<PAGE>
As filed with the Securities and Exchange Commission on ____________, 2000
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 10
GENERAL FORM FOR
REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
__________________
APW Ltd.
(Exact name of registrant as specified in its charter)
Bermuda 04-2576375
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Clarendon House, Church Street
P.O. Box 666,
Hamilton HM CX, Bermuda
N22 W23685 Ridgeview Parkway West
Waukesha, Wisconsin 53188-1013
(Address of Principal Executive Offices) (ZIP Code)
(262) 523-7600
Registrant's telephone number, including area code:
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Common Stock, $.01 par value per share
(including the associated Common Stock New York Stock Exchange
Purchase Rights)
Securities to be registered pursuant to Section 12(g) of the Act:
None
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 1. Business.
The information required by this item is contained in the sections
entitled "Introduction," "Risk Factors," "The Distribution," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business of APW Ltd. and its Subsidiaries" in the Information Statement dated
____________, 2000 (the "Information Statement"), attached hereto as Annex A.
Those sections are incorporated herein by reference.
Item 2. Financial Information.
The information required by this item is contained in the sections
entitled "Summary," "Capitalization," "Selected Historical Financial
Information" "Selected Unaudited Pro Forma Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Information Statement. Those sections are incorporated herein by reference.
Item 3. Properties.
The information required by this item is contained in the section
entitled "Business of APW Ltd. and its Subsidiaries" in the Information
Statement. That section is incorporated herein by reference.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is contained in the sections
entitled "Security Ownership of Certain Beneficial Owners" and "Management of
APW Ltd. -- Security Ownership of Directors and Executive Officers" in the
Information Statement. Those sections are incorporated herein by reference.
Item 5. Directors and Executive Officers.
The information required by this item is contained in the sections
entitled "Management of APW Ltd. -- Directors" and "Management of APW Ltd. --
Executive Officers" in the Information Statement. Those sections are
incorporated herein by reference.
Item 6. Executive Compensation.
The information required by this item is contained in the section
entitled "Executive
<PAGE>
Compensation" in the Information Statement. That section is incorporated herein
by reference.
Item 7. Certain Relationships and Related Transactions.
The information required by this item is contained in the sections
entitled "Summary," "The Distribution -- Relationship Between API/Actuant and
APW Ltd. After the Distribution" and "Business of APW Ltd. -- Transactions and
Agreements Between APW and API/Actuant" in the Information Statement. Those
sections are incorporated herein by reference.
Item 8. Legal Proceedings.
The information required by this item is contained in the section
entitled "Business of APW Ltd. and its Subsidiaries -- Legal Proceedings" in the
Information Statement. That section is incorporated herein by reference.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
The information required by this item is contained in the sections
entitled "Summary," "The Distribution -- Manner of Effecting the Distribution,"
"The Distribution -- Results of the Distribution," "The Distribution -- Listing
and Trading of Shares of APW Ltd. Common Stock," "The Distribution -- Dividend
Policy," "Security Ownership of Certain Beneficial Owners," "Management of APW
Ltd.-- Security Ownership of Directors and Executive Officers" and "Description
of APW Ltd. Capital Stock" in the Information Statement. Those sections are
incorporated herein by reference.
Item 10. Recent Sales of Unregistered Securities.
None. The section entitled "The Distribution" in the Information
Statement is incorporated herein by reference. Subsequent to the Distribution,
Applied Power Inc. will hold no capital stock of APW Ltd.
Item 11. Description of Registrant's Securities to be Registered.
The information required by this item is contained in the sections
entitled "Summary," "The Distribution -- Listing and Trading of Shares of APW
Ltd. Common Stock," "The Distribution -- Dividend Policy," "Description of APW
Ltd. Capital Stock," "Purposes and Effects of Certain Provisions of APW's
Charter Documents and the Rights Agreement" and "Comparison of Shareholder
Rights" in the Information Statement. Those sections are incorporated herein by
reference.
-3-
<PAGE>
Item 12. Indemnification of Directors and Officers.
The information required by this item is contained in the section
entitled "Liability and Indemnification of Officers and Directors" in the
Information Statement. That section is incorporated herein by reference.
Item 13. Financial Statements and Supplementary Data.
The information required by this item is contained (i) in the sections
entitled "Summary," "Capitalization," "Selected Historical Financial Data,"
"Selected Unaudited Pro Forma Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Information
Statement, and (ii) in the Historical Combined Financial Statements and other
financial information incorporated by reference in Item 15 hereof. Those
sections are incorporated herein by reference.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(a) Financial Statements. The following Combined Financial Statements
of APW Ltd. are included in the Information Statement and incorporated herein by
reference:
(i) Historical Combined Financial Statements of the Electronics
Business of Applied Power Inc., including APW Ltd.:
-- Report of independent accountants
-- Combined statements of earnings
-- Combined balance sheets
-- Combined statements of equity and comprehensive income
-- Combined statements of cash flows
-- Notes to combined financial statements
(ii) Unaudited Pro Forma Combined Financial Information:
-- Unaudited pro forma combined balance sheet and notes
thereto
-- Unaudited pro forma combined statements of earnings and
notes thereto
(b) Exhibits. See Exhibit Index following Signatures page in this
Registration Statement, which Exhibit Index is incorporated herein by reference.
-4-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
APW Ltd.
(Registrant)
Date: May 1, 2000 By: /s/ Richard D. Carroll
------------------------------------
Richard D. Carroll, Vice President--
Finance and Controller
-5-
<PAGE>
APW Ltd.
EXHIBIT INDEX
TO
FORM 10 REGISTRATION STATEMENT
Exhibit Description
2.1 Information Statement of the Registrant dated _____________, 2000
(attached to this Registration Statement as Annex A) (the
"Information Statement")
3.1* Form of Memorandum of Association of APW (Appendix __ to the
Information Statement)
3.2* Form of Bye-laws of APW (Appendix __ to the Information
Statement)
4.1 Form of Rights Agreement between APW and FIRSTAR BANK, N.A., as
Rights Agent (Appendix __ to the Information Statement)
4.2* Form of Credit Agreement
4.3* Form of Assumption Agreement between Applied Power Inc. ("API")
and APW
10.1 APW Ltd Stock Incentive Plan (Appendix __to the Information
Statement)
10.2 Form of Contribution Agreement, Plan and Agreement of
Reorganization and Distribution between API and APW, dated as
of____________, 2000 (the "Contribution Agreement")
10.3 Form of General Assignment, Assumption and Agreement Regarding
Litigation, Claims and Other Liabilities between API and APW,
dated as of ______________, 2000 (Exhibit D to the Contribution
Agreement)
10.4 Form of Transitional Trademark Use and License Agreement between
API and APW, dated as of ______________, 2000 (Exhibit E to the
Contribution Agreement)
10.5 Form of Insurance Matters Agreement between API and APW, dated as
of ______________, 2000 (Exhibit F to the Contribution Agreement)
10.6 Form of Bill of Sale and Assumption of Liabilities between API
and APW, dated as of ______________, 2000 (Exhibit G to the
Contribution Agreement)
10.7 Form of Employee Benefits and Compensation Agreement between API
and APW, dated as of ______________, 2000 (Exhibit H to the
Contribution Agreement)
EI-1
<PAGE>
Exhibit Description
10.8 Form of Tax Sharing and Indemnification Agreement between API and
APW, dated as of ______________, 2000 (Exhibit I to the
Contribution Agreement)
10.9 Form of Interim Administrative Services Agreement between API and
APW, dated as of ______________, 2000 (Exhibit J to the
Contribution Agreement)
10.10 Form of Confidentiality and Nondisclosure Agreement between API
and APW, dated as of ______________, 2000 (Exhibit K to the
Contribution Agreement)
10.11 Form of Patent Assignment between API and Wright Line Inc., dated
as of _______________, 2000
10.12 APW Ltd. Outside Directors' Stock Option Plan
21 Subsidiaries of APW
27.1 Financial Data Schedule for six months ended February 29, 2000
27.2 Financial Data Schedule for six months ended February 28, 1999
27.3 Financial Data Schedule for year ended December 31, 1999
27.4 Financial Data Schedule for year ended December 31, 1998
27.5 Financial Data Schedule for year ended December 31, 1997
99.1 Audited Financial Statements of Vero Group PLC for year ended
December 31, 1997
99.2 Audited Financial Statements of Rubicon Group PLC for year ended
May 31, 1998
________________
* To be filed by amendment.
EI-2
<PAGE>
As filed with the Securities and Exchange Commission on ____________, 2000
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
EXHIBITS TO
FORM 10
GENERAL FORM FOR
REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
__________________
APW Ltd.
(Exact name of registrant as specified in its charter)
Bermuda 04-2576375
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization)c Identification No.)
Clarendon House, Church Street
P.O. Box 666,
Hamilton HM CX, Bermuda
N22 W23685 Ridgeview Parkway West
Waukesha, Wisconsin 53188-1013
(Address of Principal Executive Offices) (ZIP Code)
(441) 285-1422
(262) 523-7600
Registrant's telephone number, including area code:
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Common Stock, $.01 par value per share
(including the associated Common Stock New York Stock Exchange
Purchase Rights)
Securities to be registered pursuant to Section 12(g) of the Act:
None
VOLUME ____ OF ____ EXHIBIT VOLUMES
<PAGE>
DRAFT
5/1/00
EXPLANATORY NOTES
The information contained in this Information Statement is subject to
completion or amendment. A registration statement on Form 10 relating to APW
Ltd.'s common stock has been filed with the Securities and Exchange Commission
but has not yet become effective. These securities will not be issued before the
registration statement becomes effective. This Information Statement is not an
offer to sell or the solicitation of an offer to buy any securities.
The registration statement on Form 10 and the Information Statement have
been prepared on a prospective basis on the assumption that, among other things,
the Distribution and related transactions described in the Information Statement
occur as described. They have not yet occurred, however, and we cannot be
certain that they will occur or will occur exactly as described. We will amend
or supplement the registration statement and Information Statement to reflect
any significant modifications or variations in the Distribution and related
transactions.
<PAGE>
[APPLIED POWER INC. LETTERHEAD]
____________, 2000
Dear Shareholder:
On January 27, 2000, we announced a plan to spin-off Applied Power's
integrated electronics enclosures business as a separate publicly traded
company. Through a combination of internal growth and acquisitions, Applied
Power has become the leading global supplier of integrated enclosure systems to
the electronics industry. In preparation for the spin-off of this business to
our shareholders (the "Distribution"), we have caused APW Ltd. to become a
Bermuda corporation which owns and operates (directly or through subsidiaries)
Applied Power's global electronic businesses. Following the Distribution, you
will own shares in both APW Ltd., an independent public company, and Applied
Power, which will continue to operate the company's industrial businesses. As
previously announced, Applied Power intends to change its name to "Actuant
Corporation" following the Distribution. The attached Information Statement,
which is being mailed to all Applied Power shareholders, describes the
Distribution in detail.
Your board of directors has determined that the Distribution is in the best
interest of Applied Power's shareholders. Applied Power's electronics and
industrial businesses are distinct operations with different opportunities,
challenges, strategies and means of doing business. The Distribution will permit
the management of each company to focus on the opportunities specific to the
business of that particular enterprise. We believe this will provide enhanced
growth through both internal expansion and disciplined acquisition strategies.
Additionally, the Distribution will greatly simplify the business profile of
each of the businesses, allowing investors to more easily evaluate each of the
companies in the future.
Shareholders of record as of ______________, 2000, will receive one share
of APW Ltd. common stock for every share of Applied Power Inc. common stock they
own. APW Ltd. share certificates will be mailed beginning _________, 2000. No
action is required on your part to receive your APW Ltd. shares. You will not be
required to pay anything for your APW Ltd. shares or to surrender your Applied
Power shares. Your receipt of APW Ltd. shares in the Distribution should be tax-
free for federal income tax purposes.
Following the Distribution, we expect that APW Ltd.'s common stock will be
traded on the New York Stock Exchange and that its ticker symbol will be "APW."
Applied Power/Actuant will continue to trade on the New York Stock Exchange, but
will change its ticker symbol to "ATU."
<PAGE>
Our board of directors and management teams are excited about the
opportunities for both APW Ltd. and Applied Power/Actuant following the
Distribution. We believe that the improved business focus and financial
flexibility that will result from this transaction will benefit our
shareholders, customers, and employees.
Sincerely,
---------------------------------
Richard G. Sim
Chairman, Chief Executive Officer
and President
<PAGE>
Information contained herein is subject to completion or amendment.
Preliminary Copy Dated ___________, 2000
INFORMATION STATEMENT
We are providing this Information Statement to you as a shareholder of
Applied Power Inc.("Applied Power") in connection with the Distribution by
Applied Power to its shareholders of all of the outstanding shares of APW Ltd.
common stock and related rights. APW Ltd. will own and operate what is
currently Applied Power's integrated electronic enclosure systems segment (the
"Electronics Business").
We expect to make the Distribution on _____________, 2000, to holders of
record of Applied Power common stock on __________, 2000. If you are an Applied
Power shareholder at the close of business on the Record Date, you will receive
one share of APW Ltd. common stock and related rights for every share of Applied
Power stock you own on that date. Certificates for the APW Ltd. shares will be
mailed to you, or your brokerage account will be credited with the APW Ltd.
shares, on or about ___________, 2000. You will not be required to pay anything
for the shares of APW Ltd. common stock and related rights distributed to you,
nor will you be required to surrender or exchange any of your shares of Applied
Power common stock. The Distribution is intended to be tax-free to Applied Power
shareholders.
We have applied to list the APW Ltd. common stock and related rights on the
New York Stock Exchange under the symbol "APW." No shareholder approval of the
Distribution is required or is sought. We are not asking you for a proxy.
Applied Power will continue to own and operate the industrial segment of
its business (the "Industrial Business") and intends to change its name to
"Actuant Corporation" after the Distribution. We usually refer to Applied Power
as "API/Actuant" when referring to its future operations. We expect API/Actuant
common stock to trade on the NYSE under the symbol "ATU."
Consider carefully the risk factors beginning on page __ of this
Information Statement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the terms of the APW Ltd. common stock
and related rights, or determined that this Information Statement is truthful or
complete. Any representation to the contrary is a criminal offense.
The date of this Information Statement is ________, 2000.
<PAGE>
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION....................................
SUMMARY.........................................................................
Selected Historical Financial Data.........................................
Selected Unaudited Pro Forma Financial Data................................
RISK FACTORS....................................................................
Spin-Off Distribution Risks................................................
Operational Risks..........................................................
THE DISTRIBUTION................................................................
Background of and Reasons for the Distribution.............................
Distribution Agent.........................................................
Manner of Effecting the Distribution.......................................
Post Distribution Taxation of APW Ltd. and U.S. Federal
Income Tax Consequences to Holders of APW Ltd. Shares......................
Results of the Distribution................................................
Federal Income Tax Consequences of the Distribution........................
Listing and Trading of Shares of APW Ltd. Common Stock.....................
Dividend Policy............................................................
Relationship Between API/Actuant and APW Ltd. After the Distribution.......
Distribution Conditions....................................................
BUSINESS OF APW LTD AND ITS SUBSIDIARIES........................................
EMS Industry Overview......................................................
APW Ltd. Business Strategy.................................................
Products and Services......................................................
Markets and Customers......................................................
Sources and Availability of Raw Materials..................................
Patents, Trademarks and Other Intellectual Property........................
Backlog....................................................................
Competition................................................................
Research and Development...................................................
Environmental Compliance...................................................
Employees and Labor Relations..............................................
Properties.................................................................
Legal Proceedings..........................................................
Transactions and Agreements Between APW Ltd. and API/Actuant...............
FINANCING.......................................................................
<PAGE>
Arrangements Related to the Distribution...................................
Refinancing of Senior Subordinated Notes...................................
CAPITALIZATION..................................................................
APW LTD. UNAUDITED PRO FORMA FINANCIAL STATEMENTS...............................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................
Overview...................................................................
Business Combinations......................................................
Results of Operations......................................................
New Accounting Pronouncements..............................................
European Economic Monetary Union...........................................
Risk Factors That May Affect Future Results................................
Quantitative and Qualitative Disclosures About Market Risk.................
Disclosure About Market Risk...............................................
FORWARD-LOOKING STATEMENTS AND CAUTIONARY
FACTORS......................................................................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.................................
MANAGEMENT OF APW LTD. .........................................................
Directors..................................................................
Committees of the Board of Directors.......................................
Directors' Compensation....................................................
Other Executive Officers...................................................
EXECUTIVE COMPENSATION..........................................................
Summary Compensation Table.................................................
Option/SAR Grants in Last Fiscal Year......................................
Stock Options and the Impact of the Distribution...........................
APW Ltd. 2000 Stock Plan...................................................
Stock Options..............................................................
Restricted Stock...........................................................
Term of Stock Plan.........................................................
General Terms..............................................................
Federal Tax Consequences...................................................
APW Ltd. 401(k) Plan.......................................................
APW Ltd. Employee Stock Purchase Plan......................................
Future Compensation of Executive Officers..................................
DESCRIPTION OF APW LTD. CAPITAL STOCK...........................................
Authorized Capital Stock...................................................
Common Stock...............................................................
Preferred Stock............................................................
Summary of Rights Plan.....................................................
Transfer Agent.............................................................
<PAGE>
COMPARISON OF SHAREHOLDER RIGHTS.............................................
Size and classification of the Board of Directors.......................
Removal Directors; Vacancies............................................
Meetings of Shareholders................................................
Action by Written Consent of Shareholders; Shareholder Resolutions......
Vote Required for Extraordinary Corporate Transactions..................
Interested Director Transactions........................................
Business Combination and Anti-takeover Provisions.......................
Shareholder Suits.......................................................
Dissenters' Rights......................................................
Dividends...............................................................
Voting..................................................................
Preemptive Rights.......................................................
Amendments to Corporate Governance Documents............................
Limitations on Directors' Liability and Indemnification.................
Rights of Inspection....................................................
Repurchase of Untraced Shares...........................................
Rights Agreement........................................................
Listing.................................................................
Dividends and Distributions Upon Liquidation............................
Statutory Shareholder Liability.........................................
Director and Officer Discretion.........................................
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS......................
Limitations on Liability of Directors...................................
Indemnification and Insurance...........................................
INDEPENDENT PUBLIC ACCOUNTANTS...............................................
2001 ANNUAL MEETING AND SHAREHOLDER PROPOSALS................................
WHERE YOU CAN FIND MORE INFORMATION..........................................
INDEX TO COMBINED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.....
CHARTER DOCUMENTS OF APW LTD.................................................
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION
The following questions and answers, together with the summary that follows
it, highlight important information about the Distribution of APW Ltd. stock.
Because these sections are a summary, they may not contain all of the
information that is important to you. You should read the entire Information
Statement for more complete information.
Q: WHO IS APW LTD.?
A: APW Ltd. is the Bermuda corporation that, together with its subsidiaries,
will own and operate Applied Power's Electronics Business following the
Distribution described in this Information Statement. Immediately following
the Distribution, APW Ltd will be a leading global provider of electronics
manufacturing services (EMS) focused on the rapidly growing integrated
electronic enclosure systems market. Operating in over 40 locations
throughout North America, Europe and Asia, we supply a broad range of
individual components and integrated manufacturing services to OEMs
primarily in the communications (datacom and telecom) and computing
(servers, data storage, networking) markets. We provide a comprehensive
portfolio of electronic products, including electronic enclosures, power
supplies, thermal management systems, backplanes and cabling, either as
individual standard products, or as integrated custom systems. In addition,
we provide a wide range of integrated design, manufacturing and logistics
services to our customers, including product design, supply chain
management, manufacturing, assembly, testing and drop-ship capabilities.
These services provide our customers with accelerated time-to-market and
decreased time-to-volume production, while reducing their production costs
and allowing them to focus on the design and marketing of their products.
Through a combination of internal growth and acquisitions, we have
established a leading position in the integrated enclosure systems segment
of the EMS industry. We believe that we are the leading, most vertically
integrated provider of integrated electronic enclosure systems and that our
size, global reach, product breadth, scope of services, and demonstrated
expertise uniquely positions us to win large manufacturing contracts from
leading global datacom, telecom and networking OEMs. We believe that these
customers will provide us with substantial growth opportunities due to
their significant rate of organic growth and their increased utilization of
outsourced manufacturing services. Our customers include industry leaders
such as Alcatel, Applied Materials, Cisco, Compaq, Dell, EMC, Ericsson,
Fujitsu, Hewlett Packard, IBM, Lucent, Marconi, Motorola, NCR, Nokia,
Nortel Networks and Sun Microsystems. OEMs in the communications segment of
the electronics industry accounted for approximately 25% of our net sales
for the six months ended February 29, 2000, with sales to computing segment
OEMs accounting for approximately 40% of net sales.
Q: WHO IS ACTUANT?
<PAGE>
A: "Actuant Corporation" will become the new name of Applied Power after the
Distribution. Actuant will continue to design, manufacture and sell a wide
range of branded electrical and industrial tools and supplies through
retail, catalog and other distribution channels. It will also continue to
design, manufacture and sell customized, highly engineered motion control
systems to industrial OEMs. These continuing aspects of Applied Power's
business are referred to as the "Industrial Business" in this Information
Statement. We usually refer to Applied Power as "API/Actuant" when
referring to its future operations. We expect API/Actuant common stock to
trade on the NYSE under the symbol "ATU."
Q: WHAT WILL HAPPEN IN THE DISTRIBUTION?
A: Applied Power is separating its Electronics Business from its Industrial
Business. Applied Power will accomplish this by distributing all of the
outstanding shares of APW Ltd. stock (which, together with its
subsidiaries, operates the Electronics Business) to the Applied Power
shareholders. API/Actuant will retain the Industrial Business, but it will
not retain any shares of APW Ltd. stock following the Distribution. This
type of distribution is often called a spin-off. If you are an Applied
Power shareholder as of [11:59 p.m.] on _________, 2000, you will receive
APW Ltd. stock in the Distribution. You will retain your stock in Applied
Power, which will own only the Industrial Business and will later change
its name to "Actuant Corporation." Upon completion of the Distribution, you
will own shares in two separately traded public companies, API/Actuant and
APW Ltd.
Q: WHAT DO I HAVE TO DO?
A: Nothing. No proxy or vote is necessary for the Distribution to occur. You
do not need to, and should not, mail in any certificates for Applied Power
stock in order to receive APW Ltd. stock in the Distribution.
Q: WHAT WILL I RECEIVE IN THE DISTRIBUTION?
A: You will receive one share of APW Ltd. stock for each share of Applied
Power stock you own as of the Record Date. The shares of APW Ltd. stock
will also include an associated common stock purchase right that is
designed to encourage a potential acquirer of at least 15% of APW Ltd.'s
outstanding stock to negotiate with the APW Ltd. board of directors rather
than proceed unilaterally. For more information about the common stock
purchase rights, see "Description of APW Ltd. Capital Stock--Summary of
Rights Plan."
Q: DO I HAVE TO PAY INCOME TAXES ON THE RECEIPT OF MY APW LTD. STOCK?
A: APW Ltd. has received an opinion of counsel that the receipt of APW Ltd.
stock in the Distribution should be tax-free to its U.S. shareholders for
federal income
<PAGE>
tax purposes. See "The Distribution -- Material Federal Income Tax
Consequences of the Distribution."
Q: WILL APW LTD. STOCK BE LISTED ON ANY EXCHANGE?
A: Yes. APW Ltd. has applied for approval to list on the New York Stock
Exchange and will trade under the symbol "APW." The stock of API/Actuant
will also continue to be listed on the New York Stock Exchange, but it will
trade under the symbol "ATU."
Q: WHAT WILL HAPPEN TO THE TRADING OF APPLIED POWER AND APW LTD. STOCK?
A: Beginning on or about _____________, 2000, and continuing through ________,
2000, you will only be able to sell your Applied Power stock with due bills
for APW Ltd. stock. This means that you will give up your right to receive
APW Ltd. stock if you sell your Applied Power stock during this time.
Beginning on or about __________, 2000, we expect that investors will be
able to buy and sell APW Ltd. stock on a when-issued basis until the stock
certificates are actually delivered by the transfer agent.
Q: HOW CAN I OBTAIN MORE INFORMATION ABOUT THE DISTRIBUTION?
If you have questions about the Distribution, please contact:
Ms. Susan Hrobar
Investor Relations
APW Ltd.
N22 W23685 Ridgeview Parkway West
Waukesha, WI 53188-1013
(262) 523-7600
or
Firstar Bank N.A.
Attention: Trust Department
777 East Wisconsin Avenue
Milwaukee, WI 53202
(414) 765-5000
<PAGE>
SUMMARY
This summary, together with the questions and answers immediately preceding
it, highlights some key information from this Information Statement concerning
the Distribution of APW Ltd. common stock by Applied Power. However, it does not
contain all of the information that may be important to you. To better
understand the Distribution and the business and financial position of APW Ltd.
and its subsidiaries, you should carefully review this entire document.
References in this Information Statement to "Applied Power" mean Applied Power
Inc., a Wisconsin corporation, and its subsidiaries and affiliates. Because
Applied Power Inc. intends to change its name to "Actuant Corporation"
after the Distribution, we usually refer to it as "API/Actuant" when discussing
its future operations. References to APW Ltd. include operations of its
predecessors.
Securities to be
distributed............... One share of APW Ltd. common stock (plus associated
common stock purchase rights issued pursuant to a
shareholder rights plan (collectively with the
distributed common stock, the "Shares")) for each
outstanding share of Applied Power common stock
owned on the Record Date. Approximately 39.1
million Shares will be issued in the Distribution.
The Shares to be distributed will constitute all of
the outstanding Shares of APW Ltd. immediately
after the Distribution.
Record Date................ _______________, 2000 (close of business).
Distribution Date.......... _______________, 2000 (12:01 a.m., Central time).
Tax consequences........... In the opinion of Weil, Gotshal & Manges LLP,
special tax counsel to Applied Power, for federal
income tax purposes the Distribution should be tax
free to Applied Power shareholders. Applied Power
shareholders should apportion their tax basis in
the Applied Power common stock held immediately
before the Distribution between the Applied Power
common stock and the APW Ltd. Shares received in
the Distribution, based on the relative fair market
values of each as of the Distribution Date. An
Applied Power shareholder's holding period for the
APW Ltd. shares should include the holding period
of the Applied Power common stock on which the
Distribution is made. See "The Distribution -
Material Federal Income Tax
<PAGE>
Consequences of the Distribution."
Distribution agent and
transfer agent for the
APW Ltd. Shares............ Firstar Bank, N.A.
Dividends.................. APW Ltd. does not intend to pay cash dividends on
the APW Ltd. common stock in the foreseeable
future. Rather, we currently anticipate that
earnings generally will be retained by APW Ltd. for
use in its business. See "The Distribution -
Dividend Policy."
Risk factors............... See "Risk Factors" for a discussion of certain
risks that should be considered in connection with
the Shares received in the Distribution.
Principal offices of APW
Ltd........................ c/o Conyers Dill & Pearman, Clarendon House,
2 Church Street, P.O. Box HM666, Hamilton HM CX,
Bermuda; telephone (441) 295 1422.
N22 W23685 Ridgeview Parkway West, Waukesha,
Wisconsin 53188-1013; telephone (262) 523-7600.
Relationship with
API/Actuant after the
Distribution.............. API/Actuant will have no stock ownership interest
in APW Ltd. after the Distribution. APW Ltd. and
API/Actuant will have entered into several
agreements for the purpose of giving effect to the
Distribution and defining their ongoing
relationships. These include agreements providing
for the transfer to APW Ltd. of substantially all
of the assets and liabilities of the Electronics
Business, pursuant to which API/Actuant generally
will indemnify APW Ltd. against liabilities,
litigation and claims arising out of all Applied
Power operations not transferred to APW Ltd., and
APW Ltd. will indemnify API/Actuant against
liabilities, litigation and claims arising out of
the Electronics Business. Additional agreements
will relate to, among other things, certain
employee benefit and compensation matters,
intellectual property rights, certain interim
administrative services, tax matters (including
allocations of tax obligations), insurance, the
transfer of real estate and other miscellaneous
matters. See "The Distribution -- Relationship
Between API/Actuant and APW Ltd. After the
Distribution" and "Business of APW Ltd. and its
Subsidiaries - Transactions and Agreements Between
APW Ltd. and API/Actuant."
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
- ----------------------------------
The following selected financial data have been derived from the combined
financial statements and financial information of APW Ltd. and subsidiaries. The
data should be read in conjunction with the combined financial statements of APW
Ltd. and notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Information
Statement. The statement of earnings data for the years ended August 31, 1997,
1998 and 1999 and the balance sheet data as of August 31, 1998 and 1999 have
been derived from the audited combined financial statements of APW Ltd. The
statement of earnings data for the years ended August 31, 1995 and 1996 and the
balance sheet data as of August 31, 1995, 1996 and 1997 have been derived from
unaudited combined financial information of APW Ltd. not included in this
information statement. The statement of earnings data for the six months ended
February 28, 1999 and February 29, 2000, and the balance sheet data as of those
dates have been derived from unaudited combined financial statements of APW
Ltd., which, in the opinion of management, includes all adjustments necessary
for a fair presentation of assets and liabilities as of such dates and results
of operations for such periods. Operating results for the six months ended
February 29, 2000 are not indicative of the results that may be expected for the
entire year ending August 31, 2000.
<TABLE>
<CAPTION>
(In millions)
Six Months
Year Ended August 31, Ended February
------------------------------------------------------------ ----------------------------
1995 1996 1997 1998 (1) 1999 28, 1999 29, 2000 (1)
---------- ---------- ---------- ---------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF EARNINGS DATA:
Net sales $ 215.8 $ 263.0 $ 375.3 $ 593.2 $1,055.3 $ 513.2 $ 566.2
Gross profit 86.9 109.8 146.7 194.1 291.8 139.9 149.7
Operating expenses (2) 57.1 67.9 84.8 142.8 188.0 91.4 94.0
Amortization expense 0.5 1.0 3.0 7.8 20.9 9.7 11.8
Operating earnings 29.3 40.9 58.8 43.5 82.9 38.7 43.8
Net financing costs (3) - 3.7 9.5 16.6 52.9 23.6 23.6
Net other (income) expense (.7) (.5) (1.3) (8.7) (1.8) (1.3) 1.4
Earnings before income taxes 30.0 37.7 50.6 35.5 31.8 16.4 18.9
Income taxes 10.8 14.9 18.9 17.2 11.4 5.4 8.0
Earnings before extraordinary loss 19.3 22.8 31.7 18.3 20.4 11.0 10.9
Extraordinary loss, net of income
tax benefit of $1.3 million (4) - - - - - - (2.1)
Net earnings 19.3 22.8 31.7 18.3 20.4 11.0 8.9
COMBINED BALANCE SHEET DATA:
(at end of period)
Working capital $ 30.8 $ 32.3 $ 48.3 $ 9.9 $ 6.6 $ 57.9 $ 27.2
Total assets 124.1 178.7 303.7 743.8 1,180.0 1,126.6 1,184.5
Total debt (3) - 50.0 119.9 367.8 728.8 715.7 680.8
Total equity 83.9 84.4 114.2 197.3 172.8 212.0 236.6
OTHER DATA:
Cash flows -- Operating Activities $ 28.3 $ 60.3 $ 95.1 $ 29.2 $ 7.3
Cash flows -- Investing Activities (93.1) (314.0) (435.3) (399.9) (28.6)
Cash flows -- Financing Activities 71.8 245.7 354.6 372.1 6.2
EBITDA (5) 71.4 75.1 135.6 66.0 71.6
Depreciation and amortization 11.3 23.0 50.9 26.0 29.1
Capital expenditures 17.7 31.6 43.0 20.3 18.1
</TABLE>
<PAGE>
(1) Results of operations in fiscal 2000 include a $3.3 million make-whole
premium ($2.1 million after-tax) paid in connection with the early
retirement of debt which is recorded as an extraordinary charge, net of tax.
Fiscal 2000 also includes a $2.2 million allocated charge for costs
associated with the Distribution of the Electronics Business from Applied
Power and incorporating APW Ltd. in Bermuda. See Note 8 - "Merger,
Restructuring and Other Non-recurring Items" in Notes to Combined Financial
Statements for further discussion.
Operating results in fiscal 1998 include allocated non-recurring charges
related to ZERO merger, plant consolidation and product rationalization
costs of $27.9 million before tax, $21.1 million net of applicable income
tax. Fiscal 1998 results also include an allocated net gain of $6.5 million
before tax for gains recognized by ZERO for life insurance proceeds and sale
of property. See Note 8 - "Merger, Restructuring and Other Non-recurring
Items" in Notes to Combined Financial Statements for further discussion.
Excluding the one-time items discussed above, operating earnings were as
follows for each of the periods presented (in millions):
<TABLE>
<CAPTION> Six Months
Year Ended August 31, Ended February
---------------------------------------------------------------------------- --------------------------------
1995 1996 1997 1998 1999 28, 1999 29, 2000
-------------- -------------- -------------- ------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 29.3 $ 40.9 $ 58.8 $ 71.3 $ 82.9 $ 38.7 $ 46.0
</TABLE>
(2) Historical operating expenses include APW Ltd.'s allocated share of Applied
Power's corporate general and administrative expenses. The allocation of
Applied Power's corporate general and administrative expenses is based on
estimated levels of effort devoted to APW Ltd. and the relative size of APW
Ltd. compared to Applied Power's total revenues, operating profit, assets
and employee headcount. APW Ltd. expects that costs for these functions will
differ following the Distribution.
(3) Applied Power's historical practice has been to incur indebtedness for its
consolidated businesses at the parent company level or at a limited number
of subsidiaries, rather than at the operating company level, and to
centrally manage various cash functions. Accordingly, historical amounts
include debt and related interest expense allocated to APW Ltd. from Applied
Power based on the portion of Applied Power's investment in the Electronics
Business which is deemed to be debt. This allocation is generally based upon
a cash flow model which details the historical uses of debt proceeds by the
Electronics Business and the deemed debt repayments by the Electronics
Business based on free cash flow. Management believes that the allocation of
corporate debt and related interest expense for the historical periods is
reasonable. This historical allocation, however, is not indicative of the
total amount of debt that APW Ltd. will have upon completion of Applied
Power's realignment of its consolidated debt before the Distribution. See
"Unaudited Pro Forma Combined Financial Statements" for further discussion
of APW Ltd. debt levels after the Distribution.
(4) Represents costs associated with a make-whole premium paid in connection
with the early retirement of debt.
(5) "EBITDA" is defined as income from continuing operations before interest,
taxes, depreciation and amortization. Management believes that EBITDA
provides useful information regarding APW Ltd.'s and its subsidiaries'
ability to service its indebtedness, but should not be considered in
isolation or as a substitute for operating income or cash flow from
operations as an indicator of operating performance or as a measure of APW
Ltd.'s and its subsidiaries' liquidity. Excluding restructuring and other
non-recurring items (described in Note (1) above), EBITDA would have been as
follows for each of the periods indicated (in millions):
<TABLE>
<CAPTION>
Six Months
Year Ended August 31, Ended February
-------------------------------------- ----------------------------
1997 1998 1999 28, 1999 29, 2000
------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 71.4 $ 96.5 $ 135.6 $ 66.0 $ 73.8
</TABLE>
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
- -------------------------------------------
The following table sets forth selected unaudited pro forma financial data of
APW Ltd. and its subsidiaries. This data presents the combined statement of
earnings data of APW Ltd. and its subsidiaries assuming that the transactions
contemplated by the Distribution had been completed as of September 1, 1998. The
combined balance sheet data of APW Ltd. and its subsidiaries is presented
assuming that the transactions contemplated by the Distribution had been
completed as of February 29, 2000. See the Unaudited Pro Forma Combined
Financial Statements of APW Ltd. and notes thereto included in this Information
Statement for computation of pro forma amounts, including descriptions of the
pro forma adjustments.
The selected unaudited pro forma financial data has been prepared utilizing the
historical combined financial statements of APW Ltd. and its subsidiaries. This
information should be read in conjunction with the historical combined financial
statements and notes to those statements, included elsewhere in this Information
Statement. The selected unaudited pro forma financial data does not purport to
be indicative of the results of APW Ltd. and its subsidiaries in the future or
what the financial position and results of operations would have been had APW
Ltd. been a separate, stand-alone entity during the periods shown.
<TABLE>
<CAPTION>
(In millions) Year Ended Six Months Ended
August 31, 1999 February 29, 2000
----------------- -------------------
PRO FORMA COMBINED STATEMENT OF EARNINGS DATA (1):
<S> <C> <C>
Net sales $1,055.3 $ 566.2
Gross profit 291.8 149.7
Operating expense 192.6 94.2
Amortization expense 20.9 11.8
Operating earnings 78.3 43.7
Net financing costs 27.6 13.9
Net other (income) expenses (1.8) 1.4
Earnings before income taxes 52.5 28.4
Income taxes 15.7 8.5
Net earnings 36.7 19.9
PRO FORMA COMBINED BALANCE SHEET DATA (1):
(at end of period)
Working capital N/A $ 27.2
Total assets N/A 1,184.5
Total debt (2) N/A 288.9
Total equity N/A 628.5
PRO FORMA OTHER DATA (1):
EBITDA $ 131.0 $ 71.4
Depreciation and amortization 50.9 29.1
Capital expenditures 43.0 18.1
</TABLE>
(1) Pro forma adjustments include adjustments to debt, interest expense and
general corporate expenses, as well as the exclusion of non-recurring items
which were incurred in anticipation of the Distribution. See further
explanation of these items in the footnotes to the Unaudited Pro Forma
Combined Financial Statements.
(2) Represents debt allocated to APW Ltd. after giving effect to the debt
realignment as discussed in the Unaudited Pro Forma Combined Financial
Statements.
<PAGE>
RISK FACTORS
Spin-Off Distribution Risks
The tax consequences of the Distribution are not assured.
The Distribution is conditioned upon receipt of the opinion of Weil,
Gotshal & Manges LLP, special tax counsel to Applied Power, that the
Distribution should be a tax-free spin-off to Applied Power's U.S. shareholders.
No rulings have been requested from the Internal Revenue Service as to the tax
consequences of the Distribution. The opinion of Weil, Gotshal & Manges LLP is
not binding on the Internal Revenue Service or the courts. If the Distribution
does not qualify as a tax-free distribution, each U.S. holder of Applied Power
common stock would generally be treated as if the shareholder had received a
taxable dividend in an amount equal to the fair market value of the APW Ltd.
common stock received, and Applied Power would recognize gain equal to the
excess of the fair market value of the APW Ltd. common stock distributed to its
shareholders over Applied Power's basis in the APW Ltd. common stock. See "The
Distribution -- Material Federal Income Tax Consequences of the Distribution."
Because the Distribution will violate covenants under Applied Power's
outstanding subordinated notes, Applied Power needs to borrow additional money
to repurchase those notes.
Applied Power's $200 million of outstanding senior subordinated notes
include a covenant effectively prohibiting the proposed Distribution. Applied
Power intends to repurchase those notes and issue new subordinated notes that
will not include that restriction, but the repurchase and refinancing have not
yet been completed and a successful refinancing on terms acceptable to Applied
Power cannot be assured.
An Applied Power creditor could attempt to prevent the Distribution or to
rescind it.
A creditor of Applied Power could bring a lawsuit to prevent or rescind the
Distribution by claiming that Applied Power was insolvent at the time of the
Distribution, was rendered insolvent by the Distribution, was engaged in a
transaction for which its remaining assets constituted unreasonably small
capital, or intended to incur (or believed it would incur) debts beyond its
ability to pay them as they matured. If a court agreed with any of these claims
it might prevent or void the Distribution (entirely or in part) as a fraudulent
conveyance or as unlawful under the Wisconsin Business Corporation Law and
require the shareholders to return some or all of the shares of APW Ltd. stock
to API/Actuant, or require APW Ltd. to fund certain liabilities of API/Actuant
for the benefit of creditors. Generally, Applied Power would be considered
insolvent if the fair value of its assets was less than the total amount of its
liabilities or if it incurred debt beyond its ability to repay as the debt
matures.
<PAGE>
The boards of directors of both APW Ltd. and Applied Power have carefully
considered these issues and have structured the Distribution and related
agreements and transactions in a manner such that they believe that both
companies are solvent and will be solvent immediately after the Distribution.
The charter documents of APW include provisions that may prevent or delay
change of control transactions, which could adversely affect the price of its
common stock, and the rights of APW Ltd. shareholders under Bermuda law are not
as favorable in some ways as the rights of Applied Power shareholders under
Wisconsin law.
APW Ltd.'s charter documents contain anti-takeover provisions that could
have the effect of delaying or preventing changes in control that a shareholder
may consider favorable. The provisions in APW Ltd.'s charter documents include:
. the Rights (see "Description of APW Ltd.'s Capital Stock - Summary of
Rights Plan");
. a classified board of directors with three-year staggered terms and removal
only for cause;
. the ability of APW Ltd.'s board of directors to issue shares of preferred
stock and to determine the price and other terms, including preferences and
voting rights, of those shares without shareholder approval;
. anti-takeover provisions in APW Ltd.'s bye-laws (see "Comparison of
Shareholder Rights - Business Combination and Anti-takeover Provisions");
and
. supermajority voting requirements to approve extraordinary transactions or
to amend charter documents, including board of director approval to amend
the bye-laws.
Other provisions of APW Ltd.'s charter documents or Bermuda law that could
be disadvantageous to shareholders include:
. Shareholders may not be able to obtain jurisdiction over APW Ltd. outside
Bermuda, so certain remedies available to shareholders of Applied Power, such as
class action lawsuits under United States federal and Wisconsin law, might not
be available to APW Ltd. shareholders.
. The right to bring a derivative action in the name of a company for a wrong
to the company committed by present or former directors of the company is more
limited under Bermuda law than under Wisconsin law. See "Comparison of
Shareholder Rights - Shareholder Suits."
. APW Ltd.'s common stock has no prior public market, and it is not possible
to predict how its stock will perform after the Distribution.
<PAGE>
There has been no prior trading market for APW Ltd.'s stock and there can
be no assurance as to the prices at which APW Ltd.'s common stock will trade
before or after the date of the Distribution. Until the APW Ltd. common stock is
fully distributed and an orderly market develops, the prices at which APW Ltd.
stock trades may fluctuate significantly. Prices for APW Ltd. common stock will
be determined in the trading markets and may be influenced by many factors,
including:
. the depth and liquidity of the market for APW Ltd. common stock;
. developments generally affecting the EMS industry and the electronics
enclosure systems market;
. investor perceptions of APW Ltd. and its business;
. the financial results of APW Ltd.; and
. general economic and industry conditions.
In addition, the stock market, in general, often experiences substantial
volatility that is often seemingly unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the
trading price of APW Ltd. common stock.
The separation of APW Ltd. from Applied Power poses new financial and
operational risks.
When the Distribution occurs, APW Ltd. will own and operate the Electronics
Business, and API/Actuant will own and operate the Industrial Business. Neither
company has a recent operating history as a separate entity.
After the Distribution, each company initially will be smaller and less
diversified than was Applied Power prior to the Distribution. The ability of APW
Ltd. to satisfy its obligations and maintain profitability will be solely
dependent upon its own future performance; it will not be able to rely upon the
capital resources and cash flows of API/Actuant. The future performance and cash
flows of APW Ltd. will be subject to prevailing economic conditions and to
financial, business and other factors affecting its business operations,
including factors beyond its control.
The separation of the Electronics Business from the Industrial Business and
the Distribution of APW Ltd. to the Applied Power shareholders may result in
some temporary dislocation and inefficiencies to the business operations, as
well as the organization and personnel structure, of APW Ltd., and will also
result in the duplication of certain personnel, administrative and other
expenses required for the operation of independent companies. Accordingly, there
can be no assurance that the Distribution will not alter or disrupt the
management and operations of APW Ltd.
<PAGE>
APW Ltd. has certain indemnification obligations to API/Actuant, or may not
be able to collect on indemnification rights from API/Actuant.
Under the terms of the Distribution Agreements, APW Ltd. and API/Actuant
have each agreed to indemnify the other (and certain related parties) from and
after the Distribution with respect to certain indebtedness, liabilities and
obligations. These indemnification obligations could be significant. The
availability of these indemnities will depend upon the future financial strength
of each of the companies. We cannot determine whether APW Ltd. will have
substantial indemnification obligations to API/Actuant after the Distribution.
We also cannot assure you that, if API/Actuant has substantial indemnification
obligations to APW Ltd., API/Actuant will have the ability to satisfy those
obligations. See "Business of APW Ltd. and its Subsidiaries -- Transactions and
Agreements Between APW Ltd. and API/Actuant."
The reorganization transactions may present tax risks for APW Ltd.
The reorganization leading up to the Distribution, including the merger and
continuation of APW Ltd. as a Bermuda corporation, involve taxable transactions.
APW Ltd.'s estimate of the federal and state income tax cost resulting from
these transactions, which is reflected in the pro forma financial information
included in this Information Statement, is based upon current valuations of the
affected assets by PricewaterhouseCoopers LLP. Under the Tax Sharing Agreement
with API/Actuant, APW Ltd. will be responsible for federal and state income
taxes resulting from the reorganization transactions. As a result, APW Ltd. will
bear the risk of any audit adjustments by the IRS or other taxing authorities
challenging the reporting of the reorganization transactions, including the
valuations of the affected assets.
The extent of tax benefit from becoming a Bermuda corporation is uncertain.
We believe that a significant portion of the income derived from our non-
U.S. operations will not be subject to tax, either by Bermuda, which currently
does not have a corporate income tax, or by the United States or other countries
in which we conduct other activities or in which our customers are located. We
will be subject to a 2.5% income tax in Barbados on certain income. We base
these beliefs upon:
. the anticipated nature and conduct of our business, which may change; and
. our understanding of our position under the tax laws of the various
countries in which we have assets or conduct activities, which position is
subject to review and possible challenge by taxing authorities and to
possible changes in law, which may have retroactive effects.
We cannot predict the amount of tax to which we may become subject and
cannot be certain that any of these factors would not have a material adverse
effect on our business,
<PAGE>
financial condition and results of operations. Our shareholders
might also become subject to special tax rules applicable to foreign
corporations under the circumstances described under the heading "The
Distribution -- U.S. Federal Income Tax Consequences to Holders of APW Ltd.
Shares."
Operational Risks
APW Ltd.'s recent growth places new demands on its management.
There are substantial risks presented by the fact that APW Ltd.'s
Electronics Business has grown rapidly and significantly. For example, from
fiscal 1997 to fiscal 1999, APW Ltd. saw an increase in net sales of its
Electronics Business of about 181% and an increase in employees of about 140%.
This growth comes from both expanding current operations and acquiring other
businesses. With this growth comes risks, such as:
. risks from integrating new people and operations;
. risks from making technical, operational and administrative changes;
. risks from increasing reliance on outside financing sources.
APW Ltd.'s acquisitions may create transitional challenges.
APW Ltd.'s business strategy includes continued growth through strategic
acquisitions, which depends upon the availability of suitable acquisition
candidates at reasonable prices and APW Ltd.'s ability to quickly resolve
transitional challenges. These challenges include integration of product lines,
sales forces and manufacturing facilities and decisions regarding divestitures,
inventory write-offs and other charges. Also, these challenges involve risks of
employee turnover, disruption in product cycles and the loss of sales momentum.
Although APW Ltd.'s Electronics Business has substantial experience in managing
these risks, we cannot be certain that we will successfully manage them in the
future.
APW Ltd.'s business strategy depends in part upon continued outsourcing by
customers.
APW Ltd.'s customers and potential customers could decide to manufacture in
house the products offered by APW Ltd. and its subsidiaries. To be successful,
APW Ltd. and its subsidiaries must excel in terms of service, product quality,
and price not only when compared with its direct competitors but also when
compared with the customer itself doing the manufacturing in house.
APW Ltd.'s industry concentration may expose it to cyclical fluctuations in
the electronics, datacom, networking and telecommunications industries.
<PAGE>
APW Ltd.'s business is highly focused in the electronics, datacom,
networking and telecommunications industries, with approximately 65% of sales
coming from businesses in those industries. Management believes that the best
use of APW Ltd.'s resources is in serving these high growth industries and
responding to their changing needs, so it is unlikely that APW Ltd.'s customer
base will broaden significantly beyond those industries for the near term. These
industry segments are subject to rapid technological change and product
obsolescence. Any discontinuance or modification of orders or commitments could
lower our operating results. To the extent these industries experience weakened
demand, APW Ltd.'s revenues and profitability will suffer.
APW Ltd. and its subsidiaries typically do not obtain long-term volume
purchase commitments from our customers, and cancellation or rescheduling of
purchase orders could adversely affect our operating results.
We typically do not obtain long-term volume purchase contracts from our
customers. Customers orders may be cancelled and volume levels may be changed or
delayed on short notice. Future cancellations or rescheduling of orders or
commitments could cause our operating results to be below expectations.
Increased competition may result in decreased demand or prices for our
products.
The EMS industry is highly competitive. We compete against numerous other
U.S. and foreign companies with global operations, as well as with those who
compete on a local or regional basis. Current and prospective customers
continually evaluate the merits of manufacturing products internally.
Consolidation in the EMS industry results in larger and more geographically
diverse competitors who have significant resources with which to compete against
us.
APW Ltd.'s international operations pose political and economic risks.
APW Ltd.'s Electronic Business has recently increased the size of its
international operations, especially those in Europe. This increase has been due
in large part to its recent acquisitions. In addition to the risks associated
with rapid growth discussed above, such international operations present APW
Ltd. with special risk factors, including those associated with:
. New regulatory systems or changes in foreign regulations;
. Foreign currency fluctuations;
. Trade or currency exchange restrictions;
. Potential political and economic instability in some countries; and
. Cultural differences.
As APW Ltd. expands its international presence, these risks may increase.
<PAGE>
THE DISTRIBUTION
Background of and Reasons for the Distribution
Applied Power was founded in 1910 with the formation of the American
Grinder and Manufacturing Company, which produced hand grinders for hardware and
agricultural applications. Over the course of the following 80 years, the
Company grew through a series of acquisitions and product introductions into a
diversified conglomerate of industrial businesses, including leading brands such
as Enerpac, Gardner Bender and Power-Packer.
In 1989, Applied Power acquired the Barry Wright Corporation, which
included both Barry Controls, a manufacturer of vibration isolation products for
aerospace, defense and general industrial markets, and Wright Line, Inc., a
designer of specialized equipment and technical furniture to support the use of
computers in the workplace. In the mid-1990's, Wright Line, the predecessor of
Applied Power's Electronics Business, began to experience rapid growth, driven
by greatly increased demand for custom enclosure systems from electronics OEM
customers. Capitalizing on this opportunity, Applied Power dedicated significant
resources to the Electronics Business to exploit the identified potential in
this market. In order to expand its product portfolio, manufacturing
capabilities and global breadth in this industry, Applied Power acquired 17
enclosure companies for an aggregate purchase price of approximately $1.1
billion. Through a combination of internal growth and acquisitions, Applied
Power became a leading worldwide supplier of integrated enclosure systems to
the global electronics industry.
In 1999, in order to more effectively pursue strategic opportunities in the
electronics market, Applied Power's management began to consider the separation
of Applied Power's Industrial Business from its Electronics Business. Management
considered a number of alternatives, including the sale of the Industrial
Business, a spin-off of either of the businesses, and the combination of a spin-
off of the Electronics Business with the sale of the Industrial Business. On
August 3, the board of directors of Applied Power approved in principle a plan
to pursue the sale of the Industrial Business in combination with the spin-off
of the Electronics Business. Following an extensive marketing process, Applied
Power did not identify a potential acquiror of the Industrial Business as a
whole that was willing to purchase the Industrial Business at an acceptable
valuation level and in a tax efficient transaction structure.
On January 12, 2000, the board of directors reevaluated a number of
strategic alternatives, most of which had been discussed previously, and
determined that separation of the Electronics Business and the Industrial
Business through the Distribution would be in the best interests of Applied
Power, APW Ltd. and Applied Power's shareholders. At a subsequent meeting on
January 26, the board of directors authorized Applied Power to proceed with the
Distribution. On _____, the Board formally approved the Distribution in the form
of a dividend of one share of APW Ltd. for every share of Applied Power held.
The dividend will be payable on _____ (the "Distribution Date"), to each holder
of record of Applied Power stock as of the close of business on _____ (the
"Record Date").
<PAGE>
APW Ltd. is a Bermuda corporation, the predecessor of which was originally
incorporated in Massachusetts on November 7, 1975 as Wright Line Inc. Prior to
the Distribution, Wright Line Inc. will merge with and into WLI-Texas, followed
by the continuation of WLI-Texas as APW Ltd., a Bermuda corporation. Currently,
a significant portion of Applied Power's electronics operations in and outside
the United States are owned directly or indirectly by Wright Line Inc. Those
electronics operations which are not currently owned directly or indirectly by
Wright Line Inc. will be contributed to APW Ltd. prior to the Distribution.
Therefore, at the time of the Distribution, APW Ltd. will directly or indirectly
own all of the worldwide electronics operations currently conducted by Applied
Power.
In reaching its decision to prepare for and proceed with the Distribution,
Applied Power's board of directors considered the recommendations of Applied
Power management as well as financial advice provided by Credit Suisse First
Boston Corporation, Applied Power's financial adviser. The board considered and
discussed with Credit Suisse First Boston Corporation a number of financial
analyses, including a review of the financial forecasts prepared by Applied
Power's management with respect to API/Actuant and APW Ltd. as stand alone
companies, as well as pro forma capital structures for API/Actuant and APW Ltd.
and their impact on the future operating results of both of the companies. The
board also reviewed Applied Power's recent trading price and trading multiples
and the trading prices and trading multiples of comparable EMS companies and
diversified industrial companies. The board's decision to pursue the
Distribution was based on the following factors, among others:
. Applied Power's Industrial Business and its Electronics Business are
distinct, complex enterprises with different opportunities, challenges,
strategies and means of doing business. The opportunities for coordination
of purchasing, production, distribution or marketing between the two
businesses are limited.
. Applied Power believes that the Distribution will permit the management of
each business to focus solely on the opportunities and challenges specific
to that business, and to be more responsive to changes in its own business
environment.
. Applied Power believes that the Distribution will permit the management of
each company to adopt capital structures and allocate resources in ways
that best reflect the financial and strategic characteristics of that
particular enterprise.
. Applied Power believes that the Distribution will enable the Electronics
Business to obtain debt and equity financing necessary to execute its
business plans and acquisition strategies more efficiently and cost
effectively.
. The Distribution will permit each company to offer stock-based incentive
compensation to its executives that is more closely aligned with the
performance of that enterprise, as reflected in the stock market's
valuation of the stock of that company. We believe that this will help each
company attract, retain and reward key employees.
<PAGE>
. The Distribution will permit investors to choose whether to invest in the
Electronics Business, the Industrial Business, or both. It will also enable
the investment community to better understand and evaluate the two
businesses.
. The Distribution will facilitate acquisitions by the Electronics Business
by improving the attractiveness of its capital stock as an acquisition
currency.
. Management of APW Ltd believes that the Distribution and the realignment
of debt will allow it to compete more effectively in its market.
As previously noted, Applied Power's board of directors had considered a
number of alternatives to a spin-off of the Electronics Business, including a
sale of the Industrial Business as a whole, the sale of selected portions of the
Industrial Business from time to time, and a retention of all of the operations
following an internal restructuring to more clearly align the Industrial
Business and the Electronics Business into separate groups of operations. Under
the circumstances, the board decided to authorize the spin-off of the
Electronics Business as a Bermuda corporation supplemented by the disposition of
non-strategic Industrial Business assets.
Corporate Fit and Focus
The Distribution will allow the management of both companies to devote more
attention and focus to their respective businesses. APW Ltd. competes in the
rapidly growing EMS industry. Participants in this industry provide services and
products to a defined number of large electronics OEM customers. These customers
require nimble suppliers that are able to support very rapid growth, with highly
accelerated scale-up requirements on a global basis. While management believes
that APW Ltd. is well positioned to capitalize on the substantial opportunities
available in the EMS market, achievement of APW Ltd.'s full potential requires
management to focus its resources more exclusively on the EMS market.
<PAGE>
Applied Power sells tools and supplies through distribution and retail
channels as well as highly engineered components and systems to OEM customers.
Applied Power's industrial markets are fairly mature, with lower potential for
internally generated growth as compared to APW Ltd.'s electronics markets.
Capital requirements for Applied Power's Industrial Businesses are relatively
low, and it has historically generated significant free cash flow. API/Actuant's
strategy will be focused on debt reduction, enhancing its profitability and
operating results through a continuing focus on operation efficiencies and the
effective re-investment of the substantial cash it generates.
The differences between these businesses require different management
techniques and investment strategies. The Distribution will permit management of
each company to specialize in its respective business.
Capital Structure and Resource Allocation Optimization
The Distribution will provide both API/Actuant and APW Ltd. the opportunity
to create capital structures and adopt resource allocation policies that best
reflect the cash flow, investment requirements, competitive landscape,
shareholder expectations and corporate strategy and business objectives of each
company. By appropriately tailoring the capital structures of API/Actuant and
APW Ltd., each should be better able to pursue its strategic objectives while
achieving the lowest overall cost of capital consistent with the risk profiles
and competitive factors inherent in its business segment.
Attraction and Retention of Key Employees
APW Ltd.'s management believes that having a publicly traded equity
security will create a highly effective incentive tool for motivating management
and attracting and retaining talented employees at all levels for both APW Ltd.
and API/Actuant. Following the Distribution, the stock price of APW Ltd. will
be directly influenced by the operational and financial performance of APW Ltd.
without regard to the performance of the Industrial Businesses retained by
API/Actuant. APW Ltd. believes that this direct link between performance and
stock price appreciation will create an effective incentive system and is likely
to enhance the levels of dedication, commitment and productivity of the
management and employees of APW Ltd.
<PAGE>
Stock as Acquisition Currency
Acquisitions have been, and are expected to continue to be, an important
part of APW Ltd.'s growth strategy. The Distribution will permit APW Ltd. to use
its stock as a more attractive currency with which to pursue acquisitions.
Management of APW Ltd. believes that shareholders in potential target companies
often prefer to receive stock in a corporation focused on the industry in which
the target company is engaged as consideration in an acquisition. As a
diversified industrial company, Applied Power shares may not be as attractive to
shareholders in target companies as would be shares of APW Ltd. Management
believes that following the Distribution, as a "pure-play" EMS company, APW Ltd.
will have more opportunity to pursue acquisitions using stock as currency than
Applied Power would have in the absence of the Distribution.
Improve Investor Understanding of APW Ltd. and API/Actuant Equity
APW Ltd. management believes that the public equity markets currently
perceive Applied Power to be a diversified industrial company. The Distribution
will position APW Ltd. as a focused EMS company with a leading global position
in the electronics enclosures market, which investors will be better able to
understand and evaluate. Publicly-traded EMS companies are currently valued at
significantly higher multiples of earnings than diversified industrial
conglomerates. Management believes that if, following the Distribution,
investors value APW Ltd. in a manner consistent with the valuations of other EMS
companies, APW Ltd. will be able to raise equity capital at a lower cost than it
can as part of the combined enterprise. Following the Distribution, API/Actuant
will continue to be positioned as an industrial company. Further debt reduction,
continuing operational improvements and the execution of a selective acquisition
strategy will be expected to drive earnings growth. API/Actuant will be
positioned to be more easily evaluated versus other comparable industrial
companies.
Distribution Agent
The Distribution Agent is Firstar Bank N.A. Its address and telephone
number are:
Firstar Bank N.A.
Attn: Trust Department
777 East Wisconsin Avenue
Milwaukee, WI 53202
Telephone No.: 414-765-5000
Manner of Effecting the Distribution
Reorganizations - Continuance
<PAGE>
For U.S. federal income tax purposes, the continuation of Wright Line Inc.
as APW Ltd., a Bermuda corporation, will be treated as if Wright Line Inc. sold
all of its assets in a fully taxable transaction in which gain, but not loss,
will be recognized. Applied Power's estimate of the federal and state income
tax cost resulting from the taxable exchange of Wright Line Inc.'s assets is
based upon current valuations of the affected assets by PricewaterhouseCoopers
LLP and is reflected in the pro forma financial information included elsewhere
in this Information Statement.
Reorganizations -- other than Continuance
Since Wright Line Inc. will not own directly or indirectly all of Applied
Power's electronics operations prior to its continuance as APW Ltd. in Bermuda,
other corporate structure reorganizations will be required to allow for the
contribution of these other electronics operations to APW Ltd. or its
subsidiaries prior to the Distribution. Also APW Ltd. and its subsidiaries will
transfer certain industrial operations to API/Actuant or its continuing
subsidiaries. Upon these transactions, and to the extent not previously
recognized, gain, if any (but not loss), will be recognized based upon the fair
market value of the contributed assets less APW Ltd.'s cost basis in these
assets. Applied Power's estimate of the federal and state income tax cost
resulting from the taxable exchange of the affected assets is based upon current
valuations of the affected assets by PricewaterhouseCoopers LLP and is reflected
in the pro forma financial information included elsewhere in this Information
Statement.
Post Distribution Taxation of APW Ltd.
Bermuda and Barbados Income Tax Consequences to APW Ltd.
After the reorganizations described above, APW Ltd. will have its corporate
charter in Bermuda; however, it will be treated as resident in Barbados for
purposes of the Barbados Income Tax Act and the U.S. -- Barbados Double Taxation
Treaty. A favorable ruling has been obtained from the Department of Inland
Revenue of Barbados confirming this treatment.
Under current Bermuda law, APW Ltd. is not subject to tax on income or
capital gains, and no income, withholding or other taxes or stamp or other
duties are imposed upon the issue, transfer or sale of, among other things,
shares of common stock, shares of preferred stock, or debt securities, or on any
payments thereunder.
APW Ltd. will be registered in Barbados as an external company and
anticipates becoming licensed under the International Business Companies Act,
1991 as an International Business Company (IBC). As an IBC, APW Ltd. would be
subject to a maximum tax rate of 2.5% of its taxable income. Its taxable income
would consist of all income derived from Barbados, together with all non-
Barbados income remitted to Barbados.
U.S. Federal Income Tax Consequences to APW Ltd.
<PAGE>
APW Ltd. believes that it and its non-U.S. subsidiaries will be subject to
U.S. federal income tax only to the extent that they derive certain U.S. source
income that is subject to U.S. withholding tax or income that is effectively
connected with the conduct of a trade or business within the U.S. and is not
otherwise exempt from U.S. tax under the U.S.-Barbados tax treaty. The U.S.
subsidiaries of APW Ltd. will all continue to be subject to U.S. federal income
taxes, as before.
U.S. Federal Income Tax Consequences to Holders of APW Ltd. Shares
Passive Foreign Investment Company Rules
A foreign corporation will constitute a "passive foreign investment
company" (a "PFIC") under the Code with respect to a taxable year if 75% or more
of its gross income is passive income or 50% or more of its average assets
(generally by value) held during the taxable year consists of passive assets.
Based on its current operations, Applied Power believes that APW Ltd. will not
be a PFIC.
If a U.S. Holder is treated as owning PFIC stock, the U.S. Holder will be
subject to special rules, generally intended to reduce or eliminate any benefits
from the deferral of U.S. federal income tax that the holder could derive from
investing in a foreign investment company that does not distribute all of its
earnings on a current basis. If APW Ltd. is a PFIC, then unless the U.S. Holder
makes a "qualified electing fund" election (a "QEF Election") or a "mark-to-
market" election, upon disposition of the APW Ltd. common shares, or upon
receipt of an "excess distribution" for APW Ltd. (generally, distributions
during a taxable year in excess of 125% of the average annual distributions paid
by a foreign corporation in the three preceding taxable years), the U.S. Holder
generally will be subject to tax as if the gain or distribution were ordinary
income earned ratably and subject to tax at the highest rate applicable to the
U.S. Holder over the period during which the APW Ltd. common shares were held
(including any periods in which APW Ltd. was not a PFIC) and will be subject to
an interest charge on the deferred tax.
A U.S. Holder may avoid or mitigate the adverse tax consequences described
above by making a QEF Election, which is made on a shareholder-by-shareholder
basis and, once made, is effective for all subsequent taxable years of the U.S.
Holder, unless revoked with the consent of the IRS. A U.S. Holder of APW Ltd.
common shares who makes a QEF Election will be taxed currently on its pro rata
share of APW Ltd.'s net ordinary income and net capital gain, if any, in any
year in which APW Ltd. is a PFIC. If a U.S. Holder makes a QEF Election for the
first taxable year in which, with respect to that holder, APW Ltd. qualifies as
a PFIC, the U.S. Holder will not be currently liable on any portion of APW
Ltd.'s undistributed earnings, and will not be subject to any of the adverse
PFIC provisions described above, for any taxable year in which APW Ltd. is not a
PFIC. APW Ltd. expects that it will not be a PFIC in any taxable year in which
it has significant net income. APW Ltd. intends to advise its U.S. Holders
within 75 days of the close of each taxable year in which it qualifies as a PFIC
that it was a PFIC for that year.
<PAGE>
Applied Power believes that APW Ltd. will not be a PFIC in any taxable year
following the Distribution. However, the tests for determining PFIC status are
applied annually, and it is difficult to predict accurately future income and
assets relevant to this determination. Accordingly, Applied Power cannot assure
a U.S. Holder that APW Ltd. will not become a PFIC. If APW Ltd. should determine
in the future that it is a PFIC, it will endeavor so to notify U.S. Holders,
although there can be no assurance that it will be able to do so in a timely and
complete manner. U.S. Holders should consult their own tax advisers about the
PFIC rules, including the QEF election.
A U.S. Holder may make a QEF Election by filing IRS Form 8621 with its
income tax return on an annual basis and by maintaining records supporting the
information entered on the form.
A U.S. Holder may also make a mark-to-market election, in which case the
PFIC rules described above will not apply. Instead, in general, an electing
shareholder will include in each year as ordinary income the excess, if any, of
the fair market value to the APW Ltd. common shares at the end of the taxable
year over their adjusted basis and will be permitted an ordinary loss in respect
of the excess, if any, of the adjusted basis of the APW Ltd. common shares over
their fair market value at the end of the taxable year (but only to the extent
of the net amount of previously included income as a result of the mark-to-
market election). The electing U. S. Holder's basis in the APW Ltd. common
shares will be adjusted to reflect any such income or loss amounts.
Foreign Personal Holding Company, Personal Holding Company and
Controlled Foreign Corporation Rules
Special U.S. federal income tax rules apply to a holder in a "foreign
personal holding company" (a "FPHC") and to a foreign corporation that is a
"personal holding company" (a "PHC"). A foreign corporation will not constitute
a FPHC or a PHC unless five or fewer individuals own more than 50% of the voting
power or the value of its shares. APW Ltd. believes that it will not be a FPHC
or PHC for any taxable year. Special U.S. federal income tax rules also apply to
certain holders of a foreign corporation classified as a "controlled foreign
corporation" (a "CFC"). A foreign corporation will not constitute a CFC unless
U.S. shareholders, each owning more than 10% of its voting power, collectively
own more than 50% of the total combined voting power or total value of the
corporation's stock. APW Ltd. does not expect that it will be a CFC for any
taxable year.
U.S. Backup Withholding Tax and Information Reporting
Generally, 31% "backup" withholding tax and information reporting
requirements will apply to dividends paid on APW Ltd. common shares to a non-
corporate U.S. Holder if such a holder fails to provide a correct taxpayer
identification number and other information or fails to comply with certain
other requirements. The proceeds from the sale of APW Ltd. common shares by a
U.S. Holder will be subject to U.S. backup withholding and information reporting
unless the holder has provided the required certification or has otherwise
established an exemption.
<PAGE>
A U.S. Holder can establish an exemption from the imposition of backup
withholding tax by providing a duly completed IRS Form W-9 to the holder's
broker or paying agent, reporting the holder's taxpayer identification number
(which for an individual will be his or her social security number), or by
otherwise establishing its corporate or exempt status.
Any amounts withheld under the backup withholding tax rules from a payment
to a holder will be allowed as a refund or a credit against the holder's U.S.
federal income tax, provided that the required information is furnished to the
IRS.
Results of the Distribution
After the Distribution, APW Ltd. will be an independent, publicly traded
company owning and operating the Electronics Business. The number and identity
of shareholders of APW Ltd. immediately after the Distribution will be the same
as the number and identity of shareholders of Applied Power on the Record Date.
Immediately after the Distribution, APW Ltd. expects to have approximately
[4,300] holders of record and approximately [39.1 million] shares outstanding
based on the number of record shareholders and outstanding shares on [February
29, 2000]. Using the distribution ratio of one share of APW Ltd. common stock
for every one share of Applied Power common stock, the actual number of shares
to be distributed will be determined as of the Record Date. The Distribution
will not affect the number of outstanding shares of Applied Power common stock
or any rights of Applied Power shareholders.
Material Federal Income Tax Consequences of the Distribution
The Distribution is conditioned upon receipt by Applied Power of an opinion
from Weil, Gotshal & Manges LLP, special tax counsel to Applied Power,
substantially to the effect that, among other things, the Distribution should
qualify as a tax-free spin-off to Applied Power's U.S. shareholders under the
tax-free spin-off provisions of the Internal Revenue Code of 1986, as amended
(the "Code"). No rulings have been requested from the Internal Revenue Service
with respect to these matters and the opinion of Weil, Gotshal & Manges LLP is
not binding on the Internal Revenue Service or the courts. Additionally, the
opinion of Weil, Gotshal & Manges LLP is based upon various representations and
assumptions described therein.
The opinion is based on current provisions of the Code, existing
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. No attempt has been made to comment on all
federal income tax consequences of the Distribution that may be relevant to
particular holders, including holders that are subject to special tax rules such
as dealers in securities, foreign persons, mutual funds, insurance companies,
tax-exempt entities, shareholders who acquire their APW Ltd. common stock
pursuant to the exercise of employee stock options or otherwise as compensation
and holders who do not hold their Applied
<PAGE>
Power common stock as capital assets. Holders of Applied Power common stock are
urged to consult their own tax advisors regarding the federal income tax
consequences of the Distribution in light of their personal circumstances and
the consequences under applicable state, local and foreign tax laws.
In the opinion of Weil, Gotshal & Manges LLP, the Distribution should
qualify as a tax-free distribution to Applied Power's U.S. shareholders under
the Code. Accordingly:
(1) An Applied Power shareholder should not recognize any income, gain or
loss as a result of the Distribution.
(2) An Applied Power shareholder's aggregate tax basis for his or her
Applied Power common stock on which APW Ltd. common stock is
distributed and the APW Ltd. common stock received by the shareholder
in the Distribution should be the same as the basis of the Applied
Power common stock held by the shareholder immediately prior to the
Distribution. An Applied Power shareholder's aggregate basis should
be allocated between his or her Applied Power common stock and APW
Ltd. common stock received in the Distribution in proportion to the
fair market value of both the Applied Power common stock and APW Ltd.
common stock on the Distribution Date.
(3) An Applied Power shareholder's holding period for the APW Ltd. common
stock received in the Distribution should include the holding period
of the Applied Power common stock on which the Distribution is made
provided that the Applied Power common stock is held as a capital
asset by the shareholder on the Distribution Date.
Current United States Treasury regulations require each Applied Power
shareholder who receives APW Ltd. common stock pursuant to the Distribution to
attach to his or her federal income tax return for the year in which the
Distribution occurs a detailed statement setting forth such data as may be
appropriate in order to show the applicability under the tax-free spin-off
provisions of the Code to the Distribution. Applied Power will provide the
appropriate information to each shareholder of record as of the Record Date.
Listing and Trading of Shares of APW Ltd. Common Stock
There is no existing market of APW Ltd. common stock. APW Ltd. [has
received] approval to list its common stock on the NYSE. When the shares are
accepted for listing, a "when issued" trading market for APW Ltd. common stock
is expected to develop on or shortly before the Record Date. The term "when
issued" means that shares can be traded prior to the time certificates are
actually available or issued. We cannot predict the trading prices for APW Ltd.
common stock before or after the Distribution Date. Until the common stock is
fully distributed
<PAGE>
and an orderly market develops, the trading prices for APW Ltd.'s common stock
may fluctuate substantially. Prices for APW Ltd. common stock will be determined
in the trading markets and may be influenced by many factors, including:
. the depth and liquidity of the market for APW Ltd. common stock;
. developments generally affecting APW Ltd.'s business;
. the impact of the factors referred to in "Risk Factors" beginning on page
__;
. investor perceptions of APW Ltd. and its business;
. APW Ltd.'s financial results; and
. general economic and market conditions.
We anticipate that APW Ltd. common stock will be traded on the NYSE under
the symbol "APW." The transfer agent and registrar for APW Ltd. common stock
will be Firstar Bank N.A.
As of February 29, 2000, Applied Power had approximately 4,300 shareholders
of record. Assuming that each shareholder is a shareholder of record on the
Record Date, each of them will become a shareholder of record of APW Ltd. For
certain information regarding options and other equity-based awards involving
APW Ltd. common stock which may become outstanding after the Distribution, see
"Executive Compensation." Shares of APW Ltd. common stock distributed to Applied
Power shareholders in the Distribution will be freely transferable under the
Securities Act, except for shares of APW Ltd. common stock received by persons
who may be deemed to be affiliates of APW Ltd. Persons who may be deemed to be
affiliates of APW Ltd. after the Distribution generally include individuals or
entities that control, are controlled by, or are under common control with APW
Ltd. and may include officers and directors, or principal shareholders, of APW
Ltd. After APW Ltd. becomes a publicly traded company, securities held by
persons who are its affiliates will be subject to resale restrictions under the
Securities Act. Affiliates of APW Ltd. will be permitted to sell shares of the
entity of which they are affiliates only pursuant to an effective registration
statement or exemption for the registration requirements of the Securities Act,
such as the exemption afforded by Rule 144 under the Securities Act.
Dividend Policy
APW Ltd. has no current plans to pay dividends following the Distribution,
and it does not anticipate paying dividends for the foreseeable future.
Dividends will be paid on APW Ltd. common stock only if declared by the APW Ltd.
board of directors in its sole discretion following the Distribution. The
payment and level of cash dividends, if any, will be based upon a number of
factors, including the operating results, cash flow, financial requirements and
business prospects of APW Ltd. The actual amount and timing of dividends, if
any, will depend upon these and any other matters APW Ltd.'s board of directors
may deem relevant.
Relationship Between API/Actuant and APW Ltd. After the Distribution
<PAGE>
Immediately after the Distribution, API/Actuant and APW Ltd. will be
independent, public companies with no direct relationships between them, except
that (a) Mr. Sim and Mr. Boel will be directors of API/Actuant (and Mr. Sim will
also be a director of APW Ltd.) as well as officers of APW Ltd. and (b) the two
companies will be parties to certain agreements intended to assist each of them
in transitioning to stand-alone businesses. See "Business of APW Ltd. and its
Subsidiaries - Transactions and Agreements between APW Ltd. and API/Actuant."
Distribution Conditions
We expect that the Distribution will occur on the Distribution Date,
provided that the following conditions are satisfied (unless waived by Applied
Power), among other things:
1. The SEC must have declared effective the registration statement on
Form 10 under the Exchange Act, filed by APW Ltd., and no stop order
relating to the registration statement can be in effect.
2. Applied Power and APW Ltd. must have received all necessary permits,
registrations and consents required under the securities or blue sky
laws in connection with the Distribution.
3. Applied Power and APW Ltd. must have received a favorable tax opinion
from Weil, Gotshal & Manges LLP, and the opinion must not have been
revoked or modified in any material respect.
4. The NYSE must have approved the APW Ltd. common stock for listing on
the NYSE, subject to official notice of issuance.
5. Applied Power must have completed the transfers of assets and
liabilities to APW Ltd. required to constitute APW Ltd. as described
in this Information Statement.
6. APW Ltd. must have obtained credit facilities on acceptable terms and
conditions and in amounts expected to be adequate (together with APW
Ltd.'s anticipated cash flow) to fund its capital expenditure, debt
service and working capital requirements.
7. No order, injunction or decree can have been issued by any court of
competent jurisdiction or other legal restraint or prohibition
preventing consummation of the Distribution or related transactions.
The fulfillment of the foregoing conditions will not create any obligation
on the part of Applied Power to effect the Distribution, and Applied Power's
board of directors has reserved the right to amend, modify or abandon the
Distribution and the related transactions at any time prior to the Distribution
Date.
BUSINESS OF APW LTD. AND ITS SUBSIDIARIES
<PAGE>
Overview
APW Ltd. is a leading global provider of EMS solutions focused on the
rapidly growing integrated electronic enclosure systems market. Operating in
over 40 locations throughout North America, Europe and Asia, we supply a broad
range of individual components and integrated manufacturing services to OEMs
primarily in the communications (datacom and telecom) and computing (servers,
data storage, networking) markets. We provide a comprehensive portfolio of
electronic products, including electronic enclosures, power supplies, thermal
management systems, backplanes and cabling, either as individual standard
products, or as integrated custom systems. In addition, we provide a wide range
of integrated design, manufacturing and logistics services to our customers,
including product design, supply chain management, manufacturing, assembly,
testing and drop-ship capabilities. These services provide our customers with
accelerated time-to-market and decreased time-to-volume production, while
reducing their production costs and allowing them to focus on the design and
marketing of their products.
Through a combination of internal growth and acquisitions, we have
established a leading position in the integrated enclosure systems segment of
the EMS industry. We believe that we are the leading, most vertically integrated
provider of integrated electronic enclosure systems and that our size, global
reach, product breadth, scope of services, and demonstrated expertise uniquely
positions us to win large manufacturing contracts from leading global datacom,
telecom and networking OEMs. We believe that these customers will provide us
with substantial growth opportunities due to their significant rate of organic
growth and their increased utilization of outsourced manufacturing services. Our
customers include industry leaders such as Alcatel, Applied Materials, Cisco,
Compaq, Dell, EMC, Ericsson, Fujitsu, Hewlett Packard, IBM, Lucent, Marconi,
Motorola, NCR, Nokia, Nortel Networks, and Sun Microsystems. OEMs in the
communications segment of the electronics industry accounted for approximately
25% of our net sales for the six months ended February 29, 2000, with sales to
computing OEMs accounting for approximately 40% of net sales.
Since September 1996, we have completed 17 acquisitions of EMS companies.
These acquisitions have allowed us to strengthen our product and service
offering, establish our leading global capabilities and diversify our customer
base. The acquisition of Vero Group plc in June 1998 provided us with a strong
base of operations in the European enclosures market and significant engineering
and test capabilities, as well as entry into the power supply market. Our July
1998 merger with ZERO Corporation enabled us to increase the scale of our North
American enclosure operations, while also providing a leading position in the
thermal management market. The acquisition of Rubicon plc in September 1998
expanded our presence in Ireland and Scotland for integrated custom enclosures.
In addition, we have completed 14 niche acquisitions that have provided access
to new customers and additional geographic coverage. We intend to continue to
selectively pursue strategic acquisition opportunities, particularly when these
opportunities have the potential to enable us to access new customers,
technologies or geographic markets or to continue to implement our vertical
integration strategy.
<PAGE>
EMS Industry Overview
The EMS industry is comprised of companies that provide a range of
manufacturing services to OEMs in the electronics industry. The EMS industry has
experienced rapid growth in recent years, fueled by the expansion of the overall
electronics industry and increased outsourcing of manufacturing and related
functions by electronics OEMs. Industry sources forecast that the EMS industry
will grow annually at approximately 20% each year through 2003, with total
industry revenue projected to be approximately $150 billion by 2003. The great
majority of the existing EMS industry is based around populating printed circuit
boards and assembling these boards into finished products such as personal
computers, mobile telephones or into subracks for subsequent integration into
larger, more complex products. While subject to the same market dynamics, APW
Ltd. is not a "board" company; rather it competes in the electro-mechanical, low
to medium volume, larger product part of the EMS industry. This is a new
emerging segment of EMS in which APW Ltd. is the leader. Examples of such
larger, lower-volume products are wireless base stations, servers, high-end
memory wireline switching equipment, larger lithographic equipment and kiosks.
EMS Industry Demand
(U.S. Dollars in Billions)
1998 1999 2000 2001 2002 2003
---- ---- ---- ----- ----- -----
60.0 73.2 87.7 105.5 125.5 149.4
20% Compound annual growth rate.
Years 1999 - 2003 are estimated.
Source: Technology
Forecasters, Inc.
Electronic OEMs have increasingly outsourced manufacturing and other
related functions to EMS companies in order to focus their own resources on core
competencies, while leveraging the expertise of EMS providers in design,
procurement, assembly and test operations and supply chain management. As this
trend has developed, many EMS providers have established strong strategic
relationships with many of their OEM customers. Additionally, OEMs have sold
manufacturing operations to EMS providers with demonstrated expertise in
generating manufacturing efficiencies. Key benefits driving OEMs to favor
outsourcing to EMS providers include:
.Accelerated Time-to-Market and Decreased Time-to-Volume
.Reduced Operating Costs and Capital Requirements
.Focused Resources on Core Competencies
.Greater Access to Leading Design and Manufacturing Technologies
<PAGE>
.Abitity to Leverage EMS Companies' Logistics Expertise
.Improved Inventory Management
We believe the fast-growing communications and computing equipment
industries represent large and attractive markets for EMS providers. The more-
established telecommunication OEMs began to outsource their manufacturing
operations relatively recently and are increasingly utilizing EMS providers for
product design and manufacturing. Other, newer OEMs have never manufactured in-
house and have always used EMS companies. We believe the communications and
computing industries have excellent growth characteristics, driven by
accelerating product development cycles and the demand for network
infrastructure expansion to handle greater voice and data traffic related to the
Internet and the enhanced functionality of mobile telephones.
We believe that OEMs will continue to outsource more complex products and
services, and will tend to favor large, global EMS providers that can
demonstrate an advantage in terms of scale, geographic reach, technology and
quality. We believe that the key success factors for EMS providers seeking to
establish and expand relationships with leading OEMs include:
.Global Presence
.Global Supply Chain Management Skills
.Sophisticated Technological Capabilities
.Broad Product and Service Offering
.Large-Scale and Flexible Production Capacity
We believe that larger EMS providers that possess the foregoing attributes
are well positioned to take advantage of the growth in the EMS industry.
Conversely, we believe that smaller providers who seek to serve leading OEM's
are disadvantaged due to lack of scale and difficulty in meeting demanding OEM
requirements.
The EMS industry has experienced significant acquisition activity in recent
years. Consolidation has occurred both through the sale of OEM manufacturing
operations to EMS providers and through acquisition activity among EMS
businesses themselves. Larger EMS companies are well positioned to lead
consolidation in the industry, as OEMs have tended to sell manufacturing
operations to larger EMS providers that possess the capital, management
expertise and advanced systems required to effectively acquire and integrate the
acquired businesses. We believe that the EMS industry will continue to
experience significant consolidation, driven by the ongoing trend among OEMs to
outsource large-volume programs to the leading EMS providers, the continued
disposition of OEM manufacturing assets to these companies, and acquisition
activity among EMS businesses themselves.
APW Ltd. Business Strategy
Our goal is to continue to be a leading vertically integrated electronic
enclosures systems supplier in the world, providing total EMS solutions to
leading OEMs on a global basis. To accomplish this goal, we have developed a
business strategy that includes the following components:
<PAGE>
Provide Vertically Integrated Electronic Manufacturing Solutions. We offer
a comprehensive, vertically integrated range of products and services to our
electronics OEM customers. Our ability to provide a broad portfolio of metal and
plastic enclosures, thermal management systems, backplanes, power supplies, wire
harnesses and cable assemblies allows us to shorten our customers' product
development cycles and to lower their total cost. In addition, our vertical
integration provides us with greater control over quality, delivery and cost,
enabling us to offer our customers a complete EMS solution. Through our
integrated manufacturing capabilities, we provide our customers with a broad
range of value-added services, including complete system design, manufacturing,
supply chain management, full system integration, assembly and test. We believe
our emphasis on being a full-solution partner to our customers is a competitive
advantage.
Build Relationships with Leading OEMs. We are focused on developing
strategic relationships with leading OEMs in the datacom, telecommunications,
networking and computer industries. Our vertically integrated manufacturing
capabilities provide total solutions to these customers on a global basis. We
believe that we can become an integral part of our customers' operations by
working closely with them throughout the design, manufacturing and distribution
process. Our world-class manufacturing capabilities allow our customers to
accelerate time-to-market, decrease time-to-volume, reduce costs, and improve
their supply chains. Through effectively executing our strategy, we have forged
relationships with leading electronics OEMs such as Alcatel, Applied Materials,
Cisco, Compaq, Dell, EMC, Ericsson, Fujitsu, Hewlett Packard, IBM, Lucent,
Marconi, Motorola, NCR, Nokia, Nortel Networks, and Sun Microsystems. We are
committed to expanding these relationships while further diversifying our
customer base.
Expand Relationships with Communications Customers. We have established
strong customer relationships with OEM customers in a range of electronics
market segments and have targeted the communications segment as a key growth
opportunity. Communications OEMs are experiencing rapid growth due to rapid
technological advances and increasing global demand for more sophisticated
communications technology. Communications OEMs are also increasing the volume of
their outsourced manufacturing in order to meet the accelerating time-to-market
and decreasing time-to-volume requirements of their market. We believe that our
vertically integrated global manufacturing base and comprehensive value-added
service capabilities are well suited to meet these customers' needs. We
currently have established relationships with leading communications customers
such as Alcatel, Cisco, Ericsson, Lucent, Marconi, Motorola, Nokia, and Nortel
Networks.
Continue to Build Global Capabilities. We have established an extensive
global network of manufacturing facilities to service our customers'
requirements on a worldwide basis. We have a significant presence in Europe,
which contributes over 40% of our net sales. We currently maintain facilities in
the United States, Canada, England, Scotland, Ireland, Germany, Denmark, Italy,
France, India and China. By strategically locating our facilities close to our
customers' end markets, we are better able to serve our customers' worldwide
manufacturing requirements, reduce transportation costs, meet local content
requirements and reduce time-to-market. We intend to continue to expand globally
through organic growth and acquisitions. We are making significant investments
in personnel, hardware
<PAGE>
and software directed at standardizing our business systems and manufacturing
practices, and providing for real-time communications from our customers to all
our plants and to our suppliers' plants.
Selectively Pursue Strategic Acquisitions. During the 1990s we built a
leading global integrated electronics enclosure systems company through internal
growth and the completion of 17 acquisitions of EMS companies. We plan to
continue to grow through strategic acquisitions in order to further develop
strategic relationships with leading OEMs, expand our capacity, diversify into
new market sectors, broaden our service offerings and optimize our global
capabilities. In addition to acquisitions of EMS companies, we plan to
selectively acquire the manufacturing operations of our OEM customers, which
frequently involves long-term outsourcing contracts as part of the transaction.
As a leading consolidator in the fragmented electronics enclosure systems
market, we believe that we are well positioned to execute our acquisition
strategy.
Continue Efficiency and Productivity Improvements. Our World Class
Performance Program uses JIT inventory practices, Kanban replenishment systems
and Kaizen events to improve quality, efficiency, on-time delivery and space
utilization. These enhancements result in better use of manufacturing floor
space, lower inventory levels and reduced working capital requirements. The
success of these efforts can produce cost savings for our customers and enhance
our financial performance. These programs have contributed to a reduction of
primary working capital (defined as accounts receivable plus inventories less
accounts payable) as a percentage of sales from 21% for the fiscal year ended
August 31, 1996, to 15% for the fiscal year ended August 31, 1999. Additionally,
APW Ltd.'s e-Resources organization coordinates the purchasing and sourcing of
commodity parts and materials in order to further reduce costs.
Cultivate Performance Based Culture. Our culture is based on the belief
that people are the key ingredient in successful execution of global business
strategies and the drivers of financial performance. Our team members
participate in a structured compensation system based on achievement of overall
performance targets. Executive compensation is heavily weighted toward stock
ownership, thereby aligning management's interests with investors' interests in
achieving strategic goals.
Our Services and Products
EMS Services
------------
We offer a broad range of value-added services to provide our OEM customers
with an integrated solution for the development, manufacture and distribution of
a product.
New Product Design. New Product Introduction ("NPI") centers in the United
Kingdom and on the East and West coasts of the United States provide customers
with comprehensive and rapid turnaround prototype development. We work closely
with our OEM customers' development teams from the early stages of product
design. Our development teams design all the electro-mechanical aspects of our
customers' products with a focus on reducing costs and increasing ease of
manufacturability. In addition to fast
<PAGE>
prototype capability, our NPI centers provide complete in-house testing, airflow
analysis, safety agency approvals, EMI/RFI compliance, and testing to ensure
shock, vibration, FCC and environmental compliance.
Manufacturing. Our manufacturing operations include hard and soft metal
tooling, plastic injection molded and structural foam parts, tool and die design
and manufacturing, backplane boards, cable assembly and PC board population in
Europe and North America. We manufacture components, subassemblies and systems
both for sale as standard products and for incorporation into our custom
integrated electronics enclosure systems. We employ just-in-time, flow
manufacturing and continuous improvement processes to reduce costs and shorten
lead times. We are committed to maintaining World Class Performance in our
manufacturing operations and employ Kaizen techniques to continuously identify
improvements in our processes.
Supply Chain Management. We provide our customers with extensive
flexibility in materials purchasing and inventory management requirements. We
use a variety of software systems to monitor our operations and facilitate
global inter- and intra- company communication. Our procurement activities are
designed to provide our customers with flexibility in their volume requirements
within established frameworks. We procure materials and components from vendors
who meet our strict standards for timely delivery, high quality, cost-
effectiveness and compliance with our customers' exacting specifications. Kanban
methodologies are utilized to pull inventory through our facilities and further
reduce costs. Strategic purchasing teams work closely with our suppliers to
achieve additional efficiencies.
Assembly and Testing. We provide a wide range of assembly services, from
component assembly (Level 0) to full system integration services (level 5)
consisting of enclosures with backplanes, power supplies, thermal management
assemblies and active boards completely assembled, wired and fully functionally
tested. Our assembly services allow our customers to rapidly bring their
products to market at reduced costs, utilizing advanced manufacturing and
testing technology. Our engineers continuously evaluate our ongoing
manufacturing and assembly processes and recommend improvements to reduce costs,
improve quality and shorten lead times. We offer comprehensive in house testing,
airflow analysis, safety agency approvals, and EMI/RFI compliance, as well as
shock, vibration, FCC and environmental compliance. Each enclosure system is
subjected to a battery of tests that verify the performance of every component.
Electro-Mechanical Products
---------------------------
We manufacture a wide range of electro-mechanical components, which are
either combined to produce our integrated electronics enclosure solutions or
sold as standard or modified standard products. Our products include enclosures,
racks, backplanes, thermal management systems, power supplies and cabling as
well as technical furniture and manufacturing assembly and test equipment. We
believe that the combination of our extensive manufacturing services
capabilities coupled with our ability to provide a wide range of high quality
electro-mechanical components provides us a unique competitive advantage in the
EMS industry.
<PAGE>
Enclosures. We are the leading global manufacturer of enclosures and racks
for the electronics industry. We have an integrated global network of 29
enclosure manufacturing facilities with operations in the Americas, Europe and
Asia. We believe this manufacturing infrastructure for integrated enclosure
solutions is unequaled in the industry and allows us to better serve the
international needs of our global electronics OEM customers.
Electronic enclosures are steel, aluminum or plastic cabinets that organize
and configure individual electronic components and house, protect and insulate
the entire electronics system. We manufacture a complete range of standard and
custom enclosure products including subracks, racks, indoor and outdoor cabinets
and cases. Our custom enclosure products are developed in coordination with our
customers and typically are incorporated into an integrated manufacturing
solution that includes other APW Ltd. components and a range of value-added
design, manufacturing, assembly and test services. These custom products are
marketed under the APW brand name. Our standard enclosures are designed for a
wide range of electronics applications and are marketed under the brand name APW
Electronic Supplies.
Thermal Management. We manufacture and market thermal management products
under the McLean brand name. Thermal management products cool and protect vital
electronic components housed within an electronic system. These products are of
particular importance in highly complex communications and networking systems,
which generate a high level of heat and require exacting heat dissipation
capabilities. Products include air conditioners, heat exchangers, filter fan
packages, AC and DC motorized impellers, fan assemblies, centrifugal blowers and
packaged blowers.
Backplanes. We manufacture a wide range of standard and custom backplanes
for integration into our electronics enclosure systems. Backplanes are complex,
multi-layered printed circuit boards that are used in an electronic system to
interconnect various components. Our ability to offer custom manufactured
backplanes to our OEM customers provides us with a competitive advantage in
securing full system assembly contracts. We manufacture boards for backplanes in
the United Kingdom, including boards to VME and compact PCI standards.
Power Supplies. We manufacture a complete range of fault-tolerant power
supplies for electronics systems. Our power supply products range from 20 to
1200 watts with either AC or DC input and single or multiple output. The
majority of our power supplies are developed in cooperation with our customers
to meet their unique power supply requirements.
Markets and Customers
We believe we offer a more comprehensive range of EMS products and services
than our competitors in the electronic enclosures market. We provide electronic
enclosure products such as cases, racks, cabinets, backplanes, thermal
management systems and power supplies. More importantly, we offer broad design
and engineering expertise to integrate these products into customized, cost-
effective enclosure systems for our customers worldwide.
We sell our products under the APW brand name, while continuing to co-brand
APW with McLean in the thermal management market and with Wright Line in the
technical furniture market. We
<PAGE>
serve a wide range of principal markets including the datacom, networking,
telecommunication, data storage, semiconductor equipment, ATM, medical,
electronic and manufacturing industries.
Our customers include a diversified base of electronics OEMs. The following
table lists our ten largest customers and the end products for which we provide
manufacturing services. Our ten largest customers comprised 36% of our sales in
the six months through February 29, 2000, with our largest customer accounting
for only 6% of our sales during that same time period.
Customer Customer Solutions Provided
- -------- ---------------------------
Applied Materials Semiconductor equipment
Compaq High end server products
EMC Various memory products
Hewlett-Packard High end server products
IBM Server and PC products
Lucent Wireless base stations
Marconi Power supplies for wireless base stations
NCR ATM machines
Nortel Networks Wireless base stations
Sun Microsystems High end servers and memory products
Sources and Availability of Raw Materials
We have strong relationships with a broad range of suppliers. We view the
volume of our procurement as an important competitive advantage as it enhances
our ability to obtain favorable pricing for raw materials using long-term
purchasing contracts. We generally order materials and components only to the
extent necessary to satisfy existing customer orders, and we work with our
suppliers to develop just-in-time supply systems, which reduce inventory
carrying costs. Materials and components we use are readily available in the
open market from a number of local and national suppliers, both in
<PAGE>
North America and in Europe, and to date, we have not experienced any
significant shortages of materials.
Patents, Trademarks and Other Intellectual Property
We own a number of United States and foreign patents and trademarks. No
individual patent or trademark is believed to be of sufficient importance that
its termination would have a material adverse effect on our business.
Backlog
Although APW Ltd. obtains firm purchase orders from its customers, OEM
customers typically do not make firm orders for delivery of products more than
30 to 90 days in advance. APW Ltd. does not believe that the backlog of expected
product sales covered by firm purchase orders is a meaningful measure of future
sales, since orders may be rescheduled or canceled.
Competition
The EMS industry is growing rapidly and is extremely competitive. While APW
Ltd. enjoys a leading position today in the area of the EMS market in which it
competes, we expect that other companies will try to replicate our strategy. In
the short term, APW Ltd. believes that the demand for our services exceeds
supply. However, in the longer-term, there will be more direct competition.
While price is always important, APW Ltd. believes that other parameters such as
new product design, technical innovation, quality, and delivery costs are
equally or more important. APW Ltd. believes that its array of capabilities will
continue to serve as a competitive advantage.
Research and Development
APW Ltd. employs over 200 engineers who design new products and make
improvements to existing product lines. Expenditures for APW Ltd. research and
development were $5.5 million, $2.7 million and $0.9 million in fiscal years
1999, 1998 and 1997, respectively. The larger more complicated products that APW
Ltd. competes for often involve lengthy development programs before they go into
production. Complex integrated systems are typically developed at one of our
three NPI centers. Specific custom products may be developed elsewhere. Our
policy is that customers should pay for the development expenses for new
products. From time to time, APW Ltd. funds certain activities directed at
acquiring new technology with the purpose of upgrading its basic product
offerings.
Environmental Compliance
We have facilities in a number of geographic locations that are subject to
a range of environmental laws and regulations. Compliance with these laws has
and will require expenditures on a continuing basis. The predecessor to APW Ltd.
has been identified by the United States Environmental Protection Agency as a
"Potentially Responsible Party" regarding various multi-party Superfund sites.
Any liability in connection with certain of these sites involving Electronics
Businesses has been assumed
<PAGE>
by APW Ltd. Based on our investigations, we believe that we are a de minimis
participant in any site, and that any liability, which may be incurred as a
result of our involvement with such Superfund sites, taken together with our
expenditures for environmental compliance, will not have a material adverse
effect on our financial position.
We anticipate that environmental costs will be expensed or capitalized
depending on their future economic benefits. Expenditures that have no future
economic value will be expensed. Liabilities will be recorded when environmental
remediation is probable and the costs can be reasonably estimated. Environmental
expenditures over the last three years for APW Ltd. have not been material.
Although the level of future expenditures for environmental remediation is
impossible to determine with any degree of certainty, in our opinion these costs
are not likely to have a material adverse effect on our financial position,
results of operations or cash flows. Environmental remediation accruals of $2.8
million and $2.1 million were included in the Combined Balance Sheets for APW
Ltd. and its subsidiaries at August 31, 1999 and 1998, respectively.
Employees and Labor Relations
As of February 29, 2000, we employed approximately 8,100 people on a full-
time equivalent basis. Some of our European employees are represented by
collective bargaining agreements. In addition, 150 employees in North America
are represented by collective bargaining agreements. We have never experienced a
work stoppage or strike, and we believe our relationship with our employees is
good.
Properties
We are truly a global provider to our international customer base with over
40 locations strategically located around the world. We believe the breadth of
our geographic coverage is a key competitive advantage. Our established
footprint will be complemented by future expansion to continue to serve the
global needs of our customers on a local basis. We operate 23 facilities in
North America, aggregating 3.2 million square feet of which 16 of the properties
are leased and the remaining 7 are owned. In Europe, APW Ltd. operates in 19
facilities totaling 1.5 million square feet of which 15 are leased and 4 are
owned. In addition to our principal manufacturing facilities listed below, we
operate a number of other facilities in Denmark, Finland, Sweden, the United
Kingdom and the United States. Our corporate offices are located in an 18,000
square foot leased space in Waukesha, Wisconsin and we lease office space in
Bermuda.
<TABLE>
<CAPTION>
North America
- ------------------------------------
<S> <C> <C>
Anaheim, California Austin, Texas Robbinsville, New Jersey
Camarillo, California Garland, Texas Radford, Virginia
Garden Grove, California North Salt Lake, Utah Monson, Massachusetts
Grass Valley, California Champlin, Minnesota Worcester, Massachusetts
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C> <C> <C>
Irvine, California Oak Creek, Wisconsin Hudson, New Hampshire
Poway, California Monon, Indiana
San Jose, California Milton Ontario, Canada
Valencia, California Erie, Pennsylvania
Europe
- ------------------------------------
Eastleigh, England Beith, Scotland Bremen, Germany
Middlesex, England Dundee, Scotland Beauvais, France
Sheffield, England Hamilton, Scotland Cedex, France
Southampton, England Tallaght Dublin, Aarup, Denmark
Ireland
Totton, England
Wandsworth London, England Galway, Ireland
Berkhamsted, England Cork, Ireland
Smethwick West Midlands,
England
</TABLE>
Legal Proceedings
APW Ltd. and its subsidiaries are parties to various legal proceedings that
have arisen in the normal course of its business. These legal proceedings
typically include product liability, environmental, labor and patent claims. APW
Ltd. will assume and indemnify API/Actuant with respect to those proceedings
involving the Electronics Businesses, while API/Actuant will indemnify APW Ltd.
with respect to its Industrial Business.
<PAGE>
We have recorded reserves for estimated losses based on the specific
circumstances of each case. Such reserves are recorded when it is probable that
a loss has been incurred as of the balance sheet date and the amount of such
loss can be reasonably estimated. In our opinion, the resolution of these
contingencies is not expected to have a material adverse effect on our financial
condition, results of operations or cash flows.
Transactions and Agreements Between APW Ltd. and API/Actuant
In order to effect the Distribution, API/Actuant and APW Ltd. have entered
or will enter into the following agreements:
1 Contribution Agreement, Plan and Agreement of Reorganization and
Distribution
2. General Assignment, Assumption and Agreement regarding
Litigation, Claims, and other Liabilities
3. Transitional Trademark Use and License Agreement
4. Insurance Matters Agreement
8. Bill of Sale and Assumption of Liabilities
9. Employee Benefits and Compensation Agreement
10. Tax Sharing and Indemnification Agreement
11. Interim Administrative Services Agreement
12. Confidentiality and Non Disclosure Agreement
13. Assumption of Applied Power Inc. Debt Obligation
These agreements describe the reorganization of Applied Power and
define the ongoing relationship between the parties after the Distribution.
Because these agreements were negotiated while APW Ltd. was a wholly-owned
subsidiary, they are not the result of negotiations between independent parties,
although API/Actuant and APW Ltd. have set pricing terms for interim services
believed to be comparable to what could be achieved through arms-length
negotiations. Following the Distribution, additional or modified agreements,
arrangements and transactions may be entered into and such agreements and
transactions will be determined through arms-length negotiations.
Contribution Agreement
Pursuant to the Contribution Agreement, Plan and Agreement of
Reorganization and Distribution, immediately prior to the spin-off,
substantially all of the assets and liabilities of the Electronics Business will
be transferred by Applied Power to APW Ltd. Under this agreement API/Actuant
will retain debt equal to four times its twelve month earnings before interest,
taxes, depreciation and amortization (estimated to be approximately $450 million
of interest bearing obligations) and APW Ltd. will assume the remaining debt.
<PAGE>
Assignment and Assumption Agreement
Pursuant to the General Assignment and Assumption Agreement regarding
Litigation, Claims and other Liabilities, in general APW Ltd. will assume and
will agree to indemnify API/Actuant and acquire substantially all the
liabilities, litigation and claims arising out of the Electronics Businesses,
including all environmental liabilities. API/Actuant will retain and will
indemnify APW Ltd. against substantially all liabilities, litigation and claims
arising out of its Industrial Business and other items not transferred to APW
Ltd. The indemnification obligations will not entitle the indemnified party to
recover to the extent that such liabilities are covered by proceeds received
from a third party insurer. In circumstances in which the potential liability of
API/Actuant and APW Ltd. is joint, the parties will share responsibility for
such liability on a mutually agreed basis consistent with the allocation of the
business segments.
Transitional Trademark Use and License Agreement
Pursuant to the Transitional Trademark Use and License Agreement,
Applied Power will grant to APW Ltd. certain rights to continue to use, for a
limited period of time and under certain defined circumstances, certain
API/Actuant trademarks and trade dress already inscribed upon APW Ltd.'s
existing inventory of labels, promotional materials, product materials and other
materials relating to APW Ltd.'s existing inventory of products. Also
API/Actuant will grant to APW Ltd. a royalty free, nontransferable, nonexclusive
license to use certain API/Actuant trademarks and certain products for nine (9)
months after the Distribution.
Patent Assignment
In connection with the Distribution, Applied Power will assign to APW
Ltd. and its subsidiaries all rights and title to numerous patents related to
the Electronics Business.
Insurance Matters
An Insurance Matters Agreement will govern the rights and obligations
of API/Actuant and APW Ltd. with respect to various pre-existing contracts
insuring Applied Power and covering risks associated with, or arising out of,
the Electronics Business. The types of policies covered by the Insurance
Agreement include, without limitation, automobile liability, comprehensive and
general liability. This Agreement also establishes certain procedures for
dealing with pending litigation, new litigation and the resolution of disputes
between the parties concerning the Insurance Matters Agreement.
<PAGE>
Employee Benefit and Compensation Matters
An Employee Benefits and Compensation Agreement will govern the rights
and obligations of API/Actuant and APW Ltd. with respect to various matters and
obligations concerning employee benefits of the former Applied Power employees
who will become employees of APW Ltd. or its subsidiaries as of the Distribution
Date. The Benefits Agreement will cover APW Ltd.'s assumption of certain
compensation and benefit obligations relative to APW Ltd.'s employees. The
Benefits Agreement will also transfer assets and liabilities under Applied
Power's 401(k) plan for certain employees to APW Ltd.'s 401(k) plan. Pursuant to
the Benefits Agreement, APW Ltd. will assume responsibility for certain benefits
previously offered by Applied Power to its employees prior to the Distribution
who become employed by APW Ltd. and will receive funds from Applied Power for
disbursement to such employees for compensation and certain employee benefits
earned prior to the Distribution.
Tax Indemnification Agreement
The Tax Sharing and Indemnification Agreement (the "Tax
Indemnification Agreement") will govern the allocation of certain tax
responsibilities between API/Actuant and its subsidiaries on the one hand and
APW Ltd. and its subsidiaries on the other hand after the Distribution. While
API/Actuant will assume and pay, and will indemnify and hold harmless APW Ltd.
and its subsidiaries from and against, all income taxes based upon income
required to be shown in Applied Power consolidated income tax returns for the
taxable year in which the Distribution occurs and all prior taxable years, in
the event of an audit of Applied Power's consolidated income tax returns for the
taxable year in which the Distribution occurs or any prior taxable year, APW
Ltd. assumes and will indemnify and hold harmless API/Actuant and its
subsidiaries after the Distribution from all income taxes (other than
Reorganization Taxes) in excess of $1,000,000 resulting from a final
determination of tax liability based upon adjustments to the separate taxable
income of APW Ltd. and its subsidiaries.
Confidentiality Agreement
As of the Distribution Date, APW Ltd. and API/Actuant will enter into
a Confidentiality and Nondisclosure Agreement whereby, subject to certain
exceptions, each party will agree to treat as confidential and not disclose
certain proprietary and other confidential information belonging to the other
company.
<PAGE>
Interim Administrative Services Agreement
As of the Distribution Date, API/Actuant and APW Ltd. (through a U.S.
subsidiary of APW Ltd.) will enter into an Interim Administrative Services
Agreement. This agreement will govern the administrative and financial services
that API/Actuant will continue to provide to APW Ltd. on an interim basis and
those which APW Ltd. will provide to API/Actuant. In general, APW Ltd. will
provide certain financial services, human resource services and information
system services for a period of six months to one year. The Interim
Administrative Services Agreement will also provide for certain financial
support, technical support, and staff support services for six months to one
year. Each party will compensate the other parties at negotiated amounts which,
APW Ltd. believes, will be comparable to rates APW Ltd. could have achieved
through arm's-length negotiations and approximate current intercompany
allocations.
FINANCING
Arrangements Related to the Distribution
APW Ltd.'s financing requirements have historically been met by Applied
Power. APW Ltd. is presently in discussions with several lenders to arrange its
own credit facilities prior to the Distribution. APW Ltd. believes that these
credit facilities, along with the cash flow from operations, will be adequate to
fund its debt service, capital expenditure and working capital requirements. We
anticipate that APW Ltd.'s credit agreements will contain financial and other
covenants and provisions customary for such arrangements.
Refinancing of Senior Subordinated Notes
In connection with the reorganization and Distribution, Applied Power
anticipates that it will repurchase the outstanding 8.75% Senior Subordinated
Notes due 2009 (the "Notes"). The aggregate principal amount of the Notes
outstanding as of February 29, 2000, was $200.0 million. In addition, Applied
Power anticipates issuing new notes (the "Offering") concurrently with obtaining
a new credit facility at API/Actuant (the "New API/Actuant Credit Facility"),
proceeds from which, if the Offering and New API/Actuant Credit Facility are
successfully completed, would be used in part to finance the repurchase of the
Notes and for general corporate purposes.
Applied Power has not determined what the terms of such a repurchase will
be nor when to begin the repurchase. Furthermore, since these transactions are
part of the current plan of restructuring and Distribution, Applied Power may
not repurchase any Notes if the restructuring and Distribution are not expected
to be completed.
<PAGE>
CAPITALIZATION
- --------------
The following table sets forth the unaudited historical capitalization of APW
Ltd. and its subsidiaries as of February 29, 2000, and unaudited pro forma
capitalization of APW Ltd. and its subsidiaries as of February 29, 2000 after
giving effect to the Distribution and the debt realignment as discussed in the
Unaudited Pro Forma Combined Financial Statements. The pro forma information may
not reflect the capitalization of APW Ltd. in the future or as it would have
been had APW Ltd. been a stand-alone company on February 29, 2000. This table
should be read in conjunction with the Combined Financial Statements of APW Ltd.
and its subsidiaries and related notes, the Unaudited Pro Forma Combined
Financial Statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations, each contained elsewhere in this
Information Statement.
<TABLE>
<CAPTION>
(in millions) February 29, 2000
Historical Pro Forma
------------ -----------
<S> <C> <C>
Short-term debt:
Allocated from Applied Power (1) $ 5.9 $ -
Borrowings under new APW Ltd. credit facility (2) (3) - 5.9
Long-term debt:
Allocated from Applied Power (1) 632.9 -
Borrowings under new APW Ltd. credit facility (2) (3) - 241.0
Pound Sterling credit agreement 14.7 14.7
Other 27.3 27.3
------------ -----------
Total debt 680.8 288.9
------------ -----------
Common stock (2) (4) - 0.4
Share premium (2) (4) - 636.9
Accumulated other comprehensive income (8.8) (8.8)
Combined equity (4) (5) 245.4 -
------------ -----------
Total equity 236.6 628.5
------------ -----------
Total capitalization $ 917.4 $ 917.4
============ ===========
Debt to total capitalization 74% 31%
</TABLE>
(1) Applied Power's historical practice has been to incur indebtedness for its
consolidated businesses at the parent company level or at a limited number
of subsidiaries, rather than at the operating company level, and to
centrally manage various cash functions. Accordingly, historical amounts
include debt and related interest expense allocated to APW Ltd. from
Applied Power based on the portion of Applied Power's investment in APW
Ltd. which is deemed to be debt. This allocation is generally based upon a
cash flow model which details the historical uses of debt proceeds by APW
Ltd. and the deemed debt repayments by APW Ltd. based on free cash flow.
Management believes that the allocation of corporate debt and related
interest expense for the historical periods is reasonable. This historical
allocation, however, is not indicative of the total amount of debt that APW
Ltd. will have upon completion of Applied Power's realignment of its
consolidated debt before the Distribution. See Unaudited Pro Forma Combined
Financial Statements of APW Ltd. for further discussion of APW Ltd. debt
levels after the Distribution.
(2) The Pro forma adjustment to debt and equity reflects the change in
allocated debt from Applied Power to APW Ltd. that is a result of the debt
realignment. The debt realignment contemplates allocating to APW Ltd. the
remaining Applied Power debt balance outstanding after payment of costs
associated with the Distribution, including transaction costs, estimated
federal taxes from the reorganization and expenses in connection with
redeeming the Applied Power Subordinated Notes, the receipt of proceeds
from the anticipated divestiture of Air Cargo Equipment Company and Barry
Wright Corporation, the completion of sale-leaseback transactions and the
additional allocation of $392 million of debt to API/Actuant.
<PAGE>
(3) APW Ltd. is in the process of arranging a multi-currency revolving credit
facility with a group of banks. The credit facility will be used to support
working capital requirements and for other general corporate purposes when
APW Ltd. becomes a stand-alone company.
(4) The Distribution is reflected as the elimination of Applied Power's net
investment in APW Ltd. and the issuance of an estimated 39.1 million shares
of APW Ltd. common stock, par value $0.01 per share. This is based on the
number of shares of Applied Power common stock outstanding on February 29,
2000 and the distribution ratio of one share of APW Ltd. common stock for
every one share of Applied Power common stock issued and outstanding.
(5) The "Combined equity" caption represents Applied Power's cumulative net
investment in the combined businesses of APW Ltd. and its subsidiaries.
Changes in the "Combined equity" caption represent the net income (loss) of
APW Ltd. and its subsidiaries, net cash and noncash contributions from
(distributions to) Applied Power, changes in allocated corporate debt and
allocated corporate interest, net of tax. See the accompanying Combined
Statements of Equity and Comprehensive Income for an analysis of the
activity in the "Combined equity" caption for the three years ended August
31, 1999 and the six months ended February 29, 2000.
<PAGE>
APW LTD. UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined statements of earnings and unaudited
pro forma combined balance sheet present the combined results of APW Ltd. and
its subsidiaries and its financial position, assuming that the transactions
contemplated by the Distribution had been completed as of September 1, 1998 for
statement of earnings purposes and as of February 29, 2000 for balance sheet
purposes.
The unaudited pro forma information has been prepared utilizing the historical
combined financial statements of APW Ltd. and its subsidiaries. You should read
this information in conjunction with the historical combined financial
statements and related notes thereto included elsewhere in this Information
Statement. We have included the unaudited pro forma financial data as required
by the rules and regulations of the SEC and, as such, it is for comparative
purposes only. The unaudited pro forma financial data does not purport to be
indicative of the results of APW Ltd. and its subsidiaries in the future or what
the financial position and results of operations would have been had APW Ltd.
been a separate, stand-alone entity during the periods shown.
APW Ltd.
Unaudited Pro Forma Combined Statement of Earnings
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended February 29, 2000
----------------------------------------------
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- ---------
<S> <C> <C> <C>
Net sales $566,216 $ - $566,216
Cost of products sold 416,517 - 416,517
-------- ------- --------
Gross profit 149,699 - 149,699
Engineering, selling and administrative expenses 91,859 2,314 (1) 94,173
Amortization of intangible assets 11,842 - 11,842
Corporate reorganization expenses 2,162 (2,162) (2) -
-------- ------- --------
Operating earnings 43,836 (152) 43,684
Other expense (income)
Net financing costs 23,567 (9,665) (3)(4) 13,902
Other - net 1,353 - 1,353
-------- ------- --------
Earnings before income tax expense 18,916 9,513 28,429
Income tax expense 7,972 557 (5) 8,529
-------- ------- --------
Net earnings before extraordinary item 10,944 8,956 19,900
Extraordinary loss on early retirement of debt,
net of income tax benefit of $1,250 (2,083) 2,083 (6) -
-------- ------- --------
Net earnings $ 8,861 $11,039 $ 19,900
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements
<PAGE>
APW Ltd.
Unaudited Pro Forma Combined Statement of Earnings
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended August 31, 1999
----------------------------------------------
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- ---------
<S> <C> <C> <C>
Net sales $1,055,338 $ - $1,055,338
Cost of products sold 763,585 - 763,585
---------- ----------- ----------
Gross profit 291,753 - 291,753
Engineering, selling and administrative expenses 187,991 4,623 (1) 192,614
Amortization of intangible assets 20,876 - 20,876
---------- ----------- ----------
Operating earnings 82,886 (4,623) 78,263
Other expense (income)
Net financing costs 52,857 (25,269) (3) 27,588
Other -- net (1,786) - (1,786)
---------- ----------- ----------
Earnings before income tax expense 31,815 20,646 52,461
Income tax expense 11,390 4,348 (5) 15,738
---------- ----------- ----------
Net earnings $ 20,425 $ 16,298 $ 36,723
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements
<PAGE>
APW Ltd.
Unaudited Pro Forma Combined Balance Sheet
(Dollars in Thousands)
<TABLE>
<CAPTION>
February 29, 2000
----------------------------------------------------------
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- ----------
<S> <C> <C> <C>
ASSETS
- ------
Current assets
Cash and cash equivalents $ 250 $ - $ 250
Accounts receivable, net 98,656 - 98,656
Inventories, net 130,599 - 130,599
Prepaid expenses 10,482 - 10,482
Deferred income taxes 7,517 - 7,517
---------- --------- ----------
Total current assets 247,504 - 247,504
Property, plant and equipment 371,591 - 371,591
Less: accumulated depreciation (176,744) - (176,744)
---------- --------- ----------
Net property, plant and equipment 194,847 - 194,847
Goodwill, net of accumulated amortization 682,612 - 682,612
Other intangibles, net of accumulated 11,154 - 11,154
amortization
Other assets 48,385 - 48,385
---------- --------- ----------
Total assets $1,184,502 $ - $1,184,502
========== ========= ==========
LIABILITIES AND EQUITY
- ----------------------
Current liabilities
Short-term borrowings $ 5,904 $ - $ 5,904
Trade accounts payable 102,840 - 102,840
Accrued compensation and benefits 24,449 - 24,449
Income taxes payable 38,108 - 38,108
Other current liabilities 49,036 - 49,036
---------- --------- ----------
Total current liabilities 220,337 - 220,337
Long-term debt 674,885 (391,858) (7) 283,027
Deferred income taxes 8,149 - 8,149
Other deferred liabilities 44,476 - 44,476
Equity
Common stock - 391 (7) 391
Share premium - 636,912 (7) 636,912
Combined equity (8) 245,445 (245,445) (7) -
Accumulated other comprehensive income (8,790) - (8,790)
---------- --------- ----------
Total equity 236,655 391,858 628,513
---------- --------- ----------
Total liabilities and equity $1,184,502 $ - $1,184,502
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements
<PAGE>
Notes to Pro Forma Combined Financial Statements
(1) Pro forma adjustments to engineering, selling and administrative expenses
of $2.3 million for the six months ended February 29, 2000 and $4.6 million
for the twelve months ended August 31, 1999 represent the incremental costs
that would have been incurred by APW Ltd. for general corporate expenses if
the transaction discussed in the Distribution would have occurred on
September 1, 1998, the beginning of fiscal 1999. For the six months ended
February 29, 2000 and twelve months ended August 31, 1999, the aggregate
total of Pro Forma general corporate expenses in these Pro Forma financial
statements is $6.0 million and $12.0 million, respectively.
(2) Pro forma adjustment reflects the exclusion of APW Ltd.'s allocated portion
of a one-time charge incurred by Applied Power associated with the
transaction discussed in the Distribution. These pro forma statements of
earnings reflect the transaction discussed in the Distribution as having
taken place at September 1, 1998 and as such, the charge is excluded given
that these corporate reorganization expenses would have been incurred by
APW Ltd. before the Distribution.
(3) Pro forma adjustment reflects an adjustment to net financing costs based on
the debt realignment anticipated with the transaction. The debt
realignment contemplates allocating APW Ltd. the remaining Applied Power
debt balance outstanding after payment of costs associated with the
Distribution, including transaction costs, estimated federal taxes from the
reorganization and expenses in connection with redeeming the Applied Power
Subordinated Notes, the receipt of proceeds from the anticipated
divestiture of Air Cargo Equipment and Barry Wright Corporation, the
completion of sale-leaseback transactions and the additional allocation of
$392 million in debt to API/Actuant. The pro forma adjustment is a result
of APW Ltd.'s lower anticipated indebtedness and subsequent lower financing
costs as a result of the debt realignment. The weighted average interest
rate used to calculate pro forma net financing costs for the six months
ended February 29, 2000 and the twelve months ended August 31, 1999 was
7.75%. A 0.25% change in the interest rate would result in a $0.5 million
and a $0.7 million change in pro forma net financing costs for the six
months ended February 29, 2000 and for the twelve months ended August 31,
1999, respectively.
(4) Pro forma adjustment represents the reversal of APW Ltd.'s allocated
portion of net gain associated with the unwinding of interest rate swap
agreements by Applied Power in conjunction with final debt payments. The
unwinding of the swaps and recording of the resulting gain was initiated by
Applied Power in anticipation of the transaction discussed in the
Distribution. These pro forma statements of earnings reflect the results of
APW Ltd. as if the transaction occurred at September 1, 1998 and, as such,
the swap gains are appropriately excluded given that this gain would have
been incurred by APW Ltd. before the Distribution.
(5) Pro forma adjustment to income tax expense represents the anticipated lower
effective tax rate of 30% (versus the historical effective tax rates of
42.1% and 35.8% for the six months ended February 29, 2000 and the year
ended August 31, 1999, respectively) on the higher pro forma pre-tax
earnings that APW Ltd. will be subject to after its incorporation in
Bermuda, as discussed in the Distribution.
(6) The pro forma adjustment represents the exclusion of the extraordinary loss
on the early retirement of debt that was recorded during the six months
ended February 29, 2000, which was incurred in anticipation of the
transaction. The Pro Forma Combined Statement of Earnings presents the
results of APW Ltd. as if the transaction discussed in the Distribution had
occurred on September 1, 1998. Because the extraordinary loss was incurred
by APW Ltd. before the Distribution, the pro forma results should exclude
this loss.
(7) The pro forma adjustment to debt and equity reflects the change in
allocated debt from Applied Power to APW Ltd. that is a result of the debt
realignment discussed in Note (3) above. In addition, the pro forma
adjustment reflects the Distribution as the elimination of Applied Power's
net investment in APW Ltd. and the issuance of an estimated 39.1 million
share of APW Ltd. common stock.
(8) The "Combined equity" caption in the Pro Forma Combined Balance Sheet
represents Applied Power's cumulative net investment in the combined
business of APW Ltd. Changes in the "Combined equity" caption represent
the net income (loss) of APW Ltd., net cash and noncash contributions from
(distributions to) Applied Power, changes in allocated corporate debt and
allocated corporate interest, net of tax.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
--------------------------------------------------------------------------
OPERATIONS
----------
The following discussion of the financial condition and results of
operations of APW Ltd. and its subsidiaries should be read in conjunction with
the accompanying Combined Financial Statements of APW Ltd. and its subsidiaries,
and related notes thereto, included in this Information Statement. The Combined
Financial Statements of APW Ltd. and its subsidiaries generally reflect the
financial position, results of operations and cash flows of the operations
expected to be transferred to APW Ltd. from Applied Power in connection with the
Distribution. Accordingly, APW Ltd.'s Combined Financial Statements have been
carved out from the consolidated financial statements of Applied Power using the
historical results of operations and historical basis of the assets and
liabilities of APW Ltd.'s businesses and the allocation methodology described
under "Allocations" below. Management believes the assumptions underlying APW
Ltd.'s financial statements are reasonable.
Overview
On January 27, 2000, Applied Power's board of directors authorized various
actions intended to put Applied Power in a position to distribute its
Electronics Business segment (APW Ltd.) to its shareholders. In the
Distribution, Applied Power shareholders will receive one share of APW Ltd.
common stock for each share of Applied Power common stock held in the form of a
special dividend, and APW Ltd. will become a separately traded, publicly held
company. As part of the Distribution, APW Ltd. will be converted to a Bermuda
corporation. The Distribution should be tax-free to Applied Power shareholders.
APW Ltd. is a leading global electronic manufacturing services (EMS)
provider focused on the rapidly growing integrated electronic enclosure systems
market. Operating in over 50 locations throughout North America, Europe and
Asia, APW Ltd. supplies a broad range of individual components and integrated
manufacturing services to OEM's primarily in the datacom, networking, computing
and telecommunications markets. APW Ltd. provides a comprehensive portfolio of
electronic products, including electronic enclosures, power supplies, thermal
management systems, backplanes and cabling, either as individual standard
products, or as integrated custom systems. In addition, APW Ltd. provides a wide
range of integrated design, manufacturing and logistics services to their
customers, including product design, supply chain management, manufacturing,
assembly, testing and drop-shipping capabilities.
Since September 1996, APW Ltd. has completed 17 acquisitions of EMS
companies. These acquisitions have allowed APW Ltd. and its subsidiaries to
strengthen their product and service offering, establish their leading global
capabilities and diversify their customer base. Through these acquisitions and
internal growth, APW Ltd. has established a leading global position in the
integrated enclosure systems segment of the EMS industry.
APW Ltd.'s customers include industry leaders such as Applied Materials,
Cisco, Compaq, Dell, EMC, Ericsson, Fujitsu, Hewlett Packard, IBM, Lucent,
Motorola, NCR, Nortel Networks and Sun Microsystems. APW Ltd. believes that
these customers provide substantial growth opportunities due to their
significant rate of organic growth and their increased utilization of outsourced
manufacturing services.
<PAGE>
Business Combinations
Six Months Ended February 29, 2000 -
On January 28, 2000, APW Ltd., through a wholly-owned subsidiary, acquired all
of the outstanding stock of Metalade of Pennsylvania, Inc. ("Metalade").
Metalade specializes in metal fabrication relating to electronic enclosures. The
purchase price of the acquisition totaled $8.7 million, including fees and
expenses, plus future consideration not to exceed $5.0 million based on future
achieved sales levels. The acquisition was funded by borrowings under current
Applied Power credit facilities. The acquisition has been accounted for using
the purchase method and the results of operations of Metalade have been included
in the Combined Statements of Earnings from the acquisition date. Preliminary
allocations of the purchase price resulted in approximately $6.7 million of
goodwill.
Fiscal 1999 -
On September 29, 1998, APW Ltd., through its wholly-owned subsidiary, APW
Enclosure Systems Limited, accepted for payment all shares of Rubicon Group plc
("Rubicon") common stock which had been tendered pursuant to the APW Enclosure
Systems Limited tender offer for all outstanding shares of common stock at 2.35
pounds sterling per share and all outstanding shares of cumulative preferred
stock at 0.50 pounds sterling per share, which constituted control. Subsequently
the remaining outstanding common shares were acquired. Rubicon is a leading
provider of electronic manufacturing services and engineered magnetic solutions
to major OEMs in the information technology and telecommunication industries.
The acquisition was recorded using the purchase method of accounting.
Consideration for the transaction totaled approximately $371.5 million,
including related fees and expenses, with the purchase price resulting in $340.6
million of goodwill. Funds for the acquisition were provided through Applied
Power's revolving credit facility.
In June 1999, APW Ltd., through a wholly-owned subsidiary, acquired all of
the outstanding stock of Innovative Metal Fabrication, Inc. ("Innovative").
Innovative designs and manufactures technical environments used in electronic
assembly operations, as well as electronic gaming enclosures, in two sites in
Grass Valley, CA and Austin, TX. In May 1999, APW Ltd. also acquired certain
assets of Connector Technology, Inc. ("CTI") of Anaheim, CA. CTI, which
manufactures custom backplanes, was integrated with APW Ltd.'s Electronic
Solutions business unit. The acquisition was recorded using the purchase method
of accounting. The purchase price of the combined Innovative and CTI
acquisitions totaled approximately $13.0 million, including fees and expenses.
The acquisitions were accounted for under the purchase accounting method and
resulted in $7.7 million of goodwill.
Fiscal 1998
On June 5, 1998, Applied Power Limited, a United Kingdom subsidiary of APW
Ltd., accepted for payment all of the VERO Group plc ("VERO") stock tendered,
which totaled over 72% of the outstanding VERO shares, pursuant to Applied Power
Limited's tender offer to acquire the entire issued share capital of VERO at a
price of 192 pence per VERO share (the "Offer"). Applied Power Limited had
previously acquired approximately 10% of VERO's shares, so that after accepting
the shares tendered, Applied Power Limited owned or had accepted over 82% of
VERO's shares. On June 19, 1998, Applied Power Limited announced that additional
shares tendered brought the total of the shares it owned or had accepted for
payment to over 90% of VERO's issued share capital and that it would invoke
Section 429 of the U.K. Companies Act of 1985, as amended, to acquire the
remaining outstanding shares of VERO stock. After the required procedures were
completed, Applied Power Limited owned all of the issued share capital of VERO.
Cash paid for the transaction totaled approximately $191.7 million. Allocations
of the purchase price resulted in approximately $183.8 million of goodwill. VERO
is a United Kingdom based company that manufactures electronic enclosures,
racks, backplanes and power supplies. The acquisition has been recorded using
the purchase method of accounting. The operating results of VERO subsequent to
June 5, 1998 are included in the Combined Statements of Earnings.
On July 31, 1998, Applied Power completed its merger with ZERO Corporation
("ZERO"), a leading supplier of electrical and electronic system enclosure
products and thermal management products. Approximately 10.6 million shares of
Applied Power common stock were issued in exchange for all outstanding common
stock of ZERO while Applied Power assumed outstanding options to purchase ZERO
common stock that were converted into options to purchase approximately 0.6
million shares of Applied Power's common stock pursuant to the terms of the
merger. The merger has been accounted for as a pooling of interests. As such,
the historical financial results for ZERO's Electronics Businesses have been
included in this Form 10 for all years presented. Prior to the merger, ZERO had
a March 31 fiscal year end. APW Ltd.'s historical results for the year ended
August 31, 1998 have been combined using an August 31 year end for both ZERO's
and Applied Power's Electronics Businesses. For all years preceding the merger,
APW Ltd.'s results of operations and financial position reflect the combination
of ZERO's Electronics Businesses with a March 31 fiscal year end and Applied
Power's Electronics Businesses with an August 31 fiscal year end. Net sales and
net income for ZERO's Electronics Businesses for the period April 1, 1997
through August 31, 1997 (which results are not included in APW Ltd.'s historical
combined results) were $89.7 million and $7.5 million, respectively.
In addition to the above transaction, during fiscal year 1998, APW Ltd.
acquired several other businesses to expand its presence within the electronic
enclosures market and to further execute its growth strategy within the EMS
industry. In October 1997, Applied Power acquired all of the outstanding stock
of Versa Technologies Inc.(Versa/tek). Eder Industries, based out of Milwaukee,
Wisconsin, is the sole Electronics Business of Versa/tek to be included in
<PAGE>
APW Ltd. or its subsidaries. Substantially all of the assets of Performance
Manufactured Products Inc., located in San Jose, California, and a related
entity ("PMP") were acquired in January 1998. In February 1998, APW Ltd.
acquired AA Manufacturing, Inc. ("AA"), located in Garland, Texas. APW Ltd.
purchased certain assets of Product Technology Inc. ("PTI"), located in Irvine,
California, in May 1998. Premier Industries ("Premier"), located in Hudson, New
Hampshire, was purchased in May 1998. Finally, APW Ltd. purchased certain assets
of Brown Manufacturing Company ("Brown"), located in Austin, Texas, in June
1998. All of the above acquisitions in aggregate relate to electronic enclosures
manufacturing, assembly, integration and critical component support such as
backplanes, thermal management and power supplies.
Fiscal 1997
During the 1997 fiscal year, APW Ltd. began its aggressive growth strategy
into the electronic enclosures market by acquiring several businesses. Certain
assets of Everest Electronic Equipment, Inc. ("Everest") were acquired on
September 26, 1996. Everest manufactures electronic enclosures and is
headquartered in Anaheim, California. On January 13, 1997, APW Ltd. acquired C
Fab Group Limited ("C Fab"), located in Dublin, Ireland, which also manufactures
electronic enclosures. APW Ltd. purchased certain assets of All-Round Systemen
B.V. ("All-Round") on April 1, 1997. All-Round was a technical environments
distributor based in the Netherlands. Another electronic equipment business,
Hormann Security Systems Limited ("Hormann"), was purchased on June 5, 1997.
Hormann is headquartered in Cork, Ireland.
In all, APW Ltd. has invested approximately $1.1 billion since 1996 to
carry out its electronics acquisition strategy. APW Ltd. intends to continue
this strategy of growth via acquisitions.
For further information regarding these acquisitions, see Note 3 - "Merger
and Acquisitions" in Notes to Combined Financial Statements.
Results of Operations
- ---------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
($ Millions) Six Months Ended
Years Ended August 31, February
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1998(2) 1999 28, 1999 29, 2000(1)
- -------------------------------------------------------------------------------------------------------------------
Net Sales 375.3 593.2 1,055.3 513.2 566.2
% increase/(decrease) from prior 58.1% 77.9% 10.3%
period
Gross Profit 146.7 204.2 291.8 139.9 149.7
% increase/(decrease) from prior 39.2% 42.9% 7.0%
period
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <S>
Operating Expenses 84.8 125.2 188.0 91.4 91.9
% increase/(decrease) from prior 47.6% 50.2% 0.6%
period
Amortization of Intangible Assets 3.0 7.8 20.9 9.7 11.8
% increase/(decrease) from prior 160.0% 168.0% 21.7%
period
Operating Earnings 58.8 71.3 82.9 38.7 46.0
% increase/(decrease) from prior 21.3% 16.3% 18.9%
period
Net Financing Costs 9.5 16.6 52.9 23.6 23.6
% increase/(decrease) from prior 74.7% 218.7% 0.0%
period
Net Other (Income) Expense (1.3) (2.2) (1.8) (1.3) 1.4
% increase /(decrease) from 69.2% (18.2)% (207.7)%
prior period
Earnings Before Income Tax Expense 50.6 56.8 31.8 16.4 21.1
% increase/(decrease) from prior 12.3% (44.0)% 28.7%
period
Income Tax Expense 18.9 21.3 11.4 5.4 8.8
% increase/(decrease) from prior 12.7% (46.5)% 63.0%
period
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net Earnings 31.7 35.5 20.4 11.0 12.3
% increase/(decrease) from prior period 12.0% (42.5)% 11.8%
===============================================================================================================================
===============================================================================================================================
(as a percentage of Net Sales) Years Ended August 31, Six Months Ended
February
===============================================================================================================================
===============================================================================================================================
1997 1998(2) 1999 28, 1999 29, 2000(1)
===============================================================================================================================
Net Sales 100.0% 100.0% 100.0% 100.0% 100.0%
Gross Profit 39.1% 34.4% 27.7% 27.3% 26.4%
Operating Expenses 22.6% 21.1% 17.8% 17.8% 16.2%
Amortization of Intangible Assets 0.8% 1.3% 2.0% 1.9% 2.1%
Operating Earnings 15.7% 12.0% 7.8% 7.5% 8.1%
Net Financing Costs 2.5% 2.8% 5.0% 4.6% 4.2%
Earnings Before Income Tax Expense 13.5% 9.6% 3.0% 3.2% 3.7%
Income Tax Expense 5.0% 3.6% 1.1% 1.1% 1.6%
Net Earnings 8.4% 6.0% 1.9% 2.1% 2.2%
===============================================================================================================================
</TABLE>
1. Results of operations in fiscal 2000 exclude (i) a $3.3 million make-whole
premium ($2.1 million net of tax benefit) paid for the early retirement of
debt which is recorded as an extraordinary charge, net of tax and (ii) a $2.2
million allocated charge for costs associated with Distribution of the
Electronics Business from Applied Power and incorporating APW Ltd. in
Bermuda. See Note 8 -"Merger, Restructuring and Other Non-recurring Items" in
Notes to Combined Financial Statements for further discussion.
-5-
<PAGE>
2. Operating results in fiscal 1998, as shown herein, exclude non-recurring
allocated charges related to ZERO merger, plant consolidation and product
rationalization costs of $27.9 million before tax, $21.1 million net of
applicable income tax. Fiscal 1998 results also exclude an allocated pre-
tax net gain of $6.5 million for gains recognized by ZERO for life
insurance proceeds and sale of property. See Note 8 - "Merger,
Restructuring and Other Non-recurring Items" in Notes to Combined Financial
Statements for further discussion.
Allocations
Applied Power provides certain general and administrative services to APW
Ltd. including administration, finance, legal, tax, treasury, information
systems, corporate communications and human resources. The cost for these
services was allocated to APW Ltd. by Applied Power based upon a formula that
includes sales, operating profit, assets and headcount. Management of Applied
Power believes that the allocation of cost for these services is reasonable.
After the Distribution, APW Ltd. will be required to perform these general and
administrative services using its own resources or purchased services and will
be responsible for the costs and expenses associated with the management of a
public company.
Applied Power's historical practice has been to incur indebtedness for its
consolidated businesses at the parent company level or at a limited number of
subsidiaries, rather than at the operating company level, and to centrally
manage various cash functions. Accordingly, historical amounts for APW Ltd.
include debt and related interest expense allocated from Applied Power based on
the portion of Applied Power's investment in APW Ltd. which is deemed to be
debt. This allocation is generally based upon a cash flow model which details
the historical uses of debt proceeds by APW Ltd. and the deemed debt repayments
by APW Ltd. based on free cash flow. Management believes that the allocation of
corporate debt and related interest expense for the historical periods is
reasonable. This historical allocation, however, is not indicative of the total
amount of debt that APW Ltd. will have upon completion of Applied Power's
realignment of its consolidated debt before the Distribution. See "Unaudited Pro
Forma Combined Financial Statements" of APW Ltd. for further discussion of APW
Ltd. debt levels after the Distribution.
The allocation methodology followed in preparing the combined financial
statements may not necessarily reflect the results of operations, cash flows, or
financial position of APW Ltd. in the future, or what the results would have
been had APW Ltd. been a separate stand-alone public entity for all periods
presented.
The following table displays total Applied Power debt, interest expense
and general corporate expenses along with APW Ltd.'s allocated share of those
items recorded in the accompanying Combined Financial Statements:
<TABLE>
<CAPTION>
===========================================================================================================
($ Millions) Years Ended August 31, Six Months Ended
February
===========================================================================================================
===========================================================================================================
1997 1998 1999 28, 1999 29, 2000
===========================================================================================================
<S> <C> <C> <C> <C> <C>
Applied Power - Total Debt $ 174.6 $ 512.6 $ 808.7 $ 876.4 $ 795.3
Allocated to APW Ltd. 119.9 367.8 728.8 715.7 680.8
Applied Power - Net Financing Costs 16.2 28.5 63.9 29.4 28.4
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Allocated to APW Ltd. 9.5 16.6 52.9 23.6 23.6
Applied Power - General Corporate 15.2 17.5 12.1 6.0 5.9
Expenses (1)
Allocated to APW Ltd. (1) 7.1 9.8 7.4 3.7 3.7
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excludes corporate reorganization expenses as well as fiscal 1998
restructuring charges.
SIX MONTHS ENDED FEBRUARY 29, 2000 COMPARED TO SIX MONTHS ENDED FEBRUARY 28,
1999
NET EARNINGS. Net earnings for the first half of fiscal 2000 were $8.9
million. Excluding one time items recorded in fiscal 2000, net earnings were
$12.3 million, an increase of 12% over the $11.0 million in the prior year first
half. The one-time items in fiscal 2000 relate to (i) a $2.2 million allocated
pre-tax charge, $1.4 million after-tax, related to costs incurred associated
with the Distribution and costs to incorporate APW Ltd. in Bermuda; and (ii) a
$2.1 million after-tax extraordinary charge related to a make-whole premium paid
in connection with the early retirement of the $50.0 million senior promissory
notes due March 8, 2011. The senior promissory notes were issued by an
Electronics entity, therefore, the entire extraordinary charge was allocated to
APW Ltd.
NET SALES. Sales for the six months ended February 29, 2000 were $566.2
million, an increase of 10% over the $513.2 million reported in the comparable
prior year period. Foreign currency translation had a 3% negative effect on
reported fiscal 2000 first half sales. Internal growth contributed to the
majority of this growth.
GROSS PROFIT. Fiscal 2000 first half gross profit dollars increased by 7%
over the comparable prior year period from $139.9 million to $149.7 million. As
a percentage of net sales, gross profit declined from 27% in the prior year
first half to 26% in the current year half. As compared to the prior year
period, both the increase in gross profit dollars and the decline in gross
profit as a percentage of sales were a result of lower margin integration
business accounting for a greater percentage of total revenues.
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES. Fiscal 2000 first half
engineering, selling and administrative ("ESA") expenses were 0.5% higher than
that reported in the first half of fiscal 1999. ESA expenses have remained
relatively flat despite additional ESA expenses being incurred from businesses
acquired since or during the first half of fiscal 1999. This increase in ESA
expenses from acquisitions is being offset by lower ESA expenses due to
initiatives in place to aggressively manage spending levels and to integrate
acquired businesses into APW Ltd. In total, ESA expenses were reduced to 16% of
net sales for the current year six months ended compared to 18% for the prior
year six months ended. The reduction was the result of the continued efforts
discussed above to manage spending levels throughout APW Ltd., along with the
incremental growth of integration business, which typically has a lower
percentage of ESA expenses to sales.
Historical ESA expenses include an allocation of Applied Power's corporate
general and administrative expenses based upon estimated levels of effort
devoted to APW Ltd. and the relative size of APW Ltd. compared to Applied
Power's total revenues, operating profit, assets and employee headcount.
Management believes that the allocation of Applied Power's corporate general and
administrative expense for the historical periods is reasonable. APW Ltd.
expects that costs for these general corporate type
<PAGE>
functions will differ following the Distribution. See "Allocations" above for
further discussion of ESA expenses allocated to APW Ltd. from Applied Power.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization expense for the first six
months of fiscal 2000 was higher than that reported for the first six months of
fiscal 1999 due to the acquisitions made during and subsequent to the first half
of fiscal 1999, which include Innovative, Metalade and one additional month of
amortization for Rubicon.
CORPORATE REORGANIZATION EXPENSE. In the second quarter of fiscal 2000,
Applied Power allocated to APW Ltd. $2.2 million of fees and expenses associated
with the Distribution and incorporation of APW Ltd. in Bermuda. Those fees and
expenses represent APW Ltd.'s allocated portion of legal, accounting, tax and
investment banking fees incurred through February 29, 2000 for services related
to the transactions.
OPERATING EARNINGS. Operating profit margin remained flat for the first
half of fiscal 2000 compared to the first half of fiscal 1999.
NET FINANCING COSTS. For the first six months of fiscal 2000, net financing
costs included a $3.3 million allocated portion of a pre-tax gain related to the
unwinding of interest rate swap agreements in conjunction with final debt
payments. The interest rate swap agreements were unwound by Applied Power in the
second quarter of fiscal 2000 and a portion of the associated gain was allocated
to APW Ltd. Excluding the interest rate swap gains, net financing costs for the
six months ended February 29, 2000 increased over the comparable prior year
period primarily as a result of additional borrowings incurred to finance
acquisitions completed during and subsequent to the first half of fiscal 1999,
coupled with higher interest rates in effect during the current year period. See
"Allocations" above for further discussion of net financing costs allocated to
APW Ltd. from Applied Power.
INCOME TAX EXPENSE. APW Ltd.'s effective tax rate for the first half of
fiscal 2000 was 42.1%, compared to 32.9% in the first half of fiscal 1999. The
goodwill and subsequent amortization expense recorded as a result of most of APW
Ltd.'s acquisitions is non-deductible for tax purposes. In addition, the
effective tax rate increased between periods due to a change in the mix of
domestic and foreign income. The effective tax rate was higher than the
statutory rate in both periods primarily as a result of state income taxes and
non-deductible amortization of goodwill, offset by net effects of foreign tax
rates and credits.
Management believes that APW Ltd.'s effective tax rate should decrease
significantly once APW Ltd. becomes a Bermuda corporation.
EXTRAORDINARY CHARGE. The fiscal 2000 first half results include a $2.1
million after-tax extraordinary charge related to a make-whole premium paid in
connection with the early retirement of the $50.0 million senior promissory
notes of a business unit of APW Ltd. due March 8, 2011.
<TABLE>
<CAPTION>
LIQUIDITY AND CAPITAL RESOURCES.
Cash Flows-
Cash Provided By (Used In) Six months ended Six months ended
- -------------------------------------------------------------------------------
(in millions) February 28, 1999 February 29, 2000
- -------------------------------------------------------------------------------
<S> <C> <C>
Operating activities $ 29.2 $ 7.3
Investing activities (399.9) (28.6)
</TABLE>
<PAGE>
Financing activities 372.1 6.2
- --------------------------------------------------------------------------------
Cash and cash equivalents totaled $0.3 million at February 29, 2000 and $2.9
million at February 28, 1999. In order to minimize net financing costs, the
Company intentionally maintains low cash balances by using available cash to
reduce short-term bank borrowings.
Net cash generated from operations, after considering non-cash items and
changes in operating assets and liabilities, decreased between periods due to a
temporary build up in working capital.
Net cash used in investing activities totaled $28.6 million for the first
half of fiscal 2000. Investing activities included $18.1 million for capital
expenditures and $10.7 million for business acquisitions and investments in
unconsolidated affiliates.
Financing activities in the first six months of fiscal 2000 included $52.3
million of net cash investments by and advances from Applied Power, offset by
$45.3 million of net principal payments on long-term debt, the majority of which
being the $50.0 million of senior promissory notes, due March 8, 2011, plus the
$3.3 million make-whole premium paid for the early retirement of the promissory
notes. In addition, $12.5 million of additional borrowings were drawn on a
United Kingdom revolver.
Capitalization-
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Total Capitalization Percentage of Total Capitalization
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
( $'s in millions ) August 31, February 29, August 31, February 29,
1999 2000 1999 2000
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Debt $728.8 $680.8 80% 73%
Total Equity 172.8 236.6 19% 26%
Deferred Income Taxes 8.1 8.1 1% 1%
- ----------------------------------------------------------------------------------------------------------
Total $909.7 $925.5 100% 100%
=========================================================================================================
</TABLE>
See "Allocations" for discussion of Applied Power debt allocated to APW Ltd.
"Total equity" in APW Ltd.'s combined financial statements includes "Combined
equity" which represents Applied Power's cumulative net investment in the
combined businesses of APW Ltd. and its subsidiaries. Changes in "Combined
equity" represent the net income (loss) of APW Ltd. and its subsidiaries, net
cash and noncash contributions from (distributions to) Applied Power, changes in
allocated corporate debt and allocated corporate interest, net of tax. "Total
Equity" also includes "Accumulated Other Comprehensive Income" which represents
foreign currency translation adjustments.
Outstanding debt at February 29, 2000 totaled $680.8 million, a decrease of
approximately $48.0 million since the beginning of the fiscal year. Net
repayments of debt of approximately $45.3 million, offset by additional debt
incurred to fund the Metalade acquisition, contributed to this decrease.
To reduce risk of interest rate increases, APW Ltd. will periodically enter
into interest rate swap agreements. Currently, APW Ltd.'s interest rate swap
activity is not significant.
Capital Commitments-
<PAGE>
During the next several years, a significant portion of APW Ltd.'s cash flow
is expected to be used to fund business acquisitions, to fund capital
expenditures and to service indebtedness. APW Ltd. periodically evaluates
electronics businesses for potential investment, consistent with its strategic
objectives. Management intends that any acquisition which requires significant
funding would be financed using APW Ltd.'s bank facilities and, depending upon
market conditions, APW Ltd.'s common stock.
APW Ltd. estimates that capital expenditures aggregating approximately $40.0
million will be required during fiscal 2000 to complete equipment, facility and
information technology upgrade and expansion projects. Certain commitments have
been made in connection with those projects.
Liquidity-
In March 2000, APW Ltd. began to take initial steps to obtain financing on a
stand-alone basis, in order to operate as an independent company from Applied
Power. Prior to the Distribution, APW Ltd. expects to enter into multi-currency
revolving credit facilities with a group of banks. In addition, APW Ltd. intends
to establish short-term lines of credit and a receivable financing facility with
a variety of banks. Applied Power believes that both for APW Ltd. and for
API/Actuant, future credit facilities or other borrowings, plus funds generated
from operations, will be adequate to meet operating, debt service and capital
expenditure requirements for the foreseeable future.
Before the Distribution occurs, Applied Power intends to initiate a
realignment of its debt. The debt realignment contemplates allocating to APW
Ltd. the remaining Applied Power debt balance outstanding after payment of
Distribution transaction costs, the payment of estimated Federal Income Tax in
connection with incorporating APW Ltd. in Bermuda, the receipt of proceeds from
the anticipated divestiture of Air Cargo Equipment Company and Barry Wright
Corporation, the payment of charges and expenses in repurchasing Applied Power's
existing $200 million senior subordinated notes, the completion of sale-
leaseback transactions and the additional allocation of approximately $392
million of debt to API/Actuant. This debt realignment will significantly reduce
the amount of debt that is currently being allocated to APW Ltd. from Applied
Power.
FISCAL 1999 COMPARED TO FISCAL 1998 COMPARED TO FISCAL 1997
NET SALES. Fiscal 1999 sales increased $462.1 million, or 78%, over fiscal
1998. The acquisition of Rubicon and Innovative in fiscal 1999 and inclusion of
a full year sales of the Vero, AA Manufacturing, PMP, PTI, Premier and Brown
locations acquired in fiscal 1998 contributed $427.8 million in sales in fiscal
1999. Exclusive of acquisitions and the adverse impact of the stronger dollar on
reported sales, sales increased 7% in fiscal 1999. Fiscal 1999 sales growth
resulted from the continued expansion of the size, territory and content of APW
Ltd.'s enclosure product lines, partially offset by lower thermal management
product sales as these lines were refocused on the higher growth
telecommunications market. Fiscal 1998 sales, excluding acquisitions and net of
the negative impact of the stronger US Dollar, grew 18% primarily as a result of
the continued expansion of end user electronics markets in the US and Europe.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
($ Millions) Sales Percentage Change from Prior Year
- ----------------------------------------------------------------------------------------------------------
Geographic Sales 1997 1998 1999 1997 1998 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
North America $334.4 $461.0 $ 576.0 32% 38% 25%
Europe and other 40.9 132.2 479.3 359% 223% 263%
</TABLE>
<PAGE>
<TABLE>
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Total $375.3 $593.2 $1,055.3 43% 58% 78%
===========================================================================================================
</TABLE>
APW Ltd. does business in many different geographic regions and is
subject to various and diverse economic conditions. Fiscal 1999 North American
sales grew 25% primarily due to acquisitions made in the prior fiscal year and
internal growth. An improved economic environment in North America and the
effect of acquisitions combined to increase fiscal 1998 North American sales 38%
over 1997.
European sales volume in fiscal 1999 more than doubled due primarily to
the September 1998 acquisition of Rubicon and a full year of sales for the VERO
businesses acquired in fiscal 1998, both of which are concentrated in the U.K.
and continental Europe. European sales grew 223% in fiscal 1998 compared to
1997. The combination of the VERO acquisition, which contributed $53.9 million,
along with strong internal growth accounted for fiscal 1998 growth. Sales in
Asia and Latin America were approximately 1% of total net sales for fiscal 1999,
1998 and 1997.
GROSS PROFIT. Gross profit increased 43% in fiscal 1999 to $291.8
million compared to $204.2 million, exclusive of one-time charges, in fiscal
1998. Fiscal year 1998 gross profit, exclusive of one-time charges, increased
39% from $146.7 million in fiscal year 1997. The increases in gross profit
dollars for both years were primarily a result of the increases in sales volume
discussed above. The one-time charges in fiscal 1998 related to a $10.1 million
write-off of obsolete inventory. (See further discussion below under Merger,
Restructuring and Other Non-Recurring Items).
Gross profit as a percentage of sales has declined in each of the last
two years, reflecting APW Ltd.'s aggressive move from primarily technical
environments and standard products into lower-margin electronic enclosures and
systems integration during the past three years. APW Ltd. believes that the
electronic enclosure and integration markets offer APW Ltd. significant growth
opportunities. The lower gross margins associated with the enclosure and
integration markets, as compared to APW Ltd.'s historic average, are partially
offset by lower ESA expenses to relative sales.
ENGINEERING, SELLING AND ADMINISTRATIVE EXPENSES. Fiscal 1999 ESA of
$188.0 million increased $62.8 million, or 50%, over the 1998 prior year,
exclusive of fiscal 1998 one-time charges. As a percentage of sales and
exclusive of one-time charges in fiscal 1998, ESA declined to 18% in fiscal 1999
from 21% and 23% in fiscal years 1998 and 1997, respectively. The fiscal 1999
and 1998 declines in ESA expense as a percent of sales were due primarily to
acquisitions of electronic enclosure and electronic integration businesses,
which have a lower ratio of ESA expenses to sales. It is APW Ltd.'s goal to
continually identify ways to be more cost efficient, allowing APW Ltd. to reduce
operating costs as a percent of sales. In addition to variable selling
expenses, ESA expenses have increased as a result of acquisitions, product
development programs and expenditures to support expansion of APW Ltd. and
geographic expansion into emerging markets.
Fiscal 1998 ESA expenses includes $1.4 million in allocated one-time
charges relating to a number of initiatives, including the ZERO merger, the ZERO
headquarters closing and the rationalization of manufacturing facilities and
infrastructure to further integrate acquired companies into the Electronics
Business. These fiscal 1998 restructuring initiatives are further described
below under Merger, Restructuring and Other Non-Recurring Items.
Historical ESA expenses include an allocation of Applied Power's
corporate general and administrative expenses based on estimated levels of
effort devoted to APW Ltd. and the relative size of APW Ltd. compared to Applied
Power's total revenues, operating profit, assets and employee headcount.
Management believes that the allocation of Applied Power's corporate general and
administrative expense for the historical periods is reasonable. APW Ltd.
expects that costs for these corporate type functions will differ following the
Distribution. See "Allocations" above for further discussion of ESA expenses
allocated to APW Ltd. from Applied Power.
AMORTIZATION OF INTANGIBLE ASSETS. The fiscal 1999 increase in
amortization expense was primarily a result of the acquisition of Rubicon in
September 1998 and a full year of amortization expense for acquisitions
completed during
<PAGE>
fiscal 1998. The fiscal 1998 increase in amortization expense resulted from the
acquisition of VERO, Brown, PTI, Product, AA and PMP during the 1998 fiscal
year, combined with a full year of amortization expense on Hormann and C Fab
which were acquired during fiscal 1997.
MERGER, RESTRUCTURING AND OTHER NON-RECURRING ITEMS. In the fourth
quarter of fiscal 1998, APW Ltd. recorded merger, restructuring and other one-
time charges of $21.1 million after-tax. The pre-tax charges of $27.9 million
related to costs associated with the ZERO merger, various plant and
infrastructure consolidations, and other cost reduction and product
rationalization efforts of APW Ltd. With the exception of approximately $3.3
million in reserves relating primarily to long-term lease commitments and other
contractual obligations, no accrued restructuring reserves remained at August
31, 1999. The following table summarizes the manner in which merger,
restructuring and other non-recurring items were recorded in APW Ltd.'s fiscal
1998 Combined Statement of Earnings and how those charges were allocated from
Applied Power.
<TABLE>
<CAPTION>
($ millions) Charge Allocation Fiscal 1998 Total
Related to of Corporate APW Ltd. Original
Electronics Charge Charge Applied
Power
Charge
------------------------------------------- --------
<S> <C> <C> <C> <C>
Cost of products sold $10.1 $ - $10.1 $25.8
Engineering, selling and administrative expense - 1.4 1.4 8.9
Amortization of intangible assets - - - 5.1
Restructuring charges 8.9 2.3 11.2 20.3
Merger related expenses - 5.2 5.2 9.3
------------------------------------------- --------
Operating Earnings $19.0 $8.9 27.9 69.4
============================
Less: Income tax benefit 6.8 16.8
----------- --------
Net Earnings $21.1 $52.6
=========== ========
</TABLE>
On July 31, 1998, a newly created subsidiary of Applied Power merged into
ZERO Corporation after shareholder approval of both companies. All fees and
expenses related to the ZERO merger and to the integration of the combined
companies have been expensed as required under the pooling of interests method
of accounting. Total fees and expenses amounted to $15.9 million and are
included in the above $27.9 million pre-tax charge recorded in the fourth
quarter of fiscal 1998. This total includes merger transaction costs of
approximately $5.2 million related to legal, accounting and financial advisory
services. The remaining $10.7 million reflects costs associated with
organizational realignment, closure of ZERO headquarters, facility
consolidation, a change in estimate of a receivable valuation and the write-off
of obsolete inventory due to conforming of product lines.
It is APW Ltd.'s strategy to become the premier, global electronic
enclosure manufacturer. In line with that strategy, APW Ltd. completed eleven
electronic enclosure acquisitions in fiscal 1998 and 1997, operating 34
facilities in 11 countries at
<PAGE>
August 31, 1998. As a result of this rapid expansion into the electronic
enclosure business, there were significant rationalization and integration
opportunities within and between the acquired businesses. In late fiscal 1998,
APW Ltd. formalized a plan to eliminate redundancies and streamline operations
within these acquired businesses. These rationalization efforts include
consolidating three facilities into one in the northeastern United States, the
consolidation of production of several product lines between facilities,
standardization of design and development functions, and other organizational
realignments. As a result of this plan, APW Ltd. recorded $7.1 million for
related charges, including provisions for costs associated with employee
severance and provisions for long-term lease commitments on closed facilities.
APW Ltd. completed the planned reorganization of its acquired companies in
fiscal 1999.
Also in late fiscal 1998, APW Ltd. initiated aggressive programs to
eliminate or reduce product lines and items which were not generating sufficient
economic return. The programs include the elimination of slow moving or
marginal products and the entire exit of less productive product lines. As a
result of these programs, APW Ltd. recorded a $4.9 million charge to cost of
products sold for the write-off of obsolete inventory. APW Ltd.'s product line
initiatives were materially completed by the end of fiscal 1999.
In total, the charges discussed above included $8.9 million for severance
payments for a reduction of approximately 190 employees.
OPERATING EARNINGS. Operating profit margin decreased to 8% for fiscal
1999 compared to 12% for fiscal 1998, excluding one-time charges discussed
above. Fiscal 1998 operating profit margin, exclusive of one-time charges,
decreased 4% from the fiscal 1997 operating profit margin. The decrease in
operating profit margin between periods is a result of APW Ltd. expanding into
the integrated electronic enclosures market where operating margins are not as
large as those generated by the technical environment and standard product
markets. This decrease in operating profit margin is offset by continued
efforts to manage spending levels throughout APW Ltd. Inclusive of one-time
charges discussed above, fiscal 1998 operating profit margin was 7%.
NET FINANCING COSTS. Net financing costs for fiscal 1999 and 1998
increased over the comparable prior year periods primarily as a result of
additional borrowings incurred to finance acquisitions completed during and
subsequent to the previous fiscal years, coupled with a higher weighted average
interest rate during fiscal 1999. See "Allocations" above for further discussion
of Net Financing Costs allocated to APW Ltd. from Applied Power.
OTHER - NET. Other - Net includes foreign exchange gains and losses,
gains and losses on the sale of fixed assets as well as other miscellaneous,
non-operating income and expenses. In fiscal 1998, APW Ltd. recognized an
allocated portion of gain on the sale of a ZERO corporate property totaling $5.5
million and an allocated portion of gain from proceeds on a ZERO life insurance
policy of $1.0 million.
INCOME TAX EXPENSE. APW Ltd.'s effective income tax rate was 35.8%,
48.3% and 37.4% in fiscal 1999, 1998 and 1997, respectively. The effective
income tax rate for fiscal 1998 was largely impacted by the current non-
deductibility of the one-time charges recorded in the fourth quarter. Excluding
the one-time items, the fiscal 1998 effective income tax rate was 37.7%. The
goodwill and subsequent amortization expense recorded as a result of most of
Applied Power's acquisitions is non-deductible for tax purposes.
LIQUIDITY AND CAPITAL RESOURCES.
Cash Flows-
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Cash Provided By (Used In)
(in millions) Fiscal 1997 Fiscal 1998 Fiscal 1999
=============================================================================================================
<S> <C> <C> <C>
</TABLE>
<PAGE>
<TABLE>
===============================================================================================================
<S> <C> <C> <C>
Operating activities $ 28.3 $ 60.3 $ 95.1
Investing activities (93.1) (314.0) (435.3)
Financing activities 71.8 245.7 354.6
===============================================================================================================
</TABLE>
In order to minimize interest expense, APW Ltd. intentionally maintains low
cash balances and uses available cash to reduce short-term bank borrowings.
Cash and cash equivalents increased $13.7 million in fiscal 1999 as compared to
a decrease of $7.8 million in fiscal 1998 and an increase of $7.2 million in
fiscal 1997.
The increase in cash flow from operating activities during fiscal 1999 over
fiscal 1998 resulted primarily from a higher level of earnings before non-cash
depreciation and amortization expenses. In addition, reductions in working
capital provided a significant source of cash during fiscal 1999. The increase
in cash provided by operations in fiscal 1998 over fiscal 1997 was also a result
of increased operating earnings before non-cash charges, combined with further
reductions in working capital.
Fiscal 1999 uses for investing included $401.9 million for acquisitions,
primarily Rubicon, and a $43.0 million use for capital expenditures, partially
offset by $9.6 million in proceeds from the sale of assets. Fiscal 1998
included uses of $290.3 million to fund acquisitions and $31.6 million to fund
capital expenditures. Investing activities in fiscal 1997 included $77.0
million for acquisitions and $17.7 million for capital expenditures.
Net cash investments by and advances from Applied Power make up the majority
of financing activities for fiscal 1997, 1998 and 1999. Proceeds from the
financing of trade receivables provided $7.7 million, $14.3 million and $37.1
million for fiscal 1997, 1998 and 1999, respectively. Additionally, in fiscal
1998, APW Ltd. used $17.8 million of cash to fund the obligations of two ZERO
employee benefit programs as a result of APW Ltd.'s merger with ZERO. Fiscal
1999 financing activities also included $24.0 million of principal payments on
long-term debt assumed in the VERO and Rubicon acquisitions.
Capitalization-
<TABLE>
<CAPTION>
==========================================================================================================
Total Capitalization ($'s in millions) Percentage of Total Capitalization
==========================================================================================================
==========================================================================================================
August 31, 1998 1999 1998 1999
==========================================================================================================
<S> <C> <C> <C> <C>
Total Debt $367.8 $728.8 64% 80%
Total Equity 197.3 172.8 35% 19%
Deferred Income Taxes 7.0 8.1 1% 1%
==========================================================================================================
Totals $572.1 $909.7 100% 100%
==========================================================================================================
</TABLE>
Outstanding debt totaled $367.8 million and $728.8 million at August 31
of each of fiscal 1998 and 1999, respectively. Net increase in borrowings in
both fiscal 1998 and 1999 primarily reflects incremental borrowings to fund
acquisitions (see Business Combinations discussion above).
See the Combined Statements of Equity and Comprehensive Income contained
elsewhere in this Information Statement for a description of factors affecting
equity.
<PAGE>
New Accounting Pronouncements
- -----------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires that an entity recognize
derivative instruments, including certain derivative instruments embedded in
other contracts, as either assets or liabilities and measure those instruments
at fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. In July 1999, the FASB issued SFAS
No. 137 "Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of SFAS No. 133," which delays the effective date of SFAS
No. 133 by one year. As a result, SFAS No. 133 will be effective for APW Ltd.'s
2001 fiscal year. Adoption of SFAS No. 133 is not expected to have a material
effect on APW Ltd. based on its current derivative and hedging activities.
Year 2000 Considerations
- ------------------------
In prior years, Applied Power had executed an action plan to ensure that
its computer systems are capable of processing the periods for the Year 2000 and
beyond. This action plan was completed in late calendar year 1999. As a result
of those planning and implementation efforts, Applied Power experienced no
significant disruptions in mission critical information technology and non-
information technology systems and believes those systems successfully responded
to the Year 2000 date change. While no disruption has developed as of the date
of this filing, Year 2000 problems may still surface throughout calendar year
2000. Applied Power will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the calendar year
2000 to ensure that any latent year 2000 matters that arise may be addressed
promptly.
European Economic Monetary Union
- --------------------------------
On January 1, 1999, eleven of the European Union countries (including
eight countries where APW Ltd. operations are located) adopted the Euro as their
single currency, resulting in fixed conversion rates between their existing
currencies ("legacy currencies") and the Euro. The Euro trades on currency
exchanges and is available for non-cash transactions. Following the
introduction of the Euro, the legacy currencies remain legal tender in the
participating countries during the transition through January 1, 2002.
Beginning on January 1, 2002, the European Central Bank will issue Euro-
denominated bills and coins for use in cash transactions. On or before July 1,
2002, the participating countries will withdraw all legacy bills and coins and
use the Euro as their legal currency.
APW Ltd.'s various operating units located in Europe which are affected
by the Euro conversion intend to maintain their books in their respective legacy
currency through a portion of the three year introductory period. At this time,
APW Ltd. does not expect the reasonably foreseeable consequences of the ongoing
Euro conversion to have material adverse effects on APW Ltd.'s business,
operations or financial condition.
Inflation
- ---------
No meaningful measures of inflation are available because APW Ltd. has a
significant number of operations which operate in countries with diverse rates
of inflation and currency rate movements.
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
APW Ltd. is exposed to market risk from changes in foreign exchange and
interest rates and, to a lesser extent, commodities. To reduce these risks, APW
Ltd. selectively uses financial instruments. All hedging transactions are
authorized and executed pursuant to clearly defined policies and procedures,
which strictly prohibit the use of financial instruments for trading purposes.
<PAGE>
A discussion of APW Ltd.'s accounting policies for derivative financial
instruments is included in Note 2 - "Summary of Significant Accounting Policies"
in Notes to the Combined Financial Statements.
Currency Risk - APW Ltd. and its subsidiaries have significant
international operations. In most instances, APW Ltd.'s products are produced at
manufacturing facilities located near the customer. As a result, significant
volumes of finished goods are manufactured in countries for sale into those
markets. For goods purchased from other Company affiliates, APW Ltd. denominates
the transaction in the functional currency of the producing operation.
APW Ltd. has adopted the following guidelines to manage its foreign exchange
exposures:
(i) increase the predictability of costs associated with goods whose
purchase price is not denominated in the functional currency of the
buyer;
(ii) minimize the cost of hedging through the use of naturally offsetting
positions (borrowing in local currency), netting, pooling; and
(iii) where possible, sell product in the functional currency of the
producing operation.
APW Ltd.'s identifiable foreign exchange exposures result primarily from the
anticipated purchase of product from affiliates and third-party suppliers along
with the repayment of intercompany loans with foreign subsidiaries denominated
in foreign currencies. APW Ltd. periodically identifies naturally occurring
offsetting positions and expects that it may from time to time purchase hedging
instruments to protect against anticipated exposures. APW Ltd.'s financial
position is not materially sensitive to fluctuations in exchange rates as any
gains or losses on foreign currency exposures are generally offset by gains and
losses on underlying payables, receivables and net investments in foreign
subsidiaries.
Interest Rate Risk - APW Ltd. expects that it may from time to time enter into
interest rate swaps to stabilize financing costs by minimizing the effect of
potential interest rate increases on floating-rate debt in a rising interest
rate environment. Under these agreements, APW Ltd. contracts with a counter
party to exchange the difference between a fixed rate and a floating rate
applied to the notional amount of the swap. The differential to be paid or
received on interest rate swap agreements is accrued as interest rates change
and is recognized in net income as an adjustment to interest expense. Gains
relating to terminations of qualifying hedges are deferred and recognized in
income at the same time as the underlying hedged transactions.
Commodity Prices - APW Ltd. and Applied Power are exposed to fluctuation in
market prices for steel. Therefore, APW Ltd. has established a program for
centralized negotiation of steel prices. This program allows APW Ltd. to take
advantage of economies of scale as well as to cap pricing. All business units
are able to purchase steel under this arrangement. In general, the contracts
lock steel pricing for 18 months and enable APW Ltd. to pay less if market
prices fall.
FORWARD-LOOKING STATEMENTS AND CAUTIONARY FACTORS
This Information Statement contains statements relating to future
results of APW Ltd. and its subsidiaries. Those statements, which are not
historical facts, are "forward-looking statements" that involve risks and
uncertainties. The terms "anticipate", "believe", "estimate", "expect",
"objective", "plan", "project" and similar expressions are intended to identify
forward-looking statements. Such forward-looking statements are subject to
inherent risks and uncertainties that may cause actual results or events to
differ materially from those contemplated by such forward-looking statements. In
addition to the assumptions and other factors referred to specifically in
connection with such statements, factors that may cause actual results or events
to differ materially from those contemplated by such forward-looking statements
include, without limitation, general economic conditions and market conditions
in the computer, semiconductor, telecommunication, and electronic industries in
North America, Europe and, to a lesser extent, Asia, market acceptance of
existing and new products, successful integration of acquisitions, competitive
product and pricing
<PAGE>
pressures, foreign currency risk, interest rate risk, the Company's ability to
access capital markets, and other factors that are set forth under "Risk
Factors" in this Information Statement and those that may be referred to in APW
Ltd.'s reports filed with the Securities and Exchange Commission from time to
time.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All of APW Ltd.'s outstanding stock is currently owned by Applied Power.
The following table sets forth the projected, pro forma beneficial ownership of
APW Ltd.'s shares immediately following the Distribution. This information is
based upon holdings as of March 31, 2000, by each executive officer of APW Ltd.
named in the Summary Compensation Table below and by APW Ltd. executive officers
and directors as a group. With regard to options, the following table assumes a
one-to-one conversion in connection with the Distribution. The actual number of
APW Ltd. options issued will depend upon the price of APW Ltd. common stock and
API/Actuant common stock shortly before the Distribution. Briefly stated, shares
are deemed to be beneficially owned by any person or group who has the power to
vote or direct the vote or the power to dispose or direct the disposition of
such shares, or who has the right to acquire beneficial ownership thereof within
60 days. To the knowledge of the Company, no one is likely to be the beneficial
owner of more than 5% of APW Ltd.'s common stock immediately following the
Distribution.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Beneficial Owner Beneficial Ownership(1) of Class
<S> <C> <C>
Richard G. Sim 1,514,579(2) 3.8%
William J. Albrecht 185,197(3) *
Gustav H.P. Boel 51,697(4) *
Joseph T. Lower 0 *
[Officer # 5] -- *
All Executive Officers and Directors
as a Group (12 persons) 2,063,925(5) 4.9%
- -----------------
</TABLE>
*Less than 1%.
(1) Unless otherwise noted, the specified persons have sole voting power and/or
dispositive power over the shares shown as beneficially owned.
(2) Includes options to purchase 900,342 shares exercisable currently or within
60 days of the Record Date, 5,110 shares allocated to Mr. Sim's Savings Plan
account and 18,710 shares held by a custodian for Mr. Sim's children (with
respect to which Mr. Sim disclaims beneficial ownership). Excludes 187,201
deferred shares received upon exercise of options in 1998 and 1999 pursuant
to Applied Power's option deferral program which represent the right to
receive an equivalent number of shares of common stock at the end of the
deferral period.
(3) Includes options to purchase 174,150 shares exercisable currently or within
60 days of the Record Date and 8,352 shares allocated to Mr. Albrecht's
Savings Plan account and 2,000 shares held by his spouse. Excludes 8,036
deferred shares received upon exercise of options in 1999 pursuant to
<PAGE>
the deferral program which represent the right to receive an equivalent
number of shares of common stock at the end of the deferral period.
(4) Includes options to purchase 41,100 shares exercisable currently or within
60 days of the Record Date and 2,317 shares allocated to Mr. Boel's Savings
Plan account.
(5) Includes options to purchase 1,152,592 shares exercisable currently or
within 60 days of the Record Date, 15,779 shares allocated to executive
officers' Savings Plan accounts, 256,452 shares held by certain trusts with
respect to which certain officers have voting and dispositive power and
18,710 shares owned by family members of the directors and executive
officers (beneficial ownership of which is, in certain instances,
disclaimed). Excludes 195,237 deferred shares received upon exercise of
options pursuant to Applied Power's deferral program which represent the
rights to receive an equivalent number of shares of common stock at the end
of the deferral period.
The beneficial ownership information set forth above, and below under
"Election of Directors", is based on information furnished by the specified
persons or known to APW Ltd. and is determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as required for purposes of this
Information Statement. It is not necessarily to be construed as an admission of
beneficial ownership for other purposes.
<PAGE>
MANAGEMENT OF APW LTD.
Directors
The following table sets forth the names, principal positions, ages and
stock ownership of the persons who are expected to serve as APW Ltd.'s directors
following the Distribution. Each of these persons will serve as director until
their term ends, subject to their earlier death, resignation or removal.
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned at
March 31, 2000
Director Number of Percent
Name and Principal Position Age Since Shares of Class
<S> <C> <C> <C> <C>
Peter Douglas 44 NA 0 *
General Manager of ATI International
SRL (Barbados subsidiary of supplier of
3Dgraphics and multimedia technology
for personal computers and consumer
electronics)
Jack L. Heckel 68 1993 20,000(1) *
Retired President and Chief
Operating Officer, GenCorp. Inc.
(manufacturer of aerospace
and defense, polymer and automotive
products)
L. Dennis Kozlowski 53 1994 15,000(2) *
Chairman of the Board, President and
Chief Executive Officer, Tyco
International Ltd. (manufacturer of
disposable and specialty products, fire
and safety services, flow control, and
electrical and electronic components)
John J. McDonough 63 1996 21,000(3) *
Vice Chairman and Chief Executive
Officer, Newell Rubbermaid Inc.
(manufacturer of consumer products);
President and Chief Executive
Officer, McDonough Capital
Company LLC (venture capital
investment firm)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned at
March 31, 2000
Director Number of Percent
Name and Principal Position Age Since Shares of Class
<S> <C> <C> <C> <C>
Gerald McGoey 51 NA 0 0
President, Jolian Investments Limited
(Toronto based investment firm)
Richard G. Sim 55 1985 1,514,579(4) 3.8%
Chairman of the Board, President and
Chief Executive Officer, APW Ltd.
John Ziemniak 45 NA 0 0
Managing Partner at Mentor
International (privately owned U.K
consultancy serving the telecom, IT
and media markets)
</TABLE>
_________________
*Less than 1%.
(1) Includes options to purchase 15,000 shares exercisable currently or within
60 days of the Record Date.
(2) Includes options to purchase 13,000 shares exercisable currently or within
60 days of the Record Date.
(3) Includes options to purchase 9,000 shares exercisable currently or within
60 days of the Record Date.
(4) Includes options to purchase 900,342 shares exercisable currently or within
60 days of the Record Date, 5,110 shares allocated to Mr. Sim's Savings
Plan account and 18,710 shares held by a custodian for Mr. Sim's children
(with respect to which Mr. Sim disclaims beneficial ownership). Excludes
187,201 deferred shares received upon exercise of options in 1998 and 1999
pursuant to the Company's deferral program which represent the right to
receive an equivalent number of shares of common stock at the end of the
deferral period.
All of the directors have held the positions with Applied Power or other
organizations shown in the above table during the past five years, except that
(i) Jack L. Heckel was President and Chief Operating Officer of GenCorp. Inc.
from January 1987 through December 1993; and (ii) John J. McDonough was Chairman
of SoftNet Systems, Inc. from July 1995 through July 1997 and also served as its
Chief Executive Officer from September 1996 through July 1997, Vice Chairman of
DENTSPLY International
<PAGE>
Inc. from February 1995 through October 1995, and Vice Chairman and Chief
Executive Officer of DENTSPLY International Inc. from June 1993 through February
1995.
Jack L. Heckel is a director of WD-40 Co., Inc. and Advanced Tissue
Sciences, Inc. L. Dennis Kozlowski is a director of Tyco International Ltd. and
RJR Nabisco Holdings Corp. John J. McDonough is a director of Newell Rubbermaid
Inc. and CGW Southeast Fund. Richard G. Sim is a director of IPSCO Inc. and
Oshkosh Truck Corporation.
Committees of the Board of Directors
The Audit Committee of the board of directors of APW Ltd.: (i) will review
the scope and timing of the audit of APW Ltd.'s financial statements by its
independent auditors; (ii) will review with the independent accountants, and
with management, policies and procedures with respect to internal auditing and
financial and accounting controls; and (iii) will review with the independent
accountants their reports on APW Ltd.'s financial statements and recommendations
they make for improvements in APW Ltd.'s internal controls and the
implementation of those recommendations.
The Compensation Committee of the board of directors of APW Ltd. will
determine the compensation of APW Ltd.'s executive officers, award bonuses to
such key management personnel as the Committee selects and administer APW Ltd.'s
stock incentive plans.
The Nominating Committee of the board of directors of APW Ltd. will seek
qualified persons for the position of director to recommend to the entire board
of directors. In carrying out its responsibilities, the Nominating Committee
will consider candidates suggested by other directors, employees and
shareholders.
Directors' Compensation
Directors who are compensated as employees of APW Ltd. will receive no
additional compensation for service as directors.
The board of directors and compensation committee of APW Ltd. have not yet
established any formal compensation policies, so their actual compensation is
not yet certain. However, management believes that APW Ltd. is likely to
establish policies similar to those of Applied Power. If it does so, each
director of APW Ltd. who is not an employee of APW Ltd. or its subsidiaries will
be paid an annual retainer of approximately $19,000 for serving on the board of
directors and an attendance fee of approximately $1,000 for each board of
directors meeting and committee meeting attended.
Each non-employee director also receives an option grant each year to
purchase shares of common stock under the APW Ltd. 2000 Outside Directors' Stock
Option Plan (the "2000 Directors Plan"). The 2000 Directors Plan is intended to
promote the growth and development of the Company by providing incentives for
non-employee directors of the Company through the grant to such directors of
nonqualified stock options to acquire shares of common stock. There is no
discretion as to the amount or timing of options to be granted, which are fixed
by the terms of the 2000 Directors Plan. The exercise
<PAGE>
price at which shares may be purchased under each option is equal to the fair
market value of the shares on the date of grant. Options are not exercisable
until eleven months after the date of grant and then become fully exercisable,
in whole or in part, at any time prior to their expiration or termination.
Unless earlier exercised or terminated, the expiration date of each option
granted under the 2000 Directors Plan is ten years and one day after the date of
grant.
Other Executive Officers
APW Ltd. also has the following additional executive officers:
Richard D. Carroll joined Applied Power as Corporate Controller in 1996 and
was appointed Treasurer and Controller in 1998 and stayed in such position until
1999. In 1999, Mr. Carroll served as Financial Leader - APW Electronics and in
January 2000 became Vice President - Finance and Controller. Mr. Carroll was
previously employed with the Northwest Indiana Water Company as its Vice
President/Controller during 1995.
Anthony W. Asmuth III is a partner in the law firm of Quarles & Brady LLP,
Milwaukee, Wisconsin, having joined that firm in 1989. Quarles & Brady performs
legal services for the Company and certain of its subsidiaries. Mr. Asmuth had
previously served as Secretary of the Company from 1986 to 1993 and from 1994 to
the present.
Each officer is appointed by the Board of Directors and holds office until he
resigns, dies, is removed or a different person is appointed to the office. The
Board of Directors generally appoints officers at its meeting following the
Annual Meeting of Shareholders.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation awarded to, earned by or paid to
APW Ltd.'s Chief Executive Officer and individuals who are expected to be APW
Ltd.'s next four most highly compensated executive officers ("named executive
officers") based on their compensation by Applied Power during 1999, except that
the table sets forth the current base compensation rate of Joseph T. Lower.
During this period, the named executive officers were compensated in accordance
with Applied Power's plans and policies.
<TABLE>
<CAPTION>
Long-Term
Compensa-
tion Awards
Securities
Other Annual Underlying All Other
Name and Principal Compensation Options/ Compensa-
Position Salary Bonus (1) SARs (#)(2) tion ($)(3)
<S> <C> <C> <C> <C> <C>
Richard G. Sim
Chairman, President and
Chief Executive Officer 662,977 120,000 -0- 100,000 18,640
William J. Albrecht
Senior Vice President -
Americas (4) 290,964 75,600 5,796 90,000 17,720
Gustav H.P. Boel
Senior Vice President- 243,078 155,000 -0- 64,000 20,581
Europe & Asia (5)
Joseph T. Lower 185,000 -0- -0- 60,000 -0-
Vice President-Finance and
Business Development
Officer #5
</TABLE>
<PAGE>
(1) Consists entirely of interest paid on the Deferred Plan.
(2) Consists entirely of stock options.
(3) These amounts represent: (a) Applied Power's Savings Plan matching
contributions as follows: Mr. Sim - $2,625, Mr. Albrecht - $2,625, Mr.
Boel - $2,625 and Mr. Lower - $0; (b) Company allocations under the Savings
Plan as follows: Mr. Sim - $4,800, Mr. Albrecht - $4,800, Mr. Boel - $4,800
and Mr. Lower - $0; and (c) premiums paid by the Company for split-dollar
life insurance as follows: Mr. Sim - $11,215, Mr. Albrecht - $10,295, Mr.
Boel - $13,156 and Mr. Lower - $0.
(4) Effective November 3, 1998, Mr. Albrecht's title was changed to Senior Vice
President and in May 1999, Mr. Albrecht became Senior Vice
President--Electronics and in February 2000 Senior Vice President--
Americas.
(5) Effective November 3, 1998, Mr. Boel's title was changed to Vice President
and in May 1999, Mr. Boel became Senior Vice President--Industrial and in
February 2000 Senior Vice President--Europe and Asia.
<PAGE>
Option/SAR Grants in Last Fiscal Year
The following table sets forth information concerning stock option grants
to purchase Applied Power common stock pursuant to Applied Power's stock option
plan during the last fiscal year to the named executive officers. No stock
appreciation rights ("SARs") were granted in fiscal 1999.
<TABLE>
<CAPTION>
Individual Grants
Percent
of Total Potential Realizable
Number of Options/ Value at Assumed
Securities SARs Annual Rates of
Underlying Granted to Exercise Stock Price
Options/ Employees or Base Appreciation for
SARs in Fiscal Price Expiration Option Term(3)
Name Granted(#) Year(1) ($/Sh) Date(2) 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Richard G. Sim 100,000 15.5% 27.719 11/03/08 $1,743,200 $4,417,600
William J. Albrecht 30,000 4.6% 27.719 11/03/08 522,960 1,325,280
60,000 9.3% 24.6875 06/01/09 931,550 2,360,731
Gustav H.P. Boel 24,000 3.7% 27.719 11/03/08 418,376 1,060,247
40,000 6.2% 24.6875 06/01/09 621,033 1,573,821
Joseph T. Lower 60,000 -- 27.3438 3/20/10 1,031,782 2,614,739
[Officer #5]
</TABLE>
- -------------
(1) Based on stock option grants for an aggregate of 646,230 shares made to all
Applied Power employees during the fiscal year ended August 31, 1999 except
for Joseph T. Lower, which is based upon a grant in March 2000.
(2) Unless earlier terminated, options expire ten years from the date of grant
and generally become exercisable as to half of the shares granted two years
after the date of grant and fully exercisable five years after the date of
grant. In the event of a change-in-control of Applied Power, the
Compensation Committee may either provide for equivalent substitute options
to be granted to the optionees or a cash-out of the options based on the
highest fair market value per share of Applied Power common stock during
the 60-day period immediately preceding the change-in-control. Optionees
who earn more than $100,000 per year may elect to defer receipt of option
shares upon exercise of an option. Throughout the deferral period, the
deferred shares are credited with "deemed dividends" at the same rate as
dividends paid on Applied Power common stock. At the end of the deferral
period, such accumulated cash dividend equivalent amounts are converted
into shares of common stock and distributed with the shares of common stock
issued to settle the optionee's deferred share account.
<PAGE>
(3) The dollar amounts under these columns are the result of calculations at
the 5% and 10% appreciation rates set by the Securities and Exchange
Commission and are not intended to forecast possible future appreciation,
if any, of the common stock price.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table sets forth information for each of the named executive
officers concerning Applied Power options exercised during fiscal 1999 and the
number and value of stock options outstanding at the end of the fiscal year. No
SARs are outstanding.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End(#) Fiscal Year-End($)(2)
Shares
Acquired on Value Exer- Unexer- Exer- Unexer-
Name Exercise (#) Realized ($) cisable cisable(1) cisable cisable(1)
<S> <C> <C> <C> <C> <C> <C>
Richard G. Sim 68,000(3) 1,498,122 875,342 239,100 $18,426,193 $1,603,700
William J. Albrecht 12,000(4) 256,124 166,750 132,400 $ 3,433,166 $ 845,030
Gustav H.P. Boel -- -- 34,500 97,700 $ 595,906 $ 593,213
Joseph T. Lower -- -- -- 60,000 -- 1,710,000
[Officer #5]
</TABLE>
(1) Represents unvested options at the end of fiscal 1999.
(2) Based on the August 31, 1999, $30.625 closing price of the Applied Power
common stock on the New York Stock Exchange at the end of the fiscal year
except with regard to Mr. Lower, for which the March 31, 2000 closing price
of $28.50 was used.
<PAGE>
(3) Options exercised for 68,000 shares under Applied Power's option deferral
program. In connection therewith, Mr. Sim attested to the ownership of
20,755 shares of common stock in lieu of delivering such shares in payment
of the option exercise price and has been allocated 47,245 deferred shares
of common stock.
(4) Options exercised for 12,000 shares under Applied Power's option deferral
program. In connection therewith, Mr. Albrecht attested to the ownership
of 3,964 shares of common stock in lieu of delivering such shares in
payment of the option exercise price and has been allocated 8,036 deferred
shares of common stock.
Stock Options and the Impact of the Distribution
In connection with Distribution, APW Ltd. will adopt its own option plan.
The APW Ltd. employees who have options to purchase shares of Applied Power
common stock at the time of the Distribution will have their existing Applied
Power stock options converted to APW Ltd. stock options. The number of shares
covered by the APW Ltd. stock options and the exercise price for the stock
options will be adjusted so that the value of the APW Ltd. common stock covered
by the stock options, based upon the APW Ltd. and API/Actuant common stock price
immediately prior to Distribution, and the aggregate exercise price for the APW
Ltd. and API/Actuant stock options, will be equivalent to the existing values of
the former Applied Power stock options. This adjustment will result in an
increase in the number of shares covered by the options and a reduction in the
exercise price per share, although the aggregate value of the shares and the
aggregate exercise price for the adjusted APW Ltd. options will be equivalent to
the former Applied Power Inc. stock options. The adjustment will not affect the
other terms of the stock options or cause the options to become exercisable.
APW Ltd. 2000 Stock Plan
APW Ltd. expects to adopt the APW Ltd. 2000 Stock Plan (the "Stock Plan").
Under the Stock Plan, incentive stock options, nonqualified stock options and
restricted stock (each, an "Award") may be granted to any regular salaried
employee of APW Ltd. or a subsidiary of APW Ltd. who, in the sole opinion of the
compensation committee, contributes significantly to the growth and success of
APW Ltd. or a subsidiary. This includes employees who are members of the board
of directors, but excludes directors who are not employees of APW Ltd. or any of
its subsidiaries. Eligible participants in the Stock Plan are referred to as
"Eligible Employees."
The total number of shares of common stock available for issuance under the
Stock Plan may not exceed five million (5,000,000) shares, although no Eligible
Employee may be granted an Award or Awards covering more than two-hundred fifty
thousand (250,000) shares of common stock in any calendar year. These stock
thresholds are subject to adjustment in the event of a stock split, stock
distribution or other capital event, as described in the Stock Plan.
Shares available for an Award under the Stock Plan may be either authorized
but unissued or reacquired shares of common stock. Shares subject to, but not
issued under, an option which expires, terminates, is cancelled or forfeited for
any reason under the Stock Plan and shares of restricted stock which have been
forfeited before the grantee has received any benefit of ownership (such as
dividends) shall again become available for the granting of Awards under the
Stock Plan.
The Stock Plan will be administered by the compensation committee of the
board of directors of APW Ltd. (the "Committee"). The Committee shall be
constituted so as to permit the Stock Plan to comply with the provisions of
Section 162(m) of the Code and to afford Stock Plan participants an exemption
for Stock Plan transactions pursuant to Rule 16b-3 under the Securities Exchange
Act of 1934. The Committee will be empowered to adopt such rules, regulations
and procedures and take such other action as it deems necessary or proper for
administration of the Stock Plan, including any modification, extension or
renewal of any option granted thereunder. The Committee will have the authority
to interpret the provisions of the Stock Plan, which interpretations shall be
final and conclusive. Specifically, the Committee will be empowered, subject to
any contrary provisions of the Stock Plan, to designate the persons to whom
Awards
<PAGE>
shall be granted, to grant Awards in such form and amount as the
Committee shall determine, to impose such limitations, restrictions and
conditions upon any such Award as the Committee shall deem appropriate, and to
waive in whole or in part any limitations, restrictions or conditions imposed
upon any such Award as the Committee shall deem appropriate. The board of
directors may also amend, modify, suspend or terminate the Stock Plan from time
to time; provided, however, that no such action can be taken without shareholder
approval if required by applicable law. Furthermore, subject to the terms and
conditions of the Stock Plan, the Committee may modify, extend or renew
outstanding Awards granted under the Stock Plan, accept the surrender of
outstanding options (to the extent not theretofore exercised), reduce the
exercise price of outstanding options and authorize the granting of new options
in substitution therefor (to the extent not theretofore exercised); provided,
however, that no such modification of an Award (either directly or through
modification of the Stock Plan) shall, without the consent of the grantee, alter
or impair any rights of the grantee under the Award.
Stock Options
Stock Options ("Options") may be granted to Eligible Employees at any time
as determined by the Committee (subject to the volume limitations set forth
above). Options granted under the Stock Plan may be either "Incentive Stock
Options" under Section 422 of the Code or options that are not intended to
qualify as Incentive Stock Options ("Nonqualified Stock Options"). Each Option
must be evidenced by an agreement between APW Ltd. and the grantee which must
contain the terms and conditions required by the Stock Plan and such other terms
and conditions not inconsistent therewith as the Committee may deem appropriate.
The exercise price of an Option granted under the Stock Plan will be
determined by the Committee; provided, however, that in the case of an Incentive
Stock Option, the exercise price may not be less than 100% of the Fair Market
Value of the common stock (as defined in the Stock Plan) when the Option is
granted; and provided further that the Committee may only grant a Nonqualified
Stock Option with an exercise price of less than 100% of the Fair Market Value
of the common stock on the condition that the grantee makes a cash payment to
APW Ltd. on the date of grant of at least the difference between the Fair Market
Value and the option price (i.e., the sum of the cash payment and the exercise
price must be equal to or in excess of the Fair Market Value of the common stock
on the date of grant).
For purposes of the Stock Plan, an Option will be considered as having been
granted on the date on which the Committee authorizes its grant (unless the
Committee has designated a later grant date). Options granted under the Stock
Plan may be exercisable at such times and subject to such restrictions and
conditions as the Committee in each instance approves, but no Option may be
exercisable until at least six months have elapsed from the date of grant
(except in the case of death or disability) or prior to shareholder approval of
the Stock Plan. Furthermore, the period of exercisability of an Incentive Stock
Option may not exceed 10 years from the date the Option is granted and no Option
may be treated as an Incentive Stock Option unless the grantee exercises the
Option while employed by APW Ltd. (or a subsidiary) or within three months after
termination of
<PAGE>
employment, unless such termination is caused by death or disability, in which
case the optionee has one year after such termination within which to exercise.
An Option may be exercised in whole or in part from time to time as
specified in the Option agreement by the grantee giving a written notice of
exercise to APW Ltd. specifying the number of shares to be purchased,
accompanied by payment in full of the exercise price. The exercise price may be
paid either (i) in cash, (ii) by check, or (iii) with the approval of the
Committee, through delivery of shares of common stock which have been
beneficially owned by the grantee, the grantee's spouse or both of them for a
period of at least six months prior to the exercise ("Delivered Stock"), or (iv)
through a combination of cash and Delivered Stock. Delivered Stock is valued at
its Fair Market Value as of the date of the exercise. The holder of an Option
shall not have any rights as a shareholder with respect to the shares subject to
the Option until certificates evidencing such shares are delivered to him or
her.
Special provisions will be contained in the Stock Plan covering a merger,
consolidation or reorganization of APW Ltd. with another corporation in which
APW Ltd. is not the surviving corporation. In that circumstance, the Committee
may, subject to the approval of the Board of Directors of APW Ltd. or the Board
of Directors of any corporation assuming the obligations of APW Ltd. under the
Stock Plan, take action regarding each outstanding unexercised option to either
(i) substitute on an equitable and economically equivalent basis an appropriate
number of shares of the surviving corporation for the shares of common stock
covered by the Option, or (ii) cancel the Option and provide for a payment to
the optionee of an amount equal to the cash value of the Option (determined in
accordance with the provisions of the Stock Plan). In addition, the Stock Plan
permits Options to be granted to new Eligible Employees who become such as a
result of APW Ltd.'s acquisition of property or stock from an unrelated
corporation in substitution for options granted to such Eligible Employees by
their former employer.
Restricted Stock
The Committee, at any time, may grant Awards of restricted stock under the
Stock Plan; provided, however, that no more than 150,000 shares of restricted
stock may be granted in the aggregate during any calendar year. The Committee
may condition the grant of restricted stock upon the attainment of specified
levels of revenue, earnings per share, net income, return on assets, return on
sales, customer satisfaction, stock price, costs, individual performance
measures or such other factors or criteria as the Committee shall determine.
The provisions of various restricted stock Awards need not be identical;
provided, however, that such restricted stock Awards shall be subject to the
following terms and conditions: (i) until all applicable restrictions lapse,
the grantee shall not be permitted to sell, assign, transfer, pledge, or
otherwise encumber the shares of restricted stock; (ii) the grantee shall have
all of the rights of a shareholder of APW Ltd. with respect to the shares of
restricted stock (including the right to vote the shares and the right to
receive any cash dividends); (iii) unless otherwise provided in the applicable
restricted stock agreement or pursuant to (iv) below, all shares of restricted
stock shall be forfeited by the grantee upon termination of employment; (iv) in
the event of a hardship or other special circumstances under which a grantee's
employment is involuntarily terminated (other than for cause), the
<PAGE>
Committee may waive in whole or in part any or all remaining restrictions
attendant to shares of restricted stock held by such grantee; (v) upon the lapse
of all applicable restrictions, unlegended certificates for such shares shall be
delivered to the grantee; and (vi) each Award shall be subject to the terms of a
restricted stock agreement. All grantees of restricted stock shall be issued a
certificate in respect of such shares, registered in such grantee's name and
bearing an appropriate legend. In its discretion, the Committee may require that
the certificates evidencing such shares of restricted stock be held in custody
by APW Ltd. until the restrictions thereon have lapsed.
Term of Stock Plan
The Stock Plan will terminate 10 years after its effective date, except as
to Awards then outstanding, which Awards shall remain in effect until they have
been exercised, the restrictions have lapsed or the Awards have expired or been
forfeited.
General Terms
APW Ltd. may require, as a condition to the exercise of an Option or the
issuance of an unrestricted stock certificate, that the grantee concurrently pay
to APW Ltd. any taxes which APW Ltd. is required to withhold by reason of such
exercise or lapse of restrictions. Such payment may be made either in cash or,
at the discretion of the Committee, and subject to all applicable rules and
regulations, through shares of Delivered Stock or shares of stock withheld from
the Award having a Fair Market Value equal to the amount of the tax obligation.
No Award granted under the Stock Plan shall be transferable by a grantee other
than by will or the laws of descent and distribution; provided, however, that
the Committee, in its discretion but in accordance with Internal Revenue Service
guidance, may grant Nonqualified Stock Options that are transferable, without
payment of consideration, to family members of the grantee or to trusts or
partnerships for such family members.
Federal Tax Consequences
An Eligible Employee realizes no taxable income at the time an Option is
granted under the Stock Plan. An Eligible Employee generally realizes no
taxable income at the time of an Award of restricted stock, so long as the
restricted stock is not vested. Stock is vested for this purpose if it is
either transferable or is not subject to a substantial risk of forfeiture.
With regard to Incentive Stock Options, no income is recognized by an
Eligible Employee upon transfer to him of shares pursuant to his exercise of an
Incentive Stock Option. In order to avail himself of this tax benefit, the
Eligible Employee must make no disposition of the shares so received before he
has held such shares for at least one year and at least two years have passed
since he was granted the Option. Assuming compliance with this and other
applicable tax provisions, an Eligible Employee will realize long-term capital
gain or loss when he disposes of his shares, measured by the difference between
the exercise price and the amount received for the shares at the time of
disposition. If an Eligible Employee disposes of shares acquired by exercise of
an Incentive Stock Option before the expiration of the above-noted periods, any
amount realized
<PAGE>
from such disqualifying disposition will be taxable as ordinary income in the
year of disposition to the extent the lesser of (a) the Fair Market Value of the
shares on the date the Option was exercised, or (b) the amount realized upon
such disposition, exceeds the exercise price. Any amount realized in excess of
the Fair Market Value on the date of exercise is treated as long-term or short-
term capital gain, depending upon the holding period of the shares. If the
amount realized upon such disposition is less than the exercise price the loss
will be treated as long-term or short-term capital loss, depending upon the
holding period of the shares. For purposes of the alternative minimum tax, the
Eligible Employee shall recognize income upon the transfer of shares to him
pursuant to the exercise of an Incentive Stock Option in an amount equal to the
difference between the Fair Market Value of the shares at the time of exercise
and the exercise price.
With regard to Nonqualified Stock Options, ordinary income generally is
realized by the Eligible Employee at the time of his exercise of an Option. The
amount of income is generally equal to the difference between the exercise price
and the Fair Market Value of the shares on the date of exercise. Tax
withholding is currently required on such income. When an Eligible Employee
disposes of shares acquired upon the exercise of a Nonqualified Stock Option,
any amount received in excess of the Fair Market Value of the shares on the date
of exercise will be treated as long-term or short-term capital gain, depending
upon the holding period of the shares, and if the amount received is less than
the Fair Market Value of the shares on the date of exercise, the loss will be
treated as long-term or short-term capital loss, depending upon the holding
period of the shares.
With regard to restricted stock, ordinary income is realized by an Eligible
Employee at the time that such restricted stock vests. The amount of income is
generally equal to the excess of the Fair Market Value of the shares at the time
of vesting over the purchase price for such shares, if any. Tax withholding is
required on such income. When an Eligible Employee disposes of restricted
stock, any amount received in excess of the Fair Market Value of the shares on
the date of vesting will be treated as long-term or short-term capital gain,
depending upon the holding period of the shares, and if the amount received is
less than the Fair Market Value on the date of vesting, the loss will be treated
as long-term or short-term capital loss, depending on the holding period of the
shares. Dividends paid on restricted stock which has not vested and which has
not been the subject of an election under Section 83(b) of the Code are treated
as compensation income. Section 83(b) of the Code permits the Eligible Employee
to elect, not more than 30 days after the date of grant of the restricted stock,
to include as ordinary income the difference between the Fair Market Value of
the restricted stock on the date of grant and the purchase price of the
restricted stock, if any. If no Section 83(b) election is made, then the
ordinary income inclusion occurs on the date the restricted stock becomes vested
and the amount of such inclusion will be the spread between the Fair Market
Value of the restricted stock and the purchase price for the restricted stock at
the time of vesting, if any.
If an Eligible Employee pays the exercise price of an Option by tendering
other vested shares then owned by the Eligible Employee, the difference between
the Fair Market Value and adjusted basis of the tendered shares will not produce
a taxable gain or loss to the Eligible Employee; however, the Eligible
Employee's tax basis for an equal number of acquired shares will
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be the same as the Eligible Employee's tax basis for the tendered shares. The
remaining acquired shares will have an original tax basis equal to the sum of
the amount paid in cash, if any, plus any amount that the optionee is required
to recognize as income as a result of the exercise of the Option.
No deduction will be allowed to APW Ltd. for federal income tax purposes at
the time of the grant or exercise of any Incentive Stock Option. At the time of
a disqualifying disposition by an Eligible Employee, APW Ltd. will be entitled
to a deduction for the amount taxable to the Eligible Employee as ordinary
income. APW Ltd. will be entitled to a deduction for federal income tax
purposes at the same time and in the same amount as the Eligible Employee is
considered to have realized ordinary income in connection with the exercise of a
Nonqualified Stock Option and the grant of restricted stock, assuming compliance
with Section 162(m) of the Code.
APW Ltd. 401(k) Plan
APW Ltd. will adopt a tax-qualified defined contribution retirement plan
(the "401(k) Plan") for its employees. The 401(k) Plan will allow participants
to reduce their taxable income by making voluntary contributions on a "pre-tax"
basis in an amount representing a fixed percent of their defined compensation,
not to exceed 19%, subject to certain Internal Revenue Code limitations.
Participants will also be allowed to make additional contributions not to exceed
5% of their defined compensation on an after-tax basis, subject to certain
limitations. Plan participants will have the ability to self-direct their
contributions into various investment funds.
APW Ltd. intends to provide a matching contribution on the pre-tax
contributions by employees equal to the first $300 of pre-tax contributions,
plus an additional 25% of the pre-tax contributions between $300 and 6% of
compensation. In addition, APW Ltd. intends to make a "core" contribution to the
accounts of eligible participants equal to 3% of compensation for the plan year,
subject to certain limitations. Employees must be employed at plan year end and
must have 1,000 or more hours of service in the plan year to be eligible for the
employer contributions. All employer contributions will be invested in an APW
Ltd. stock fund. However, participants who are age 50 or older and are fully
vested will be eligible to invest one-half of their employer contributions into
any of the investment funds available under the 401(k) Plan.
Participants will be immediately vested in their pre-tax and after-tax
contributions. Vesting in the employer contributions will be based upon years
of credited service. Benefits from employer contributions will be 50% vested
after three years of credited service and 100% after five years of credited
service.
Plan benefits are generally distributed to participants upon termination of
employment. However, plan loans will be available to plan participants under
certain circumstances. In addition, participants will be permitted hardship
distributions under the 401(k) Plan.
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APW Ltd. will create a trust to fund the benefits payable pursuant to the
401(k) Plan. The trust will be maintained as part of a plan qualified pursuant
to Code Section 401(a) and will be exempt from federal tax pursuant to Code
Section 501(a).
APW Ltd. Employee Stock Purchase Plan
APW Ltd. intends to adopt an employee stock purchase plan for its
employees. The plan will permit eligible employees to acquire APW Ltd. common
stock with payroll deductions. If specified performance objectives are
achieved, the employees will receive a 10% discount on the purchase price. The
amount of any discount will be includible in employees' taxable income and be
deductible by APW Ltd.
Future Compensation of Executive Officers
The board of directors of APW Ltd. and its compensation committee have not
yet met and established any formal policies concerning compensation of executive
officers of APW Ltd. Nevertheless, management believes the board of directors is
likely to develop guidelines similar to those of Applied Power. If so, it is
likely that the compensation committee will seek to establish a total value of
each executive's pay package approximately equal to the competitive median for
like positions in companies of similar size and type. However, it is likely that
the mix of compensation may be somewhat atypical. It is likely that cash
compensation will be set at a lower level than the median (in recent years
Applied Power's salary standards were targeted at approximately 95% of the
market median and target bonuses were set at approximately 70% of the market
median). Stock incentives, on the other hand, are likely to be generally set
above the median for other companies in order to bring the total compensation
opportunity to a level competitive with others in the marketplace. This general
approach to compensation mix, though varied in certain circumstances when the
compensation committee in its discretion concludes it is appropriate to do so,
is designed to encourage the executive's continued focus on building shareholder
value and align the interests with the shareholders.
DESCRIPTION OF APW LTD. CAPITAL STOCK
The following summary is a description of the material terms of our common
stock. Because this is a summary, it may not contain all of the information
that is important to you. It is subject in all respects to the applicable
provisions of Bermuda law and of our constituent documents. We have filed our
memorandum of association and bye-laws as exhibits to this Information
Statement.
Authorized Capital Stock
Under our memorandum of association, our authorized share capital is
$3,000,000, divided into:
<PAGE>
. 250,000,000 shares of common stock, par value $0.01 per share, of
which immediately after the Distribution approximately 39.1 million
shares will be outstanding and an additional ____ shares will be
subject to employee options; and
. 50,000,000 shares of preferred stock, par value $0.01 per share, of
which only the shareholder rights associated with the common stock
will be outstanding immediately after the Distribution. See "Rights,"
below.
Common Stock
Voting Restrictions. Each share of our common stock generally is entitled
to one vote on all matters properly coming before the shareholders. However,
APW Ltd.'s bye-laws include provisions that limit the voting rights of certain
large shareholders under certain circumstances in a manner comparable to Section
180.1150 of the Wisconsin Business Corporation Law, which currently applies to
Applied Power. Pursuant to APW Ltd.'s bye-laws, the voting power of shares,
including shares issuable upon conversion of convertible securities or upon the
exercise of options or warrants, held by a person (including persons acting as a
group) in excess of 20% of the voting power in the election of directors is
limited to 10% of the full voting power of the shares in excess of 20%, unless
shareholders of APW Ltd. approve full restoration of the voting power of the
shares at a shareholders meeting. This restriction does not apply to shares
acquired directly from APW Ltd. or in certain specified transactions.
Under APW Ltd.'s bye-laws, shareholders can also temporarily lose voting
power for the period in which the shareholder fails to comply with a notice from
APW Ltd.'s board requesting specific information regarding the shareholder's
intentions. This period continues until 90 days after the APW Ltd. board has
been satisfied as to the completeness of the response. This temporary voting
provision is commonly included in the organizational documents of Bermuda
corporations.
Amendments to the voting reallocation and transfer restriction provisions
of our bye-laws require both the approval of our board of directors and
approval of shareholders holding at least 75% of the votes of all outstanding
shares of common stock.
These voting and transfer restrictions could make it difficult for any
person or group of persons acting in concert, other than some existing owners,
to acquire control of APW Ltd.
Distributions. Holders of common stock are treated equally with respect to
all distributions to our shareholders.
Preferred Stock
As noted above, we have authorized 50,000,000 shares of preferred stock,
par value $0.01 per share. As of the date of the Distribution, we will have no
shares of preferred stock issued and outstanding other than the shareholder
rights described below.
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Our board of directors is authorized to:
. issue shares of preferred stock in one or more series;
. establish the number of shares in each series; and
. fix the designations, powers, preferences and rights of each series and
the qualifications, limitations or restrictions of each series.
Each time that we issue a new series of preferred stock, we will file with
the Bermuda Monetary Authority and the SEC a definitive certificate of
designations of the preferred stock. In addition, we will specify the
particular amount, price and other terms of that new series. These terms will
include:
. the designation of the title of the series;
. dividend rates;
. redemption provisions, if any;
. special or relative rights in the event of liquidation, dissolution,
distribution or winding up of APW Ltd.;
. sinking fund provisions, if any;
. whether the preferred stock will be convertible into our common stock or
any other of our securities or exchangeable for securities of any
other person;
. voting rights, if any; and
. any other preferences, privileges, powers, rights, qualifications,
limitations and restrictions, not inconsistent with our bye-laws.
The shares of any series of preferred stock will be, when issued, fully
paid and non-assessable. The holders of the preferred stock will not have
preemptive rights.
Ranking. Each new series of preferred stock will rank with respect to each
other series of our preferred stock as specified in the certificate of
designation relating to that new series of preferred stock.
Dividends. Holders of each new series of preferred stock will be entitled
to receive cash dividends or dividends in kind, if declared by our board of
directors out of funds legally available for dividends. For each series of
preferred stock, we will specify:
<PAGE>
. the dividend rate;
. whether the dividend rate will be fixed or variable or both;
. the dates of distribution of the cash dividends; and
. whether the dividends on any series of preferred stock will be
cumulative or non-cumulative.
Conversion and Exchange of Preferred Stock. We will determine the terms
and other provisions, if any, on which shares of the new series of preferred
stock are convertible into shares of our common stock.
Redemption. We will determine for each new series of preferred stock:
. whether that new series will be redeemable at any time, in whole or in
part, at our option or at the option of the holder of the shares of
preferred stock;
. whether that new series will be subject to mandatory redemption under a
sinking fund or on other terms; and
. whether to have redemption prices.
Liquidation Preference. Upon our voluntary or involuntary liquidation,
dissolution or winding up, holders of each series of preferred stock will be
entitled to receive:
. distributions upon liquidation in the amount provided in the certificate
of designation of that series of preferred stock; plus
. any accrued and unpaid dividends.
These payments will be made to holders of preferred stock out of our assets
available for distribution to shareholders before any distribution is made on
any securities ranking junior to the preferred stock regarding liquidation
rights.
After payment of the full amount of the liquidation preference to which
they are entitled, the holders of each series of preferred stock will not be
entitled to any further participation in any distribution of our assets.
Voting Rights. The holders of shares of any series of preferred stock will
have no voting rights except as indicated in the certificate of designation
relating to that series or as required by law.
Transfer Agent and Registrar. We will determine the transfer agent,
registrar, dividend disbursing agent and redemption agent for shares of each new
series of preferred stock.
<PAGE>
Summary of Rights Plan
The board of directors of APW Ltd. declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of common stock on
_______________. Each Right entitles the registered holder to purchase from APW
Ltd. one one-ten thousands of a share of Series A Junior Participating Preferred
Stock, par value $1.00 per share (the "Preferred Shares"), of APW Ltd. at a
price of [$ ] per one one-ten thousands of a Preferred Share (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between APW. Ltd. and
Firstar Bank, N.A., as Rights Agent (the "Rights Agent").
Triggering Events. Until the earlier to occur of (i) 10 days following a
public announcement that a person or group of affiliated or associated persons
(subject to certain exceptions) (an "Acquiring Person") have acquired beneficial
ownership of 15% or more of the outstanding common stock or (ii) 10 business
days (or such later date as may be determined by action of the board of
directors prior to such time as any Person becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of such outstanding common stock
(the earlier of such dates being called the "Rights Distribution Date"), the
Rights will be evidenced, with respect to any of the common stock certificates
outstanding as of the Record Date, by the common stock certificates with a copy
of a Summary of Rights Plan attached thereto.
The Rights Agreement provides that, until the Rights Distribution Date, the
Rights will be transferred with and only with the common stock. Until the Rights
Distribution Date (or earlier redemption or expiration of the Rights), new
common share certificates issued after the Record Date, upon transfer or new
issuance of common stock, will contain a notation incorporating the Rights
Agreement by reference. Until the Rights Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for common stock, outstanding as of the Record Date, even without
such notation or a copy of the Summary of Rights Plan being attached thereto,
will also constitute the transfer of the Rights associated with the common stock
represented by the certificate. As soon as practicable following the Rights
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the common stock as of the
close of business on the Rights Distribution Date and thereafter the separate
Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Rights Distribution Date. The
Rights will expire on May __, 2010 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier redeemed by
APW Ltd., in each case, as described below.
Adjustment Provisions. The Purchase Price payable, and the number of
Preferred Shares or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (1) in
the event of a stock dividend on, or a subdivision,
<PAGE>
combination or reclassification of, the Preferred Shares, (2) upon the grant to
holders of the Preferred Shares of certain rights or warrants to subscribe for
or purchase Preferred Shares at a price, or securities convertible into
Preferred Shares with a conversion price, less than the then current market
price of the Preferred Shares or (3) upon the distribution to holders of the
Preferred Shares of evidences of indebtedness or assets (excluding regular
periodic cash dividends paid out of earnings or retained earnings or dividends
payable in Preferred Shares) or of subscription rights or warrants (other than
those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% of
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-ten thousands of a Preferred
Share, which may, at the election of APW Ltd., be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
The number of outstanding Rights and the number of one one-ten thousands of
a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the common stock or a stock dividend
on the common stock payable in common stock or subdivisions, amalgamations or
combinations of the common stock occurring, in any such case, prior to the
Rights Distribution Date.
Dividends, Liquidation and Voting. Preferred Shares purchasable upon
exercise of the Rights are not redeemable. Each Preferred Share will be entitled
to a minimum preferential quarterly dividend payment of $1 per share but will be
entitled to an aggregate dividend of 10,000 times the dividend declared per
common share. In the event of liquidation, the holders of the Preferred Shares
will be entitled to a minimum preferential liquidation payment of $100 per share
plus an amount equal to accrued and unpaid dividends thereon but will be
entitled to an aggregate payment of 10,000 times the payment made per Common
Share. Each Preferred Share will have 10,000 votes, voting together with the
common stock. Finally, in the event of any merger, amalgamation or other
transaction in which common stock is exchanged, each Preferred Share will be
entitled to receive 10,000 times the amount received per common share. These
rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-ten thousands interest in a Preferred
Share purchasable upon exercise of each Right holds approximately the value of
one common share.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a Shareholder of APW Ltd., including, without limitation, the right to
vote or to receive dividends.
Flip-Over Provision. In the event that (1) any person becomes an Acquiring
Person or (2) during any time that there is an Acquiring Person, there shall be
a reclassification of securities or a recapitalization or reorganization of APW
Ltd. or other transaction or series of transactions involving APW Ltd. which has
the effect of increasing by more than 1% the proportionate share of
<PAGE>
the outstanding shares of any class of equity securities of APW Ltd. or any of
its subsidiaries beneficially owned by the Acquiring Person, proper provision
shall be made so that each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive upon exercise that number of shares of common stock
having a market value of two times the exercise price of the Right. In the event
that, after a person or a group has become an Acquiring Person, APW Ltd. is
acquired in a merger or other business combination transaction or 50% or more of
its consolidated assets or earning power are sold or transferred (subject to
certain exceptions), proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, that number of shares of common
stock of the acquiring company which at the time of the transaction will have a
market value of two times the exercise price of the Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
common stock and prior to the acquisition by such person or group of 50% or more
of the outstanding common stock, the board of directors of APW Ltd. may exchange
the Rights (other than Rights owned by such person or group which have become
void), in whole or in part, at an exchange ratio of one common share per Right
(subject to adjustment).
Redemption Provisions. At any time prior to the acquisition by a person or
group of affiliated or associated persons of beneficial ownership of 15% or more
of the outstanding common stock, the board of directors of APW Ltd. may redeem
the Rights in whole, but not in part, at a price of $0.01 per Right (the
"Redemption Price"). The redemption of the Rights may be made effective at such
time on such basis and with such conditions as the board of directors in its
sole discretion may establish. Immediately upon any redemption of the Rights,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
Amendment Provisions. The terms of the Rights may be amended by the board
of directors of APW Ltd. without the consent of the holders of the Rights,
including an amendment to lower certain thresholds described above to not less
than (1) the greater of the sum of .001% and the largest percentage of the
outstanding common stock then known to APW Ltd. to be beneficially owned by any
person or group of affiliated or associated persons, and (2) 10%. In addition
the board may modify the Expiration Date, except that from and after such time
as any person or group of affiliated or associated persons becomes an Acquiring
Person no such amendment may adversely affect the interests of the holders of
the Rights.
Transfer Agent
APW Ltd.'s transfer agent is Firstar Bank N.A.
COMPARISON OF SHAREHOLDER RIGHTS
<PAGE>
Upon the Distribution, holders of Applied Power common stock will become
entitled to receive APW Ltd. common stock. APW Ltd. is a company formed under
the laws of Bermuda, and Applied Power is a corporation incorporated under the
laws of Wisconsin. The Companies Act of 1981 is the statute that governs Bermuda
companies, and the Wisconsin Business Corporation Law is the statute that
governs Wisconsin corporations.
The following is a summary of some material differences between the rights
of holders of Applied Power common stock and APW Ltd. common shares. These
differences arise from differences between the corporate laws of the State of
Wisconsin and the corporate law of Bermuda, as well as differences between the
Applied Power articles of incorporation and the Applied Power by-laws, on the
one hand, and the APW Ltd. memorandum of association and the APW Ltd. bye-laws,
on the other hand. See "Description of APW Ltd. Capital Stock." This discussion
is not a complete statement of all differences between rights of holders of APW
Ltd. common stock and Applied Power common shares. This summary discusses
material differences between the laws of Bermuda and those of Wisconsin. It also
discusses material differences between the APW Ltd. memorandum of association
and bye-laws on the one hand and the Applied Power restated articles of
incorporation and by-laws on the other hand. This summary is qualified by the
full text of each document and the Companies Act 1981 and the Wisconsin Business
Corporation Law. For information as to how to get those documents, see "Where
You Can Find More Information" beginning on page [___].
Size and Classification of the Board of Directors
APW Ltd. Bermuda law permits a company's board of directors to be divided
into classes with staggered terms of office. The APW Ltd. bye-laws provide for
three classes of directors with staggered terms. The APW Ltd. bye-laws mandate
that APW Ltd. have not less than three directors.
Applied Power. Wisconsin law permits a company's board of directors to be
divided into classes with staggered terms of office. While the Applied Power
articles allow for staggered classes, Applied Power has chosen to elect all of
its directors annually.
Removal of Directors; Vacancies
APW Ltd. The APW Ltd. bye-laws provide that shareholders holding not less
than one-tenth of the paid up share capital of APW Ltd. carrying the right to
vote at general meetings may call a special meeting to consider removal of a
director for cause. Notice of the meeting must be given to the director not less
than 90 days before the meeting, and the director is entitled to be heard at the
meeting. A director is removed if the motion received the affirmative vote of
the holders of at least 75% of the votes cast at the meeting. Any vacancy
created by the removal of a director at a special meeting may be filled at the
meeting by the election of another director or, in the absence of an election,
by the board of directors.
Applied Power. Under Wisconsin law and the Applied Power by-laws,
shareholders holding shares totaling more than 10% of the stock may require that
the corporation call a special meeting and seek to
<PAGE>
remove directors, with or without cause. Any vacancy can be filled at the
meeting or in the absence of an election, by the board of directors.
Meetings of Shareholders
APW Ltd. Under Bermuda law, an annual general meeting must be held once
every calendar year. A special general meeting of shareholders may be convened
by a majority of the directors or chairman at any time and must be convened upon
the request of shareholders holding not less than one-tenth of the paid up share
capital of APW Ltd. carrying the right to vote at general meetings.
Applied Power. Under Wisconsin law and Applied Power's by-laws, an annual
meeting generally must be held each year. A special meeting may be called by the
chairman or a majority of the board of directors, and the company is required to
call a special meeting upon the written demand of shareholders holding 10% of
the outstanding shares.
Action by Written Consent of Shareholders; Shareholder Resolutions
APW Ltd. Action by written consent of shareholders is permitted in
Bermuda, except for the purpose of removing an auditor or director before the
expiration of his or her term of office. A written resolution must be signed by
all shareholders entitled to attend and vote at a meeting. In addition, the APW
Ltd. bye-laws provide that, unless a greater percentage is required by the
Companies Act 1981 or by a specific bye-law provision, any matter proposed for
consideration at any general meeting requires the affirmative vote of a majority
of votes that may be cast by all shareholders to be approved.
Applied Power. The Wisconsin Business Corporation Law provides that
shareholders may take any action without a meeting by written consent only if
the consent is signed by the holders of all the outstanding shares entitled to
vote on that action, unless otherwise provided in the articles of incorporation.
Applied Power's articles of incorporation do not permit shareholder action
without a meeting by less than unanimous written consent.
Vote Required for Extraordinary Corporate Transactions
APW Ltd. Bermuda law permits an amalgamation between two or more Bermuda
exempted companies or between one or more Bermuda exempted companies and one or
more foreign corporations subject, unless the bye-laws otherwise provide, to
obtaining a majority vote of the shareholders of each company present and voting
in person or by proxy at a meeting called for that purpose at which the quorum
shall be two or more persons present in person and representing in person or by
proxy in excess of 50% of the issued shares. Short form amalgamations are
permitted between a holding company and one or more of its wholly owned
subsidiary companies or between two or more wholly owned subsidiary companies of
the same holding company subject to approval of the amalgamation by a resolution
of the directors of each amalgamating company. The APW Ltd. bye-laws provide
that an amalgamation requires the approval of a majority of three-fourths of
votes cast at any shareholder's meeting, subject to specified quorum
requirements.
<PAGE>
Applied Power. The Wisconsin Business Corporation Law and Applied Power's
articles of incorporation require the affirmative vote of two-thirds of all
outstanding shares entitled to vote thereon to effect a merger, a consolidation,
a share exchange or the sale, lease or disposition of all or substantially all
of the corporation's assets. In addition, under some circumstances, holders of
shares of a class or series of a class are entitled to vote together and to vote
as a separate class on the transaction.
Interested Director Transactions
APW Ltd. The APW Ltd. bye-laws provide that a director may be a party to,
or otherwise interested in, any transaction or arrangement with APW Ltd. or in
which APW Ltd. is otherwise interested except that a director or director's
firm, partner or such company can act as auditor of APW Ltd. So long as the
director declares the nature of his or her interest in writing as required by
the bye-laws and the Companies Act 1981, he or she will not be accountable to
APW Ltd. for any benefit which he or she derives from a similar transaction or
arrangement. For the purposes of the bye-laws, a director is deemed to have an
interest in a transaction or arrangement with APW Ltd. if he or she is the
holder of or is beneficially interested in 5% or more of any class of stock of a
company with which APW Ltd. is proposing to enter into a transaction or
arrangement.
Applied Power. The Wisconsin Business Corporation Law provides that a
transaction between a corporation and one or more of its directors is not
voidable by the corporation solely for that reason if, after disclosure of
material facts (unless those facts were known):
(1) the disinterested directors or a committee of disinterested directors
approved or specifically ratified the transaction by a vote sufficient for
such purpose without counting the vote of any interested director, or, if
the vote of disinterested directors is insufficient to constitute an act of
the board under Wisconsin law, by the unanimous vote of the disinterested
directors; or
(2) the transaction is approved by a vote of the shareholders; or
(3) the transaction is fair to the corporation.
Business Combination and Anti-takeover Provisions
APW Ltd. The Companies Act 1981 does not contain any business combination
or antitakeover statute similar to the Wisconsin statutes described below.
However, APW Ltd.'s bye-laws contain corresponding provisions.
Applied Power. Sections 180.1140 to 180.1144 of the Wisconsin Business
Corporation Law (the "Wisconsin Business Combination Statute") regulate a broad
range of "business combinations" between a "resident domestic corporation" and
an "interested stockholder." The Wisconsin Business Combination Statute defines
a "business combination" to include: a merger or share exchange; a sale, lease,
exchange, mortgage, pledge, transfer, or other disposition of assets equal to at
least 5% of the market value of the stock or assets of the company or 10% of its
earning power; the issuance of stock or rights to purchase stock with a market
value equal to at least 5% of the outstanding stock; the adoption of a plan of
liquidation; and certain other transactions involving
<PAGE>
an "interested stockholder." An "interested stockholder" is defined as a person
who beneficially owns, directly or indirectly, 10% or more of the voting power
of the outstanding voting stock of a corporation or who is an affiliate or
associate of the corporation and beneficially owned 10% or more of the voting
power of the then outstanding voting stock within the last three years. The
Wisconsin Business Combination Statute prohibits a corporation from engaging in
a business combination (other than a business combination of a type specifically
excluded from the coverage of the statute) with an interested stockholder for a
period of three years following the date such person becomes an interested
stockholder, unless the board of directors approved the business combination or
the acquisition of the stock that resulted in the person becoming an interested
stockholder before such acquisition. Business combinations after the three-year
period following the stock acquisition date are permitted only if:
(1) the board of directors approved the acquisition of the stock prior to the
acquisition date;
(2) the business combination is approved by a majority of the outstanding
voting stock not beneficially owned by the interested stockholder; or
(3) the consideration to be received by shareholders meets certain fair price
requirements of the statute with respect to form and amount.
The Wisconsin Business Corporation Law also provides, in Sections 180.1130
to 180.1133, that certain mergers, share exchanges or sales, leases, exchanges
or other dispositions of assets in a transaction involving a "significant
shareholder" and a "resident domestic corporation" (a "Section 180.1130 business
combination") are subject to a supermajority vote of shareholders (the
"Wisconsin Fair Price Statute"), in addition to any approval otherwise required,
unless shareholders receive a fair price for their shares that satisfies a
statutory formula. A "significant shareholder," with respect to a resident
domestic corporation, is defined as a person who beneficially owns, directly or
indirectly, 10% or more of the voting stock of the corporation, or an affiliate
of the corporation which beneficially owned, directly or indirectly, 10% or more
of the voting stock of the corporation within the last two years. A Section
180.1130 business combination must be approved by 80% of the voting power of the
corporation's stock and at least two-thirds of the voting power of the
corporation's stock not beneficially held by the significant shareholder who is
party to the relevant transaction or any of its affiliates or associates, in
each case voting together as a single group, unless the following fair price
standards have been met:
. the aggregate value of the per share consideration is equal to the
highest of
(a) the highest price paid for any common shares of the corporation by the
significant shareholder in the transaction in which it became a
significant shareholder or within two years before the date of the
business combination,
(b) the market value of the corporation's shares on the date of
commencement of any tender offer by the significant shareholder, the
date on which the person became a significant shareholder or the date
of the first public announcement of the proposed business combination,
whichever is highest, or
(c) the highest liquidation or dissolution distribution to which holders
of the shares would be entitled, and
. either cash, or the form of consideration used by the significant
shareholder to acquire the largest number of shares, is offered.
<PAGE>
Under Section 180.1150 (the "Wisconsin Control Share Statute") of the
Wisconsin Business Corporation Law, unless otherwise provided in the articles of
incorporation, the voting power of shares, including shares issuable upon
conversion of convertible securities or exercise of options or warrants, of a
"resident domestic corporation," held by any person (including two or more
persons acting as a group) in excess of 20% of the voting power in the election
of directors is limited (in voting on any matter) to 10% of the full voting
power of those shares. This restriction does not apply to shares acquired
directly from the resident domestic corporation, in certain specified
transactions, or in a transaction in which the corporation's shareholders have
approved restoration of the full voting power of the otherwise restricted
shares. As discussed above, APW Ltd.'s bye-laws include a provision similar to
the Wisconsin Control Share Statute.
Section 180.1134 of the Wisconsin Business Corporation Law provides that,
in addition to the vote otherwise required by law or the articles of
incorporation of a resident domestic corporation such as APW Ltd., the approval
of the holders of a majority of the shares entitled to vote is required before
the corporation can take certain action while a takeover offer is under way or
after a takeover offer has been publicly announced and before it is concluded.
Shareholder approval is required if the corporation desires to:
. acquire more than 5% of its outstanding voting shares at a price above the
market price from any individual or organization that owns more than 3% of
the outstanding voting shares and has held such shares for less than two
years, unless a similar offer is made to acquire all voting shares, or
. sell or option assets of the corporation which amount to at least 10% of the
market value of the corporation, unless the corporation has at least three
independent directors (directors who are not officers or employees) and a
majority of the independent directors vote not to have this provision apply
to the corporation.
These restrictions above may have the effect of deterring a shareholder from
acquiring shares with the goal of seeking to have the corporation repurchase
such shares at a premium over the market price.
Shareholder Suits
APW Ltd. Class actions and derivative actions are generally not available
to shareholders under the laws of Bermuda. The Bermuda courts, however, would
ordinarily be expected to permit a shareholder to begin an action in the name of
APW Ltd. to remedy a wrong done to APW Ltd.:
(1) where the act complained of is alleged to be beyond the corporate
power of APW Ltd. or illegal or would result in a violation of APW
Ltd.'s memorandum of association or bye-laws;
(2) where the act complained of is alleged to constitute a fraud against
the minority shareholders; or
(3) where an act requires approval by a greater percentage of our
shareholders than actually approved it.
<PAGE>
There is also a statutory remedy under Section 111 of the Companies Act,
which provides that a shareholder may seek redress of the court as long as he or
she can establish that the company's affairs are being conducted, or have been
conducted, in a manner oppressive or prejudicial to the interests of some of the
shareholders, including himself.
Applied Power. Under Wisconsin law, a shareholder may institute a lawsuit
against one or more directors, either on his or her own behalf, or derivatively
on behalf of the corporation.
Dissenters' Rights
APW Ltd. Under Bermuda law a dissenting shareholder of a company
participating in an amalgamation, other than an amalgamation between a company
and its wholly owned subsidiary or between two or more wholly owned subsidiaries
of the same holding company, [ ] may, in specified circumstances,
receive cash or other consideration in the amount of the fair value of the
shareholder's shares as determined by a court, instead of the consideration he
or she would otherwise receive in the amalgamation.
Applied Power. The Wisconsin Business Corporation Law grants dissenters'
rights to shareholders, which are rights to receive payment of the fair value of
one's shares determined by judicial appraisal, in the case of specified mergers
or consolidations, a sale of all or substantially all of the corporation's
assets and, in the case of a shareholder whose shares would be adversely
affected, specified amendments to the articles of incorporation. The right to
receive payment of the fair value is not available, however,
(1) to a shareholder of the surviving corporation in a merger, unless
(A) the articles of amendment alters or abolishes any preferential
rights of the shares having preferences; or
(B) creates, alters or abolishes any provision or right in respect of
the redemption of the shares or any sinking fund for the redemption or
purchase of the shares; or
(C) alters or abolishes any preemptive right of the holder to acquire
shares or other securities; or
(D) excludes or limits the right of the holder to vote on any matter,
except as that right may be limited by the voting rights given to new
shares then being authorized of any existing or new class;
(2) to a shareholder of the parent corporation in a merger between the
parent and subsidiary corporation of which the parent owns at least
90% of the outstanding shares; or
(3) to a shareholder for the shares that were listed on a national
securities exchange or designated as a national market system security
by the National Association of Securities Dealers, Inc. on the record
date for the related meeting.
<PAGE>
Dividends
APW Ltd. The APW Ltd. bye-laws provide that the board of directors may
from time to time declare dividends or distributions out of contributed surplus
to be paid to the shareholders according to their rights and interests,
including any interim dividends that appear to the board of directors to be
justified. The board of directors must be satisfied on reasonable grounds that
at the time when the dividends are declared and at the time when the dividends
are paid, APW Ltd. is, and would after the payment be, able to pay its debts as
they fall due and that the realizable value of APW Ltd.'s assets would not be
less than the aggregate of its liabilities and its issued share capital and
share premium accounts.
Applied Power. Under the Wisconsin Business Corporation Law, a corporation
may declare and pay dividends on its outstanding shares except when the
corporation is insolvent (meaning that either (a) the corporation is not able to
pay its debts as they become due in the ordinary course of business, or (b) that
the corporation's total assets would be less than its total liabilities plus
certain preferential rights upon dissolution) or would be made insolvent upon
payment of the dividends or when the declaration, payment or distribution would
be contrary to any restrictions contained in the articles of incorporation.
Voting
APW Ltd. The APW Ltd. bye-laws contain restrictions on voting shares if a
holder owns more than a specified percentage of the voting power. There is no
provision for cumulative voting. See "Description of APW Ltd. Capital
Stock--Voting and Transfer Restrictions" for detailed information.
Applied Power. The Applied Power articles of incorporation and by-laws
contain no similar restriction on voting. However, Wisconsin law applicable to
Applied Power does apply a similar limit under the Wisconsin Control Share
Statute discussed above. There is no provision for cumulative voting.
Preemptive Rights
APW Ltd. Bermuda law does not require that preemptive rights be provided
for in the bye-laws of the company. Preemptive rights may exist by contractual
arrangement or pursuant to the terms of issuance of the shares. The APW Ltd.
bye-laws do not contain any provision concerning preemptive rights, nor has APW
Ltd. entered into any agreement or arrangement granting preemptive rights.
Applied Power. The Applied Power restated articles of incorporation state
that no holder of shares of Applied Power of any class or series, now authorized
or authorized in the future, will have any preemptive rights.
Amendments to Corporate Governance Documents
<PAGE>
APW Ltd. Amendments to the memorandum of association or to the bye-laws of
a Bermuda company must be submitted to a general meeting of the shareholders and
will be effective only to the extent approved by the shareholders at that
meeting and, in respect of certain amendments to a company's memorandum of
association, by the Bermuda Minister of Finance. The APW Ltd. bye-laws provide
that the bye-laws may be amended by resolution of a majority of not less than
75% of the votes cast.
Applied Power. The Wisconsin Business Corporation Law generally provides
that amendments to a corporation's articles of incorporation must be proposed by
the board of directors and approved by the shareholders by a majority of the
votes cast by each voting group (class or series of shares) entitled to vote
thereon, if a quorum exists, unless a greater proportion is required by law or
the corporation's articles or bylaws. Neither Applied Power's articles of
incorporation nor its by-laws provide for a greater voting proportion. Under the
Wisconsin Business Corporation Law, certain insignificant amendments to the
articles of incorporation may be made by Applied Power's board of directors
without shareholder approval.
Limitations on Directors' Liability and Indemnification
APW Ltd. See "Liability and Indemnification of Directors and Officers,"
below, for a discussion of Bermuda law and APW Ltd.'s bye-law provisions
concerning indemnification.
Applied Power. The Wisconsin Business Corporation Law and Applied Power's
by-laws provide for mandatory indemnification of a director or officer against
certain liabilities and expenses if the director or officer was a party to a
proceeding because of his or her status as such:
(a) to the extent such director or officer is successful on the merits or
otherwise in the defense of a proceeding (whether brought derivatively
or by a third party) and
(b) in proceedings in which the director or officer is not successful in
the defense thereof, unless it is determined that the director or
officer breached or failed to perform a duty that he or she owes to
the corporation and the breach or failure to perform constitutes:
(1) a willful failure to deal fairly with the corporation or its
shareholders in connection with a matter in which the director or
officer has a material conflict of interest;
(2) a violation of criminal law, unless the director or officer had
reasonable cause to believe that his or her conduct was lawful or no
reasonable cause to believe that his or her conduct was unlawful;
(3) a transaction from which the director or officer derived an
improper personal profit; or
(4) willful misconduct.
The Wisconsin Business Corporation Law specifically states that it is the public
policy of Wisconsin to require or permit indemnification in connection with a
proceeding involving
<PAGE>
securities regulation, as described therein, to the extent otherwise required or
permitted under the Wisconsin Business Corporation Law. Applied Power's by-laws
also require payment of a director's or officer's litigation expenses as
incurred, subject to certain conditions.
Consistent with the Wisconsin Business Corporation Law, Applied Power's
by-laws provide that, after receipt of a written request, the corporation shall
indemnify a director or officer, to the extent he or she has been successful on
the merits or otherwise in the defense of a proceeding, for all reasonable
expenses incurred in the proceeding if the director or officer was a party
because he or she is a director or officer of Applied Power. In other cases,
Applied Power must indemnify a director or officer against all liabilities and
expenses incurred by the director or officer in a proceeding to which the
director or officer was a party because he or she is a director or officer of
Applied Power.
Rights of Inspection
APW Ltd. Bermuda law provides the public with a right of inspection of a
Bermuda company's public documents at the office of the Registrar of Companies
in Bermuda and provides a Bermuda company's shareholders with a right of
inspection of the company's bye-laws, minutes of general shareholder meetings
and audited financial statements. The register of shareholders is also open to
inspection by shareholders free of charge and, upon payment of a small fee, by
any other person. A Bermuda company is required to maintain its share register
in Bermuda, but if it is a public company, it may establish a branch register
outside Bermuda. A Bermuda company is required to keep at its registered office
a register of its directors and officers which is open for inspection by members
of the public without charge. Bermuda law does not, however, provide a general
right for shareholders to inspect or obtain copies of any other corporate
records.
Applied Power. By contrast, under the Wisconsin Business Corporation Law,
in order to inspect and copy the corporate records of a corporation, including
the shareholder list, a shareholder must have been a shareholder of the
corporation for at least six months before making a demand or the shareholder
must hold at least 5% of the outstanding shares of the corporation. A
shareholder's demand must also be made for a proper purpose. In addition, under
the Wisconsin Business Corporation Law, all shareholders (regardless of how long
they have owned stock) may, upon written demand, inspect and, subject to
satisfying the proper purpose requirement, copy the shareholder list during the
period beginning two business days after the notice of a meeting of shareholders
is given and continuing to the date of the meeting, and any shareholder may
inspect the list at any time during the meeting.
Repurchase of Untraced Shares
APW Ltd. The APW Ltd. bye-laws provide that APW Ltd. will be entitled to
repurchase its own shares in accordance with the Companies Act 1981.
<PAGE>
Applied Power. The Applied Power by-laws do not contain any similar
provision regarding untraced shares.
Rights Agreement
APW Ltd. APW Ltd. has adopted a rights agreement, dated ______________,
between APW Ltd. and Firstar Bank, N.A. which contains provisions that may
delay, defer or prevent a change of control of APW Ltd.
Applied Power. Applied Power has not adopted a shareholder rights plan.
Listing
APW Ltd. APW Ltd. common stock will trade on the New York Stock Exchange
on a "when issued" basis beginning _______, 2000, under the symbol "APW."
Applied Power. Applied Power common stock is currently listed on the New
York Stock Exchange, and the common stock of API/Actuant will continue to be
listed after the Distribution under the symbol "ATU."
Dividends and Distributions Upon Liquidation
Applied Power and APW Ltd. Under both the articles of incorporation of
Applied Power and Bermuda statutory provisions applicable to APW Ltd., subject
to the prior rights and preferences of any issued and outstanding shares of
preferred stock, such dividends as may be determined by the respective board of
directors may be declared and paid on the common stock from time to time out of
any funds legally available therefor. In the event of a liquidation, dissolution
or winding up, the holders of common stock are entitled to share equally and
ratably in the corporate assets, if any, remaining after the payment of all
debts and liabilities, subject to the prior rights of the holders of any
authorized series of preferred stock.
<PAGE>
Statutory Shareholder Liability
APW Ltd. APW Ltd. has no provision imposing personal liability on
shareholders who have paid their share subscriptions in full.
Applied Power. Wisconsin law as judicially interpreted makes shareholders
personally liable for debts owed to employees for services performed, but not
exceeding six months' service in any one case.
Director and Officer Discretion
Applied Power. The Wisconsin Business Corporation Law provides than an
officer or director, in discharging his or her duties to the corporation and in
determining what he or she believes to be in the best interests of the
corporation, may consider the effects of the action on employees, suppliers,
customers, the communities in which the corporation operates and any other
factors that the director or officer considers pertinent, in addition to
considering the effects of any action on shareholders.
APW Ltd. Bermuda law has no comparable provision.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Limitations on Liability of Directors
The APW Ltd. bye-laws provide that each shareholder agrees to waive any
claim or right of action he or she may have, whether individually or by or in
the right of APW Ltd., against any director of APW Ltd. on account of any action
taken by any director, or the failure of any director to take any action in the
performance of his or her duties with or for APW Ltd.; provided, however, that
this waiver does not apply to any claims or rights of action arising out of the
fraud or dishonesty of a director.
Indemnification and Insurance
The bye-laws of APW Ltd. provide for indemnification of APW Ltd.'s officers
and directors against all liabilities, loss, damage or expense incurred or
suffered by any officer or director in his or her role as an officer or director
of APW Ltd. to the maximum extent permitted by Bermuda law. However, the
indemnification does not extend to any matter which would render it void
pursuant to the Companies Act of 1981 as in effect from time to time in Bermuda.
The Companies Act provides that a Bermuda company may indemnify its
officers and directors in respect of any loss arising or liability attaching to
them as a result of any negligence, default, breach of duty or breach of trust
of which they may be guilty. A company is also permitted to indemnify any
officer or director against any liability incurred by him or her in defending
any
<PAGE>
proceedings, whether civil or criminal, in which judgment is given in favor
of the director or officer, or in which he or she is acquitted, or in connection
with any application under relevant Bermuda legislation in which relief from
liability is granted to him or her by the court. However, the Companies Act
also states that any provision, whether contained in APW Ltd.'s bye-laws or in a
contract or arrangement between APW Ltd. and the director, indemnifying a
director against any liability which would attach to him in respect of his or
her fraud or dishonesty will be void.
The directors and officers of APW Ltd. also are covered by directors' and
officers' insurance policies maintained by APW Ltd.
INDEPENDENT PUBLIC ACCOUNTANTS
APW Ltd. anticipates that PricewaterhouseCoopers LLP will be its
independent auditors following the Distribution.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
APW Ltd. has filed with the SEC a registration statement, of which this
Information Statement constitutes a part, under the Securities Act of 1934 with
respect to the APW Ltd. common stock that will be received by Applied Power
shareholders in the Distribution. This Information Statement does not contain
all of the information set forth in the registration statement. Also, the
summaries herein of the material terms of certain contracts and other documents
related to the reorganization of Applied Power and APW Ltd. and to the
Distribution may not contain all of the information that is important to you.
In each case where a copy of the contract or document has been filed as an
exhibit to the registration statement, please refer to the registration
statement exhibit.
You may read and copy all or any portion of the registration statement at
the offices of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies of all or any part of the registration statement may be
obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington D.C. 20549 upon payment of the applicable fees. Please call the SEC
at 1-800-SEC-0330 for more information about reference rooms. You may also
visit the SEC's web site, http://www.sec.gov, to view reports, proxy and
information statements, and other information regarding registrants, such as APW
Ltd. and Applied Power, that file electronically with the SEC. Upon completion
of the Distribution, APW Ltd. will become subject to the information and
periodic reporting requirements of the Securities Exchange Act of 1934, and so
will file period reports, proxy statements and other information with the SEC.
These filings will be available for inspection and copying at the SEC's public
reference rooms and at the SEC's web site.
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
INDEX TO COMBINED FINANCIAL STATEMENTS Page
- -------------------------------------- ----
<S> <C>
Report of Independent Accountants........................................ F-1
Combined Statements of Earnings
For the years ended August 31, 1997, 1998 and 1999;
and the six months ended February 28, 1999 (unaudited)
and February 29, 2000 (unaudited)................................... F-2
Combined Balance Sheets
As of August 31, 1998 and 1999; and February 29, 2000 (unaudited)... F-3
Combined Statements of Equity and Comprehensive Income
For the years ended August 31, 1997, 1998 and 1999;
and the six months ended February 29, 2000 (unaudited).............. F-4
Combined Statements of Cash Flows
For the years ended August 31, 1997, 1998 and 1999;
and the six months ended February 28, 1999 (unaudited)
and February 29, 2000 (unaudited)................................... F-5
Notes to Combined Financial Statements................................... F-6
INDEX TO FINANCIAL STATEMENT SCHEDULE
- -------------------------------------
Report of Independent Accountants on Financial Statement Schedule........ F-22
Schedule II - Valuation and Qualifying Accounts.......................... F-23
</TABLE>
All other schedules are omitted because they are not applicable, not required or
because the required information is included in the combined financial
statements or notes thereto.
<PAGE>
Report of Independent Accountants
- ---------------------------------
To the Shareholders and Directors of Applied Power Inc.:
In our opinion, the accompanying combined balance sheets and the related
combined statements of earnings, equity and comprehensive income, and cash flows
present fairly, in all material respects, the combined financial position of APW
Ltd. (the Company) at August 31, 1998 and 1999, and the combined results of
their operations and their cash flows for each of the three years in the period
ended August 31, 1999, in conformity with accounting principles generally
accepted in the United States. 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 auditing standards generally accepted in the
United States, 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.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
April 20, 2000
F-1
<PAGE>
APW LTD.
COMBINED STATEMENTS OF EARNINGS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
Years Ended August 31, ---------------------------
--------------------------------------- February February
1997 1998 1999 28, 1999 29, 2000
--------- -------- ---------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $375,318 $593,210 $1,055,338 $513,240 $566,216
Cost of products sold 228,645 399,122 763,585 373,388 416,517
-------- -------- ---------- -------- ---------
Gross profit 146,673 194,088 291,753 139,852 149,699
Engineering, selling and administrative expenses 84,847 126,536 187,991 91,415 91,859
Amortization of intangible assets 3,042 7,771 20,876 9,708 11,842
Corporate reorganization expenses - - - - 2,162
Restructuring charges - 11,111 - - -
Merger related expenses - 5,195 - - -
-------- -------- ---------- -------- ---------
Operating earnings 58,784 43,475 82,886 38,729 43,836
Other expense (income)
Net financing costs 9,518 16,623 52,857 23,579 23,567
Gain on life insurance policy - (957) - - -
Gain on sale of building - (5,496) - - -
Other - net (1,329) (2,201) (1,786) (1,281) 1,353
-------- -------- ---------- -------- ---------
Earnings before income tax expense 50,595 35,506 31,815 16,431 18,916
Income tax expense 18,899 17,159 11,390 5,413 7,972
-------- -------- ---------- -------- ---------
Net earnings before extraordinary item 31,696 18,347 20,425 11,018 10,944
Extraordinary loss on early retirement of debt,
net of income tax benefit of $1,250 - - - - (2,083)
-------- -------- ---------- -------- ---------
Net earnings $ 31,696 $ 18,347 $ 20,425 $ 11,018 $ 8,861
======== ======== ========== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-2
<PAGE>
APW LTD.
COMBINED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
August 31,
------------------------- February 29,
1998 1999 2000
-------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
- ------
Current assets
Cash and cash equivalents $ 1,280 $ 15,002 $ 250
Accounts receivable, net 92,930 101,765 98,656
Inventories 78,989 106,794 130,599
Prepaid expenses 6,735 5,710 10,482
Deferred income taxes 12,347 8,496 7,517
-------- ---------- ----------
Total current assets 192,281 237,767 247,504
Property, plant and equipment 230,326 357,393 371,591
Less: Accumulated depreciation (82,437) (162,489) (176,744)
-------- ---------- ----------
Net property, plant and equipment 147,889 194,904 194,847
Goodwill, net 336,525 687,256 682,612
Other intangibles, net 12,352 11,631 11,154
Other assets 54,763 48,420 48,385
-------- ---------- ----------
Total assets $743,810 $1,179,978 $1,184,502
======== ========== ==========
LIABILITIES AND EQUITY
- ----------------------
Current liabilities
Short-term borrowings $ 30,804 $ 3,207 $ 5,904
Trade accounts payable 77,897 105,154 102,840
Accrued compensation and benefits 19,848 26,749 24,449
Income taxes payable 15,775 37,295 38,108
Other current liabilities 38,068 58,749 49,036
-------- ---------- ----------
Total current liabilities 182,392 231,154 220,337
Long-term debt 337,008 725,579 674,885
Deferred income taxes 7,016 8,149 8,149
Other deferred liabilities 20,047 42,260 44,476
Equity
Combined equity 199,449 183,328 245,445
Accumulated other comprehensive income (2,102) (10,492) (8,790)
-------- ---------- ----------
Total equity 197,347 172,836 236,655
-------- ---------- ----------
Total liabilities and equity $743,810 $1,179,978 $1,184,502
======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
APW LTD.
COMBINED STATEMENTS OF EQUITY
AND COMPREHENSIVE INCOME
(Dollars in Thousands)
<TABLE>
<CAPTION>
Years Ended August 31, 1997, 1998 and 1999 and
Six Months Ended February 29, 2000 (unaudited)
------------------------------------------------
Accumulated
Other
Combined Comprehensive Total
Equity Income Equity
-------- ------------- ---------
<S> <C> <C> <C>
Balance at September 1, 1996 $ 85,292 $ (900) $ 84,392
Net earnings for the year 31,696 31,696
Currency translation adjustments 3,010 3,010
--------
Total comprehensive income 34,706
--------
Investments by (distributions to)
Applied Power Inc., net (4,883) (4,883)
-------- -------- --------
Balance at August 31, 1997 112,105 2,110 114,215
Net earnings for the year 18,347 18,347
Currency translation adjustments (4,212) (4,212)
--------
Total comprehensive income 14,135
--------
Investments by (distributions to)
Applied Power Inc., net 68,997 68,997
-------- -------- --------
Balance at August 31, 1998 199,449 (2,102) 197,347
Net earnings for the year 20,425 20,425
Currency translation adjustments (8,390) (8,390)
--------
Total comprehensive income 12,035
--------
Investments by (distributions to)
Applied Power Inc., net (36,546) (36,546)
-------- -------- --------
Balance at August 31, 1999 183,328 (10,492) 172,836
(Unaudited)
Net earnings for the six month period 8,861 8,861
Currency translation adjustments 1,702 1,702
--------
Total comprehensive income 10,563
--------
Investments by (distributions to)
Applied Power Inc., net 53,256 53,256
-------- -------- --------
Balance at February 29, 2000 (Unaudited) $245,445 $ (8,790) $236,655
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
APW LTD.
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
Years Ended August 31, ---------------------------
--------------------------------------- February 28, February 29,
1997 1998 1999 1999 2000
--------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operating activities (Unaudited) (Unaudited)
Net earnings $ 31,696 $ 18,347 $ 20,425 $ 11,018 $ 8,861
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 11,322 23,007 50,942 25,988 29,115
Gain from sale of assets (511) (7,244) (805) - -
Provision for deferred income taxes 1,133 (4,000) 4,649 - -
Restructuring and other one-time charges, net of
income tax benefit - 21,119 - - -
Extraordinary loss on early retirement of debt - - - - 3,333
Changes in operating assets and liabilities, excluding
the effects of business acquisitions and disposals:
Accounts receivable (11,220) (1,439) 741 1,960 3,651
Inventories (10,110) (2,622) 3,390 (10,012) (21,005)
Prepaid expenses and other assets (747) (5,992) (2,625) 6,713 (3,579)
Trade accounts payable 3,145 4,172 27,640 (15,305) (2,176)
Other liabilities 3,574 14,943 (9,266) 8,875 (10,927)
---------- ---------- ---------- ---------- ---------
Net cash provided by operating activities 28,282 60,291 95,091 29,237 7,273
Investing activities
Proceeds on sale of property, plant and equipment 1,577 7,933 9,571 2,569 211
Additions to property, plant and equipment (17,729) (31,613) (43,017) (20,298) (18,139)
Business acquisitions, net of cash acquired (76,951) (290,319) (401,891) (382,125) (10,687)
---------- ---------- ---------- ---------- ---------
Net cash used in investing activities (93,103) (313,999) (435,337) (399,854) (28,615)
Financing activities
Investments by (distributions to) Applied Power Inc.,
net, including debt allocations 64,051 249,238 340,599 351,627 52,347
Net principal payments on long-term debt - - (24,004) (7,580) (45,297)
Additional receivables financed 7,716 14,301 37,079 28,051 (820)
Pre-funding of trusts and other - (17,801) 900 - -
---------- ---------- ---------- ---------- ---------
Net cash provided by financing activities 71,767 245,738 354,574 372,098 6,230
Effect of exchange rate changes on cash 244 201 (606) 108 360
---------- ---------- ---------- ---------- ---------
Net increase (decrease) in cash and cash equivalents 7,190 (7,769) 13,722 1,589 (14,752)
Cash and cash equivalents - beginning of year 1,859 9,049 1,280 1,280 15,002
---------- ---------- ---------- ---------- ---------
Cash and cash equivalents - end of year $ 9,049 $ 1,280 $ 15,002 $ 2,869 $ 250
========= ========== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
APW LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1 - Distribution Transaction and Description of Business
- -------------------------------------------------------------
On January 26, 2000, Applied Power Inc's. (Applied Power) board of directors
authorized various actions intended to put Applied Power in a position to
distribute its Electronics business segment (APW Ltd.) to its shareholders. In
the Distribution, Applied Power shareholders will receive one share of APW Ltd.
common stock for each share of Applied Power common stock held in the form of a
special dividend, and as a result, APW Ltd. will become a separately traded,
publicly held company. As part of the Distribution, APW Ltd. will be converted
to a Bermuda corporation.
APW Ltd. is a leading global provider of electronics manufacturing services
(EMS) focused on the rapidly growing integrated electronic enclosure systems
market. Operating in over 50 locations in North America, Europe and Asia, APW
Ltd. supplies electronic enclosures, power supplies, thermal systems, backplanes
and cabling, either as individual standard products, or as integrated custom
systems or technical environments, incorporating APW Ltd.'s product design,
supply chain management, manufacturing, assembly, testing and drop-shipping
capabilities. In addition, APW Ltd. provides design, integration and logistic
capabilities to its customers. APW Ltd.'s products are used by industry leading
OEM's in the datacom, networking, telecommunication, semiconductor equipment,
ATM, medical, electronic and manufacturing industries.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Basis of Presentation: The accompanying combined financial statements have been
prepared on a basis which reflects the historical financial position, results of
operations and cash flows of APW Ltd. For all periods presented, the
presentation assumes that the Electronics businesses of Applied Power expected
to be contributed to APW Ltd. in connection with the Distribution were organized
as a separate legal entity. Generally, only assets and liabilities of the
ongoing Applied Power Electronics business segment expected to be transferred to
APW Ltd. prior to the Distribution were included in the Combined Balance Sheets.
In addition, the combined financial statements of APW Ltd. include allocations
of certain Applied Power corporate assets, liabilities and expenses as discussed
below.
The financial statements assume that Applied Power has provided certain general
and administrative services to APW Ltd. including administration, finance,
legal, tax, treasury, information systems, corporate communications and human
resources. The cost for these services has been allocated to APW Ltd. by Applied
Power based upon a formula that includes sales, operating profit, assets and
headcount. Management of Applied Power believes that the allocation of cost for
these services is reasonable. These allocations were $7.1 million, $9.8 million
and $7.4 million in 1997, 1998 and 1999, respectively, and $3.7 million for the
six month periods ended February 28, 1999 (unaudited) and February 29, 2000
(unaudited), respectively. After the Distribution, APW Ltd. will be required to
perform these general and administrative services using its own resources or
purchased services and will be responsible for the costs and expenses associated
with the management of a public company. Certain assets and liabilities related
to the above general and administrative services have been allocated by Applied
Power to APW Ltd. on a basis consistent with the related expenses.
Applied Power's historical practice has been to incur indebtedness for its
consolidated businesses at the parent company level or at a limited number of
subsidiaries, rather than at the operating company level, and to centrally
manage various cash functions. Accordingly, historical amounts include debt and
related interest expense allocated to APW Ltd. from Applied Power based on the
portion of Applied Power's investment in APW Ltd. which is deemed to be debt.
This allocation is generally based upon a cash flow model which details the
historical uses of debt proceeds by APW Ltd. and the deemed debt repayments by
APW Ltd. based on free cash flow. Management believes that the allocation of
corporate debt and related interest expense for the historical periods is
reasonable.
The allocation methodology followed in preparing the combined financial
statements may not necessarily reflect the results of operations, cash flows, or
financial position of APW Ltd. in the future, or what the results would have
been had APW Ltd. been a separate, stand-alone public entity for all periods
presented.
F-6
<PAGE>
Principles of Combination: The combined financial statements of APW Ltd.
include the accounts of the related Electronics businesses of Applied Power.
All significant interdivisional balances, transactions and profits have been
eliminated in combination.
Unaudited Interim Financial Statements: The accompanying interim combined
statements of earnings and cash flows for the six months ended February 28, 1999
and February 29, 2000, the combined statement of equity and comprehensive income
for the six months ended February 29, 2000, and the combined balance sheet as of
February 29, 2000, have not been audited. However, they have been prepared in
conformity with the accounting principles stated in the audited financial
statements for the years ended August 31, 1997, 1998, and 1999. In the opinion
of management, all adjustments have been made, including normal recurring
adjustments, that are necessary to present fairly the unaudited interim combined
financial statements. The results of operations for the interim periods are not
necessarily indicative of the results of operations to be expected for the full
year.
Cash Equivalents: APW Ltd. considers all highly liquid investments with original
maturities of 90 days or less to be cash equivalents.
Inventories: Inventories are comprised of material, direct labor and
manufacturing overhead, and are stated at the lower of cost or market. Cost is
determined using principally the first-in, first-out or average cost methods for
APW Ltd. inventories.
Property, Plant and Equipment: Property, plant and equipment are stated at cost.
Plant and equipment are depreciated over the estimated useful lives of the
assets, ranging from two to thirty years, under the straight-line method for
financial reporting purposes and either the straight-line or regulatory methods
for income tax purposes. Capital leases and leasehold improvements are amortized
over the life of the related asset or the life of the lease, whichever is
shorter. Expenditures for maintenance and repairs not expected to extend the
useful life of an asset beyond its normal useful life are expensed as incurred.
Goodwill and Other Intangible Assets: Goodwill is amortized on a straight-line
basis over periods of fifteen to forty years. Other intangible assets,
consisting primarily of purchased patents, trademarks and noncompete agreements,
are amortized over periods from two to forty years. APW Ltd. periodically
evaluates the carrying value of goodwill and other intangible assets. Impairment
of goodwill, if any, is measured on the basis of whether anticipated
undiscounted operating cash flows generated by the underlying assets exceeds the
recorded goodwill. No impairment of goodwill was indicated for all periods
presented.
Revenue Recognition: Revenues and costs of products sold are recognized as the
related products are shipped.
Research and Development Costs: Research and development costs are expensed as
incurred. Such costs incurred in the development of new products or significant
improvements to existing products totaled approximately $0.9 million, $2.7
million and $5.5 million in fiscal 1997, 1998 and 1999, respectively.
Financing Costs: Net financing costs represent APW Ltd.'s allocated portion of
amounts incurred by Applied Power for interest expense, financing fees,
amortization of debt financing costs and accounts receivable financing costs,
net of interest and investment income earned. See Basis of Presentation for
discussion of debt and interest allocation.
Income Taxes: APW Ltd. is included in the consolidated U.S. income tax return
of Applied Power. Therefore, the provision for income taxes of APW Ltd. has
been calculated as if APW Ltd. was a stand-alone corporation filing a separate
tax return. APW Ltd. uses the liability method to record deferred income tax
assets and liabilities relating to the expected future income tax consequences
of transactions that have been recognized in APW Ltd.'s financial statements.
Under this method, deferred tax assets and liabilities are determined based on
the temporary differences between financial statement carrying amounts and
income tax bases of assets and liabilities using enacted tax rates in effect in
the years in which temporary differences are expected to reverse. For further
information, see Note 13 - "Income Taxes."
Earnings Per Share: Historical earnings per share have not been presented as APW
Ltd. was operated as a division of Applied Power and had no outstanding stock.
Foreign Currency Translation: A significant portion of APW Ltd.'s sales, income
and cash flow is derived from its international operations. The financial
position and the results of operations of APW Ltd.'s foreign operations are
measured using the local or regional currency of the countries in which they
operate and are translated into U.S. dollars. Revenues and expenses of foreign
subsidiaries are translated into U.S. dollars at the average exchange rate
F-7
<PAGE>
effective during the fiscal year. Although the effects of foreign currency
fluctuations are mitigated by the fact that expenses of foreign subsidiaries are
generally incurred in the same currencies in which the sales are generated, the
reported results of operations of APW Ltd.'s foreign subsidiaries are affected
by changes in foreign currency exchange rates and, as compared to prior periods,
will be higher or lower depending on the weakening or strengthening of the U.S.
dollar. In addition, a portion of APW Ltd.'s net assets are based in its
foreign subsidiaries and are translated into U.S. dollars at the foreign
currency rate in effect at the end of each period. Accordingly, APW Ltd.'s
equity and comprehensive income will fluctuate depending upon the strengthening
or weakening of the U.S. dollar versus other currencies. Such currency
translation amounts constitute the balance of accumulated other comprehensive
income in the accompanying Combined Balance Sheets. Net gains resulting from
foreign currency transactions, included in "Other - net" in the Combined
Statements of Earnings, amounted to $0.3 million, $0.8 million and $0.8 million
for the years ended August 31, 1997, 1998 and 1999, respectively.
Foreign Currency Hedging and Derivative Financial Instruments: Borrowings under
long-term foreign currency loans are used to partially hedge against declines in
the value of net investments in certain foreign subsidiaries. APW Ltd. also
periodically enters into foreign currency contracts to hedge certain exposures
related to selected transactions. APW Ltd. had no foreign currency contracts in
place at August 31, 1999.
Derivative financial instruments are primarily utilized by APW Ltd. to manage
risks associated with interest rate market volatility and foreign exchange
exposures. APW Ltd. does not hold or issue derivative financial instruments for
trading purposes. APW Ltd. currently holds only interest rate swap agreements.
For interest rate swap agreements, the differential to be paid or received is
accrued monthly as an adjustment to interest expense. APW Ltd. also utilizes
foreign currency forward contracts to hedge existing foreign exchange exposures.
Gains and losses resulting from these instruments are recognized in the same
period as the underlying transaction. Gains relating to terminations of
qualifying hedges are deferred and recognized in income at the same time as the
underlying hedged transactions.
Fair Value of Financial Instruments: The fair value of APW Ltd.'s cash and cash
equivalents, accounts receivable, accounts payable, short-term borrowings and
other long-term debt approximated book value as of August 31, 1998 and 1999 due
to their short-term nature and the fact that the interest rates approximated
year-end market rates of interest. The fair value of debt instruments is
calculated by discounting the cash flow of such obligations using the market
interest rates for similar instruments.
Use of Estimates: The financial statements have been prepared in accordance with
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses for the years presented. They also affect the
disclosure of contingencies. Actual results could differ from those estimates
and assumptions.
New Accounting Pronouncements: In June 1998, SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" was issued and was effective for
all fiscal years beginning after June 15, 1999. SFAS No. 133 was subsequently
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133," and will now be
effective for fiscal years beginning after June 15, 2000, with early adoption
permitted. SFAS No. 133, as amended, requires APW Ltd. to recognize all
derivatives as either assets or liabilities and measure those instruments at
fair value. Upon adoption, APW Ltd. will be required to report derivative and
hedging instruments at fair value in the balance sheet and recognize changes in
the fair value of derivatives in net earnings or other comprehensive income, as
appropriate. This Statement will be effective for APW Ltd.'s fiscal year 2001
first quarter financial statements and restatement of prior years will not be
permitted. Given APW Ltd.'s current derivative and hedging activities, the
Statement is not expected to have a material effect on its financial position or
results of operations.
Note 3 - Mergers and Acquisitions
- ---------------------------------
Six Months Ended February 29, 2000 -
Acquisitions -
On January 28, 2000, APW Ltd., through a wholly-owned subsidiary, acquired all
of the outstanding stock of Metalade of Pennsylvania, Inc. ("Metalade").
Metalade specializes in metal fabrication relating to electronic enclosures.
The total purchase price of this acquisition totaled $8.7 million, including
fees and expenses, plus future consideration not to exceed $5.0 million based on
future achieved sales levels. The acquisition was funded by borrowings under
current Applied Power credit facilities. The acquisition has been accounted for
using the purchase method and the results of operations of Metalade are included
in the Combined Statements of Earnings from the acquisition date. Preliminary
allocations of the purchase price resulted in approximately $6.7 million of
goodwill.
Fiscal 1999 -
Acquisitions
On September 29, 1998, APW Ltd., through its wholly-owned subsidiary, APW
Enclosure Systems Limited, accepted for payment all shares of Rubicon Group plc
("Rubicon") common stock which had been tendered pursuant to the APW Enclosure
Systems Limited tender offer (with a guaranteed loan note alternative) for all
outstanding shares of common
F-8
<PAGE>
stock at 2.35 pounds sterling per share and all outstanding cumulative
preference shares at 0.50 pounds sterling per share. The tendered common shares
accepted for payment exceeded 90% of the outstanding common shares on October 8,
1998, and APW Enclosure Systems Limited invoked Section 429 of the UK Companies
Act of 1985, as amended, to acquire the remaining outstanding common shares of
Rubicon. APW Enclosure Systems Limited now owns all of the common shares of
Rubicon. Rubicon is a leading provider of electronic manufacturing services and
engineered magnetic solutions to major OEMs in the information technology and
telecommunication industries. Cash paid for Rubicon totaled $371.5 million, with
the purchase price allocation resulting in $340.6 million of goodwill. Funds for
the acquisition were provided through Applied Power's revolving credit facility.
The acquisition was recorded using the purchase method of accounting. The
operating results of Rubicon subsequent to September 29, 1998 are included in
the Combined Statements of Earnings.
In June 1999, APW Ltd., through a wholly-owned subsidiary, acquired all of the
outstanding stock of Innovative Metal Fabrication, Inc. ("Innovative").
Innovative designs and manufactures technical environments used in electronic
assembly operations, as well as electronic gaming enclosures, in Grass Valley,
CA and Austin, TX. In May 1999, the APW Ltd. also acquired certain assets of
Connector Technology, Inc. ("CTI") of Anaheim, CA. CTI manufactures custom
backplanes and was integrated with APW Ltd.'s Electronic Solutions business
unit. The total purchase price of the combined Innovative and CTI acquisitions
totaled approximately $13.0 million, including fees and expenses, and was funded
by borrowings under existing Applied Power credit facilities. Both acquisitions
have been accounted for using the purchase method and the results of operations
of the acquired companies are included in the Combined Statements of Earnings
from their respective acquisition dates. Preliminary allocations of the
purchase price resulted in approximately $7.4 million of goodwill.
Fiscal 1998 -
Merger
On July 31, 1998, shareholders of Applied Power voted to approve the merger of a
newly created subsidiary of Applied Power into ZERO Corporation (ZERO). The
Merger was completed after the approval of the shareholders of Applied Power and
ZERO at their respective special shareholder meetings. Under the terms of the
Merger Agreement, ZERO stockholders received 0.85 of a share of Applied Power's
Common Stock for each share of ZERO Common Stock. Applied Power issued
approximately 10.6 million shares of its common stock in exchange for all
outstanding common stock of ZERO Corporation and assumed outstanding options to
purchase ZERO common stock that were converted into options to purchase
approximately 0.6 million shares of Applied Power's common stock pursuant to the
terms of the Merger. This equates to a purchase price of approximately $386
million based on the July 30, 1998 closing stock price of Applied Power. ZERO's
primary business is protecting electronics. ZERO's system packaging, thermal
management and engineered cases serve the telecommunication, instrumentation and
data-processing markets. ZERO also produces the line of ZERO Halliburton(R)
cases for consumers worldwide and cargo containers and proprietary loading
systems to the airline industry. The Merger has been accounted for using the
pooling of interests method of accounting, and, therefore, the financial
statements of APW Ltd. reflect the combined financial position, operating
results and cash flows of Applied Power's Electronics businesses and ZERO's
Electronics businesses as if they had been combined for all periods presented.
Prior to the merger, ZERO had a March 31 fiscal year end. APW Ltd.'s historical
results for the year ended August 31, 1998 have been combined using an August 31
year end for both ZERO's and Applied Power's Electronics Businesses. For all
years preceding the merger, APW Ltd.'s results of operations and financial
position reflect the combination of ZERO's Electronics Businesses with a March
31 fiscal year end and Applied Power's Electronics Businesses with an August 31
fiscal year end. Net sales and net income for ZERO's Electronics Businesses for
the period April 1, 1997 through August 31, 1997 (which results are not included
in APW Ltd.'s historical combined results) were $89.7 million and $7.5 million,
respectively, and have been included in the Combined Statements of Equity and
Comprehensive Income as a fiscal 1998 adjustment within "Investments by
(Distributions to) Applied Power Inc., net."
All fees and expenses related to the ZERO merger and to the integration of the
combined companies have been expensed as required under the pooling of interests
method of accounting. A portion of such fees and expenses have been allocated
to APW Ltd. from Applied Power. Transaction costs of $5.2 million, related to
legal, accounting and financial advisory services for the Merger were allocated
to APW Ltd. from Applied Power. In addition, APW Ltd. was allocated $3.3 million
for expenses incurred associated with closure of ZERO corporate headquarters and
a change in estimate of a ZERO corporate receivable valuation. Also related to
the ZERO merger, APW Ltd. recorded $7.4 million of expense for costs associated
primarily with facility consolidation and realignment, and the write-off of
obsolete inventory due to conforming of product lines. See Note 8 - "Merger,
Restructuring and Other Non-recurring Items" for further discussion of these
charges.
Acquisitions
On June 5, 1998, Applied Power Limited, a United Kingdom subsidiary of APW Ltd.,
accepted for payment all of the VERO Group plc ("VERO") stock tendered, which
totaled over 72% of the outstanding VERO shares, pursuant to Applied Power
Limited's tender offer to acquire the entire issued share capital of VERO at a
price of 192 pence per VERO share (the "Offer"). Applied Power Limited had
previously acquired approximately 10% of VERO's shares, so that after accepting
the shares tendered, Applied Power Limited owned or had accepted over 82% of
VERO's shares. On June 19, 1998, Applied Power Limited announced that additional
shares tendered brought the total of the shares it owned or had accepted for
payment to over 90% of VERO's issued share capital and that it would invoke
Section 429 of the U.K. Companies Act of 1985, as amended, to acquire the
remaining outstanding shares of VERO stock. After the required procedures were
completed, Applied Power Limited owned all of the issued share capital of VERO.
F-9
<PAGE>
Total purchase price for the transaction amounted to approximately $191.7
million. Allocations of the purchase price resulted in approximately $183.8
million of goodwill. VERO is a United Kingdom based company that manufactures
electronic enclosures, racks, backplanes and power supplies. The acquisition has
been recorded using the purchase method of accounting. The operating results of
VERO subsequent to June 5, 1998 are included in the Combined Statements of
Earnings.
In addition to the VERO acquisition discussed above, in fiscal 1998 APW Ltd.
acquired seven other companies, for an aggregate purchase price of approximately
$140.5 million, including $133.9 million in cash and the assumption of
approximately $6.6 million in debt. The cash portion of the acquisitions was
funded by borrowings under existing Applied Power credit facilities. Each of
these acquisitions was accounted for using the purchase method of accounting and
the results of operations of the acquired companies are included in the Combined
Statements of Earnings from their respective acquisition dates. As a result of
the acquisitions, approximately $103.2 million of goodwill was recorded by APW
Ltd.
The following 1998 unaudited pro forma data summarize the results of operations
as if the acquisitions of Rubicon and VERO had been completed on September 1,
1997, the beginning of APW Ltd.'s 1998 fiscal year. The following 1999 unaudited
pro forma data summarize the results of operations as if the acquisition of
Rubicon had been completed on September 1, 1998, the beginning of APW Ltd.'s
1999 fiscal year. The pro forma data give effect to actual operating results
prior to the respective acquisition dates and appropriate adjustments to
interest expense, goodwill amortization and income tax expense. These pro forma
amounts do not purport to be indicative of the results that would have actually
been obtained if the acquisitions had occurred on the dates indicated above or
that may be obtained in the future. The pro forma effects of all other
acquisitions are not included in the below data as they are not significant to
the net sales and net earnings reported in the accompanying financial
statements.
<TABLE>
<CAPTION>
- ----------------------------------------------------------
(in thousands) Fiscal Year Ended August 31,
- ----------------------------------------------------------
1998 1999
- ----------------------------------------------------------
<S> <C> <C>
Net Sales $1,020,246 $1,079,977
Net Earnings 16,867 19,501
==========================================================
</TABLE>
Fiscal 1997 -
- -------------
Acquisitions
On September 26, 1996, APW Ltd. acquired the net assets of Everest Electronic
Equipment, Inc. ("Everest") for cash consideration of $52.0 million, which was
funded through borrowings under then existing Applied Power credit facilities.
Approximately $43.0 million of the purchase price was assigned to goodwill.
Everest is a manufacturer of custom and standard electronic enclosures used by
the computer, telecommunication, datacom and other industries and is
headquartered in Anaheim, California. The acquisition has been recorded using
the purchase method of accounting. The results of Everest subsequent to the
acquisition date are included in the Combined Statements of Earnings.
In addition to the acquisition of Everest discussed above, in fiscal 1997 APW
Ltd. acquired three other companies for an aggregate of approximately $22.8
million in cash plus $5.8 million in subsequent earn-out payments. The cash
portion of the acquisitions' purchase price was funded by borrowings under then
existing Applied Power credit facilities. Each of these acquisitions was
accounted for as a purchase and the results of operations of the acquired
companies are included in the Combined Statements of Earnings from their
respective acquisition dates. As a result of the acquisitions, approximately
$17.0 million in goodwill was recorded by APW Ltd.
Note 4 - Transactions and Agreements with Applied Power
- -------------------------------------------------------
In order to effect the Distribution, Applied Power and APW Ltd. will enter into
the following agreements:
. Contribution Agreement, Plan and Agreement of Reorganization and Distribution
. General Assignment, Assumption and Agreement regarding Litigation, Claims, and
other Liabilities
. Transitional Trademark Use and License Agreement
. Insurance Matters Agreement
. Bill of Sale and Assumption of Liabilities
. Employee Benefits and Compensation Agreement
. Tax Sharing and Indemnification Agreement
. Interim Administrative Services Agreement
. Confidentiality and Non Disclosure Agreement
. Assumption of Applied Power Inc. Debt Obligation
F-10
<PAGE>
These Agreements define the ongoing relationship between the parties after the
Distribution. Applied Power and APW Ltd. have set pricing terms for services
believed to be comparable to what could be achieved through arms-length
negotiations. Following the Distribution, additional or modified agreements,
arrangements and transactions may be entered into and such agreements and
transactions will be determined through arms-length negotiations.
Note 5 - Accounts Receivable Financing
- --------------------------------------
Applied Power and certain subsidiaries (collectively, "Originators"), sell trade
accounts receivable to Applied Power Credit Corporation ("APCC"), a wholly-owned
limited purpose subsidiary of Applied Power. APCC is a separate corporate entity
that sells participating interests in its pool of accounts receivable to
financial institutions ("Purchasers"). The Purchasers, in turn, receive an
ownership and security interest in the pool of receivables. Participation
interests in new receivables generated by the Originators are purchased by APCC
and resold to the Purchasers as collections reduce previously sold participation
interests. The sold accounts receivable to Purchasers are reflected as a
reduction of receivables in Applied Power's Consolidated Balance Sheet. APCC has
the risk of credit loss on such receivables up to a maximum recourse amount of
16% of sold receivables. Applied Power retains collection and administrative
responsibilities on the participation interests sold as servicer for APCC and
the Purchasers.
APW Ltd. sells trade receivables to a third party in the ordinary course of
business through the above accounts receivable financing facility.
At August 31, 1998 and 1999, APW Ltd. accounts receivable were
reduced by $38.4 million and $75.5 million, respectively, representing
receivable interests sold under this program. Sales of trade receivables are
reflected as a reduction of accounts receivable in the accompanying Combined
Balance Sheets and the proceeds received, which are used to reduce debt, are
included in cash flows from financing activities in the accompanying Combined
Statements of Cash Flow. APW Ltd. expects to establish their own accounts
receivable financing facility prior to the Distribution.
APW Ltd.'s allocated portion of accounts receivable financing costs totaling
$1.2 million, $1.7 million and $2.9 million for the years ended August 31, 1997,
1998 and 1999, respectively, are included in net financing costs in the
accompanying Combined Statements of Earnings.
Note 6 - Net Inventories
- ------------------------
The nature of APW Ltd.'s products in several significant parts of its business
is such that they have a very short production cycle. Consequently, the amount
of work-in-process at any point in time is minimal. In addition, many parts or
components are ultimately either sold individually or assembled with other parts
making a distinction between raw materials and finished goods impractical to
determine. At these locations, APW Ltd. has not deemed it necessary or cost
effective to categorize inventory by state of completion, but rather between
material, labor and overhead.
As a result of these factors, it is neither practical nor cost effective to
segregate the amounts of raw materials, work-in-process or finished goods
inventories at the respective balance sheet dates, as segregation would only be
possible as the result of physical inventories which are taken at dates
different from the balance sheet dates.
Note 7 - Combined Equity
- ------------------------
The "Combined equity" caption in the accompanying combined financial statements
represents Applied Power's cumulative net investment in the combined businesses
of APW Ltd. Changes in the "Combined equity" caption represent the net income
(loss) of APW Ltd., net cash and noncash contributions from (distributions to)
Applied Power, changes in allocated corporate debt and allocated corporate
interest, net of tax. See the accompanying Combined Statements of Equity and
Comprehensive Income for an analysis of the activity in the "Combined equity"
caption for the three years ended August 31, 1999 and the six months ended
February 29, 2000 (unaudited).
Note 8 - Merger, Restructuring and Other Non-recurring Items
- ------------------------------------------------------------
Six Months Ended February 29, 2000-
In the second quarter of fiscal 2000, Applied Power allocated to APW Ltd. $2.2
million of fees and expenses associated with the Distribution transaction and
incorporating APW Ltd. in Bermuda. Those fees and expenses are classified under
the caption "Corporate Reorganization Expenses" in the Combined Statements of
Earnings for the six months ended February 29, 2000 (unaudited), and represent
APW Ltd.'s allocated portion of legal, accounting, tax and investment banking
fees incurred through February 29, 2000 (unaudited), for services related to the
transaction.
Also in the second quarter of fiscal 2000, a subsidiary of APW Ltd. paid a $3.3
million pre-payment premium for the early retirement of debt in anticipation of
the Distribution transaction. This charge is recorded in the Combined Statements
of Earnings for the six months ended February 29, 2000 (unaudited), as an
extraordinary loss, net of the $1.2 million tax benefit.
Fiscal 1998-
F-11
<PAGE>
In the fourth quarter of fiscal 1998, APW Ltd. recorded merger, restructuring
and other one-time charges of $21.1 million. The pre-tax charges of $27.9
million related to costs associated with the ZERO merger, various plant and
infrastructure consolidations, and other cost reduction and product
rationalization efforts of APW Ltd. With the exception of approximately $3.3
million in reserves relating primarily to long-term lease commitments and other
contractual obligations, no accrued restructuring reserves remained at August
31, 1999. The following table summarizes the manner in which these merger,
restructuring and other non-recurring items were recorded in APW Ltd.'s fiscal
1998 Combined Statement of Earnings:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
Merger, Restructuring and Other Non-recurring Items
- --------------------------------------------------------------
(in thousands)
<S> <C>
Cost of products sold $10,125
Engineering, selling and administrative expenses 1,429
Restructuring charges 11,111
Merger related expenses 5,195
- --------------------------------------------------------------
Subtotal 27,860
Less: Income tax benefit 6,741
- --------------------------------------------------------------
Total $21,119
==============================================================
</TABLE>
On July 31, 1998, a newly created subsidiary of APW Ltd. merged into ZERO
Corporation after shareholder approval of both companies. All fees and expenses
related to the ZERO merger and to the integration of the combined companies have
been expensed as required under the pooling of interests method of accounting.
Such fees and expenses, which have been allocated from Applied Power, amounted
to $15.9 million and are included in the above $27.9 million pre-tax charge
recorded in the fourth quarter of fiscal 1998. The total ZERO fees and expenses
include transaction costs of approximately $5.2 million related to legal,
accounting and financial advisory services. The remaining $10.7 million reflects
costs associated with organizational realignment, closure of ZERO headquarters,
facility consolidation, a change in estimate of a receivable valuation and the
write-off of obsolete inventory due to conforming of product lines.
It is APW Ltd.'s strategy to become the premier, global electronic enclosure
manufacturer. In line with that strategy, APW Ltd. completed eleven electronic
enclosure acquisitions in fiscal 1997 and 1998, operating 34 facilities in 11
countries at August 31, 1998. As a result of this rapid expansion into the
electronic enclosure business, there were significant rationalization and
integration opportunities within and between the acquired businesses. In late
fiscal 1998, APW Ltd. formalized a plan to eliminate redundancies and streamline
operations within these acquired businesses. These rationalization efforts
included consolidating three facilities into one in the northeastern United
States, the consolidation of production of several product lines between
facilities, standardization of design and development functions, and other
organizational realignments. As a result of this plan, APW Ltd. recorded $7.1
million for related charges, including provisions for costs associated with
employee severance and provisions for long-term lease commitments on closed
facilities. APW Ltd. completed the planned reorganization of its acquired
companies in fiscal 1999.
Also in late fiscal 1998, APW Ltd. initiated aggressive programs to eliminate or
reduce product lines and items which were not generating sufficient economic
return. The programs include the elimination of slow moving or marginal
products and the entire exit of less productive product lines. As a result of
these programs, APW Ltd. recorded a $4.9 million charge to cost of products sold
for the write-off of obsolete inventory. APW Ltd.'s product line initiatives
were materially completed by the end of fiscal 1999.
In total, the above $27.9 million pre-tax charge included $8.9 million for
severance payments for a reduction of approximately 190 employees.
In addition to the above fourth quarter fiscal 1998 $21.1 million after-tax
charge, APW Ltd. recorded an allocated portion of two non-operating gains
incurred by the corporate headquarters of ZERO. In the first quarter of fiscal
1998, APW Ltd. recorded a $1.0 million pre-tax gain related to proceeds received
on a ZERO corporate officer life insurance policy. Also, in the third quarter
of fiscal 1998, APW Ltd. recognized a $5.5 million pre-tax gain for APW Ltd.'s
allocated share of a gain on the sale of ZERO corporate property.
Note 9 - Debt
- -------------
Long-term Debt: August 31,
- --------------- ----------------------------
(in thousands) 1998 1999
------------ ------------
Borrowings under:
F-12
<PAGE>
<TABLE>
<S> <C> <C>
General borrowings allocated from Applied Power $233,404 $639,275
Senior promissory notes, due March 8, 2011 50,000 50,000
Floating rate unsecured loan notes, due 2003 27,386 30,681
Pound Sterling multi-currency revolving credit agreement 26,218 5,623
-------- --------
Total long-term debt $337,008 $725,579
======== ========
</TABLE>
General borrowings allocated from Applied Power were determined based on a model
that allocated API's debt proceeds on a where incurred basis and allocated
Applied Power's net debt paydowns based on APW Ltd's free cash flow. The debt
allocated to APW Ltd. from Applied Power includes portions of balances
outstanding under Applied Power's multi-currency revolving credit agreement,
Applied Power's $200 million senior subordinated notes due 2009, amounts
outstanding from Applied Power's commercial paper program and other general
debt. Under Applied Power, these debt instruments were held centrally, and as
such, debt from these specific instruments was not historically allocated. See
Note 2 -"Summary of Significant Accounting Policies - Basis of Presentation" for
further discussion of Applied Power debt allocation.
The Senior promissory notes due March 8, 2011 bear interest at 7.13%, and are
payable in 11 annual installments of $4.5 million beginning March 8, 2001. The
proceeds from the notes were used solely for the repurchase of ZERO's common
stock in a Dutch Auction Tender Offer in fiscal 1996 and for payment of related
expenses.
The floating rate unsecured loan notes were entered into by APW Ltd. as a result
of its acquisitions of VERO and Rubicon. The notes were exchanged with
individual shareholders of VERO and Rubicon, at their option, in lieu of
receiving cash payment for their tendered shares. The notes carry an interest
rate of LIBOR minus 0.50% and can be redeemed at the option of the note holder
on various dates through 2003.
The Pound Sterling multi-currency revolving credit agreement was entered into by
VERO in April 1998, prior to the acquisition of VERO by APW Ltd. The facility
provides up to 27.5 million Pounds Sterling of multi-currency borrowings and
expires in 2003. Any borrowings under this agreement carry an interest rate of
LIBOR plus 0.65%, determined by the underlying currency of the debt which is
being borrowed. At August 31, 1999, the facility had outstanding borrowings
denominated in Pounds Sterling, German Marks, French Francs, US Dollars, Danish
Krone and Italian Lira. The agreement has certain covenants regarding tangible
net worth and debt-to-net worth, neither of which were deemed restrictive at
August 31, 1999. The total unused line of credit available under this agreement
at August 31, 1999 was approximately $38.4 million.
Short-term Debt: APW Ltd. had other short-term borrowings under unsecured
non-committed lines of credit with banks at August 31, 1998 and 1999. Interest
rates vary depending on the currency being borrowed. The weighted average
interest rates on the US and non-US short-term borrowings were 5.24% and 5.45%
at August 31, 1998 and 1999, respectively.
F-13
<PAGE>
Note 10 - Leases
- ----------------
APW Ltd. leases certain facilities, computers, equipment and vehicles under
various lease agreements generally over periods of one to twenty years. Under
most arrangements, APW Ltd. pays the property taxes, insurance, maintenance and
expenses related to the leased property. Many of the leases include provisions
which enable APW Ltd. to renew the lease based upon the fair values on the date
of expiration of the initial lease.
Future obligations on non-cancelable operating leases in effect at August 31,
1999 are: $17.9 million in fiscal 2000; $15.6 million in fiscal 2001; $21.2
million in fiscal 2002; $12.6 million in fiscal 2003; $9.6 million in fiscal
2004 and $114.4 million thereafter.
Total rental expense under operating leases was $3.3 million, $9.1 million and
$17.1 million in fiscal 1997, 1998 and 1999, respectively.
Note 11 - Stock Option Plans
- ----------------------------
Certain employees of APW Ltd. participate in stock option plans sponsored by
Applied Power and have stock options outstanding under Applied Power's 1990
Stock Plan and 1996 Stock Plan, and ZERO's 1994 Stock Plan. No further options
may be granted under Applied Power's 1990 Stock Plan and ZERO's 1994 Stock Plan,
although options previously issued and outstanding under these plans remain
exercisable pursuant to the provisions of the plans. Under the terms of Applied
Power's 1996 Plan, options may be granted to officers and key employees. Options
granted under Applied Power's plans generally have a maximum term of ten years
and an exercise price equal to 100% of the fair market value of a share of
Applied Power's common stock at the date of grant. Options generally vest 50%
after two years and 100% after five years. ZERO's options have an exercise price
not less than the fair market value of ZERO common stock on the date of grant.
In addition, ZERO's options were granted with terms of five to eight years and
become exercisable in annual installments (generally one-third of the total
grant) commencing one year from the date of grant, on a cumulative basis.
As part of the Distribution, APW Ltd. will adopt their own stock option plan and
the outstanding stock options of APW Ltd. employees will be converted to an
equivalent number of options to purchase the same value of APW Ltd. common stock
based on the fair market value of APW Ltd. common stock at the time of the
Distribution.
A summary of option activity for these APW Ltd. employees under the Applied
Power and ZERO stock option plans is as follows:
- --------------------------------------------------------------------------------
Number of Weighted Average
Shares Exercise Price
- --------------------------------------------------------------------------------
Outstanding at August 31, 1996 1,506,572 $ 9.90
Granted 208,850 19.01
Exercised (11,072) 16.19
- --------------------------------------------------------------------------------
Outstanding at August 31, 1997 1,704,350 $ 10.98
Granted 187,322 31.96
Exercised (233,999) 9.05
- --------------------------------------------------------------------------------
Outstanding at August 31, 1998 1,657,673 $ 13.62
Granted 427,400 27.13
Exercised (109,379) 11.31
Cancelled (9,300) 28.30
- --------------------------------------------------------------------------------
Outstanding at August 31, 1999 1,966,394 $ 16.62
- --------------------------------------------------------------------------------
Exercisable at August 31, 1999 1,224,988 $ 11.17
================================================================================
APW Ltd. applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
employee stock option plans. Accordingly, no compensation expense has been
recognized by APW Ltd. for these stock-based compensation plans. If APW Ltd. had
accounted for these stock options issued to APW Ltd. employees in accordance
with SFAS No. 123, "Accounting for Stock-Based Compensation," APW Ltd.'s net
earnings would have decreased by $0.2 million, $0.4 million and $1.0 million in
fiscal 1997, 1998 and 1999, respectively.
The pro forma effects of applying SFAS No. 123 may not be representative of the
effects on reported net income for future years since options vest over several
years and additional awards are made each year.
The fair value of APW Ltd. employee stock options used to compute pro forma net
earnings disclosures is the estimated present value at grant date using the
Black-Scholes option-pricing model. The weighted average fair values per share
of APW Ltd. options granted in fiscal 1997, 1998 and 1999 are $5.03, $11.40 and
$10.44, respectively. The following weighted average assumptions were used in
completing the model:
- --------------------------------------------------------------------------------
1997 1998 1999
- --------------------------------------------------------------------------------
Dividend yield 0.33% 0.24% 0.20%
Expected volatility 19.0% 23.5% 31.9%
Risk-free rate of return 6.3% 5.5% 6.4%
Expected life 5.0 years 5.6 years 5.1 years
================================================================================
<PAGE>
Note 12 - Employee Benefit Plans
- --------------------------------
Defined Benefit Pension Plan - APW Ltd. provides defined benefit pension
benefits to certain United Kingdom employees of VERO who were entitled to those
benefits prior to VERO's acquisition by APW Ltd. The following tables provide a
reconciliation of benefit obligations, plan assets, funded status and net
periodic benefit cost for those plans:
<TABLE>
<CAPTION>
VERO
Pension Benefits
- --------------------------------------------------------------------------------
(in thousands) 1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Change in benefit obligation-
Benefit obligation at beginning of year $ - $ 50,698
Service cost - 2,497
Interest cost - 3,315
Acquisition 50,698 -
Translation difference - (1,030)
Employee contributions - 1,071
Actuarial loss - 9,553
Benefits paid - (2,429)
- --------------------------------------------------------------------------------
Benefit obligation at end of year $ 50,698 $ 63,675
================================================================================
Change in plan assets-
Fair value of plan assets at beginning of year $ - $ 39,938
Actual return on plan assets - 6,709
Acquisition 39,938 -
APW Ltd. contributions - 2,262
Employee contributions - 1,071
Translation difference - (792)
Benefits paid from plan assets - (2,429)
- --------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 39,938 $ 46,759
================================================================================
Funded status of the plans $ (10,760) $ (16,916)
Unrecognized net loss - 5,993
- --------------------------------------------------------------------------------
Accrued benefit cost $ (10,760) $ (10,923)
================================================================================
Weighted-average assumptions as of August 31-
Discount rate 6.30% 5.80%
Expected return on plan assets 8.00% 7.50%
Rate of compensation increase 3.90% 3.80%
================================================================================
</TABLE>
<TABLE>
<CAPTION>
VERO
Pension Benefits
- ------------------------------------------------------------------------------
(in thousands) 1997 1998 1999
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Components of net periodic benefit cost -
Service cost $ - $ - $ 3,569
Employee contributions - - (1,071)
Interest cost - - 3,315
Expected return on assets - - (3,189)
- ------------------------------------------------------------------------------
Benefit cost $ - $ - $ 2,624
==============================================================================
</TABLE>
The VERO pension benefits consist of two plans which cover the majority of
VERO's United Kingdom employees, executives and directors. The assets of the
plans are held in a separately administered trust and contributions are
determined based on triennial actuarial valuations using the projected unit
credit funding method. APW Ltd. assumed the accrued benefit obligation upon
acquisition of VERO in June of 1998.
Defined Contribution Benefit Plans
Substantially all of APW Ltd.'s full-time US employees have been eligible to
participate in a qualified 401(k) plan under the APW 401(k) Plan. Under the
provisions of the 401(k) Plan, the plan administrator acquires shares of Class A
Common Stock on the open market and allocates such shares to accounts set aside
for APW Ltd. employee's retirements. APW Ltd. core contributions generally
equal 3% of each employee's annual cash compensation, subject to IRS
limitations. Additionally, employees generally may contribute up to 15% of
their base compensation. APW Ltd. also matches approximately 25% of each
employee's contribution up to the participant's first 6% earnings.
During the years ended August 31, 1997, 1998 and 1999, pre-tax expense related
to the above defined contribution plan was approximately $3.2 million, $3.7
million and $5.3 million, respectively.
Non-US Benefit Plans - APW Ltd. contributes to a number of retirement programs
for employees outside the US. Pension expense under these programs amounted to
approximately $0.1 million, $0.9 million and $1.9 million in fiscal 1997, 1998
and 1999, respectively. As these plans are not significant APW Ltd. does not
determine the actuarial value of accumulated plan benefits or net assets
available for benefits.
F-16
<PAGE>
Note 13 - Income Taxes
- ----------------------
Income tax expense consists of the following (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1997 1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $15,224 $17,513 $(3,029)
Foreign (53) 1,190 9,281
State 2,595 2,456 489
- --------------------------------------------------------------------------------
Subtotals 17,766 21,159 6,741
- --------------------------------------------------------------------------------
Deferred:
Federal 1,097 (5,215) 5,276
Foreign - 1,958 (1,328)
State 36 (743) 701
- --------------------------------------------------------------------------------
Subtotals 1,133 (4,000) 4,649
- --------------------------------------------------------------------------------
Totals $18,899 $17,159 $11,390
================================================================================
</TABLE>
Income tax expense differs from the amounts computed by applying the Federal
income tax rate to earnings before income tax expense. A reconciliation of
income taxes at the US statutory rate to the effective tax rate follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
% of Pre-tax Earnings
- --------------------------------------------------------------------------------
1997 1998 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of Federal effect 3.4 3.1 2.4
Non-deductible amortization and other expenses 0.3 11.1 14.3
Net effects of foreign tax rates and credits (1.6) 0.8 (16.0)
Other items 0.3 (1.7) 0.1
- --------------------------------------------------------------------------------
Effective tax rate 37.4% 48.3% 35.8%
================================================================================
</TABLE>
Temporary differences and carryforwards which gave rise to the deferred tax
assets and liabilities included the following items (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
August 31,
- --------------------------------------------------------------------------------
1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax assets:
Operating loss and state tax credit carryforwards $ 772 $ 1,159
Compensation and other employee benefits 10,711 9,053
Inventory items 1,671 2,822
Restructuring expenses 5,349 1,362
Deferred income 405 994
Book reserves and other items 3,459 1,369
- -------------------------------------------------------------------------------
Total deferred assets 22,367 16,759
Valuation allowance (772) (1,159)
- --------------------------------------------------------------------------------
Net deferred income tax assets 21,595 15,600
- --------------------------------------------------------------------------------
Deferred income tax liabilities:
Depreciation and amortization 13,800 15,450
Inventory items 442 442
Other items income tax liabilities 2,022 (639)
- --------------------------------------------------------------------------------
Net deferred 16,264 15,253
- --------------------------------------------------------------------------------
Net deferred income taxes $ 5,331 $ 347
================================================================================
</TABLE>
The valuation allowance represents a reserve for foreign and domestic operating
loss and state tax credit carryforwards for which utilization is uncertain. The
increase in the valuation allowance represents the current year increase in such
loss carryforwards. The majority of the foreign losses may be carried forward
indefinitely. The state loss carryforwards expire in various years through 2014.
F-17
<PAGE>
APW Ltd.'s policy is to remit earnings from foreign subsidiaries only to the
extent any resultant foreign income taxes are creditable in the US. Accordingly,
APW Ltd. does not currently provide for the additional US and foreign income
taxes which would become payable upon remission of undistributed earnings of
foreign subsidiaries. Undistributed earnings on which additional income taxes
have not been provided amounted to approximately $31.8 million at August 31,
1999. If all such undistributed earnings were remitted, an additional provision
for income taxes of approximately $0.8 million would have been necessary as of
August 31, 1999.
Earnings from continuing operations before income taxes from non-US operations
were $1.9 million, $7.9 million and $25.9 million for 1997, 1998 and 1999,
respectively.
Note 14 - Supplemental Combined Balance Sheet Information:
- ----------------------------------------------------------
<TABLE>
<CAPTION>
August 31,
-------------------------
1998 1999
(in thousands) --------- ---------
<S> <C> <C>
Accounts receivable -
Accounts receivable $ 95,429 $ 105,302
Less allowances 2,499 3,537
--------- ---------
Accounts receivable, net $ 92,930 $ 101,765
========= =========
Property, plant and equipment -
Property $ 3,065 $ 15,739
Plant 47,320 33,508
Machinery and equipment 179,941 308,146
--------- ---------
Total 230,326 357,393
Less accumulated depreciation 82,437 162,489
--------- ---------
Property, plant and equipment, net $ 147,889 $ 194,904
========= =========
August 31,
-------------------------
1998 1999
--------- ---------
Goodwill -
Goodwill $ 343,810 $ 719,717
Less accumulated amortization 7,285 32,191
--------- ---------
Goodwill, net $ 336,525 $ 687,526
========= =========
Other Intangibles -
Other intangibles $ 17,892 $ 18,662
Less accumulated amortization 5,540 7,031
--------- ---------
Other intangibles, net $ 12,352 $ 11,631
========= =========
</TABLE>
F-18
<PAGE>
Note 15 - Business Segment, Geographic and Customer Information
- ---------------------------------------------------------------
APW Ltd. is organized as one reportable segment. APW Ltd. supplies electronic
enclosures, power supplies, thermal systems, backplanes, and cabling either as
individual products, or as an integrated system incorporating certain of APW
Ltd.'s product design, supply chain management, assembly and test capabilities.
Sales between geographic areas are insignificant and are accounted for at prices
intended to yield a reasonable return to the selling affiliate.
The following table summarizes financial information by geographic region. The
information for Operating Earnings includes the effects of the merger,
restructuring and other non-recurring items discussed in Note 8 - "Merger,
Restructuring and Other Non-recurring Items." Fiscal 2000 results include $2.2
million in fees and expenses allocated by Applied Power to APW Ltd. associated
with the spin-off and incorporating APW Ltd. offshore with the entire amount
being allocated to General corporate and other. Fiscal 1998 results include a
$27.9 million restructuring and merger charge that was allocated by geographic
region as follows: $18.3 million in North America, $8.8 million General
Corporate and $0.8 million in Europe.
<TABLE>
<CAPTION>
Six Months Ended
Years Ended August 31, ----------------------------
------------------------------------------ February 28, February 29,
1997 1998 1999 1999 2000
--------- --------- ----------- ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales:
North America $334,391 $460,998 $ 576,034 $266,247 $ 327,082
Europe and other 40,927 132,212 479,304 246,993 239,134
--------- --------- ----------- --------- -----------
Totals $375,318 $593,210 $1,055,338 $513,240 $ 566,216
========= ========= =========== ========= ===========
Operating earnings:
North America $ 64,355 $ 53,502 $ 58,727 $ 21,093 $ 38,076
Europe and other 1,536 8,548 31,536 21,383 11,608
General corporate and other (7,107) (18,575) (7,377) (3,747) (5,848)
--------- --------- ----------- --------- -----------
Totals $ 58,784 $ 43,475 $ 82,886 $ 38,729 $ 43,836
========= ========= =========== ========= ===========
Assets:
North America $395,167 $ 367,475 $ 391,180
Europe and other 334,049 760,435 743,813
General corporate and other 14,594 52,068 49,509
--------- ----------- -----------
Totals $743,810 $1,179,978 $1,184,502
========= =========== ===========
</TABLE>
Corporate assets, which are not allocated, represent principally cash and
deferred income taxes.
No single customer accounted for more than 10% of total net sales in 1997, 1998
or 1999. Export sales from domestic operations were less than 3% of total net
sales in each of the periods presented.
F-19
<PAGE>
Note 16 - Contingencies and Litigation
- --------------------------------------
APW Ltd. is a party to various legal proceedings which have arisen in the normal
course of its business. These legal proceedings typically include product
liability, environmental, labor, patent claims and commission disputes. APW Ltd.
has recorded reserves for loss contingencies based on the specific circumstances
of each case. Such reserves are recorded when it is probable that a loss has
been incurred as of the balance sheet date and such loss can be reasonably
estimated. In the opinion of management, the resolution of these contingencies
will not have a material adverse effect on APW Ltd.'s financial condition,
results of operations or cash flows.
APW Ltd. has facilities at numerous geographic locations which are subject to a
range of environmental laws and regulations. Environmental costs are expensed or
capitalized depending on their future economic benefits. Expenditures that have
no future economic value are expensed. Liabilities are recorded when
environmental remediation is probable and the costs can be reasonably estimated.
Environmental expenditures over the last three years have not been material.
Although the level of future expenditures for environmental remediation is
impossible to determine with any degree of certainty, it is management's opinion
that such costs will not have a material adverse effect on APW Ltd.'s financial
position, results of operations or cash flows. Environmental remediation
accruals of $2.1 million and $2.8 million were included in the Combined Balance
Sheets at August 31, 1998 and 1999, respectively.
F-20
<PAGE>
Note 17 - Quarterly Financial Data (Unaudited)
- ----------------------------------------------
<TABLE>
<CAPTION>
Fiscal 1998
-------------------------------------------------------
First Second Third Fourth(1)
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Net sales $ 124.6 $ 125.5 $ 139.2 $ 203.9
Gross profit 44.7 44.1 48.3 57.0
Net earnings 8.8 7.3 10.0 (7.8)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1999
-------------------------------------------------------
First Second Third Fourth
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Net sales $ 263.2 $ 250.1 $ 260.5 $ 281.5
Gross profit 75.9 64.5 72.4 79.0
Net earnings 7.8 3.3 3.9 5.4
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
(In millions) Fiscal 2000
------------------------
First Second (2)
------- ----------
<S> <C> <C>
Net sales $ 289.1 $ 277.1
Gross profit 77.4 72.3
Net earnings 6.4 2.5
======= =======
</TABLE>
(1) Fiscal 1998 fourth quarter results include a pre-tax charge of $27.9 million
related to costs associated with the ZERO merger, various plant and
infrastructure consolidations, and other cost reduction and product
rationalization efforts of APW Ltd.
(2) Includes $2.2 million allocated charge for fees and expenses associated with
the Distribution and the incorporating of APW Ltd. offshore. Those fees and
expenses which are included in the Combined Statements of Earnings for the
six months ended February 29, 2000, represent APW Ltd.'s allocated portion
of legal, accounting, tax and investment banking fees incurred through
February 29, 2000 for services related to the transaction.
Also in the second quarter of fiscal 2000, a $3.3 million make-whole premium
($2.1 million net of tax benefit) was paid in connection with the early
retirement of debt in anticipation of the Distribution. This charge is
recorded in the Combined Statements of Earnings for the six months ended
February 29, 2000, as an extraordinary item, net of tax.
F-21
<PAGE>
Report of Independent Accountants on Financial Statement Schedule
- -----------------------------------------------------------------
To the Directors of Applied Power Inc.:
Our audits of the combined financial statements referred to in our report
dated April 20, 2000 on page F-1 of this Form 10 also included an audit of the
information as of and for the years ended August 31, 1997, 1998 and 1999,
respectively, set forth in the Financial Statement Schedule included in this
Form 10. In our opinion, this Financial Statement Schedule presents fairly, in
all material respects, the information set forth therein as of and for the years
ended August 31, 1997, 1998, and 1999, when read in conjunction with the related
combined financial statements.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
April 20, 2000
F-22
<PAGE>
APW LTD. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additions Deductions
------------------------ ------------
Accounts
Balance at Effect of Charged to Written Off Balance
Beginning Excluded Costs and Net Less at End
Description of Period Activity Expenses Acquired Recoveries Other of Period
- --------------------------- ---------- --------- ---------- -------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------
Deducted from assets to
Which they apply:
- -----------------------
Allowance for losses -
trade accounts receivable
August 31, 1997 $ 760 $ - $ 220 $ 133 $ 216 $ - $ 897
======= ==== ====== ====== ====== ====== =======
August 31, 1998 $ 897 $ 59 $1,295 $ 509 $ 233 $ (28) $ 2,499
======= ==== ====== ====== ====== ====== =======
August 31, 1999 $ 2,499 $ - $ 641 $1,254 $ 801 $ (56) $ 3,537
======= ==== ====== ====== ====== ====== =======
Allowance for losses -
Inventory
August 31, 1997 $ 626 $ - $1,048 $ 280 $ 141 $ - $ 1,813
======= ==== ====== ====== ====== ====== =======
August 31, 1998 $ 1,813 $162 $7,604 $4,627 $ 827 $(192) $13,187
======= ==== ====== ====== ====== ====== =======
August 31, 1999 $13,187 $ - $4,197 $1,359 $6,521 $(286) $11,936
======= ==== ====== ====== ====== ====== =======
</TABLE>
F-23
<PAGE>
Exhibit 4.1
APW LTD.
and
FIRSTAR BANK N.A.
as Rights Agent
RIGHTS AGREEMENT
Dated as of ______, ____
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Certain Definitions............................................................................. 4
2. Appointment of Rights Agent..................................................................... 8
3. Issue of Rights Certificates.................................................................... 8
4. Form of Rights Certificates..................................................................... 10
5. Countersignature and Registration............................................................... 10
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates....................................... 11
7. Exercise of Rights; Purchase Price; Expiration Date of Rights................................... 12
8. Cancellation and Destruction of Rights Certificates............................................. 14
9. Reservation and Availability of Common Stock.................................................... 14
10. Common Stock Record Date........................................................................ 16
11. The Flip-In..................................................................................... 16
12. The Flip-Over................................................................................... 17
13. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights............................................................................ 20
14. Fractional Rights and Fractional Shares......................................................... 25
15. Rights of Action................................................................................ 26
16. Agreement of Rights Holders..................................................................... 26
17. Rights Holder Not Deemed a Shareholder.......................................................... 27
18. Concerning the Rights Agent..................................................................... 27
19. Merger or Consolidation or Change of Name of Rights Agent....................................... 27
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
20. Duties of Rights Agent......................................................................... 28
21. Change of Rights Agent......................................................................... 30
22. Issuance of New Rights Certificates............................................................ 31
23. Redemption and Termination..................................................................... 31
24. Exchange....................................................................................... 32
25. Notice of Certain Events....................................................................... 33
26. Notices........................................................................................ 34
27. Supplements and Amendments..................................................................... 35
28. Determination and Actions by the Board of Directors............................................ 35
29. Successors..................................................................................... 35
30. Benefits of this Agreement..................................................................... 35
31. Severability................................................................................... 36
32. Governing Law.................................................................................. 36
33. Counterparts................................................................................... 36
34. Descriptive Headings........................................................................... 36
</TABLE>
EXHIBITS
- --------
EXHIBIT A -- Forms of Rights Certificates
EXHIBIT B -- Form of Rights Summary
3
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of ____________, 2000 (the "AGREEMENT"), between
APW LTD., a Bermuda corporation (the "COMPANY"), and FIRSTAR BANK N.A. (the
"Rights Agent").
W I T N E S S E T H:
WHEREAS, on ______, 2000 the Board of Directors of the Company authorized
and declared a dividend distribution of one Right (as defined below) for each
outstanding share of common stock, par value $.001 per share, of the Company
(the "COMMON STOCK") outstanding on ________, 2000 (the "RECORD DATE"), and the
issuance of one Right for each share of Common Stock of the Company issued
between the Record Date and the Separation Date and one Right for each share of
Common Stock of the Company issued upon exercise of stock options granted prior
to the Separation Date or under any employee plan or arrangement established
prior to the Separation Date, each Right representing the right to purchase one
share of Common Stock, upon the terms and subject to the conditions hereinafter
set forth (the "RIGHTS");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates (as hereinafter defined) and
Associates (as hereinafter defined) of such Person, shall be the Beneficial
owner (as hereinafter defined) of 15% or more of the shares of Common Stock then
outstanding and shall include all Affiliates and Associates of such Person, but
shall not include the (i) Company, (ii) any Subsidiary of the Company, (iii) any
employee benefit plan of the Company or any Subsidiary of the Company (iv) any
Person or entity holding shares of Common Stock organized, appointed or
established by the Company for or pursuant to the terms of any such plan, or (v)
an institutional investor who qualifies for use of a Schedule 13G and files a
Schedule 13G provided it does not state any intention or reserve the right to
control or influence the Company. Notwithstanding the foregoing, no Person
shall become an Acquiring Person as a result of an acquisition of Common Stock
by the Company which by reducing the number of shares outstanding increases the
proportionate number of shares beneficially owned to 15% or more of the Common
Stock then outstanding.
4
<PAGE>
(b) "AFFILIATE" shall mean, with respect to a specified Person, a Person
that directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
(c) "ASSOCIATE" shall mean, with respect to a specified Person, (i) any
corporation or organization (other than the Company or a Subsidiary of the
Company) of which such Person is an officer, director or partner or is, directly
or indirectly, the beneficial owner of 10% or more of any class of equity
security as defined in Rule 3a-11 of the General Rules and Regulations under the
Exchange Act (or any successor rule or statutory provision), (ii) any trust or
other estate in which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary capacity, and
(iii) any relative or spouse of such Person, or any relative of such spouse, who
has the same home as such Person, or is an officer or director of any
corporation controlling or controlled by such Person.
(d) "BENEFICIAL OWNERSHIP" shall be determined pursuant to Rule 13d-3 of
the General Rules and Regulations under Exchange Act (or any successor rule or
statutory provision) or, if Rule 13d-3 shall be rescinded and there shall be no
successor rule or statutory provision thereto, pursuant to Rule 13d-3 as in
effect on the date hereof; provided, however, that a Person shall, in any event,
also be deemed to be the "Beneficial Owner" of any securities:
(i) which such Person or any Affiliate or Associate thereof
beneficially owns, directly or indirectly;
(ii) which such Person or any Affiliate or Associate thereof,
directly or indirectly, has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon
the exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by or on behalf of
such Person or any Affiliate or Associate thereof until the tendered
securities are accepted for purchase or exchange, or (B) securities
issuable upon exercise of the Rights;
(iii) which such Person or any Affiliate or Associate thereof,
directly or indirectly, has sole or shared voting or investment power with
respect thereto pursuant to any agreement, arrangement or understanding
(whether or not in writing); provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own," any security
under this subparagraph (iii) as a result of an agreement, arrangement or
understanding to vote such security if the agreement, arrangement or
understanding (A) arises solely from a revocable
5
<PAGE>
proxy given in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and (B) is not also
then reportable by such Person on Schedule 13D under the Exchange Act; or
(iv) which are beneficially owned, directly or indirectly, by any other
Person or any Affiliate or Associate thereof with which such Person or any
Affiliate or Associate thereof has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described in
subparagraph (iii) of this paragraph (e)) or disposing of any voting
securities of the Company.
Nothing in this Section 1(d) shall cause a Person engaged in business as an
underwriter to be the "Beneficial Owner" of, or to "beneficially own," any
securities acquired through such Person's participation in good faith in a firm
commitment underwriting until the expiration of 40 days after the date of such
acquisition.
(e) "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the Country of Bermuda are authorized or
obligated by law or executive order to close.
(f) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M., Central
Standard time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Central Standard time, on the next
succeeding Business Day.
(g) "CLOSING PRICE" of any security on any given day shall be the last
sale price, regular way, of such security or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, on
the principal trading market on which such security is then traded.
(h) "COMMON STOCK" shall mean the common stock, par value $.001 per share,
of the Company; and "COMMON STOCK" when used with reference to any Person other
than the Company shall mean the capital stock with the greatest voting power, or
the equity securities or other equity interest having power to control or direct
the management, of such Person.
(i) "CURRENT MARKET PRICE" of any security on any given day shall be
deemed to be the average of the daily Closing Prices per share or other trading
unit of such security for 10 consecutive Trading Days (as hereinafter defined)
immediately preceding such date; provided, however, that with respect to shares
of capital stock, in the event that the current market price per share of the
capital stock is determined during a period following the announcement of (i) a
dividend or distribution on the capital stock payable in shares of such capital
stock or securities convertible into shares of such capital stock (other than
the Rights), or (ii) any subdivision, combination or
6
<PAGE>
reclassification of the capital stock, and prior to the expiration of the
requisite 10 Trading Day period, as set forth above, after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then and in each such case, the Current Market
Price, shall be properly adjusted to take into account ex-dividend trading; and
provided further that if the security is not publicly held or not so listed or
traded, Current Market Price per share or other trading unit shall mean the fair
value per share or other trading unit as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended and in effect on the date of this Agreement, and all references to any
rule or regulation of the General Rules and Regulations under the Exchange Act
shall be, except as otherwise specifically provided herein, to such rule or
regulation as was in effect on the date of this Agreement.
(k) "EXCHANGE DATE" shall mean the date at which the Rights are exchanged
as provided in Section 24 of this Agreement.
(l) "EXPIRATION DATE" shall mean the Close of Business on _______, 20__
subject to extension as provided in Section 12(c) of this Agreement.
(m) "FLIP-IN EVENT" shall mean any Person becoming an Acquiring Person.
(n) "FLIP-OVER EVENT" shall mean any of the events described in Section
12(a) of this Agreement.
(o) "PERSON" shall mean any individual, firm, corporation, partnership or
other entity and shall include any "group" as that term is used in Rule 13d-5(b)
under the Exchange Act (or any successor rule or statutory provision).
(p) "PURCHASE PRICE" shall mean with respect to each Right, the price set
forth in Section 7(b) of this Agreement (subject to adjustment).
(q) "PRINCIPAL PARTY" shall have the meaning set forth in Section 12(b) of
this Agreement.
(r) "REDEMPTION DATE" shall mean the time at which the Rights are ordered
to be redeemed pursuant to Section 23 of this Agreement.
(s) "SEPARATION DATE" shall mean the earlier of (i) the tenth day after
the Stock Acquisition Date (as hereinafter defined) or (ii) the tenth day after
the date of the commencement of, or first public announcement of the intent to
commence, a tender or
7
<PAGE>
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company or any entity holding shares of Common Stock organized, appointed or
established by the Company for or pursuant to the terms of any such plan), if
upon consummation thereof, such Person would be the Beneficial Owner of 50% or
more of the shares of Common Stock then outstanding (including any such date
which is after the date of this Agreement and prior to the issuance of the
Rights).
(t) "STOCK ACQUISITION DATE" shall mean the first date of public
announcement by the Company, an Acquiring Person or otherwise, that an Acquiring
Person, has become such.
(u) "SUBSIDIARY" shall mean, with reference to any Person, any corporation
of which a majority of any class of equity security is Beneficially Owned,
directly or indirectly, by such Person.
(v) "TRADING DAY," with respect to any security shall mean a day on which
the principal national securities exchange on which the security is listed or
admitted to trading is open for the transaction of business or, if the security
is not listed or admitted to trading on any national securities exchange, a
Business Day.
(w) "TRIGGERING EVENT" shall mean a Flip-In Event or a Flip-Over Event.
Any determination required by the definitions contained in this Section 1
shall be made by the Board of Directors of the Company in its good faith
judgment, which determination shall be final and binding on the Rights Agent.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 of this Agreement, shall prior to the Separation
Date also be the holders of the Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the Separation Date, (i) the Rights will be evidenced by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (ii) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company).
8
<PAGE>
(b) As soon as practicable after the Separation Date, the Rights Agent
will send by first-class, postage prepaid mail, to each record holder of the
Common Stock as of the Close of Business on the Separation Date, at the address
of such holder shown on the records of the Company, a Rights certificate (the
"RIGHTS CERTIFICATE"), evidencing one Right (as adjusted from time to time prior
to the Separation Date pursuant to this Agreement) for each share of Common
Stock so held. As of and after the Separation Date, the Rights will be
evidenced solely by Rights Certificates.
(c) As soon as practicable after the Record Date, the Company will send a
copy of a Summary of Rights, in substantially the form attached hereto as
Exhibit B (the "SUMMARY OF RIGHTS"), by first-class, postage prepaid mail to
each record holder of the Common Stock as of the Close of Business on the Record
Date, at the address of such holder shown on the records of the Company.
(d) Certificates for the Common Stock issued after the Record Date, but
prior to the earlier of the Separation Date or the Expiration Date (as
hereinafter defined), shall be deemed also to be certificates for Rights, and
shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between APW Ltd. (the
"Company") and Firstar Bank N.A., dated as of _________, ____ (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal offices of the Company.
Under certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt of
a written request therefor. Under certain circumstances, Rights
beneficially owned by Acquiring Persons (as defined in the Rights
Agreement) become null and void and the holder of such Rights (including
any subsequent holder) shall not have any right to exercise the Rights.
(e) After the Separation Date, but prior to the Expiration Date, Rights
shall be issued in connection with the issuance of Common Stock upon the
exercise of stock options granted prior to the Separation Date or pursuant to
other benefits under any employee plan or arrangement established prior to the
Separation Date; provided, however, that if, pursuant to the terms of any option
or other benefit plan, the number of shares issuable thereunder is adjusted
after the Separation Date, the number of Rights issuable upon issuance of the
shares shall be equal only to the number of shares which would have been
issuable prior to the adjustment.
9
<PAGE>
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the form of election to purchase shares
and form of assignment) shall be in substantially the form attached hereto as
Exhibit A and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed or to conform to
usage. Subject to the provisions of this Agreement, the Rights Certificates,
whenever issued, shall be dated as of the Record Date and on their face shall
entitle the holders thereof to purchase such number of shares of Common Stock
which shall be set forth therein at the Purchase Price set forth therein,
subject to adjustment as provided in this Agreement.
(b) Any Rights Certificate issued pursuant to Section 3(a) of this
Agreement that represents Rights beneficially owned by an Acquiring Person or
that represents any Rights owned on or after the Separation Date by any Person
who subsequently becomes an Acquiring Person and any Rights Certificate issued
at any time upon the transfer of any Rights to an Acquiring Person or to any
nominee of such Acquiring Person and any Rights Certificate issued pursuant to
Section 6 or Section 13 of this Agreement upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this sentence, may
contain the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in
the Rights Agreement). This Rights Certificate and the Rights represented
hereby may become void in the circumstances specified in Section 7(e) of
the Rights Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company by
the Chairman of its Board of Directors, its President, its Secretary, or any
Vice President, either manually or by facsimile signature and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. Each Rights Certificate shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before counter-
signature by the Rights Agent and issuance and delivery by the Company, such
Rights Certificates, nevertheless, may be countersigned by the
10
<PAGE>
Rights Agent, and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Separation Date, the Rights Agent will keep or cause to
be kept, at one of its offices, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced by each of the Rights Certificates, and the certificate number
and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 14 of this Agreement, at any time
after the Close of Business on the Separation Date, and at or prior to the Close
of Business on the Expiration Date, any Rights Certificate or Certificates may
be transferred, split up, combined or exchanged for another Rights Certificate
or Certificates, entitling the registered holder to purchase a like number of
shares of Common Stock (or other securities, cash or other property, as the case
may be) as the Rights Certificate or Certificates surrendered then entitled such
holder (or former holder in the case of a transfer) to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent designated for such purpose. Thereupon, the Rights Agent shall
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
11
<PAGE>
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Until the Separation Date, no Right may be exercised. Each Right
shall entitle (except as otherwise provided in this Agreement) the registered
holder thereof, upon the exercise thereof as provided in this Agreement, to
purchase, for the Purchase Price, at any time after the Separation Date and
prior to the earliest of the Expiration Date, the Exchange Date and the
Redemption Date, one share of Common Stock, subject to adjustment from time to
time as provided in Section 13 of this Agreement, payable in lawful money of the
United States of America in accordance with Paragraph (c) below.
(b) Subject to Section 7(e), Section 23(a) and Section 24 of this
Agreement, the registered holder of any Rights Certificate may exercise the
Rights evidenced thereby in whole or in part at any time after the Separation
Date upon surrender of the Rights Certificate, with the form of election to
purchase on the reverse side thereof including the certificate contained therein
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each share of Common Stock as to
which the Rights are exercised prior to the earliest of the Expiration Date, the
Exchange Date and the Redemption Date. The Purchase Price for each share of
Common Stock purchasable pursuant to the exercise of a Right shall initially be
$15.00 (Fifteen & 00/100 dollars), and shall be payable in lawful money of the
United States of America in accordance with Paragraph (c) below. The Purchase
Price and the number of shares of Common Stock to be acquired upon exercise of a
Right shall be subject to adjustment from time to time as provided in Section 13
of this Agreement.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase including the certificate contained
therein duly executed, accompanied by payment of the Purchase Price for the
shares (or cash or other assets as the case may be) to be purchased and an
amount equal to any applicable transfer tax in cash, or by certified check or
bank draft payable to the order of the Company, the Rights Agent shall thereupon
promptly:
(i)(A) requisition from any transfer agent of the Common Stock
certificates for the total number of shares of Common Stock to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply
with all such requests, or (B) requisition from the depositary agent
depositary receipts representing such number of shares of Common Stock as
are to be purchased (in which case certificates for the shares of Common
Stock represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company will direct the depositary agent
to comply with such request;
12
<PAGE>
(ii) requisition from the Company the amount of cash, if any, to be
paid in lieu of fractional shares in accordance with Section 14 of this
Agreement;
(iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of
such Rights Certificate, registered in such name or names as may be
designated by such holder; and
(iv) after receipt, deliver such cash, if any, to or upon the order of
the registered holder of such Rights Certificate.
In the event that the Company is obligated to issue other securities of the
Company, pay cash and/or distribute other property pursuant to this Agreement,
the Company will make all arrangements necessary so that such other securities,
cash and/or other property are available for distribution by the Rights Agent,
if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to the registered holder of such Rights Certificate
or to his duly authorized assigns, subject to the provisions of Section 6 and
Section 14 of this Agreement.
(e) Notwithstanding anything in this Agreement to the contrary, upon the
occurrence of the earlier of (x) the date on which the Board of Directors of the
Company decides to exchange the Rights pursuant to Section 24 of this Agreement
and (y) a Triggering Event, any unexercised Rights beneficially owned by (i) an
Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any Associate or Affiliate thereof) who
becomes a transferee after the Acquiring Person becomes such, (iii) a transferee
of an Acquiring Person (or of any Associate or Affiliate thereof) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall immediately
become permanently null and void without any further action, and no holder of
such Rights shall have any right whatsoever with respect to such Rights under
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) of this
Agreement are complied with, but shall have no liability to any holder of Rights
Certificates or to any other Person as a result of
13
<PAGE>
its failure to make any determinations with respect to an Acquiring Person or
its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder of any Rights Certificate upon the occurrence of
any purported exercise thereof unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former or proposed Beneficial Owner) or Affiliates thereof
as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificates purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such cancelled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Common Stock.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available at all times out of its authorized and unissued shares of Common
Stock (and/or other shares of capital stock or securities) or its authorized and
issued shares of Common Stock (and/or other shares of capital stock or
securities) held in its treasury, free from preemptive rights or any right of
first refusal, the number of shares of Common Stock (and/or other shares of
capital stock or securities) that will be sufficient to permit the exercise in
full of all Rights from time to time outstanding.
(b) So long as the shares of Common Stock (and/or other shares of capital
stock or securities) issuable upon the exercise of the Rights may be listed on
any national securities exchange, the Company shall use its reasonable efforts
to cause, from and after the time the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
(c) The Company shall use its best efforts to:
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(i) file, as soon as practicable following the earlier of the
Separation Date or as soon as is required by law, a registration statement
under the Securities Act of 1933 (the "Act"), with respect to the
securities purchasable upon exercise of the Rights on an appropriate form;
(ii) cause such registration statement to become effective as soon
as practicable after the filing; and
(iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
earliest of (A) the date as of which Rights are no longer exercisable for
such securities, (B) the Expiration Date and (C) the Redemption Date.
The Company will also take all action necessary to ensure compliance with
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statements and permit them to become
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in that jurisdiction shall have been obtained and, if
applicable, until a registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Common Stock delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any shares of Common Stock (and/or other shares of capital stock of securities,
as the case may be) upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Rights Certificates to a Person other than, or the
issuance or delivery of any certificate for shares of Common Stock (and/or other
shares of capital stock of securities, as the case may be) in respect of a name
other than that of, the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise or the issuance or delivery of any certificates
for shares of Common Stock (and/or other shares of capital stock of
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securities, as the case may be), upon the exercise of any Rights until such tax
shall have been paid (any such tax being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
Section 10. Common Stock Record Date. Each Person in whose name any
certificate for shares of Common Stock (and/or other shares of capital stock of
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the shares of
Common Stock (and/or other shares of capital stock of securities, as the case
may be) represented thereby on, and such certificate shall be dated, the date
upon which the Rights Certificate evidencing such Rights was duly surrendered
and payment of the Purchase Price (and all applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Common Stock (and/or other shares of capital stock of securities, as
the case may be) transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Common Stock
(and/or other shares of capital stock of securities, as the case may be)
transfer books of the Company are open.
Section 11. The Flip-In. (a) In the event any Person shall become an
Acquiring Person, then, subject to the provisions of Section 24 of this
Agreement, each holder of a Right, except as provided below and in Section 7(e)
of this Agreement, shall thereafter have a right to receive, upon exercise of
the Right at the then current Purchase Price, in accordance with the terms of
this Agreement, in lieu of one share of Common Stock per Right held, such number
of shares of Common Stock of the Company as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the then number of shares of
Common Stock for which a Right is then exercisable and dividing that product by
(y) 50% of the Current Market Price per share of the Common Stock on the date on
which the first of the events listed above in this subparagraph (a) occurs (such
number of shares being herein referred to as the "ADJUSTMENT SHARES").
(b) In the event that there shall not be sufficient treasury shares or
authorized but unissued shares of Common Stock to permit the exercise in full of
the Rights in accordance with the foregoing subparagraph (a), the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exercise of the Rights; provided, however, that
if the Company is unable to cause the authorization of a sufficient number of
additional shares of Common Stock, then, in the event the Rights become so
exercisable, the Company, with respect to each Right and to the extent necessary
and permitted by applicable law and any agreements or instruments in effect on
the date hereof to which the Company is a party, shall, upon the exercise of
such Rights,
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(i) pay an amount in cash equal to the excess of (A) the product of
(1) the number of Adjustment Shares, multiplied by (2) the Current Market
Price of the Common Stock (such product being herein referred to as the
"CURRENT VALUE"), over (B) the Purchase Price, in lieu of issuing shares of
Common Stock and requiring payment therefor, or
(ii) issue debt or equity securities, or a combination thereof,
having a value equal to the Current Value, where the value of such
securities shall be determined by a recognized investment banking firm
selected by the Board of Directors of the Company, and require the payment
of the Purchase Price, or
(iii) deliver any combination of cash, property, Common Stock and/or
other securities having the requisite value, and require payment of all or
any requisite portion of the Purchase Price.
To the extent that the Company determines that some action need be taken
pursuant to clauses (i), (ii), or (iii) of the proviso of this Section 11(b), a
majority of the directors of the Company may suspend the exercisability of the
Rights for a period of up to 60 days following the date on which the first of
the events listed in Section 11 of this Agreement shall have occurred, in order
to decide the appropriate form of distribution to be made pursuant to the above
proviso and to determine the value thereof. In the event of any suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at the
time the suspension is no longer in effect.
Section 12. The Flip-Over.
(a) In the event that, following the Separation Date, directly or
indirectly:
(w) the Company shall consolidate with, or merge with and into, any
other Person; or
(x) any Person shall consolidate with the Company, or merge with and
into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part
of the shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other Person or cash or any other property; or
(y) the Company shall effect a share exchange in which all or part of
the Common Stock of the Company shall be changed into (including, without
limitation, any conversion into or exchange for) securities of any other
Person, cash or any other property; or
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(z) the Company shall sell, lease, exchange, mortgage, pledge or
otherwise transfer (or one or more of its Subsidiaries shall sell, lease,
exchange, mortgage, pledge or otherwise transfer), in one or more
transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons then, and in each such case, subject
to the provisions of Section 24 of this Agreement,
(i) each holder of a Right, except as provided in Section 7(e) of
this Agreement, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, such number of shares of freely tradeable common
stock of the Principal Party, free and clear of any lien, encumbrance or
other adverse claim, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the then number of shares of
Common Stock for which a Right is then exercisable (or the number of shares
of Common Stock for which a Right was exercisable immediately prior to the
occurrence of the Flip-In Event if a Flip-In Event has previously occurred)
and dividing that product by (2) 50% of the Current Market Price per share
of the common stock of such Principal Party on the date of consummation of
the Flip-Over Event;
(ii) all common stock of any Person for which any Right may be
exercised after consummation of a business combination as provided in this
Section 12(a) shall, when issued upon exercise thereof in accordance with
this Agreement, be duly and validly authorized and issued and fully paid
and nonassessable;
(iii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of the Flip-Over Event, all the obligations and duties of
the Company pursuant to this Agreement;
(iv) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of
Section 13 hereof shall apply to such Principal Party;
(v) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its common
stock) in connection with such consummation as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of common stock thereafter
deliverable upon the exercise of the Rights; and
(vi) the provisions of Section 11 of this Agreement shall be of no
effect following the first occurrence of any Flip-Over Event.
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(b) "PRINCIPAL PARTY" shall mean:
(i) in the case of any transaction described in (w), (x) or (y) of
the first sentence of Section 12(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted
or exchanged in such merger, consolidation or other business combination,
and if no securities are so issued, the Person that is the other party to
the merger, consolidation or other business combination; and
(ii) in the case of any transaction described in (z) of the first
sentence in this Section 12(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any such case, (1) if the common stock of such Person
is not at such time and has not been continuously over the preceding 12-month
period registered under the Exchange Act, as then in effect, and such Person is
a direct or indirect Subsidiary of another Person the common stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the common stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the common stock having the greatest aggregate market value.
(c) The Company shall not consummate any Flip-Over Event unless prior
thereto the Company and each Principal Party and each other Person who may
become a Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 12 and further providing that, as soon as practicable after
the date of any Flip-Over Event, the Principal Party will:
(i) prepare and file at its own expense a registration statement
under the Act with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, will use its best
efforts to cause such registration statement to become effective as soon as
practicable after such filing and will use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earliest of the Expiration
Date, the Exchange Date and the Redemption Date; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Exchange Act.
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The Principal Party shall temporarily suspend, for a period of time not to
exceed 90 days following the occurrence of a Flip-Over Event, the exercisability
of the Rights in order to prepare and file the registration statement referred
to in clause (i) above, and the Expiration Date shall be extended by the number
of days of such suspension. The provisions of this Section 12 shall similarly
apply to successive Flip-Over Events. In the event that a Flip-Over Event shall
occur at any time after the occurrence of a Flip-In Event, the Rights which have
not theretofore been exercised shall thereafter become exercisable in the manner
described in Section 12(a).
Section 13. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 13.
(a) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend or make a distribution on the Common Stock
payable in shares of Common Stock, (B) subdivide the outstanding Common Stock
into a larger number of shares, (C) combine the outstanding Common Stock into a
smaller number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then in each such event, except as otherwise provided
in this Section 13(a), the Purchase Price in effect at the time of the record
date for such dividend or distribution, or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of Common Stock or capital stock issuable on such date, shall be proportionately
adjusted so that the holder of any Rights (except as provided in Section 7(e) of
this Agreement) exercised on or after such time shall be entitled to receive
upon payment of the Purchase Price in effect immediately prior to such date, the
aggregate number and kind of shares of Common Stock or capital stock which, if
such Rights had been exercised immediately prior to such date and at a time when
the Common Stock transfer books of the Company were open, that holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, distribution, subdivision, combination or reclassification. If an
event occurs which would require an adjustment under both Section 11(a) of this
Agreement and this Section 13(a), the adjustment provided for in this Section
13(a) shall be in addition to, and shall be made prior to any adjustment
required pursuant to Section 11(a).
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Stock entitling them to
subscribe for or purchase Common Stock or securities convertible into Common
Stock at a price per share of Common Stock(or having a conversion price per
share, if a security convertible into Common Stock) of less than the Current
Market Price per share of Common Stock on such record date, the Purchase Price
to be in effect after the record date shall be
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determined by multiplying the Purchase Price in effect immediately prior to the
record date by a fraction,
(1) the numerator of which shall be the number of shares of Common
Stock outstanding on the record date, plus the number of shares of Common
Stock which the aggregate exercise price of the total number of shares of
Common Stock which are obtainable upon the exercise of the rights, options
or warrants (and/or the aggregate initial conversion price of the
convertible securities so offered) would purchase at the Current Market
Price; and
(2) the denominator of which shall be the number of shares of Common
Stock outstanding on the record date, plus the number of additional shares
of Common Stock which may be obtained upon exercise of the rights, options
or warrants (or into which the convertible securities so offered are
initially convertible).
If the subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent. Shares of Common Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively whenever
such a record date is fixed; and in the event that rights, options or warrants
are not issued following an adjustment, the Purchase Price shall again be
adjusted to be the Purchase Price which would be in effect if the record date
had not been fixed.
(c) In case the Company shall fix a record date for a distribution to all
holders of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the surviving corporation) of
evidences of indebtedness, cash (other than a regular periodic cash dividend out
of the earnings or retained earnings of the Company), assets (other than a
dividend payable in Common Stock, but including any dividend payable in stock
other than Common Stock) or subscription rights or warrants (excluding those
referred to in Section 13(b)), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction,
(1) the numerator of which shall be the Current Market Price per
share of Common Stock on such record date, less the fair market value (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights
Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to
one share of Common Stock; and
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(2) the denominator of which shall be such Current Market Price per
share of Common Stock.
Such adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would be in effect
if such record date had not been fixed.
(d) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 13(d)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 13 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share as the case may be. Notwithstanding the first sentence of this
Section 13(d), any adjustment required by this Section 13 shall be made no later
than the earlier of (i) three years from the date of the transaction which
mandates the adjustment or (ii) the earliest of the Expiration Date, the
Exchange Date and the Redemption Date.
(e) If as a result of an adjustment made pursuant to Section 11(a), the
holder of any Rights thereafter exercised shall become entitled to receive any
securities of the Company other than shares of Common Stock, thereafter the
number of such other securities so receivable upon exercise of any Rights shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares contained
in Section 13(a) through (c), inclusive, and the provisions of Sections 7, 9,
10, 12 and 14 of this Agreement with respect to the Common Stock shall apply on
like terms to any such other securities.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common Stock
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided in this Agreement.
(g) Unless the Company shall have exercised its election as provided in
Section 13(h), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 13(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of shares of Common Stock
(calculated to the nearest ten-thousandth) obtained by
22
<PAGE>
(i) multiplying (x) the number of shares of Common Stock covered by
a Right immediately prior to this adjustment by (y) the Purchase Price in
effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase Price.
(h) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Common Stock purchasable upon the exercise
of a Right. Each of the Rights outstanding after the adjustment in the number
of Rights shall be exercisable for the number of shares of Common Stock for
which a Right was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights shall become
that number of Rights obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 13(h), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Purchase Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Purchase Price or the
number of shares of Common Stock issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Purchase Price per share and the number of shares which were expressed in
the initial Rights Certificates issued hereunder.
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<PAGE>
(j) Before taking any action that would cause an adjustment reducing the
Purchase Price below the par value of the shares of Common Stock issuable upon
exercise of the Rights, the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock at
such adjusted Purchase Price.
(k) In any case in which this Section 13 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Rights exercised after such record date the shares
of Common Stock and other capital stock or securities, cash or property of the
Company, if any, issuable upon such exercise over and above the shares of Common
Stock and other capital stock or securities, cash or property of the Company, if
any, issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares and other capital stock or securities,
cash or property upon the occurrence of the event requiring such adjustment.
(l) Anything in this Section 13 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 13, as and to
the extent that in its sole discretion the Company shall determine to be
advisable in order that any (i) consolidation or subdivision of the Common
Stock, (ii) issuance wholly for cash of any shares of Common Stock at less than
the Current Market Price, (iii) issuance wholly for cash of shares of Common
Stock or securities which by their terms are convertible into or exchangeable or
exercisable for shares of Common Stock, (iv) stock dividends, or (v) issuance of
rights, options or warrants referred to in this Section 13, hereafter made by
the Company to holders of its Common Stock shall, if practicable, not be taxable
to such shareholders.
(m) The Company covenants and agrees that it shall not (i) consolidate
with, (ii) merge with or into, or (iii) directly or indirectly sell, lease or
otherwise transfer or dispose of, in one or more transactions, assets or earning
power aggregating more than 50% of the assets or earning power of the Company
and its Subsidiaries taken as a whole, to any other Person, if at the time of or
immediately after such consolidation, merger, sale, lease, transfer or
disposition there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
(n) The Company covenants and agrees that, after the Stock Acquisition
Date, it will not, except as permitted by Section 23 or Section 27 of this
Agreement, take any
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<PAGE>
action the purpose or effect of which is to diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
(o) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time prior to the Separation Date (i)
declare a dividend or distribution on the outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding shares of
Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior to
the Separation Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to the event by a
fraction, (1) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to the occurrence of the event and
(2) the denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of the event.
(p) Whenever an adjustment is made as provided in Sections 11, 12 and 13
of this Agreement, the Company shall (a) promptly prepare a certificate setting
forth such adjustment and a brief statement of the facts accounting for the
adjustment, (b) promptly file with the Rights Agent and with each transfer agent
for the Common Stock and the Common Stock a copy of the certificate and (c) mail
a brief summary thereof to each holder of a Rights Certificate in accordance
with Section 26 of this Agreement. The Rights Agent shall be fully protected in
relying on the certificate and on any adjustment therein contained.
Section 14. Fractional Rights and Fractional Shares.
(a) In no case shall the Company be required to issue fractional Rights or
to distribute Rights Certificates which evidence fractional Rights. In lieu of
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which fractional Rights would otherwise be issuable,
an amount in cash equal to the same fraction of the Current Market Price of a
whole Right as of the date on which fractional Rights would have been otherwise
issuable.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company may pay to the registered holders of Rights
Certificates, at the time such Rights are exercised as herein provided, an
amount in cash equal to the same fraction of the Current Market Price of one
share of Common Stock as of the date of such exercise.
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<PAGE>
(c) The holder of a Right by its acceptance thereof expressly waives any
right to receive any fractional Rights or any fractional shares upon exercise of
a Right.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Separation Date, the registered holders of the
Common Stock); and any registered holder of a Rights Certificate (or, prior to
the Separation Date, of the Common Stock) without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Separation Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his rights
pursuant to this Agreement. Without limiting the foregoing or any remedies
available to the holders of Rights, it is specifically acknowledged that the
holders of Rights would not have an adequate remedy at law for any breach of
this Agreement and shall be entitled to specific performance of the obligations
hereunder and injunctive relief against actual or threatened violations of the
obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Separation Date, the Rights will be transferable only in
connection with the transfer of Common Stock;
(b) after the Separation Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
corporate trust office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person in
whose name a Rights Certificate (or, prior to the Separation Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court or by a
governmental, regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted
26
<PAGE>
by any governmental authority prohibiting or otherwise restraining performance
of such obligation; provided, however, the Company must use its best efforts to
have any order, decree or ruling lifted or otherwise overturned.
Section 17. Rights Holder Not Deemed a Shareholder. Except as otherwise
expressly provided in this Agreement, no holder of any Rights Certificate shall
be entitled to vote, receive dividends or be deemed for any purpose the holder
of the shares of Common Stock or any other securities of the Company which may
at any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights Certificate any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders, or to receive dividends or subscription
rights, or otherwise, until and only to the extent that the Right or Rights
evidenced by the Rights Certificate shall have been exercised in accordance with
the provisions of this Agreement.
Section 18. Concerning the Rights Agent. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and disbursements and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, or willful misconduct on the part of the
Rights Agent, for anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement, including the costs
and expenses of defending against any claim of liability in the premises. The
indemnification provided for hereunder shall survive the expiration of the
rights and the termination of this Agreement. The costs and expenses of
enforcing this right of indemnification shall be paid by the Company.
The Rights Agent may conclusively rely upon, and shall be protected and
shall incur no liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this Agreement in
reliance upon, any Rights Certificate or certificate for Common Stock or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged
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<PAGE>
or with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Rights Agent or any successor Rights Agent
shall be a party, or any corporation succeeding to the corporate trust business
of the Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that the
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 of this Agreement. In case at the time the
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
the successor Rights Agent may adopt the countersignature of the predecessor
Rights Agent and deliver the Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign the Rights Certificates either in the
name of the predecessor or in its name as successor Rights Agent; and in all
such cases the Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
that time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign the Rights Certificates either in its prior name or in its
changed name; and those Rights Certificates shall have the full force provided
in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, and no implied duties or obligations shall be read into this
Agreement against the Rights Agent, by all of which the Company and the holders
of Rights Certificates, by their acceptance thereof, shall be bound:
(a) Before the Rights Agent acts or refrains from acting, it may consult
with legal counsel (who may be legal counsel for the Company), and the opinion
of such counsel shall be full and complete authorization and protection to the
Rights Agent as to any action taken or omitted by it in good faith and in
accordance with the opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person) be proved
or established by the Company prior to taking or suffering any action hereunder,
the fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by the Chairman of the
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<PAGE>
Board, the President, any Vice President, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of the Company and delivered
to the Rights Agent; and the certificate shall be full authorization to the
Rights Agent, for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance thereon.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of facts or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except its countersignature),
but all statements and recitals are and shall be deemed to have been made by the
Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under Sections 11 or 13 of this
Agreement or responsible for the manner, method or amount of any adjustment or
the ascertaining of the existence of facts that would require an adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of an adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock to be issued pursuant to this
Agreement or any Rights Certificate or as to whether any shares of Common Stock
will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer.
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(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of funds or
adequate indemnification against the risk or liability is not reasonably assured
to it.
(k) The Rights Agent shall not be required to take notice or be deemed to
have notice of any fact event or determination (including, without limitation,
any dates or events defined in this Agreement or the designation of any Person
as an Acquiring Person, Affiliate or Associate thereof) under the Rights
Agreement unless and until the Rights Agent shall be specifically notified in
writing by the Company of the fact, event or determination.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company, and at the expense of the
Company, to each transfer agent of the Common Stock by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon 30 days'
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the registered holder of
any Rights Certificate may
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<PAGE>
apply to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by the
court, shall be a corporation organized and doing business under the laws of the
United States or of the State of Wisconsin (or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in the State of Wisconsin), in good standing or in active status, as
the case may be, which is authorized under the laws to exercise corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of the appointment, the Company
shall file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Stock and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price per share and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provision of this Agreement.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at any time
prior to 5:00 P.M., Central Standard time, on the earlier of (i) the tenth day
following the Stock Acquisition Date, subject to extension by the Board of
Directors for a period of time, or (ii) the Expiration Date, redeem all but not
less than all the then outstanding Rights at a redemption price of $0.0001 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "REDEMPTION PRICE"). Notwithstanding anything in
this Agreement to the contrary, no Rights may be exercised at any time that the
Rights are subject to redemption in accordance with the terms of this Agreement.
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(b) Immediately upon the action of the Board of Directors of the Company
extending the redemption period pursuant to Section 23(a)(i), evidence of which
shall have been filed with the Rights Agent, the Company shall issue a press
release indicating the date to which the Board of Directors has extended its
right to redeem the Rights.
(c) Notwithstanding anything in this Agreement to the contrary, no
redemption of the Rights shall be permitted after 5:00 P.M., Central Standard
time, on the earlier of (i) the tenth day following the Stock Acquisition Date,
subject to extension by the Board of Directors for a period of time up to, but
not exceeding, ten additional days, or (ii) the Expiration Date.
(d) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent, and without any further action and without any notice,
the right to exercise the Rights will terminate and the only right thereafter of
the holders of Rights shall be to receive the Redemption Price. Within 10 days
after the action of the Board of Directors ordering the redemption of the
Rights, the Company shall mail notice of the redemption to the Rights Agent and
the holders of the then outstanding Rights to all holders at their last
addresses as they appear upon the registry books of the Rights Agent or prior to
the Separation Date, on the registry books of the Transfer Agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each notice of redemption
will state the method by which the payment of the Redemption Price will be made.
In any case, failure to give notice to any particular holder of Rights shall not
affect the sufficiency of the notice to other holders of Rights. Neither the
Company nor any of its Affiliates or Associates may redeem for value any Rights
at any time, in any manner, other than that specifically set forth in this
Section 23, and neither the Company nor any of its Affiliates or Associates may
acquire or purchase for value any Rights at any time, in any manner, other than
in connection with the purchase of shares of associated Common Stock prior to
the Separation Date.
Section 24. Exchange.
(a) The Company may, at its option, but subject to receipt of any required
regulatory approvals, by action of the Board of Directors, at any time after any
Person becomes an Acquiring Person, exchange all or any part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e)) for shares of Common
Stock at an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being herein referred to as
the "EXCHANGE RATIO"). Notwithstanding the foregoing, the Board of Directors
shall not be empowered to effect an exchange at any
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time after any Person (other than the Company, any Subsidiary of the Company,
any employee plan of the Company or of a Subsidiary of the Company or any Person
holding Common Stock for or pursuant to the terms of any employee plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50 percent or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to Section 24(a) and without any
further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of Rights shall be to
receive that number of shares of Common Stock equal to the number of such Rights
held by the holder multiplied by the Exchange Ratio. The Company shall promptly
give public notice of any exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of the exchange.
The Company promptly shall mail a notice of any exchange to all of the holders
of Rights at their last addresses as they appear upon the registry books of
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each notice of
exchange will state the method by which the exchange of the Common Stock for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e)) held by each holder of Rights.
(c) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional Common
Stock. In lieu of fractional shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which fractional shares would
otherwise be issuable an amount in cash equal to the same fraction of the
Current Market Value of a whole share of Common Stock.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any dividend payable in
stock of any class to the holders of Common Stock or to make any other
distribution to the holders of Common Stock, or (ii) to offer to the holders of
Common Stock rights or warrants to subscribe for or to purchase any additional
shares of Common Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Common Stock,
or (iv) to effect any Flip-Over Event, or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each case, the Company shall
give to each holder of a Rights Certificate, in accordance with Section 26, a
notice of the proposed action, which shall specify the record date for the
purposes of the stock dividend, distribution of rights or warrants, or the date
on which the reclassification, Flip-Over Event, liquidation, dissolution, or
winding up is to take place
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and the date of participation therein by the holders of the shares of Common
Stock, if any date is to be fixed, and the notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least 20 days prior to the
record date for determining holders of the shares of Common Stock for purposes
of such action, and in the case of any other action, at least 20 days prior to
the date of the taking of the proposed action or the date of participation
therein by the holders of the shares of Common Stock whichever shall be the
earlier.
(b) Upon the occurrence of a Flip-In Event or a Flip-Over Event, the
Company or Principal Party, as the case may be, shall as soon as practicable
thereafter give to each holder of a Rights Certificate, to the extent feasible
and in accordance with Section 26, a notice of the occurrence of the event and
the consequences thereof to holders of Rights under Sections 11 or 12 of this
Agreement, as the case may be.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sent by registered or certified mail and shall be
deemed given upon receipt and addressed (until another address is filed in
writing with the Rights Agent) as follows:
APW Ltd.
N22 W23685 Ridgeview Parkway West
Waukesha, WI 53188-1013
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
delivered by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
Firstar Bank N.A.
1555 North River Center Drive, Suite 301
Milwaukee, WI 53212
Attention: ______________
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the holder's address as shown on the registry books
of the Company. The Company shall deliver a copy of any notice or demand it
delivers to the holder of any Rights
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Certificate to the Rights Agent and the Rights Agent shall deliver to the
Company a copy of any notice or demand it delivers to the holder of any Rights
Certificate.
Section 27. Supplements and Amendments. The Company and the Rights Agent
may from time to time supplement or amend this Agreement without the approval of
any holders of Rights Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein or to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Rights
Certificates other than an Acquiring Person; provided, however, that no
amendment or supplement may be made if the effect would be to extend or shorten
the redemption period after the Stock Acquisition Date or (subject to the
following sentence) change the Purchase Price or the Redemption Price.
Notwithstanding the other provisions of this Section 27, the Board shall retain
the right to amend the Purchase Price for a period of six (6) months from the
date hereof.
Section 28. Determination and Actions by the Board of Directors. The
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Company or as may be necessary or advisable in the administration
of this Agreement, including without limitation the right and power to (a)
interpret the provisions of this Agreement and (b) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including without limitation a determination to redeem or not to redeem the
Rights or to amend this Agreement). All such actions, calculations,
interpretations and determinations which are done by the Board of Directors of
the Company in good faith shall be final, conclusive and binding on the Company,
the Rights Agent and holders of the Rights and all other interested parties and
shall not subject the Board of Directors of the Company to any liability to the
holders of the Rights.
Section 29. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the Separation
Date, the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Separation Date, the Common Stock).
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Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the Country of Bermuda and for all purposes shall be governed by and
construed in accordance with the laws of Bermuda applicable to contracts made
and to be performed entirely within Bermuda.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of which shall for all purposes be deemed to be an
original, and all counterparts shall together constitute but one and the same
instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
* * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
FIRSTAR BANK N.A. APW LTD.
By: By:
----------------------------- ---------------------------------
Name: Name:
--------------------------- -------------------------------
Title: Vice President Title: President and Chief Executive
Officer
Attest: Attest:
By: By:
----------------------------- -------------------------------
Name: Name:
--------------------------- -----------------------------
Title: Assistant Secretary Title: Secretary
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Exhibit A
[Form of Rights Certificate]
Certificate No. R- Rights
NOT EXERCISABLE AFTER ________, 20__ OR EARLIER IF NOTICE OF REDEMPTION OR
EXCHANGE IS GIVEN.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT.
THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED
BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS THE TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF THE RIGHTS AGREEMENT.
RIGHTS CERTIFICATE
APW LTD.
This certifies that ____________________________or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of ______, ____ (the "RIGHTS AGREEMENT") between
APW Ltd., a Bermuda corporation (the "COMPANY"), and Firstar Bank N.A. (the
"RIGHTS AGENT"), unless notice of redemption shall have been previously given by
the Company, to purchase from the Company at any time after the Separation Date
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M.
(Central Standard time) on _________________ at the principal corporate trust
office of the Rights Agent, or at the office of its successor as Rights Agent,
one fully paid nonassessable share of the Common Stock, par value $.001 per
share, of the Company (the "COMMON STOCK"), at a purchase price of $15.00 per
share (the "PURCHASE PRICE") upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase duly executed. The Purchase
Price may be paid by certified bank check or money order payable to the order of
the Company.
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The number of Rights evidenced by this Rights Certificate (and the number
of shares of Common Stock which may be purchased upon exercise thereof) and the
Purchase Price set forth above have been determined as of ________, ____, based
on the Common Stock of the Company as constituted at that date. As provided in
the Rights Agreement, the Purchase Price and the number of shares of Common
Stock or other securities, cash or other property which may be purchased upon
the exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events.
If the Rights evidenced by this Rights Certificate are or were formerly
beneficially owned, on or after the earlier of the Separation Date and the Stock
Acquisition Date, by an Acquiring Person or an Affiliate, Associate or direct or
indirect transferee of an Acquiring Person, the Rights may become null and void
and the holder of the Right (including any subsequent holder) shall not have any
right with respect to the Right.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates.
Capitalized terms used in this Rights Certificate have the same meanings as such
terms are defined in the Rights Agreement. Copies of the Rights Agreement are
on file at the principal executive offices of the Company and the office of the
Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal corporate trust office of the Rights Agent, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of shares of Common Stock or other property as the Rights evidenced by
the Rights Certificate or Rights Certificates surrendered entitled the holder to
purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $.0001 per Right at any time prior to the earlier of (i) the close of
business on the tenth day following the time it becomes public that an Acquiring
Person has become such (with the possibility of an extension for an additional
ten days) and (ii) the Expiration Date.
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No fractional shares of Common Stock will be issued upon the exercise of
any Right or Rights evidenced hereby, but in lieu thereof the Company will make
a cash payment, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote or
to receive dividends or shall be deemed, for any purpose, the holder of Common
Stock or of any other securities, cash or property which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or this Rights Certificate be construed to confer upon the holder
hereof, as such, any of the rights of a shareholder of the Company, including,
without limitation, any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in the Rights Agreement), or
to receive dividends or subscription rights, or to institute, as a holder of
Common Stock or other securities issuable on the exercise of the Rights
represented by this Certificate, any derivative action, or otherwise, until and
only to the extent the Right or Rights evidenced by this Rights Certificate
shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of __________, ____.
APW LTD.
By:
------------------------------------
Title: President and Chief Executive
Officer
ATTEST:
- --------------------------
, Secretary
Countersigned:
By:
-----------------------
Firstar Bank N.A.
Authorized Signature
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[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if the holder desires to transfer
the Rights Certificates.)
FOR VALUE RECEIVED, _________________________________ hereby sells, assigns
and transfers ____________________________ (Please print name and address of
transferee) this Rights Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint __________________
Attorney to transfer this Rights Certificate on the books of the Company, with
full power of substitution.
Dated: , ____
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is or was an Acquiring Person or an Affiliate or Associate of an
Acquiring Person.
Dated: , ____ Signature
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Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Assignment is
not completed, the Company will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and, in the case of an
Assignment, will affix a legend to that effect on any Rights Certificate issued
in exchange for this Rights Certificate.
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FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights represented by
this Rights Certificate)
To: APW Ltd.
The undersigned hereby irrevocably elects to exercise __________________
Rights represented by this Rights Certificate to purchase the shares of Common
Stock or other securities, cash or other property issuable upon the exercise of
the Rights and requests that certificates for the shares or other securities be
issued in the name of, and such cash or other property be paid to:
Please insert social security or other identifying number
(Please print name and address)
If the number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the remaining balance of the Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
(Please print name and address)
Dated: , ____
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
this Rights Certificate)
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Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being exercised by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is or was an Acquiring Person or an Affiliate or Associate of an
Acquiring Person.
Dated: , ____ Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
NOTICE
The signature on the foregoing Form of Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Election is
not completed, the Company will deem the beneficial owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement) and, in the case of an
Assignment, will affix a legend to that effect on any Rights Certificate issued
in exchange for this Rights Certificate.
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Exhibit B
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On ______, ____, the Board of Directors of APW Ltd., a Bermuda corporation
(the "COMPANY"), declared a dividend of one common share purchase right (a
"RIGHT") for each share of Common Stock, par value $.001 per share of the
Company (the "COMMON STOCK"). The dividend is payable to shareholders of record
at the close of business on ________, ____ (the "RECORD DATE") and with respect
to all shares of Common Stock that become outstanding after the Record Date and
prior to the earliest of the Separation Date (as defined below), the redemption
of the Rights, the exchange of the Rights and the expiration of the Rights.
Except as set forth below and subject to adjustment as provided in the Rights
Agreement (as defined below), each Right entitles the registered holder to
purchase from the Company shares of the Company's Common Stock (the "COMMON
STOCK"), at an exercise price of $15.00 per share (the "PURCHASE PRICE"). The
description and terms of the Rights are set forth in a Rights Agreement dated as
of ______, ____ (the "RIGHTS AGREEMENT"), between the Company and Firstar Bank
N.A., as Rights Agent (the "RIGHTS AGENT").
The Rights will be evidenced by Common Stock certificates and not separate
certificates until the earlier to occur of (i) 10 days following the date of
public disclosure that a person or group, together with persons affiliated or
associated with such person or group (an "ACQUIRING PERSON") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding Common Stock (the "STOCK ACQUISITION DATE") and (ii) 10 days
following commencement or disclosure of an intention to commence a tender offer
or exchange offer by a person or group other than the Company and certain
related entities if, upon consummation of the offer, such person or group,
together with persons affiliated or associated with such person or group, could
acquire beneficial ownership of 50% or more of the outstanding Common Stock (the
earlier of such dates being called "SEPARATION DATE"). Until the Separation
Date (or earlier redemption or expiration of the Rights), the transfer of Common
Stock will also constitute transfer of the associated Rights. Following the
Separation Date, separate certificates will evidence the Rights.
The Rights will first become exercisable on the Separation Date (unless
sooner redeemed). The Rights will expire at the close of business on ________,
20__ (the "EXPIRATION DATE"), unless earlier redeemed or exchanged by the
Company as described below.
The Purchase Price and the number of shares of Common Stock or other
securities, cash or other property issuable upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend or
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distribution on, or a subdivision, combination or reclassification of, the
Common Stock, (ii) upon the grant to holders of the Common Stock of certain
rights, options or warrants to subscribe for Common Stock or securities
convertible into Common Stock at less than the current market price of the
Common Stock, or (iii) upon the distribution to holders of the Common Stock of
other securities, cash, property, evidences of indebtedness, or assets.
In the event that, following the Separation Date, the Company is acquired
in a merger or other business combination in which the Common Stock does not
remain outstanding or is changed or 50% or more of its consolidated assets is
sold, leased, exchanged, mortgaged, pledged or otherwise transferred or disposed
of (in one transaction or a series of transactions) the Rights will "FLIP OVER"
and entitle each holder of a Right to purchase, upon the exercise of the Right
at the then-current Purchase Price, that number of shares of common stock of the
acquiring company (or, in certain circumstances, one of its affiliates) which at
the time of such transaction would have a market value of two times the Purchase
Price.
If a person or group acquires beneficial ownership of 15% or more of the
Common Stock, the Rights will "FLIP IN" and entitle each holder of a Right,
except as provided below, to purchase, upon exercise at the then-current
Purchase Price, that number of shares of Common Stock having a market value of
two times the Purchase Price.
Any "flip over" event or "flip in" event is a "TRIGGERING EVENT."
Any Rights beneficially owned at any time on or after the Separation Date
by an Acquiring Person or an affiliate or associate of an Acquiring Person
(whether or not such ownership is subsequently transferred) will become null and
void upon the occurrence of the earlier of the Board of Directors' decision to
exchange the Rights and a Triggering Event, and any holder of the Rights will
have no right to exercise the Rights.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% of
the Purchase Price. Holders will have no right to receive fractional shares of
Common Stock upon the exercise of Rights. In lieu of fractional shares, an
adjustment in cash may be made based on the market price of the Common Stock on
the last trading date prior to the date of exercise.
The number of outstanding Rights and the number shares of Common Stock
issuable upon exercise of each Right and the Purchase Price are also subject to
adjustment in the event of a stock split of the Common Stock or distributions,
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subdivisions, consolidations or combinations of the Common Stock occurring, in
any case, prior to the Separation Date.
At any time prior to the earlier of (i) the closing of business on the
tenth day following the time that it becomes public that an Acquiring Person has
become such (with the possibility for the Board of Directors to extend this time
for an additional 10 days) and (ii) the Expiration Date, the Company may redeem
the Rights in whole, but not in part, at a price of $0.0001 per Right.
Immediately upon the action of the Company's Board of Directors electing to
redeem the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights thereafter will be to receive the applicable
redemption price.
At any time any person becomes an Acquiring Person and prior to such time
as such person, together with its affiliates becomes the beneficial owner of at
least 50% of the Company's outstanding Common Stock, the Company may, provided
that all necessary regulatory approvals have been obtained, exchange the Rights
(other than Rights owned by the Acquiring Person which become null and void), in
whole or in part, at a ratio of one share of Common Stock per Right, subject to
adjustment.
Until a Right is exercised, the holder has no rights as a shareholder of
the Company, including, without limitation, the right to vote or to receive
dividends or distributions.
The Company may, without the approval of any holder of the Rights,
supplement or amend any provision of the Rights Agreement, except the redemption
window, the Purchase Price or the redemption price; provided, however, that the
Company's directors have the right to amend the Purchase Price.
Common Stock purchasable upon exercise of the Rights will not be
redeemable.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors prior to the time a person or group has acquired beneficial
ownership of 15% or more of the Common Stock, because until such time, the
Rights may be redeemed by the Company at $.0001 per Right.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission and is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is hereby
incorporated herein by reference.
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Exhibit 10.1
APW LTD.
2000 STOCK PLAN
I. INTRODUCTION
1.01 Purpose. This plan shall be known as the APW Ltd. 2000 Stock Option
Plan (the "2000 Plan" or the "Plan"). The purpose of the Plan is to provide
incentive for key employees of APW Ltd. and its Subsidiaries to improve
corporate performance on a long-term basis, and to attract and retain key
employees.
1.02 Effective Date. The effective date of the Plan shall be
______________, 2000, subject to approval of the Plan by the shareholders of APW
Ltd. Any Award granted prior to such shareholder approval shall be expressly
conditioned upon such shareholder approval of the Plan.
1.03 Substitute Options. APW Ltd. is the result of a spin-off from
Applied Power Inc. Certain APW Ltd. employees were previously granted options
to purchase Applied Power Inc. common stock. The Committee shall have the power
to grant APW Ltd. employees substitute options under this Plan on terms which
are to be economically consistent with the prior Applied Power Inc. stock
options.
II. PLAN DEFINITIONS
2.01 Definitions. For Plan purposes, except where the context clearly
indicates otherwise, the following terms shall have the meanings set forth
below:
(a) "Award" shall mean the grant of any form of stock option or restricted
stock.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
(d) "Committee" shall mean the Compensation Committee of the Board, as
described in Section 4.01.
(e) "Company" shall mean APW Ltd., a Bermuda corporation.
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(f) "Company Stock" shall mean common stock of the Company and such other stock
and securities as may be substituted therefor pursuant to Section 3.02.
(g) "Eligible Employee" shall mean any regular salaried employee of the Company
or a Subsidiary who satisfies all of the requirements of Section 5.01.
(h) "Fair Market Value" on any date shall mean, with respect to Company Stock,
if the stock is then listed and traded on a registered national securities
exchange, or is quoted in the NASDAQ National Market System, the mean of the
high and low sale prices recorded in composite transactions as reported in the
Wall Street Journal (Midwest Edition). In the absence of reported sales on such
date, or if the stock is not so listed or quoted, but is traded in the over-the-
counter market, "Fair Market Value" shall be the mean of the closing bid and
asked prices for such shares on such date as reported in the Wall Street Journal
(Midwest Edition), or, if not so reported as obtained from a bona fide market
maker in such shares.
(i) "Grantee" shall mean any person who has been granted an Award, under the
Plan.
(j) "Option Period" shall mean the period of time provided pursuant to Section
6.04 within which a stock option may be exercised.
(k) "Subsidiary" shall mean any corporation now or hereafter in existence in
which the Company owns, directly or indirectly, a voting stock interest of more
than fifty percent (50%).
(l) "Substitute Options" shall mean an option granted under the Plan in
substitution for an option to purchase common stock of Applied Power Inc.
III. SHARES SUBJECT TO OPTION
3.01 Available Shares. The total number of shares of Company Stock that
may be issued under the Plan, including shares that may be issued upon exercise
of a Substitute Option, shall in the aggregate not exceed five million
(5,000,000) shares. Shares subject to and not issued under an option which
expires, terminates, is canceled or forfeited for any reason under the Plan and
shares of restricted Company Stock which have been forfeited before the Grantee
has received any benefits of ownership, such as dividends from the forfeited
shares, shall again become available for the granting of Awards.
3.02 Changes in the Number of Available Shares. If any stock dividend is
declared upon the Company Stock, or if there is any stock split, stock
distribution, or other recapitalization of the Company with respect to the
Company Stock, resulting in a split or combination or exchange of shares, the
aggregate
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number and kind of shares which may thereafter be offered under the Plan shall
be proportionately and approximately adjusted and the number and kind of shares
then subject to options granted to employees under the Plan and the per share
option price therefor shall be proportionately and appropriately adjusted,
without any change in the aggregate purchase prices to be paid therefor.
IV. ADMINISTRATION
4.01 Administration by the Committee. The Plan shall be administered by
the Compensation Committee of the Board, or such other committee of the Board as
the Board may from time to time determine. The Committee shall be constituted
so as to permit the Plan to comply with the provisions of Rule 16b-3 under the
Securities Exchange Act of 1934 (or any successor rule) and Section 162(m) of
the Code.
4.02 Committee Powers. The Committee is empowered to adopt such rules,
regulations and procedures and take such other action as it shall deem necessary
or proper for the administration of the Plan and, in its discretion, may modify,
extend or renew any option theretofore granted. The Committee shall also have
authority to interpret the Plan, and the decision of the Committee on any
questions concerning the interpretation of the Plan shall be final and
conclusive. The Committee may consult with counsel, who may be counsel for the
Company, and shall not incur any liability for any action taken in good faith in
reliance upon the advice of counsel. The Committee may adopt such procedures
and subplans as are necessary or appropriate to permit participation in the Plan
by Eligible Employees who are foreign nationals or employed outside of the
United States.
Subject to the provisions of the Plan, the Committee shall have full and
final authority to:
(a) designate the persons to whom Awards shall be granted;
(b) grant Awards in such form and amount as the Committee shall determine;
(c) impose such limitations, restrictions and conditions upon any such
Award as the Committee shall deem appropriate, and
(d) waive in whole or in part any limitations, restrictions or conditions
imposed upon any such
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Award as the Committee shall deem appropriate.
V. PARTICIPATION
5.01 Eligibility. Key employees of the Company and its Subsidiaries
(including officers and employees who may be members of the Board) who, in the
sole opinion of the Committee, contribute significantly to the growth and
success of the Company or a Subsidiary shall be eligible for Awards under the
Plan. From among all such Eligible Employees, the Committee shall determine from
time to time those Eligible Employees to whom Awards shall be granted. No
Eligible Employee may be granted an Award or Awards covering more than two-
hundred fifty thousand (250,000) shares of Company Stock in any calendar year.
No Eligible Employee shall have any right whatsoever to receive an Award unless
so determined by the Committee.
5.02 No Employment Rights. The Plan shall not be construed as conferring
any rights upon any person for a continuation of employment, nor shall it
interfere with the rights of the Company or any Subsidiary to terminate the
employment of any person or to take any other action affecting such person.
VI. STOCK OPTIONS
6.01 General. Stock options granted under the Plan may be in the form of
incentive stock options (within the meaning of the Code) or nonqualified stock
options. Each option granted under the Plan shall be evidenced by a stock
option agreement between the Company and the Grantee which shall contain the
terms and conditions required by this Article VI, and such other terms and
conditions, not inconsistent herewith, as the Committee may deem appropriate in
each case.
6.02 Option Price. The price at which each share of Company Stock covered
by an option may be purchased shall be determined in each case by the Committee
and set forth in each stock option agreement. In no event shall such price be
less than one hundred percent (100%) of the Fair Market Value of the Company
Stock when the option is granted. Notwithstanding the foregoing, the Committee
may grant nonqualified stock options with an option price of less than 100% of
the Fair Market Value of the
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Company Stock on the condition that the Grantee make a cash payment to the
Company on the date of grant of at least the difference between the Fair Market
Value of the Company Stock and the option price (i.e., the sum of the cash
payment and the option price must be equal to or in excess of the Fair Market
Value of the Company Stock on the date of grant). Employees who own, directly or
indirectly, within the meaning of Code 425(d), more than 10% of the voting power
of all classes of stock of the Company or any parent or subsidiary corporation
shall not be eligible to receive an incentive stock option hereunder unless the
purchase price per share under such option is at least 110% of the Fair Market
Value of the stock subject to the option and such option by its terms is not
exercisable after the expiration of 5 years from the date such option is
granted.
6.03 Date Option Granted. For purposes of the Plan, a stock option shall
be considered as having been granted on the date on which the Committee
authorized the grant of the option, except where the Committee has designated a
later date, in which event the later date shall constitute the date of grant of
the option; provided, however, that in either case notice of the grant of the
option shall be given to the employee within a reasonable time.
6.04 Period for Exercise. Each stock option agreement shall state the
period or periods of time within which the option may be exercised by the
Grantee, in whole or in part, which shall be the period or periods of time as
may be determined by the Committee, provided that:
(a) No option granted under this Plan may be exercised prior to
shareholder approval of the Plan,
(b) No Option Period for an incentive stock option may exceed ten (10)
years from the date the option is granted, and
(c) No option may be treated as an incentive stock option unless the
Grantee exercises the option while employed by the Company or a Subsidiary or
within three months after termination of employment, or if termination is caused
by death or disability, within one year after such termination.
6.05 Special Rule for Incentive Stock Options. For so long as Section 422
(or any successor
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provision) of the Code so provides, the aggregate Fair Market Value (determined
as of the date the incentive stock option is granted) of the number of shares
with respect to which incentive stock options are exercisable for the first time
by a Grantee during any calendar year shall not exceed One Hundred Thousand
Dollars ($100,000) or such other limit as may be required by the Code.
6.06 Method of Exercise. Subject to Section 6.04, each option may be
exercised in whole or in part from time to time as specified in the stock option
agreement. Each Grantee may exercise an option by giving written notice of the
exercise to the Company, specifying the number of shares to be purchased,
accompanied by payment in full of the purchase price therefor. The purchase
price may be paid in cash, by check, or, with the approval of the Committee, by
delivering shares of Company Stock which have been beneficially owned by the
Grantee, the Grantee's spouse, or both of them for a period of at least six
months prior to the time of exercise ("Delivered Stock") or a combination of
cash and Delivered Stock. Delivered Stock shall be valued at its Fair Market
Value determined as of the date of exercise of the option. No Grantee shall be
under any obligation to exercise any option hereunder. The holder of an option
shall not have any rights of a stockholder with respect to the shares subject to
the option until such shares shall have been delivered to him or her.
6.07 Merger, Consolidation or Reorganization. In the event of a merger,
consolidation or reorganization with another corporation in which the Company is
not the surviving corporation, the Committee may, subject to the approval of the
Board of Directors of the Company, or the board of directors of any corporation
assuming the obligations of the Company hereunder, take action regarding each
outstanding and unexercised option pursuant to either clause (a) or (b) below:
(a) Appropriate provision may be made for the protection of such option by
the substitution on an equitable basis of appropriate shares of the
surviving corporation, provided that the excess of the aggregate Fair
Market Value of the shares subject to such option immediately before
such substitution over the exercise price thereof is not more than the
excess of the
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aggregate fair market value of the substituted shares made subject to
option immediately after such substitution over the exercise price
thereof; or
(b) The Committee may cancel such option. In such event, the Company, or
the corporation assuming the obligations of the Company hereunder,
shall pay the employee an amount of cash (less normal withholding
taxes) equal to the excess of the highest Fair Market Value per share
of the Company Stock during the 60-day period immediately preceding
the merger, consolidation or reorganization over the option exercise
price, multiplied by the number of shares subject to such option.
6.08 Substitute Options. Notwithstanding the provisions of Sections 6.02
and 6.03 above, in the event that the Company or a Subsidiary consummates a
transaction described in Section 424(a) of the Code (e.g., the acquisition of
property or stock from an unrelated corporation), persons who become Eligible
Employees on account of such transaction may be granted options in substitution
for options granted by their former employer. If such substitute options are
granted, the Committee, in its sole discretion and consistent with Section
424(a) of the Code, may determine that such substitute options shall have an
exercise price less than one hundred (100%) of the Fair Market Value of the
shares on the grant date.
6.09 Deferral of Stock Option Gain. The Committee may permit, in its
discretion, an optionee who exercises a stock option to defer the taxable income
attributable to such exercise. In the event the Committee elects to permit such
deferrals, the Committee shall identify the optionees to whom such deferral
elections shall be made available and establish procedures for implementing such
deferrals. An optionee who defers a stock option gain under this Plan or any
other Company stock option plan shall be credited with deemed dividends under
this Plan on such terms as the Committee shall prescribe. All deferrals which
are permitted under this section and all deemed dividends shall be distributed
in APW Ltd. common stock.
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VII. RESTRICTED STOCK
7.01 Administration. Shares of restricted stock may be issued either alone
or in addition to other Awards granted under the Plan; provided that a maximum
of 150,000 shares of restricted stock may be granted in any calendar year. The
Committee shall determine the Eligible Employees to whom and the time or times
at which grants of restricted stock will be made, the number of shares to be
awarded, the time or times within which such Awards may be subject to forfeiture
and any other terms and conditions of the Awards. The Committee may condition
the grant of restricted stock upon the attainment of specified levels of
revenue, earnings per share, net income, return on assets, return on sales,
customer satisfaction, stock price, costs, individual performance measures or
such other factors or criteria as the Committee shall determine. The provisions
of restricted stock Awards need not be the same with respect to each recipient.
7.02 Awards and Certificates. Each individual receiving a restricted stock
Award shall be issued a certificate in respect of such shares of restricted
stock. Such certificate shall be registered in the name of such individual and
shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the APW Ltd. 2000 Stock Plan and a Restricted Stock
Agreement. Copies of such Plan and Agreement are on file at the offices of
APW Ltd."
The Committee may require that the certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any restricted stock Award, the Grantee shall have
delivered a stock power, endorsed in blank, relating to the Company Stock
covered by such Award.
7.03 Terms and Conditions. Shares of restricted stock shall be subject to
the following terms and conditions:
(a) Until the applicable restrictions lapse, the Grantee shall not be
permitted to sell, assign, transfer, pledge or otherwise encumber
shares of restricted stock.
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(b) The Grantee shall have, with respect to the shares of restricted
stock, all of the rights of a stockholder of the Company, including
the right to vote the shares and the right to receive any cash
dividends. Unless otherwise determined by the Committee, cash
dividends shall be automatically paid in cash and dividends payable in
Company Stock shall be paid in the form of additional restricted
stock.
(c) Except to the extent otherwise provided in the applicable Restricted
Stock Agreement and (d) below, all shares still subject to restriction
shall be forfeited by the Grantee upon termination of a Grantee's
employment for any reason.
(d) In the event of hardship or other special circumstances of a Grantee
whose employment is involuntarily terminated (other than for cause),
the Committee may waive in whole or in part any or all remaining
restrictions with respect to such Grantee's shares of restricted
stock.
(e) If and when the applicable restrictions lapse, unlegended certificates
for such shares shall be delivered to the Grantee.
(f) Each Award shall be confirmed by, and be subject to the terms of, a
Restricted Stock Agreement.
VIII. WITHHOLDING TAXES.
8.01 General Rule. Pursuant to applicable federal and state laws, the
Company is or may be required to collect withholding taxes upon the exercise of
an option or the lapse of stock restrictions. The Company may require, as a
condition to the exercise of an option or the issuance of a stock certificate,
that the Grantee concurrently pay to the Company (either in cash or, at the
request of Grantee but in the discretion of the Committee and subject to such
rules and regulations as the Committee may adopt from time to time, in shares of
Delivered Stock) the entire amount or a portion of any taxes which the Company
is required to withhold by reason of such exercise or lapse of restrictions, in
such amount as the Committee or the Company in its discretion may determine.
8.02 Withholding from Shares to be Issued. In lieu of part or all of any
such payment, the Grantee may elect, subject to such rules and regulations as
the Committee may adopt from time to time, or the Company may require that the
Company withhold from the shares to be issued that number of shares having a
Fair Market Value equal to the amount which the Company is required to withhold.
8.03 Special Rule for Insiders. Any such request or election (to satisfy a
withholding obligation
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using shares) by an individual who is subject to the provisions of Section 16 of
the Securities Exchange Act of 1934 shall be made in accordance with the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder.
IX. GENERAL
9.01 Nontransferability. No Award shall be transferable by a Grantee
otherwise than by will or the laws of descent and distribution, provided that in
accordance with Internal Revenue Service guidance, the Committee, in its
discretion, may grant nonqualified stock options that are transferable, without
payment of consideration, to family members of the Grantee or to trusts or
partnerships for such family members. The Committee may also amend outstanding
stock options to provide for such transferability.
9.02 General Restriction. Each Award shall be subject to the requirement
that if at any time the Board or the Committee shall determine, in its
discretion, that the listing, registration, or qualification of securities upon
any securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Award or the issue or
purchase of securities thereunder, such Award may not be exercised in whole or
in part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Board or the Committee.
9.03 Expiration and Termination of the Plan. The Plan will terminate ten
(10) years after the effective date of the Plan, except as to Awards then
outstanding under the Plan, which Awards shall remain in effect until they have
been exercised, the restrictions have lapsed or the Awards have expired or been
forfeited. The Plan may be abandoned or terminated at any time by the Board of
Directors of the Company, except with respect to any Awards then outstanding
under the Plan.
<PAGE>
9.04 Amendments. The Board may from time to time amend, modify, suspend
or terminate the Plan; provided, however, that no such action shall be made
without shareholder approval where such change would be required in order to
comply with Rule 16b-3 under the Securities Exchange Act of 1934 (or any
successor rule) or the Code. Subject to the terms and conditions and within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
Awards granted under the Plan, accept the surrender of outstanding options (to
the extent not theretofore exercised), reduce the exercise price of outstanding
options, or authorize the granting of new options in substitution therefor (to
the extent not theretofore exercised). Notwithstanding the foregoing, no
modification of an Award (either directly or through modification of the Plan)
shall, without the consent of the Grantee, alter or impair any rights of the
Grantee under the Award.
9.05 Construction. Except as otherwise required by applicable federal
laws, the Plan shall be governed by, and construed in accordance with, the laws
of the State of ____________________.
<PAGE>
Exhibit 10.2
CONTRIBUTION AGREEMENT,
PLAN AND AGREEMENT OF REORGANIZATION AND DISTRIBUTION
This Agreement is made as of __________, 2000, by APPLIED POWER INC., a
Wisconsin corporation, with offices at 6101 N. Baker Road, Milwaukee, Wisconsin
53209 ("API"), and APW LTD., a Bermuda corporation, with offices at N22 W23685
Ridgeview Parkway West, Waukesha, Wisconsin 53188-1013 ("APW").
WHEREAS, API conducts its industrial business through the corporations and
other entities listed on Schedule 1 hereto (collectively, the "Industrial
Business") and its electronics or enclosure business through the corporations
and other entities listed on Schedule 2 ("Electronics Business").
WHEREAS, APW is a successor by merger/agreement of continuation to a
corporation formerly known as Wright Line Inc. and at one time an indirect
wholly-owned subsidiary of API. APW will serve to take title to assets
associated with the Electronics Business, including, without limitation, the
stock of the corporations and other entities described on Schedule 2 hereto and
certain assets of API and in limited cases of other subsidiaries of API listed
on Schedule 2, and assuming certain of the liabilities associated with the
Electronics Business, such that APW will own, directly or indirectly, all of the
assets, business and operations formerly and currently used and conducted by the
Electronics Business as generally described on Schedule 2 hereto;
WHEREAS, in order to separate API's Industrial Business from its
Electronics Business, API will or has undertaken the reorganization described in
Schedule 3 hereto;
WHEREAS, the parties wish to provide for the transfer of assets generally
listed on Schedule 2 as will be transferred and delivered to APW and its
subsidiaries;
WHEREAS, the parties wish to provide for the assumption by APW and its
subsidiaries of certain liabilities associated with the Electronics Business;
WHEREAS, API intends to distribute all of the common stock of APW, pro
rata, to the shareholders of API in accordance with resolutions of the Board of
Directors of API, and in accordance with the terms of a tax opinion obtained
from API's special tax counsel (the "Distribution"), so that after the
Distribution API will own no shares of stock representing the equity of APW and
APW will be a publicly traded corporation whose shares are listed and traded on
the New York Stock Exchange;
WHEREAS, the parties wish to provide for their agreements with respect to
certain matters pertaining to their business relationships following the
Distribution and other matters mutual to their interest;
NOW, THEREFORE, in furtherance of the foregoing purposes and in
consideration of the issuance of the common stock of APW to API as provided in
Section 3.1 and the mutual promises and undertakings herein contained and
contained in any agreement or other document executed in connection with this
Agreement, the parties agree as follows:
<PAGE>
ARTICLE I
EFFECTIVE DATE AND CLOSING
Section 1.1 Unless otherwise provided in this Agreement, or in any
agreement to be executed in connection with this Agreement, the effective date
of each transfer of property, assumption of liability, license, undertaking, or
agreement in connection herewith shall be 12:01 a.m., Central Standard Time,
__________, 2000 (the "Effective Date"), or such other date as may be fixed by
the Board of Directors of API.
Section 1.2 This Agreement shall be void if the Board of Directors of API
refrains from declaring or proceeding with the Distribution.
Section 1.3 Unless otherwise provided herein, the closing of the
transactions contemplated hereunder shall occur by the lodging of each of the
executed instruments of transfer, assumptions of liability, undertakings,
agreements, instruments or other documents executed or to be executed in
connection with this Agreement with Quarles & Brady LLP, 411 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, attorneys for API, to be held in escrow for
delivery as provided in Section 1.4 of this Agreement.
Section 1.4 Upon receipt of a certificate from an officer of API in the
form attached to this Agreement as Exhibit A, Quarles & Brady LLP shall deliver
to APW on behalf of API all of the items required to be delivered by API
hereunder lodged with it pursuant to Section 1.3 of this Agreement and each such
item shall be deemed to be delivered to APW as of the Effective Date upon
delivery of such certificate. Upon receipt of a certificate from an officer of
APW in the form attached to this Agreement as Exhibit B, Quarles & Brady LLP
shall deliver to API on behalf of APW all of the items required to be delivered
by APW hereunder and each such item shall be deemed to be delivered to API as of
the Effective Date upon receipt of such certificate.
ARTICLE II
CLOSING
Section 2.1 As of the Effective Date or such later date as specified, API
will or will cause an appropriate subsidiary to deliver to APW all of the
following:
(a) Duly executed General Assignment, Assumption and Agreement Regarding
Litigation, Claims and Other Liabilities (the "Assignment")
substantially in the form annexed as Exhibit D;
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<PAGE>
(b) Certificates representing the shares owned by API, indirectly or
directly, of the Electronics Business subsidiaries (as listed on
Schedule 2), which may be so delivered at any time prior to the
Effective Date, as may be agreed to by the parties;
(c) Duly executed assignments of the patents listed on Schedule 2.1(c),
and a duly executed Transitional Trademark Use and License Agreement
substantially in the form annexed as Exhibit E;
(d) Duly executed Insurance Matters Agreement substantially in the form
annexed as Exhibit F;
(e) Cash, as provided in the Assignment (subject to adjustment as set
forth in Section 3.3 herein and in other related documents);
(f) Duly executed bills of sale or titles as to the motor vehicles listed
on Schedule 2.1(f);
(g) A duly executed Employee Benefits and Compensation Agreement
substantially in the form annexed as Exhibit H;
(h) A duly executed Tax Sharing and Indemnification Agreement (the "Tax
Agreement") substantially in the form annexed as Exhibit I;
(i) Such documents or instructions as may be necessary to satisfy the
provisions of this Agreement;
(j) A duly executed Interim Administrative Services Agreement
substantially in the form annexed as Exhibit J;
(k) A duly executed Confidentiality and Non-Disclosure Agreement
substantially in the form annexed as Exhibit K;
(l) At the consummation of the Distribution, resignations of each person
employed by APW or its subsidiaries who is an officer or director of
API or its subsidiaries (excluding APW and its subsidiaries); and
(m) Such other agreements, documents or instruments as the parties may
agree are necessary or desirable in order to achieve the purposes
hereof, including a Bill of Sale and Assumption of Liabilities in the
form annexed as Exhibit G and the option waivers and releases
substantially in the form annexed as Exhibit C.
Section 2.2 As of the Effective Date or such later date as specified, APW
will deliver to API all of the following:
3
<PAGE>
(a) In each case where APW is a party to any agreement or instrument
referred to in Section 2.1, a duly executed counterpart of such
agreement or instrument;
(b) A certificate or certificates representing all of the outstanding
shares of the common stock of APW other than those already owned by
API, all as provided in Section 3.1;
(c) At the consummation of the Distribution, resignations of each person
employed by APW after the Effective Date who is an officer of API, or
any of its subsidiaries or affiliates not constituting part of the
Electronics Business, immediately prior to the Effective Date;
(d) Such other agreements, documents or instruments as the parties may
agree are necessary or desirable in order to achieve the purposes
hereof.
ARTICLE III
THE DISTRIBUTION
Section 3.1 By the Effective Date, APW shall issue and deliver to API a
certificate or certificates registered in the name of API representing that
number of shares of the common stock of APW which, when taken together with the
shares of common stock already owned by API, will result in API owning, of
record and beneficially, all of the issued and outstanding shares of APW common
stock and a number such that API shall own one (1) share of the common stock of
APW for each one (1) share of the common stock of API issued and outstanding
(the "Distribution Ratio") on the Record Date for the Distribution (the "Record
Date"). Each share of the common stock of APW shall be validly issued, fully
paid, nonassessable and free of preemptive rights.
Section 3.2 Nothing contained in Section 3.1 or elsewhere in this
Agreement, including the Schedules, Exhibits, and Annexes hereto, shall be
construed to limit or alter the authority of the Board of Directors of API to
declare or refrain from declaring the Distribution, fixing or changing the
Record Date, fixing or changing the Effective Date, or fixing or changing all
the appropriate procedures in connection with the Distribution, including the
Distribution Ratio, and no rights shall have been created hereunder in favor of
any person, whether or not a party to this Agreement, in respect of the
Distribution.
Section 3.3 API and APW agree that APW will assume an amount of debt (as
generally described in Schedule 4 hereto) equal to the residual amount after API
retains an amount equal to four times the Industrial Business earnings before
income taxes, depreciation and amortization as calculated before the
Distribution and as set forth in Schedule 4 hereto.
4
<PAGE>
ARTICLE IV
OTHER MATTERS
Section 4.1 API does not, in this Agreement or any other agreement,
instrument or document contemplated by this Agreement, make any representation
as to, warranty of or covenant with respect to:
(a) the value of any asset or thing of value to be transferred to APW;
(b) the freedom from encumbrance of any asset or thing of value to be
transferred to APW (except for encumbrances in favor of API and its
subsidiaries, excluding APW and its subsidiaries); or
(c) the absence of defenses or freedom from counterclaims with respect to
any claim, including accounts receivable, to be transferred to APW
(except defenses and counterclaims in favor of API and its
subsidiaries, excluding APW and its subsidiaries).
All assets to be transferred to APW shall be transferred "AS IS, WHERE IS."
Section 4.2 Each of API and APW will execute and deliver such further
instruments of conveyance, transfer and assignment and will take such other
actions as either of them may reasonably request of the other in order to
effectuate the purposes of this Agreement and to carry out the terms hereof. At
the request of APW and without further consideration, API will execute and
deliver to APW such other instruments of transfer, conveyance, assignment,
assumption, novation, substitution and confirmation and take such action as APW
may reasonably deem necessary or desirable in order to more effectively to
transfer, convey and assign to APW and, subject to the provisions of Section
4.1, confirm APW's title to all of the assets, rights and other things of value
contemplated to be transferred to APW hereunder, to place APW in actual
possession and operating control thereof and to permit APW to exercise all
rights with respect thereto (including, without limitation, rights under
contracts and other arrangements as to which the consent of any third party to
the transfer thereof shall not have previously been obtained). At the request
of API and without further consideration, APW will execute and deliver to API
all instruments, assumptions, novations, undertakings, substitutions or other
documents and take such other action as API may reasonably deem necessary or
desirable in order to have APW fully and unconditionally assume and discharge
the liabilities contemplated to be assumed by APW under this Agreement or any
document in connection herewith and to relieve API of any liability or
obligation with respect thereto and evidence the same to third parties. Neither
API nor APW shall be obligated, in connection with the foregoing, to expend
money other than reasonable out-of-pocket expenses, attorneys' fees and
recording or similar fees.
API and APW will use their reasonable efforts to obtain any consent,
substitution, approval or amendment required to novate or assign all agreements,
leases, licenses and other rights of any nature whatsoever relating to the
assets, rights and other things of value being transferred to
<PAGE>
APW and all liabilities and obligations being assumed by APW or its
subsidiaries; provided, however, that neither API nor APW shall be obligated to
pay any consideration therefor (except for filing fees and other similar
charges) to the third party from whom such consents, approvals, substitutions
and amendments are requested. If API or APW is unable to obtain any such
required consent, approval, substitution or amendment, API shall continue to be
bound by such agreements, leases, licenses and other rights and obligations and,
unless not permitted by law or the terms thereof, APW shall, as agent for API or
as subcontractor, pay, perform and discharge fully all the obligations of API
thereunder from and after the Effective Date and indemnify and hold harmless API
from and against all losses, claims, damages, liabilities and expenses
whatsoever arising out of or in connection with APW's performance of, or
omission to perform, its obligations thereunder. APW will not be responsible for
or indemnify API for any claims, damages, liabilities, and expenses whatsoever
arising out of or in connection with API's performance of or omissions to
perform any of its obligations under such agreements, leases, licenses and other
rights thereof which API and APW have agreed will be performed by API. API
shall, without further consideration, pay, transfer or remit, as the case may
be, to APW promptly all money, rights and other consideration received in
respect of such performance. API shall exercise its rights and options under all
such agreements, leases, licenses and other rights and obligations referred to
in this Section 4.2 only as reasonably directed by APW and at APW's expense. If
and when any such consent shall be obtained or such agreement, lease, license or
other rights shall otherwise become assignable or able to be novated, API shall
promptly assign all its rights and obligations thereunder to APW without payment
of further consideration and APW shall, without the payment of any further
consideration, assume such rights and obligations. To the extent that the
assignment of any contract or agreement or the proceeds thereof pursuant to this
Section 4.2 is prohibited by law, the assignment provisions of this paragraph
shall operate to create a subcontract with APW to perform each relevant,
unassignable contract or agreement, and the subcontract price paid to APW shall
be equal to the money, rights and other consideration received by API with
respect to the performance by APW under such subcontract.
Section 4.3 APW and API agree to cooperate to determine the amount of
sales, transfer or other similar taxes or fees (including, but not limited to,
all real estate, patent, copyright transfer taxes and recording fees) payable in
connection with the transactions contemplated by this Agreement. API and APW
agree to file promptly and timely returns for such taxes with the appropriate
taxing authorities and remit payment thereof in accordance with the terms of the
Tax Agreement.
Section 4.4 APW shall make a timely application to the New York Stock
Exchange and use its reasonable efforts to have the common stock of APW quoted
for trading on the New York Stock Exchange and shall arrange for such stock to
trade on a "when issued" basis as promptly as practicable following the
declaration of the Distribution. API shall provide reasonable assistance to APW
in obtaining such listing. The parties agree to take whatever reasonable steps
are necessary so that APW may use the ticker symbol "APW" on the New York Stock
Exchange.
Section 4.5 The parties agree that Schedule 4.5 sets forth the banks
maintaining lock boxes or similar deposit arrangements and maintained by API in
connection with the Electronics Business
6
<PAGE>
prior to the Effective Date. As of the Effective Date, API will terminate any
arrangement whereby funds directed to such lock boxes or similar arrangements
are consolidated with other funds of API or otherwise made available to API. API
shall, as of the Effective Date, take all necessary steps to remove all persons
who are not employees of APW who are signatories or holders of powers-of-
attorney with respect to such lock boxes or other arrangements from the list of
such signatories and holders and otherwise extinguish their signing authority
with respect thereto. As of the Effective Date, API shall do such things as may
be required to deliver to APW full authority with respect to such lock boxes or
other arrangements. Each of API and APW hereby grants the other a limited
irrevocable power-of-attorney to endorse, deposit and negotiate all checks,
drafts or other forms of payment made in respect of any invoice representing a
receivable payable to either of them but which are sent by the payor to a lock
box maintained by the other ("Misdirected Payments") or is made payable to the
either of them or any of their subsidiaries but which is the payment of a
receivable which is a receivable of the other ("Mispayee Items"). API and APW
shall develop procedures reasonably satisfactory to them whereby they reconcile
Misdirected Payments and Mispayee Items monthly and make appropriate and timely
payments to each other in respect thereof.
Section 4.6 At all times the management of API will cause the Electronics
Business before the Effective Date to continue to ship products, invoice
customers and pay payables in the ordinary course of business consistent with
past practices and will not undertake or permit any arrangement with any third
party which is intended to or has the effect of delaying the payment of any
account receivable beyond the Effective Date or accelerating the payment of any
account payable before the Effective Date.
Section 4.7 APW shall authorize the execution and cause the authorized
officers of APW to execute all documents, notes and undertakings and to do such
other things required in connection with the irrevocable and unconditional
assumption by APW without any recourse whatsoever to API of all obligations of
API relating to the Electronics Business and required to be assumed by APW
pursuant to the terms hereof.
Section 4.8 APW shall, in addition to its obligations under the Tax
Agreement, cooperate with API and special tax counsel to API in obtaining an
opinion from the special tax counsel to the effect that the Distribution should
be tax-free to API shareholders. In that regard, APW agrees that it will
authorize, cause to be executed and comply with any and all undertakings,
representations or agreements required in connection with obtaining special tax
counsel's opinion.
Section 4.9 API and APW agree that the expenses associated with
preparation of this Agreement, the transfers contemplated hereunder, matters
related to the organization of APW, the Distribution and related employment
matters shall be borne by API and APW as set forth on Schedule 4.9 annexed
hereto.
Section 4.10 API and APW shall cause their foreign subsidiaries to execute
such assignments, assumptions, novations and other documents as shall be
necessary to carry out the plan of reorganization described in the Exhibits
hereto to effect the purposes of this Agreement with respect to their respective
operations outside the United States.
<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.1 This Agreement, including the Schedules, Annexes and Exhibits
hereto, and the agreements and other documents referred to herein, shall
constitute the entire Agreement between API and APW with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter, provided however, in the event of
conflict between this Agreement and any other agreement executed in connection
herewith, the provisions of such other agreement, including the Schedules,
Annexes, and Exhibits hereto, shall prevail.
Section 5.2 This Agreement shall be governed and construed and enforced in
accordance with the internal laws of the State of Wisconsin as to all matters,
including without limitation, matters of validity, construction, effect,
performance and remedies.
Section 5.3 This Agreement may be amended, modified or supplemented only
by a written agreement of the parties.
Section 5.4 This Agreement and all the provisions hereof shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by either party without the prior
written consent of the other party.
Section 5.5 This Agreement is solely for the benefit of the parties and is
not intended to confer upon any person except the parties any rights or remedies
hereunder. There are no third party beneficiaries to this Agreement.
Section 5.6 This Agreement, and any other agreement to be executed in
connection herewith, may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Section 5.7 If any section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, such determination
shall not affect the validity or enforceability of any other section, paragraph
or provision hereof.
8
<PAGE>
IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their duly authorized officers this _____ day of __________, 2000.
APPLIED POWER INC. APW LTD.
By: ________________________ By: ________________________
President and Chief Executive Officer President and Chief Executive
Officer
9
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Description Exhibit or Schedule Number
- ----------- --------------------------
Certificate of Secretary of API Exhibit A
Certificate of Secretary of APW Exhibit B
Release of Option Holder Exhibit C
General Assignment, Assumption and Agreement
Regarding Litigation, Claims and Other
Liabilities Exhibit D
Transitional Trademark Use and License Agreement Exhibit E
Insurance Matters Agreement Exhibit F
Bill of Sale and Assumption of Liabilities Exhibit G
Employee Benefits and Compensation Agreement Exhibit H
Tax Agreement Exhibit I
Interim Administrative Services Agreement Exhibit J
Confidentiality and Non-Disclosure Agreement Exhibit K
List of Industrial Business Entities Schedule 1
List of Electronics Business Entities; Description of
Electronics Business Schedule 2
Reorganization Steps Schedule 3
List of Borrowings being Assumed Schedule 4
Assignment of Patents and List of Patents Schedule 2.1(c)
Motor Vehicles being Assigned Schedule 2.1(f)
List of Banks Maintaining Electronics Business Accounts Schedule 4.5
Allocation of Expenses Relating to Distribution Schedule 4.9
10
<PAGE>
Exhibit 10.3
EXHIBIT D
GENERAL ASSIGNMENT, ASSUMPTION AND AGREEMENT
REGARDING LITIGATION, CLAIMS AND OTHER LIABILITIES
Between
APPLIED POWER INC.
and
APW LTD.
Dated __________, 2000
<PAGE>
EXHIBIT D
TABLE OF CONTENTS
GENERAL ASSIGNMENT, ASSUMPTION AND AGREEMENT
REGARDING LITIGATION, CLAIMS AND OTHER LIABILITIES
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Assignment and Assumption............................................ 2
1.1 General Assignment.............................................. 2
1.2 Accounting Records.............................................. 4
1.3 General Assumption.............................................. 4
1.4 Special Assumption Arrangements................................. 6
1.5 Liabilities Not Assumed......................................... 6
1.6 Allocation of Joint Assets and Liabilities...................... 7
1.7 Classification of Litigation and Claims......................... 7
2. Assumed Liabilities, Exculpation and Indemnification by APW.......... 7
3. Exculpation and Indemnification by API............................... 8
4. Specific Indemnification Issues...................................... 9
4.1 Worker's Compensation........................................... 9
4.2 Specific Litigation Retained by API............................. 9
4.3 Officer, Director, Employee or Agent Liability.................. 10
4.4 Post-Effective Date Contracts Between API & APW................. 10
4.5 Joint Liability................................................. 10
5. Notice and Payment of Claims......................................... 10
5.1 Procedure for Notification...................................... 10
5.2 Waiver of Objection............................................. 11
5.3 Insurance Coverage.............................................. 11
6. Defense of Third-Party Claims........................................ 11
6.1 Assumption of Third-Party Claims................................ 11
6.2 Settlement of Third-Party Claims................................ 12
6.3 Indemnification After Settlement................................ 12
6.4 Third-Party Joint Liability Claim.............................. 12
7. Cooperation and Preservation of Records.............................. 12
7.1 General......................................................... 12
7.2 Availability of Records......................................... 13
7.3 Retention of Records............................................ 13
7.4 Cost of Access to Records....................................... 13
</TABLE>
D-ToC-1
<PAGE>
<TABLE>
<S> <C>
7.5 Confidential or Proprietary Records............................. 13
8. Dispute Resolution................................................... 13
8.1 General......................................................... 13
8.2 Arbitration..................................................... 13
8.3 Legal Proceedings............................................... 14
9. Notices.............................................................. 14
9.1 General......................................................... 14
9.2 Change in Address............................................... 14
10. Amendment and Non-Waiver............................................. 14
10.1 Written Amendment and Waiver.................................... 14
10.2 Limited Amendment or Waiver..................................... 14
11. Miscellaneous........................................................ 14
11.1 Governing Law................................................... 14
11.2 Entire Agreement................................................ 14
11.3 Parties In Interest............................................. 15
11.4 Effectiveness................................................... 15
11.5 Reformation and Severability.................................... 15
11.6 Titles and Headings............................................. 15
11.7 Counterparts.................................................... 15
</TABLE>
D-ToC-2
<PAGE>
EXHIBIT D
GENERAL ASSIGNMENT, ASSUMPTION AND AGREEMENT
REGARDING LITIGATION, CLAIMS AND OTHER LIABILITIES
This Agreement, dated as of __________, 2000, between APPLIED POWER INC., a
Wisconsin corporation with offices at 6101 N. Baker Road, Milwaukee, WI 53209
("API"), and APW LTD., a Bermuda corporation with offices at N22 W23685
Ridgeview Parkway West, Waukesha, Wisconsin 53188-1013 ("APW"), shall govern the
rights and obligations of API and APW with respect to the assignment of assets
and assumption of liabilities associated with, or arising out of, the assets,
business or operations of the electronics or enclosure business ("Electronics
Business") as set forth on Schedule 1 hereto. Reference is made to the
Contribution Agreement, Plan and Agreement of Reorganization and Distribution
between the parties (the "Contribution Agreement:). After the spin-off, API
will continue to operate the industrial business ("Industrial Business"). APW
and the corporations and other entities listed on Schedule 1 will conduct the
Electronic Business. The term "API" when used in this Agreement shall not be
construed to include the Electronics Business where such construction would have
the effect of negating any obligation of APW and its subsidiaries or the
Electronics Business hereunder. The term "APW" when used in this Agreement
shall not be construed to include API and its subsidiaries or any enterprise
other than those which will conduct the Electronics Business where such
construction would have the effect of negating any obligation of APW and its
subsidiaries or such other enterprises hereunder.
RECITALS
WHEREAS, API hereby and by certain other instruments of even date herewith
transfers or will transfer to APW, effective as of 12:01 a.m., Central Standard
Time, __________, 2000, or such other date as specified as the effective date
("Effective Date") in or pursuant to the Contribution Agreement, those assets of
API arising out of, relating to, or associated with API's Electronics Business
as conducted by the Electronics Business including the assets described in
Section 1.1 hereof ("Electronics Assets") in accordance with the Contribution
Agreement between the parties, and including, without limitation, assets
associated, in whole or in part, with the past, present and future development,
production, manufacture, marketing, use, storage, distribution, disposal and
sale of the electronics and enclosure and related products manufactured by the
Electronics Business ("Electronics Business Products") throughout the world.
WHEREAS, the parties hereto intend, by this Agreement and the other
agreements and instruments provided for in the Contribution Agreement, to cause
API to convey to APW all of the business and assets of the Electronics Business
owned by API, including, without limitation, the subsidiaries and other
enterprises listed on Schedule 1.
<PAGE>
WHEREAS, the parties further intend that APW shall assume certain of the
liabilities of API.
WHEREAS, and without limiting the generality of the foregoing, the parties
acknowledge that, as of the Effective Date, there will be pending certain
litigation brought and threatened against API, and there are certain claims
alleged against API associated with or arising out of the Electronics Business,
which may include, without limitation, civil actions, workers' compensation
proceedings, administrative and regulatory proceedings, investigations, audits,
inquiries, demands, claims and threatened actions ("Litigation and Claims").
WHEREAS, it is anticipated that after the Effective Date there may be
further Litigation and Claims brought, threatened or alleged against API
associated with or arising out of the activities of the Electronics Business
prior to the Effective Date and other instances of Litigation and Claims
brought, threatened or alleged against either APW or API associated with or
arising out of the activities of the other party after the Effective Date.
WHEREAS, by this Agreement API and APW seek to implement the general
principle that with the exceptions noted herein, in the Contribution Agreement
and in the other agreements and instruments provided for in the Contribution
Agreement including any Schedules, Exhibits or Annexes thereto (collectively,
"Contribution Documents"), APW shall be responsible for any Litigation and
Claims directly and primarily associated with or directly and primarily arising
at any time out of the Electronics Business and the assets, business and
operations used and conducted by APW, currently or previously, following the
Effective Date and API shall be responsible for any Litigation and Claims
associated with or arising at any time out of API's other assets, business and
operations, including former operations of API not directly relating to the
Electronics Business.
NOW THEREFORE, in consideration of the premises and the mutual promises
contained in this Agreement, the Contribution Documents, the parties hereto
agree as follows:
1. Assignment and Assumption.
1.1 General Assignment. At the Effective Date, and except as specifically
------------------
provided in the Contribution Documents, API hereby assigns, transfers, conveys
and delivers to APW and APW hereby accepts the assets, whether tangible or
intangible, known or unknown, arising out of, relating to, or associated with
the Electronics Business, Electronics Business Products or Electronics Assets
except as specifically provided elsewhere in the Contribution Documents, and
except for assets the disposition of which is subject to separate agreements
between the parties, all other assets, tangible or intangible, known or unknown,
related to, arising out of, or associated with, or used or held for use in the
Electronics Business, whether or not reflected or required to be reflected on
the books and records of API and its subsidiaries, including any subsidiary's
ledgers ("Accounting Records"), as of the Effective Date, including without
limitation:
(a) all of the outstanding equity securities of the entities listed
on Schedule 1 hereto which are owned by API;
D-2
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(b) to the extent related to the Electronics Business, all airplanes,
automobiles and trucks owned or leased by API and subsidiaries,
and all associated spare parts, as reflected on the Accounting
Records, as of the Effective Date ("Transportation Equipment"),
including without limitation, the Transportation Equipment shown
on Attachment A hereto;
(c) to the extent used in the Electronics Business, Electronics
Business Products or Electronics Assets, all customer lists
(including sales and service lists), prospect lists, and supplier
records, correspondence and product literature, artwork,
Accounting Records and files, design, development and
manufacturing files, vendor and customer drawings, formulas and
specifications for equipment and raw materials currently used in
the operation of the Electronics Business, wherever located
("Business Records") and in whatever form such Business Records
may exist as of the Effective Date;
(d) to the extent related to the Electronics Business, Electronics
Business Products or Electronics Assets, the rights of API under
all agreements for the purchase by or the furnishing to or for
the benefit of the Electronics Business of raw materials, parts,
supplies and services relating to the Electronics Business,
including the Electronics Business Products, as of the Effective
Date ("Purchase Orders");
(e) the rights, title, and interest of API or its subsidiaries under
every agreement or contract to sell Electronics Business Products
and services arising before the Effective Date, and any bids or
offers made by API or its subsidiaries to sell Electronics
Business Products or services in connection therewith to the
extent such Electronics Business Products have not been shipped
or such services have not been rendered prior to the Effective
Date ("Sales Orders");
(f) the rights of API or its subsidiaries under the miscellaneous
agreements and assets listed on Exhibit B hereto ("Miscellaneous
Agreements") including, without limitation, corporate assets of
API listed on Exhibit B hereto;
(g) all trade accounts and notes receivable related to the sale of
Electronics Business Products and services ("Receivables") as
reflected on the Accounting Records as of the Effective Date;
(h) to the extent related primarily to the Electronics Business,
Electronics Business Products or Electronics Assets, prepaid
expenses as reflected on the Accounting Records, as of the
Effective Date; and
(i) cash in the amount of $250,000.
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Except as specifically provided above or elsewhere in the Contribution
Documents, APW will not receive any of the API cash on hand, cash in banks, cash
equivalents and investments. APW will also retain checkbooks and canceled
checks, or any tax and Accounting Records located at APW's headquarters,
provided that API shall be entitled to copies of tax and Accounting Records
relating to the Industrial Business located at APW headquarters, with API and
APW sharing the copying expense equally.
1.2 Accounting Records. The parties acknowledge and agree that the
------------------
Accounting Records as of the Effective Date will be prepared by APW as soon as
practicable after the Effective Date. Each party agrees to use the normal
accounting procedures and practices, consistent with past practices, in
preparing the Accounting Records which will be used as a reference for conveying
the assets and liabilities to APW. In case of any differences or questions
about the preparation of such documents, the parties agree to resolve any
controversy in accordance with Section 8 of this Agreement.
1.3 General Assumption. At the Effective Date, and except as specifically
------------------
provided in the Contribution Documents, APW hereby irrevocably assumes the
obligations and liabilities of API incurred by the Electronics Business or
otherwise to the extent arising out of, relating to or associated with the
Electronics Business, the Electronics Business Products or the Electronics
Assets, whether matured or unmatured, liquidated or unliquidated, fixed or
contingent, known or unknown, and whether arising out of circumstances existing
prior to or on and after the Effective Date, (such liabilities and obligations,
being herein referred to collectively as the "Assumed Liabilities") except as
provided elsewhere in the Contribution Documents, and except for obligations,
liabilities and expenses the allocation of responsibility for which is subject
to separate agreements between the parties as set forth in the Contribution
Documents, all other obligations, liabilities and expenses directly and
primarily relating to, arising out of, or associated with the Electronics
Business, Electronics Business Products or any Electronics Assets, whether or
not reflected or required to be reflected in the Accounting Records, including
without limitation:
(a) obligations and liabilities directly and primarily arising out
of, relating to, or associated with all Transportation Equipment;
(b) obligations and liabilities directly and primarily arising out
of, relating to, or associated with all Sales Orders and all
Receivables;
(c) obligations and liabilities directly and primarily arising out
of, relating to, or associated with all Purchase Orders;
(d) obligations and liabilities directly and primarily arising out
of, relating to, or associated with all Miscellaneous Agreements;
(e) obligations and liabilities arising out of, relating to, or
associated with all accounts payable associated with the
Electronics Business as reflected on the Accounting Records, as
of the Effective Date;
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(f) obligations and liabilities arising out of, relating to, or
associated with all product warranty obligations, including any
product recall obligations or liabilities whenever arising
directly and primarily with respect to Electronics Business
Products, whether shipped prior to or on or after the Effective
Date;
(g) obligations and liabilities resulting from claims for personal
injury or property damage or consequential damage which are
caused by any actual or alleged defect in or actual or alleged
breach of warranty directly and primarily related to any
Electronics Business Products or the Electronics Assets or
Electronics Business, whether arising prior to or on or after the
Effective Date;
(h) all Litigation and Claims pending as of the Effective Date
against API or any API subsidiary ("Pending Electronics Business
Litigation") and all Litigation and Claims brought against APW or
API, or any APW or API subsidiary, after the Effective Date ("New
Electronics Business Litigation"), in each case if and solely to
the extent that such Litigation and Claims (in whole or in part)
directly and primarily arise out of or are associated with
(regardless of the party named in the allegation or complaint)
the Electronics Business, any Electronics Business Products or
any Electronics Assets, or the assets, business and operations
used and conducted by APW on and after the Effective Date, or
directly and primarily arise out of, relate to or are associated
with APW's obligations, covenants, warranties, representations,
assumptions and agreements contained or reflected in the
Contribution Documents, or any other activities of APW (whether
or not in the ordinary course of business and whether occurring
before or on or after the Effective Date);
(i) except to the extent provided to the contrary by Section 4.2,
every and all obligations, liabilities and expenses (including
closure or remediation costs) of API for harm or alleged harm to
the environment directly and primarily arising out of or
associated with the Electronics Business, any Electronics
Business Products or any Electronics Assets ("Environmental
Liabilities"); provided, however, APW does not assume any such
obligations, liabilities or expenses with respect to the disposal
or use by API of Electronics Business Products or APW products
purchased by API after the Effective Date or those listed on
Schedule 1.3(i); and
(j) all liabilities of API in any instance where APW is operating as
agent or subcontractor under Section 4.3 of the Contribution
Agreement or any agreement or instrument provided for therein
provided that APW will not be responsible for or indemnify API
for any claims, damages, liabilities and expenses whatsoever to
the extent such arose out of or in connection with
D-5
<PAGE>
API's performance of or omission to perform any of its remaining
obligations under Section 4.3 of the Contribution Agreement.
APW shall be responsible for the Assumed Liabilities, regardless of when or
where such Assumed Liabilities arose or arise, or whether the facts on which
they are based occurred prior to or subsequent to the Effective Date, regardless
of where or against whom such Assumed Liabilities are asserted (including any
Assumed Liabilities arising out of claims made by APW's directors, officers,
employees, agents, subsidiaries and affiliates against API) or whether asserted
prior or subsequent to the Effective Date and regardless of whether such Assumed
Liabilities arose from negligence, reckless, violation of law, fraud, or
misrepresentation by API or any of its directors, officers, employees, agents,
subsidiaries or affiliates.
1.4 Special Assumption Arrangements. The parties acknowledge and agree
-------------------------------
that certain assets and obligations, liabilities, and expenses relating to,
arising out of or associated with the Electronics Business, the Electronics
Business Products and the Electronics Assets as of the Effective Date are the
subject of separate agreements between the parties. The transfer of assets and
assumption of obligations, liabilities, and expenses provided for in this
Agreement is subject in all respects to the provisions of such separate
agreements insofar as the provisions of this Agreement may be deemed to relate
to the subject matter of such separate agreements and this Agreement shall not
be deemed to effect the transfer of any asset or assumption of any obligation,
liability, or expense expressly provided for pursuant to any of the separate
agreements.
1.5 Liabilities Not Assumed. Notwithstanding anything to the contrary,
-----------------------
APW does not assume any obligation, liability or expense if and to the extent
that: (i) such obligation, liability, or expense (in whole or in part) arises
out of or is associated with the assets, business or operations of API other
than the Electronics Business, Electronics Business Products or Electronics
Assets, or (ii) API has expressly agreed to retain such obligation, liability,
or expense pursuant to the Contribution Documents (such obligations,
liabilities, and expenses referred to in clauses (i) and (ii) of this sentence,
together with all obligations, liabilities, and expenses of API arising out of
or associated with Pending API Litigation and New API Litigation (each as
hereinafter defined), being referred to herein as "Retained Liabilities,"
including the liabilities listed in Schedule 1.5 hereto). APW does not assume,
and shall not be responsible for, any Litigation and Claims pending as of the
Effective Date against API or any API subsidiary except subsidiaries listed on
Exhibit 1, exclusive of Litigation and Claims set forth in Section 1.3(h) or
specifically assumed by APW in the Contribution Documents ("Pending API
Litigation"), or Litigation and Claims brought, threatened or alleged against
API, including any subsidiary, exclusive of Litigation and Claims set forth in
Section 1.3(h) or specifically assumed by APW in the Contribution Documents,
after the Effective Date ("New API Litigation").
API shall be responsible for the Retained Liabilities, regardless of
when or where any such obligation, liability, or expense arose or arise, or
whether the facts on which they are based occurred prior to or subsequent to the
Effective Date, regardless of where or against whom such obligation, liability,
or expense is asserted or determined or whether asserted or determined prior to
or subsequent to the Effective Date.
D-6
<PAGE>
1.6 Allocation of Joint Assets and Liabilities. The parties are only
------------------------------------------
aware of one joint contract involving the purchase of steel. The parties agree
that by this Agreement, API and APW, except as specifically provided in the
Contribution Documents, seek to transfer, assign, and convey to APW, and/or have
APW assume, as the case may be, the assets and liabilities of the Electronics
Business, Electronics Business Products and the Electronics Assets. By this
Agreement and except as otherwise provided in the Contribution Documents
(including certain corporate assets), API does not intend to transfer, assign,
and convey to APW and have APW assume, as the case may be, the assets and
liabilities of API business, products, assets other than the Electronics
Business, Electronics Business Products or Electronics Assets. The assets and
liabilities listed on Schedule 1.6 hereto shall remain assets and liabilities of
API.
In the case of an asset or liability, if any, which relates to, arises
out of, or is associated with both the Electronics Business and API, both
parties agree to apportion the asset or liability among the parties in
accordance with their respective interests in or responsibility for such asset
or liability. If the asset or liability is not divisible, the asset or
liability will be wholly allocated to the party to which party's business the
indivisible asset or liability primarily relates. The parties will make this
decision in accordance with Section 8 of this Agreement. The parties will use
reasonable efforts to resolve any controversy or disputes as promptly as
possible.
1.7 Classification of Litigation and Claims. Each party acknowledges that
---------------------------------------
the other party has previously informed each other of all Pending Electronics
Business Litigation known to such party, other than workers' compensation
claims. Such information was prepared by API to the best of its ability based
upon facts reasonably available to it as of the date hereof. There may be
additional Pending Electronics Business Litigation either commenced or
threatened between the date such information was provided and the Effective Date
or which was not reasonably identifiable and which should have been included in
such information. The parties agree that such Litigation and Claims when
identified shall be classified as Pending Electronics Business Litigation. The
parties also agree that with respect to certain Litigation and Claims currently
considered to be Pending Electronics Business Litigation, or later deemed as
included, it may be or become difficult to determine whether they were properly
so classified, in which case the parties agree to appropriately reclassify any
such Litigation and Claims as newly discovered facts may indicate or, in the
case of disputed facts, to negotiate their proper handling under Section 6 or
Section 8 hereof.
2. Assumed Liabilities, Exculpation and Indemnification by APW.
2.1 Subject to the provisions of Section 4 hereof, from and after the
Effective Date, APW shall, without any further responsibility or liability of or
recourse to, API, or any subsidiary of API or any of their respective directors,
shareholders, officers, employees, agents, consultants, representatives,
successors, transferees or assignees, exclusive of APW and its subsidiaries
(collectively, the "API Parties"), absolutely and irrevocably assume and be
solely liable and responsible for the Assumed Liabilities. Neither API nor any
of the other API Parties shall be liable to APW or any subsidiary of APW or any
of their respective directors, shareholders, officers, employees, agents,
consultants, customers, representatives, successors, transferees or assignees
for any reason whatsoever on account of (i) any Assumed Liabilities or (ii) any
obligations, liabilities
D-7
<PAGE>
or expenses arising out of or associated with or any Litigation and Claims
arising out of or associated with the assets, business and operations used and
conducted by APW following the Effective Date, arising from or associated with
APW's obligations, covenants, warranties, representations, assumptions,
agreements contained or reflected in the Contribution Documents, or any other
activities of APW (whether or not in the ordinary course of business, and
whether occurring before or on or after the Effective Date), except as otherwise
specifically provided in the Contribution Documents; provided, that API shall
remain liable to APW for any breach by API and its subsidiaries of any of its
obligations, covenants, warranties, representations, assumptions or agreements
contained or reflected in the Contribution Documents. The matters with respect
to which the liability of API and the other API Parties is excluded pursuant to
clauses (i) and (ii) of the preceding sentence are hereby referred to as the
"Electronics Business Liabilities."
APW shall fully indemnify, defend, save and hold harmless API and each
of the other API Parties from and against all claims, liabilities, obligations,
leases, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' or others' fees), expenses, fines, taxes,
levies, imports, duties, deficiencies, assessments, charges, penalties,
allegations, demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, to the extent directly and primarily
arising out of or associated with the Electronics Business Liabilities (all of
which are hereinafter in this Section collectively called the "API Damages").
Except as specifically provided elsewhere, the indemnities provided by
APW hereunder shall extend to any and all Electronics Business Liabilities of
whatsoever nature, including, without limitation, any and all Electronics
Business Liabilities with respect to environment, health, safety, personal
injury, property damage, employment, benefits, compensation, pension rights,
claims arising out of contracts, product liability, warranty, merchantability or
fitness of goods for any particular purpose, conformity of goods to contractual
requirements, deceptive trade practice, misrepresentation, fraud or any other
actual breach or violation of any obligation or requirement arising out of, or
in connection with, Electronics Assets, the Electronics Business, Electronics
Business Products or the assets, business and operations of APW.
3. Exculpation and Indemnification by API.
3.1 Subject to the provisions of Section 4 hereof, from and after the
Effective Date, API shall, without any further responsibility or liability of,
or recourse to, APW, or any subsidiary of APW or any of their respective
directors, shareholders, officers, employees, agents, consultants,
representatives, successors, transferees or assignees (collectively, the "APW
Parties"), absolutely retain and be solely liable and responsible for the
Retained Liabilities. From and after the Effective Date, neither APW nor any of
the other APW Parties shall be liable to API or any subsidiary of API or any of
their respective directors, shareholders, officers, employees, agents,
consultants, customers, representatives, successors, transferees or assignees
for any reason whatsoever: (i) on account of any Retained Liabilities; or (ii)
on account of any obligations, liabilities or expenses arising out of or
associated with the breach by API of any of its obligations under the
Contribution Documents. The
D-8
<PAGE>
matters with respect to which API retains liability pursuant to clauses (i) and
(ii) of the preceding sentence are herein referred to as the "API Liabilities."
API shall fully indemnify, defend, save and hold harmless APW and each
of the other APW Parties from and against, all claims, liabilities, obligations,
leases, costs, costs of defense (as and when incurred, and including reasonable
outside attorneys' and consultants' fees), expenses, fines, taxes, levies,
imports, duties, deficiencies, assessments, charges, penalties, allegations,
demands, damages (including but not limited to actual, punitive or
consequential, foreseen or unforeseen, known or unknown), settlements, awards or
judgments of any kind or nature whatsoever, to the extent directly and primarily
arising out of or associated with the API Liabilities or, except as otherwise
provided in the Contribution Documents, that otherwise are related to, arise
from, or associated with the ownership, use, possession, operation or conduct of
the assets, business or operations of API, other than the Electronics Assets and
APW assets, Electronics Business and APW's business or Electronics Business
Products or APW's products, before or after the Effective Date (all of which are
hereinafter collectively called the "APW Damages").
Except as specifically provided in the Contribution Documents, the
indemnities provided by API hereunder shall extend to any and all API
Liabilities of whatsoever nature, including, without limitation, any and all API
Liabilities with respect to environment, health, safety, personal injury,
property damage, employment, benefits, compensation, pension rights, claims
arising out of contracts, product liability, warranty, merchantability or
fitness for any particular purpose of goods, conformity of goods to contractual
requirements, deceptive trade practice misrepresentation, fraud or any other
alleged or actual breach or violation of any obligation of or requirement
arising out of, or in connection with, the assets, business or operations of API
other than the Electronics Business, Electronics Assets, Electronics Business
Products or the assets, business and operations of APW.
4. Specific Indemnification Issues.
4.1 Worker's Compensation. Workers' compensation claims filed with the
---------------------
appropriate state administrative agency prior to the Effective Date by a person
employed at the time of filing by API alleging that prior to the Effective Date
such employee was injured while employed by API shall be considered to be API
Liabilities. Any workers' compensation claims made against APW (including any
subsidiaries) which are filed either on or after the Effective Date shall be
considered to be Assumed Liabilities. Any workers' compensation claims made
against API which are filed after the Effective Date shall be considered to be
API Liabilities. In the event a party has a claim filed against it after the
Effective Date which the party believes should be the responsibility of the
other party (i.e. a misfiled claim), the parties agree to use the procedures set
forth at Section 8 of the Agreement to resolve any dispute or controversy.
4.2 Specific Litigation Retained by API. The parties agree that API will
-----------------------------------
remain solely responsible for the pending claims listed on Schedule 4.2 hereto,
and will indemnify the APW parties in respect thereto.
D-9
<PAGE>
4.3 Officer, Director, Employee or Agent Liability. It is understood and
----------------------------------------------
agreed that, with respect to any obligation, liability, or expense or any
Litigation and Claims arising out of or associated with, an act or omission of
any officer, director, employee or agent of API or any of its subsidiaries prior
to the Effective Date, the respective obligations of APW and API pursuant to
this Agreement (including their respective indemnification obligations) shall be
indemnified by API and otherwise, in full force and effect, regardless of
whether such person was, at the time of such act or omission, an officer,
director, employee or agent of the Electronics Business (including APW
employees, officers or directors) or of API (excluding the Industrial Business)
and regardless of whether such obligation, liability, or expense or Litigation
and Claims are alleged or determined in any judgment, award or decree after
trial to arise out of or be associated with such person's negligence, gross
negligence, recklessness or intentional conduct or culpability.
4.4 Post-Effective Date Contracts Between API & APW. It is acknowledged
-----------------------------------------------
that after the Effective Date the parties and their subsidiaries may have arms
length negotiated business relationships between and among each other, which
relationships are or shall be described in contracts, agreements and other
documents entered into in the normal course of business. Such documents may
include agreements by the parties and their affiliates and subsidiaries to
supply after the Effective Date materials or services. Such business
relationships shall not be subject to the indemnity or other provisions hereof
or any other agreements covered by the Contribution Documents, unless the
parties expressly agree to such in the agreements governing such relationships.
4.5 Joint Liability. In the event a claim, demand, action or proceeding
---------------
is brought by a third party in which the liability as between API and APW is
determined after trial in any judgment, award or decree to be joint or in which
the entitlement to indemnification hereunder is not readily determinable, the
parties shall negotiate in good faith in an effort to agree, as between API and
APW, on the proper allocation of liability or entitlement to indemnification, as
well as the proper allocation of the costs of any joint defense or settlement
pursuant to Section 6.4, all in accordance with the provisions of and the
principles set forth in this Agreement. In the absence of any such agreement,
such allocation of liability or entitlement to indemnification, and such
allocation of costs, shall be subject to ultimate resolution between API and APW
based upon all of the relevant facts and circumstances pursuant to Section 8 and
consistent with the policy set forth in the last whereas recital of this
Agreement.
5. Notice and Payment of Claims.
5.1 Procedure for Notification. If either a party to this Agreement or a
--------------------------
person entitled to a defense and/or indemnification under this Agreement ("the
Indemnified Party") determines that it is or may be entitled to a defense or
indemnification by APW or API, as the case may be ("the Indemnifying Party"),
under this Agreement:
(a) The Indemnified Party shall deliver promptly to the Indemnifying
Party a written notice and demand for a defense or
indemnification, specifying the basis for the claim for defense
and/or indemnification, the nature of the claim,
D-10
<PAGE>
and, if known, the amount for which the Indemnified Party
reasonably believes it is entitled to be indemnified;
(b) The Indemnifying Party shall have 30 days from receipt of the
notice requesting indemnification within which to either (1)
assume the defense of such litigation or claim; (2) pay the claim
in immediately available funds; (3) reserve its rights pending
negotiations under Section 6.4; or (4) object in accordance with
Section 5.2. This 30 day period may be extended by express
agreement of the parties.
(c) However, if the amount for which the Indemnifying Party may be
liable is not known or reasonably determinable at the time of
such notice, the Indemnified Party shall deliver to the
Indemnifying Party a further notice specifying the amount for
which the Indemnified Party reasonably believes it is entitled to
be indemnified as soon as reasonably practicable after such
amount is known or reasonably determinable and the Indemnifying
Party shall have a further opportunity to take action as set
forth above. Nothing in this subparagraph shall be interpreted to
abrogate or delay an Indemnifying Party's obligation to provide
the other with a defense under this Agreement.
5.2 Waiver of Objection. The Indemnifying Party may object to the claim
-------------------
for defense and/or indemnification set forth in any notice; provided, however,
that if the Indemnifying Party does not give the Indemnified Party written
notice setting forth its objection to such claim (or the amount thereof) and the
grounds therefor within the same 30-day period (or any extended period), the
Indemnifying Party shall be deemed to have acknowledged its liability to provide
a defense or for the amount of such claim and the Indemnified Party may exercise
any and all of its rights under applicable law to collect such amount or obtain
such defense. Any objection to a claim for a defense or indemnification shall
be resolved in accordance with Section 8.
5.3 Insurance Coverage. The right to a defense or indemnification under
------------------
this Agreement applies only insofar as defense and indemnification are not
covered by insurance proceeds or the provision of legal defense received by a
party from its insurance carrier. Nevertheless, the potential availability of
insurance coverage to API or APW shall not relieve the other party of its
obligations for defense or indemnification hereunder, or delay either party's
obligation to the other to assume a defense or pay any sums due hereunder. Once
proceeds are received appropriate adjustments will be made under the Insurance
Matters Agreement, dated as of the date hereof, between API and APW, which
governs the rights and obligations of API and APW with respect to such
insurance.
6. Defense of Third-Party Claims.
6.1 Assumption of Third-Party Claims. If the Indemnified Party's claim
--------------------------------
for indemnification is based, under this Agreement, on a claim, demand,
investigation, action or proceeding, judicial or otherwise, brought by a third
party, and the Indemnifying Party does not object under Section 5.2 hereof, the
Indemnifying Party shall, within the 30-day period (or any extended period)
referred to
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<PAGE>
in Section 5 above, assume the defense of such third-party claim at its sole
cost and expense and shall thereafter be designated as the case handler. Any
such defense shall be conducted by attorneys employed by the Indemnifying Party.
The Indemnified Party may retain attorneys of its own choosing to participate in
such defense at the Indemnified Party's sole cost and expense.
6.2 Settlement of Third-Party Claims. If the Indemnifying Party assumes
--------------------------------
the defense of any such third-party claim, the Indemnifying Party may settle or
compromise the claim without the prior consent of the Indemnified Party so long
as all present and future claims against the Indemnified Party relating to such
third-party claim(s) are irrevocably and unconditionally released in full.
6.3 Indemnification After Settlement. The Indemnifying Party shall pay to
--------------------------------
the Indemnified Party in immediately available funds the amount for which the
Indemnified Party is entitled to be indemnified within 30 days after the
settlement or compromise of such third-party claim or the final unappealable
judgment of a court of competent jurisdiction (or within such longer period as
agreed to by the parties). If the Indemnifying Party does not assume the
defense of any such third-party claim, the Indemnifying Party shall be bound by
the result obtained with respect thereto by the Indemnified Party, except that
the Indemnifying Party has the right to contest that it is obligated to the
Indemnified Party under the terms of this Agreement, provided the Indemnifying
Party shall have raised its objections in a timely manner under Section 5.2.
6.4 Third-Party Joint Liability Claim. In the event a claim, demand,
---------------------------------
action or proceeding is brought by a third party in which the liability as
between API and APW is alleged to be joint or in which the entitlement to
indemnification hereunder is not readily determinable (or, if an objection, in
good faith, pursuant to Section 5.2 has been received), the parties shall
cooperate in a joint defense. Such joint defense shall be under the general
management and supervision of the party which is expected to bear the greater
share of the liability, as determined by representatives of API and APW, and
which will be considered the case handler, unless otherwise agreed, provided,
however, that neither party shall settle or compromise any such joint defense
matter without the consent of the other. The costs of such joint defense, any
settlement and any award or judgment (unless the award or judgment specifies
otherwise) shall be borne as the parties may agree or, in the absence of such
agreement, such costs shall be borne by the party incurring such costs, subject
to ultimate resolution between APW and API based upon all of the relevant facts
and circumstances pursuant to Section 8.
7. Cooperation and Preservation of Records.
7.1 General. APW and API shall cooperate with one another fully and in a
-------
timely manner in connection with the defense of any Pending Electronics Business
Litigation, Threatened Electronics Business Litigation, New Electronics Business
Litigation, Assumed Liabilities, Retained Liabilities or any other actual or
threatened claim, investigation, audit or administrative or judicial action or
proceeding brought or commenced by a third party (including any governmental
agency or authority) involving any matter affecting the potential liability of
API or APW, so long as API and APW are not directly adverse in a lawsuit between
each other in that specific matter.
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<PAGE>
7.2 Availability of Records. The cooperation required by this Section,
-----------------------
shall include, without limitation, making available to the other party during
such normal business hours and upon reasonable notice, appropriate books,
records and information ("Litigation Records"), officers and employees (without
substantial interruption of employment) necessary or useful in connection with
any accrued or actual or threatened claim, investigation, audit, action or
proceeding, so long as API and APW are not directly adverse in a lawsuit between
each other in that specific matter.
7.3 Retention of Records. Each party shall continue in force or, at the
--------------------
request of the other party, shall issue notices exempting from destruction at
the expiration of normal records retention periods any Litigation Records which
the requesting party represents may be necessary to the defense of, or required
to be produced in discovery in connection with, any claim, investigation, audit,
action or proceeding and shall refrain from destroying any Litigation Records
until authorized by the requesting party. The requesting party shall notify the
other party promptly when the Litiga tion Records are no longer required to be
maintained.
7.4 Cost of Access to Records. The party requesting access to Litigation
-------------------------
Records or officers and employees pursuant to Section 7.2 or preservation of
Litigation Records under Section 7.3 shall bear all reasonable out-of-pocket
expenses (except reimbursement of salaries, employee benefits and general
overhead) incurred in connection with providing such Litigation Records or
officers and employees.
7.5 Confidential or Proprietary Records. The party providing Litigation
-----------------------------------
Records under this Section 7 may elect, upon a reasonable basis and within a
reasonable time, to designate all or a portion of the Litigation Records as
confidential or proprietary. If Litigation Records are so designated, the party
receiving them will treat them as it would its own confidential or proprietary
information and will take all reasonable steps to protect and safeguard the
Litigation Records while in its own custody and will attempt to shield the
information contained in the Litigation Records from disclosure by motions to
quash, motions for a protective order, reduction or other appropriate actions.
8. Dispute Resolution.
8.1 General. In an effort to resolve informally and amicably any claim or
-------
controversy arising out of or related to the interpretation or performance of
this Agreement without resorting to litigation, a party shall first notify the
other of any difference or dispute hereunder that requires resolution. API and
APW each shall designate an employee to investigate, discuss and seek to settle
the matter between them. If the two are unable to settle the matter within 30
days after such notification (or such longer period as may be agreed upon), the
matter shall be submitted to a senior officer of API and APW, respectively, for
consideration.
8.2 Arbitration. If settlement cannot be reached through the efforts of
-----------
the senior officers within an additional 30 days or such longer period as may be
agreed upon, the parties shall consider arbitration or other alternative means
to resolve the dispute.
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<PAGE>
8.3 Legal Proceedings. If the parties are unable to agree on an
-----------------
alternative dispute resolution mechanism as set forth in Section 8.2, either
party may initiate legal proceedings to resolve such matter.
9. Notices.
9.1 General. All notices and communications required or permitted under
-------
this Agreement shall be in writing and any communication or delivery hereunder
shall be deemed to have been duly made if actually delivered, or if mailed by
first class mail, postage prepaid, or by air express service, with charges
prepaid and addressed as follows:
If to API: Applied Power Inc.
6101 N. Baker Road
Milwaukee, WI 53209
Attention: __________
If to APW: APW LTD.
N22 W23685 Ridgeview Parkway West
Waukesha, Wisconsin 53188-1013
Attention: __________
9.2 Change in Address. Either party may, by written notice so delivered
-----------------
to the other, change the address to which future delivery shall be made.
10. Amendment and Non-Waiver.
10.1 Written Amendment and Waiver. This Agreement may not be altered or
----------------------------
amended nor any rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with the amendment or waiver.
10.2 Limited Amendment or Waiver. No waiver of any term, provision or
---------------------------
condition of this Agreement or failure to exercise any right, power or remedy or
failure to enforce any provision of this Agreement, in any one or more
instances, shall be deemed to be a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition or enforcement right of this Agreement or deemed to be an impairment
of any right, power or remedy or acquiescence to any breach.
11. Miscellaneous.
11.1 Governing Law. This Agreement and the transactions contemplated hereby
-------------
shall be construed in accordance with and governed by the internal laws of the
State of Wisconsin.
11.2 Entire Agreement. The Contribution Documents constitute the entire
----------------
understanding of the parties hereto with respect to the subject matter hereof,
superseding all negotiations, prior
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<PAGE>
discussions and prior agreements and understandings relating to their subject
matter; provided, however, that the specific provisions of any other agreement
between the parties executed and delivered by the parties in connection with the
closing under the Contribution Agreement shall not be superseded by this
Agreement and to the extent any such other agreement is in conflict herewith,
such specific agreement shall control.
11.3 Parties In Interest. Neither party may assign its rights or delegate
-------------------
any of its duties under this Agreement without prior written consent of the
other. This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors and assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
third party any benefits, rights or remedies.
11.4 Effectiveness. This Agreement shall become effective at the Effective
-------------
Date and may be terminated by API at any time prior thereto without any
liability on API's part.
11.5 Reformation and Severability. If any provision of this Agreement shall
----------------------------
be held to be invalid, unenforceable or illegal in any jurisdiction under any
circumstances for any reason, (a) that provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal and preserve the original intent of the parties, or (b) if that provision
cannot be so reformed, it shall be severed from this Agreement. The holding
shall not affect or impair the validity, enforceability or legality of the
provision in any other jurisdiction or under any other circumstances. Neither
the holding nor the reformation or severance shall affect or impair the
legality, validity or enforceability of any other provision of this Agreement to
the extent that the other provision is not itself actually in conflict with any
applicable law.
11.6 Titles and Headings. All titles and headings have been inserted solely
-------------------
for the convenience of the parties and are not intended to be a part of this
Agreement or to affect its meaning or interpretation.
11.7 Counterparts. This Agreement, and any other agreement to be executed
------------
in connection herewith, may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
D-15
<PAGE>
IN WITNESS WHEREOF the Parties have caused this Agreement to be executed by
their duly authorized officers as of this _____ day of __________, 2000.
APPLIED POWER INC.
By: _________________________________________
President and Chief Executive Officer
APW LTD.
By: _________________________________________
President and Chief Executive Officer
D-16
<PAGE>
Exhibit 10.4
EXHIBIT E
TRANSITIONAL TRADEMARK USE AND LICENSE AGREEMENT
This Agreement dated __________, 2000, is made by and between APPLIED POWER
INC., a Wisconsin corporation with its principal place of business at 6101 N.
Baker Road, Milwaukee, WI 53209 ("API"), and APW LTD., a Bermuda corporation
with its principal place of business at N22 W23685 Ridgeview Parkway West,
Waukesha, Wisconsin 53188-1013 ("APW").
1. Definitions for this Agreement:
(a) "APW" means APW and its subsidiaries (including successors) after
the contemplated restructuring as listed on Schedule 1 attached
hereto operating its electronics business.
(b) "Contribution Agreement" means the Contribution Agreement, Plan
and Agreement of Reorganization and Distribution, dated
__________, 2000, between API and APW.
(c) "Inventory Products" means the products produced by API and/or
its subsidiaries and transferred to APW under the Contribution
Agreement and that bear the Trademarks or labels that bear the
Trademarks or that are packaged in packaging that bears the
Trademarks, whether such labels are affixed or the
<PAGE>
products are packaged in such packaging before or after such
transfer.
(d) "Inventory Materials" means the promotional materials, product
literature, and other similar materials bearing the Trademarks
produced by API and/or its subsidiaries and transferred to APW
under the Contribution Agreement, but excludes labels and product
packaging bearing the Trademarks, if any, transferred to APW.
(e) "Trademarks" means the trademarks, logos, trade dress or other
trade designations of API listed on Schedule 2, or any one or
more of same.
(f) "APW Materials" means those APW advertising and promotional
materials that use the Trademarks as permitted by paragraph 3 of
this Agreement.
2. Transitional Use Trademarks on Inventory Materials and Inventory
Products. API and APW recognize that APW possesses Inventory Materials and
Inventory Products. APW shall have the right and license to sell the Inventory
Products until June 30, 2004. APW shall have the right and license to use the
Inventory Materials in connection with the sale of Inventory Products until the
Inventory Materials are exhausted or until August 31, 2001, whichever occurs
first. APW shall not make any claims for or
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<PAGE>
about the Inventory Products that have not been approved in advance by API or
were not made prior to August 31, 2000.
3. Transitional Trademark and Trade Name License. Solely for the purpose
of enabling APW to inform its customers of its new identity and to make a
transition from the Trademarks to APW's own trademarks and trade identity, API
grants to APW, for a period of nine (9) months from the date of the Agreement, a
royalty free, nontransferable, and nonexclusive license to use the Trademarks in
APW's advertising and promotional materials, subject to the quality control
provision of paragraph 4 of this Agreement.
4. Quality Control. APW shall distribute and sell the Inventory Products
and shall distribute the Inventory Materials without any change in their nature
or quality from that existing at the time of transfer under the Contribution
Agreement, except that, for any such products not bearing the Trademarks or not
packaged in packaging bearing the Trademarks at the time of transfer but for
which API has transferred to APW labels or packaging bearing the Trademarks, APW
can affix said labels to such products or package same in such packaging. The
use of the Trademarks on APW Materials shall be consistent with API's use
thereof prior to the transfer under the Contribution Agreement and shall be in
appearance and quality reasonably satisfactory to
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<PAGE>
API. APW shall not use the Inventory Materials or sell the Inventory Products
with any other labels, packaging, trademarks or trade dress other than those
explicitly permitted by this Agreement. API shall have the right, on reasonable
notice, to inspect the Inventory Products, the Inventory Materials, and the APW
Materials and obtain representative samples for inspection for quality control.
5. Use of APW Trademarks on Transferred Products. To the extent API
transfers to APW under the Contribution Agreement products that do not bear the
Trademarks and do not bear any other API trademark or trade designation, APW may
mark said products with its own trademarks or package said products in packaging
that bears APW's trademarks, but in that case APW shall not sell said products
using the Inventory Materials.
6. Limitations. No license or rights under any other trademark, trade
name, trade dress, trade designation or any other property right of API is
granted by this Agreement. APW has no right to assign, transfer or sublicense
any of its rights acquired or obligations assumed under this Agreement. Any
such attempted assignment, transfer or sublicense shall be void. APW shall not
use or permit the use of any trademarks or trade dress that are confusingly
similar to the Trademarks. APW will promptly notify API of any conflicting use
of or acts of
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<PAGE>
infringement concerning the Trademarks and will cooperate as API reasonably may
deem advisable to protect API's rights.
7. Ownership of Trademarks. APW acknowledges that API is the owner of and
has acquired substantial goodwill in the Trademarks and agrees that every use
thereof in connection with the Inventory Products and Inventory Materials shall
inure solely to the benefit of API. Upon API's request, APW shall place on APW
Materials reasonable notices of such ownership. APW shall not dispute or assist
in disputing directly or indirectly API's rights in the Trademarks.
8. API Warranty. API warrants that it has full power to make this
Agreement and to grant the rights as provided herein and that it has no actual
knowledge that the Trademarks violate the valid rights of any third party. API
agrees to indemnify and defend APW against any claims of third parties (and to
pay any damages and attorneys' fees awarded) based on a breach of the foregoing
express warranty. The parties agree to generally utilize the notice and payment
provisions and defense of third-party claims as set forth in Article V and VI of
the General Assignment, Assumption and Agreement Regarding Litigation, Claims
and Other Liabilities, dated __________, 2000 (hereinafter the "General
Assignment").
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<PAGE>
9. Product Liability Claims. APW shall comply with all laws and
regulations applicable to the sale and distribution of Inventory Products. APW
will defend, indemnify and hold API harmless against all loss, expense, and
damage occasioned by any claim, action or recovery (including all personal
injury and product liability claims) by any party (including any government
agency) against API arising out of any sale, distribution, or use of the
Inventory Products both during and after expiration or termination of this
Agreement, except for those claims based on the breach of the API warranty of
paragraph 8 of this Agreement. To the extent not inconsistent with the
foregoing, the parties agree to generally utilize the notice and payment
provisions and defense of third-party claims as set forth in Article V and VI of
the General Assignment.
10. Termination. Either party may terminate this Agreement upon written
notice to the other party with cause for any material breach of this Agreement
by the other party, unless within a period of thirty days after written notice
the other party remedies the breach in all material respects. This Agreement
will terminate automatically (to the extent permitted by law at the time) in the
event APW files a petition in bankruptcy, becomes insolvent, makes an assignment
for the benefit of creditors or an arrangement pursuant to any bankruptcy
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<PAGE>
law, discontinues its business or has a receiver appointed for it.
11. Post Termination/Expiration Rights. Upon expiration or termination,
all rights of APW under this Agreement will cease and immediately revert to API,
and APW will destroy all Inventory Materials and all products, labels,
packaging, and promotional and other material in its possession that bear the
Trademarks. APW shall discontinue and use its best efforts to require its
distributors to discontinue forthwith the use of any Inventory Materials and the
Trademarks and any and all products, packaging, advertising and promotional
materials using and/or making reference in any manner to the Trademarks.
12. Survival of Terms. The parties' obligations under paragraphs 6, 7, 8,
9, 11, and 12 of this Agreement shall survive expiration or termination of this
Agreement and they shall not be relieved of any of their continuing obligations
thereunder.
13. Miscellaneous.
This Agreement shall be construed in accordance with the internal laws
of the State of Wisconsin.
The parties intend to enter into a license agreement only and this
Agreement shall not in any way be deemed to
E-7
<PAGE>
establish any other relationship between them. APW agrees that it does not have
the authority and will not directly or indirectly contract any obligations of
any kind in the name of or chargeable against API or agents or employees of API.
This Agreement supersedes all prior and contemporaneous agreements
between the parties in connection with the matters set forth herein and may only
be amended in a writing signed by both parties.
14. Notices. All demands, notices and communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
personally delivered or sent by certified or registered United States Mail,
postage prepaid, to:
(a) in the case of API:
Applied Power Inc.
6101 N. Baker Road
Milwaukee, WI 53209
Attention: __________
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<PAGE>
(b) in the case of APW:
APW LTD.
N22 W23685 Ridgeview Parkway West
Waukesha, Wisconsin 53188-1013
Attention: __________
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written by their duly authorized officers.
APPLIED POWER INC.
By:__________________________________
President and Chief Executive Officer
APW LTD.
By:__________________________________
President and Chief Executive Officer
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<PAGE>
Exhibit 10.5
EXHIBIT F
INSURANCE MATTERS
This Agreement, dated as of __________, 2000, between APPLIED POWER INC., a
Wisconsin corporation, with offices at 6101 N. Baker Road, Milwaukee, WI 53209
("API"), and APW LTD., a Bermuda corporation, with offices at N22 W23685
Ridgeview Parkway West, Waukesha, Wisconsin 53188-1013 ("APW"), shall govern the
rights and obligations of API and APW with respect to various pre-existing
contracts insuring API and its subsidiaries and covering risks associated with,
or arising out of, the assets, business or operations of the electronics and
enclosure business (the "Electronics Business") of the corporations and other
entities listed on Schedule 1 hereto, as described in the General Assignment,
Assumption and Agreement Regarding Litigation, Claims and Other Liabilities of
even date herewith between the parties (the "Assignment Agreement"). The term
"API" when used in this Agreement means Applied Power Inc. and its subsidiaries,
excluding the Electronics Business. The term "APW" when used in this agreement
means APW and its subsidiaries listed on Schedule 1, which generally constitute
the Electronics Business. After the spin-off described below, API will own and
operate its industrial business.
WHEREAS, API has transferred to APW, effective as of __________, 2000 (the
"Effective Date"), certain API assets related to API's worldwide electronics,
enclosure and related products business conducted by the Electronics Business in
accordance with the terms of the Contribution Agreement, Plan and Agreement of
Reorganization and Distribution (the "Contribution Agreement") of even date
herewith, including, without limitation, the development, production,
manufacture, marketing, use, storage, distribution, disposal and sale of certain
electronics and enclosure and related products and the various real property
assets used in the business (all of which shall be referred to collectively as
the "Electronics Business.")
WHEREAS, prior to the transfer, API obtained various policies of insurance,
listed on Exhibit 1.2 hereto (the "Policies"), covering, among other things,
risks associated with, or arising out of, the assets, business or operations of
the Electronics Business.
WHEREAS, the Policies may provide coverage in a number of areas, including,
without limitation: automobile liability; comprehensive and general liability;
employer's liability; fiduciary liability, directors and officers liability and
excess liability; including liabilities under the owner controlled insurance
program.
WHEREAS, without relinquishing its rights as an owner of, and insured
under, the Policies, API now wishes to permit APW to share certain of API's
benefits, and APW wishes to assume certain of API's responsibilities, under the
Policies.
<PAGE>
NOW THEREFORE, in consideration of the mutual promises contained in this
document, the parties agree that:
1. Insurance Coverage.
1.1. API shall continue at all times as owner of, and beneficiary
under, the Policies, and this Agreement shall not be considered as an attempted
assignment of the Policies or as a contract of insurance.
1.2. The Policies which are listed on related Exhibit 1.2 were
obtained by API at various times prior to the date of this Agreement and may
cover risks associated with, or arising out of, the Electronics Business. API
does not warrant that related Exhibit 1.2 contains or will contain an accurate
or complete list of the insurance potentially available to cover the Electronics
Business, and states only that it has compiled the list to the best of its
abilities based on currently available information. API shall have no
obligation to undertake any further search of its records, or the records of any
third parties, to seek additional policies or information about policies not
found on the exhibit. However, each party agrees that it will share with the
other any information it gathers about additional policies, and that such
additional policies which are found potentially to provide coverage for risks
associated with the Electronics Business shall be subject to the provisions of
this Agreement as if listed on related Exhibit 1.2 and shall be deemed within
the definition of Policies.
1.3. API does not warrant that the Policies or any other policies of
insurance provide any coverage to APW or API generally, or with respect to any
particular risk.
1.4. With respect to coverages after the Effective Date, API shall
have no obligation to continue in force the Policies or any other policy of
insurance and may cease to continue in force any policy of insurance without
notice to APW and API will be entitled to receive any refund of proceeds or
policy premium thereof. After the Effective Date, APW shall be solely
responsible for obtaining and maintaining all policies of insurance covering its
business and other activities after such date.
2. Pending Insured Litigation.
2.1. APW has compiled Exhibit 2.1 which contains a list of the
litigation, if any, allegedly associated with, or arising out of, the
Electronics Business prior to the date of this Agreement for which APW believes
there may be insurance coverage under the Policies. This litigation together
with all threatened litigation and claims arising out of the Electronics
Business shall be referred to as "Pending Insured Litigation." APW does not
warrant that this exhibit will contain an accurate or complete list of the
Pending Insured Litigation, and states only that it has compiled and will
compile the list to the best of its abilities based on currently available
information. Additional litigation and threatened litigation determined by APW
at a later date as having been omitted from the exhibit shall be subject to this
Agreement as if listed on the exhibit and shall be deemed included within the
definition of litigation or threatened litigation.
F-2
<PAGE>
2.2. With respect to Pending Insured Litigation, API states to the
best of its knowledge that all appropriate insurance carriers have been or will
be placed on notice in a timely fashion, as or if required by the terms of the
Policies.
3. New Insured Litigation.
3.1. The parties acknowledge that after the Effective Date there may
be further litigation or other claims made, filed, commenced or threatened
against APW or API allegedly associated with, or arising out of, the Electronics
Business ("New Insured Litigation").
3.2. APW shall notify API of any New Insured Litigation which may be
covered under API's insurance policies and Mr. Andrew Lampereur, an API
employee, shall be responsible for notifying any appropriate insurance carriers.
3.3. Except as provided in Paragraph 3.2 above, APW shall be solely
responsible for notifying all appropriate insurance carriers providing coverage
to APW or for the activities and operations of the Electronics Business, if any,
regarding New Insured Litigation and all other litigation and claims, except in
cases where the insurance carriers have refused in writing to deal directly with
APW, in which case APW shall promptly notify API. APW shall notify API of any
litigation and claims APW has submitted to API's insurers. APW also shall
notify API promptly if it appears that New Insured Litigation may involve the
assets, business or operations of API.
4. Case Handling and Cooperation.
4.1. APW agrees that it shall notify, report to, and cooperate fully
with the insurance carriers and API with respect to Pending Insured Litigation
and New Insured Litigation as though APW were the named insured under the
policies of insurance.
4.2. The parties acknowledge that APW has been designated the case
handler for all Pending Insured Litigation and, likewise, may be designated by
API as the case handler for all New Insured Litigation, under the terms of the
Assignment Agreement.
4.3. API will notify the insurance carriers issuing the Policies of
the terms of this Agreement and the Contribution Agreement and the Assignment
Agreement and will request that the insurance carriers deal directly with APW,
as case handler regarding the management of any Pending Insured Litigation and
any New Insured Litigation.
4.4. In the event that an insurance carrier shall refuse or fail to
deal directly with APW, APW shall continue as case handler and API shall provide
reasonable support to APW in communicating with the insurance carrier.
4.5. In the event APW wishes to commence an action against an
insurance carrier for failure to provide defense or indemnification for Pending
Insured Litigation or New Insured Litigation under one or more of the Policies,
it shall not do so without informing API. After notice
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<PAGE>
APW may prosecute such an action in the name of API, in which case APW shall
bear all expenses of the litigation and shall hold API harmless from any costs
of such litigation, including without limitation fees, expenses, charges, awards
of any type or judgments which may be assessed against API. API's consent to the
prosecution of such an action will not be withheld or delayed unreasonably.
5. Payment of Costs and Proceeds.
5.1. To the extent that an insurance carrier pays API for all or any
portion of the costs of defense of, or pays all or any portion of the amounts in
settlement of, or in satisfaction of a judgment for, Pending Insured Litigation
or New Insured Litigation, for which APW provided API with defense and
indemnification as required by the Assignment Agreement, API shall pay over (or
cause such sums to be paid over) to APW or for its benefit such sums in excess
of API's own reasonable expenses and costs within thirty days of their receipt.
5.2. If APW fails to defend and indemnify API for a Pending Insured
Litigation matter or New Insured Litigation matter as required under the
Assignment Agreement, API shall have no obligation to pay over to APW any
portion of the payments received with respect to that matter from the insurance
carriers; however, receipt of such payments by API shall not relieve APW of its
obligations to defend or indemnify API to the extent such proceeds are
insufficient to meet APW's obligations.
5.3. It is understood between the parties that APW's obligation to
defend, indemnify, save and hold harmless API under the Assignment Agreement
shall arise at a time specified in that Agreement which will often be prior to
the time insurance proceeds will be available. Furthermore, it is agreed that,
ultimately, the right to a defense and indemnification under the Assignment
Agreement applies only insofar as it is not covered by insurance. Therefore,
the parties acknowledge that APW's obligation to provide a defense and
indemnification under the Assignment Agreement shall not be delayed pending the
results of any claims made under insurance policies and that API and APW shall
account between themselves at the conclusion of a matter if any financial
adjustments are required due to the receipt of such proceeds.
5.4. To the extent a non-claim specific deductible applies, the
parties agree that the deductible will be allocated proportionately among APW
and API based upon the total amount claimed by each party in any respective
insurance period.
6. Dispute Resolution.
6.1. In an effort to resolve informally and amicably any claim or
controversy arising out of or related to the interpretation or performance of
this Agreement without resorting to litigation, a party shall first notify the
other of any difference or dispute under this Agreement that requires
resolution. API and APW each shall designate an employee to investigate,
discuss and seek to settle the matter between them. If the two are unable to
settle the matter within 30 days after
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<PAGE>
notification (or such longer period as may be agreed to expressly by the
parties), the matter shall be submitted to a senior officer of API and APW,
respectively, for consideration.
6.2. If settlement cannot be reached through the efforts of the
senior officers within an additional 30 days, or such longer time period as they
shall agree upon, the parties shall consider mediation, arbitration or other
alternative means to resolve the dispute. If they are unable to agree on an
alternative dispute resolution mechanism, either party may initiate legal
proceedings to resolve the matter.
7. Notices.
7.1. All notices and communications required or permitted under this
Agreement shall be in writing and any communication or delivery of them shall be
deemed to have been duly made if actually delivered, or if mailed by first class
or certified mail, postage prepaid, or by air express service, with charges
prepaid. Except for notices to insurance carriers under Section 3.2 and 3.3 and
for bills and payments under Section 6 of this Agreement, all notices and
communications shall be addressed as follows:
If to API: APPLIED POWER INC.
6101 N. Baker Road
Milwaukee, WI 53209
Attention: __________
If to APW: APW LTD.
N22 W23685 Ridgeview Parkway West
Waukesha, Wisconsin 53188-1013
Attention: __________
7.2. Either party may by written notice so delivered to the other,
change the address to which future delivery shall be made.
8. Amendment and Non-Waiver.
8.1. This Agreement may not be altered or amended, nor any rights
hereunder be waived, except by an instrument in writing executed by the party or
parties to be charged with such amendment or waiver.
8.2. No waiver of any term, provision or condition of this Agreement
or failure to exercise any right, power or remedy or failure to enforce any
provision of this Agreement, in any one or more instances, shall be deemed to be
a further or continuing waiver of any such term, provision or condition or as a
waiver of any other term, provision or condition or enforcement right of this
Agreement or deemed to be an impairment of any right, power or remedy or
acquiescence to any breach.
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<PAGE>
9. Miscellaneous.
9.1. Governing Law. This Agreement and the transactions it
contemplates shall be construed in accordance with, and governed by, the
internal laws of the State of Wisconsin.
9.2. Entire Agreement. This Agreement and the Contribution Agreement
and the other agreements executed and delivered thereunder constitute the entire
understanding of the parties with respect to their subject, superseding all
negotiations, prior discussions and prior agreements and understandings relating
to such subject matter.
9.3. Parties In Interest. Neither party may assign its rights or
delegate any of its duties under this Agreement without prior written consent of
the other. This Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective successors and assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
third party any benefits, rights or remedies.
9.4. Reformation and Severability. If any provision of this
Agreement shall be held to be invalid, unenforceable or illegal in any
jurisdiction under any circumstances for any reason, (i) such provision shall be
reformed to the minimum extent necessary to cause such provision to be valid,
enforceable and legal and preserve the original intent of the parties, or (ii)
if such a provision cannot be reformed, such provision shall be severed from
this Agreement. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other circumstances. Neither such holding nor such reformation or severance
shall affect or impair the legality, validity or enforceability of any other
provision of this Agreement to the extent that such other provision is not
itself actually in conflict with any applicable law.
9.5. Titles and Headings. All titles and headings have been inserted
solely for the convenience of the parties and are not intended to be a part of
this Agreement or to affect its meaning or interpretation.
9.6 Conflict. In the event of conflict between this Agreement and
the Contribution Agreement or any agreement, schedule, exhibit, or annex
thereto, this Agreement, to the extent any part specifically covers a matter,
shall control; provided that any specific matters covered in the Employee
Benefits and Compensation Agreement, dated __________, 2000 will control over
any conflicting provisions of this Agreement.
F-6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of this _____ day of __________, 2000.
APPLIED POWER INC.
By: _____________________________________
President and Chief Executive Officer
APW LTD.
By: _____________________________________
President and Chief Executive Officer
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<PAGE>
Exhibit 10.6
EXHIBIT G
BILL OF SALE AND ASSUMPTION OF LIABILITIES
THIS BILL OF SALE AND ASSUMPTION OF LIABILITIES is made as of this _____
day of __________, 2000 by APPLIED POWER INC. ("API"), a Wisconsin corporation,
with its principal place of business at 6101 N. Baker Road, Milwaukee, Wisconsin
53209, and APW LTD., ("APW"), a Bermuda corporation with its principal place of
business at N22 W23685 Ridgeview Parkway West, Waukesha, Wisconsin 53188-1013.
RECITALS
WHEREAS, API and APW are parties to a Contribution Agreement, Plan and
Agreement of Reorganization and Distribution, including its exhibits, schedules,
instruments and conveyances attached or referenced thereto or incorporated
therein (collectively, the "Contribution Agreement") dated as of __________,
2000; and
WHEREAS, API desires to sell and assign to APW, and APW wishes to purchase
and accept from API, for the consideration and upon the terms and conditions set
forth in the Contribution Agreement, certain of the assets, properties and
rights of API, and APW wishes to assume certain of the liabilities and
obligations of API;
NOW, THEREFORE, pursuant to the Contribution Agreement and in consideration
of the foregoing, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed that:
1. Conveyance. API does hereby sell, assign, convey, and deliver to APW
----------
all of API's right, title and interest in and to the assets and the liabilities
and obligations as set forth in the Contribution Agreement.
2. Acceptance and Assumption. APW hereby accepts the foregoing sale,
-------------------------
assignment and conveyance. APW hereby assumes and agrees to pay, perform in
accordance with the terms of and be bound by, all of the covenants, terms and
obligations thereof.
3. Power of Attorney. Subject to the provisions of the Contribution
-----------------
Agreement, API hereby constitutes and appoints APW, its successors or assigns,
the true and lawful attorney of API with full power of substitution, for the
benefit and at the expense of APW: (a) to institute and prosecute all
proceedings which APW may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to any of the conveyed assets and
liabilities, to defend or compromise any and all actions, suits and proceedings
in respect of any of the conveyed assets and liabilities, and to do all such
acts and things in relation thereto as APW shall deem advisable; and (b) to take
all action which APW may deem proper in order to provide APW the benefits or
obligations under any
<PAGE>
of the conveyed assets or liabilities where any required consent of another
party to the assignment thereof to APW pursuant to the Contribution Agreement
shall not have been obtained. API acknowledges that the foregoing powers are
coupled with an interest and shall be irrevocable by API in any manner or for
any reason. APW shall be entitled to retain for its own account any amounts
collected pursuant to the foregoing powers, including any amounts payable as
interest in respect thereto.
4. Rights. Nothing contained in this Bill of Sale and Assumption of
------
Liabilities shall be deemed to supersede, enlarge, diminish or otherwise modify
any of the obligations, agreements, covenants or warranties of API or APW
contained in the Contribution Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Bill of Sale and
Assumption of Liabilities to be executed by their duly authorized officers this
_____ day of __________, 2000.
APPLIED POWER INC.
By: _____________________________________
President and Chief Executive Officer
APW LTD.
By: _____________________________________
President and Chief Executive Officer
STATE OF WISCONSIN )
) ss.
COUNTY OF WAUKESHA )
The foregoing instrument was acknowledged before me this _____ day of
__________, 2000.
________________________________________
Notary Public, Waukesha County
State of Wisconsin
My commission expires __________________.
(NOTARY SEAL)
<PAGE>
Exhibit 10.7
EXHIBIT H
---------
EMPLOYEE BENEFITS AND COMPENSATION AGREEMENT
Between
APPLIED POWER INC.
and
APW LTD.
Dated __________, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
EMPLOYEE BENEFITS AND COMPENSATION........................................ 1
RECITALS.................................................................. 1
ARTICLE I - Additional Definitions........................................ 2
ARTICLE II - Identification of Benefit Plans.............................. 3
ARTICLE III - Employees and Employee Benefits............................. 3
3.1 Employees............................................................ 3
3.2 Allocation of Benefit Payment Responsibility......................... 4
3.3 APW to Indemnify API................................................. 5
3.4 Retirees............................................................. 5
3.5 COBRA................................................................ 5
3.6 Personnel and Medical Records........................................ 6
3.7 International Retirement Plan........................................ 6
ARTICLE IV - Savings Plan Spinoff......................................... 6
4.1 Spinoff.............................................................. 6
ARTICLE V - Deferred Compensation Benefits................................ 7
ARTICLE VI - Dispute Resolution........................................... 7
6.1 General.............................................................. 7
6.2 Arbitration.......................................................... 7
6.3 Legal Proceedings.................................................... 7
ARTICLE VII - Notices..................................................... 7
7.1 General.............................................................. 7
7.2 Change in Address.................................................... 8
ARTICLE VIII - Written Amendment and Non-Waiver........................... 8
8.1 Written Amendment and Waiver......................................... 8
8.2 Limited Amendment or Waiver.......................................... 8
ARTICLE IX - Miscellaneous................................................ 8
9.1 Governing Law........................................................ 8
9.2 Entire Agreement..................................................... 8
9.3 Parties In Interest.................................................. 9
9.4 Effectiveness........................................................ 9
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9.5 Reformation and Severability......................................... 9
9.6 Titles and Headings.................................................. 9
9.7 No Reliance.......................................................... 9
</TABLE>
<PAGE>
EMPLOYEE BENEFITS AND COMPENSATION
This Agreement dated as of __________, 2000 between APPLIED POWER INC., a
Wisconsin corporation with offices at 6101 N. Baker Road, Milwaukee, Wisconsin
53209 ("API"), and APW LTD., a Bermuda corporation with offices at N22 W23685
Ridgeview Parkway West, Waukesha, Wisconsin 53188-1013 ("APW"), shall govern the
rights and obligations of API and its subsidiaries listed on Schedule 1 and APW
and its subsidiaries listed on Schedule 2 with respect to the employees
(including their compensation and benefits) in connection with the transactions
effected by the Contribution Agreement as defined below. The term "API" when
used in this Agreement shall not be construed to include APW and its
subsidiaries where such construction would have the effect of negating any
obligation of APW and its subsidiaries or API and its subsidiaries hereunder.
The term APW when used shall not be construed to include API and its
subsidiaries where such construction would have the effect of negating any
obligation of API and its subsidiaries (exclusive of APW and its subsidiaries)
or APW and its subsidiaries hereunder. After the spin-off (described below),
API will continue to own and operate its industrial business.
RECITALS
WHEREAS, API hereby and by certain other instruments of even date herewith
transfers or will transfer to APW effective as of 12:01 a.m., Central Standard
Time, __________, 2000 or such other date as specified in the Contribution
Agreement, Plan and Agreement of Reorganization and Distribution ("Contribution
Agreement") dated as of __________, 2000 as the effective date ("Effective
Date"), those assets of API related to API's electronics and related enclosure
products as conducted by those businesses listed on Schedule 2 in accordance
with the Contribution Agreement between the parties, and including, without
limitation, assets associated with the past, present and future development,
production, manufacture, marketing, use, storage, distribution, disposal and
sale of certain enclosures and related products manufactured by the electronics
solutions business throughout the world and certain API corporate assets.
WHEREAS, the assets, business and operations formerly and currently used
and conducted by the Electronics Business are herein referred to collectively as
the "Electronics Business."
WHEREAS, the parties hereto intend, by this Agreement and the other
agreements and instruments provided for in the Contribution Agreement, to convey
to APW substantially all of the business and assets of the Electronics Business.
NOW THEREFORE, in consideration of the premises and the mutual promises
contained in this Agreement, the Contribution Agreement and in the other
agreements and instruments provided for in the Contribution Agreement, the
parties hereto agree as follows:
H-1
<PAGE>
ARTICLE I
Additional Definitions
----------------------
"Active Electronics Business Employees" means employees of API and its
subsidiaries who are actively working for the Electronics Business immediately
prior to the Effective Date, including those employees listed on Exhibit H-1.
"Benefit Plans" means, collectively, all Pension Plans, Welfare Plans and
Other Benefit Plans maintained by API and its subsidiaries and covering
Electronics Business Employees or their dependents or beneficiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Hired Electronics Business Employees" means all Active Electronics
Business Employees and Inactive Electronics Business Employees described in
Section 3.1(a).
"Inactive Electronics Business Employees" means employees of API and its
subsidiaries who would have been Active Electronics Business Employees except
that they are not actively working for the Electronics Business immediately
prior to the Effective Date solely by reason of vacation, sick leave, family or
medical leave, military leave, short-term disability leave, long-term disability
leave, leave compensated by workers' compensation or other leave of absence or
layoff or strike, but excluding persons for whom the employment relationship has
been finally terminated whether by retirement, discharge, quit or death, and
excluding persons who prior to the Effective Date have, pursuant to procedures
established by API and its subsidiaries, elected to transfer to employment with
API and its subsidiaries other than Electronics Business employment.
"Other Benefit Plans" means any written or oral plan, contract or other
arrangement of benefits or advantage to any group of employees, including
without limitation bonus, profit sharing, deferred compensation, stock purchase,
stock option, severance plan, salary continuation, vacation, sick leave, fringe
benefit, incentive, insurance, training program, apprenticeship program, welfare
or similar arrangement (other than a Pension Plan or Welfare Plan) maintained by
API and covering Electronics Business Employees or their beneficiaries or
dependents.
"Pension Plan" means any employee pension benefit plan, as defined in
Section 3(2) of ERISA, maintained by API and covering Electronics Business
Employees or their beneficiaries.
"Welfare Plan" means any employee welfare benefit plan, as defined in
Section 3(1) of ERISA, maintained by API and covering Electronics Business
Employees or dependents or beneficiaries of Electronics Business Employees.
H-2
<PAGE>
ARTICLE II
Identification of Benefit Plans
-------------------------------
Schedule H-2 sets forth a list of the Benefit Plans maintained by API and
its subsidiaries with respect to Electronics Business Employees. APW
acknowledges that it has been furnished with descriptions of all Benefit Plans
described on Schedule H-2. In the event another benefit plan is offered to
Hired Electronics Business Employees which is not listed on Schedule H-2, the
parties agree to allocate financial responsibility between themselves consistent
with the approach taken for similar benefits listed under Schedule H-2. The
parties agree to resolve any disputes in accordance with the procedures set
forth at Article VI.
The parties agree that all matters concerning the Worker's Compensation
Plans listed on Schedule H-2, will be treated as set forth in the General
Assignment, Assumption and Agreement regarding Litigation, Claims and Other
Liabilities, dated __________, 2000 ("Exhibit D").
The parties further agree that all matters concerning the API stock option
plan will be governed by the Release and Settlement Agreement, dated __________,
2000 by and among the employees listed on Schedule H-3.
ARTICLE III
Employees and Employee Benefits
-------------------------------
3.1 Employees. (a) As of the Effective Date, APW shall offer employment
---------
to all persons who are Active Electronics Business Employees. APW shall on the
Effective Date assume the employment responsibilities for each Inactive
Electronics Business Employee and shall offer to return each such employee to a
position with job responsibilities comparable to such employee's prior position
of employment in the Electronics Business if such position is available or if
required by law, or otherwise to any other open position for which such employee
is qualified.
(b) All Electronics Business Employees (and their dependents and
beneficiaries) shall be provided compensation and benefits by APW comparable to
compensation and benefits being provided to them by API immediately prior to the
Effective Date.
(c) Hired Electronics Business Employees shall be given credit for API
service under APW's benefit plans.
(d) (i) API, in good faith, will calculate the estimated liability amount
related to unpaid and accrued vacation and sick day expense earned for the
period __________, _____ through __________, 2000 for those employees listed on
Schedule H-1. By __________, 2000, API will remit to APW cash equal to 1.0765
times this liability amount. This remitted amount will be in addition to the
cash APW receives pursuant to Section 1.1 of Exhibit D.
H-3
<PAGE>
(ii) APW hereby assumes any and all obligations owed under the API
bonus plan to the Hired Electronics Business Employees listed on Schedule H-1.
API will calculate the liability amount related to the Bonus Plan, utilizing its
unaudited accounting records, (including APW's results from September 1, 1999
through __________, _____) for the fiscal period ending August 31, 2000 assuming
100% of the target amounts met for the Bonus Plan. After calculating this
liability, API will prorate the amounts owed to reflect the fact that the
Electronics Business' operations were owned for only part of its 2000 fiscal
year. For purposes of prorating this liability, API and APW will assume ____
and ____, respectively, of this liability. By _____________, 2000 API will
remit cash to APW equal to 1.0765 times API's liability amount.
(iii) APW will assume all liability related to Hired Electronics
Business Employees' payroll taxes listed on Schedule H-1. APW will remit the
payroll taxes to the appropriate regulatory authorities. API will not be
responsible for any of the payroll taxes relating to Hired Electronics Business
Employees.
(iv) APW hereby assumes the obligation to pay any and all benefits
accrued by Hired Electronics Business Employees under the non-qualified
executive deferred compensation plan and the stock deferral plan. On
__________, 2000 API will remit cash to APW in the amount of $__________ in
consideration of its assumption of this liability.
(v) Any disputes concerning the calculation of the liability will be
resolved by the dispute resolution provisions of this Agreement.
(e) Both before and after the Effective Date, API and APW shall coordinate
with each other and shall take all actions necessary to effect the smooth
transfer of Hired Electronics Business Employees and continuing benefit coverage
and administration.
3.2 Allocation of Benefit Payment Responsibility. Except as provided in
--------------------------------------------
this Agreement, APW is not assuming any benefit or compensation program
maintained by API and API is not assigning any such program to APW. APW's
obligations with respect to such benefit and compensation programs shall be as
described therein. As to all other Benefit Plans, from and after the Effective
Date APW shall provide Hired Electronics Business Employees with all benefits
and payments which would have been provided to them under the Benefit Plans
(other than stock option or stock purchase plans) with respect to claims for
benefits incurred prior to the Effective Date so long as API would not
ordinarily have paid such benefits in accordance with its ordinary benefit
payment practices prior to the Effective Date. However, notwithstanding the
foregoing, with respect to (a) health benefits, (b) dental benefits, (c) vision
benefits, (d) life insurance, (e) travel accident insurance and (f) such other
benefits for which an insurance carrier or some party other than API is
responsible, API shall remain responsible, subject to and in accordance with the
terms of the applicable Benefits Plan, for all claims incurred by Hired
Electronics Business Employees prior to the Effective Date even if such claims
are not filed until after the Effective Date. Further, if any Hired Electronics
Business Employee or dependent is not actively at work by reason of
hospitalization on the Effective Date, API shall retain responsibility for the
payment of health care
H-4
<PAGE>
claims until the end of such hospitalization, subject to and in accordance with
the terms and conditions of the applicable health benefits plan as in effect on
the Effective Date.
3.3 APW to Indemnify API. APW shall indemnify, hold harmless and defend
--------------------
API from and against any damages, claims (including, but not limited to, unfair
labor practice claims), liabilities, obligations, costs of defense (including
attorney fees), expenses, fines, levies, assessments, charges, penalties,
damages, settlements or awards asserted against API associated with Benefit
Plans or compensation applicable to Hired Electronics Business Employees
(including dependents or beneficiaries, if any) except to the extent liability
has been specifically retained by API in this Agreement, provided that APW's
obligation to indemnify, hold harmless, and defend shall not apply to the extent
(a) an insurance carrier or (b) any party other than API or APW is responsible.
Without limiting the foregoing, it is specifically contemplated that APW's
indemnity shall extend to any claims (except to the extent (a) liability has
been specifically retained by API in this Agreement, (b) an insurance carrier is
responsible, or (c) any party other than API or APW is responsible) made against
API for benefits which would have been provided by API to the Hired Electronics
Business Employees under its Benefit Plans had the Hired Electronics Business
Employees remained API employees throughout the remainder of their careers but
are not provided by APW which would have been applicable to them had they
continued to be covered under the API Benefit Plans. The parties agree to
generally follow the procedure for notification of a claim for defense or
indemnification and the procedures for obtaining indemnification or defense as
set forth in Articles V and VI of Exhibit D.
3.4 Retirees. Those individuals who were employees of the Electronics
--------
Business who retired prior to the Effective Date and were eligible for benefits
available to retired employees of the Electronics Business under a plan
maintained by API shall continue to be the responsibility of API after the
Effective Date.
3.5 COBRA. (a) This paragraph (a) applies to (i) those individuals who
-----
are Hired Electronics Business Employees (and their dependents) and (ii) those
individuals who are not Hired Electronics Business Employees but who had been
employees of the Electronics Business (in this circumstance meaning an
individual who for over 50% of the time in the most recent 2 years of his
employment or if employed less than 2 years, 50% of his total employment was an
employee of the Electronics Business) prior to the Effective Date (or their
dependents). If an election for any such person of continuing coverage under a
health, dental and/or vision benefits plan sponsored by API as a result of the
requirements of ERISA Sections 601-608 is in effect on the Effective Date or if
such an election for any such person is made on or after the Effective Date, APW
shall at its option either (i) reimburse API for the amount of health, dental
and vision benefit claims paid by API for such persons for claims incurred after
the Effective Date less the amount of any premiums paid by such persons to API
with respect to periods after the Effective Date for the right to receive such
continuing coverage or (ii) provide replacement coverage with no applicable pre-
existing condition exclusion.
H-5
<PAGE>
(b) Notwithstanding any other provision of this agreement to the contrary,
API shall retain all liabilities for the provision of continuing coverage under
a health, dental and/or vision benefits plan sponsored by API as a result of the
requirements of ERISA Section 601-608 for those individuals who had been
employees of the Electronics Business (or their dependents) for whom the
employment relationship with the Electronics Business and API ended prior to the
Effective Date and who are not otherwise described in paragraph (a) above.
3.6 Personnel and Medical Records. API shall transfer or make available
-----------------------------
to APW the personnel and medical records of Hired Electronics Business
Employees. APW shall indemnify, hold harmless, and defend API from and against
any damages, claims, liabilities, obligations, costs of defense (including
attorney fees), expenses, fines, levies, assessments, charges, penalties,
damages, settlements or awards asserted against API resulting from the release
of any personnel and medical records under this Section 3.6.
3.7 International Retirement Plan. API and its subsidiaries have
-----------------------------
maintained certain Retirement Plan assets and those Retirement Plans for
employees at subsidiaries that are part of APW shall be transferred to APW and
be the sole responsibility of APW for no additional payment by API.
ARTICLE IV
Savings Plan Spinoff
--------------------
4.1 Spinoff. API maintains the APW 401(k) Plan (the "APW 401(k) Plan").
-------
The assets of the APW 401(k) Plan are held by Fidelity Management Trust Company
("Fidelity"), as trustee. By virtue of the fact that the employment of Hired
Electronics Business Employees is terminated on the Effective Date, no
contributions shall be made to the APW 401(k) Plan on their behalf for periods
from and after the Effective Date. API agrees to transfer 100% of the account
balances of all Hired Electronics Business Employees in the APW 401(k) Plan plus
100% of the prefunded employer contribution to the APW 401(k) Plan for the plan
year (the "Prefunding") to a new plan created by APW on the Effective Date (the
"New Plan"). The transfer of accounts of Hired Electronics Business Employees
and the transfer of the Prefunding from the APW 401(k) Plan to the New Plan
shall be made by transfer of the assets of those accounts in kind from the APW
401(k) Plan to the New Plan. To the extent that all contributions due to the
APW 401(k) Plan for Hired Electronics Business Employees have not been made by
the Effective Date, API will make those contributions to the APW 401(k) Plan in
accordance with its normal payment practices and when it deposits such amounts
in the APW 401(k) Plan, API shall instruct Fidelity to immediately transfer
such amounts in cash to the New Plan. API and APW shall cooperate with one
another and with Fidelity in facilitating such transfer of final contributions.
In addition, and without regard to the Prefunding, API shall remit to APW an
amount equal to its share of any employer contributions that would have been
made to the APW 401(k) Plan based upon the employees' employment through the
Effective Date. APW further agrees to take all actions necessary to obtain, as
soon as practicable, an Internal Revenue Service determination that the New Plan
meets the requirements
H-6
<PAGE>
of Section 401(a) of the Internal Revenue Code and that the Trust which
implements such Plan meets the requirements of Section 401(a) and is exempt from
tax under Section 501 of the Code.
ARTICLE V
Deferred Compensation Benefits
------------------------------
5.1 General. As of the Effective Date, APW assumes all
-------
liabilities and obligations under the API deferred compensation plans and stock
option deferral programs for Hired Electronic Business Employees consistent with
Section 3.1 hereof.
ARTICLE VI
Dispute Resolution
------------------
6.1 General. In an effort to resolve informally and amicably any claim or
-------
controversy arising out of or related to the interpretation or performance of
this Agreement without resorting to litigation, a party shall first notify the
other of any difference or dispute hereunder that requires resolution. API and
APW each shall designate an employee to investigate, discuss and seek to settle
the matter between them. If the two are unable to settle the matter within 30
days after such notification (or such longer period as may be agreed upon),
the matter shall be submitted to a senior officer of API and APW, respectively,
for consideration.
6.2 Arbitration. If settlement cannot be reached through the efforts of
-----------
the senior officers within an additional 30 days or such longer period as may be
agreed upon, the parties shall consider arbitration or other alternative means
to resolve the dispute.
6.3 Legal Proceedings. If the parties are unable to agree on an
-----------------
alternative dispute resolution mechanism within 30 days, either party may
initiate legal proceedings to resolve such matter.
ARTICLE VII
Notices
-------
7.1 General. All notices and communications required or permitted under
-------
this Agreement shall be in writing and any communication or delivery hereunder
shall be deemed to have been duly made if actually delivered, or if mailed by
first class mail, postage prepaid, or by air express service, with charges
prepaid and addressed as follows:
H-7
<PAGE>
If to API: Applied Power Inc.
6101 N. Baker Road
Milwaukee, Wisconsin 53209
Attention: __________
If to APW: APW LTD.
N22 W23685 Ridgeview Parkway West
Waukesha, Wisconsin 53188-1013
Attention: __________
7.2 Change in Address. Either party may, by written notice so delivered
-----------------
to the other, change the address to which future delivery shall be made.
ARTICLE VIII
Written Amendment and Non-Waiver
--------------------------------
8.1 Written Amendment and Waiver. This Agreement may not be altered or
----------------------------
amended nor any rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver.
8.2 Limited Amendment or Waiver. No waiver of any term, provision or
---------------------------
condition of this Agreement or failure to exercise any right, power or remedy or
failure to enforce any provision of this Agreement, in any one or more
instances, shall be deemed to be a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition or enforcement right of this Agreement or deemed to be an impairment
of any right, power or remedy or acquiescence to any breach.
ARTICLE IX
Miscellaneous
-------------
9.1 Governing Law. This Agreement and the transactions contemplated
-------------
hereby shall be construed in accordance with and governed by the internal laws
of the State of Wisconsin.
9.2 Entire Agreement. This Agreement constitutes the entire understanding
----------------
of the parties hereto with respect to the subject matter hereof, superseding all
negotiations, prior discussions and prior agreements. To the extent a subject
is specifically covered in this Agreement and to the extent any other agreement
(other than the Release and Settlement Agreement and General Assignment
Agreement provision on Worker's Compensation described in Article II) is in
conflict herewith, this Agreement, if specific, shall control.
H-8
<PAGE>
9.3 Parties In Interest. Neither party may assign its rights or delegate
-------------------
any of its duties under this Agreement without prior written consent of the
other. This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors and assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
third party any benefits, rights or remedies.
9.4 Effectiveness. This Agreement shall become effective at the Effective
-------------
Date and may be terminated by API at any time prior thereto without any
liability on API's part.
9.5 Reformation and Severability. If any provision of this Agreement
----------------------------
shall be held to be invalid, unenforceable or illegal in any jurisdiction under
any circumstances for any reason, (i) such provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal and preserve the original intent of the parties, or (ii) if such provision
cannot be so reformed, such provision shall be severed from this Agreement.
Such holding shall not affect or impair the validity, enforceability or legality
of such provision in any other jurisdiction or under any other circumstances.
Neither such holding nor such reformation or severance shall affect or impair
the legality, validity or enforceability of any other provisions of this
Agreement to the extent that such other provision is not itself actually in
conflict with any applicable law.
9.6 Titles and Headings. All titles and headings have been inserted
-------------------
solely for the convenience of the parties and are not intended to be a part of
this Agreement or to affect its meaning or interpretation.
9.7 No Reliance. No third party is entitled to rely on any of the
-----------
representations, warranties and agreements of the parties contained in this
Agreement. The parties assume no liability to any third party because of any
reliance on the representation, warranties and agreements of the parties
contained in this Agreement.
H-9
<PAGE>
IN WITNESS WHEREOF the Parties have caused this Agreement to be executed by
their duly authorized officers as of this _____ day of __________, 2000.
APPLIED POWER INC.
By: __________________________________________
President and Chief Operating Officer
APW LTD.
By: __________________________________________
President and Chief Executive Officer
H-10
<PAGE>
Exhibit 10.8
EXHIBIT I
TAX SHARING AND INDEMNIFICATION AGREEMENT
By and Between
APPLIED POWER INC.
and
APW LTD.
Dated __________, 2000
<PAGE>
EXHIBIT I
TABLE OF CONTENTS
TAX SHARING AND INDEMNIFICATION AGREEMENT
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS
1.1 Affiliated Group.............................................. 2
1.2 API Group..................................................... 2
1.3 APW Group..................................................... 2
1.4 Code.......................................................... 2
1.5 Consolidated Returns.......................................... 2
1.6 Contribution.................................................. 2
1.7 Date of Distribution or Distribution Date..................... 2
1.8 Distribution.................................................. 2
1.9 Expenses...................................................... 2
1.10 Final Determination........................................... 2
1.11 IRS........................................................... 3
1.12 Party......................................................... 3
1.13 Restructuring Taxes........................................... 3
1.14 Tax or Taxes.................................................. 3
1.15 Taxing Authority.............................................. 3
1.16 Tax Controversy............................................... 3
1.17 Tax Item...................................................... 3
1.18 Tax Returns................................................... 3
ARTICLE II
LIABILITY FOR PRE-DISTRIBUTION AND OTHER TAX LIABILITIES
2.1 Taxes......................................................... 4
(a) Current and Prior Consolidated Return Periods........... 4
(b) Future Periods.......................................... 4
(c) Separate Return Periods................................. 4
(d) Zero Consolidated Returns............................... 4
2.2 Indemnification for Restructuring Taxes....................... 5
ARTICLE III
REFUNDS OF CREDITS AND TAXES
3.1 Refunds and Credits........................................... 5
</TABLE>
I-ToC-i
<PAGE>
<TABLE>
<S> <C>
ARTICLE IV
TAX RETURN PREPARATION
4.1 Tax Returns................................................... 5
4.2 Post-Distribution Tax Returns................................. 5
4.3 Cooperation; Exchange of Information.......................... 5
ARTICLE V
TAX AUDITS
5.1 Tax Controversies............................................. 6
5.2 Cooperation................................................... 6
5.3 Record Retention.............................................. 7
ARTICLE VI
PAYMENTS
6.1 Payments in General........................................... 7
6.2 Payment of Restructuring Taxes................................ 7
6.3 Interest on Late Payments..................................... 7
ARTICLE VII
ADMINISTRATIVE PROVISIONS
7.1 Interest...................................................... 7
7.2 Expenses...................................................... 7
ARTICLE VIII
DISPUTE RESOLUTION
8.1 General....................................................... 8
8.2 Arbitration................................................... 8
8.3 Legal Proceedings............................................. 8
ARTICLE IX
MISCELLANEOUS
9.1 Termination of Tax Sharing Agreement.......................... 8
9.2 Enforceability................................................ 8
9.3 Modification of Agreement..................................... 8
9.4 Successors and Assigns........................................ 8
9.5 Term.......................................................... 9
9.6 Rights Confined to Parties.................................... 9
9.7 Notices....................................................... 9
9.8 Effect of Headings............................................ 9
9.9 Governing Law................................................. 9
9.10 Counterparts.................................................. 9
</TABLE>
I-ToC-ii
<PAGE>
EXHIBIT I
TAX SHARING AND INDEMNIFICATION AGREEMENT
This Tax Sharing and Indemnification Agreement dated __________, 2000, is
entered into by and between APPLIED POWER INC., a Wisconsin corporation, with
offices at 6101 N. Baker Road, Milwaukee, Wisconsin 53209 ("API"), and APW LTD.,
a Bermuda corporation, with offices at N22 W23685 Ridgeview Parkway West,
Waukesha, Wisconsin 53188-1013 ("APW").
WHEREAS, API and APW have entered into a Contribution Agreement, Plan and
Agreement of Reorganization and Distribution dated __________, 2000 (the
"Contribution Agreement");
WHEREAS, API is the common parent of an "affiliated group", as that term is
defined in Section 1504 of the Code, which files consolidated federal income tax
returns and prior to APW becoming a Bermuda corporation, APW and certain of its
subsidiaries were members of such group.
WHEREAS, pursuant to the Contribution Agreement, API and APW have agreed to
a Plan and Agreement of Reorganization and Distribution (the "Plan") which
provides for the reorganization and pro rata distribution to API shareholders of
all of the outstanding shares of the stock of APW (the "Distribution");
WHEREAS, as a consequence of the Distribution, APW will no longer be a
subsidiary of API;
WHEREAS, pursuant to Treas. Reg. Section 1.1502-6, API and each subsidiary
which was a member of the API Group (as hereinafter defined but excluding any
foreign corporations) during any part of a consolidated return year is severally
liable for the consolidated federal income tax liability of the API Group for
such year; and
WHEREAS, API and APW desire to set forth their rights and obligations with
respect to foreign, federal, state and local taxes due for periods both before
and after the Distribution and with respect to certain tax liabilities that may
be asserted in connection with the Distribution.
NOW THEREFORE, API on behalf of itself and members of the API Group other
than APW and its subsidiaries listed on Schedule 1 hereto, and APW, on behalf of
itself and members of the APW Group (as hereinafter defined), in consideration
of the mutual covenants contained herein, agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following definitions shall apply:
1.1 Affiliated Group means an affiliated group of corporations within the
meaning of section 1504(a) (determined without regard to the exceptions
contained in section 1504(b)) of the Code for the taxable period in question.
1.2 API Group means, for each taxable period, the Affiliated Group of
which API or any successor of API is the common parent.
1.3 APW Group means APW and the subsidiaries listed on Schedule 1.
1.4 Code means the Internal Revenue Code of 1986, as amended from time to
time.
1.5 Consolidated Returns means the consolidated United States federal
income tax returns of the API Group for consolidated return years beginning
before the Date of Distribution and any consolidated, unitary or combined state
income tax returns of any members of the API Group for taxable years beginning
before the Date of Distribution.
1.6 Contribution shall mean the transfer to APW by API of those certain
assets of API as set forth in and pursuant to the Contribution Agreement.
1.7 Date of Distribution or Distribution Date means the date on which the
Distribution occurs.
1.8 Distribution shall mean the distribution as defined in the recitals.
1.9 Expenses means out-of-pocket expenses paid to third party providers
and shall not include any overhead or indirect costs.
1.10 Final Determination means the final resolution of liability for any
Tax for a taxable period (i) by IRS Form 870 or 870-AD (or any successor forms
thereto), on the date of acceptance by or on behalf of the IRS, or by a
comparable agreement form under the laws of other jurisdictions, except that a
Form 870 or 870-AD or comparable form that reserves the right of the taxpayer to
file a claim for refund and/or the right of the taxing authority to assert a
further deficiency shall not constitute a Final Determination, to the extent of
the reservation; (ii) by a decision, judgment, decree, or other order by a court
or agency of competent jurisdiction which has become final and unappealable;
(iii) by a closing agreement or offer in compromise under Section 7121 or 7122
of the Code or any subsequently enacted corresponding provisions of the Code, or
comparable agreements under the laws of other jurisdictions; (iv) by an
allowance of a refund or credit in respect of an overpayment of Tax, but only
after the expiration of all periods during which such refund may be
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recovered (including by way of offset) by the Tax imposing jurisdiction; or (v)
by any other final disposition by reason of the expiration of the applicable
statutes of limitations.
1.11 IRS means the Internal Revenue Service.
1.12 Party means either of the parties to this Agreement.
1.13 Restructuring Taxes means any Taxes (including any Tax imposed as a
result of the application of Sections 311, 355(c), 361, 367(a) or 1001 of the
Code) incurred on the consummation of the transactions set forth on Schedule 2.
1.14 Tax or Taxes means all forms of taxation, whenever created or imposed,
whether domestic or foreign, and whether imposed by a nation, locality,
municipality, government, state, federation, or other body (a "Taxing
Authority"), and without limiting the generality of the foregoing shall include
net income, alternative or add-on minimum tax, gross income, sales, use,
franchise, gross receipts, value added, ad valorem, profits, license, payroll,
withholding, social security, unemployment insurance, employment, property,
transfer, recording, excise, severance, stamp, occupation, premium, windfall
profit, custom duty, or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any related interest, penalties or
other additions to tax, or additional amounts imposed by any such Taxing
Authority.
1.15 Taxing Authority means any federal, national, foreign, state,
municipal or other local government, or any subdivision, agency, commission or
authority thereof or any quasi-governmental body or other authority exercising
any taxing or tax regulatory authority.
1.16 Tax Controversy means any audit, examination, dispute, suit, action,
litigation or other judicial or administrative proceeding by or against the IRS
or any other Taxing Authority.
1.17 Tax Item means any item of income, gain, loss, deduction, credit,
recapture of credit or any other item including, but not limited to, an
adjustment under Code Section 481 resulting from a change in accounting method
which increases or decreases taxes paid or payable.
1.18 Tax Returns means all reports, estimates, declarations of estimated
tax, information statements, returns or other documents required to be filed in
connection with any Taxes, including but not limited to requests for extensions
of time, information statements and reports, claims for refund, and amended
returns.
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ARTICLE II
LIABILITY FOR PRE-DISTRIBUTION AND OTHER TAX LIABILITIES
2.1 Taxes.
(a) Current and Prior Consolidated Return Periods. Except as
---------------------------------------------
otherwise provided in this Agreement: (i) API shall pay, on a timely basis, all
Taxes based upon income of the API Group required to be shown in Consolidated
Returns for the taxable year that includes the Distribution Date (the "2000
Income Taxes") and for all periods ending prior to the Distribution Date and
(ii) API hereby assumes all such liability and shall indemnify and hold harmless
APW and any member of the APW Group from and against any share or amount of the
2000 Income Taxes and all income taxes based upon income of the API Group
required to be shown in Consolidated Returns for periods ending prior to the
Distribution Date; provided that, in the event of any income Tax Controversies
of the API Group for 2000 Income Taxes and for all periods ending prior to the
Distribution Date, APW assumes and shall indemnify and hold harmless API and the
members of the Affiliated Group of which API is a member from all income Taxes
(other than Restructuring Taxes which are separately provided for in Section 2.2
hereof) in excess of $1,000,000 resulting from any Final Determinations based
upon adjustments to the separate taxable income of any member of the APW Group.
(b) Future Periods. Except as otherwise provided in this Agreement:
--------------
(i) APW and the members of the APW Group shall pay, on a timely
basis, all Taxes based upon income of the APW Group for any period beginning
after the Distribution Date, and APW shall indemnify and hold harmless API and
the members of any Affiliated Group of which API is a member from and against
all income Taxes based upon the income of the APW Group for any period beginning
after the Distribution Date; and
(ii) API and the members of any Affiliated Group of which API is
a member shall pay, on a timely basis, all Taxes based upon the income of such
Affiliated Group for any period beginning after the Distribution Date and API
shall indemnify and hold harmless APW and any member of the APW Group from and
against all income Taxes based upon the income of the Affiliated Group of which
API is a member for any period beginning after the Distribution Date.
(c) Separate Return Periods. Except as otherwise provided in this
-----------------------
Agreement, each member of the API Group and the APW Group shall be liable for
its own Taxes required to be shown in a separate return of such member for any
period filed with any Tax Authority.
(d) Zero Consolidated Returns. APW shall cause Zero Corporation to
-------------------------
pay all Taxes based upon income of Zero Corporation and its subsidiary
corporations required to be shown in consolidated, unitary or combined federal
or state income tax returns of Zero Corporation and its subsidiary corporations
for any period ending on or before the date of the acquisition by Zero
Corporation by API, and APW shall indemnify and hold harmless API from and
against any such Taxes.
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2.2 Indemnification for Restructuring Taxes. Notwithstanding any other
provision of this Agreement to the contrary, APW shall pay, and shall indemnify
and hold harmless API and the members of any Affiliated Group of which API is a
member from and against any and all Restructuring Taxes.
ARTICLE III
REFUNDS OF CREDITS AND TAXES
3.1 Refunds and Credits. Each Party shall be entitled to all refunds or
credits of any Tax, including without limitation, in the case of APW, any
refunds or credits attributable to Restructuring Taxes, for which such Party is
liable hereunder. Any Party receiving a refund or credit (and interest, if any,
with respect thereto) that is for the account of another Party hereunder shall
promptly and, in any event, no later than five business days following its
receipt, pay to the other Party such refund or credit (and any interest with
respect thereto).
ARTICLE IV
TAX RETURN PREPARATION
4.1 Tax Returns.
API and APW shall jointly prepare and timely file all Consolidated
Returns for the 2000 Income Taxes and other Tax Returns for any period beginning
before or ending on the Distribution Date, if not already filed. APW shall
control the decisions in the preparation of such Tax Returns for which it has
liability hereunder (including without limitation all items regarding
Restructuring Taxes) and API shall control the decisions in the preparation of
such Tax Returns for which it has liability hereunder. Such Consolidated Returns
shall be prepared and filed in compliance with applicable tax laws and on a
basis that is consistent with API's prior Tax Returns.
4.2 Post-Distribution Tax Returns. All Tax Returns of the APW Group for
periods beginning after the Distribution Date shall be filed by APW or the
appropriate member of the APW Group, and all Tax Returns of the Affiliated Group
of which API is a member for periods beginning after the Distribution Date shall
be filed by API or the appropriate member of the Affiliated Group of which API
is a member. APW, with the assistance of API as needed, shall be responsible for
providing information to shareholders as APW may determine for purposes of
Treasury Regulations, Section 1.355-5(b).
4.3 Cooperation; Exchange of Information. Each Party shall promptly
deliver to the other Party all information of which it has knowledge regarding
any Tax Item which may properly be included in any Tax Return to be filed by the
other Party, and shall provide any and all other information and documentation
(including, but not by way of limitation, working papers and schedules)
reasonably requested by the other Party for use in connection with the
preparation and filing of any Tax Returns.
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ARTICLE V
TAX AUDITS
5.1 Tax Controversies.
(a) Except as otherwise provided in this Article V, API shall have
full responsibility and discretion in handling, settling or contesting any Tax
Controversy involving a Tax Return for which it has liability, and any legal and
accounting costs incurred in handling, settling or contesting any such Tax
Controversy shall be borne by API.
(b) APW shall have full responsibility and discretion in handling,
settling or contesting any Tax Controversy which involves matters for which APW
is obligated to indemnify API under Section 2.1 or 2.2 of this Agreement. API
shall immediately inform APW of any such Tax Controversy and any legal and
accounting costs incurred in handling, setting or contesting any such Tax
Controversy shall be borne by APW. APW shall attend and control any meeting with
representatives of a Taxing Authority concerning Restructuring Taxes.
5.2 Cooperation. API and APW agree to afford full cooperation to one
another and to their respective representatives, if any, in any Tax Controversy
involving:
(a) any Tax Return filed or required to be filed by or for any member
of the API Group for any pre-Distribution period or period which includes the
Distribution Date, or
(b) any item or issue affecting API or APW's potential liability
hereunder.
Such cooperation shall include, but not by way of limitation:
(i) preparing responses to information requests by any Taxing
Authority;
(ii) making available books, records and other documentation
(including, but not by way of limitation, working papers and
schedules) relevant to such proceeding, and systems support for
documentation furnished in electronic form;
(ii) making directors, officers or employees available to appear
in person for interview or for testimony;
(iv) making employees available on a mutually convenient basis
to provide additional information and explanation of materials
provided hereunder;
(v) executing powers of attorney, tax information
authorizations and any other necessary or appropriate authorizations;
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(vi) executing agreements with the Taxing Authority or other
documents reasonably necessary or appropriate for the settlement or
pursuit of the contest of such issue; and
(vi) doing whatever is reasonable in the circumstances to assist
the other Party.
5.3 Record Retention. The parties agree to retain all books, records,
returns, schedules, documents and all material papers or relevant items of
information for periods ending on or prior to the Date of Distribution for the
later of (i) seven (7) years or (ii) the full period of the applicable statute
of limitations, including any extensions thereof.
ARTICLE VI
PAYMENTS
6.1 Payments in General. Except as otherwise provided in this Agreement,
any amount required to be paid by one Party pursuant to this Agreement shall be
paid in immediately available funds within thirty (30) days after written demand
therefor from the other Party given after a Final Determination of the amount
thereof.
6.2 Payment of Restructuring Taxes. APW shall pay to API or to the
applicable Tax authority as APW may determine the amount of Restructuring Taxes
which APW is obligated to pay pursuant to Section 2.2 hereof. Such payment of
Restructuring Taxes by APW shall be made at the time such Taxes are due,
including estimated Tax payments which take into account its liability for the
Restructuring Taxes as and when such estimated Tax payments are required to be
made.
6.3 Interest on Late Payments. Any amount payable under this Agreement
by one Party to another Party shall, if not paid within ten (10) business days
after the due date specified in this Agreement (or in the case of payments
pursuant to Section 6.2 hereof if not paid when due), bear interest from the
due date until the date paid at the applicable Federal short term rate as
defined in Section 6621 of the Code in effect on the due date.
ARTICLE VII
ADMINISTRATIVE PROVISIONS
7.1 Interest. Except as expressly provided herein, no obligation to pay
or right to collect interest or other amounts shall arise by virtue of this
Agreement.
7.2 Expenses. Except as otherwise provided in this Agreement, each Party
to this Agreement hereby agrees to be responsible for all of the Expenses which
it may incur in carrying out its duties hereunder.
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ARTICLE VIII
DISPUTE RESOLUTION
8.1 General. In an effort to resolve informally and amicably any claim or
controversy arising out of or related to the interpretation or performance of
this Agreement without resorting to litigation, a party shall first notify the
other of any difference or dispute hereunder that requires resolution. API and
APW each shall designate an employee to investigate, discuss and seek to settle
the matter between them. If the two are unable to settle the matter within 30
days after such notification (or such longer period as may be agreed upon), the
matter shall be submitted to a senior officer of API and APW, respectively, for
consideration.
8.2 Arbitration. If settlement cannot be reached through the efforts of
the senior officers within an additional 30 days or such longer period as may be
agreed upon, the parties shall consider arbitration or other alternative means
to resolve the dispute.
8.3 Legal Proceedings. If the parties are unable to agree on an
alternative dispute resolution mechanism within the period specified in Section
8.2, either party may initiate legal proceedings to resolve such matter.
ARTICLE IX
MISCELLANEOUS
9.1 Termination of Tax Sharing Agreement. Except for this Agreement, any
Tax sharing agreement or policy of the API Group is hereby terminated and API
and APW shall have no obligation under any such agreement or policy.
9.2 Enforceability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
9.3 Modification of Agreement. No modification, amendment or waiver of
any provision of this Agreement shall be effective unless the same shall be in
writing, and signed by each of the Parties hereto and then such modification,
amendment or waiver shall be effective only in the specific instance and for the
purpose for which given.
9.4 Successors and Assigns. Except as hereinafter provided, neither this
Agreement nor any rights hereunder shall be assignable or transferable by either
Party hereto, without the prior written consent of the other Party hereto,
except by operation of law. Each Party hereby guarantees the performance of all
actions, agreements and obligations provided for under this Agreement of each of
its subsidiaries. Each Party shall, upon the written request of the other Party,
cause any of its subsidiaries formally to execute this Agreement. This Agreement
shall be binding upon, and shall inure to the benefit of, the successors,
assigns and persons controlling any of the corporations bound
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hereby for so long as such successors, assigns or controlling persons are a
subsidiary of a Party or its successors and assigns by operation of law.
9.5 Term. This Agreement shall commence on the date of execution
indicated below and shall continue in effect until otherwise agreed to in
writing by the Parties or their successors. Notwithstanding any other provision
in this Agreement, this Agreement shall remain in effect and its provisions
shall survive for the full period of all applicable statutes of limitation
(giving effect to any extension, waiver or mitigation thereof).
9.6 Rights Confined to Parties. Nothing expressed or implied herein is
intended or shall be constructed to confer upon or to give to any person, firm
or corporation (other than the Parties hereto, members of their Affiliated
Groups, and their successors and assigns) any right, remedy or claim under or by
reason of this Agreement or of any term, covenant or condition hereof. All
terms, covenants, conditions, promises and agreements contained herein shall be
for the sole and exclusive benefit of the Parties hereto, the members of their
Affiliated Groups, and their successors and assigns.
9.7 Notices. All demands, notices and communications under this Agreement
shall be in writing and shall be deemed to have been duly given if personally
delivered or sent by certified or registered United States Mail, postage
prepaid, to:
(a) in the case of API:
Applied Power Inc.
6101 N. Baker Road
Milwaukee, Wisconsin 53209
Attention: ___________________
(b) in the case of APW Ltd.:
APW Ltd.
N22 W23685 Ridgeview Parkway West
Waukesha, WI 53188-1013
Attention: ___________________
9.8 Effect of Headings. The paragraph headings herein are for convenience
only and shall not affect the construction hereof.
9.9 Governing Law. The provisions of this Agreement and all rights and
obligations of the parties hereunder shall be governed by the internal laws of
the State of Wisconsin.
9.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall, when so executed, be considered an original
and all of which, taken together, shall be considered one document.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers this _____ day of __________, 2000.
APPLIED POWER INC.
By: _________________________________________
President and Chief Executive Officer
APW LTD.
By: _________________________________________
President and Chief Executive Officer
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Exhibit 10.9
EXHIBIT J
INTERIM ADMINISTRATIVE SERVICES AGREEMENT
This Interim Administrative Services Agreement ("Agreement"), dated as of
__________, 2000 (the "Effective Date"), is made between Applied Power Inc., a
Wisconsin corporation, with offices at 6101 N. Baker Road, Milwaukee, Wisconsin
53209 ("API"), and APW North America Inc., a Delaware corporation ("APW North
America") which will ultimately become a wholly owned subsidiary of APW LTD., a
Bermuda corporation ("APW"), with offices at N22 W23685 Ridgeview Parkway West,
Waukesha, Wisconsin 53188-1013. The term "APW" when used in this agreement
means APW and its subsidiaries listed on Schedule 1, which generally constitute
the electronics business (collectively, "Electronics Business"). The term "API"
means API and its subsidiaries, exclusive of APW as listed on Schedule 2.
WHEREAS, the Electronics Business was one of API's segments until the
Effective Date when it was spun off as a separate and independent company, APW
(the "Spin-off");
WHEREAS, APW will operate the Electronics Business as a separate publicly
traded company and API will continue to operate its industrial business
("Industrial Business");
WHEREAS, prior to the Spin-Off, API provided certain limited support
services to its Electronics Business and Industrial Business;
WHEREAS, APW North America, a U.S. subsidiary of APW, acquired certain
corporate office functions of API and, as set forth herein, APW has acquired
certain subsidiaries of API used to provide certain support services to the
corporate headquarters and each party will provide limited support services to
other party on an interim basis; and
WHEREAS, API desires and APW North America is willing to provide certain
administrative and support services (as herein defined) for API's operations for
certain specified interim periods after the Spin-off solely for purposes of
assisting API in the transition. Further, one of API's subsidiaries will
provide certain information technology services to APW North America and other
subsidiaries of APW North America and one of API's European facilities will
provide certain administrative services to an APW subsidiary upon APW's request.
NOW, THEREFORE, in consideration of the promises set forth herein, the
parties do hereby agree as follows:
1. Services.
--------
(a) Subject to the terms and conditions provided herein, APW North
America shall provide API with Services on an interim basis, consisting of:
<PAGE>
(i) "Tax Services" shall mean tax preparation of the return and tax
compliance matters.
(ii) "Insurance/Risk Management Services" which shall mean the
procurement and renewal of property, casualty and related
insurance policies and the administration of claims and rights.
(b) Subject to the terms and conditions provided herein, API and its
subsidiaries shall provide APW and its subsidiaries with certain Services as
defined below:
(i) "Veenendaal Support" which shall mean administrative services
offered by API's subsidiary Enerpac Europe B.V. as presently
conducted. These services include invoicing, preparing purchase
orders, tracking of inventory, warehousing, shipping, Oracle
systems support, inventory storage and other general
administrative services currently provided as of the date of
this agreement at Veenendaal, Holland to support APW's Wright
Line operations.
(ii) "Computer and Financial Support" which shall mean computer and
financial support for the corporate headquarters and related
Electronics Business as currently provided by the Industrial
Business Glendale, Wisconsin facility. Such financial services
shall include the payroll processing, credit support for
receivables, fixed asset listing and human resources services
currently provided to corporate and other Electronics
Businesses as currently provided.
2. Agreement Principles and Guidelines. By this Agreement, API, APW North
-----------------------------------
America and APW seek to implement the general principle that with the exceptions
noted herein or in the Contribution Agreement, Plan and Agreement of
Reorganization and Distribution including any Schedules, Exhibits or Annexes
thereto ("Contribution Documents"), each party will provide Services on an
interim basis similar to those previously offered to the other party while it is
not reasonably feasible for API, APW North America or APW, as the case may be,
to provide independently such Services itself. Each party will continue to
offer Services in the same or similar magnitude as previously offered to the
other party and by this Agreement does not promise, covenant, or agree to
provide a greater level or magnitude of Services. Each party acknowledges and
covenants to use reasonable efforts to independently provide such Services for
itself as soon as
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reasonably feasible. If reasonably feasible, each party will provide such
Services for itself, prior to the term limits set forth in Section 4 of this
Agreement. Each party hereby acknowledges that the requirement for the other
party to use reasonable efforts to independently provide such Services as soon
as reasonably feasible is a material element and condition to this Agreement and
that failure to fully comply with such provision will give rise to, among other
provisions, the termination rights set forth in Paragraph 16(e) of this
Agreement. Nothing in this Agreement shall be construed to cause APW North
America or API to become a service bureau or to perform a Service which it
cannot provide (i) without conflict with a third-party contract to which APW,
APW North America or API is a party or (ii) a breach of any third-party contract
to which APW, APW North America or API is a party. In no event will APW, APW
North America or API be responsible for any damages if it is unable to offer or
continue to provide a Service to the other party pursuant to this paragraph.
3. Fees and Additional Charges. The parties agree to pay for the Services
---------------------------
the amounts respectively shown on Schedule 3 hereto.
(a) Additional Charges. In addition to the charges set forth above,
------------------
API or APW North America, as the case may be, agrees to pay for any
manufacturers, sales, use, excise, personal property, or any other tax or
charge, or duty or assessment cost, expense, or fee attributable to the
execution or performance of any Service pursuant to this Agreement, except (i)
any income, franchise, doing business or similar taxes levied or assessed on or
based on such party's income, capital stock or other similar base, and (ii)
employment taxes with respect to employees of such party (including, but not
limited to, unemployment taxes, social security taxes and income tax
withholdings). Each party also agrees to pay any fee, expense, or charge
associated with obtaining consents from any party other than such party to
utilize software or other contracts necessary to offer any Service under this
Agreement. Each party also agrees to reimburse the other party for its
reasonable out-of-pocket expenses directly attributable to the provision of
Services hereunder.
(b) Terms of Payment. Each party shall pay the other party's fees and
----------------
any additional charges owed within fifteen (15) days of invoice. Each party
shall also pay any collection fees and reasonable attorneys' fees incurred by
the other party in collecting payment of the charges and other amounts for which
such party is liable under the terms and conditions of this Agreement. Without
limiting the foregoing, if one party is more then two months in arrears on any
payment, the other party may terminate this Agreement pursuant to the provisions
of Paragraph 16(e).
4. Term. This Agreement shall be effective upon __________, 2000 or such
----
other date as agreed upon by the parties ("Effective Date"). Subject to the
requirement set forth in Section 2 that each party must use reasonable efforts
to independently provide such Services when reasonably feasible, the respective
periods Services offered by API or APW North America will be for a six-month
term.
Each party, at its sole discretion, and upon request of the party at
least 30 days prior to termination of any Service Period, may extend the term
date for an additional period not greater than
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six months. Such Services will then be offered at a rate of up to 200% of the
billing rate in effect at such time, subject to any subsequent adjustment
pursuant to Section 3 of this Agreement.
5. Subsidiaries. To the extent such Services were previously provided to
------------
subsidiaries of API or APW, as the case may be, all Services shall be included
as part of the Services provided under this Agreement and shall be done in
accordance with the terms and conditions of this Agreement. API and APW each
agree that each are responsible for assuring compliance with the Agreement by
its subsidiaries and further agrees to be responsible for the compliance with
its subsidiary's obligations in order to allow the other party to offer the
above described Services.
6. Equipment. API, at its own cost, shall obtain and maintain such data
---------
processing, computer and communications equipment as may be necessary or
appropriate to facilitate the proper use and receipt of the Services set forth
in this Agreement. API will be permitted access to any APW North America
equipment or property in order (i) to provide maintenance, repair or updates, or
(ii) to remove such equipment listed on its accounting records, if appropriate,
or (iii) to respond to any reasonable request related to APW's equipment. There
will be no charge for API's right to enter APW North America's property.
7. Systems Modification; Amendment of Services. Each party, at its sole
-------------------------------------------
discretion, may modify, amend, enhance, update or provide an appropriate
replacement for any of the Services offered by this Agreement, the software used
to provide the Services or any element of its systems (hardware or software) at
any time.
8. Insurance and Bonds.
-------------------
(a) Fidelity Bonds. At either party's request, the other party shall
--------------
obtain, at the requesting party's expense, fidelity bond coverage for the
employees who provide Services hereunder.
(b) Insurance. Throughout the term of this Agreement, each party may
---------
maintain insurance coverage for losses from fire, disaster and other causes
contributing to interruption of the Services. The proceeds of any such
insurance shall be payable to the party contracting for such insurance. Nothing
in this Agreement shall be construed as to permit the other party to receive any
of such proceeds, or to be named as an additional loss payee under any such
insurance policy.
9. Responsibility.
--------------
(a) General. API and APW North America agree to perform the Services
-------
in a reasonable manner, which is similar to services the party provides for its
own operations, and assumes no other or higher degree of care. In connection
with providing Services, API and APW North America acknowledge that it is a
reasonable manner for the party to mail items or documents to the other party,
provided that any party may request documents or items to be delivered via
messenger, at the requesting party's cost. Except as specifically provided
herein, the party assumes no other obligations as to performance, timing or
quality of the Services provided under this
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Agreement; all risks of error are expressly and solely assumed by the party
receiving Services and the party providing Services shall not be responsible for
loss or damage due to delays in providing the Services under this Agreement. NO
PARTY WILL IN ANY EVENT BE LIABLE FOR ANY INDIRECT, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES INCURRED BY API INCLUDING, BUT NOT LIMITED TO, LOST PROFITS OR BUSINESS
OPERATION LOSS, REGARDLESS OF WHETHER THE PARTY WAS ADVISED OF THE POSSIBLE
OCCURRENCE OF SUCH DAMAGES. API shall be required to maintain throughout the
term of this Agreement, off-site disaster recovery capabilities which permit API
to recover from a disaster and continue providing Services to APW North America
within a commercially reasonable period.
(b) Reliance on the Party. In connection with the foregoing, API and
---------------------
APW North America agree that the other party and its employees will have a
significant impact on the timing and quality of the performance of the Services
offered. API and APW North America will each provide those Services described
in this Agreement on the basis of information and/or instructions furnished by
the other party. Each party shall be entitled to rely upon any such data,
information, or instructions as provided by the other party. If any error
results from incorrect input supplied by a party, such party shall be
responsible for discovering and reporting such error and supplying the
information or instruction necessary to correct such error to the other party.
Each party may rely upon any instrument, signature, instruction or telephone
call from any employee of the other party as to Services requested under this
Agreement. In connection with providing such Services, neither party shall be
liable for any action taken or omitted by it in good faith and believed to have
been authorized by the other party or its employees.
10. Warranties. EXCEPT AS SPECIFICALLY DESCRIBED IN THIS AGREEMENT, EACH
----------
PARTY DISCLAIMS ALL OTHER WARRANTIES, WHETHER WRITTEN, ORAL, EXPRESSED OR
IMPLIED INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
11. Force Majeure. Each party shall not be liable to the other party if
-------------
such party's fulfillment or performance of any terms or provisions of this
Agreement is delayed or prevented by revolution or other civil disorders, wars,
act of enemies, strikes, electrical equipment availability failures, labor
disputes, fires, floods, act of God, federal, state, or municipal action,
statute, ordinance or regulation, or, without limiting the foregoing, any other
causes not within its reasonable control, and which by the exercise of
reasonable diligence it is unable to prevent, whether of the class of causes
hereinbefore enumerated or not. In case of emergency, the party may also select
the order, timeliness, or availability of providing any Services to the other
party.
12. Employees. All employees of APW North America providing Services to
---------
API will continue to remain employees of APW North America and all employees of
API providing services to APW North America will remain employees of API.
13. Confidentiality. The parties recognize that the rendering of Services
---------------
will be governed by the Confidentiality and Nondisclosure Agreement entered into
by the parties in connection with
J-5
<PAGE>
the Spin-off, except the confidentiality requirements of both parties will
survive for one (1) year after termination of the Services under this Agreement,
regardless of the reason for termination. In the event of any dispute concerning
confidentiality, the parties agree to utilize the provisions of Section 14.
14. Dispute Resolution Procedure.
----------------------------
(a) General. Subject to the parties respective rights under Section
-------
16(e), in an effort to resolve informally and amicably any claim or controversy
arising out of or related to the interpretation or performance of this Agreement
without resorting to litigation, a party shall first notify the others of any
difference or dispute hereunder that requires resolution. Andrew G. Lampereur
and Richard D. Carroll of API, APW and APW North America, respectively, or their
designated successor each shall investigate, discuss and seek to settle the
matter between them. If the two are unable to settle the matter within 30 days
after such notification (or such longer period as may be agreed upon), the
matter shall be submitted to another executive officer of API, APW and APW North
America, respectively, for consideration.
(b) Arbitration. If settlement cannot be reached through the efforts
-----------
of the senior officers within an additional 30 days or such longer period as may
be agreed upon, API, APW and APW North America shall consider arbitration or
other alternative means to resolve the dispute.
(c) Legal Proceedings. If API, APW and APW North America are unable to
-----------------
agree on an alternative dispute resolution mechanism within the period provided
in Section 14(b), either party may initiate legal proceedings to resolve such
matter.
15. Precedence and Updating of Agreement. This Agreement is being executed
------------------------------------
contemporaneously with the Contribution Documents. To the extent the
Contribution Documents, or any other document or other agreement executed in
connection with the Contribution Documents, is in conflict with any term of
provision of this Agreement or any Exhibit to this Agreement, this Agreement
will take precedence. To the extent this Agreement is in conflict with any
Exhibit, the Exhibit will take precedence.
16. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be construed in accordance
-------------
with the internal laws of the State of Wisconsin.
(b) Limitations. Nothing in this Agreement is to be construed as an
-----------
assignment or grant of any right, title or interest in any trademark, copyright,
design or trade dress or patent right.
(c) Parties in Interest. This Agreement may be assigned to a parent or
-------------------
subsidiary of a party, or to a third party acquiring substantially all of the
assets of a party, provided that prior to such assignment the other party has
granted its written consent to the assignment, and further
J-6
<PAGE>
provided that neither party may unreasonably withhold its consent to a request
for assignment. Except as provided above, this Agreement may not be assigned to
a third party.
(d) Entire Agreement. This Agreement and the Exhibits are the entire
----------------
Agreement between the Parties in connection with the matters set forth herein.
This Agreement may only be amended in writing signed by both Parties.
(e) Termination.
-----------
(i) APW or APW North America may promptly terminate this Agreement
upon written notice to API with cause for any material breach of this
Agreement by API, unless within a period of fifteen (15) days after
written notice API remedies the breach or proposes a course of action,
reasonably acceptable to APW or APW North America, to remedy the breach
within a reasonable time. API may promptly terminate this Agreement
upon written notice to APW or APW North America with cause for any
material breach of this Agreement by APW or APW North America, unless
within a period of fifteen (15) days after written notice APW or APW
North America remedies the breach or proposes a course of action,
reasonably acceptable to API, to remedy the breach within a reasonable
time. This Agreement will terminate automatically (to the extent
permitted by law at the time) in the event API files a petition in
bankruptcy, becomes insolvent, makes an assignment for the benefit of
creditors or an arrangement pursuant to any bankruptcy law, or
discontinues its business or has a receiver appointed for it.
(ii) Upon any termination hereunder, API will promptly pay any
charges or fees owed to APW North America. There will be no cost or
charge to APW North America or APW if either of them elects to
terminate this Agreement.
(f) Notices. All notices and communications required or permitted
-------
under this Agreement shall be in writing and any communication or delivery
hereunder shall be deemed to have been duly made if personally delivered, or if
mailed by first class mail, postage prepaid, or by air express service, with
charges prepaid and addressed as follows:
If to API: Applied Power Inc.
(must send to 6101 N. Baker Road
both individuals Milwaukee, Wisconsin 53209
specified) Attention: Chief Financial Officer
If to APW North America APW North America Inc. or APW Ltd.
or APW Ltd. N22 W23685 Ridgeview Parkway West
Waukesha, Wisconsin 53188-1013
Attention: Richard D. Carroll
J-7
<PAGE>
Either party may, by written notice so delivered to the other,
change the address to which future delivery shall be made.
(g) No Reliance. No third party is entitled to rely on any of the
-----------
representations, warranties and agreements of the parties contained in this
Agreement. The parties assume no liability to any third party because of any
reliance on the representation, warranties and agreements of the parties
contained in this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their duly authorized officers this _____ day of __________, 2000.
APPLIED POWER INC.
By:_____________________________________
President and Chief Operating Officer
APW LTD.
By:_____________________________________
President and Chief Executive Officer
APW NORTH AMERICA INC.
By:_____________________________________
Vice President
J-8
<PAGE>
Exhibit 10.10
EXHIBIT K
CONFIDENTIALITY AND
NONDISCLOSURE AGREEMENT
This Agreement, dated __________, 2000 (the "Effective Date"), is made
between APPLIED POWER INC., a Wisconsin corporation, with offices at 6101 N.
Baker Road, Milwaukee, Wisconsin 53209 ("API"), and APW LTD., a Bermuda
corporation ("APW"), with offices at N22 W23685 Ridgeview Parkway West,
Waukesha, Wisconsin 53188-1013.
WHEREAS, API owns and operates businesses generally known as its industrial
business (hereinafter "Industrial Businesses"), and electronics business, and
intends to spin off the electronics business (the "Electronics Business") to
APW;
WHEREAS, API is in the business of research, development, manufacture and
sale of industrial tools and electronics enclosures;
WHEREAS, APW will acquire API's Electronics Business in the upcoming spin-
off and will be in the business of research, development, manufacture and sale
of various electronics, enclosure and related products and engineered solutions
products;
WHEREAS, API and the Electronics Business (and now APW) are the respective
proprietary owners of confidential information concerning technical and other
confidential data (the "Proprietary Information");
WHEREAS, API and APW consider the Proprietary Information including that
held by their subsidiaries, to be valuable, confidential and not otherwise
available for disclosure;
WHEREAS, API and APW have entered into certain agreements to govern their
relationship after the spin-off as set forth in a Contribution Agreement, Plan
and Agreement of Reorganization and Distribution, including the exhibits,
schedules, instruments, and conveyances attached thereto, dated as of
__________, 2000 (the "Spin-off Agreements"). The Spin-off Agreements will
require that API and APW disclose information to one another which one or the
other safeguards as confidential (the "Spin-off Confidential Information"); and
WHEREAS, prior to the Spin-off certain of API's and APW's employees were
privy to information regarding API's and APW's business operations which one or
the other regards as confidential (the "General Confidential Information").
NOW THEREFORE, in consideration of the promises set forth herein, the
parties do hereby agree as follows:
<PAGE>
1. Proprietary Information.
For a five year period, APW and API agree to treat the Proprietary
Information, General Confidential Information and Spin-off Confidential
Information as confidential and acknowledge that an equivalent of a fiduciary
and confidential relationship between API and APW is established.
APW and API agree to disclose the Proprietary Information, General
Confidential Information and Spin-off Information of the other only to such
employee(s), representatives, advisers, officers, directors and agents as
necessary and only if such persons agree to respect the fiduciary and
confidential relationship between API and APW. APW or API or any of their
respective employee(s), representatives, advisers, officers, directors and
agents shall not make any use or disclosure of the Proprietary Information
General Confidential Information and Spin-off Confidential Information to any
other third party without the owner's prior written consent.
2. Non-Confidential Information.
The provisions of Section 2 of this Agreement shall not apply to:
(a) information which at the time of disclosure is generally available to
the public in a published work; or
(b) information which after disclosure by either API or APW to the other
becomes published or generally available to the public, otherwise than
through any act or omission on the part of API or APW in violation of
this Agreement; or
(c) information which either API or APW can show was in its possession at
the time of disclosure by the other and which was not acquired directly
or indirectly from the other either prior to, on or after the Effective
Date; or
(d) information rightfully acquired from third parties who did not obtain
it under pledge of secrecy to either API or APW; or
(e) information required to be disclosed pursuant to a court, federal
regulatory agency, or state regulatory agency order, or required to be
disclosed pursuant to any federal or state statutory or regulatory
provision provided the disclosing party provides the other party with
five business days advance written notice of such disclosure.
3. Conflicts between this Agreement and Any Other Agreement(s).
API and APW agree that these confidentiality provisions are superseded by
corresponding provisions that are included in any of the Spin-off Agreements
entered into prior to or as of the Effective Date hereof.
K-2
<PAGE>
4. Remedies.
In an effort to resolve informally and amicably any claim or any
controversy arising out of or relating to the interpretation or performance of
this Confidentiality and Nondisclosure Agreement without resorting to
litigation, a party shall first notify the other of any difference or dispute
hereunder that requires resolution. API and APW each shall designate an
employee to investigate, discuss and seek to settle the matter between them. If
the two are unable to settle the matter within 30 days after such notification
(or such longer period as may be explicitly agreed upon), the matter shall be
submitted to a senior officer of API and APW, respectively, for consideration.
If settlement cannot be reached through the efforts of the senior officers
within an additional 30 days (or such longer period as may be agreed upon), the
parties shall consider mediation, arbitration or other alternative means to
resolve the dispute.
If the parties are unable to agree on an alternative dispute resolution
mechanism, either party may initiate legal proceedings to resolve such matter.
In the event of legal proceedings, API and APW agree that it is impossible
to measure in money the damages that may accrue to a party hereto by reason of a
failure to perform any of the obligations hereunder. Therefore, in the event of
any controversy concerning the rights or obligations under this Confidentiality
and Nondisclosure Agreement such rights or obligations shall be enforceable in a
court of equity by a decree of specific performance. Such remedy, however,
shall be cumulative and non-exclusive and it shall be in addition to any other
remedy which the parties may have.
5. Miscellaneous.
(a) Governing Law. This Agreement and the transactions contemplated hereby
-------------
shall be construed in accordance with and governed by the internal laws of the
State of Wisconsin.
(b) Entire Agreement. This Agreement, the Contribution Agreement and the
----------------
other Agreements and instruments executed and delivered pursuant to this
Agreement or the Contribution Agreement constitute the entire understanding of
the parties hereto with respect to the subject matter hereof, superseding all
negotiations, prior discussions and prior agreements and understandings relating
to such subject matter; provided, however, that the specific provisions of any
other agreement between the parties executed and delivered by the parties in
connection with the closing under the Contribution Agreement shall not be
superseded by this Agreement and to the extent any such other agreement is in
conflict herewith, such specific agreement shall control.
(c) Parties In Interest. Neither party may assign its rights or delegate
-------------------
any of its duties under this Agreement without prior written consent of the
other. This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors and assigns. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
third party any benefits, rights or remedies.
K-3
<PAGE>
(d) Effectiveness. This Agreement shall become effective at the Effective
-------------
Date.
(e) Reformation and Severability. If any provision of this Agreement
----------------------------
shall be held to be invalid, unenforceable or illegal in any jurisdiction under
any circumstances for any reason, (i) such provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal and preserve the original intent of the parties, or (ii) if such provision
cannot be so reformed, such provision shall be severed from this Agreement. Such
holding shall not affect or impair the validity, enforceability or legality of
such provision in any other jurisdiction or under any other circumstances.
Neither such holding nor such reformation or severance shall affect or impair
the legality, validity or enforceability of any other provisions of this
Agreement to the extent that such other provision is not itself actually in
conflict with any applicable law.
(f) Titles and Headings. All titles and headings have been inserted solely
-------------------
for the convenience of the parties and are not intended to be a part of this
Agreement or to affect its meaning or interpretation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers this _____ day of __________, 2000.
APPLIED POWER INC.
By:___________________________________________
President and Chief Executive Officer
APW LTD.
By:___________________________________________
President and Chief Executive Officer
K-4
<PAGE>
Exhibit 10.11
ASSIGNMENT
This Assignment is made this ____ day of ____________, 2000, between
APPLIED POWER INC., a Wisconsin corporation with its principal place of business
at 6101 N. Baker Road, Milwaukee, WI 53209 USA ("Assignor")
and WRIGHT LINE INC., a Massachusetts corporation with its principal place of
business at 160 Gold Star Boulevard, Worcester, MA 01606 USA ("Assignee").
WHEREAS, Assignor is the record title holder of the Patents and Patent
Applications listed on Exhibit A hereto (hereafter "the Patents and Patent
Applications");
WHEREAS, Assignor and Assignee have entered into various agreements in
order to effect a spin off including a Contribution Agreement, Plan and
Agreement of Reorganization and Distribution (the "Plan"); and
WHEREAS, Assignee is desirous of acquiring record title of the Patents and
Patent Applications under the Plan.
NOW, THEREFORE, in consideration of good and valuable consideration,
receipt whereof by Assignor is hereby acknowledged, Assignor hereby sells,
assigns and transfers unto Assignee, its successors and assigns, its entire
right, title and interest in and to the Patents and Patent Applications
including all continuations, divisions, reissues and reexaminations thereof, the
inventions described therein, all patents which issue from any of the aforesaid
Patent Applications, and all patents and patent applications which claim
priority of any of the Patents and Patent Applications; together with all rights
to profits, royalties and damages for past and future infringement of any of the
Patents and Patent Applications by any party and all rights to sue for and
collect such profits, royalties and damages.
IN WITNESS WHEREOF, APPLIED POWER INC. and WRIGHT LINE INC. have caused
this Assignment to be executed by their duly authorized officer this ______ day
of ______________, 2000.
APPLIED POWER INC. (Assignor)
By ____________________________________
WRIGHT LINE INC. (Assignee)
By ___________________
<PAGE>
STATE OF WISCONSIN )
) SS
COUNTY OF MILWAUKEE)
Before me on this _____ day of ____________, 2000, came
_________________________, to me known to be the person named in the foregoing
assignment and that the execution thereof is acknowledged to be his\her free act
and deed.
(SEAL) _________________________________
Notary Public,
State of Wisconsin
My Commission Expires____________
-2-
<PAGE>
Exhibit 10.12
APW LTD.
OUTSIDE DIRECTORS' STOCK OPTION PLAN
I. INTRODUCTION
1.01 Purpose. This plan shall be known as the APW Ltd. Outside Directors'
Stock Option Plan (the "Plan"). The purpose of this Plan is to promote the
growth and development of APW Ltd. by providing increased incentives for the
directors of the Company. This Plan provides for the granting of non-qualified
stock options.
1.02 Effective Date. The effective date of the Plan shall be
______________, 2000, subject to approval of the Plan by the shareholders of APW
Ltd. Options granted prior to such shareholder approval shall be expressly
conditioned upon such shareholder approval of the Plan.
1.03 Substitute Options. APW Ltd. is the result of a spin-off from Applied
Power Inc. APW Ltd. directors who were previously directors of Applied Power
Inc. and were granted options to purchase Applied Power Inc. common stock shall
be granted substitute options to purchase APW Ltd. common stock under this Plan
on terms which are to be economically consistent with the prior Applied Power
Inc. stock options.
II. PLAN DEFINITIONS
2.01 Definitions. For Plan purposes, except where the context clearly
indicates otherwise, the following terms shall have the meanings set forth
below:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
<PAGE>
(c) "Committee" shall mean the Compensation Committee of the Board, as
described in Section 4.01.
(d) "Company" shall mean APW Ltd., a Bermuda corporation.
(e) "Company Stock" shall mean common stock of the Company and such other
stock and securities as may be substituted therefor pursuant to
Section 3.02.
(f) "Fair Market Value" on any date shall mean, with respect to Company
Stock, if the stock is then listed and traded on a registered national
securities exchange, or is quoted in the NASDAQ National Market
System, the mean of the high and low sale prices recorded in composite
transactions as reported in the Wall Street Journal (Midwest Edition).
In the absence of reported sales on such date, or if the stock is not
so listed or quoted, but is traded in the over-the-counter market,
"Fair Market Value" shall be the mean of the closing bid and asked
prices for such shares on such date as reported in the Wall Street
Journal (Midwest Edition), or, if not so reported as obtained from a
bona fide market maker in such shares.
(g) "Optionee" shall mean any person who has been granted an option under
the Plan.
(h) "Outside Director" shall mean a director of the Company who is not
also an employee of the Company.
(i) "Substitute Options" shall mean an option granted under the Plan in
substitution for an option to purchase common stock of Applied Power
Inc.
III. SHARES SUBJECT TO OPTION
3.01 Available Shares. The total number of shares of Company Stock that may
be issued under the Plan, including shares that may be issued upon exercise of a
Substitute Option, shall in the aggregate not exceed two hundred thousand
(200,000) shares. Shares subject to and not issued under an option which
expires, terminates, is canceled or forfeited for any reason under the Plan
shall again become available for the granting of options.
3.02 Changes in the Number of Available Shares. If any stock dividend is
declared upon the Company Stock, or if there is any stock split, stock
distribution, or other recapitalization of
2
<PAGE>
the Company with respect to the Company Stock, resulting in a split or
combination or exchange of shares, the aggregate number and kind of shares which
may thereafter be offered under the Plan shall be proportionately and
approximately adjusted and the number and kind of shares then subject to options
granted to employees under the Plan and the per share option price therefor
shall be proportionately and appropriately adjusted, without any change in the
aggregate purchase prices to be paid therefor.
IV. ADMINISTRATION
4.01 Administration by the Committee. The Plan shall be administered by the
Compensation Committee of the Board, or such other committee of the Board as the
Board may from time to time determine. The Committee shall be constituted so as
to permit the Plan to comply with the provisions of Rule 16b-3 under the
Securities Exchange Act of 1934 (or any successor rule).
4.02 Committee Powers. The Committee is empowered to adopt such rules,
regulations and procedures and take such other action as it shall deem necessary
or proper for the administration of the Plan and, in its discretion, may modify,
extend or renew any option theretofore granted. The Committee shall also have
authority to interpret the Plan, and the decision of the Committee on any
questions concerning the interpretation of the Plan shall be final and
conclusive. The Committee may consult with counsel, who may be counsel for the
Company, and shall not incur any liability for any action taken in good faith in
reliance upon the advice of counsel.
Subject to the provisions of the Plan, the Committee shall have full and
final authority to:
3
<PAGE>
(a) designate the persons to whom options shall be granted;
(b) grant options in such form and amount as the Committee shall
determine;
(c) impose such limitations, restrictions and conditions upon any such
option as the Committee shall deem appropriate, and
(d) waive in whole or in part any limitations, restrictions or conditions
imposed upon any such option as the Committee shall deem appropriate.
V. STOCK OPTIONS
5.01 General. Each year, upon the first meeting of the Company's Board of
Directors following the Company's annual meeting of shareholders, each person
then serving the Company as an Outside Director at that time shall automatically
be granted an option to purchase four thousand (4,000) shares, subject to
adjustment under Section 3.02 hereof. Each option granted under the Plan shall
be evidenced by a stock option agreement between the Company and the Grantee
which shall contain the terms and conditions required by this Article V, and
such other terms and conditions, not inconsistent herewith, as the Committee may
deem appropriate in each case.
5.02 Option Price. The price at which each share of Company Stock covered
by an option may be purchased shall be one hundred percent (100%) of the Fair
Market Value of the Company Stock on the date the option is granted.
5.03 Period for Exercise. Each stock option agreement shall state the
period or periods of time within which the option may be exercised by the
Optionee, in whole or in part, which shall be the period or periods of time as
may be determined by the Committee, provided that unless otherwise determined by
the Committee:
(a) Options will vest eleven (11) months after grant.
4
<PAGE>
(b) If the option is not earlier exercised or terminated, all rights to
exercise an option shall expire ten (10) years from the date the
option was granted.
(c) Upon termination of service as a director of the Company for any
reason other than death, after the director shall have continuously so
served for eleven (11) months after the date of option grant, the
director may, at any time within two (2) years after the date of such
termination, but in no event later than the date of expiration of the
option, exercise the option to the extent he or she was entitled to do
so on the date of termination.
(d) If an Optionee dies while serving as a director of the Company, or
within two (2) years after termination of such service, the personal
representative of the Optionee's estate or the person or persons to
whom the option is transferred by will or the laws of descent and
distribution may, at any time within two (2) years after the date of
death, but not later than the date of expiration of the option,
exercise the option to the extent the Optionee was entitled to do so
on the date of death.
(e) All options shall become immediately exercisable in full upon a change
in control (as determined by the Committee).
5.04 Method of Exercise. Each option may be exercised in whole or in part
from time to time as specified in the stock option agreement. Each Optionee may
exercise an option by giving written notice of the exercise to the Company,
specifying the number of shares to be purchased, accompanied by payment in full
of the purchase price therefor. The purchase price may be paid in cash, by
check, or, with the approval of the Committee, by delivering shares of Company
Stock which have been beneficially owned by the Optionee, the Optionee's spouse,
or both of them for a period of at least six months prior to the time of
exercise ("Delivered Stock") or a combination of cash and Delivered Stock.
Delivered Stock shall be valued at its Fair Market Value determined as of the
date of exercise of the option. No Optionee shall be under any obligation to
exercise any option hereunder. An Optionee shall not have any rights of a
stockholder with respect to the shares subject to the option until such shares
shall have been
5
<PAGE>
delivered to him or her.
5.05 Merger, Consolidation or Reorganization. In the event of a merger,
consolidation or reorganization with another corporation in which the Company is
not the surviving corporation, the Committee may, subject to the approval of the
Board of Directors of the Company, or the board of directors of any corporation
assuming the obligations of the Company hereunder, take action regarding each
outstanding and unexercised option pursuant to either clause (a) or (b) below:
(a) Appropriate provision may be made for the protection of such option by
the substitution on an equitable basis of appropriate shares of the
surviving corporation, provided that the excess of the aggregate Fair
Market Value of the shares subject to such option immediately before
such substitution over the exercise price thereof is not more than the
excess of the aggregate fair market value of the substituted shares
made subject to option immediately after such substitution over the
exercise price thereof; or
(b) The Committee may cancel such option. In such event, the Company, or
the corporation assuming the obligations of the Company hereunder,
shall pay the Optionee an amount of cash (less normal withholding
taxes) equal to the excess of the highest Fair Market Value per share
of the Company Stock during the 60-day period immediately preceding
the merger, consolidation or reorganization over the option exercise
price, multiplied by the number of shares subject to such option.
5.06 Withholding Taxes. Pursuant to applicable federal and state laws, the
Company is or may be required to collect withholding taxes upon the exercise of
an option or the lapse of stock restrictions. The Company may require, as a
condition to the exercise of an option or the issuance of a stock certificate,
that the Optionee concurrently pay to the Company (either in cash or, at the
request of Grantee but in the discretion of the Committee and subject to such
rules and regulations as the Committee may adopt from time to time, in shares of
Delivered Stock) the entire amount or a portion of any taxes which the Company
is required to withhold by reason of
6
<PAGE>
such exercise or lapse of restrictions, in such amount as the Committee or the
Company in its discretion may determine. In lieu of part or all of any such
payment, the Optionee may elect, subject to such rules and regulations as the
Committee may adopt from time to time, or the Company may require that the
Company withhold from the shares to be issued that number of shares having a
Fair Market Value equal to the amount which the Company is required to withhold.
VI. GENERAL
6.01 Nontransferability. No option shall be transferable by an Optionee
otherwise than by will or the laws of descent and distribution, provided that in
accordance with Internal Revenue Service guidance, the Committee, in its
discretion, may grant options that are transferable, without payment of
consideration, to family members of the Optionee or to trusts or partnerships
for such family members. The Committee may also amend outstanding stock options
to provide for such transferability.
6.02 General Restriction. Each option shall be subject to the requirement
that if at any time the Board or the Committee shall determine, in its
discretion, that the listing, registration, or qualification of securities upon
any securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such option or the issue or
purchase of securities thereunder, such option may not be exercised in whole or
in part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Board or the Committee.
7
<PAGE>
6.03 No Promise of Continued Service as a Director. Nothing in the Plan or
in any option granted under the Plan shall confer on any director any right to
continue as a director of the Company or affect the right of the Company to
terminate his or her service to the Company at any time.
6.04 Expiration and Termination of the Plan. The Plan will terminate ten
(10) years after the effective date of the Plan, except as to options then
outstanding under the Plan, which options shall remain in effect until they have
been exercised, the restrictions have lapsed or the options have expired or been
forfeited. The Plan may be abandoned or terminated at any time by the Board of
Directors of the Company, except with respect to any options then outstanding
under the Plan.
6.05 Amendments. The Board may from time to time amend, modify, suspend or
terminate the Plan; provided, however, that no such action shall be made without
shareholder approval where such change would be required in order to comply with
Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule) or
the Code. Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding options granted
under the Plan, accept the surrender of outstanding options (to the extent not
theretofore exercised), reduce the exercise price of outstanding options, or
authorize the granting of new options in substitution therefor (to the extent
not theretofore exercised). Notwithstanding the foregoing, no modification of an
option (either directly or through modification of the Plan) shall, without the
consent of the Optionee, alter or impair any rights of
8
<PAGE>
the Optionee under the option.
6.06 Construction. Except as otherwise required by applicable federal laws,
the Plan shall be governed by, and construed in accordance with, the laws of the
State of ____________________.
9
<PAGE>
Exhibit 21
STATE/COUNTRY OF
NAME OF SUBSIDIARY: INCORPORATION:
Eder Inc. Wisconsin
Aspen Power Systems LLC Virginia
Zero Corporation Delaware
Cambridge Aeroflow, Inc. Massachusetts
Electronic Solutions Nevada
Zero Enclosures Inc. Vermont
Air Cooling Technology, Inc. California
McLean Midwest Corporation Minnesota
Zero East Divsn. Zero Corp. Massachusetts
APW Enclosure Systems, Inc. Delaware
Zero Integrated Systems California
Innovative Metal Fabrication, Inc. California
Zero International, Inc. California
Tower Flame United Kingdom
Air Cargo Equipment (UK) Ltd. United Kingdom
Zero Cases Europe Ltd. United Kingdom
<PAGE>
STATE/COUNTRY OF
NAME OF SUBSIDIARY: INCORPORATION:
McLean Europe Ltd. United Kingdom
Zero McLean Europe Ltd. United Kingdom
Precision Fabrication Tech. Inc. Indiana
Metalade of Pennsylvania, Inc. New York
APW Enclosure Systems Holdings, Inc. Delaware
APW Enclosure Systems, LP Delaware
Wright Line
Danish Newco Denmark
APW Holding BV Netherlands
APW Finance Ltd. Dutch resident UK inc.
Wright Line Europe B.V. WLBV
APW Enclosures Ltd. (CFAB)
C Fab Development Ltd. (C Fab grp)
C Fab Manufacturing Ltd. (C Fab grp)
Horman Security Systems Ltd. Ireland
Horman Electronics Ltd. Ireland
Applied Power Far East (APFE) Japan
<PAGE>
STATE/COUNTRY OF
NAME OF SUBSIDIARY: INCORPORATION:
APW Products and Systems Holding BV Netherlands
APW Products and Systems BV Netherlands
APW Products and Systems Ltd. United Kingdom
Applied Power Ltd. United Kingdom
APW Enclosure Systems Holdings Ltd. United Kingdom
APW Enclosure Systems plc United Kingdom
Beeley Wood Holdings Limited United Kingdom
HSP Sheffield Limited United Kingdom
High Speed Production (Holdings) Ltd. United Kingdom
APW Enclosure Systems (UK) Limited United Kingdom
High Speed Production (Scotland) Ltd. United Kingdom
HSP Strathclyde Limited United Kingdom
APW Investments Limited United Kingdom
APW Holdings (Europe) Limited United Kingdom
Rubicon Netherlands BV Netherlands
J Higgins Manufacturing (Ireland) Ltd. Ireland
J Higgins Engineering (Galway) Ltd. Ireland
<PAGE>
STATE/COUNTRY OF
NAME OF SUBSIDIARY: INCORPORATION:
Artec SA France
Rubicon EMS Canada Inc. Canada
Rubicon USA Inc. USA
Aspen Motion Technologies Inc. Virginia
HSP USA Inc. USA
Airspeed LLC (joint venture) NC, USA
Magnet Applications Inc. USA
Magnet Applications US USA
Rubicon Finance Ireland Ireland
Rubicon Finance Limited United Kingdom
APW Holdings (UK) Limited United Kingdom
East Anglia Metal Merchants Ltd. United Kingdom
APW Electronics Group plc United Kingdom
Vero President Systems Limited India
APW Electronics Ltd. United Kingdom
Vero Distribution Ltd. (Wright Line) United Kingdom
<PAGE>
STATE/COUNTRY OF
NAME OF SUBSIDIARY: INCORPORATION:
APW New Forest Ltd. United Kingdom
Instant Finishers Ltd. United Kingdom
Malcoe Enclosures Ltd. United Kingdom
Malcoe Security Products Ltd. United Kingdom
Malcoe Telecommunication Ltd. United Kingdom
VERO Connectors Limited United Kingdom
VERO Circuitboards Limited United Kingdom
Electronics Packaging Limited United Kingdom
Imhof-Bedco Limited United Kingdom
VERO Electronics (Exports) Ltd. United Kingdom
Imhof-Bedco Special Products Ltd. United Kingdom
Imhof-Bedco Standards Products Ltd. United Kingdom
APW Elect. Overseas Investments Ltd. United Kingdom
VERO Electronics Inc. New York
Jia Huang Metal Industrial (Shanghai) Ltd. PRC
APW-VERO Electronics (China) Limited Hong Kong
APW-Vero Electronics Ple Limited Singapore
<PAGE>
STATE/COUNTRY OF
NAME OF SUBSIDIARY: INCORPORATION:
SJ Manufacturing Pte Ltd. Singapore
APW Electronics GmbH Germany
APW Electronics S.A. France
APW Electronics Srl Italy
APW Electronics AB Sweden
Danish Branch
Finnish Branch
APW Power Supplies AS Denmark
APW Power Supplies Limited United Kingdom
APW Finance Company Barbados
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Combined Balance Sheet as of February 28, 1999 and the Combined Statement of
Earnings for the six months ended February 28, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> FEB-28-1999
<CASH> 2,869
<SECURITIES> 0
<RECEIVABLES> 108,604
<ALLOWANCES> 2,279
<INVENTORY> 104,876
<CURRENT-ASSETS> 234,142
<PP&E> 302,373
<DEPRECIATION> 104,974
<TOTAL-ASSETS> 1,126,588
<CURRENT-LIABILITIES> 176,221
<BONDS> 708,805
0
0
<COMMON> 0
<OTHER-SE> 211,954
<TOTAL-LIABILITY-AND-EQUITY> 1,126,588
<SALES> 513,240
<TOTAL-REVENUES> 513,240
<CGS> 373,388
<TOTAL-COSTS> 373,388
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,579
<INCOME-PRETAX> 16,431
<INCOME-TAX> 5,413
<INCOME-CONTINUING> 11,018
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,018
<EPS-BASIC> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> APW Ltd. had no stock prior to the Distribution and therefore no EPS to
report.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Combined Balance Sheet as of February 29, 2000 and the Combined Statement of
Earnings for the six months ended February 29, 2000 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 250
<SECURITIES> 0
<RECEIVABLES> 102,036
<ALLOWANCES> 3,380
<INVENTORY> 130,599
<CURRENT-ASSETS> 247,504
<PP&E> 371,591
<DEPRECIATION> 176,744
<TOTAL-ASSETS> 1,184,502
<CURRENT-LIABILITIES> 220,337
<BONDS> 674,885
0
0
<COMMON> 0
<OTHER-SE> 236,655
<TOTAL-LIABILITY-AND-EQUITY> 1,184,502
<SALES> 566,216
<TOTAL-REVENUES> 566,216
<CGS> 416,517
<TOTAL-COSTS> 416,517
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,567
<INCOME-PRETAX> 18,916
<INCOME-TAX> 7,972
<INCOME-CONTINUING> 10,944
<DISCONTINUED> 0
<EXTRAORDINARY> (2,083)
<CHANGES> 0
<NET-INCOME> 8,861
<EPS-BASIC> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> APW Ltd. had no stock prior to the Distribution and therefore no EPS to
report.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Combined Balance Sheet as of August 31, 1997 and the Combined Statement of
Earnings for the 12 months ended August 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<CASH> 9,049
<SECURITIES> 0
<RECEIVABLES> 53,888
<ALLOWANCES> 897
<INVENTORY> 45,386
<CURRENT-ASSETS> 111,216
<PP&E> 138,751
<DEPRECIATION> 63,005
<TOTAL-ASSETS> 303,748
<CURRENT-LIABILITIES> 62,919
<BONDS> 110,828
0
0
<COMMON> 0
<OTHER-SE> 114,215
<TOTAL-LIABILITY-AND-EQUITY> 303,747
<SALES> 375,318
<TOTAL-REVENUES> 375,318
<CGS> 228,645
<TOTAL-COSTS> 228,645
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,518
<INCOME-PRETAX> 50,595
<INCOME-TAX> 18,889
<INCOME-CONTINUING> 31,696
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,696
<EPS-BASIC> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> APW Ltd. had no stock prior to the Distribution and therefore no EPS to
report.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Combined Balance Sheet as of August 31, 1998 and the Combined Statement of
Earnings for the 12 months ended August 31, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<CASH> 1,280
<SECURITIES> 0
<RECEIVABLES> 95,429
<ALLOWANCES> 2,499
<INVENTORY> 78,989
<CURRENT-ASSETS> 192,281
<PP&E> 230,326
<DEPRECIATION> 82,437
<TOTAL-ASSETS> 743,810
<CURRENT-LIABILITIES> 182,392
<BONDS> 337,008
0
0
<COMMON> 0
<OTHER-SE> 197,347
<TOTAL-LIABILITY-AND-EQUITY> 743,810
<SALES> 593,210
<TOTAL-REVENUES> 593,210
<CGS> 399,122
<TOTAL-COSTS> 399,122
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,623
<INCOME-PRETAX> 35,506
<INCOME-TAX> 17,159
<INCOME-CONTINUING> 18,347
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,347
<EPS-BASIC> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> APW Ltd. had no stock prior to the Distribution and therefore no EPS to
report.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Combined Balance Sheet as of August 31, 1999 and the Combined Statement of
Earnings for the 12 months ended August 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> AUG-31-1999
<CASH> 15,002
<SECURITIES> 0
<RECEIVABLES> 105,302
<ALLOWANCES> 3,537
<INVENTORY> 106,794
<CURRENT-ASSETS> 237,767
<PP&E> 357,393
<DEPRECIATION> 162,489
<TOTAL-ASSETS> 1,179,978
<CURRENT-LIABILITIES> 231,154
<BONDS> 725,579
0
0
<COMMON> 0
<OTHER-SE> 172,836
<TOTAL-LIABILITY-AND-EQUITY> 1,179,978
<SALES> 1,055,338
<TOTAL-REVENUES> 1,055,338
<CGS> 763,585
<TOTAL-COSTS> 763,585
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,857
<INCOME-PRETAX> 31,815
<INCOME-TAX> 11,390
<INCOME-CONTINUING> 20,425
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,425
<EPS-BASIC> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> APW Ltd. had no stock prior to the Distribution and therefore no EPS to
report.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.1
VERO GROUP PLC
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
VERO Group plc
We have audited the consolidated balance sheet of VERO Group plc as at
December 31, 1997 and the related consolidated profit and loss accounts and
consolidated statements of total recognized gains and losses and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to form an independent opinion on
these financial statements based on our audit.
We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of VERO Group plc
at December 31, 1997 and the consolidated results of its operations and its
consolidated cash flows for the year then ended in conformity with accounting
principles generally accepted in the United Kingdom which differ in certain
respects from those generally accepted in the United States (see Note 23 of
Notes to the Accounts).
/s/Ernst & Young
----------------
ERNST & YOUNG
Chartered Accountants
Southampton, England
March 23, 1998
<PAGE>
VERO GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 1997
<TABLE>
<CAPTION>
YEAR TO Year to
31 DECEMBER 31 December
1997 1996
Notes (Pounds)000 (Pounds)000
(unaudited)
--------------------------------------------------
<S> <C> <C> <C>
TURNOVER - CONTINUING OPERATIONS 1 101,219 106,062
Cost of sales (68,524) (68,280)
--------------------------------------
Gross profit 32,695 37,782
--------------------------------------
Distribution costs (13,749) (14,411)
Administration expenses (8,619) (9,257)
Income from interests in associated undertakings 7 39
--------------------------------------
OPERATING PROFIT - CONTINUING OPERATIONS 2 10,334 14,153
Net interest payable 5 (312) (562)
--------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 10,022 13,591
Taxation 6 (3,422) (4,926)
--------------------------------------
Profit on ordinary activities after taxation 6,600 8,665
Minority interest 5 -
--------------------------------------
PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY 6,605 8,665
--------------------------------------
Dividends 7 (3,454) (3,434)
--------------------------------------
Retained profit for the year 17 3,151 5,231
--------------------------------------
EARNINGS PER ORDINARY SHARE - BASIC 8 11.1P 14.7p
EARNINGS PER ORDINARY SHARE - FULLY DILUTED 8 10.9P 14.3p
--------------------------------------
</TABLE>
NOTE OF HISTORICAL COST PROFITS AND LOSSES. There is no difference between the
historical cost profit and the retained profit for the year ended 31 December
1997 or 31 December 1996.
2
<PAGE>
VERO GROUP PLC
CONSOLIDATED BALANCE SHEET
as at 31 December 1997
<TABLE>
<CAPTION>
1997 1996
Notes (Pounds)000 (Pounds)000
(unaudited)
----------------------------------------------------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 9 17,121 15,467
Investments 10 823 543
---------------------------------------
17,944 16,010
CURRENT ASSETS
Stocks 11 13,791 12,735
Debtors 12 18,096 17,982
Cash at bank and in hand 4,093 6,619
---------------------------------------
35,980 37,336
CREDITORS: amounts falling due within one year
Bank and other borrowings 13 (510) (493)
Other creditors 13 (22,706) (24,254)
---------------------------------------
(23,216) (24,747)
---------------------------------------
NET CURRENT ASSETS 12,764 12,589
---------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 30,708 28,599
---------------------------------------
CREDITORS: amounts falling due after more than one year
Bank and other borrowings 14 (6,210) (6,221)
Provision for liabilities and charges 15 (252) (142)
---------------------------------------
24,246 22,236
MINORITY INTERESTS (10) -
---------------------------------------
24,236 22,236
---------------------------------------
CAPITAL AND RESERVES
Called up share capital 16 3,007 3,007
Share premium account 17 18,231 18,231
Capital redemption reserve 17 9 9
Goodwill reserve 17 (11,471) (11,301)
Profit and loss account 17 14,460 12,290
---------------------------------------
Shareholders' funds 24,236 22,236
---------------------------------------
</TABLE>
3
<PAGE>
VERO GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 1997
<TABLE>
<CAPTION>
YEAR TO YEAR TO
31 DECEMBER 31 DECEMBER
1997 1996
Notes (Pounds)000 (Pounds)000
(unaudited)
-------------------------------------------------
<S> <C> <C> <C>
Net cash inflow from operating activities 18(a) 11,957 15,561
Returns on investments and servicing of finance 18(b) (310) (644)
Taxation (4,802) (2,498)
Capital expenditure 18(c) (5,054) (5,354)
Acquisitions and disposals 18(d) (1,057) (1,230)
Equity dividend paid (3,442) (1,179)
-----------------------------------
Cash (outflow)/inflow before use of liquid resources and financing (2,708) 4,656
Financing increase/(decrease) in debt 15 (2,009)
-----------------------------------
(Decrease)/increase in cash in the year (2,693) 2,647
-----------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR TO YEAR TO
31 DECEMBER 31 DECEMBER
1997 1996
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Notes (Pounds)000 (Pounds)000
(unaudited)
--------------------------------------------------
<S> <C> <C> <C>
(Decrease)/increase in cash in the year (2,693) 2,647
Cash (inflow)/outflow from movements in debt (15) 2,009
------------------------------------
Change in net debt resulting from cash flows (2,708) 4,656
Exchange adjustment 176 (79)
------------------------------------
Movement in net debt in the year (2,532) 4,577
Net debt at 1 January (95) (4,672)
------------------------------------
Net debt at 31 December 18(e) (2,627) (95)
------------------------------------
</TABLE>
4
<PAGE>
VERO GROUP PLC
ADDITIONAL STATEMENTS
for the year ended 31 December 1997
<TABLE>
<CAPTION>
YEAR TO Year to
31 DECEMBER 31 December
1997 1996
CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES (Pounds)000 (Pounds)000
(unaudited)
---------------------------------------
<S> <C> <C>
Profit for the financial year 3,151 5,231
Exchange loss on retranslation of net assets of subsidiary (981) (1,872)
undertakings
---------------------------------------
Total recognized gains relating to the year 2,170 3,359
---------------------------------------
YEAR TO Year to
31 DECEMBER 31 December
1997 1996
RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUND (Pounds)000 (Pounds)000
(unaudited)
---------------------------------------
<S> <C> <C>
Total recognized gains and losses 2,170 3,359
Other movements:
Goodwill written off (432) (718)
Adjustment to goodwill (note 17) 262 -
---------------------------------------
Net addition to shareholders' funds 2,000 2,641
Opening shareholders' funds 22,236 19,595
---------------------------------------
Closing shareholders' funds 24,236 22,236
---------------------------------------
</TABLE>
5
<PAGE>
VERO GROUP PLC
COMPANY BALANCE SHEET
as at 31 December 1997
<TABLE>
<CAPTION>
1997 1996
Notes (Pounds)000 (Pounds)000
(unaudited)
----------------------------------------------------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 9 72 101
Investments 10 22,008 22,008
------------------------------------------
22,080 22,109
CURRENT ASSETS
Debtors 12 14,368 14,000
Cash at bank and in hand 700 53
------------------------------------------
15,068 14,053
CREDITORS: amounts falling due within one year
Bank and other borrowings 13 (3,074) -
Other creditors 13 (8,381) (8,512)
------------------------------------------
(11,455) (8,512)
NET CURRENT ASSETS 3,613 5,541
TOTAL ASSETS LESS CURRENT LIABILITIES 25,693 27,650
------------------------------------------
CREDITORS: amounts falling due after more than one year
Bank and other borrowings 14 (1,500) (3,700)
------------------------------------------
24,193 23,950
------------------------------------------
CAPITAL AND RESERVES
Called up share capital 16 3,007 3,007
Share premium account 17 18,231 18,231
Capital redemption reserve 17 9 9
Profit and loss account 17 2,946 2,703
------------------------------------------
Shareholders' funds 24,193 23,950
------------------------------------------
</TABLE>
6
<PAGE>
VERO GROUP PLC
ACCOUNTING POLICIES
for the year ended 31 December 1997
A summary of the principal accounting policies, which have been consistently
applied throughout the year, is set out below:
a) BASIS OF PREPARATION The accounts are prepared under the historical cost
convention and in accordance with applicable United Kingdom accounting
standards.
b) BASIS OF CONSOLIDATION The Group accounts consolidate the accounts of VERO
Group plc and all its subsidiary undertakings drawn up to 31 December each
year. Undertakings, other than subsidiary undertakings, in which the Group
has an investment and over which it is in a position to exercise a
significant influence are treated as associated undertakings. The Group
accounts include the appropriate share of associated undertakings' results
and reserves.
No profit and loss account is presented for VERO Group plc as permitted by
section 230 of the Companies Act 1985.
c) GOODWILL Purchased goodwill is set off directly against reserves.
d) DEPRECIATION Depreciation is provided on all tangible fixed assets, other
than freehold land, at rates calculated to write off the cost, less
estimated residual value based on prices prevailing at the date of
acquisition, of each asset evenly over its expected useful life, as
follows:
<TABLE>
<S> <C>
Freehold buildings - over 25 years
Leasehold buildings: more than 40 years unexpired - over 40 years
Leasehold buildings: less than 40 years unexpired - equally over the life of the lease
Plant and machinery - over 3 years to 10 years
</TABLE>
Assets in the course of construction are stated at cost. No depreciation is
provided until the asset is brought into use.
e) STOCKS Stocks are stated at the lower of cost incurred in bringing each
product to its present location and condition and net realizable value, as
follows:
<TABLE>
<S> <C>
Raw materials, consumables and goods for resale - purchase cost on a first-in, first-out basis.
Work in progress and finished goods - cost of direct materials and labour plus
attributable overheads based on the normal
level of activity.
</TABLE>
Net realizable value is based on estimated selling price less any further
costs expected to be incurred to completion and disposal.
f) RESEARCH AND DEVELOPMENT Expenditure on research and development is
written off as incurred.
g) DEFERRED TAXATION Deferred taxation is provided using the liability method
on all timing differences which are expected to reverse in the future
without being replaced, calculated at the rate at which it is anticipated
the timing differences will reverse. Advance corporation tax which is
expected to be recoverable in the future is deducted from the deferred
taxation balance.
h) ADVANCE CORPORATION TAX Advance corporation tax is carried forward only to
the extent that it is recoverable in the foreseeable future.
7
<PAGE>
VERO GROUP PLC
ACCOUNTING POLICIES
for the year ended 31 December 1997
i) FOREIGN CURRENCIES Assets and liabilities in overseas currencies are
translated into sterling at the rates ruling at 31 December. Profit and
loss accounts in foreign currencies are translated into sterling at the
average rates applicable during the year. Exchange differences arising on
opening net assets, less any loans hedging those investments, are taken
directly to reserves, as are the differences arising between the
translation of revenue items at average and closing rates. Exchange
differences arising on trading transactions are taken to the profit and
loss account.
j) LEASING AND HIRE PURCHASE COMMITMENTS Assets held under finance leases and
hire purchase contracts, which are those where substantially all the risks
and rewards of ownership have passed to the Group, are capitalized in the
balance sheet and are depreciated over their useful lives. The interest
element of the rental obligations is charged to the profit and loss account
over the period of the lease and represents a constant proportion of the
balance of capital repayments outstanding.
Rentals paid under operating leases are charged to income on a straight
line basis over the lease term.
k) PENSIONS The Group operates defined benefit pension schemes in the UK
which require contributions to be made to separately administered funds.
Contributions to these funds are charged to the profit and loss account so
as to spread the cost of pensions over the employees' working lives within
the Group. The regular cost is attributed to individual years using the
projected unit credit method. Variations in pension cost, which are
identified as a result of actuarial valuations, are amortized over the
average expected remaining working lives of employees in proportion to
their expected payroll costs. Differences between the amounts funded and
the amounts charged to the profit and loss account are treated as either
provisions or prepayments in the balance sheet.
The Group also operates defined contribution pension schemes in some
overseas countries. Contributions are charged to the profit and loss
account as they become payable in accordance with the rules of the schemes.
8
<PAGE>
VERO GROUP PLC
NOTES TO THE ACCOUNTS
for the year ended 31 December 1997
1. TURNOVER AND SEGMENTAL ANALYSIS
- --------------------------------------------------------------------------------
Turnover represents the amounts derived from the provision of goods and services
which fall within the Group's ordinary activities, stated net of value added tax
and similar taxes. Turnover and pre-tax profit are attributable to one
continuing activity: the manufacture and sale of mechanical and electronic
components for the electronics and telecommunications industries. Turnover,
profit before taxation and net assets are analyzed as follows:
<TABLE>
<CAPTION>
Year to Year to
31 December 31 December
1997 1996
(Pounds)000 (Pounds)000
(unaudited)
------------------------------------
<S> <C> <C>
TURNOVER BY GEOGRAPHICAL DESTINATION
Sales to third parties:
United Kingdom 36,280 33,876
Continental Europe 45,486 55,576
Rest of World 19,453 16,610
------------------------------------
101,219 106,062
------------------------------------
TURNOVER BY GEOGRAPHICAL ORIGIN
Total sales (including inter-Group):
United Kingdom 68,630 70,794
Continental Europe 44,356 50,964
Rest of World 14,310 12,849
------------------------------------
127,296 134,607
------------------------------------
Inter-Group sales:
United Kingdom 1,345 2,445
Continental Europe 18,949 21,180
Rest of World 5,783 4,920
------------------------------------
26,077 28,545
------------------------------------
Sales to third parties:
United Kingdom 67,285 68,349
Continental Europe 25,407 29,784
Rest of World 8,527 7,929
------------------------------------
101,219 106,062
------------------------------------
PROFIT BEFORE TAXATION
United Kingdom 10,507 11,944
Continental Europe 1,999 4,188
Rest of World 307 718
------------------------------------
12,813 16,850
------------------------------------
Common costs (2,479) (2,697)
Net interest payable (312) (562)
------------------------------------
Profit on ordinary activities before taxation 10,022 13,591
------------------------------------
</TABLE>
9
<PAGE>
VERO GROUP PLC
NOTES TO THE ACCOUNTS
for the year ended 31 December 1997
<TABLE>
<CAPTION> Year to
YEAR TO 31 December
31 DECEMBER 1996
1997 (Pounds)000
1. TURNOVER AND SEGMENTAL INFORMATION continued (Pounds)000 (unaudited)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSETS
United Kingdom 15,893 14,052
Continental Europe 11,606 11,187
Rest of World 4,552 3,671
Unallocated net liabilities (7,815) (6,674)
-----------------------------------------
24,236 22,236
-----------------------------------------
Unallocated net assets/(liabilities) comprise:
Cash at bank and in hand 4,093 6,619
Bank overdrafts (334) (231)
Loans (6,386) (6,483)
Net tax liabilities (2,659) (4,182)
Deferred taxation (252) (142)
Dividend payable (2,267) (2,255)
Minority interests (10) -
------------------------------------------
Unallocated net liabilities (7,815) (6,674)
-----------------------------------------
</TABLE>
<TABLE>
<CAPTION> Year to
2. OPERATING PROFIT YEAR TO 31 December
31 DECEMBER 1996
1997 (Pounds)000
Operating profit is stated after charging: (Pounds)000 (unaudited)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Auditors' remuneration - audit services - UK 50 38
- audit services - overseas 53 38
- non-audit services - UK 59 58
- non-audit services - overseas 43 58
Depreciation 3,290 2,956
Research and development expenditure 1,293 1,218
Operating lease rentals - land and buildings 2,189 1,959
- other 793 579
</TABLE>
<TABLE>
<CAPTION> Year to
3. EMPLOYEE INFORMATION YEAR TO 31 December
31 DECEMBER 1996
The average monthly number of persons (including executive directors) 1997 number
employed by the Group was: NUMBER (unaudited)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Management and administration 147 133
Manufacturing, sales and distribution 1,520 1,431
------------------------------------
1,667 1,564
------------------------------------
Aggregate staff costs (for the above persons) (Pounds)000 (Pounds)000
- ----------------------------------------------------------------------------------------------------------
Wages and salaries 30,653 29,886
Social Security costs 4,107 4,177
Other pension costs 1,414 1,450
------------------------------------
36,174 35,513
------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION> Year to
YEAR TO 31 December
31 DECEMBER 1996
1997 (Pounds)000
4. DIRECTORS' EMOLUMENTS (Pounds)000 (unaudited)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fees - paid to directors 48 39
- paid to third parties 18 18
Executive directors' emoluments (excluding pension contributions) 227 245
----------------------------------
293 302
----------------------------------
</TABLE>
<TABLE>
<CAPTION> Year to
YEAR TO 31 December
31 DECEMBER 1996
1997 (Pounds)000
5. NET INTEREST PAYABLE (Pounds)000 (unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest receivable
Bank interest receivable 233 194
Other interest receivable - 11
-----------------------------------
233 205
-----------------------------------
Interest payable
Bank loans and overdrafts (523) (767)
Other loans (22) -
-----------------------------------
(545) (767)
-----------------------------------
Net interest payable (312) (562)
-----------------------------------
</TABLE>
<TABLE>
<CAPTION> Year to
YEAR TO 31 December
31 DECEMBER 1996
1997 (Pounds)000
6. TAXATION (Pounds)000 (unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
United Kingdom corporation tax 2,537 2,968
Deferred taxation (note 15) 340 603
Overseas taxation 562 1,291
Adjustments in respect of prior years - overseas taxation (6) 47
- current taxation - (149)
- deferred taxation (11) 166
-----------------------------------
3,422 4,926
-----------------------------------
</TABLE>
<TABLE>
<CAPTION> Year to
YEAR TO 31 December
31 DECEMBER 1996
1997 (Pounds)000
7. DIVIDENDS (Pounds)000 (unaudited)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity dividends on ordinary shares
Interim paid 2.0p (1996: 2.0p (unaudited)) 1,187 1,179
Final proposed 3.8p (1996: 3.8p (unaudited)) 2,267 2,255
---------------------------------
3,454 3,434
---------------------------------
</TABLE>
In accordance with the trust deed dated 31 October 1995 between the Company and
the trustee to the employee benefit trust, the trustee has elected to waive all
but 0.001p per share of dividend on the 454,324 shares held by the trust.
11
<PAGE>
VERO GROUP PLC
NOTES TO THE ACCOUNTS
for the year ended 31 December 1997
8. EARNINGS PER ORDINARY SHARE
- --------------------------------------------------------------------------------
The calculation of the basic earnings per ordinary share is based on earnings
for the financial year of (Pounds)6,605,000 (1996: (Pounds)8,665,000
(unaudited)) and 59,340,410 shares (1996: 59,019,149 (unaudited)), being the
weighted average number of shares in issue and ranking for dividend during the
year after adjustment to exclude those shares held by the employee benefit
trust.
The fully diluted earnings per share is based on 60,980,561 (1996: 60,863,460
(unaudited)) ordinary shares, to show the effect on earnings per share of shares
held by the employee benefit trust, of options granted over shares under the
Company's savings related share option schemes and adjusted earnings of
(Pounds)6,645,000 (1996: (Pounds)8,705,000 (unaudited)). Earnings have been
adjusted, in connection with the share options (note 16), by adding interest
deemed to be earned from 2 1/2 % Consolidated Stock on the proceeds of such
share issue.
<TABLE>
<CAPTION>
Assets in Plant
Land and course of machinery &
9. TANGIBLE FIXED ASSETS buildings construction motor vehicles Total
GROUP (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COST
At 1 January 1997 3,504 1,369 14,346 19,219
Additions 76 584 4,828 5,488
Disposals (87) - (628) (715)
Reclassifications 115 (1,022) 907 -
Exchange adjustment (458) (89) (937) (1,484)
--------------------------------------------------------------------------
At 31 December 1997 3,150 842 18,516 22,508
--------------------------------------------------------------------------
DEPRECIATION
At 1 January 1997 504 - 3,248 3,752
Charge for the year 127 - 3,163 3,290
Disposals (85) - (598) (683)
Reclassifications 1 - (1) -
Exchange adjustment (195) - (777) (972)
--------------------------------------------------------------------------
At 31 December 1997 352 - 5,035 5,387
--------------------------------------------------------------------------
NET BOOK VALUE
At 31 December 1997 2,798 842 13,481 17,121
--------------------------------------------------------------------------
At 31 December 1996 (unaudited) 3,000 1,369 11,098 15,467
--------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Assets in Plant
Land and course of machinery &
9. TANGIBLE FIXED ASSETS CONTINUED buildings construction motor vehicles Total
COMPANY (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COST
At 1 January 1997 - - 158 158
Additions - - - -
Disposals - - - -
-------------------------------------------------------------------------
At 31 December 1997 - - 158 158
------------------------------------------------------------------------
DEPRECIATION
At 1 January 1997 - - 57 57
Charge for the year - - 29 29
Disposals - - - -
-------------------------------------------------------------------------
At 31 December 1997 - - 86 86
------------------------------------------------------------------------
NET BOOK VALUE
At 31 December 1997 - - 72 72
-------------------------------------------------------------------------
At 31 December 1996 (unaudited) - - 101 101
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROUP Group
1997 1996
The net book value of land and building comprises: (Pounds)000 (Pounds)000
(unaudited)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Freehold 2,109 2,487
Long leasehold - -
Short leasehold 689 513
--------------------------------------
2,798 3,000
--------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Share of net
10. INVESTMENTS tangible assets
Group - associated undertakings (Pounds)000
- ---------------------------------------------------------------------------------------------------------
<S> <C>
At 1 January 1997 543
Exchange adjustment (25)
Second call on shares in VERO President Systems Limited 262
Investment in VERO Austin Electronics (China) Limited 39
Share of profits retained by associated undertakings 4
--------------------
At 31 December 1997 823
-------------------
</TABLE>
Income of (Pounds)7,000 and tax of (Pounds)3,000 have been dealt with in the
profit and loss account for the year in respect of associated undertakings.
During the year a second call was made on the shares issued by VERO President
Systems Limited at the time of its flotation. The Group did not subscribe for
any such shares and therefore is not required to make a further payment. The
Group only recognizes its share of the increased net assets on a received basis.
During the year, the Group's share of net tangible assets increased by
(Pounds)262,000 with an appropriate adjustment to goodwill (note 17).
The shares of the associated undertaking, VERO President Systems Limited, are
listed on the Pune and Bangalore stock exchanges in India. As at 31 December
1997 the market value of those shares was (Pounds)1,300,000.
13
<PAGE>
VERO GROUP PLC
NOTES TO THE ACCOUNTS
for the year ended 31 December 1997
10. INVESTMENTS CONTINUED
- ------------------------------------------------------------------------------
During the year the Group set up VERO Austin Electronics (China) Limited, a
company registered in Hong Kong. VERO Austin Electronics (China) Limited is a
distributor of networking products into the Hong Kong Chinese region. The
Group's interest in the company is 50%.
<TABLE>
<CAPTION>
Subsidiary Associated
undertaking undertaking Total
Company (Pounds)000 (Pounds)000 (Pounds)000
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
At 1 January and 31 December 1997 20,778 1,230 22,008
</TABLE>
Details of the principal investments in which the Group or the Company holds
more than 10% of the nominal value of any class of share capital are as follows:
<TABLE>
<CAPTION>
Country of
Registration
(or incorporation)
NAME OF SUBSIDIARY UNDERTAKINGS Holding and operation
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
VERO Electronics Limited 100% England
VERO Electronics Overseas Investments Limited 100% England
*VERO Electronics SA 100% France
*VERO Electronics GmbH 100% Germany
*VERO Electronics SrL 100% Italy
*VERO Electronics AB 100% Sweden
*VERO Electronics Inc. 100% USA
*VERO Electronics Pte Limited 60% Singapore
</TABLE>
During the year the Group set up VERO Electronics Pte Limited, a company
registered in Singapore. VERO Electronics Pte Limited is a distributor of
electronic components into the ASEAN region. The Group's interest in the
company is 60%.
<TABLE>
<CAPTION>
Country of
Registration
(or incorporation)
NAME OF ASSOCIATED UNDERTAKINGS Holding and operation
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
VERO President Systems Limited 35% India
*VERO Austin Electronics (China) Limited 50% Hong Kong
</TABLE>
VERO Electronics Overseas Investments Limited acts as the intermediate holding
company for overseas subsidiary undertakings. All other subsidiary and
associated undertakings are principally engaged in the manufacture and sale of
mechanical and electronic components for the electronics and telecommunications
industries (*denotes that shares are held through an intermediate holding
company).
The issued share capital of VERO President Systems Limited is 5,040,000 ordinary
shares of Rs 10 each.
The issued share capital of VERO Austin Electronics (China) Limited is 1,010,000
ordinary shares of HK$1 each.
14
<PAGE>
<TABLE>
<CAPTION>
GROUP Group
1997 1996
11. STOCKS (Pounds)000 (Pounds)000
(unaudited)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials 3,228 3,126
Work in progress 3,891 2,959
Finished goods and goods for resale 6,672 6,650
------------------------------------------
13,791 12,735
------------------------------------------
</TABLE>
The difference between purchase price or production cost of stock and their
replacement cost is not significant.
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1996 1997 1996
12. DEBTORS (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(unaudited) (unaudited)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trade debtors 16,126 16,569 - -
Amounts owed by subsidiary undertakings - - 11,603 11,234
Overseas tax 239 129 - -
Advance corporation tax 130 346 567 564
Deferred tax (note 15) - - 29 26
Other debtors 377 214 70 103
Prepayments and accrued income 1,224 724 22 14
Dividends receivable - - 2,077 2,059
--------------------------------------------------------------------
18,096 17,982 14,368 14,000
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROUP COMPANY
Amounts falling due after more than 1997 1996 1997 1996
one year included above are: (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(unaudited) (unaudited)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Overseas tax 110 129 - -
Advance corporation tax 130 346 864 564
Deferred taxation - - 29 26
Other debtors 4 - - -
Prepayments and accrued income 62 - - -
--------------------------------------------------------------------
306 475 893 590
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROUP COMPANY
13. CREDITORS: AMOUNTS FALLING DUE 1997 1996 1997 1996
WITHIN ONE YEAR (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(unaudited) (unaudited)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current installments due on loans (note 14) 176 262 - -
Bank overdraft (note 14) 334 231 3,074 -
Trade creditors 9,083 7,152 - -
Amounts owed to subsidiary undertakings - - 4,870 4,840
Current corporation tax 2,018 3,327 - 119
Overseas tax 146 471 - -
Advance corporation tax 864 859 864 859
Other taxes and social security costs 1,609 1,885 24 27
Other creditors 2,984 3,525 208 115
Accruals 3,735 4,780 148 297
Dividend payable 2,267 2,255 2,267 2,255
--------------------------------------------------------------------
23,216 24,747 11,455 8,512
--------------------------------------------------------------------
</TABLE>
Included in other creditors is an amount of (Pounds)525,000 (1996:
(Pounds)567,000 (unaudited)) in respect of the German pension scheme.
15
<PAGE>
VERO GROUP PLC
NOTES TO THE ACCOUNTS
for the year ended 31 December 1997
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1996 1997 1996
14. BANK AND OTHER BORROWINGS (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(unaudited) (unaudited)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Secured borrowings - - - -
Unsecured borrowings 6,386 6,483 1,500 3,700
--------------------------------------------------------------------
Total loans 6,386 6,483 1,500 3,700
Bank overdrafts 334 231 3,074 -
--------------------------------------------------------------------
6,720 6,714 4,574 3,700
--------------------------------------------------------------------
</TABLE>
Unsecured borrowings include certain borrowings on which rates of interest vary
in accordance with market rates. As at 31 December 1997, these borrowings bear
interest at rates of between 4.4375% and 8.5250%.
<TABLE>
<CAPTION>
CURRENCY ANALYSIS GROUP COMPANY
The outstanding loans are repayable in 1997 1996 1997 1996
the following currencies: (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(unaudited) (unaudited)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sterling 1,676 3,962 1,500 3,700
Deutsche Marks 1,689 889 - -
French Francs 1,263 - - -
US Dollars 1,758 1,632 - -
------------------------------------------------------------
6,386 6,483 1,500 3,700
------------------------------------------------------------
AMOUNTS FALLING DUE WITHIN ONE YEAR
Repayable other than by installments 176 262 - -
Repayable by installments - - - -
------------------------------------------------------------
176 262 - -
------------------------------------------------------------
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Repayable other than by installments
Between one and two years - - - -
Between two and five years 6,210 6,221 1,500 3,700
In five years or more - - - -
------------------------------------------------------------
6,210 6,221 1,500 3,700
------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
15. PROVISION FOR LIABILITIES AND CHARGES GROUP COMPANY
DEFERRED TAXATION (Pounds)000 (Pounds)000
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
At 1 January 1997 (142) 26
ACT movement 219 -
Arising during the year (340) 3
Prior year adjustment 11 -
---------------------------------------
At 31 December 1997 (252) 29
---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GROUP COMPANY
AMOUNT PROVIDED AMOUNT PROVIDED
1997 1996 1997 1996
DEFERRED TAX PROVIDED IN THE ACCOUNTS (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
(unaudited) (unaudited)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax effect of timing differences:
Excess of tax allowances over depreciation (684) (563) - -
Other short term timing differences (5) 203 29 26
------------------------------------------------------------------
(689) (360) 29 26
------------------------------------------------------------------
Less: advance corporation tax recoverable 437 218 - -
------------------------------------------------------------------
(252) (142) 29 26
------------------------------------------------------------------
</TABLE>
No provision has been made in respect of the tax which might become payable if
the retained profits of overseas subsidiary undertakings were fully distributed
to the United Kingdom because there is no current intention that such profits be
remitted. There is no unprovided deferred tax.
<TABLE>
<CAPTION>
16. SHARE CAPITAL 1997 1996 1997 1996
AUTHORIZED NO. No. (Pounds) (Pounds)
(unaudited) (unaudited)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ordinary shares of 5p each 75,000,000 75,000,000 3,750,000 3,750,000
------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1997 1996
ALLOTTED, CALLED UP AND FULLY PAID NO. No. (Pounds) (Pounds)
(unaudited) (unaudited)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ordinary shares of 5p each 60,131,827 60,131,827 3,006,591 3,006,591
------------------------------------------------------------------
</TABLE>
The Company operates a savings related share option scheme under which options
to subscribe for the Company's shares have been granted to subscribing
employees. At 1 January 1997 options under this scheme were outstanding over
731,633 shares at (Pounds)2.22 each, exercisable between February 2001 and
August 2001. During the year options were granted over 558,116 shares at
(Pounds)1.525 each, exercisable between June 2000 and June 2002. As at 31
December 1997 the total number of shares over which options were outstanding was
901,962 shares.
17
<PAGE>
VERO GROUP PLC
NOTES TO THE ACCOUNTS
for the year ended 31 December 1997
<TABLE>
<CAPTION>
Share Capital
premium Goodwill redemption Profit and
17. RESERVES account reserve reserve loss account
GROUP (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
At 1 January 1997 18,231 (11,301) 9 12,290
Retained profit for the year - - - 3,151
Exchange adjustment - - - (981)
Arising on acquisition - (432) - -
Adjustment to goodwill - 262 - -
---------------------------------------------------------------------
At 31 December 1997 18,231 (11,471) 9 14,460
---------------------------------------------------------------------
COMPANY
At 1 January 1997 18,321 - 9 2,703
Retained profit for the year - - - 243
---------------------------------------------------------------------
At 31 December 1997 18,321 - 9 2,946
---------------------------------------------------------------------
</TABLE>
The Company's profit for the financial year amounted to (Pounds)3,697,000 (1996:
(Pounds)3,589,000 (unaudited)).
On 10 January 1997 the Group acquired the assets and liabilities of a French
company, Societe de Realisations Metallurgiques SA ("SRM"). Net assets at the
date of acquisition were:
<TABLE>
<CAPTION>
Book Fair value to
value Group
(Pounds)000 (Pounds)000
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tangible fixed assets 557 557
Stock 29 29
------------------------------
Net assets 586 586
--------------
Goodwill arising on acquisition 432
-----------------
1,018
-----------------
Discharged in cash 1,018
-----------------
</TABLE>
The goodwill arising on acquisition of (Pounds)432,000 has been written off
against reserves.
The adjustment to goodwill in the year reflects the increase in the Group's
share of the net assets of VERO President Systems Limited following a second
call on the shares it issued at the time of its flotation (note 10).
As at 31 December 1997 accumulated goodwill on acquisitions written off to
reserves amounted to (Pounds)11,471,000 (1996: (Pounds)11,301,000 (unaudited)).
Shareholders' funds are attributable to equity interests only. As at 31
December 1997 and 31 December 1996 there were no non-equity interests.
18
<PAGE>
<TABLE>
<CAPTION>
YEAR TO Year to
31 DECEMBER 31 December
18. CASHFLOW 1997 1996
(A) RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS (Pounds)000 (Pounds)000
(unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating profit 10,334 14,153
Depreciation charges 3,290 2,956
Profit on disposal of tangible fixed assets (50) (142)
Share of profits of associated undertakings (7) (39)
Increase in stock (1,456) (125)
Increase in debtors (921) (278)
Increase/(decrease) in creditors and provisions 767 (964)
-------------------------------------
NET CASH INFLOW FROM CONTINUING OPERATING ACTIVITIES 11,957 15,561
-------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR TO Year to
31 DECEMBER 31 December
1997 1996
(B) RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (Pounds)000 (Pounds)000
(unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest received 230 200
Interest paid (540) (844)
-------------------------------------
(310) (644)
-------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR TO Year to
31 DECEMBER 31 December
1997 1996
(C) CAPITAL EXPENDITURE (Pounds)000 (Pounds)000
(unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchase of tangible fixed assets (5,136) (6,065)
Proceeds from sale of tangible fixed assets 82 711
-------------------------------------
(5,054) (5,354)
-------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR TO Year to
31 DECEMBER 31 December
1997 1996
(D) ACQUISITIONS AND DISPOSALS (Pounds)000 (Pounds)000
(unaudited)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Payment to acquire trade business (note 17) 1,018 -
Investments in associated undertakings 39 1,230
------------------------------------
1,057 1,230
------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1 January Exchange 31 DECEMBER
1997 Cash flow movement 1997
(E) ANALYSIS OF DEBT (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash in hand and at bank 6,619 (2,596) 70 4,093
Overdrafts (231) (97) (6) (334)
-------------------------------------------------------------------------------
6,388 (2,693) 64 3,759
Debt due after 1 year (6,221) (101) 112 (6,210)
Debt due within 1 year (262) 86 - (176)
-------------------------------------------------------------------------------
(95) (2,708) 176 (2,627)
-------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
VERO GROUP PLC
NOTES TO THE ACCOUNTS
for the year ended 31 December 1997
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1996 1997 1996
19. FINANCIAL COMMITMENTS (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
CAPITAL COMMITMENTS (unaudited) (unaudited)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital expenditure that has been contracted
for but has not been provided for in the accounts 1,076 782 - -
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 1996
(unaudited)
LEASING COMMITMENTS LAND AND Land and
At 31 December the Group had annual commitments BUILDINGS OTHER buildings Other
under non-cancelable operating leases as follows: (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expiring within one year 30 169 37 151
Expiring between two and five years 89 537 179 566
Expiring in over five years 2,073 - 1,947 -
------------------------------------------------------
2,192 706 2,163 717
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 1996
(unaudited)
LAND AND Land and
At 31 December the Company had annual commitments BUILDINGS OTHER buildings Other
under non-cancelable operating leases as follows: (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expiring within one year - - - -
Expiring between two and five years - 14 - 11
Expiring in over five years - - - -
------------------------------------------------------
- 14 - 11
------------------------------------------------------
</TABLE>
20. PENSION COMMITMENTS
- --------------------------------------------------------------------------------
The Group operates a number of pension schemes around the world.
The pension cost in respect of the UK pension schemes for the year ended 31
December 1997 amounted to (Pounds)1,196,000 (1996: (Pounds)1,178,000
(unaudited)). Contributions are charged to the profit and loss account so as to
spread the costs of pensions over employees' working lives within the Group.
The major scheme (which is operated in the UK) covers the majority of the
Group's UK employees and is a defined benefit scheme. The assets of the scheme
are held in a separately administered trust and managed by independent
professional investment managers. Contributions are determined by a
professionally qualified actuary on the basis of triennial actuarial valuations
using the projected unit credit funding method. The latest valuation was at 1
January 1995. The most significant actuarial assumptions made were that the rate
of return on investments would be 10% per annum and the rate of increase in
salaries would be 8% per annum. The actuarial valuation as at 1 January 1995
showed that the market value of the scheme's assets, ignoring any net current
assets which were assumed to be negligible, was (Pounds)12,154,773 and that the
actuarial value of those assets represented 102% of the benefits that had
accrued to members, after allowing for expected increases in salaries. In
accordance with the Actuary's recommendation the contributions of the Group are
currently 9.1% of pensionable salaries per annum. Employees' contributions at
the rate of 5% of pensionable salaries per annum are payable in addition.
A valuation as at 1 January 1998 is due to be undertaken by the Actuary, the
results of which will be available later this year, whereupon the Actuary's
recommendations regarding the funding rate will be reviewed.
The Group also operates a number of smaller pension schemes in the UK,
Continental Europe and the United States. These are set up in accordance with
local conditions and practices in the countries concerned.
20
<PAGE>
21. CONTINGENT LIABILITIES
- --------------------------------------------------------------------------------
The Company has guaranteed bank loan facilities to certain Group undertakings.
As at 31 December 1997 the maximum potential liability under these guarantees
was (Pounds)4,710,000 (1996: (Pounds)2,521,000 (unaudited)).
As at 31 December 1997, the Company has given guarantees and indemnities in the
ordinary course of business in respect of certain Group undertakings.
22. RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The Group recharges the VERO Group pension schemes with the costs of
administration and independent advisors borne by the Group. The total amount
recharged during the year to 31 December 1997 was (Pounds)210,000 (1996:
(Pounds)146,000 (unaudited)).
During the year VERO Group plc made sales of (Pounds)3,000 (1996: (Pounds)40,000
(unaudited)) to VERO President Systems Limited and sales of (Pounds)68,000 to
VERO Austin Electronics (China) Limited. The balances owing to the Group at 31
December 1997 were respectively (Pounds)13,000 (1996: (Pounds)40,000
(unaudited)) and (Pounds)68,000.
21
<PAGE>
23. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
- --------------------------------------------------------------------------------
The Group's consolidated accounts are prepared in accordance with accounting
principles generally accepted in the United Kingdom ("U.K. GAAP") which differ
from United States generally accepted accounting principles ("U.S. GAAP"). The
only significant difference applicable to the Group relates to the treatment of
goodwill.
In the consolidated accounts, goodwill arising on acquisition of subsidiaries is
written off to shareholders' funds. Under US GAAP, such goodwill would be
capitalised and amortised over its estimated useful life. For the purposes of
the reconciliation below, the useful life is taken as 40 years. Under US GAAP,
the recoverability of capitalised goodwill would be periodically evaluated based
on undiscounted cash flows and if any impairment is identified the amount of
such impairment would be calculated based on the estimated fair value of such
goodwill.
The following is a summary of the significant adjustment to profit for the year
and shareholders' funds which would be required if US GAAP were to be applied
instead of UK GAAP.
<TABLE>
<CAPTION>
Year to
31 December
1997
(Pounds) 000
- --------------------------------------------------------------------------------
<S> <C>
Profit for the year as reported in the consolidated profit
and loss account 6,605
Adjustment
Goodwill amortisation (287)
-------
Net income as adjusted to accord with US GAAP 6,318
=======
Shareholders' funds as reported in the consolidated balance sheet 24,236
Adjustment
Goodwill at cost 11,471
Amortisation (1,148)
-------
Net book amount 10,323
-------
Shareholders' funds as adjusted to accord with US GAAP 34,559
=======
</TABLE>
22
<PAGE>
Consolidated statement of cash flows
The consolidated statement of cash flows prepared under UK GAAP presents
substantially the same information as that required under US GAAP but it
differs, however, with regard to classification of items within the statements
and as regards the definition of cash under UK GAAP and cash and cash
equivalents under US GAAP.
Under US GAAP, cash and cash equivalents include short-term highly liquid
investments but do not include bank overdrafts. Under UK GAAP, cash flows are
presented separately for operating activities, returns on investments and
servicing of finance, taxation, capital expenditure and financial investment,
acquisitions, equity dividends and management of liquid resources and financing.
US GAAP, however, requires only three categories of cash flow activity to be
reported; operating, investing and financing. Cash flows from taxation and
returns on investments and servicing of finance shown under UK GAAP would be
included as operating activities under US GAAP. The payment of dividends would
be included in financing under US GAAP. Capital expenditure and financial
investment and acquisitions would be reported under investing under US GAAP.
The categories of cash flow activity under US GAAP can be summarised as follows:
As at
31 December
1997
(Pounds)000
- --------------------------------------------------------------------------------
Cash inflow from operating activities 6,845
Cash outflow on investing activities (6,111)
Cash outflow from financing activities (3,330)
------
Decrease in cash and cash equivalents (2,596)
Effect of foreign exchange rate changes 70
Cash and cash equivalents at 1 January 6,619
------
Cash and cash equivalents at 31 December 4,093
======
23
<PAGE>
Consolidated statement of cash flows
The consolidated statement of cash flows prepared under UK GAAP presents
substantially the same information as that required under US GAAP but it
differs, however, with regard to classification of items within the statements
and as regards the definition of cash under UK GAAP and cash and cash
equivalents under US GAAP.
Under US GAAP, cash and cash equivalents include short-term highly liquid
investments but do not include bank overdrafts. Under UK GAAP, cash flows are
presented separately for operating activities, returns on investments and
servicing of finance, taxation, capital expenditure and financial investment,
acquisitions, equity dividends and management of liquid resources and financing.
US GAAP, however, requires only three categories of cash flow activity to be
reported; operating, investing and financing. Cash flows from taxation and
returns on investments and servicing of finance shown under UK GAAP would be
included as operating activities under US GAAP. The payment of dividends would
be included in financing under US GAAP. Capital expenditure and financial
investment and acquisitions would be reported under investing under US GAAP.
The categories of cash flow activity under US GAAP can be summarised as follows:
As at
31 December
1997
(Pounds)000
- --------------------------------------------------------------------------------
Cash inflow from operating activities 6,845
Cash outflow on investing activities (6,111)
Cash outflow from financing activities (3,330)
------
Decrease in cash and cash equivalents (2,596)
Effect of foreign exchange rate changes 70
Cash and cash equivalents at 1 January 6,619
------
Cash and cash equivalents at 31 December 4,093
======
23
<PAGE>
Exhibit 99.2
Directors' responsibilities
Directors' responsibilities for the preparation of the financial statements
The directors are required by the Companies Act 1985 to prepare financial
statements which give a true and fair view of the state of affairs of the group
and the company at the end of each financial year and of its profit and cash
flows for the year. In preparing those financial statements, the directors are
required to:
. select suitable accounting policies and then apply them consistently;
. make judgments and estimates that are reasonable and prudent;
. state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
. prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the company will continue in
business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
group and the company and to enable them to ensure that the financial statements
comply with the Companies Act 1985. They are also responsible for safeguarding
the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors confirm that the financial statements comply with the above
requirements.
G S Papworth Company Secretary
26 August 1998
13
<PAGE>
Report of the Independent Chartered Accountants
To the Board of Directors and Shareholders of Rubicon Group Plc
In our opinion, the accompanying consolidated balance sheet, consolidated profit
and loss account and consolidated cash flow statement present fairly, in all
material respects, the financial position of Rubicon Group Plc and its
subsidiaries at 31 May 1998 and the results of its operations and cash flows for
the year then ended in conformity with generally accepted accounting principles
in the United Kingdom. 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 audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards in the
United Kingdom which are substantially consistent to those followed in the
United States. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material mis-statement. 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
audit provides a reasonable basis for our opinion expressed above.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Independent Chartered Accountants
As of 26 August 1998
Birmingham, England
14
<PAGE>
Rubicon Group plc Report and accounts 1998
Consolidated profit and loss account
for the year ended 31 May 1998
<TABLE>
<CAPTION>
Continuing Discontinued Total
operations operations 1998
Notes (Pounds)000 (Pounds)000 (Pounds)000
---------------------------------------------------------
<S> <C> <C> <C> <C>
Turnover 2 & 3 146,159 94,924 241,083
Cost of sales 3 (120,682) (76,568) (197,250)
---------------------------------------------------------
Gross profit 25,477 18,356 43,833
Other operating income and expenses 3 (10,173) (12,989) (23,162)
---------------------------------------------------------
Operating profit 2 & 3 15,304 5,367 20,671
Share of loss in associated undertaking (76) - (76)
Loss on disposal of discontinued operations 6 - (37,315) (37,315)
---------------------------------------------------------
Profit/(loss) on ordinary activities before interest 15,228 (31,948) (16,720)
Interest payable and similar charges 7 (2,149)
------------------
Loss on ordinary activities before taxation 8 (18,869)
Tax on loss on ordinary activities 9 (3,628)
------------------
Loss on ordinary activities after taxation (22,497)
Minority interests (55)
------------------
Loss for the year (22,552)
Dividends 10 (6,680)
Retained loss 22 (29,232)
------------------
Dividend per share 10 7.6p
------------------
Earnings per share 11 (25.7)p
Adjustment for loss on sale or termination of discontinued
operations after taxation 42.5p
------------------
Adjusted earnings per share 11 16.8p
------------------
</TABLE>
There is no material difference between the profit on ordinary activities before
taxation and the retained profit for the year stated above, and their historical
cost equivalents.
15
<PAGE>
Rubicon Group plc Report and accounts 1998
Consolidated balance sheet
at 31 May 1998
<TABLE>
<CAPTION>
1998
Notes (Pounds)000
---------------
<S> <C> <C>
Fixed assets
Tangible assets 12 20,092
Investments 13 152
---------------
20,244
Current assets
Stocks 14 13,206
Debtors: amounts falling due within one year 15 25,024
Debtors: amounts falling due after more than one year 15 11,528
Cash at bank and in hand 20,931
---------------
70,689
---------------
Creditors: amounts falling due within one year 16 (53,409)
---------------
Net current assets 17,280
---------------
Total assets less current liabilities 37,524
---------------
Creditors: amounts falling due after more than one year 17 (7,537)
Provisions for liabilities and charges 19 (1,421)
---------------
(8,958)
---------------
Net assets 28,566
---------------
Capital and reserves
Called-up share capital including non-equity shares 21 8,845
Share premium account 22 21,387
Merger reserve 22 18,760
Retained profits 31,004
Goodwill written off in respect of businesses sold 22 (51,485)
---------------
Profit and loss account 22 (20,481)
---------------
Shareholders' funds 23 28,511
Minority interests 55
---------------
28,566
---------------
</TABLE>
16
<PAGE>
Rubicon Group plc Report and accounts 1998
Company balance sheet
at 31 May 1998
<TABLE>
<CAPTION>
1998
Notes (Pounds)000
-----------
<S> <C> <C>
Fixed assets
Tangible assets 12 1,470
Investments 13 159,825
-------
161,295
Current assets
Debtors: amounts falling due within one year 15 3,047
Debtors: amounts falling due after more than one year 15 11,518
Cash at bank and in hand 13,629
-------
28,194
-------
Creditors: amounts falling due within one year 16 (54,663)
-------
Net current liabilities (26,469)
-------
Total assets less current liabilities 134,826
-------
Creditors: amounts falling due after more than one year 17 (5,048)
Provisions for liabilities and charges 19 (496)
-------
(5,544)
-------
Net assets 129,282
-------
Capital and reserves
Called-up share capital including non-equity shares 21 8,845
Share premium account 22 21,387
Merger reserve 22 96,377
Profit and loss account 22 2,673
-------
Shareholders' funds 129,282
-------
</TABLE>
17
<PAGE>
Rubicon Group plc Report and accounts 1998
Consolidated cash flow statement
for the year ended 31 May 1998
<TABLE>
<CAPTION>
1998
Notes (Pounds)000
------------------------
<S> <C> <C>
Net cash inflow from operating activities 25 13,968
Returns on investments and servicing of finance 25 (2,425)
Taxation (3,017)
Capital expenditure and financial investment 25 (11,634)
Acquisitions and disposals 25 36,685
Equity dividends paid (5,968)
-------
Cash inflow before financing 27,609
Financing 25
Issue of ordinary shares 274
Decrease in debt (11,967)
-------
(11,693)
-------
Increase in cash in the period 15,916
-------
Reconciliation of net cash flow to movement in net cash
Increase in cash in the period 15,916
Cash outflow on bank term loans 9,779
Cash outflow on finance leases 2,188
-------
Change in net cash arising from cash flows 27,883
Finance leases disposed of with subsidiaries 152
Translation differences 317
-------
Increase in net cash in period 28,352
Net borrowings at 1 June (13,003)
-------
Net cash at 31 May 18 15,349
-------
</TABLE>
Statement of recognised gains and losses
for the year ended 31 May 1998
<TABLE>
<CAPTION>
1998
(Pounds)000
-----------
<S> <C>
Loss on ordinary activities after taxation (22,497)
Dividends (6,680)
-----------
Retained loss for the year (29,177)
Exchange gain on foreign currency borrowings 756
Exchange loss on foreign currency net assets (758)
UK taxation on unrealised exchange gains (1,001)
-----------
Total net recognised losses (30,180)
-----------
</TABLE>
18
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
1 Principal accounting policies
The financial statements have been prepared in accordance with applicable
Accounting Standards in the United Kingdom. A summary of the more important
group accounting policies, which have been applied consistently, is set out
below.
Basis of accounting The financial statements have been prepared under the
historical cost convention, modified by the revaluation of certain fixed assets.
As permitted by Section 230 of the Companies Act 1985, the holding company's
profit and loss account has not been included in these financial statements.
Basis of consolidation The consolidated financial statements include the
company and its subsidiary undertakings. The results of subsidiaries acquired or
disposed of during the year are included in the consolidated profit and loss
account from the date of acquisition or to the date of disposal. Intra-group
sales and profits are eliminated fully on consolidation.
Goodwill Goodwill arising on consolidation represents the excess of the
consideration paid over the fair value of the identifiable net assets acquired.
Goodwill arising on the acquisition of subsidiaries is written off immediately
against reserves. Fixed asset investments are stated at cost or directors'
valuation. To the extent that the directors consider that the amount
recoverable in respect of the investments is less than the value at which they
are included in the balance sheet, a provision is made.
Research and development Expenditure on research is charged against the profit
and loss account in the period in which it is incurred. Development expenditure
relating to specific start-up projects is carried forward where the ultimate
viability has been assessed with reasonable certainty. Such expenditure is
amortised over the period expected to benefit.
Tangible fixed assets The cost of fixed assets is their purchase cost, together
with any incidental costs of acquisition.
Freehold and short leasehold land and buildings are stated at cost or valuation.
Periodically, full valuations are made by independent professionally qualified
valuers and in intervening years these valuations are updated by the directors
with the assistance of independent professional advice as required. Valuations
are made at open market value on an existing use basis.
Depreciation is calculated so as to write off the cost, or valuation, of
tangible fixed assets, less their estimated residual values, on a straight line
basis over the expected useful economic lives of the assets concerned. The
principal annual rates used for this purpose are:
- - Freehold buildings - over 50 years
- - Leasehold property - over the term of the lease
- - Plant and machinery - at rates between 4% and 25%
- - Fixture and fittings - at rates between 10% and 33%
The estimated useful lives of certain individual items of plant and machinery
have been extended during the year ended 31 May 1998. This does not represent a
change in accounting policy as the revised estimated useful lives of the assets
concerned remain consistent with the depreciation rates noted above. The impact
of this change is not material to the results for the year.
Operating leases Costs in respect of operating leases are charged on a straight
line basis over the lease term.
19
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
Finance leases Leasing agreements, which transfer to the group substantially
all the benefits and risks of ownership of an asset, are treated as if the asset
had been purchased outright. The assets are included in fixed assets and the
capital element of the leasing commitments is shown as obligations under finance
leases. The lease rentals are treated as consisting of capital and interest
elements. The capital element is applied to reduce the outstanding obligations
and the interest element is charged against profit in proportion to the reducing
capital element outstanding. Assets held under finance leases are depreciated
over the shorter of their estimated useful lives or their lease terms.
Stocks and work in progress Stocks and work in progress are valued at the lower
of cost and net realisable value. Finished goods and work in progress are
valued at works cost which includes an appropriate proportion of overhead
expenses.
Grants Grants that relate to specific capital expenditure or specific projects
are credited to the profit and loss account over the related asset's useful life
or duration of the project. Other grants are credited to the profit and loss
account when received.
Foreign exchange Profit and loss accounts of overseas companies are translated
at average exchange rates for the year. Assets and liabilities denominated in
foreign currencies are translated into sterling at the exchange rate ruling at
the balance sheet date. Differences arising from the translation, at closing
rates, of the net investment in overseas subsidiaries, less the applicable
foreign currency borrowings raised to finance such investments, are taken to
reserves. Exchange differences arising in the ordinary course of business are
included in the trading profit for the year.
Turnover Turnover, which excludes value added tax, represents the invoiced
value of goods and services supplied to customers outside the group.
Deferred tax Provision is made for deferred taxation, using the liability
method, on all material timing differences to the extent that it is probable
that a liability or asset will crystallise.
Pension costs The group operates a number of defined contribution schemes and
operated a defined benefit pension scheme until the divestment of the Lead
Products and Specialist Castings division on 31 March 1998. Pension costs for
the defined benefit scheme were accounted for on the basis of charging the
expected cost of providing pensions over the period during which the group
benefits from the employee's services. The effects of variations from regular
cost were spread over the expected average remaining service lives of members of
the schemes. Contributions to defined contribution schemes are charged to the
profit and loss account as they fall due.
20
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
2 Segmental analysis
a) By division
<TABLE>
<CAPTION>
1998
Turnover Profit Net assets
(Pounds)000 (Pounds)000 (Pounds)000
--------------------------------------------------
<S> <C> <C> <C>
Continuing operations
Electronic Manufacturing Services 132,013 14,154 19,164
Magnetics 14,146 2,516 2,585
--------------------------------------------------
Continuing operations 146,159 16,670 21,749
Discontinued operations 94,924 5,367 -
Holding companies - continuing - (1,366) (8,674)
---------------------------------
241,083
--------------
Operating profit 20,671
Associated undertaking (76) 142
Loss on sale or termination of discontinued operations (37,315)
Net interest payable (2,149)
-------------------
Group loss before taxation (18,869)
-------------------
Capital employed 13,217
Net cash 15,349
-----------------
Net assets 28,566
-----------------
</TABLE>
Group financing is undertaken centrally and group interest is not attributed to
classes of business. Capital employed has been calculated on net assets
excluding net borrowings.
b) Geographically
<TABLE>
<CAPTION>
1998
Operating
Turnover profit Net assets
(Pounds)000 (Pounds)000 (Pounds)000
-------------------------------------------------
<S> <C> <C> <C>
United Kingdom:
Continuing operations including acquisitions 100,295 7,814 (21,569)
Discontinued operations 59,842 2,441 -
Other Europe and rest of world:
Continuing operations including acquisitions 45,864 7,490 34,786
Discontinued operations 35,082 2,926 -
-------------------------------------------------
241,083 20,671 13,217
---------------------------------
Net cash 15,349
-----------
28,566
-----------
</TABLE>
<TABLE>
<CAPTION>
c) Turnover by geographic market 1998
(Pounds)000
-----------
<S> <C>
Continuing
United Kingdom 93,345
Other Europe 45,563
USA 6,869
Rest of World 382
-----------
146,159
-----------
Discontinued operations 94,924
-----------
241,083
-----------
</TABLE>
21
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
3 Analysis of operations
<TABLE>
<CAPTION>
Continuing Discontinued 1998
operations operations Total
(Pounds)000 (Pounds)000 (Pounds)000
---------------------------------------------------
<S> <C> <C> <C>
Turnover 146,159 94,924 241,083
Cost of sales (120,682) (76,568) (197,250)
---------------------------------------------------
Gross profit 25,477 18,356 43,833
Distribution costs (1,154) (3,909) (5,063)
Administrative expenses (9,378) (8,084) (17,462)
Other operating income/(expenses) 359 (996) (637)
---------------------------------------------------
(10,173) (12,989) (23,162)
---------------------------------------------------
Operating profit 15,304 5,367 20,671
---------------------------------------------------
</TABLE>
4 Employee information
The average monthly number of persons (including executive directors) employed
by the group during the year was:
<TABLE>
<CAPTION>
1998
Number
------
<S> <C>
Management and administration 437
Production and sales 2,358
------
2,795
------
1998
Staff costs (for the above persons) (Pounds)000
-----------
Wages and salaries 39,227
Social security costs 4,492
Other pension costs (see note 20) 1,999
-----------
45,718
-----------
</TABLE>
5 Directors' emoluments
<TABLE>
<CAPTION>
1998
(Pounds)000
-----------
<S> <C>
Aggregate emoluments 1,055
Pension contributions to defined contribution schemes 44
-----
1,099
-----
</TABLE>
No emoluments have been waived by any of the directors in the year.
At 31 May 1998, two directors were members of defined benefit pension schemes
and one director contributed to a money purchase scheme. Accrued entitlements
and transfer values in respect of the defined benefit schemes are given below.
22
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
5 Directors' emoluments continued
<TABLE>
<CAPTION>
Additional Pension
pension entitlement
earned in Accrued transfer value
the year entitlement for the year
(Pounds) (Pounds) (Pounds)
----------------------------------------------------
<S> <C> <C> <C>
A S Thompson 2,928 12,167 41,900
T R Wightman 2,924 7,300 42,600
</TABLE>
1 The pension entitlement shown is that which would be paid annually on
retirement based on service to the end of the year.
2 The increase in accrued pension during the year excludes any increase for
inflation.
3 The transfer value has been calculated on the basis of actuarial advice in
accordance with Actuarial Guidance Note GN11.
4 Members of the scheme have the option to pay Additional Voluntary
Contributions; neither the contributions nor the resulting benefits are included
in the above table.
<TABLE>
<CAPTION>
1998
The following amount were paid to the highest paid director: (Pounds)000
-----------
<S> <C>
Aggregate emoluments and benefits under long-term executive schemes 313
-----------
Accrued pension at year end 7
</TABLE>
6 Loss on termination of discontinued operations
<TABLE>
<CAPTION>
1998
(Pounds)000
-----------
<S> <C>
Loss on sale of businesses (37,315)
-----------
</TABLE>
The (Pounds)37.3m loss on disposal relates to the sale of the Lead Products and
Specialist Castings divisions and includes goodwill previously written off to
reserves of (Pounds)51.5m. There was no tax attributable to this transaction.
7 Interest payable and similar charges
<TABLE>
<CAPTION>
1998
(Pounds)000
-----------
<S> <C>
Bank and other interest on loans and overdrafts 2,189
Finance leases and hire purchase 182
Other interest 60
-----------
2,431
Interest receivable (282)
-----------
2,149
-----------
</TABLE>
23
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
8 Loss on ordinary activities before taxation
<TABLE>
<CAPTION>
1998
(Pounds)000
-----------
Loss on ordinary activities before taxation is stated after crediting:
<S> <C>
Grant income 406
And after charging:
Depreciation charge for the year:
Tangible owned fixed assets 3,968
Tangible fixed assets held under finance leases 717
Research, development and design expenditure 118
Auditors' remuneration (company (Pounds)39,000) 133
Fees to auditors for other services 396
Operating leases - plant and machinery 238
- other 568
-----------
</TABLE>
9 Tax on loss on ordinary activities
<TABLE>
<CAPTION>
1998
(Pounds)000
-----------
United Kingdom corporation tax at 31%:
<S> <C>
Current 2,084
Deferred 16
Irrecoverable ACT 822
Overseas corporation tax:
Current 1,939
Over provision in respect of previous years:
United Kingdom corporation tax (1,224)
Overseas (9)
-----------
3,628
-----------
</TABLE>
10 Dividends
<TABLE>
<CAPTION>
1998
(Pounds)000
-----------
<S> <C>
Declared interim 2.7p per share 2,369
Proposed final 4.9p per share 4,309
4.2% cumulative preference (non-equity shares) 2
-----------
6,680
-----------
pence
-----------
Total dividend per ordinary share 7.6
-----------
Dividend per preference share 2.1
-----------
</TABLE>
24
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
11 Earnings per share
a) The calculation of the earnings per ordinary share on the net basis is based
on the profit on ordinary activities after taxation, minority interests, and
preference dividends divided by the weighted average number of ordinary
shares in issue during the year of 87,749,343.
b) The adjusted earnings per share has been recalculated to eliminate the net
loss after taxation on sale or termination of discontinued operations. The
adjusted earnings per share figures have been provided in addition to the
disclosures required by SSAP 3 and FRS 3 since, in the opinion of the
directors, this will allow shareholders to consider the results of the
trading operations of the business.
c) There is no material difference between earnings per share and fully diluted
earnings per share in the year ended 31 May 1998. The deferred and
contingent consideration in respect of acquisitions will be fully satisfied
by cash payments rather than the issue of ordinary shares, and consequently
no disclosure of comparative fully diluted earnings per share information
has been made as the assumptions on which the calculation was based are no
longer applicable.
12 Tangible fixed assets
<TABLE>
<CAPTION>
Fixtures Capital
-------------Land and buildings----------- Plant and and work in
Freehold Long lease Short lease machinery fittings progress Total
Group (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cost
At start of year 17,439 1,470 282 68,377 2,830 921 91,319
Disposal of subsidiaries (14,153) - - (44,909) (698) (441) (60,201)
Exchange adjustments (632) (71) - (822) (17) (15) (1,557)
Additions 725 55 3 10,235 271 1,288 12,577
Disposals (192) (339) (41) (5,420) (128) (18) (6,138)
Reclassification - - - 238 (15) (223) -
------------------------------------------------------------------------------------------------------
At end of year 3,187 1,115 244 27,699 2,243 1,512 36,000
------------------------------------------------------------------------------------------------------
Depreciation
At start of year (2,772) (390) (36) (38,809) (2,010) - (44,017)
Disposal of subsidiaries 2,323 - - 24,112 577 - 27,012
Exchange adjustments 257 14 - 575 8 - 854
Charge for the year (95) (32) (16) (4,240) (302) - (4,685)
Disposals 162 181 24 4,485 76 - 4,928
------------------------------------------------------------------------------------------------------
At end of year (125) (227) (28) (13,877) (1,651) - (15,908)
------------------------------------------------------------------------------------------------------
Net book value
At 31 May 1998 3,062 888 216 13,822 592 1,512 20,092
------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
12 Tangible fixed assets continued
<TABLE>
<CAPTION>
Land and buildings Plant and Fixtures
Freehold Short lease machinery and fittings Total
Company (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cost
At start of year 799 37 17 211 1,064
Additions 571 - - 37 608
Disposals - - - (3) (3)
--------------------------------------------------------------------
At end of year 1,370 37 17 245 1,669
--------------------------------------------------------------------
Depreciation
At start of year - - (9) (133) (142)
Charge for the year - - (6) (51) (57)
--------------------------------------------------------------------
At end of year - - (15) (184) (199)
--------------------------------------------------------------------
Net book value
At 31 May 1998 1,370 37 2 61 1,470
--------------------------------------------------------------------
</TABLE>
Certain of the freehold land and buildings have been valued by the directors on
acquisition and the valuation represents the cost to the group and the company.
The net book value of tangible fixed assets includes an amount of
(Pounds)4,399,000 in respect of assets held under finance leases.
13 Fixed assets: investments
<TABLE>
<CAPTION>
Interest in
associated
undertaking Other Total
Group (Pounds)000 (Pounds)000 (Pounds)000
-----------------------------------------------------------
<S> <C> <C> <C>
At start of year 217 10 227
Exchange adjustments 1 - 1
Share of loss for the year (76) - (76)
-----------------------------------------------------------
At end of year 142 10 152
-----------------------------------------------------------
Interest in
associated Investment in
undertaking subsidiaries Total
Company (Pounds)000 (Pounds)000 (Pounds)000
-----------------------------------------------------------
Cost or valuation
At start of year 51 158,279 158,330
Acquisitions - 17,000 17,000
Disposals - (17,000) (17,000)
Deferred consideration adjustments - 1,520 1,520
Amortisation of set up costs (25) - (25)
-----------------------------------------------------------
At end of year 26 159,779 159,825
-----------------------------------------------------------
</TABLE>
26
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
13 Fixed assets: investments continued
The company indirectly holds all the ordinary allotted share capital of the
following principal subsidiaries:
<TABLE>
<CAPTION>
<S> <C> <C>
Country of
incorporation Principal activities
--------------------------------------------------------------
Rubicon HSP Limited England Electronic Manufacturing Services
J Higgins Engineering (Galway) Limited Ireland Electronic Manufacturing Services
Higgins Manufacturing Inc Canada Electronic Manufacturing Services
Arelec SA France Magnetics
Magnet Applications Limited England Magnetics
Magnet Applications Inc USA Magnetics
Rubicon Netherlands BV Netherlands International holding company
</TABLE>
The group holds 50% of the issued share capital of an associated undertaking,
Airspeed LLC, which is incorporated in North Carolina, USA, and which is engaged
in design and project management.
14 Stocks
<TABLE>
<CAPTION>
Group
1998
(Pounds)000
-------------------
<S> <C>
Raw materials and consumables 5,940
Work in progress 2,814
Finished goods and goods for resale 4,452
-------------------
13,206
-------------------
</TABLE>
At the year end the directors were not aware of any significant difference
between book value and the replacement cost of stocks.
15 Debtors
<TABLE>
<CAPTION>
Group Company
1998 1998
(Pounds)000 (Pounds)000
----------------------------------
<S> <C> <C>
Amounts falling due within one year
Trade debtors 18,994 2
Amounts owed by group undertakings - 96
Other debtors 2,749 1,761
Prepayments and accrued income 1,681 42
Corporation tax recoverable 820 59
Advance corporation tax recoverable 780 1,087
----------------------------------
25,024 3,047
Amounts falling due after one year
Other debtors 528 518
Deferred consideration 11,000 11,000
----------------------------------
11,528 11,518
----------------------------------
36,552 14,565
----------------------------------
</TABLE>
27
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
15 Debtors continued
Debtors falling due after more than one year include (Pounds)11m of secured loan
notes receivable no later than 2005 in respect of the disposal of the Lead
Products and Specialist Castings divisions.
Intercompany debtors included in the holding company's balance sheet at 31 May
1997 have been restated by (Pounds)420,000 to (Pounds)16,872,000 as a result of
an adjustment to intragroup dividends. A prior year adjustment has been made in
this respect to the profit and loss account (see note 22).
16 Creditors: amounts falling due within one year
<TABLE>
<CAPTION>
Group Company
1998 1998
(Pounds)000 (Pounds)000
-------------------------------
<S> <C> <C>
Bank loans and overdrafts 1,736 1,736
Obligations under finance leases 720 3
ECSC loans 156 -
Deferred consideration 11,222 11,222
Trade creditors 23,122 551
Amounts owed to subsidiary undertakings - 34,651
Corporation tax 3,672 -
ACT payable 1,669 1,077
Other taxation and social security 1,515 53
Other creditors 903 145
Accruals and deferred income 4,385 916
Dividends payable 4,309 4,309
-------------------------------
53,409 54,663
-------------------------------
</TABLE>
The bank loans and overdrafts are subject to a cross guarantee between the
parent company and certain of its subsidiaries.
17 Creditors: amounts falling due after one year
<TABLE>
<CAPTION>
Group Company
1998 1998
(Pounds)000 (Pounds)000
-------------------------------
<S> <C> <C>
Bank loans and overdrafts 1,736 1,736
Obligations under finance leases 984 -
ECSC loans 250 -
Deferred consideration 3,312 3,312
Corporation tax 682 -
Accruals and deferred income 573 -
-------------------------------
7,537 5,048
-------------------------------
</TABLE>
28
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
18 Net (cash)/borrowings
<TABLE>
<CAPTION>
Group Company
1998 1998
(Pounds)000 (Pounds)000
----------------------------------------
<S> <C> <C>
Due within one year
Bank term loans 1,736 1,736
Obligations under finance leases 720 3
ECSC loans 156 -
Due within one to two years
Bank term loans 1,736 1,736
Obligations under finance leases 510 -
ECSC loans 125 -
Due within two to five years
Obligations under finance leases 474 -
ECSC loans 125 -
----------------------------------------
Total borrowings 5,582 3,475
Cash at bank and in hand (20,931) (13,629)
----------------------------------------
Net (cash)/borrowings (15,349) (10,154)
----------------------------------------
</TABLE>
Bank term loans comprise foreign currency borrowings from Barclays Bank PLC, all
of which are repayable in fixed instalments falling due over the next two years.
The interest rate on these loans is the London interbank offer rate for deposits
in the respective currencies plus 0.75%.
ECSC loans represent borrowings from UK clearing banks, the funding cost of
which is supported by the European Coal and Steel Community. The loans are
fully secured by a charge over one of the group's freehold properties. The
interest rates on the ECSC loans range from 5.34% to 10.00%.
19 Provisions for liabilities and charges
<TABLE>
<CAPTION>
Vacant Reorganisation
Post leasehold and
retirement Deferred property rationalisation 1998
benefits taxation provisions provisions Total
Group (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
At start of year 2,843 1,059 663 1,034 5,599
Disposal of subsidiary undertakings (2,708) (359) (127) (200) (3,394)
Charged to profit and loss account 126 16 (160) (584) (602)
Utilised in the year (82) - (56) - (138)
Exchange movement (19) (25) - - (44)
--------------------------------------------------------------------------
At end of year 160 691 320 250 1,421
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Vacant Reorganisation
leasehold and
property rationalisation 1998
provisions provisions Total
Company (Pounds)000 (Pounds)000 (Pounds)000
-----------------------------------------------
<S> <C> <C> <C>
At start of year 311 - 311
Charged to profit and loss account (14) 250 236
Utilised in the year (51) - (51)
At end of year 246 250 496
-----------------------------------------------
</TABLE>
29
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
19 Provisions for liabilities and charges continued
The vacant leasehold property provisions have been assessed by the directors in
consultation with their property advisers and reflect anticipated future costs
to be incurred, discounted to their present value.
<TABLE>
<CAPTION>
Group
Amount Full potential
provided liability
1998 1998
Deferred taxation (Pounds)000 (Pounds)000
---------------------------------------
<S> <C> <C>
Accelerated capital allowances 1,818 1,846
Other short-term timing differences 71 71
Losses available for relief (186) (186)
---------------------------------------
1,703 1,731
Advance corporation tax recoverable (1,012) (1,012)
---------------------------------------
691 719
---------------------------------------
</TABLE>
There is no potential net liability for deferred tax in the holding company and
none has been provided.
20 Pension and similar obligations
The group operates a number of defined contribution pension schemes and operated
a defined benefit scheme until the divestment of the Lead Products and
Specialist Castings divisions on 31 March 1998. The assets of funded schemes
are held separately from the group in the name of the trustees. Certain
overseas schemes are unfunded. Contributions to all schemes are paid monthly and
at 31 May 1998 there were outstanding contributions of (Pounds)83,000. Employer
contributions during the period to 31 May 1998 were (Pounds)1,999,000.
Calder Group Pension Scheme The pension contributions paid by the group for the
defined benefit scheme (Calder Group Pension Scheme) were at the rate of 10.6%
of pensionable payroll. This rate was determined by a professionally qualified
actuary and was determined at the Scheme's valuation at 31 March 1997 which was
consistent with the funding method known as the projected unit method. The
assumptions that have the most significant effect on the valuations are return
on assets and those relating to the rates of increases in salaries. These may be
summarised as follows:
<TABLE>
<CAPTION>
Calder Group
Pension Scheme
-----------------------
Administrators Scottish Amicable
Date of actuarial review 31 March 1997
<S> <C>
Basis of valuation:
Return on assets 9.5%
Salary growth 7.5%
Value of investments - (Pounds)000 (Pounds)20,610
Value of accrued liabilities - (Pounds)000 (Pounds)20,150
-----------------------
Surplus - (Pounds)000 (Pounds)460
-----------------------
Level of funding 102%
</TABLE>
Employers' contributions during the period were (Pounds)1,189,000.
Defined contribution schemes The group operates defined contribution pension
schemes in the UK covering certain of its employees. Contributions to these
schemes are charged to the profit and loss account in the period as they fall
due. The group's total contributions to these funds for the year ending 31 May
1998 were (Pounds)412,000.
30
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
20 Pension and similar obligations continued
Overseas schemes Certain overseas subsidiaries operate defined benefit pension
schemes. An actuarial assessment has been made of the funding position of these
schemes and full provisions have been made. Contributions to overseas defined
benefit schemes and defined contribution schemes were (Pounds)398,000.
Dormant schemes There are several schemes which are in the process of being
wound up. These are:
- - Beeley Wood Holdings Limited Pension Scheme
- - Frederick Sage & Co Limited Retirement Benefits Scheme
- - Rubicon Group Directors Pension Plan
- - Strathclyde Fabricators Retirement Benefits Scheme
At 31 May 1998 the above schemes are all fully funded.
21 Called-up share capital
<TABLE>
<CAPTION>
1998
Group and company (Pounds)000
-----------------
<S> <C>
Authorised
100,000 4.2% cumulative preference shares of 50p each 50
114,339,548 ordinary shares of 10p each 11,434
-----------------
11,484
-----------------
Allotted, called-up and fully paid
At start of year - 87,724,038 ordinary shares of 10p each 8,772
Options exercised in the year - 224,147 ordinary shares of 10p 23
-----------------
At end of year - 87,948,185 ordinary shares of 10p each 8,795
100,000 4.2% cumulative preference shares of 50p each 50
-----------------
8,845
-----------------
</TABLE>
The cumulative preference shares are non-voting and have a preferential right to
return of capital on a winding up. The amount of shareholders' funds
attributable to these non-equity interest is (Pounds)50,000.
Options to subscribe for ordinary shares of 10p each have been granted to
certain directors and executives under the executive share option schemes.
Details of options granted to the directors are given in the Directors' report.
At 31 May 1998 other executives held options to subscribe for 704,929 ordinary
shares of 10p each, under this scheme. These options may be exercised at the
price and, during the periods, identified below.
<TABLE>
<CAPTION>
Option Number
- -----------Dates of exercise------------- price of
Earliest Latest (pence) options
- ----------------------------------------- --------------------------------
<S> <C> <C> <C>
11 August 1998 10 August 2005 182.00 46,500
21 August 1999 20 August 2006 175.00 34,284
5 August 2000 5 August 2007 103.50 493,000
27 November 2000 25 November 2007 109.50 39,145
25 March 2001 25 March 2008 195.50 92,000
----------------
704,929
----------------
</TABLE>
31
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
21 Called-up share capital continued
In addition to the options granted under the share option agreement and
disclosed in the Directors' report, other options over 224,147 ordinary shares
were exercised during the year under the terms of agreement.
Since 31 May 1998, no share options have been granted under the revenue approved
Rubicon Group plc Executive Share Option Scheme or under the unapproved Rubicon
Group plc 1996 Executive Share Option Scheme.
Shares to be issued At 31 May 1997 future consideration in respect of entities
acquired during the year to 31 May 1996 could, at the company's option, be
satisfied by means of the issue of ordinary shares of 10p each. The amount of
the future consideration payable was dependent on the trading results of the
entities acquired and the number of shares to be issued was estimated based on
the expectations of those future results.
Following the disposal of the Lead Products and Specialist Castings divisions in
the year ended 31 May 1998, it is now the intention of the directors that future
consideration will be settled by way of cash payments. It is therefore not
envisaged that shares will be issued in future periods and the liability for
future consideration is included within creditors in the balance sheet at 31 May
1998.
22 Reserves
<TABLE>
<CAPTION>
Share Profit and
premium Merger loss
account reserve account
Group (Pounds)000 (Pounds)000 (Pounds)000
----------------------------------------------------
<S> <C> <C> <C>
At start of year 21,136 (30,965) 9,754
Premium arising on the issue of additional shares 251 - -
Goodwill realised on disposal of businesses - 51,485 -
Goodwill adjustment arising from re-evaluation of deferred consideration - (1,519) -
Goodwill on acquisitions - (241) -
Exchange adjustments - - (1,003)
Retained profit for the year - - (29,232)
----------------------------------------------------
At end of year 21,387 18,760 (20,481)
----------------------------------------------------
Company
At start of year 21,136 96,377 4,025
Prior year adjustment/intragroup dividends - - (420)
---------------------------------------------------
At start of year as restated 21,136 96,377 3,605
Premium arising on the issue of additional shares 251 - -
Retained profit for the year - - (5,044)
Exchange adjustment - - 4,112
---------------------------------------------------
At end of year 21,387 96,377 2,673
---------------------------------------------------
</TABLE>
The amount of the consolidated loss after tax which is dealt with in the
financial statements of Rubicon Group plc was (Pounds)1,636,000 profit.
At 31 May 1998 the group reserves are stated after writing off goodwill of
(Pounds)82.5m.
32
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
23 Reconciliation of movements in shareholders' funds
<TABLE>
<CAPTION>
1998
(Pounds)000
-------------------
<S> <C>
Loss for the financial year (22,552)
Dividends (6,680)
Exchange rate adjustment (1,003)
-------------------
Movement in profit and loss reserves (30,235)
New share capital subscribed less expenses 274
Goodwill arising on acquisitions (241)
Other goodwill adjustments (1,519)
Goodwill crystallised on disposal of businesses 51,485
Adjustment to shares to be issued (20,371)
-------------------
Net reduction to shareholders' funds (607)
Opening shareholders' funds 29,118
-------------------
Closing shareholders' funds 28,511
-------------------
</TABLE>
24 Acquisition of subsidiary undertakings
On 28 January 1998, the group acquired Aspen Motion Technologies Inc. The net
assets at acquisition were (Pounds)63,000 and no provisions were necessary to
restate the assets to their fair values. Goodwill of (Pounds)241,000 arose at
acquisition. Additional future consideration of up to $17.7 million may become
payable if the business were to achieve $266 million operating profits. Further
details of this contingent liability are given in note 27.
The results of Aspen Motion Technologies Inc for the period to 31 May 1998 are
not material to the group's performance.
25 Cash flow statement
<TABLE>
<CAPTION>
1998
a) Reconciliation of operating profit to operating cash flows (Pounds)000
-------------------
<S> <C>
Operating profit before exceptional items 20,671
Depreciation charges 4,685
Amortisation of government grants (406)
Other non-cash items 22
Increase in stocks (4,642)
Increase in debtors (8,798)
Increase in creditors 3,506
-------------------
Net cash inflow from operating activities before exceptional items 15,038
Cash paid in respect of exceptional items and property provisions (1,070)
-------------------
Net cash inflow from operating activities 13,968
-------------------
</TABLE>
33
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
25 Cash flow statement continued
<TABLE>
<CAPTION>
1998
b) Analysis of cash flows netted in the cash flow statement (Pounds)000
-----------
<S> <C>
Returns on investments and servicing of finance
Interest paid (2,617)
Interest received 192
-----------
Net cash outflow for returns on investments and servicing of finance (2,425)
===========
Capital expenditure and financial investment
Fixed asset additions (12,577)
Fixed asset sale proceeds 757
Government grants received 186
-----------
Net cash outflow for capital expenditure and financial investment (11,634)
===========
Acquisitions and disposals
Purchase of subsidiary undertakings (241)
Deferred consideration paid for acquisitions (7,356)
Disposal of subsidiary undertakings 44,282
-----------
Net cash inflow for acquisitions and disposals 36,685
===========
Financing
Issue of ordinary share capital 274
Repayment of principal under term loans (9,779)
Net increase of principal under finance leases (2,188)
-----------
Decrease in borrowings (11,967)
-----------
Net cash outflow from financing (11,693)
===========
<CAPTION>
Purchases Disposals
1998 1998
c) Purchase and disposal of subsidiary undertakings (Pounds)000 (Pounds)000
----------------------------
<S> <C> <C>
Net assets (acquired)/sold (63) 43,009
Goodwill including costs (241) 51,485
----------------------------
(304) 94,494
Loss on disposal - (37,315)
Bank overdrafts less cash 63 (288)
Deferred consideration (7,356) (12,609)
----------------------------
Net cash (outflow)/inflow (7,597) 44,282
============================
</TABLE>
Group treasury is undertaken centrally and the treasury functions of
acquisitions during the year have been absorbed into the group arrangements. As
a result it is impracticable to isolate the cash flows of acquisitions and
disposals in a manner which is meaningful.
34
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
25 Cash flow statement continued
<TABLE>
<CAPTION>
Beginning Exchange End of
of year Cash flow differences year
d) Analysis of borrowings (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash at bank and in hand 6,860 14,510 (439) 20,931
Overdrafts (1,406) 1,406 - -
-------------------------------------------------------------------------------
5,454 15,916 (439) 20,931
Borrowings due within one year (3,827) 1,399 536 (1,892)
Borrowings due after one year (10,586) 8,380 220 (1,986)
Finance leases - continuing (4,044) 2,188 - (1,704)
- disposed of with subsidiaries - 152 - -
-------------------------------------------------------------------------------
(13,003) 28,035 317 15,349
-------------------------------------------------------------------------------
</TABLE>
26 Capital commitments
<TABLE>
<CAPTION>
Group
1998
(Pounds)000
-------------------
<S> <C>
Capital expenditure that has been contracted for but has not been provided for in the accounts 5,574
-------------------
</TABLE>
There is no capital expenditure contracted for but not provided in the holding
company.
27 Contingent liabilities
On 28 January 1998, Rubicon Group plc entered into an agreement for the
acquisition of the whole of the issued share capital of Aspen Motion
Technologies Inc. The initial consideration for this acquisition was $496,000.
Additional consideration will become payable over the period to 31 May 2008.
The amount of the additional consideration is dependent on the achievement of
specified rates of return on the group's investment and on the operating profit
achieved by Aspen Motion Technologies Inc over the period to 31 May 2008.
Aspen Motion Technologies Inc was originally established to exploit
technological developments in processes for the production of injection moulded
magnets. The company is in the later stages of the development of its products
and the extent of their success in the market place is currently difficult to
assess. Consequently, it is not possible for the directors to determine with
any certainty the future trading performance of Aspen Motion Technologies Inc
and, therefore, the level of the additional payments of consideration, if any,
that will become due under the terms of the share purchase agreement. As a
result, a specific provision for this liability has not been included in the
balance sheet of the group at 31 May 1998. However, the directors do not expect
the total liability for future consideration in respect of Aspen Motion
Technologies Inc to exceed $17.7m which would be self funding and would be
payable only if the business were to achieve operating profits of $266m.
The group's bankers have guaranteed certain of its obligations in respect of
deferred consideration for acquisitions amounting to (Pounds)8.7m and have
recourse to the company in the event that those guarantees crystallise.
The group has obtained certain grant assistance and is liable to repay amounts
received if it fails to comply with the terms of the grant assistance for a
period of 18 months from completion of the relevant project.
The company has provided irrevocable guarantees covering the payment of all the
liabilities of its subsidiary companies in Ireland in accordance with Section 17
Companies (Amendment) Act 1986 (Ireland).
35
<PAGE>
Rubicon Group plc Report and accounts 1998
Notes to the financial statements
27 Contingent liabilities continued
Under a group VAT registration, the company is jointly and severally liable for
the VAT liabilities of its UK subsidiaries. The contingent liability at the year
end was (Pounds)837,000.
28 Financial commitments
<TABLE>
<CAPTION>
1998
Land and
buildings Other
(Pounds)000 (Pounds)000
-------------------------------
<S> <C> <C>
On leases expiring:
Within one year 47 25
Between two and five years inclusive 414 369
After five years 567 -
-------------------------------
1,028 394
-------------------------------
</TABLE>
36
