votes and ballots, (d) determine
and retain for a reasonable period a record of the disposition of any challenges
made to any determination by the inspectors and (e) certify the determination of
the number of shares represented at the meeting, and the count of all votes and
ballots. The inspectors may appoint or retain other persons or entities to
assist them in the performance of their duties. The date and time of the opening
and the closing of the polls for each matter upon which the stockholders will
vote at a meeting shall be announced at the meeting. No ballot, proxies or
votes, nor any revocations thereof or changes thereto, shall be accepted by the
inspectors after the closing of the polls unless the Delaware Court of Chancery
upon application by a stockholder shall determine otherwise.
Section 10. Organization. The Chairman of the Board or, in his absence,
the President shall preside at all meetings of the stockholders. In the absence
of both the Chairman of the Board and the President, a majority of the members
of the Board of Directors present in person at such meeting may appoint any
officer or director to act as Chairman of the meeting. The Secretary of the
corporation shall act as secretary of all meetings of the stockholders. In the
absence of the Secretary, the chairman of the meeting shall appoint any other
person to act as secretary of the meeting.
Section 11. Order of Business. All meetings of stockholders shall be
conducted in accordance with such rules as are prescribed by the chairman of the
meeting. The order of business at all meetings of the stockholders shall be
determined by the chairman of the meeting.
Section 12. Action By Written Consent
(a) Unless otherwise provided in the certificate of incorporation, any
action required to be taken at any annual or special meeting of stockholders of
the corporation, or any action that may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice, and without a vote if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
<PAGE>
(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten (10) days after the date
on which such a request is received, adopt a resolution fixing the record date.
If no record date has been fixed by the Board of Directors within ten (10) days
of the date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded, to the attention of the Secretary of the corporation. Delivery shall
be by hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts the resolution taking such prior action.
(c) In the event of the delivery to the corporation of a written
consent or consents purporting to authorize or take corporate action and/or any
related revocation or revocations, the Secretary of the corporation shall
provide for the safekeeping of such consents and revocations, and shall as soon
as practicable thereafter conduct such reasonable investigation as the Secretary
deems necessary or appropriate for the purpose of ascertaining the validity of
such consents and revocations and all matters incident thereto, including,
without limitation, whether the holders of shares having the requisite voting
power to authorize or take the action specified in the consents have given
consents. Alternatively, the Board of Directors in its sole discretion may
appoint one or more inspectors of elections to conduct such investigation.
(d) Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated written consent received in the manner provided in section
12(b), a written consent or consents signed by a sufficient number of holders to
take such action are delivered to the corporation in the manner provided in
Section 12(b) .
Section 13. Advance Notice of Stockholder Nominations and Stockholder
Proposals.
(a) Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the corporation at any
meeting of stockholders at
<PAGE>
which directors are to be elected. Nominations of persons for election to the
Board of Directors may be made at any such meeting of stockholders (i) by or at
the direction of the Board of Directors (or any duly authorized committee
thereof) or (ii) by any stockholder of record of the corporation who is entitled
to vote in the election of directors at such meeting and who complies with the
notice procedures set forth in Section 13(b).
(b) If a stockholder proposes to nominate one or more candidates for
election as directors at a meeting of stockholders at which directors are to be
elected, the stockholder must give timely notice thereof in proper written form
to the Secretary of the corporation, in addition to complying with any other
applicable requirements. To be timely, the stockholder's notice must be
delivered to the Secretary at the principal executive offices of the corporation
not less than sixty (60) days prior to the date scheduled for such meeting;
provided, however, that if notice or public announcement of the scheduled date
of the meeting is not given or made at least seventy (70) days prior to the date
scheduled for the meeting, such stockholder's notice must be so delivered to the
Secretary not more than ten (10) days following the day on which such notice of
meeting was mailed or such public announcement was made, whichever is earlier.
In no event shall the postponement, deferral or adjournment of a stockholders'
meeting commence a new tine period for the giving of notice by a stockholder as
described above. For purposes of this Section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (i) as to each person whom the stockholder proposes to nominate
for election as a director (A) the name, age, business address and residence
address of the person, (B) the principal occupation or employment of the person,
(C) the class and number of shares of capital stock of the corporation that are
owned beneficially and owned of record by the person and (D) any other
information concerning the person that would be required to be disclosed in a
proxy statement or other filings in connection with the solicitation of proxies
for the election of such person as a director under Section 14 of the securities
Exchange Act of 1934, as amended from time to time (the "Exchange Act"), and the
rules and regulations promulgated thereunder; and (ii) as to the stockholder
giving the notice (A) the name and address, as they appear on the corporation's
books, of such stockholder, (B) the name and address of the beneficial owner, if
any, on whose behalf the nomination(s) are made, (C) the class and number of
shares of capital stock of the corporation that are owned beneficially and owned
of record by such stockholder and any such beneficial owner, (D) a description
of all arrangements or understandings between such stockholder or beneficial
owner and each proposed nominee or any other person or persons (including their
names) pursuant to which the nomination(s) are to be made by such stockholder
and (E) any other information relating to such stockholder or beneficial owner
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for the election
of directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a
<PAGE>
written consent of each proposed nominee to being named as a nominee and to
serve as a director if elected.
(c) No business may be transacted at an annual meeting of stockholders,
other than business that is either (i) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (ii) otherwise properly brought
before the annual meeting by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (iii) otherwise properly brought
before the annual meeting by any stockholder of record of the corporation who is
entitled to vote at such meeting and who complies with the notice procedures set
forth in Section 13(d). Any business to be brought before the annual meeting by
any stockholder must also be a proper matter for stockholder action.
(d) If a stockholder proposes to bring business before an annual
meeting of stockholders, the stockholder must give timely notice thereof in
proper written form to the Secretary of the corporation, in addition to
complying with any other applicable requirements. To be timely, a stockholder's
notice must be delivered to the Secretary at the principal executive offices of
the corporation within the period specified in Section 13(b) hereof. In no event
shall the postponement, deferral or adjournment of a stockholders' meeting
commence a new time period for the giving of notice by a stockholder.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (i) a brief, description of the proposal desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and address, as they appear on the corporation's
books, of such stockholder, (iii) the name and address of the beneficial owner,
if any, on whose behalf the proposal is made, (iv) the class and number of
shares of capital stock of the corporation that are owned beneficially and owned
of record by such stockholder and any such beneficial owner, (v) a description
of all arrangements or understandings between such stockholder or beneficial
owner and any other person or persons (including their names) in connection with
the proposal of such business by such stockholder, (vi) a description of any
material financial or other interest of such stockholder or beneficial owner in
such proposal and (vii) any other information that would be required to be
disclosed in a proxy statement soliciting proxies for approval of the proposal
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder.
(e) The Board of Directors, or a designated committee thereof, may
reject any stockholder's nomination or stockholder's proposal which is not
timely made in accordance with the provisions of this Section 13. If the Board
of Directors, or a designated committee thereof, determines that the information
provided in a stockholder's notice does not comply with the requirements of this
Section 13 in any material respect, the Secretary of the corporation shall
notify the stockholder of the deficiency. The stockholder shall have an
opportunity to cure the deficiency by providing additional information to the
Secretary within five (5) days from the date such deficiency notice is given to
the stockholder, or such shorter time as may reasonably be
<PAGE>
deemed appropriate by the Board or committee. If the deficiency is not cured
within such period, or if the Board of Directors or such committee determines
that the additional information provided by the stockholder, together with the
information previously provided, does not satisfy the requirements of this
Section 13 in any material respect, then, the Board of Directors or committee
may reject such stockholder's notice.
(f) Notwithstanding the procedures set forth is Section 13(e) hereof,
if the Board of Directors or any committee thereof does not make a determination
as to whether a stockholder's notice complies with the provisions of this
Section 13, the chairman of the meeting shall make the determination and declare
at the meeting whether the stockholder has so complied. If the chairman
determines that the stockholder has not so complied, then unless the chairman in
his or her sole and absolute discretion waives such noncompliance, the chairman
shall declare at the meeting that the stockholder's nomination or proposal was
not properly made and the defective nomination or stockholder proposal shall be
disregarded.
ARTICLE III
Board of Directors
Section 1. Number and Election. The number of directors which shall
constitute the Board of Directors shall be determined from time to time by
resolution of the Board of Directors, provided that no reduction by the Board of
Directors in the number of directors shall affect the term of any incumbent
director. The directors shall be elected at the annual meeting of stockholders,
except as provided in Article III, Section 2 hereof, and each director elected
shall hold office until his or her successor is elected and has qualified or
until his or her earlier death, resignation or removal.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, although less than a quorum, or
by a sole remaining director. Any director so chosen to fill any such vacancy or
newly created directorship shall hold office until the next election of
directors and until his or her successor is elected and has qualified, or until
his or her earlier death, resignation or removal.
Section 3. First Meeting of Each Board. The first meeting of each newly
elected Board of Directors, of which no notice shall be necessary, shall be held
immediately following the annual meeting of stockholders or any adjournment
thereof at the place where the annual meeting of stockholders was held, or at
such other place as a majority of the members of the newly elected Board who are
then present shall determine, for the election or appointment of officers for
the ensuing year and the transaction of such other business as may be brought
before such meeting. in the event the meeting is not held at that time and
place, such first meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings
<PAGE>
of the Board of Directors, or as shall be specified in a written waiver of
notice signed by all of the directors.
Section 4. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such times and places as the Board of Directors
may from time to time determine.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be called by order of the Chairman of the Board, the President or any two
directors. Notice of the time and place of each special meeting shall be given
by or at the direction of the person or persons calling the meeting as
hereinafter provided. Notice of the meeting shall be mailed to each director,
addressed to such director at his or her residence or usual place of business,
at least three days before the meeting, or shall be sent to him or her at such
place by telegraph, telecopy or facsimile transmission or be delivered
personally or by telephone at least twenty-four hours before the meeting. The
notice shall state the date, time and place of the meeting but need not state
the purpose thereof, except as otherwise expressly provided in these By-laws.
Section 6. Waiver of Notice. A written waiver of notice, signed by the
director entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Neither the business to be transacted at,
nor the purpose of any regular or special meeting need be specified in any
written waiver of notice unless so required by law or in the certificate of
incorporation. Attendance of a director at any meeting, whether regular or
special, shall constitute a waiver of notice of such meeting except where a
director attends a meeting for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
Section 7. Quorum; Voting. A majority of the directors then in office
(but in no event less than one-third of the total number of directors) shall
constitute a quorum for the transaction of business, but less than a quorum may
adjourn any meeting to another time or place from time to time until a quorum
shall be present, whereupon the meeting may be held, as adjourned, without
notice other than announcement at the meeting of such other time and place.
Except as otherwise required by law or in the certificate of incorporation, all
matters coming before any meeting of the Board of Directors at which there is a
quorum shall be decided by the vote of a majority of the directors present at
the meeting.
Section 8. Organization. Every meeting of the Board of Directors shall
be presided over by the Chairman of the Board, or, in his absence, the President
in the absence of the Chairman of the Board and the President, a presiding
officer shall be chosen by a majority of the directors present. The Secretary of
the corporation shall act as Secretary of the meeting, but, in the Secretary's
absence, the presiding officer may appoint any person to act as secretary of the
meeting.
<PAGE>
Section 9. Committees of Directors. The Board of Directors may by
resolution or resolutions adopted by a majority of the whole Board of Directors
designate one or more directors to constitute an executive committee, finance
committee or such other committee or committees as the Board of Directors may
from time to time deem advisable. Except to the extent restricted by law, any
said committee shall have and may exercise all of the authority of the Board of
Directors in the management of the corporation to the extent provided in said
resolutions. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any absent or disqualified member. All committees shall keep regular
minutes of their proceedings and report the same to the Board of Directors when
required.
Section 10. Telephone Meetings. Members of the Board of Directors or
any committee thereof may participate in meetings by means of conference
telephone or similar communications equipment whereby all participants can hear
each other and such participation shall constitute presence in person at the
meeting.
Section 11. Presumption of Assent. A member of the Board of Directors
or any committee thereof who is present at a meeting of the Board or such
committee, as the case may be, at which action on any matter is taken shall be
presumed to have assented to the action taken unless his or her dissent or
abstention shall be entered in the minutes of the meeting or unless he or she
shall file a written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the secretary of the corporation within ten days
after the date a copy of the minutes of the meeting is received. such right to
dissent shall not apply to a director or committee member who voted in favor of
such action.
Section 12. Action by Consent. Except as provided in the certificate of
incorporation, any action which is required or permitted to be taken at a
meeting of the directors or of any committee thereof may be taken without a
meeting if consents in writing, setting forth the action so taken, are signed by
all members of the Board or of the committee, as the case may be. Such consents
shall have the same force and effect as a unanimous vote at a meeting duly held.
The Secretary shall file such consents with the minutes of the meetings of the
Board of Directors or the committee, as the case may be.
Section 13. Removal. At a meeting called expressly for that purpose,
the entire Board of Directors or any member thereof may be removed, with or
without cause, by the vote of the holders of a majority of the shares then
entitled to vote at an election of directors. Directors may be removed with
cause by a majority of the whole Board of Directors at a special meeting of the
Board of Directors, provided that notice of such meeting, unless waived, shall
state the purpose as well as the time and place of the meeting.
<PAGE>
Section 14. Resignations. Any director of the corporation may resign at
any time by giving written notice of his or her resignation to the Chairman of
the Board or the President and to the Secretary of the corporation. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt. Unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 15. Compensation of Directors. Unless otherwise restricted by
law or by the certificate of incorporation, the Board of Directors shall have
the authority to fix the compensation, if any, of directors. The directors may
be paid their expenses, if any, of attendance at each meeting of the Board of
Directors or any committee. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be paid like
compensation for attending committee meetings.
ARTICLE IV
Officers
Section 1. General. The Board of Directors shall elect the officers of
the corporation, which shall include a President, a Secretary and a Treasurer
and such other or additional officers (including, without limitation, a Chairman
of the Board, one or more Vice-Chairmen of the Board, Vice-Presidents, Assistant
Vice-Presidents, Assistant Secretaries and Assistant Treasurers) as the Board of
Directors may designate.
Section 2. Term of Office; Removal and Vacancy. Each officer shall hold
office until his or her successor is elected and has qualified or until his or
her earlier death, resignation or removal. Any officer or agent shall be subject
to removal with or without cause at any time by the Board of Directors. Any
removal shall be without prejudice to the contractual rights, if any, of the
person so removed vacancies in any office, whether occurring by death,
resignation, removal or otherwise, may be filled by the Board of Directors.
Section 3. Powers and Duties. Each of the officers of the corporation
shall, unless otherwise ordered by the Board of Directors, have such powers and
duties as generally pertain to his or her respective office as well as such
powers and duties as from time to time may be conferred upon him or her by the
Board of Directors. Unless otherwise ordered by the Board of Directors after the
adoption of these By-laws, the President shall be the chief executive officer of
the corporation.
Section 4. Power to Vote Securities. Unless otherwise ordered by the
Board of Directors, the Chairman of the Board and the President each shall have
full power and authority on behalf of the corporation to attend and to vote at
any meeting of stockholders of any corporation in
<PAGE>
which this corporation may hold securities, and may exercise on behalf of this
corporation any and all of the rights and powers incident to the ownership of
such securities at any such meeting and shall have power and authority to
execute and deliver proxies, waivers and consents on behalf of the corporation
in connection with the exercise by the corporation of the rights and powers
incident to the ownership of such securities. The Board of Directors, from time
to time, may confer like powers upon any other person or persons.
ARTICLE V
Capital Stock
Section 1. Certificates of Stock. Certificates for stock of the
corporation shall be in such form as the Board of Directors may from time to
time prescribe and shall be signed by the Chairman of the Board or a Vice
Chairman of the Board or the President or a Vice-President and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary. Any or all
of the signatures on a certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
Section 2. Transfer of Stock. Shares of capital stock of the
corporation shall be transferable on the books of the corporation only by the
holder of record thereof, in person or by duly authorized attorney, upon
surrender and cancellation of certificates for a like number of shares, with an
assignment or power of transfer endorsed thereon or delivered therewith, duly
executed, and with such proof of the authenticity of the signature and of
authority to transfer, and of payment of transfer taxes, as the corporation or
its agents may require.
Section 3. Ownership of Stock. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the owner thereof
in fact and shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise expressly provided by
law.
Section 4. Fixing the Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix in
advance a record date, which shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
<PAGE>
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
ARTICLE V1
Miscellaneous
Section 1. Corporate Seal. The seal of the corporation shall be
circular in form and shall contain the name of the corporation and the year and
state of incorporation.
Section 2. Fiscal Year. The Board of Directors shall have power to fix,
and from time to time change, the fiscal year of the corporation.
ARTICLE VII
Amendment
The Board of Directors shall have the power to make, alter or repeal
the By-laws of the corporation subject to the power of the stockholders to alter
or repeal the By-laws made or altered by the Board of Directors.
/s/ Stanley D. Biggs
------------------------------
Secretary
PATTON ELECTRIC COMPANY, INC.
BY-LAWS
OF
RIVAL ACQUISITION COMPANY
ARTICLE I
OFFICES
The registered office of the corporation shall be located at such place
in the State of Indiana as the Board of Directors may from time to time
authorize by duly adopted resolution.
The corporation may also have offices at such other places, either
within or without the State of Indiana as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the Shareholders shall
be held at the hour of 10:00 a.m. on the last Wednesday in October in each year
beginning with the year 1995 for the purpose of electing Directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day. If the election of Directors shall not
be held on the day designated herein for any annual meeting, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the Shareholders as soon thereafter as conveniently may
be.
Section 2. SPECIAL MEETINGS. Special meetings of the Shareholders may
be called by the President, by the Board of Directors or by the holders of not
less than one-fifth of all the outstanding shares of the Corporation entitled to
vote at such meeting.
Section 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Indiana, as the place of meeting
for any annual meeting of the Shareholders or for any special meeting of the
Shareholders called by the Board of Directors. A waiver of notice signed by all
Shareholders entitled to vote at a meeting may designate any place, either
within or without the State of Indiana, as the place for the holding of such
meeting.
<PAGE>
If no designation is made, or if a special meeting be otherwise called,
the place of meeting shall be the principal office of the Corporation.
Section 4. NOTICE OF MEETINGS. Written or printed notice of each
meeting of Shareholders stating the place, day and hour of the meeting and, in
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered or given not less than ten (10) nor more than fifty
(50) days before the date of the meeting, either personally or by mail, by or at
the direction of the President, or the Secretary, or the officers or persons
calling the meeting, to each Shareholder of record entitled to vote at such
meeting. if mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Corporation. Except as otherwise
provided by statute, notice of any adjourned meeting of the Shareholders shall
not be required.
Section 5. VOTING LISTS. At least ten days before each meeting of
Shareholders, the officer or agent having charge of the transfer book for shares
of the Corporation shall make a complete list of the Shareholders entitled to
vote at such meeting, arranged in alphabetical order with the address of, and
the number of shares held by, each Shareholder, which list, for a period of ten
days prior to such meeting, shall be kept on file at the registered office of
the Corporation and shall be subject to inspection by any Shareholder at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any Shareholder during the whole time of the meeting. The original share ledger
or transfer book, or a duplicate thereof kept in this state, shall be prima
facie evidence as to who are the Shareholders entitled to examine such list or
share ledger or transfer book or to vote at any meeting of Shareholders.
Section 6. QUORUM. A majority of the outstanding shares of the
Corporation entitled to vote at any meeting, represented in person or by proxy,
shall constitute a quorum at any meeting of the Shareholders; provided, that if
less than a majority of the outstanding shares are represented at said meeting,
a majority of the shares so represented may adjourn the meeting, from time to
time, to a date not longer than ninety days from the date originally set for
such meeting.
Section 7. PROXIES. At all meetings of Shareholders, a Shareholder may
vote by proxy executed in writing by the Shareholder or by his duly authorized
attorney- in- fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 8. VOTING OF SHARES. Each outstanding share of capital stock
having voting rights shall be entitled to one vote upon each matter submitted to
a vote at a meeting of Shareholders. There shall be no cumulative voting.
<PAGE>
Section 9. INFORMAL ACTION BY SHAREHOLDERS. Any action which may be
taken at a meeting of the Shareholders may be taken without a meeting if
consents in writing, setting forth the action so taken shall be signed by all of
the Shareholders entitled to vote with respect to the subject matter thereof.
Such consents shall have the same force and effect as a unanimous vote of the
Shareholders at a meeting duly held, and may be stated as such in any
certificate or document filed under the General and Business Corporation Law of
Indiana. The Secretary shall file such consents with the minutes of the meetings
of the Shareholders.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing in the
name of a guardian, curator, or trustee may be voted by such fiduciary, either
in person or by proxy, but no guardian, curator, or trustee shall be entitled,
as such fiduciary, to vote shares held by him without a transfer of such shares
into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee and
thereafter the pledgee shall be entitled to vote the shares so transferred.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors.
Section 2. NUMBER, ELECTION AND TERM. The number of Directors of the
Corporation shall be three (3) each of whom shall be initially elected at the
organization meeting of the Incorporators to hold office until the first annual
meeting of the Shareholders, when Directors shall be elected, and annually
thereafter, for a term of one year, and each of whom shall hold office until his
successor has been elected and has qualified.
Section 3. REMOVAL OF DIRECTORS. At a meeting called expressly for that
purpose, the entire Board of Directors or any number thereof, may be removed,
with or without
<PAGE>
cause, by a vote of the holders of a majority of the shares then entitled to
vote at an election of Directors. If less than the entire Board is to be
removed, no one of the Directors may be removed if the votes cast against his
removal would be sufficient to elect him if then cumulatively voted at an
election of the entire Board of Directors. Such meeting shall be held at the
registered office or principal business office of the Corporation in the State
of Indiana or in the city or county in Indiana in which the principal business
office of the Corporation is located.
Section 4. VACANCIES. In case of the death or resignation of one or
more of the Directors, a majority of the survivors or remaining Directors may
fill such vacancy or vacancies until the successor or successors are elected at
the next annual meeting of the Shareholders. A Director elected to fill a
vacancy shall serve as such until the next annual meeting of the Shareholders.
Section 5. COMPENSATION. The compensation of the Directors, if any, may
be set by the Board of Directors unless otherwise provided herein or in the
Articles of Incorporation.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. ANNUAL MEETINGS. An annual meeting of the Board of Directors
shall be held without other notice than this By-Law, immediately after, and at
the same place as, the annual meeting of Shareholders. Other regular meetings of
the Board shall be held at such times as the Board may by resolution from time
to time determine.
Section 2. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any two Directors upon
written or printed notice served personally on each Director or by mail or
telegraph to his address upon the records of the Corporation.
Section 3. PLACE OF MEETING. Meetings of the Board of Directors shall
be held at such place within or without the State of Indiana as shall be
provided for in the resolution, notice, waiver of notice or call of such
meeting, or if not otherwise designated, at the principal office of the
Corporation.
Section 4. QUORUM. A majority of the total number of Directors shall
constitute a quorum for the transaction of business, and the vote of a majority
of the Directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors, except as may be otherwise specifically
provided by statute, by the Articles of Incorporation or by these By-Laws.
Provided, however, that if less than a majority of the Directors are present at
said meeting, a majority of the Directors present may adjourn the meeting from
time to time without further notice.
<PAGE>
Section 5. ACTIONS OF THE BOARD OF DIRECTORS WITHOUT A MEETING. Any
action which is required to be or may be taken at a meeting of the Directors may
be taken without a meeting if consents in writing, setting forth the action so
taken, are signed by all of the Directors. The consents shall have the same
force and effect as a unanimous vote of the Directors at a meeting duly held,
and may be stated as such in any certificate or document filed under the Indiana
Business Corporation Law. The Secretary shall file such consents with the
minutes of the meetings of the Board of Directors.
Section 6. PARTICIPATION. Members of the Board of Directors or of any
committee designated by the Board of Directors may participate in a meeting of
the Board or committee by means of conference telephone or similar
communications equipment whereby all persons participating in the meeting can
hear each other, and participation in a meeting in this manner shall constitute
presence in person at the meeting.
ARTICLE V
OFFICERS
Section 1. NUMBER. The officers of the Corporation shall consist of a
President and a Secretary. The Board of Directors may also elect a Chairman of
the Board, one or more Vice Presidents (one of whom may be designated the
Executive Vice President), a Treasurer, Assistant Secretaries and Assistant
Treasurers. Any two or more offices may be held by the same person.
All officers and agents of the Corporation, as between themselves and
the Corporation, shall have such authority and perform such duties in the
management of the property and affairs of the Corporation as may be provided in
the By-Laws, or, in the absence of such provision, as may be determined by
resolution of the Board of Directors.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of Shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. New offices may be created and
filled at any meeting of the Board of Directors. Each officer shall hold office
until his successor shall have been duly elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
Section 3. REMOVAL. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the Corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
Section 4. VACANCIES. If the office of any officer of the Corporation
becomes vacant because of death, resignation, removal, disqualification or for
any other reason or if any officer
<PAGE>
of the Corporation is unable to perform the duties of his office for any reason,
the Board of Directors may choose a successor who shall replace such officer or
the Board of Directors may delegate the duties of any such vacant office to any
other officer or to any director of the Corporation until a successor is elected
at the next Directors' meeting.
Section 5. THE CHAIRMAN OF THE BOARD. When elected, the Chairman of the
Board shall be the principal executive officer of the Corporation; he shall
preside at meetings of the Board of Directors, and of the Shareholders, and,
subject to the direction and control of the Board of Directors, he shall direct
the policy and management of the Corporation. He shall perform such other duties
as may be prescribed by the Board of Directors from time to time. In the absence
of the Chairman of the Board, the President shall have and may exercise all of
the powers of the Chairman.
Section 6. THE PRESIDENT. Unless and until the Board of Directors shall
have elected a Chairman of the Board, the President shall be the chief executive
officer of the Corporation, and, subject to the direction and under the
supervision of the Board of Directors, shall have general charge of the
business, affairs and property of the Corporation and control over its officers,
agents and employees; shall preside at all meetings of the Shareholders and of
the Board of Directors at which he is present, and shall do and perform such
other duties and may exercise such other powers as from time to time may be
assigned to him by these By-Laws or by the Board of Directors.
Section 7. THE VICE PRESIDENTS. At the request of the President or in
the event of his absence, disability, or refusal to act, the Vice President (or
in the event there be more than one Vice President, the Vice Presidents in the
order of their election) shall perform all the duties of the President, and,
when so acting, shall have all the powers of, and be subject to all the
restrictions upon the President, Each Vice President shall have such powers and
discharge such duties as may be assigned to him from time to time by the
President or the Board of Directors.
Section 8. THE SECRETARY. The Secretary shall keep the minutes of the
Shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by law; be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the Corporation is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
Corporation is duly authorized; maintain a complete list of all Shareholders
entitled to vote at Shareholders' meetings and have said list available for
inspection of any Shareholder who may be present at such meetings; have general
charge of the stock transfer books of the Corporation; in general perform all
duties incident to the office of Secretary and such other duties as from time
to-time may be assigned to him by the President or by the Board of Directors.
Section 9. THE TREASURER. The Treasurer shall have supervision of the
funds, securities, receipts and disbursements of the Corporation; cause all
moneys and other valuable
<PAGE>
effects of the Corporation to be deposited in its name and to its credit in such
depositories as shall be selected by the Board of Directors or pursuant to
authority conferred by the Board of Directors; cause to be kept at the
accounting office of the Corporation correct books of account, proper vouchers
and other papers pertaining to the Corporation's business; render to the
President or the Board of Directors, whenever requested, an account of the
financial condition of the Corporation.
Section 10. THE ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretaries and Assistant Treasurers, in order of their seniority,
shall, in the absence or disability of the Secretary or Treasurer, perform the
duties and exercise the powers of the Secretary or Treasurer and shall perform
such other duties as the President or the Board of Directors shall prescribe.
Section 11. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.
Section 12. EXPENSE REIMBURSEMENT. The Corporation may adopt, from time
to time, a policy with respect to reimbursement of expenses incurred on behalf
of the Corporation by its officers and/or employees. Reimbursement of such
expenses shall be in accordance with the requirements imposed by the Internal
Revenue Code for substantiation of such expenses as deductible business expenses
to the Corporation. Should the expenses paid by any officer or employee exceed
the amount determined by the Corporation to be the maximum amount reimbursed by
the Corporation, it shall be the policy of this Corporation to encourage the
officer or employee of the Corporation to incur said expense without
reimbursement if the officer or employee deems the expense to be in the best
interests of the Corporation.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as
<PAGE>
shall from time to time be determined by resolution of the Board of Directors.
Endorsements of instruments for deposit to the credit of the Corporation in any
of its duly authorized depositories may be made by rubber stamp of the
Corporation or in such other manner as the Board of Directors may from time to
time determine.
Section 4. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES FOR SHARES. Certificates representing shares of
the Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the Chairman of the Board,
President or Vice President and by the Secretary, Treasurer or an Assistant
Secretary or Treasurer, and shall be sealed with the seal of the Corporation.
All certificates for shares shall be consecutively numbered. The name of the
person owning the shares represented thereby with the number of shares and the
date of issue shall be entered on the books of the Corporation.
Section 2. TRANSFERS OF SHARES. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares. The person in whose name shares
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation.
Section 3. LOST CERTIFICATES. In the event a certificate of stock is
allegedly lost, stolen or destroyed, the Corporation may issue a new certificate
and the Corporation may require the owner thereof to give the Corporation a good
and sufficient bond to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss, theft or destruction or the
issuance of the new certificate.
Section 4. TREASURY STOCK. All issued and outstanding stock of the
Corporation that may be purchased or otherwise acquired by the Corporation shall
be treasury stock, and the Directors of the .Corporation shall be vested with
authority to resell said shares for such price and to such person or persons as
the Board of Directors may determine. Such stock shall neither vote nor
participate in dividends while held by the Corporation.
<PAGE>
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of July
in each year and end on the last day of June in each year.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time, declare, and the
Corporation may pay, dividends on its outstanding shares in cash, property or
shares, and upon the terms and conditions provided by law and its Articles of
Incorporation.
ARTICLE X
SEAL
The Corporation shall have a corporate seal which shall have inscribed
around the circumference thereof "RIVAL ACQUISITION COMPANY", and elsewhere
thereon shall bear the words "Corporate Seal". The Corporate Seal may be affixed
by impression or may be by facsimile.
ARTICLE XI
MISCELLANEOUS
Section 1. WAIVER OF NOTICE. Whenever any notice whatever is required
to be given under the provisions of these By-Laws or under the provisions of the
Articles of Incorporation or under the provisions of the Indiana Business
Corporation Law, waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
Section 2. INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS. The
Corporation will indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative, other than
an action by or in the right of the Corporation, by reason of the fact that he
is or was a Director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a Director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorney's fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit, or proceeding if he acted in
<PAGE>
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
The Corporation will indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorney's fees,
and amounts paid in settlement actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Corporation unless and only to the extent that the court in which
the action or suit was brought determines upon application that, despite the
adjudication of liability and in view of all the circumstances of the case, the
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
To the extent that a Director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in this Article, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the action, suit or proceeding.
Any indemnification under this Article, unless ordered by a court,
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the Director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in this Article. The determination shall be made by the Board
of Directors of the Corporation by a majority vote of a quorum consisting of
Directors who were not parties to the action, suit, or proceeding, or, if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
Directors so directs, by independent legal counsel in a written opinion, or by
the shareholders of the Corporation.
Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
the action, suit or proceeding as authorized by the Board of Directors in the
<PAGE>
specific case upon receipt of an undertaking by or on behalf of the Director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article.
The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under the Articles of Incorporation or By-Laws or any agreement, vote
of Shareholders or disinterested Directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
The Corporation created under the laws of this State shall have the
power to give any further indemnity, in addition to the indemnity authorized or
contemplated under of this Article, to any person who is or was a Director,
officer, employee or agent, or to any person who is or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, provided
such further indemnity is either (i) authorized, directed, or provided for in
the Articles of Incorporation of the Corporation or any duly adopted amendment
thereof or (ii) is authorized, directed, or provided for in any By-law or
agreement of the Corporation which has been adopted by a vote of the
shareholders of the Corporation, and provided further that no such indemnity
shall indemnify any person from or on account of such person's conduct which was
finally adjudged to have been knowingly fraudulent, deliberately dishonest or
willful misconduct. Nothing in this subsection shall be deemed to limit the
power of the Corporation under subsection F of this Article to enact By-laws or
to enter into agreements without shareholder adoption of the same.
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
<PAGE>
For the purpose of this Article, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person who is or was
a Director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this section with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
For purposes of this Article, the term "other enterprise", shall
include employee benefit plans; the term "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and the term
"serving at the request of the Corporation" shall include any service as a
Director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such Director, officer, employee or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article.
ARTICLE XII
AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Law may be
adopted at any annual meeting of the Board of Directors or a any special meeting
of the Board of Directors called for that purpose
I hereby certify that the foregoing is a true and correct copy of the
By-Laws adopted by the Board of Directors on the 3rd day of April, 1995.
/s/ Thomas K. Manning
------------------------------
Thomas K. Manning, President
ATTEST:
/s/ Stanley D. Biggs
- -----------------------------------
Stanley D. Biggs, Secretary
PATTON BUILDING PRODUCTS, INC.
BY-LAWS
OF
FASCO CONSUMER PRODUCTS, INC.
ARTICLE I
Stockholders
Section 1.1. Annual Meetings. An annual meeting of stockholders shall
be held for the election of directors at such date, time and place either within
or without the State of Delaware as may be designated by the Board of Directors
from time to time. Any other proper business may be transacted at the annual
meeting.
Section 1.2. Special Meetings. Special meetings of stockholders may be
called at any time by the Chairman of the Board, if any, the Vice Chairman of
the Board, if any, the President or the Board of Directors, to be held at such
date, time and place either within or without the State of Delaware as may be
stated in the notice of the meeting.
Section 1.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such, stockholder's address as
it appears on the records of the Corporation.
Section 1.4 Adjournments. Any meeting of stockholders, annual or
Special, may be adjourned from time to time, to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders, except where otherwise
provided by law or the certificate of incorporation or these by-laws, the
holders of a majority of the outstanding shares of stock entitled to vote on a
matter at the meeting, present in person or represented by proxy, shall
constitute a quorum. In the absence of a quorum of the holders of any class of
stock entitled to vote on a matter, the holders of such class of stock entitled
to vote on a matter, the
<PAGE>
holders of such class so present or represented may, by majority vote, adjourn
the meeting of such class from time to time in the manner provided by Section
1.4 of these by-laws until a quorum of such class shall be so present or
represented. Shares of its own capital stock belonging on the record date for
the meeting to the Corporation or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
is held, directly or indirectly, by the Corporation, shall neither be entitled
to vote nor be counted for quorum purposes; provided, however, that the
foregoing shall not limit the right of the Corporation to vote stock, including
but not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in the absence of the Chairman of
the Board by the Vice Chairman of the Board, if any, or in the absence of the
Vice Chairman of the Board by the President, or in the absence of the President
by a Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary, or in the absence of the
Secretary an Assistant Secretary, shall act as secretary of the meeting, but in
the absence of the Secretary and any Assistant Secretary the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
such stockholder which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders or to express consent
or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for such stockholder by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power, regardless
of whether the interest with which it is coupled is an interest in the stock
itself or an interest in the Corporation generally. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the Corporation. Voting at
meetings of stockholders need not be by written ballot and need not be conducted
by inspectors unless the holders of a majority of the outstanding shares of all
classes of stock entitled to vote thereon present in person or represented by
proxy at such meeting shall so determine. Directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. In all other
matters, unless otherwise provided by law or by the certificate of incorporation
or these by-laws, the affirmative vote of the holders of a majority of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the subject matter shall be the act of the stockholders. Where a
separate vote by class or classes is required, the affirmative vote of the
holders of a majority of the shares of such class or classes present in person
or represented by proxy at the meeting shall
<PAGE>
be the act of such class or classes, except as otherwise provided by law or by
the certificate of incorporation or these by-laws.
Section 1.8. Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date shall not be more than sixty nor less
than ten days before the date of such meeting. If no record date is fixed by the
Board of directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
<PAGE>
Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
Section 1.10. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the certificate of incorporation or by law, any action
required by law to be taken at any annual or special meeting of stockholders of
the Corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted and shall be delivered to the Corporation by delivery to
(a) its registered office in the State of Delaware by hand or by certified mail
or registered mail, return receipt requested, (b) its principal place of
business, or (c) an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Every
written consent shall bear the date of signature of each stockholder who signs
the consent and no written consent shall be effective to take the corporate
action referred to therein unless, within sixty days of the earliest dated
consent delivered in-the manner required by this by-law to the Corporation,
written consents signed by a sufficient number of holders to take action are
delivered to the Corporation by delivery to (a) its registered office in the
State of Delaware by hand or by certified or registered mail, return receipt
requested, (b) its principal place of business, or (c) an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business and affairs
of the Corporation shall be managed by or under the direction of the Board of
Directors, except as may be otherwise provided by law or in the certificate of
incorporation. The Board of Directors shall consist of one or more members, the
number thereof to be determined from time to time by the Board of Directors need
not be stockholders.
<PAGE>
Section 2.2. Election; Term of Office; Resignation; Removal; Vacancies.
Each director shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Any director may
resign at any time upon written notice to the Board of Directors or to the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, and unless otherwise specified therein no
acceptance of such resignation shall be necessary to make it effective. Any
director or the entire Board of Directors may be removed, with or without cause,
by the holders of a majority of the shares then entitled to vote at an election
of directors. Unless otherwise provided in the certificate of incorporation or
these by-laws, vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class or from any other cause
may be filled by a majority of the directors then in office, although less than
a quorum, or by the sole remaining director.
Section 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board may from time to time determine, and if so determined
notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be held at such places within or without the State of Delaware
whenever called by the Chairman of the Board, if any, by the Vice Chairman of
the Board, if any, by the President or by any two directors. Reasonable notice
thereof shall be given by the person or persons calling the meeting.
Section 2.5. Participation in Meetings by Conference Telephone
Permitted. Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the Board of Directors, or any committee designated by
the Board, may participate in a meeting of the Board or of such committee, as
the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of the
Board of Directors one-third of the entire Board shall constitute a quorum for
the transaction of business. The vote of a majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board unless the
certificate of incorporation or these by-laws shall require a vote of a greater
number. In case at any meeting of the Board a quorum shall not be present, the
members of the Board present may adjourn the meeting from time to time until a
quorum shall be present.
Section 2.7. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in their absence
by a chairman chosen at the meeting. The Secretary, or in the
<PAGE>
absence of the Secretary an Assistant Secretary, shall act as secretary of the
meeting, but in the absence of the Secretary and any Assistant Secretary the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8. Action by Directors Without a Meeting. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or of such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
Section 2.9. Compensation of Directors. Unless otherwise restricted by
the certificate of incorporation or these by-laws, the Board of Directors shall
have the authority to fix the compensation of directors.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors or in these by-laws,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the certificate of incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of the shares of any series),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, removing or
indemnifying directors or amending these by-laws; and, unless the resolution,
these by-laws or the certificate of incorporation expressly so provides, no such
committee shall have the power or authority to
<PAGE>
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger.
Section 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board may adopt, amend and repeal
rules for the conduct of its business. In the absence of a provision by the
Board or a provision in the rules of such committee to the contrary, a majority
of the entire authorized number of members of such committee shall constitute a
quorum for the transaction of business, the vote of a majority of the members
present at a meeting at the time of such vote if a quorum is then present shall
be the act of such committee, and in other respects each committee shall conduct
its business in the same manner as the Board conducts its business pursuant to
Article II of these by-laws.
ARTICLE IV
Officers
Section 4.1. Officers; Election. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall elect
a President and a Secretary, and it may, if it so determines, elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
may also elect one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board may deem desirable or
appropriate and may give any of them such further designations or alternate
titles as it considers desirable. Any number of offices may be held by the same
person unless the certificate of incorporation or these by-laws otherwise
provide.
Section 4.2. Term of Office; Resignation; Removal; Vacancies. Unless
otherwise provided in the resolution of the Board of Directors electing any
officer, each officer shall hold office until his or her successor is elected
and qualified or until his or her earlier resignation or removal. Any officer
may resign at any time upon written notice to the Board or to the President or
the Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. The Board may remove any
officer with or without cause at any time. Any such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled by the Board at any
regular or special meeting.
Section 4.3. Powers and Duties. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as shall be
stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. Securities of other corporations held by the Corporation may be voted by
any officer
<PAGE>
designated by the Board and, in the absence of any such designation, by the
President, any Vice President, the Secretary or the Treasurer. The secretary
shall have the duty to record the proceedings of the meetings of the
stockholders, the Board of Directors and any committees in a book to be kept for
that purpose. The Board may require any officer, agent or employee to give
security for the faithful performance of his or her duties.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the chairman or Vice Chairman of the Board of Directors, if any,
or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
representing the number of shares of stock in the Corporation owned by such
holder. If such certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to give
the Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
Miscellaneous
Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
<PAGE>
Section 6.3. Waiver of Notice of Meetings of Stockholders, Directors
and Committees. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transportation of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors or members of a committee of directors need be specified
in any written waiver of notice unless so required by the certificate of
incorporation or these by-laws.
Section 6.4. Indemnification of Directors, officers and Employees. The
Corporation shall indemnify to the full extent permitted by law any person made
or threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person or such person's testator or intestate is or was a director, officer
or employee of the Corporation or serves or served at the request of the
Corporation any other enterprise as a director, officer or employee. Expenses
incurred by any such person in defending any such action, suit or proceeding
shall be paid or reimbursed by the Corporation promptly upon receipt by it if an
undertaking of such person to repay such expenses if it shall ultimately be
determined that such person is not entitled to be indemnified by the
Corporation. The rights provided to any person by this by-law shall be
enforceable against the Corporation by such person who shall be presumed to have
relied upon it in serving or continuing to serve as a director, officer or
employee as provided above. No amendment of this by-law shall impair the rights
of any person arising at any time with respect to events occurring prior to such
amendment. For purposes of this by-law, the term "Corporation" shall include any
predecessor of the Corporation and any constituent corporation (including any
constituent of a constituent) absorbed by the Corporation in a consolidation or
merger; the term "other enterprise" shall include any corporation, partnership,
joint venture, trust or employee benefit plan; service "at the request of the
Corporation" shall include service as a director, officer or employee of the
Corporation which imposes duties on, or involves services by, such director,
officer or employee with respect to an employee benefit plan, its participants
or beneficiaries.
Section 6.5. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or her or their
votes are counted for such purpose, if (1) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts
<PAGE>
as to his or her relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair to the Corporation as
of the time it is authorized, approved or ratified, by the Board, a committee
thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
Section 6.6. Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 6.7. Amendment of By-Laws. These by-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
RIVAL CONSUMER SALES CORPORATION
BY-LAWS
OF
POLLENEX CORPORATION
ARTICLE I
OFFICES
The principal office of the Corporation in the State of Missouri, shall
be located in Kansas City. The Corporation may have such other offices, either
within or without the State of Missouri, as the business of the Corporation may
require from time to time.
The registered office of the Corporation required by the General and
Business Corporation Law of Missouri, to be maintained in the State of Missouri,
may be, but need not be, identical with the principal office in the State of
Missouri, and the address of the registered office may be changed from time to
time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the Shareholders shall
be held at the hour of 10:00 a.m. on the last Wednesday in October in each year
beginning with the year 1993 for the purpose of electing Directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day. If the election of Directors shall not
be held on the day designated herein for any annual meeting, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the Shareholders as soon thereafter as conveniently may
be.
Section 2. SPECIAL MEETINGS. Special meetings of the Shareholders may
be called by the President, by the Board of Directors or by the holders of not
less than one-fifth of all the outstanding shares of the Corporation entitled to
vote at such meeting.
Section 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Missouri, as the place of meeting
for any annual meeting of the Shareholders or for any special meeting of the
Shareholders called by the Board of Directors. A waiver of notice signed by all
Shareholders entitled to vote at a meeting may designate any
<PAGE>
place, either within or without the State of Missouri, as the place for the
holding of such meeting. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the principal office of the
Corporation.
Section 4. NOTICE OF MEETINGS. Written or printed notice of each
meeting of Shareholders stating the place, day and hour of the meeting and, in
case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered or given not less than ten (10) nor more than fifty
(50) days before the date of the meeting, either personally or by mail, by or at
the direction of the President, or the Secretary, or the officers or persons
calling the meeting, to each Shareholder of record entitled to vote at such
meeting. if mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Corporation. Except as otherwise
provided by statute, notice of any adjourned meeting of the Shareholders shall
not be required.
Section 5. VOTING LISTS. At least ten days before each meeting of
Shareholders, the officer or agent having charge of the transfer book for shares
of the Corporation shall make a complete list of the Shareholders entitled to
vote at such meeting, arranged in alphabetical order with the address of, and
the number of shares held by, each Shareholder, which list, for a period of ten
days prior to such meeting, shall be kept on file at the registered office of
the Corporation and shall be subject to inspection by any Shareholder at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any Shareholder during the whole time of the meeting. The original share ledger
or transfer book, or a duplicate thereof kept in this state, shall be prima
facie evidence as to who are the Shareholders entitled to examine such list or
share ledger or transfer book or to vote at any meeting of Shareholders.
Section 6. QUORUM. A majority of the outstanding shares of the
Corporation entitled to vote at any meeting, represented in person or by proxy,
shall constitute a quorum at any meeting of the Shareholders; provided, that if
less than a majority of the outstanding shares are represented at said meeting,
a majority of the shares so represented may adjourn the meeting, from time to
time, to a date not longer than ninety days from the date originally set for
such meeting.
Section 7. PROXIES. At all meetings of Shareholders, a Shareholder may
vote by proxy executed in writing by the Shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 8. VOTING OF SHARES. Each outstanding share of capital stock
having voting rights shall be entitled to one vote upon each matter submitted to
a vote at a meeting of Shareholders. There shall be no cumulative voting.
<PAGE>
Section 9. INFORMAL ACTION BY SHAREHOLDERS. Any action which may be
taken at a meeting of the Shareholders may be taken without a meeting if
consents in writing, setting forth the action so taken shall be signed by all of
the Shareholders entitled to vote with respect to the subject matter thereof.
Such consents shall have the same force and effect as a unanimous vote of the
Shareholders at a meeting duly held, and may be stated as such in any
certificate or document filed under the General and Business Corporation Law of
Missouri. The Secretary shall file such consents with the minutes of the
meetings of the Shareholders.
Section 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the by-laws of such corporation may prescribe, or, in the
absence of such provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing in the
name of a guardian, curator, or trustee may be voted by such fiduciary, either
in person or by proxy, but no guardian, curator, or trustee shall be entitled as
such fiduciary, to vote shares held by him without a transfer of such shares
into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority so to do
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee and
thereafter the pledgee shall be entitled to vote the shares so transferred.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed by its Board of Directors.
Section 2. NUMBER, ELECTION AND TERM. The number of Directors of the
Corporation shall be three (3) each of whom shall be initially elected at the
organization meeting of the Incorporators to hold office until the first annual
meeting of the Shareholders, when Directors shall be elected, and annually
thereafter, for a term of one year, and each of whom shall hold office until his
successor has been elected and has qualified.
<PAGE>
Section 3. REMOVAL OF DIRECTORS. At a meeting called expressly for that
purpose, the entire Board of Directors or any number thereof, may be removed,
with or without cause, by a vote of the holders of a majority of the shares then
entitled to vote at an election of Directors. If less than the entire Board is
to be removed, no one of the Directors may be removed if the votes cast against
his removal would be sufficient to elect him if then cumulatively voted at an
election of the entire Board of Directors. Such meeting shall be held at the
registered office or principal business office of the Corporation in the State
of Missouri or in the city or county in Missouri in which the principal business
office of the Corporation is located.
Section 4. VACANCIES. In case of the death or resignation of one or
more of the Directors, a majority of the survivors or remaining Directors may
fill such vacancy or vacancies until the successor or successors are elected at
the next annual meeting of the Shareholders. A Director elected to fill a
vacancy shall serve as such until the next annual meeting of the Shareholders.
Section 5. COMPENSATION. The compensation of the Directors, if any, may
be set by the Board of Directors unless otherwise provided herein or in the
Articles of Incorporation.
ARTICLE I
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. ANNUAL MEETINGS. An annual meeting of the Board of Directors
shall be held without other notice than this By-Law, immediately after, and at
the same place as, the annual meeting of Shareholders. other regular meetings of
the Board shall be held at such times as the Board may by resolution from time
to time determine.
Section 2. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any two Directors upon
written or printed notice served personally on each Director or by mail or
telegraph to his address upon the records of the Corporation.
Section 3. PLACE OF MEETING. Meetings of the Board of Directors shall
be held at such place within or without the State of Missouri as shall be
provided for in the resolution, notice, waiver of notice or call of such
meeting, or if not otherwise designated, at the principal office of the
Corporation.
Section 4. QUORUM. A majority of the total number of Directors shall
constitute a quorum for the transaction of business, and the vote of a majority
of the Directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors, except as may be otherwise specifically
provided by statute, by the Articles of Incorporation or by these By-Laws.
Provided, however, that if less than a majority of the Directors are present at
said meeting, a
<PAGE>
majority of the Directors present may adjourn the meeting from time to time
without further notice.
Section 5. ACTIONS OF THE BOARD OF DIRECTORS WITHOUT A MEETING. Any
action which is required to be or may be taken at a meeting of the Directors may
be taken without a meeting if consents in writing, setting forth the action so
taken, are signed by all of the Directors. The consents shall have the same
force and effect as a unanimous vote of the Directors at a meeting duly held,
and may be stated as such in any certificate or document filed under the General
and Business Corporation Law of Missouri. The Secretary shall file such consents
with the minutes of the meetings of the Board of Directors.
Section 6. PARTICIPATION. Members of the Board of Directors or of any
committee designated by the Board of Directors may participate in a meeting of
the Board or committee by means of conference telephone or similar
communications equipment whereby all persons participating in the meeting can
hear each other, and participation in a meeting in this manner shall constitute
presence in person at the meeting.
ARTICLE V
OFFICERS
Section 1. NUMBER. The officers of the Corporation shall consist of a
President and a Secretary. The Board of Directors may also elect a Chairman of
the Board, one or more Vice Presidents (one of whom may be designated the
Executive Vice President) , a Treasurer, Assistant Secretaries and Assistant
Treasurers. Any two or more offices may be held by the same person.
All officers and agents of the Corporation, as between themselves and
the Corporation, shall have such authority and perform such duties in the
management of the property and affairs of the Corporation as may be provided in
the By-Laws, or, in the absence of such provision, as may be determined by
resolution of the Board of Directors.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of Shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. New offices may be created and
filled at any meeting of the Board of Directors. Each officer shall hold office
until his successor shall have been duly elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided.
Section 3. REMOVAL. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests
<PAGE>
of the Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Section 4. VACANCIES. If the office of any officer of the Corporation
becomes vacant because of death, resignation, removal, disqualification or for
any other reason or if any officer of the corporation is unable to perform, the
duties of his office for any reason, the Board of Directors may choose a
successor who shall replace such officer or the Board of Directors may delegate
the duties of any such vacant office to any other officer or to any director of
the Corporation until a successor is elected at the next Directors, meeting.
Section 5. THE CHAIRMAN OF THE BOARD. When elected, the Chairman of the
Board shall be the principal executive officer of the Corporation; he shall
preside at meetings of the Board of Directors, and of the Shareholders, and,
subject to the direction and control of the Board of Directors, he shall direct
the policy and management of the Corporation. He shall perform such other duties
as may be prescribed by the Board of Directors from time to time. In the absence
of the Chairman of the Board, the President shall have and may exercise all of
the powers of the Chairman.
Section 6. THE PRESIDENT. Unless and until the Board of Directors shall
have elected a Chairman of the Board, the President shall be the chief executive
officer of the Corporation, and, subject to the direction and under the
supervision of the Board of Directors, shall have general charge of the
business, affairs and property of the Corporation and control over its officers,
agents and employees; shall preside at all meetings of the Shareholders and of
the Board of Directors at which he is present, and shall do and perform such
other duties and may exercise such other powers as from time to time may be
assigned to him by these By-Laws or by the Board of Directors.
Section 7. THE VICE PRESIDENTS. At the request of the President or in
the event of his absence, disability, or refusal to act, the vice President (or
in the event there be more than one Vice President, the Vice Presidents in the
order of their election) shall perform all the duties of the President, and,
when so acting, shall have all the powers of, and be subject to all the
restrictions upon the President. Each Vice President shall have such powers and
discharge such duties as may be assigned to him from time to time by the
President or the Board of Directors.
Section 8. THE SECRETARY. The Secretary shall keep the minutes of the
Shareholders and of the Board of Directors meetings in one or more books
provided for that purpose; see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by law; be custodian of the
corporate records and of the seal of the Corporation and see that the seal of
the Corporation is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
Corporation is duly authorized; maintain a complete list of all Shareholders
entitled to vote at Shareholders' meetings and have said list available for
inspection of any Shareholder who may be present at such meetings; have general
charge of the stock transfer books of the Corporation; in general perform all
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to him by the President or by the Board of Directors.
Section 9. THE TREASURER. The Treasurer shall have supervision of the
funds, securities, receipts and disbursements of the Corporation; cause all
moneys and other valuable effects of the Corporation to be deposited in its name
and to its credit in such depositories as shall be selected by the Board of
Directors or pursuant to authority conferred by the Board of Directors; cause to
be kept at the accounting office of the corporation correct books of account,
proper vouchers and other papers pertaining to the Corporation's business;
render to the President or the Board of Directors, whenever requested, an
account of the financial condition of the Corporation.
Section 10. THE ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
Assistant Secretaries and Assistant Treasurers, in order of their seniority,
shall, in the absence or disability of the Secretary or Treasurer, perform the
duties and exercise the powers of the Secretary or Treasurer and shall perform
such other duties as the President or the Board of Directors shall prescribe.
Section 11. SALARIES. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.
Section 12. EXPENSE REIMBURSEMENT. The Corporation may adopt, from time
to time, a policy with respect to reimbursement of expenses incurred on behalf
of the Corporation by its officers and/or employees. Reimbursement of such
expenses shall be in accordance with the requirements imposed by the Internal
Revenue Code for substantiation of such expenses as deductible business expenses
to the Corporation. Should the expenses paid by any officer or employee exceed
the amount determined by the Corporation to be the maximum amount reimbursed by
the Corporation, it shall be the policy of this Corporation to encourage the
officer or employee of the Corporation to incur said expense without
reimbursement if the officer or employee deems the expense to be in the best
interests of the Corporation.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
<PAGE>
Section 2. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors. Endorsements of instruments
for deposit to the credit of the Corporation in any of its duly authorized
depositories may be made by rubber stamp of the Corporation or in such other
manner as the Board of Directors may from time to time determine.
Section 4. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. CERTIFICATES FOR SHARES. Certificates representing shares of
the Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the Chairman of the Board,
President or Vice President and by the Secretary, Treasurer or an Assistant
Secretary or Treasurer, and shall be sealed with the seal of the Corporation.
All certificates for shares shall be consecutively numbered. The name of the
person owning the shares represented thereby with the number of shares and the
date of issue shall be entered on the books of the Corporation.
Section 2. TRANSFERS OF SHARES. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares. The person in whose name shares
stand on the books of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation.
Section 3. LOST CERTIFICATES. In the event a certificate of stock is
allegedly lost, stolen or destroyed, the Corporation may issue a new certificate
and the Corporation may require the owner thereof to give the Corporation a good
and sufficient bond to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss, theft or destruction or the
issuance of the new certificate.
Section 4. TREASURY STOCK. All issued and outstanding stock of the
Corporation that may be purchased or otherwise acquired by the Corporation shall
be treasury stock, and the
<PAGE>
Directors of the Corporation shall be vested with authority to resell said
shares for such price and to such person or persons as the Board of Directors
may determine. Such stock shall neither vote nor participate in dividends while
held by the Corporation.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of July
in each year and end on the last day of June in each year.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time, declare, and the
corporation may pay, dividends on its outstanding shares in cash, property or
shares, and upon the terms and conditions provided by law and its Articles of
Incorporation.
ARTICLE X
SEAL
The Corporation shall have a corporate seal which shall have inscribed
around the circumference thereof "POLLENEX CORPORATION, Missouri" , and
elsewhere thereon shall bear the words "Corporate Seal". The Corporate Seal may
be affixed by impression or may be by facsimile.
ARTICLE XI
MISCELLANEOUS
Section 1. WAIVER OF NOTICE. Whenever any notice whatever is required
to be given under the provisions of these By-Laws or under the provisions of the
Articles of Incorporation or under the provisions of the General and Business
Corporation Law of Missouri, waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
Section 2. INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS. The
Corporation will indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative, other than
an action by or in the right of the Corporation, by reason of the fact that he
is or was a Director, officer, employee or agent of the Corporation, or is \
<PAGE>
or was serving at the request of the Corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorney's fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
The corporation will indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorney's fees,
and amounts paid in settlement actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Corporation unless and only to the extent that the court in which
the action or suit was brought determines upon application that, despite the
adjudication of liability and in view of all the circumstances of the case, the
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper.
To the extent that a Director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in this Article, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the action, suit or proceeding.
Any indemnification under this Article, unless ordered by a court,
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the Director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in this Article. The determination shall be made by the Board
of Directors of the Corporation by a majority vote of a quorum consisting of
Directors who were not parties to the action, suit, or proceeding, or, if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
Directors so directs, by independent legal counsel in a written opinion, or by
the Shareholders of the Corporation.
<PAGE>
Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
the action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the Director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article.
The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under the Articles of Incorporation or By-Laws or any agreement, vote
of Shareholders or disinterested Directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
The Corporation created under the laws of this State shall have the
power to give any further indemnity, in addition to the indemnity authorized or
contemplated under of this Article, to any person who is or was a Director,
officer, employee or agent, or to any person who is or was serving at the
request of the Corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, provided
such further indemnity is either (i) authorized, directed, or provided for in
the Articles of Incorporation of the Corporation or any duly adopted amendment
thereof or (ii) is authorized, directed, or provided for in any By-law or
agreement of the Corporation which has been adopted by a vote of the
shareholders of the Corporation, and provided further that no such indemnity
shall indemnify any person from, or on account of such person's conduct which
was finally adjudged to have been knowingly fraudulent, deliberately dishonest
or willful misconduct. Nothing in this subsection shall be deemed to limit the
power of the Corporation under subsection F of this Article to enact By-laws or
to enter into agreements without shareholder adoption of the same.
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a Director, officer, employee or agent of the corporation,
or is or was serving at the request of the Corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
For the purpose of this Article, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person who is or was
a Director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a Director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this section with respect
<PAGE>
to the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
For purposes of this Article, the term "other enterprise" shall include
employee benefit plans; the term "fines" shall include any excise taxes assessed
on a person with respect to an employee benefit plan; and the term "serving at
the request of the Corporation" shall include any service as a Director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such Director, officer, employee or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article.
ARTICLE XII
AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws may
be adopted at any annual meeting of the Board of Directors or at any special
meeting of the Board of Directors called for that purpose.
I hereby certify that the foregoing is a true and correct copy of the
By-Laws adopted by the Board of Directors on the ___ day of _______, 1993.
/s/ Thomas K. Manning
-----------------------------------------
Thomas K. Manning, Chairman of the Board
ATTEST:
/s/ William L. Yager
- ----------------------------
William L. Yager, Secretary
FIRST SUPPLEMENTAL INDENTURE AND GUARANTEE
FIRST SUPPLEMENTAL INDENTURE AND GUARANTEE (this "Supplemental
Indenture"), dated as of October 14, 1998, among Holmes Motor Corp. (the
"Guaranteeing Restricted Subsidiary"), a Domestic Restricted Subsidiary of
Holmes Products Corp., a Massachusetts corporation (the "Company"), the other
Guarantors (as defined in the Indenture referred to herein) and State Street
Bank and Trust Company, as trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an Indenture (the "Indenture"), dated as of November 26, 1997 under which have
been issued an aggregate principal amount of $105.0 million of 9 7/8% Senior
Subordinated Notes due 2007 (the "Notes");
WHEREAS, the Guaranteeing Restricted Subsidiary has been created by the
Company as provided in Sections 4.17 and 11.04 of the Indenture;
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Restricted Subsidiary shall execute and deliver to the Trustee a
supplemental indenture pursuant to which such Guaranteeing Restricted Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (the "Note
Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Restricted Subsidiary, the Company, the other Guarantors and the
Trustee mutually covenant and agree for the equal and ratable benefit of the
Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture. The term "Guarantor"
as used herein shall include the Guaranteeing Restricted Subsidiary.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Restricted Subsidiary hereby
agrees as follows:
<PAGE>
(a) Along with all the Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and
assigns, irrespective of the validity and enforceability of the
Indenture, the Notes or the obligations of the Company hereunder or
thereunder, that:
(i) the principal of and premium, interest and Liquidated
Damages, if any, on the Notes will be promptly paid
in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest
on the overdue principal of, premium, interest and
Liquidated Damages, if any, on the Notes, if any, if
lawful, and all other obligations of the Company to
the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other
Obligations, the same will be promptly paid in full
when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity,
by acceleration or otherwise. Failing payment when
due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall
be jointly and severally obligated to pay the same
immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability
of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of
the Notes with respect to any provisions hereof or thereof,
the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge
or defense of a Guarantor.
(c) The following is hereby waived: diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever.
(d) This Note Guarantee shall not be discharged except by complete
performance of the Obligations contained in the Notes and the
Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guarantors, or any custodian, trustee,
liquidator or other similar official acting in relation to either
the Company or the Guarantors, any amount paid by either to the
Trustee or such Holder, this
2
<PAGE>
Note Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect.
(f) The Guaranteeing Restricted Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all
Obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as
provided in Article 6 of the Indenture for the purposes of
this Note Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in
respect of the Obligations guaranteed hereby, and (y) in
the event of any declaration of acceleration of such
Obligations as provided in Article 6 of the Indenture, such
Obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the
purpose of this Note Guarantee.
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not
impair the rights of the Holders under the Note Guarantee.
(i) Pursuant to Section 11.03 of the Indenture, after giving
effect to any maximum amount and any other contingent and
fixed liabilities that are relevant under any applicable
Bankruptcy or fraudulent conveyance laws, and after giving
effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any
other Guarantor in respect of the Obligations of such other
Guarantor under Article 11 of the Indenture the Obligations
of the Guarantors shall be limited to the maximum amount as
shall result in the Obligations of such Guarantor under its
Note Guarantee not constituting a fraudulent transfer or
conveyance.
3. EXECUTION AND DELIVERY. The Guaranteeing Restricted Subsidiary agrees
that this Note Guarantee shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Note Guarantee.
4. GUARANTOR MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) A Guarantor may not consolidate with or merge with or into (whether
or not such Guarantor is the surviving Person) another corporation,
Person or entity whether or not affiliated with such Guarantor
unless:
3
<PAGE>
(i) subject to Section 11.05 of the Indenture, the Person
formed by or surviving any such consolidation or
merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Note
Guarantee on the terms set forth herein or therein;
and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor
corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the
Trustee, of the Note Guarantee endorsed upon the Notes and
the due and punctual performance of all of the covenants
and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and
be substituted for the Guarantor with the same effect as if
it had been named herein as a Guarantor. Such successor
corporation thereupon may cause to be signed any or all of
the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee. All
the Note Guarantees so issued shall in all respects have
the same legal rank and benefit under the Indenture as the
Note Guarantees theretofore and thereafter issued in
accordance with the terms of the Indenture as though all of
such Note Guarantees had been issued at the date of the
execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture,
and notwithstanding clauses (a) and (b) above, nothing
contained in the Indenture or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with or
into the Company or another Guarantor, or shall prevent any
sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the Company or
another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the
capital stock of any Guarantor (other than to the Company
or another Guarantor), or in the case the Company
designates a Guarantor to be an Unrestricted Subsidiary in
accordance with the Indenture, then such Guarantor (in the
event of a sale or other disposition,
4
<PAGE>
by way of merger, consolidation or otherwise, of all of the
capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of
such Guarantor) shall be released and relieved of any
obligations under its Note Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture,
including without limitation Section 4.10 of the Indenture.
Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that
such sale or other disposition was made by the Company in
accordance with the provisions of the Indenture, including
without limitation Section 4.10 of the Indenture, the
Trustee shall execute any documents reasonably required in
order to evidence the release of any Guarantor from its
obligations under its Note Guarantee.
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of
and interest on the Notes and for the other obligations of any
Guarantor under the Indenture as provided in Article 10 of the
Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Restricted Subsidiary, as such, shall have any liability for any obligations of
the Company or any Guarantor under the Notes, any Note Guarantees, the Indenture
or this Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the SEC that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENT INDENTURE BUT WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
5
<PAGE>
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Restricted Subsidiary, the other
Guarantors and the Company.
SIGNATURES
Dated as of the date first set forth above.
HOLMES MOTOR CORP.
By: /s/ Jordan A. Kahn
----------------------------------------
Name: Jordan A. Kahn
Title: President
HOLMES PRODUCTS CORP.
By: /s/ Jordan A. Kahn
----------------------------------------
Name: Jordan A. Kahn
Title: President
HOLMES MANUFACTURING CORP.
By: /s/ Jordan A. Kahn
----------------------------------------
Name: Jordan A. Kahn
Title: President
HOLMES AIR (TAIWAN) CORP.
By: /s/ Jordan A. Kahn
----------------------------------------
Name: Jordan A. Kahn
Title: President
6
<PAGE>
STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE
By: /s/ Andrew M. Sinasky
----------------------------------------
Name: Andrew M. Sinasky
Title: Assistant Vice President
7
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
------------------------------------------------
Reference is made to a Registration Rights Agreement dated as of November
26, 1997, by and among Holmes Products Corp., a Massachusetts corporation (the
"Company"), and those persons listed on the Schedules thereto as "Berkshire
Investors", "Management Stockholders" and Asco Investment Ltd., a Bahamian
corporation (the "Registration Rights Agreement"). All defined terms used herein
and not otherwise defined have the meanings set forth in the Registration Rights
Agreement.
WHEREAS, the Company is this date issuing an aggregate of 9,922,243
additional shares of Common Stock, $.001 par value (the "Additional Common
Stock"), to the Berkshire Investors, certain of their affiliates, certain
Management Stockholders and certain other persons (collectively, the "New Stock
Purchasers");
WHEREAS, the New Stock Purchasers have required, as a condition to their
purchase of shares of Additional Common Stock, that the Company provide for
certain arrangements with respect to the registration of the shares of
Additional Common Stock under the Securities Act of 1933, as amended; and
WHEREAS, the parties hereto, who are Stockholders, hold sufficient shares
of stock to amend the Registration Rights Agreement and desire to amend the
Registration Rights Agreement in order to add the New Stock Purchasers as
parties thereto, and to grant the New Stock Purchasers registration rights with
respect to the Additional Common Stock purchased by them, all as hereinafter
provided.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Amendments to the Registration Rights Agreement. Paragraph 1, Certain
Definitions of the Registration Rights Agreement, is hereby amended as follows:
(a) by deleting the definition of "Common Stock" as set forth therein
and inserting in lieu thereof the following:
"Common Stock" means the common stock, $.001 par value per share, of
the Company, including, without limitation, the Additional Common
Stock, and any other securities of the Company into which such
Common Stock may hereafter be changed, or for which such Common
Stock may be exchanged after giving effect to the terms of such
change or exchange (by way of reorganization, recapitalization,
merger, consolidation or otherwise); and
<PAGE>
(b) by adding the following definition:
"Stockholders" shall mean and include Asco, the Berkshire Investors,
the Management Stockholders and each New Stock Purchaser which is
not heretofore a Stockholder.
2. Joinder to Agreement. Each New Stock Purchaser hereby joins in and
becomes a party to the Registration Rights Agreement, as amended hereby, and all
shares of Common Stock held by each New Stock Purchaser shall be Registerable
Shares for all purposes of the Registration Rights Agreement, as amended hereby.
For this purpose, each New Stock Purchaser which is already a Berkshire Investor
or a Management Stockholder shall continue in such capacity, and each additional
New Stock Purchaser which is not heretofore a party to the Registration Rights
Agreement shall be a Berkshire Investor or a Management Stockholder, as
identified on the signature page to this agreement.
3. Schedules 1 and 2 of the Registration Rights Agreement are hereby deleted
in their entirety and Schedule 1(Revised) and Schedule 2(Revised) attached
hereto shall supersede and replace such schedules for all purposes.
4. Effectiveness. This Agreement shall take effect at such time as it is
executed by Stockholders owning at least 80% of the Registered Shares owned by
all Stockholders and each New Stock Purchaser.
5. Ratification. As amended hereby, the Registration Rights Agreement is
hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the 5th day of February, 1999.
HOLMES PRODUCTS CORP.
By: /s/ Ira B. Morgenstern
_______________________________
Name: Ira B, Morgenstern
Title: Senior Vice President--Finance
*Indicates a Stockholder who is also a New Stock Purchaser
2
<PAGE>
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
BERKSHIRE FUND IV, LIMITED
PARTNERSHIP
By: Fourth Berkshire Associates, LLC,
its general partner
By: /s/ Richard K. Lubin
_______________________________
Richard K. Lubin, Managing Member
*BERKSHIRE INVESTORS, LLC
By: /s/ Richard K. Lubin
_______________________________
Richard K. Lubin, Managing Member
*Indicates a Stockholder who is also a New Stock Purchaser
3
<PAGE>
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
*FSC CORP.
By: /s/ Mary Josephs Reilly
_______________________________
*Indicates a Stockholder who is also a New Stock Purchaser
4
<PAGE>
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
SUNAPEE SECURITIES, INC.
By: /s/ Gary B. Wilkinson
_______________________________
Gary B. Wilkinson, Treasurer
SQUAM LAKE INVESTORS II, L.P.
By: /s/ Gary B. Wilkinson
_______________________________
Gary B. Wilkinson, Treasurer
SQUAM LAKE INVESTORS III, L.P.
By: /s/ Gary B. Wilkinson
_______________________________
Gary B. Wilkinson, Treasurer
*Indicates a Stockholder who is also a New Stock Purchaser
5
<PAGE>
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
*PANGAEA GROUP, INC.
By: /s/ Darren Spangler
_______________________________
*Indicates a Stockholder who is also a New Stock Purchaser
6
<PAGE>
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
ADDITIONAL BERKSHIRE INVESTORS:
BERKSHIRE FUND IV INVESTMENT CORP.
By: /s/ Richard K. Lubin
______________________________
BERKSHIRE FUND V INVESTMENT CORP.
By: /s/ Richard K. Lubin
_______________________________
*Indicates a Stockholder who is also a New Stock Purchaser
7
<PAGE>
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
ASCO:
Asco Investment Ltd.
By: /s/ Nick Webster
_______________________________
*Indicates a Stockholder who is also a New Stock Purchaser
8
<PAGE>
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
EXISTING MANAGEMENT STOCKHOLDERS:
/s/ Jordan A. Kahn
-----------------------------------
*Jordan A. Kahn
/s/ Stanley Rosenzweig
----------------------------------
Stanley Rosenzweig
/s/ Gregory F. White
----------------------------------
Gregory F. White
/s/ Liu Woon Fai (Tommy Liu)
----------------------------------
*Liu Woon Fai (Tommy Liu)
*Indicates a Stockholder who is also a New Stock Purchaser
9
<PAGE>
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
COUNTERPART SIGNATURE PAGE
New Management Stockholder:
/s/ Thomas K. Manning
-----------------------------------
*Thomas K. Manning
*Indicates a Stockholder who is also a New Stock Purchaser
10
<PAGE>
Schedule 1 (Revised)
--------------------
to First Amendment to Registration Rights Agreement
---------------------------------------------------
Berkshire Investors shall mean the following entities:
o Berkshire Fund IV, Limited Partnership
o Berkshire Fund IV Investment Corp.
o Berkshire Fund V Investment Corp.
o Berkshire Investors, LLC
o FSC Corp.
o Sunapee Securities, Inc.
o Squam Lake Investors II, L.P.
o Pangaea Group, Inc.
11
<PAGE>
Schedule 2 (Revised)
--------------------
to First Amendment to Registration Rights Agreement
---------------------------------------------------
Management Stockholders shall comprise the following:
o Jordan A. Kahn
o Stanley Rosenzweig
o Gregory F. White
o Liu Woon Fai (Tommy Liu)
o Thomas K. Manning
12
FIRST AMENDMENT TO STOCKHOLDERS' AGREEMENT
Reference is made to Stockholders' Agreement dated as of November 26, 1997
by and among Holmes Products Corp., a Massachusetts corporation (the "Company"),
those persons listed as Berkshire Stockholders on the signature pages thereof
(collectively the "Berkshire Stockholders"), those persons listed as the
Management Stockholders on the signature pages thereof (the "Management
Stockholders"), Asco Investments, Ltd., a Bahamas corporation ("Asco") and those
"Other Stockholders" who acquired shares of capital stock of the Company as
described in Section 3.12 thereof (the "Stockholders' Agreement"). All defined
terms used herein and not otherwise defined have the meanings set forth in the
Stockholders' Agreement.
WHEREAS, the Company is this date issuing an additional 9,922,243 shares
of Common Stock to certain of the existing Stockholders, certain of their
affiliates, and certain members of management of the Company, pursuant to a
certain Stock Purchase Agreement dated as of the date hereof (each purchaser or
entity purchasing shares thereunder being hereinafter referred to as a "Stock
Purchaser");
WHEREAS, each Stock Purchaser desires to enter into and to become a party
to the Stockholders' Agreement for the purpose of regulating certain aspects of
the Stock Purchasers' relationships with regard to the Company, and certain
restrictions on the Common Stock owned by the Stock Purchasers and other
Stockholders of the Company; and
WHEREAS, the existing parties to the Stockholders' Agreement
desire to amend the Agreement for such purposes;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth herein, and for one dollar and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
1. Each of the Stock Purchasers who is not already a party to the
Stockholders' Agreement hereby joins in and becomes a party to the
Stockholders' Agreement, as amended hereby, (i) as a Berkshire
Stockholder, if such Stock Purchaser is already a Berkshire
Stockholder, or is either Berkshire Fund IV Investment Corp. or is
Berkshire Fund V Investment Corp., or any permitted transferee thereof;
(ii) as a Management Stockholder, if such Stock Purchaser is already a
Management Stockholder; or (iii) in the case of any other Stock
Purchaser, as identified on the signature page hereto;
2. Hereafter, all references in the Stockholders' Agreement, as amended,
to "Stockholders" shall mean and refer to the original Stockholders who
were the parties thereto, any Other Stockholders who acquire shares of
capital stock of
<PAGE>
the Company, as described in Section 3.12 thereof, and any of the Stock
Purchasers who are not already parties thereto;
3. Section 2.5(a) and (b) of the Stockholders Agreement are hereby deleted
in their entirety and replaced by the following new sections:
2.5 Corporate Governance.
-------------------------
(a) At each annual meeting of the Stockholders and at each special
meeting of the Stockholders called for the purpose of electing
directors of the Company, and at any time at which stockholders of the
Company shall have the right to, or shall, vote for directors of the
Company, then, and in each event, the Stockholders hereby agree to
attend each meeting in person or by proxy and hereby agree to vote
stock of the Company and shares of the Company now owned or hereafter
acquired by him, her or it (whether at a meeting or by written consent
in lieu thereof) (i) so that the Company's Board of Directors shall be
designated as set forth herein, (ii) to fix the number of members of
the Board at any number up to nine (9) and (iii) to elect and
thereafter to continue in office as a Director of the Company the
following (i) two Directors shall be persons nominated by the Berkshire
Stockholders (currently Richard K. Lubin and Randy Peeler)
(collectively the "Berkshire Representatives"); (ii) up to five (5)
Directors shall be persons nominated by the Management Shareholders
(and currently include Jordan A. Kahn, Stanley Rosenzweig and Gregory
F. White) (collectively, the "Management Representatives") and (iii) up
to two (2) Directors shall be persons who are not employees or officers
of the Company, one of whom shall be nominated by the Berkshire
Stockholders (subject to the reasonable approval of the Management
Stockholders) and one of whom shall be nominated by the Management
Stockholders (subject to the reasonable approval of the Berkshire
Stockholders) (collectively the "Outside Representatives"). A vacancy
in either of the directorships to be occupied by a Berkshire
Representative shall be filled only by vote or written consent of a
majority in interest of the Berkshire Stockholders; a vacancy in any of
the directorships to be held by the Management Representative shall be
filled only by vote or written consent of Management Stockholders
holding at least eighty percent (80%) in interest of the Shares held by
all Management Stockholders; and a vacancy in the directorships to be
held by the Outside Representatives shall be filled only be vote or
written consent of the Stockholders who nominated such Outside
Representative (subject to the approval as set forth in clause (iii)
above).
(b) Board Expansion. So long as either (i) the Berkshire
Stockholders shall own at least forty percent (40%) of the Shares
(including vested Time Options and earned Performance Options) or (ii)
the Berkshire Stockholders
<PAGE>
collectively own more Shares (including vested Time Options and vested
and earned Performance Options) than the Management Stockholders or any
other single stockholder, the Berkshire Stockholder may at any time
require, by written notice to the other Stockholders (the "Increase
Notice"), that the number of directors constituting the Board of
Directors be increased by four (4). The Berkshire Stockholders shall
have the right to designate such additional directors. If the Increase
Notice is given by the Berkshire Stockholders, the nomination of the
Outside Representatives as set forth in Section 2.5(a)(iii) above shall
no longer require the approval of the other stockholders. Each
Stockholder agrees that such Stockholder and its Permitted Transferees
shall take all action as may be necessary or appropriate, including
without limitation, the voting of all Shares owned by them, to so
increase the number of directors constituting the Board of Directors
and to elect the directors so designated by the Berkshire Stockholders.
4. This Agreement shall constitute for all purposes an amendment to the
Stockholders' Agreement, and, except as amended hereby, the
Stockholders' Agreement is ratified and confirmed in all respects. All
shares of Common Stock issued to each of the Stock Purchasers shall be
subject to the restrictions on transfer, rights of purchase and other
provisions set forth in the Stockholders' Agreement, and shall be
legended in the manner set forth in Section 3.10 thereof.
5. This Agreement shall become effective at such time as it is executed by
each of the Stock Purchasers, and a majority in interest of each of the
Berkshire Stockholders and Management Stockholders who were parties to
the Stockholders' Agreement prior to the issuance of shares of Common
Stock to the Stock Purchasers this date.
<PAGE>
6. This Agreement may be executed in any number of counterparts, each of
which will be deemed an original, but all of which together shall
constitute one and the same instrument, and all signatures need not
appear in any one counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the 5 day of February, 1999.
HOLMES PRODUCTS CORP.
By: /s/ Ira B. Morgenstern
_________________________
Name: Ira B. Morgenstern
Title: Senior Vice President-Finance
<PAGE>
HOLMES PRODUCTS CORP.
FIRST AMENDMENT TO STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
BERKSHIRE STOCKHOLDERS:
BERKSHIRE FUND IV, LIMITED
PARTNERSHIP
By: Fourth Berkshire Associates, LLC,
its general partner
By: /s/ Richard K. Lubin
____________________________
Name: Richard K. Lubin
Title: Managing Member
BERKSHIRE INVESTORS LLC
By: /s/ Richard K. Lubin
____________________________
Name: Richard K. Lubin
Title: Managing Member
New Berkshire Stockholders:
BERKSHIRE FUND IV INVESTMENT CORP.
By: /s/ Richard K. Lubin
____________________________
Name: Richard K. Lubin
Title: Managing Member
Address: c/o Berkshire Partners
One Boston Place
Boston, MA 02108
BERKSHIRE FUND V INVESTMENT
CORP.
By: /s/ Richard K. Lubin
____________________________
Name: Richard K. Lubin
Title: Managing Member
Address: c/o Berkshire Partners
One Boston Place
Boston, MA 02108
<PAGE>
HOLMES PRODUCTS CORP.
FIRST AMENDMENT TO STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
BERKSHIRE STOCKHOLDERS:
FSC CORP.
By: /s/ Mary Josephs Reilly
____________________________
Name: Mary Josephs Reilly
Title:
<PAGE>
HOLMES PRODUCTS CORP.
FIRST AMENDMENT TO STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
BERKSHIRE STOCKHOLDERS:
SUNAPEE SECURITIES, INC.
By: /s/ Gary B. Wilkinson
____________________________
Name: Gary B. Wilkinson
Title: Treasurer
SQUAM LAKE INVESTORS, II, L.P.
By: /s/ Gary B. Wilkinson
____________________________
Name: Gary B. Wilkinson
Title: Treasurer
SQUAM LAKE INVESTORS, III, L.P.
By: /s/ Gary B. Wilkinson
____________________________
Name: Gary B. Wilkinson
Title: Treasurer
<PAGE>
HOLMES PRODUCTS CORP.
FIRST AMENDMENT TO STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
BERKSHIRE STOCKHOLDERS:
PANGAEA GROUP, INC.
By: /s/ Darren Spangler
____________________________
Name: Darren Spangler
Title:
<PAGE>
HOLMES PRODUCTS CORP.
FIRST AMENDMENT TO STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
ASCO:
ASCO INVESTMENT LTD.
By: /s/ Nick Webster
____________________________
Name: Nick Webster
Title:
<PAGE>
HOLMES PRODUCTS CORP.
FIRST AMENDMENT TO STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
MANAGEMENT STOCKHOLDERS:
/s/ Jordan A. Kahn
--------------------------
Jordan A. Kahn
/s/ Stanley Rosenzweig
---------------------------
Stanley Rosenzweig
/s/ Gregory F. White
---------------------------
Gregory F. White
/s/ Liu Woon Fai (Tommy Liu)
---------------------------
Liu Woon Fai (Tommy Liu)
<PAGE>
HOLMES PRODUCTS CORP.
FIRST AMENDMENT TO STOCKHOLDERS' AGREEMENT
COUNTERPART SIGNATURE PAGE
NEW MANAGEMENT STOCKHOLDER
/s/ Thomas K. Manning
-----------------------------------
Thomas K. Manning
Address: The Rival Company
---------------------------
800 East 101st Terrace
---------------------------
Kansas City, Missouri 64131
---------------------------
SECOND SUPPLEMENTAL INDENTURE AND GUARANTEE
SECOND SUPPLEMENTAL INDENTURE AND GUARANTEE (this "Supplemental
Indenture"), dated as of February 5, 1999, among Moriarty Acquisition Corp., The
Rival Company, Patton Electric Company, Inc., Patton Building Products, Inc. and
Rival Consumer Sales Corporation (collectively, the "Guaranteeing Restricted
Subsidiaries"), Holmes Products Corp., a Massachusetts corporation (the
"Company"), the other Guarantors (as defined in the Indenture and First
Supplemental Indenture and Guarantee referred to herein) and State Street Bank
and Trust Company, as trustee under the Indenture referred to herein (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an Indenture (the "Original Indenture"), dated as of November 26, 1997 under
which have been issued an aggregate principal amount of $105.0 million of 9 7/8%
Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, the Company has heretofore executed and delivered to the Trustee
a First Supplemental Indenture and Guarantee dated as of October 14, 1998
(together with the Original Indenture, the "Indenture");
WHEREAS, the Guaranteeing Restricted Subsidiaries have been acquired or
created by the Company as provided in Sections 4.17 and 11.04 of the Indenture;
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Restricted Subsidiaries shall execute and deliver to the Trustee a
supplemental indenture pursuant to which such Guaranteeing Restricted
Subsidiaries shall unconditionally guarantee all of the Company's Obligations
under the Notes and the Indenture on the terms and conditions set forth herein
(the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Restricted Subsidiaries, the Company, the other Guarantors and the
Trustee mutually covenant and agree for the equal and ratable benefit of the
Holders of the Notes as follows:
<PAGE>
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture. The term "Guarantor"
as used herein shall include the Guaranteeing Restricted Subsidiaries.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Restricted Subsidiaries hereby
agrees as follows:
(a) Along with all the Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and
assigns, irrespective of the validity and enforceability of the
Indenture, the Notes or the obligations of the Company hereunder or
thereunder, that:
(i) the principal of and premium, interest and Liquidated
Damages, if any, on the Notes will be promptly paid
in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest
on the overdue principal of, premium, interest and
Liquidated Damages, if any, on the Notes, if any, if
lawful, and all other obligations of the Company to
the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other
Obligations, the same will be promptly paid in full
when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity,
by acceleration or otherwise. Failing payment when
due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall
be jointly and severally obligated to pay the same
immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability
of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of
the Notes with respect to any provisions hereof or thereof,
the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge
or defense of a Guarantor.
(c) The following is hereby waived: diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever.
2
<PAGE>
(d) This Note Guarantee shall not be discharged except by complete
performance of the Obligations contained in the Notes and the
Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guarantors, or any custodian, trustee,
liquidator or other similar official acting in relation to either
the Company or the Guarantors, any amount paid by either to the
Trustee or such Holder, this Note Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and
effect.
(f) The Guaranteeing Restricted Subsidiaries shall not be entitled to
any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all
Obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as
provided in Article 6 of the Original Indenture for the
purposes of this Note Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed
hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article 6
of the Original Indenture, such Obligations (whether or not
due and payable) shall forthwith become due and payable by
the Guarantors for the purpose of this Note Guarantee.
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not
impair the rights of the Holders under the Note Guarantee.
(i) Pursuant to Section 11.03 of the Original Indenture, after
giving effect to any maximum amount and any other
contingent and fixed liabilities that are relevant under
any applicable Bankruptcy or fraudulent conveyance laws,
and after giving effect to any collections from, rights to
receive contribution from or payments made by or on behalf
of any other Guarantor in respect of the Obligations of
such other Guarantor under Article 11 of the Original
Indenture, the Obligations of the Guarantors shall be
limited to the maximum amount as shall result in the
Obligations of such Guarantor under its Note Guarantee not
constituting a fraudulent transfer or conveyance.
3
<PAGE>
3. EXECUTION AND DELIVERY. The Guaranteeing Restricted Subsidiaries agree
that this Note Guarantee shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Note Guarantee.
4. GUARANTOR MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) A Guarantor may not consolidate with or merge with or into (whether
or not such Guarantor is the surviving Person) another corporation,
Person or entity whether or not affiliated with such Guarantor
unless:
(i) subject to Section 11.05 of the Original Indenture,
the Person formed by or surviving any such
consolidation or merger (if other than a Guarantor or
the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the
Notes, the Indenture and the Note Guarantee on the
terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor
corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the
Trustee, of the Note Guarantee endorsed upon the Notes and
the due and punctual performance of all of the covenants
and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and
be substituted for the Guarantor with the same effect as if
it had been named herein as a Guarantor. Such successor
corporation thereupon may cause to be signed any or all of
the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee. All
the Note Guarantees so issued shall in all respects have
the same legal rank and benefit under the Indenture as the
Note Guarantees theretofore and thereafter issued in
accordance with the terms of the Indenture as though all of
such Note Guarantees had been issued at the date of the
execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Original
Indenture, and notwithstanding clauses (a) and (b) above,
nothing contained in the Indenture or in any of the Notes
shall prevent any consolidation or merger of a Guarantor
with or into the Company or another Guarantor, or shall
prevent any sale or conveyance of the property of a
Guarantor as an
4
<PAGE>
entirety or substantially as an entirety to the Company or another
Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the
capital stock of any Guarantor (other than to the Company
or another Guarantor), or in the case the Company
designates a Guarantor to be an Unrestricted Subsidiary in
accordance with the Indenture, then such Guarantor (in the
event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property
(in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) shall be
released and relieved of any obligations under its Note
Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Original Indenture. Upon
delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that
such sale or other disposition was made by the Company in
accordance with the provisions of the Indenture, including
without limitation Section 4.10 of the Original Indenture,
the Trustee shall execute any documents reasonably required
in order to evidence the release of any Guarantor from its
obligations under its Note Guarantee.
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of
and interest on the Notes and for the other obligations of any
Guarantor under the Indenture as provided in Article 10 of the
Original Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Restricted Subsidiaries, as such, shall have any liability for any obligations
of the Company or any Guarantor under the Notes, any Note Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the SEC that such a waiver is against public policy.
5
<PAGE>
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENT INDENTURE BUT WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Restricted Subsidiaries, the other
Guarantors and the Company.
SIGNATURES
Dated as of the date first set forth above.
MORIARTY ACQUISITION CORP.
By: /s/ Ira B. Morgenstern
_______________________
Name: Ira B. Morgenstern
Title: Senior Vice President-Finance
THE RIVAL COMPANY
By: /s/ Ira B. Morgenstern
_______________________
Name: Ira B. Morgenstern
Title: Senior Vice President-Finance
PATTON ELECTRIC COMPANY, INC.
By: /s/ Ira B. Morgenstern
_______________________
Name: Ira B. Morgenstern
Title: Senior Vice President-Finance
6
<PAGE>
PATTON BUILDING PRODUCTS, INC.
By: /s/ Ira B. Morgenstern
_______________________
Name: Ira B. Morgenstern
Title: Senior Vice President-Finance
RIVAL CONSUMER SALES CORPORATION
By: /s/ Ira B. Morgenstern
_______________________
Name: Ira B. Morgenstern
Title: Senior Vice President-Finance
HOLMES PRODUCTS CORP.
By: /s/ Ira B. Morgenstern
_______________________
Name: Ira B. Morgenstern
Title: Senior Vice President-Finance
HOLMES MANUFACTURING CORP.
By: /s/ Ira B. Morgenstern
_______________________
Name: Ira B. Morgenstern
Title: Senior Vice President-Finance
HOLMES AIR (TAIWAN) CORP.
By: /s/ Ira B. Morgenstern
_______________________
Name: Ira B. Morgenstern
Title: Senior Vice President-Finance
HOLMES MOTOR CORPORATION
By: /s/ Ira B. Morgenstern
_______________________
Name: Ira B. Morgenstern
Title: Senior Vice President-Finance
7
<PAGE>
STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE
By: /s/ Andrew M. Sinasky
By: ____________________________
Name: Andrew M. Sinasky
Title: Assistant Vice President
8
HOLMES PRODUCTS CORP.
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
1. Purpose of the Plan. This stock option plan (the "Plan") is intended to
provide incentives: (a) to the officers and other employees of Holmes Products
Corp., a Massachusetts corporation (the "Company"), and any present or future
subsidiaries of the Company by providing them with opportunities to purchase
stock in the Company pursuant to options granted hereunder which qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") ("ISO" or "ISOs"); and (b) to officers, directors,
employees, consultants and other key persons of the Company and any present or
future subsidiaries of the Company by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder which do not
qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"). As used
herein, the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation," respectively, as those terms are defined in Section
424 of the Code and the Treasury Regulations promulgated thereunder (the
"Regulations").
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued shares of
the common stock, $.001 par value, of the Company ("Common Stock") for which
options may be granted under the Plan shall not exceed 4,260,978 shares, subject
to adjustment as provided in Section 11 hereof.
(b) If an option granted hereunder shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the Plan may
be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee (as defined in Section 3
below).
3. Administration of the Plan. At the discretion of the Company's Board of
Directors, the Plan shall be administered by the Board of Directors or by a
committee (the "Committee") consisting of two or more members of the Company's
Board of Directors, to whom the Board of Directors may (except as provided in
Section 4 hereof) delegate its authority hereunder. In the event that the Board
of Directors is the administrator of the Plan, reference herein to the Committee
shall be deemed to include the Board of Directors. The decisions of the
Committee as to all questions of interpretation and application of the Plan
shall be final, binding and conclusive on all persons. The Committee shall have
the authority to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any
<PAGE>
inconsistency in the Plan or in any option agreement granted hereunder in the
manner and to the extent it shall deem expedient to carry the Plan into effect
and shall be the sole and final judge of such expediency. No Committee member
shall be liable for any action or determination made in good faith.
If any such Committee is appointed, the Board may from time to time
appoint a member or members of the Committee in substitution for or in addition
to the member or members then in office and may fill vacancies on the Committee
however caused. The Committee shall choose one of its members as Chairman and
shall hold meetings at such times and places as it shall deem advisable. A
majority of the members of the Committee shall constitute a quorum and any
action may be taken by a majority of those present and voting at any meeting.
Any action may also be taken without the necessity of a meeting by a written
instrument signed by a majority of the Committee.
4. Eligibility.
(a) Options designated as ISOs may be granted only to key employees
(including officers who are also employees) of the Company or any of its
subsidiaries, including subsidiaries which become such after the adoption of
this Plan. Non-Qualified Options may be granted to any director, officer,
employee, consultant or key person (including, without limitation, prospective
employees) of the Company or of any of its subsidiaries, including subsidiaries
which become such after the adoption of this Plan.
(b) In determining the eligibility of an individual to be granted an
option, as well as in determining the number of shares to be optioned to any
individual, the Board of Directors shall take into account the position and
responsibilities of the individual being considered, the nature and value to the
Company or its subsidiaries of his or her service and accomplishments, his or
her present and potential contribution to the success of the Company or its
subsidiaries, and such other factors as the Board of Directors may deem
relevant.
(c) No option designated as an ISO shall be granted to any employee of the
Company or any subsidiary if such employee owns, immediately prior to the grant
of an option, stock representing more than 10% of the total combined voting
power of all classes of stock of the Company or a parent or a subsidiary, unless
the purchase price for the stock under such option shall be at least 110% of its
fair market value at the time such option is granted and the option, by its
terms, shall not be exercisable more than five years from the date it is
granted. In determining the stock ownership under this paragraph, the provisions
of Section 424(d) of the Code shall be controlling. In determining the fair
market value under this paragraph, the provisions of Section 6 hereof shall
apply.
(d) The maximum number of shares of the Company's Common Stock with
respect to which an option or options may be granted to any employee in any one
taxable year of the Company shall not exceed 1,000,000 shares, taking into
account shares granted during such
2
<PAGE>
taxable year under options that are terminated or repriced, and subject to
adjustment under Section 11 hereof.
(e) To the extent that any portion of an option designated as an ISO
hereunder shall fail to qualify as such, such portion shall thereafter be deemed
to constitute a Non-Qualified Option.
5. Option Agreement. Each option shall be evidenced by an option agreement
(the "Agreement") duly executed on behalf of the Company and by the optionee to
whom such option is granted, which Agreement shall comply with and be subject to
the terms and conditions of the Plan. The Agreement may contain such other
terms, provisions and conditions which are not inconsistent with the Plan as may
be determined by the Board of Directors, provided that options designated as
ISOs shall meet all of the conditions for ISOs as defined in Section 422 of the
Code. The date of grant of an option shall be as determined by the Board of
Directors. More than one option may be granted to an individual.
6. Exercise Price. The exercise price or prices of shares of the Company's
Common Stock for options designated as Non-Qualified Options shall be as
determined by the Board of Directors. The exercise price or prices of shares of
the Company's Common Stock for ISOs shall be the fair market value of such
Common Stock at the time the option is granted as determined by the Board of
Directors in accordance with the Regulations promulgated under Section 422 of
the Code. If such shares are then listed on any national securities exchange,
the fair market value shall be the mean between the high and low sales prices on
such exchange on the business day immediately preceding the date of the grant of
the option or, if no sales were reported, on the nearest date preceding the
grant date for which sales were reported. If the shares are not then listed on
any such exchange, the fair market value of such shares shall be the mean
between the high and low sales prices as reported on the Nasdaq National Market
for the business day immediately preceding the date of the grant of the option,
or, if no sales were reported, on the nearest date preceding the grant date for
which sales were reported. If the shares are not then either listed on any such
exchange or quoted on the Nasdaq National Market, the fair market value shall be
the mean between the average of the "Bid" and the average of the "Ask" prices as
reported on the Nasdaq system for the business day immediately preceding the
date of the grant of the option, or, if no such prices were reported, on the
nearest date preceding the grant date for which such prices were reported. If
the fair market value cannot be determined under the preceding three sentences,
it shall be determined in good faith by the Board of Directors.
7. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may provide for the payment of the
exercise price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the exercise price of such options, (ii) shares of
Common Stock of the Company owned by the optionee for at least six (6) months
having a fair market value (determined in accordance with the provisions of
Section 6 hereof, as applicable) equal in amount to the exercise price of the
options being exercised, or (iii) any combination of (i) and (ii), provided,
however, that the payment of
3
<PAGE>
the exercise price by delivery of shares of capital stock of the Company owned
by such optionee may be made only if such payment does not result in a charge to
earnings of the Company for financial accounting purposes as determined by the
Committee.
(b) To the extent that the right to purchase shares under an option has
accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Payment in full of the
option exercise price need not accompany the written notice of exercise provided
the notice directs that the certificate or certificates for the shares for which
the option is being exercised be delivered to a securities broker acceptable to
the Company as the agent for the person exercising the option and, at the time
such certificate or certificates are delivered, the broker tenders to the
Company cash (or cash equivalents acceptable to the Company) equal to the option
exercise price plus the amount (if any) of federal and/or other taxes that the
Company may, in its judgment, be required to withhold with respect to the
exercise of the option.
(c) Notwithstanding the provisions of this paragraph 7, any optionee who
is a resident of the United Kingdom shall be permitted to pay the exercise price
upon exercise of an option hereunder solely by delivery of cash or a check
payable to the order of the Company and not by any other method.
8. Exercise of Options. Subject to the provisions of paragraphs 9 through
11, each option granted under the Plan shall be exercisable as follows:
(a) Vesting. The option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as provided
for in the Option Agreement executed pursuant to Section 5 hereof.
(b) Full Vesting of Installments. Once an installment becomes exercisable
it shall remain exercisable until expiration or termination of the option,
unless otherwise specified by the Board of Directors.
(c) Partial Exercise. Each option or installment may be exercised at any
time or from time to time, in whole or in part, for up to the total number of
shares with respect to which it is then exercisable.
(d) Acceleration of Vesting. The Board of Directors shall have the right
at any time to accelerate the vesting of any installment of any option; provided
that the Board of Directors shall not, without the consent of an optionee,
accelerate the exercise date of any installment of any option granted to any
employee as an ISO if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code.
4
<PAGE>
(e) United Kingdom Residents. Notwithstanding the provisions of this
paragraph 8, an optionee who is a resident of the United Kingdom may exercise
any option or installment of an option only once during any consecutive
three-year period, and following any option exercise, regardless of the number
of shares, no further exercise of any remaining portion of such option or of any
other option may be made by such optionee during the succeeding three years.
9. Term of Options; Exercisability.
(a) Term. Each option shall expire not more than ten (10) years from the
date of the granting thereof, but shall be subject to earlier termination as may
be provided in the Agreement.
(b) Exercisability. Except as otherwise provided in the Agreement or by
the Board of Directors at any time, an option granted to an employee optionee
who ceases to be an employee of the Company or one of its subsidiaries shall be
exercisable only to the extent that the right to purchase shares under such
option has accrued and is in effect on the date such optionee ceases to be an
employee of the Company or one of its subsidiaries. The Agreement may specify a
period or periods of time following such termination of employment within which
the option may be exercised.
10. Options Not Transferable. Except as otherwise provided by the Board of
Directors at any time, the right of any optionee to exercise any option granted
to him or her shall not be assignable or transferable by such optionee otherwise
than by will or the laws of descent and distribution or the rules thereunder,
and any such option shall be exercisable during the lifetime of such optionee
only by the optionee. Except as otherwise provided by the Board of Directors at
any time, any option granted under the Plan shall be null and void and without
effect upon the bankruptcy of the optionee to whom the option is granted, or
upon any attempted assignment or transfer, except as herein provided, including
without limitation any purported assignment, whether voluntary or by operation
of law, pledge, hypothecation or other disposition, attachment, divorce, trustee
process or similar process, whether legal or equitable, upon such option.
11. Adjustments. Upon the occurrence of any of the following events, an
optionee's rights with respect to options granted to him or her hereunder shall
be adjusted as hereinafter provided, unless otherwise specifically provided in
the written agreement between the optionee and the Company relating to such
option:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
5
<PAGE>
(b) Consolidations or Mergers. If the Company is to be consolidated with
or acquired by another entity in a merger, sale of all or substantially all of
the Company's assets or otherwise (an "Acquisition"), the Board of Directors or
the board of directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding options, either (i)
make appropriate provision for the continuation of such options by substituting
on an equitable basis for the shares then subject to such options the
consideration then payable with respect to the outstanding shares of Common
Stock in connection with the Acquisition; or (ii) upon written notice to the
optionees, provide that all options must be exercised, to the extent then
exercisable, within a specified number of days of the date of such notice, at
the end of which period the options shall terminate; or (iii) terminate all
options in exchange for a cash payment equal to the excess of the fair market
value of the shares subject to such options (to the extent then exercisable)
over the exercise price thereof.
(c) Recapitalization or Reorganization. In the event of a recapitalization
or reorganization of the Company (other than a transaction described in
subparagraph (b) above) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of Common
Stock, an optionee upon exercising an option shall be entitled to receive for
the purchase price paid upon such exercise the securities he would have received
if he had exercised his option prior to such recapitalization or reorganization.
(d) Modification of ISOs. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs (a), (b) or (c) with respect to ISOs shall be
made only after the Board of Directors, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424 of the Code) or would cause
any adverse tax consequences for the holders of such ISOs. If the Board of
Directors determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs, it may refrain from making such
adjustments.
(e) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, each option will terminate immediately prior to
the consummation of such proposed action or at such other time and subject to
such other conditions as shall be determined by the Board of Directors, provided
that prior to such dissolution or liquidation, the vesting of any option shall
automatically accelerate as if such dissolution or liquidation is deemed to be a
Change of Control. For purposes of this Plan, a "Change in Control" shall be
deemed to have occurred if any person, or any two or more persons acting as a
group, and all affiliates of such person or persons, who prior to such time
owned shares representing less than fifty percent (50%) of the voting power at
elections for the Board of Directors of the Company, shall acquire, whether by
purchase, exchange, tender offer, merger, consolidation or otherwise, such
additional shares of the Company's capital stock in one or more transactions, or
series of transactions, such that following such transaction or transactions,
such person or group and affiliates beneficially own fifty percent (50%) or more
of the voting power at elections for the Board of Directors of the Company.
6
<PAGE>
(f) Issuances of Securities. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(g) Fractional Shares. No fractional shares shall be issued under the Plan
and the optionee shall receive from the Company cash in lieu of such fractional
shares.
(h) Adjustments. Upon the happening of any of the events described in
subparagraphs (a), (b) or (c) above, the class and aggregate number of shares
set forth in Section 2 hereof that are subject to options which previously have
been or subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described in such subparagraphs. The Board of
Directors or the Successor Board shall determine the specific adjustments to be
made under this paragraph 11 and, subject to paragraph 3, its determination
shall be conclusive.
If any person or entity owning restricted Common Stock obtained by
exercise of an option made hereunder receives shares or securities or cash in
connection with a corporate transaction described in subparagraphs (a), (b) or
(c) above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Board of
Directors or the Successor Board.
12. No Special Employment Rights. Nothing contained in the Plan or in any
option granted under the Plan shall confer upon any option holder any right with
respect to the continuation of his employment by the Company (or any subsidiary)
or interfere in any way with the right of the Company (or any subsidiary),
subject to the terms of any separate employment agreement to the contrary, at
any time to terminate such employment or to increase or decrease the
compensation of the option holder from the rate in existence at the time of the
grant of an option.
13. Withholding. The Company's obligation to (i) deliver shares upon the
exercise of any option granted under the Plan or (ii) make payments under
paragraph 11 hereof, shall be subject to the option holder's satisfaction of all
applicable Federal, state and local income, excise and employment tax
withholding requirements. The Company and employee may agree to withhold shares
of capital stock purchased upon exercise of an option to satisfy the
above-mentioned withholding requirements.
7
<PAGE>
14. Restrictions on Issue of Shares.
(a) Notwithstanding the provisions of paragraph 7, the Company may delay
the issuance of shares covered by the exercise of an option and the delivery of
a certificate for such shares until one of the following conditions shall be
satisfied:
(i) The shares with respect to which such option has been
exercised are at the time of the issue of such shares effectively registered or
qualified under applicable Federal and state securities acts now in force or as
hereafter amended; or
(ii) Counsel for the Company shall have given an opinion,
which opinion shall not be unreasonably conditioned or withheld, that such
shares are exempt from registration and qualification under applicable Federal
and state securities acts now in force or as hereafter amended.
(b) It is intended that all exercises of options shall be effective, and
the Company shall use its best efforts to bring about compliance with the above
conditions within a reasonable time, except that the Company shall be under no
obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.
15. Purchase for Investment; Rights of Holder on Subsequent Registration.
Unless the shares to be issued upon exercise of an option granted under the Plan
have been effectively registered under the Securities Act of 1933, as now in
force or hereafter amended, the Company shall be under no obligation to issue
any shares covered by any option unless the person who exercises such option, in
whole or in part, shall give a written representation and undertaking to the
Company which is satisfactory in form and scope to counsel for the Company and
upon which, in the opinion of such counsel, the Company may reasonably rely,
that he or she is acquiring the shares issued pursuant to such exercise of the
option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he or
she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the Securities Act of
1933, or any other applicable law, and that if shares are issued without such
registration, a legend to this effect may be endorsed upon the securities so
issued. In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the Securities Act of 1933 or other applicable
statutes any shares with respect to which an option shall have been exercised,
or to qualify any such shares for exemption from the Securities Act of 1933 or
other applicable statutes, then the Company may take such action and may require
from each optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for such purpose and
may require reasonable indemnity to the Company and its officers and directors
and controlling persons from such holder against all losses, claims, damages and
liabilities arising from such use of the information so furnished and caused by
any untrue statement of any material fact therein
8
<PAGE>
or caused by the omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
16. Loans. The Company may make loans to optionees to permit them to
exercise options. If loans are made, the requirements of all applicable Federal
and state laws and regulations regarding such loans must be met.
17. Approval of Stockholders. The Plan shall be subject to approval by the
vote of stockholders holding at least a majority of the voting stock of the
Company voting in person or by proxy at a duly held stockholders' meeting, or by
written consent of stockholders holding at least a majority of the voting stock
of the Company, prior to or within twelve (12) months after the adoption of the
Plan by the Board of Directors and shall take effect as of the date of adoption
by the Board of Directors upon such approval. The Board of Directors may grant
options under the Plan prior to such approval, but any such option shall become
effective as of the date of grant only upon such approval and, accordingly, no
such option may be exercisable prior to such approval.
18. Termination and Amendment. Unless sooner terminated as herein provided,
the Plan shall terminate ten (10) years from the date upon which the Plan was
duly adopted by the Board of Directors of the Company. The Board of Directors
may at any time terminate the Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that except as provided in
this paragraph 18, the Board of Directors may not, without the approval of the
stockholders of the Company obtained in the manner stated in paragraph 17,
increase the maximum number of shares for which options may be granted or change
the designation of the class of persons eligible to receive options under the
Plan. The Board of Directors may grant options hereunder after an amendment to
the Plan by the Board of Directors requiring shareholder approval under this
paragraph 18, but any such option shall become effective as of the date of grant
only upon such approval and, accordingly, no such option may be exercisable
prior to such approval. The Board of Directors may terminate, amend or modify
any outstanding option with or without the consent of the option holder,
provided, however, that, except as provided in paragraph 11, without the consent
of the optionee, the Board of Directors shall not change the number of shares
subject to an option, nor the exercise price thereof, nor extend the term of
such option.
19. Reservation of Stock. The Company shall at all times during the term of
the Plan reserve and keep available such number of shares of stock as will be
sufficient to satisfy the requirements of the Plan and shall pay all fees and
expenses necessarily incurred by the Company in connection therewith.
20. Limitation of Rights in the Option Shares. An optionee shall not be
deemed for any purpose to be a shareholder of the Company with respect to any of
the options except to the extent that the option shall have been exercised with
respect thereto, the exercise price shall have been paid in full, the optionee
shall have complied with all applicable provisions of the Plan and
9
<PAGE>
Agreement pursuant to which such option was granted and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.
21. Notices. Any communication or notice required or permitted to be given
under the Plan shall be in writing, and mailed by registered or certified mail
or delivered by hand, if to the Company, to its principal place of business,
attention: President, and, if to an optionee, to the address as appearing on the
records of the Company.
Adopted by the Board of Directors: November 26, 1997
Adopted by the Stockholders: November 26, 1997
Amended and Restated by the Board of Directors effective October 30, 1998
to (i) adjust the par value and share amounts for the stock split effective
April 23, 1998, and (ii) add paragraphs 7(c) and 8(e).
Amended by the Board of Directors and the Stockholders effective February 5,
1999 to increase the number of shares subject to the Plan.
* * *
10
Holmes Products Corp. Employee Stock Purchase Plan
ARTICLE I - PURPOSE
1.01. Purpose.
The Holmes Products Corp. Employee Stock Purchase Plan is intended to
provide a method whereby employees of Holmes Products Corp. and its subsidiary
corporations (hereinafter referred to, unless the context otherwise requires, as
the "Company") will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of the Common Stock of the Company
("Shares").
ARTICLE II - DEFINITIONS
2.01. Committee.
"Committee" shall mean the individuals described in Article VI.
2.02. Employee.
"Employee" means any person who is customarily employed on a full-time or
part-time basis by the Company and is regularly scheduled to work more than 20
hours per week.
2.03 Subsidiary Corporation.
"Subsidiary Corporation" shall mean any present or future corporation
which is or becomes a direct or indirect "subsidiary corporation" of the Company
and is designated as a participant in the Plan by the Committee.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
3.01. Eligibility.
The Committee shall determine from time to time the employees who shall be
eligible to participate in offerings under the Plan.
3.02 Employment.
In order to be eligible to participate in the Plan an employee must be
employed by the Company on the date of his purchase of shares.
<PAGE>
ARTICLE IV - OFFERINGS
4.01 Awards.
The Committee may from time to time award to designated Employees the
right to purchase a specified number of Shares under and in accordance with the
terms and provisions of the Plan. In determining the eligibility of an
individual to be granted the right to purchase Shares under the Plan, as well as
in determining the number of Shares to be offered to any such person, the
Committee may take into account the position and responsibilities of the
Employee being considered, the nature and value to the Company of his or her
service and accomplishments, his or her present and potential contribution to
the success of the Company, his or her compensation, and such other factors as
the Committee may deem relevant. The Committee's determination of Employees
eligible to participate in awards under the Plan, and the number of Shares
awarded such Employees shall be conclusive and binding.
4.02 Exercise.
Any award to purchase Shares made by the Committee shall be exercisable
under such terms and conditions and pursuant to such purchase agreements as the
Committee may specify at the time of the making of the offer to the Employee.
4.03 Payment.
Payment for the Shares shall be made at the time of execution of the
applicable purchase agreement by delivery of cash or check payable to the order
of the Company in the amount equal to the purchase price for the Shares awarded
to the Employee under the Plan.
4.04 Time to Exercise.
The Committee may specify the time period within which an Employee must
determine to purchase any Shares awarded to the Employee for purchase under the
Plan.
4.05 Purchase Price.
The purchase price or prices of Shares offered to Employees for purchase
under the Plan shall be as determined by the Committee.
2
<PAGE>
ARTICLE V - SHARES
5.01 Maximum Shares.
The maximum number of Shares which may be issued under the Plan, subject
to adjustment upon changes in capitalization of the Company, as provided in
Section 5.02, shall be 350,000 Shares.
5.02 Adjustments.
The number of Shares covered by the Plan shall be appropriately increased
or decreased proportionately in the event of any subdivision, combination or
stock dividend on the Common Stock of the Company, or upon any consolidation,
merger, recapitalization or reorganization of the Company pursuant to which the
Common Stock of the Company is changed or exchanged into other securities of the
Company, or another corporation. Appropriate changes shall likewise be made with
respect to any outstanding and unexercised awards to purchase Shares granted to
Employees under the Plan.
5.03 Restrictions on Exercise.
(a) The Committee may, in its discretion, require that any Shares awarded
to purchase to an Employee under the Plan shall be issued pursuant to the terms
of a Stock Purchase Agreement, or similar agreement, containing such terms and
conditions as may be specified by the Committee and including, so long as the
Shares have not been registered under the Securities Act of 1933, as amended,
such representations and undertakings, satisfactory in form and scope to counsel
for the Company, to the effect that the Employee is acquiring the Shares issued
under the Plan for his or her own account as an investment, and not with a view
to, or for sale in connection with, the distribution of any such shares, and
that such Employee will make no transfer of same, except in compliance with any
rules and regulations in force at the time of such transfer under the Securities
Act of 1933, as amended, or any other applicable law.
(b) The Committee may also require that any Shares issued under the Plan
shall be subject to restrictions on transfer and rights of purchase upon
termination of employment and rights of take-along in the event of sales of
stock of the Company, and voting provisions, all on such terms and conditions
and pursuant to such agreements as may be specified by the Committee at the time
of any award of purchase rights under this Plan.
3
<PAGE>
ARTICLE VI - ADMINISTRATION
6.01. Appointment of Committee.
The Board of Directors may appoint a committee (the "Committee") to
administer the Plan, which shall consist of no fewer than three members of the
Board of Directors. No member of the Committee shall be eligible to purchase
stock under the Plan. If no Committee is appointed, the Board of Directors shall
exercise all powers and duties of the Committee.
6.02. Authority of Committee.
Subject to the express provisions of the Plan, the Committee shall have
plenary authority in its discretion to interpret and construe any and all
provisions of the Plan, to adopt rules and regulations for administering the
Plan, and to make all other determinations deemed necessary or advisable for
administering the Plan. The Committee's determination on the foregoing matters
shall be conclusive.
6.03. Rules Governing the Administration of the Committee.
The Board of Directors may from time to time appoint members of the
Committee in substitution for or in addition to members previously appointed and
may fill vacancies, however caused, in the Committee. The Committee may select
one of its members as its Chairman and shall hold its meetings at such times and
places as it shall deem advisable and may hold telephonic meetings. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. The Committee may correct any defect
or omission or reconcile any inconsistency in the Plan, in the manner and to the
extent it shall deem desirable. Any decision or determination reduced to writing
and signed by a majority of the members of the Committee shall be as fully
effective as if it had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
ARTICLE VII - MISCELLANEOUS
7.01. Amendment and Termination.
The Board of Directors shall have complete power and authority to
terminate or amend the Plan; provided, however, that the Board of Directors
shall not, without the approval of the stockholders of the Corporation increase
the maximum number of shares which may be issued under the Plan (except pursuant
to Section 5.02.
4
<PAGE>
7.02. Effective Date.
The Plan shall become effective as of April 1, 1998, subject to approval
by the holders of the majority of the Common Stock present and represented at a
special or annual meeting of the shareholders held on or before April 1, 1999.
If the Plan is not so approved, the Plan shall not become effective.
7.03. No Employment Rights.
The Plan does not, directly or indirectly, create any right for the
benefit of any employee or class of employees to purchase any Shares under the
Plan, or create in any employee or class of employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise modify,
an employee's employment at any time.
7.04. Governing Law.
The law of the Commonwealth of Massachusetts will govern all matters
relating to this Plan except to the extent it is superseded by the laws of the
United States.
5
SUBSIDIARIES OF HOLMES PRODUCTS CORP.
(1) Holmes Manufacturing Corp. (Massachusetts corporation)
(2) Holmes Air (Taiwan) Corp. (Massachusetts corporation)
(3) Holmes Air (Canada) Corp. (Ontario corporation)
(4) Holmes Products (Far East) Limited (Bahamian corporation)
(a) Esteem Industries Limited (Hong Kong corporation)
(i) Dongguan Huixun Electrical Products Co., Ltd. (Chinese corporation)
(b) Raider Motor Corporation (Bahamian corporation)
(i) Dongguan Raider Motor Corporation Ltd. (Chinese corporation)
(c) Holmes Products (Europe) Limited (UK corporation)
(5) Holmes Motor Corp. (Delaware corporation)
(6) The Rival Company (Delaware corporation)
(a) Patton Electric Company, Inc. (Indiana corporation)
(i) Patton Electric Hong Kong, Limited (Hong Kong corporation)(A)
(b) Patton Building Products, Inc. (f/k/a FASCO Consumer Products,
Inc.) (Delaware corporation)
(c) Waverly Products Company, Ltd. (Jamaican corporation)(B)
(d) Rival Consumer Sales Corporation (Missouri corporation)
(e) The Rival Company of Canada, Ltd. (f/k/a Bionaire, Inc.)
(Canadian corporation)
(f) Bionaire International, B.V. (Netherlands corporation)
(g) Rival De Mexico S.A. de C.V. (Mexican corporation)(C)
- -----------------------------
(A) Patton Electric Hong Kong, Limited is owned jointly by Patton Electric
Company, Inc. (99.9%) and The Rival Company (0.1%).
(B) Waverly Products Company, Ltd. is owned jointly by The Rival Company (99%)
and Patton Electric Company, Inc. (1%).
(C) Rival De Mexico S.A. de C.V. is owned 99.9% by The Rival Company directly
and 0.1% held in trust for The Rival Company.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF HOLMES PRODUCTS CORP. AND IS QUALIFIED IN IT ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 5,379
<SECURITIES> 0
<RECEIVABLES> 37,686
<ALLOWANCES> 719
<INVENTORY> 53,340
<CURRENT-ASSETS> 102,696
<PP&E> 36,613
<DEPRECIATION> 20,861
<TOTAL-ASSETS> 131,357
<CURRENT-LIABILITIES> 31,607
<BONDS> 115,139
0
0
<COMMON> 10
<OTHER-SE> (15,399)
<TOTAL-LIABILITY-AND-EQUITY> 131,357
<SALES> 214,479
<TOTAL-REVENUES> 214,479
<CGS> 146,509
<TOTAL-COSTS> 146,509
<OTHER-EXPENSES> 6,295<F1>
<LOSS-PROVISION> 260
<INTEREST-EXPENSE> 13,833
<INCOME-PRETAX> 11,183
<INCOME-TAX> 2,222
<INCOME-CONTINUING> 8,961
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,961
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Product development expenses.
<F2>The Company's shares are not publicly traded.
</FN>
</TABLE>
