<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended JUNE 30, 1996
-------------
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 1-988
-----
THE COLEMAN COMPANY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3639257
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1526 COLE BLVD., SUITE 300, GOLDEN, COLORADO 80401
-------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
303-202-2400
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirement for the past 90 days. X Yes No
--- ---
The number of shares outstanding of the registrant's par value $.01 common
stock was 53,214,220 shares as of August 1, 1996 of which 44,067,520 shares
were held by an indirect wholly-owned subsidiary of Mafco Holdings Inc.
Exhibit Index on Page 16.
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Earnings
Three months ended June 30, 1996 and 1995 and
Six months ended June 30, 1996 and 1995............. 3
Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1995.................. 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995.............. 5
Notes to Condensed Consolidated Financial Statements...... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................... 15
Item 4. Submission of Matters to a Vote of Security Holders....... 15
Item 6. Exhibits and Reports on Form 8-K.......................... 16
Signatures................................................ 17
2
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues................................. $452,654 $311,281 $726,214 $535,305
Cost of sales................................ 315,116 211,706 507,710 367,234
-------- -------- -------- --------
Gross profit................................. 137,538 99,575 218,504 168,071
Selling, general and administrative
expenses.................................... 78,916 45,839 125,653 85,436
Interest expense............................. 10,732 6,393 18,813 12,003
Amortization of goodwill and deferred
charges..................................... 2,897 1,870 5,144 3,748
Other expense (income), net.................. 627 25 657 (69)
-------- -------- -------- --------
Earnings before income taxes,
minority interest and extraordinary item.... 44,366 45,448 68,237 66,953
Provision for income tax expense............. 14,369 17,854 23,201 26,112
Minority interest in earnings of
Camping Gaz................................. 1,951 -- 1,951 --
-------- -------- -------- --------
Earnings before extraordinary item........... 28,046 27,594 43,085 40,841
Extraordinary loss on early extinguishment
of debt, net of income tax benefit.......... (647) -- (647) --
-------- -------- -------- --------
Net earnings................................. $ 27,399 $ 27,594 $ 42,438 $ 40,841
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per share:
Earnings before extraordinary item....... $ .53 $ .52 $ .81 $ .77
Extraordinary item....................... (.01) -- (.01) --
-------- -------- -------- --------
Net earnings........................ $ .52 $ .52 $ .80 $ .77
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average common shares outstanding... 53,190 53,267 53,178 53,301
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
1996 1995
---------- ------------
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . $ 11,364 $ 12,065
Accounts receivable, net . . . . . . . . . . . . 370,409 165,309
Inventories . . . . . . . . . . . . . . . . . . . 291,995 216,236
Income tax refunds receivable - affiliate . . . . -- 2,400
Deferred tax assets . . . . . . . . . . . . . . . 20,115 20,481
Prepaid assets and other . . . . . . . . . . . . 20,788 22,308
---------- -----------
Total current assets . . . . . . . . . . . . 714,671 438,799
Property, plant and equipment, net . . . . . . . . . 212,257 162,691
Intangible assets related to businesses
acquired, net . . . . . . . . . . . . . . . . . . . $ 312,940 217,289
Deferred tax assets and other . . . . . . . . . . . . 41,885 25,708
---------- -----------
$1,281,753 $ 844,487
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable . . . . . . . . . . . $ 203,519 $ 90,679
Other current liabilities 113,932 59,188
---------- -----------
Total current liabilities . . . . . . . . . 317,451 149,867
Long-term debt . . . . . . . . . . . . . . . . . . . 558,537 354,206
Other liabilities . . . . . . . . . . . . . . . . . . 65,909 48,072
Minority interest . . . . . . . . . . . . . . . . . . 5,393 --
Contingencies
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . 532 532
Additional paid-in capital . . . . . . . . . . . 166,256 165,466
Retained earnings . . . . . . . . . . . . . . . . 167,163 126,179
Currency translation adjustment . . . . . . . . . 512 165
---------- -----------
Total stockholders' equity . . . . . . . . . 334,463 292,342
---------- -----------
$1,281,753 $ 844,487
---------- -----------
---------- -----------
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
----------------------
1996 1995
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 42,438 $ 40,841
--------- --------
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Depreciation and amortization . . . . . . . . . . . 17,112 12,568
Extraordinary loss on early extinguishment of debt. 1,078 --
Minority interest in earnings of Camping Gaz. . . . 1,951 --
Change in assets and liabilities:
Increase in receivables . . . . . . . . . . . (141,964) (85,154)
Increase in inventories . . . . . . . . . . . (14,318) (8,509)
Increase in accounts payable . . . . . . . . . 24,298 12,397
Other, net . . . . . . . . . . . . . . . . . . 23,055 23,797
--------- --------
(88,788) (44,901)
--------- --------
Net cash used by operating activities . . . . . . . . . . . (46,350) (4,060)
--------- --------
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . . (18,803) (10,664)
Purchases of businesses, net of cash acquired . . . . . . . (158,228) (1,359)
Proceeds from sale of fixed assets . . . . . . . . . . . . . 433 731
--------- --------
Net cash used by investing activities . . . . . . . . . . . (176,598) (11,292)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments of) proceeds from revolving credit
agreement borrowings . . . . . . . . . . . . . . . . . . (31,996) 3,544
Net change in short-term borrowings. . . . . . . . . . . . . 24,068 16,752
Proceeds from issuance of long-term debt . . . . . . . . . . 235,000 --
Repayment of long-term debt. . . . . . . . . . . . . . . . . (5,917) (3,123)
Debt issuance and refinancing costs . . . . . . . . . . . . (1,765) --
Purchases of Company common stock . . . . . . . . . . . . . (2,329) (4,086)
Proceeds from stock options exercised . . . . . . . . . . . 1,655 3,510
--------- --------
Net cash provided by financing activities . . . . . . . . . 218,716 16,597
--------- --------
Effect of exchange rate changes on cash . . . . . . . . . . 3,531 (2,801)
--------- --------
Net decrease in cash and cash equivalents . . . . . . . . . (701) (1,556)
Cash and cash equivalents at beginning of the period . . . . 12,065 8,319
--------- --------
Cash and cash equivalents at end of the period . . . . . . . $ 11,364 $ 6,763
--------- --------
--------- --------
See Notes to Condensed Consolidated Financial Statements
5
</TABLE>
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
The Coleman Company, Inc. ("Coleman" or "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. The balance sheet at December
31, 1995 has been derived from the audited financial statements for that date
but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1995.
2. CAPITAL STOCK AND EARNINGS PER COMMON SHARE
On May 31, 1996, the Company's Board of Directors declared a two-for-one
stock split on its Common Stock, par value $.01 per share, effected in the
form of a dividend to stockholders of record on June 28, 1996 which was paid
on July 15, 1996. All references herein to number of shares and per share
amounts in the condensed consolidated financial statements and notes thereto
have been adjusted to reflect the stock split on a retroactive basis for all
periods.
3. INVENTORIES
The components of inventories consist of the following:
June 30, December 31,
1996 1995
--------- ------------
Raw material and supplies . . . $ 84,066 $ 57,653
Work-in-process . . . . . . . . 10,355 5,389
Finished goods . . . . . . . . 197,574 153,194
--------- ---------
$ 291,995 $ 216,236
--------- ---------
--------- ---------
4. ACQUISITIONS
On January 2, 1996, the Company purchased substantially all the assets
and assumed certain liabilities of Seatt Corporation ("Seatt"), a leading
designer, manufacturer and distributor of a broad range of safety related
electronic products for residential and commercial applications. The Seatt
acquisition, which was accounted for under the purchase method, was completed
for approximately $64,982 including fees and expenses and was financed
through borrowings under the Company Credit Agreement, and assumption of
certain liabilities in the amount of $7,157 by the Company. The results of
operations of Seatt have been included in the consolidated financial
statements from the date of acquisition. In connection with the preliminary
purchase price allocation of the Seatt acquisition, the Company recorded
goodwill of approximately $37,821. The Company is amortizing this amount
over 40 years on the straight-line method.
6
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
On February 28, 1996, the Company and Butagaz S.N.C. ("Butagaz"), a
subsidiary of Societe de Petroles Shell S.A., jointly announced they had
entered into an agreement (the "Share Purchase Agreement") in connection with
the sale to Coleman of approximately 60 percent of the outstanding shares of
Application des Gaz, S.A. ("ADG" or "Camping Gaz"). Pursuant to the terms of
the Share Purchase Agreement and other related documents dated February 27,
1996, Coleman has the right to, and intends to, acquire the remaining shares
held by Butagaz, which represents approximately 10% of the outstanding shares
of ADG, and accordingly considers this 10% stock ownership as under the
control of the Company. The Company obtained effective control of Camping Gaz
on March 1, 1996. Camping Gaz is the leading manufacturer and distributor of
camping appliances in Europe. On June 24, 1996, Coleman commenced a public
tender offer for the purchase of all the publicly traded outstanding shares
of ADG, or approximately 30% of the outstanding shares. The tender offer
period expired in July 1996 with approximately 28% of the outstanding shares
of ADG tendered for purchase. The Company is currently completing the
necessary steps to acquire the remaining publicly held stock and expects to
complete those actions during the third quarter of 1996. As of June 30, 1996,
the acquisition of approximately 89% of the outstanding shares of ADG amounts
to approximately French Franc 443,646 (approximately $87,622 based on the
exchange rates in effect on the dates paid) including estimated fees and
expenses. The acquisition of Camping Gaz is being accounted for under the
purchase method. In connection with the preliminary allocation of purchase
price to the fair values of assets and liabilities acquired, the Company
recorded goodwill of approximately $60,682, which is being amortized over 40
years on the straight-line method. The Company has included the results of
operations of Camping Gaz in the consolidated financial statements from March
1, 1996, the date on which the Company obtained effective control of Camping
Gaz, and has recognized minority interest related to the publicly traded
shares for the period March 1, 1996 through June 30, 1996.
The following summarized, unaudited pro forma results of operations
for the six months ended June 30, 1996 and 1995 assumes the acquisition of
Seatt and the acquisition of all the outstanding shares of Camping Gaz
occurred as of the beginning of the respective periods. The pro forma
results include certain adjustments, primarily reflecting increased
amortization and interest expense and a lower income tax provision, and are
not necessarily indicative of what the results of operations would have been
had the Seatt and Camping Gaz acquisitions occurred at the beginning of the
respective periods. Moreover, the pro forma information is not intended to
be indicative of future results of operations.
Six Months ended
June 30,
------------------------
1996 1995
--------- ---------
Net revenues . . . . . . . . . . . . . . $ 752,368 $ 692,980
Earnings before extraordinary item . . . 42,924 45,088
Net earnings . . . . . . . . . . . . . . 42,277 45,088
Earnings per common share:
Earnings before extraordinary item. . $ 0.80 $ 0.85
Net earnings . . . . . . . . . . . . 0.79 0.85
7
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
5. RELATED PARTY TRANSACTION
The Company has entered into an agreement with an affiliate in which
the Company will be able to realize tax benefits associated with certain
foreign tax net operating loss carryforwards that had not previously been
recognized. Approximately $1,236 of this benefit is reflected in the
Company's provision for income taxes in the three month and six month periods
ended June 30, 1996.
6. LONG-TERM DEBT
On April 30, 1996, the Company amended the Company Credit Agreement
to revise several of the terms and provisions of the Company Credit Agreement
and to allow for the issuance of additional long-term notes. The Company
Credit Agreement, as amended, provides for (a) an unsecured French Franc term
loan in the amount of French Franc 385,125 ($75,000 at the then current
exchange rates) and (b) an unsecured revolving credit facility of $275,000.
The Company Credit Agreement, as amended, is available to the Company until
April 30, 2001.
The outstanding loans under the Company Credit Agreement bear
interest at either of the following rates, as selected by the Company from
time to time: (i) the higher of the agent's base lending rate or the federal
funds rate plus .50% or (ii) the London Inter-Bank Offered Rate ("LIBOR")
plus a margin ranging from .25% to 1.1% based on the Company's financial
performance. If there is a default, the interest rate otherwise in effect
will be increased by 2% per annum and the margin will be 1.0% in the case of
U.S. Dollar denominated LIBOR loans and 1.1% for foreign currency denominated
LIBOR loans. The Company Credit Agreement also bears an overall facility fee
ranging from .15% to .375% based on the Company's financial performance.
The amended Company Credit Agreement contains various restrictive
covenants, including without limitation, requirements for the maintenance of
specified financial ratios and levels of consolidated net worth and certain
other provisions limiting the incurrence of additional debt, purchase or
redemption of Coleman Common Stock, issuance of Coleman Preferred Stock, and
the payment of dividends. Under the most restrictive of these covenants of
the amended Company Credit Agreement, approximately $83,560 would have been
available for payment by the Company of cash dividends at June 30, 1996.
In connection with the amending and restating of the Company's
previous credit agreement, the Company recognized an extraordinary loss of
approximately $1,078 ($647 after taxes, or $0.01 per share) in the quarter
ended June 30, 1996, which represents the write-off of the related
unamortized financing costs associated with the Company's previous credit
agreement.
On June 13, 1996, the Company completed (i) a private placement
issuance and sale of $85,000 aggregate principal amount of 7.10% Senior
Notes, Series A, due 2006 (the "Notes due 2006") and (ii) a private
placement issuance and sale of $75,000 aggregate principal amount of 7.25%
Senior Notes, Series B, due 2008 (the "Notes due 2008"). Proceeds from these
private placement issuances were used (i) to finance the acquisition of
Camping Gaz, and (ii) to pay down existing indebtedness under the revolving
credit facility under the Company Credit Agreement. The Notes due 2006 bear
interest at the rate of 7.10% per annum payable semiannually, and the
principal amount is payable in annual installments of $12,143 commencing June
13, 2000 with a final payment due on June 13, 2006. If there is a default,
the interest rate will be the greater of (i) 9.10 % or (ii) 2% above the
prime interest rate. The Notes due 2008 bear interest at the rate of 7.25%
per annum payable semiannually, and
8
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
the principal amount is payable in annual installments of $15,000 commencing
June 13, 2004 with a final payment on June 13, 2008. If there is a default,
the interest rate will be the greater of (i) 9.25 % or (ii) 2% above the
prime interest rate. The Notes due 2006 and the Notes due 2008 are unsecured
and are subject to various restrictive covenants, including without
limitation, requirements for the maintenance of specified financial ratios
and levels of consolidated net worth and certain other provisions limiting
the incurrence of additional debt and sale and leaseback transactions under
the terms of the Note Purchase Agreement.
9
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE THREE MONTHS ENDED JUNE
30, 1995
Net revenues in the 1996 and 1995 periods were $452.7 million and $311.3
million, respectively, an increase of $141.4 million, or 45.4%. All classes
of the Company's products contributed to this increase with recreation
products increasing by $101.5 million, hardware/home center products
contributing $22.5 million, and the Company's new class of home safety and
security products recording revenues of $17.4 million. Net revenues in the
United States and Canada increased 17.3%, and net revenues from international
markets increased 126.5%.
Recreation products revenues increased $101.5 million or 40.6%.
Excluding the impact of the Camping Gaz and Sierra acquisitions, the effect
of a weaker yen in 1996 as compared to 1995 and the one-time 1995
thermo-electric cooler premium promotion, comparable recreation revenues
increased approximately 11.0%. Strong new product growth was partially offset
by a decrease in camping appliances which were affected by adverse weather in
the spring. Hardware/home center revenues increased 36.8% or $22.5 million.
The increase was driven by continued growth of pressure washers sales and
sales of compressors and new lighting products. Total revenues in the 1996
period also include revenues from home safety and security products
associated with the Seatt business, which was acquired in January 1996.
Cost of sales was $315.1 million in 1996 compared with $211.7 million in
1995, an increase of 48.8%. Cost of sales as a percent of net revenues
increased to 69.6% in 1996 from 68.0% in 1995. Gross margins as a percent of
sales decreased to 30.4% in 1996 from 32.0% in 1995. Significantly higher
sales of pressure washers at reduced gross margins and lower sales of high
margin camping appliances primarily contributed to the decrease. Electric
pressure washer gross margins were significantly below 1995 as the Company
continued to experience declining sales prices. The Company does not plan to
participate in the opening price point electric pressure washer business in
1997.
Selling, general and administrative ("SG&A") expenses were $78.9 million
in 1996 compared to $45.8 million in 1995, an increase of 72.2%. The
increase in SG&A expenses primarily reflects SG&A expenses associated with
recent business acquisitions and to a lesser extent increased advertising and
marketing expenses.
Interest expense was $10.7 million in 1996 compared with $6.4 million in
1995, an increase of $4.3 million. This increase was primarily the result of
higher borrowings to fund business acquisitions and to support the increased
working capital.
The Company's effective income tax rate was 32.4% in 1996 compared with
39.3% in 1995. The decrease in the effective tax rate in 1996 as compared to
1995 is primarily due to tax benefits associated with the Company's
manufacturing operations in Puerto Rico along with lower taxes on foreign
operations, primarily in France. The 1996 effective tax rate also includes
recognition of tax benefits associated with certain foreign net operating
loss carryforwards that had not been previously recognized.
The Company obtained control of approximately 70% of Camping Gaz in
March 1996. Accordingly, the minority interest for the 1996 period
represents the minority shareholders approximate 30% proportionate share of
the results of operations of the Camping Gaz operations.
During the second quarter of 1996, in connection with the renegotiation
of its then existing credit agreement, the Company recorded an extraordinary
loss of $1.1 million ($0.6 million after taxes, or $0.01 per
10
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
share) which represents a write-off of the related unamortized financing
costs associated with its then existing credit agreement
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE SIX MONTHS ENDED JUNE 30,
1995
Net revenues in the 1996 and 1995 periods were $726.2 million and $535.3
million, respectively, an increase of $190.9 million, or 35.7%. All classes
of the Company's products contributed to this increase with recreation
products increasing by $116.7 million, hardware/home center products
contributing $38.9 million, and the Company's new class of home safety and
security products recording revenues of $35.3 million. Net revenues in the
United States and Canada increased 20.4%, and net revenues from international
markets increased 80.6%.
Recreation products revenues increased $116.7 million or 27.7%.
Excluding the impact of the Camping Gaz and Sierra acquisitions, the effect
of a weaker yen in 1996 as compared to 1995 and the one-time 1995
thermo-electric cooler premium promotion, comparable recreation revenues
increased approximately 11.2%. Strong new product growth was partially offset
by a decrease in camping appliances which were affected by adverse weather in
the spring. Hardware/home center revenues increased 34.2% or $38.9 million.
The increase was driven by strong generator sales in the winter and early
spring, pressure washer growth and new products. Total revenues in the 1996
period also include revenues from home safety and security products
associated with the Seatt business, which was acquired in January 1996.
Cost of sales was $507.7 million in 1996 compared with $367.2 million in
1995, an increase of 38.3%. Cost of sales as a percent of net revenues
increased to 69.9% in 1996 from 68.6% in 1995. Gross margins as a percent of
sales decreased to 30.1% in 1996 from 31.4% in 1995. Significantly higher
sales of pressure washers at reduced gross margins and lower sales of high
margin camping appliances primarily contributed to the decrease. Electric
pressure washer gross margins were significantly below 1995 as the Company
continued to experience declining sales prices. The Company does not plan to
participate in the opening price point electric pressure washer business in
1997.
SG&A expenses were $125.7 million in 1996 compared to $85.4 million in
1995, an increase of 47.1%. The increase in SG&A expenses primarily reflects
SG&A expenses associated with recent business acquisitions and to a lesser
extent increased advertising and marketing expenses.
Interest expense was $18.8 million in 1996 compared with $12.0 million in
1995, an increase of $6.8 million. This increase was primarily the result of
higher borrowings to fund business acquisitions and support the increased
working capital.
The Company's effective income tax rate was 34.0% in 1996 compared with
39.0% in 1995. The decrease in the effective tax rate in 1996 as compared to
1995 is primarily due to tax benefits associated with the Company's
manufacturing operations in Puerto Rico along with lower taxes on foreign
operations, primarily in France. The 1996 effective tax rate also includes
recognition of tax benefits associated with certain foreign net operating
loss carryforwards that had not been previously recognized.
The Company obtained control of approximately 70% of Camping Gaz in
March 1996. Accordingly, the minority interest for the 1996 period
represents the minority shareholders approximate 30% proportionate share of
the results of operations of the Camping Gaz operations.
During the second quarter of 1996, in connection with the renegotiation
of its then existing credit agreement, the Company recorded an extraordinary
loss of $1.1 million ($0.6 million after taxes, or $0.01 per share) which
represents a write-off of the related unamortized financing costs associated
with its then existing credit agreement
11
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in operations were $46.4 million and $4.1 million for the
six months ended June 30, 1996 and 1995, respectively. Cash used during
these periods reflects the Company's seasonal working capital requirements
associated with generally higher sales in the first half of the year as
compared to the second half of the year. Receivables increased by $142.0
million and $85.2 million for the six months ended June 30, 1996 and 1995,
respectively, as a result of the seasonality of the Company's sales and an
increase in the overall level of the Company's sales. Inventories increased
by $14.3 million and $8.5 million in the six months ended June 30, 1996 and
1995, respectively, to support the growth of the Company, especially in new
products. The Company's net cash used for investing activities was $176.6
million and $11.3 million for the six months ended June 30, 1996 and 1995,
respectively. The Company's capital expenditures were $18.8 million and
$10.7 million in the six months ended June 30, 1996 and 1995, respectively.
The increase in capital expenditures reflects the addition of equipment to
expand the Company's capacity to manufacture certain of its product lines.
The Company used $158.2 million and $1.4 million of cash for business
acquisitions during the six months ended June 30, 1996 and 1995,
respectively. Net cash provided by financing activities for the six months
ended June 30, 1996 consisted primarily of increases in long-term and
short-term borrowings to finance the seasonal increase in working capital and
the Company's investing activities. The Company also paid $2.3 million to
acquire 200,000 shares of its Common Stock and $4.1 million to acquire
440,000 shares of its Common Stock in the open market during the six months
ended June 30, 1996 and 1995, respectively.
The Company's working capital requirements are currently funded by cash
flow from operations and domestic and foreign bank lines of credit. In April
1996, the Company amended its credit agreement to allow for the Camping Gaz
acquisition as well as to extend the maturity of the credit agreement (the
"Company Credit Agreement"). The Company Credit Agreement provides a term
loan of French Franc 385,125 ($75.0 million at the then current exchange
rates) and a revolving credit facility in an amount of $275.0 million.
Availability under the Company Credit Agreement is reduced by any commercial
paper borrowings outstanding. The Company Credit Agreement is available to
the Company until April 30, 2001. At June 30, 1996, $156.8 million would
have been available for borrowings under the Company Credit Agreement.
The outstanding loans under the Company Credit Agreement bear interest at
either of the following rates, as selected by the Company from time to time:
(i) the higher of the agent's base lending rate or the federal funds rate
plus .50% or (ii) the London Inter-Bank Offered Rate ("LIBOR") plus a margin
ranging from .25% to 1.1% based on the Company's financial performance. If
there is a default, the interest rate otherwise in effect will be increased
by 2% per annum and the margin will be 1.0% in the case of U.S. Dollar
denominated LIBOR loans and 1.1% for foreign currency denominated LIBOR
loans. The Company Credit Agreement also bears an overall facility fee
ranging from .15% to .375% based on the Company's financial performance.
The Company Credit Agreement contains various restrictive covenants,
including without limitation, requirements for the maintenance of specified
financial ratios and levels of consolidated net worth and certain other
provisions limiting the incurrence of additional debt, purchase or redemption
of Coleman Common Stock, issuance of Coleman Preferred Stock, and the payment
of dividends. Under the most restrictive of these covenants of the Company
Credit Agreement, approximately $83.6 million would have been available for
payment by the Company of cash dividends at June 30, 1996.
On February 28, 1996, the Company and Butagaz S.N.C. ("Butagaz"), a
subsidiary of Societe de Petroles Shell S.A., jointly announced they had
entered into an agreement (the "Share Purchase Agreement") in connection with
the sale to Coleman of approximately 60 percent of the outstanding shares of
Application des Gaz, S.A. ("ADG" or "Camping Gaz"). Pursuant to the terms of
the Share Purchase Agreement and other related documents dated February 27,
1996, Coleman has the right to, and intends to during the third quarter of
1996, acquire the remaining shares held by Butagaz, which represents
approximately 10% of the outstanding shares
12
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
of ADG, and accordingly considers this 10% stock ownership as under the
control of the Company. The Company obtained effective control of Camping Gaz
on March 1, 1996. Camping Gaz is the leading manufacturer and distributor of
camping appliances in Europe. On June 24, 1996, the Company commenced a
tender offer for the purchase of all the publicly traded outstanding shares
of ADG, or approximately 30% of the outstanding shares, for French Franc 404
per share. The tender offer period expired in July 1996 with approximately
28% of the outstanding shares of ADG tendered for purchase. The Company is
currently completing the necessary steps to acquire the remaining publicly
held stock and expects to complete those actions during the third quarter of
1996.
Coleman is financing the acquisition of the shares of ADG with net
proceeds from (i) a private placement issuance and sale of $85.0 million
aggregate principal amount of 7.10% Senior Notes, Series A, due 2006 (the
"Notes due 2006") and (ii) a private placement issuance and sale of $75.0
million aggregate principal amount of 7.25% Senior Notes, Series B, due 2008
(the "Notes due 2008"). The Notes due 2006 bear interest at the rate of
7.10% per annum payable semiannually, and the principal amount is payable in
annual installments of $12.1 million commencing June 13, 2000 with a final
payment due on June 13, 2006. If there is a default, the interest rate will
be the greater of (i) 9.10% or (ii) 2% above the prime interest rate. The
Notes due 2008 bear interest at the rate of 7.25% per annum payable
semiannually, and the principal amount is payable in annual installments of
$15.0 million commencing June 13, 2004 with a final payment due on June 13,
2008. If there is a default, the interest rate will be the greater of (i)
9.25% or (ii) 2% above the prime interest rate. The Notes due 2006 and the
Notes due 2008 are unsecured and are subject to various restrictive
covenants, including without limitation, requirements for the maintenance of
specified financial ratios and levels of consolidated net worth and certain
other provisions limiting the incurrence of additional debt and sale and
leaseback transactions under the terms of the Note Purchase Agreement.
Camping Gaz has a significant presence in the market for camping
equipment in Europe and has recently pursued its development internationally.
The Company is currently in the process of reviewing its integration
alternatives with respect to the combination of the business operations of
Coleman and Camping Gaz. The conclusions of the review could result in a
charge against earnings in 1996.
The Company's parent (Coleman Worldwide Corporation) and its parent
(Coleman Holdings Inc.) have entered into borrowing agreements which are
collateralized by the Company's common stock.
The Company expects that the combination of the cash flow generated by
its operations and borrowings under the Company Credit Agreement will be
sufficient to enable it to meet its current operating requirements, including
projected capital expenditures, tax sharing payments and other obligations.
The Company uses a variety of derivative financial instruments to manage
its foreign currency and interest rate exposures. The Company does not
speculate on interest rates or foreign currency rates. Instead it uses
derivatives when implementing its risk management strategies to reduce the
possible effects of these exposures.
With respect to foreign currency exposures the Company principally uses
forward and option contracts to reduce risks arising from firm commitments,
anticipated intercompany sales transactions and intercompany receivable and
payable balances. The Company generally uses interest rate swaps and
interest rate caps to fix certain of its variable rate debt. The Company
manages credit risk related to these derivative contracts through credit
approvals, exposure limits and other monitoring procedures.
13
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
SEASONALITY
The Company's sales generally are highest in the second quarter of the
year and lowest in the fourth quarter. As a result of this seasonality, the
Company has generally incurred a loss in the fourth quarter. The Company's
sales may be affected by weather conditions, especially during the second and
third quarters of the year.
14
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1996 annual meeting of shareholders was held on May 31, 1996.
Directors elected at the meeting were Ronald O. Perelman, Donald G. Drapkin,
Jordan L. Haines, Michael N. Hammes, Lawrence M. Jones, Robert J. Lanigan,
Jerry W. Levin, Robert S. Miller, John A. Moran, Bruce Slovin, and William H.
Spoor, constituting the entire board of directors. All of the directors were
elected without opposition. There were no broker nonvotes. Other matters
voted on were proposals to ratify the appointment of Ernst & Young LLP as the
independent certified public accountants for the Company for 1996 and to
approve The Coleman Company, Inc. 1996 Stock Option Plan.
The tabulation of votes (adjusted to reflect the two-for-one stock split
paid on July 15, 1996) for each matter are as follows:
1. ELECTION OF DIRECTORS
Nominees
for Against or
Directors For Withheld Abstained
--------- --- ---------- ---------
Ronald O. Perelman 51,420,376 37,044 --
Donald G. Drapkin 51,420,376 37,044 --
Jordan L. Haines 51,420,376 37,044 --
Michael N. Hammes 51,418,976 38,444 --
Lawrence M. Jones 51,420,350 37,070 --
Robert J. Lanigan 51,419,976 37,444 --
Jerry W. Levin 51,420,376 37,044 --
Robert S. Miller 51,420,372 37,048 --
John A. Moran 51,420,376 37,044 --
Bruce Slovin 51,420,376 37,044 --
William H. Spoor 51,419,770 37,650 --
2. Ratification of Independent Certified Public Accountants
51,427,130 4,476 25,544
3. Approval of the 1996 Stock Option Plan
51,123,836 282,496 51,088
15
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Index Description
------------- -----------
10.1* Employment Agreement dated as of May 1, 1996 between the
Company and Frederik van den Bergh.
10.2* Employment Agreement dated as of August 1, 1996 between the
Company and Steven F. Kaplan.
10.3* Addendum dated August 3, 1996 and effective August 1, 1996
to Employment Agreement dated as of August 1, 1996 between
the Company and Steven F. Kaplan.
10.4* First Amendment dated July 1, 1996 to Employment Agreement
effective January 1, 1996 between the Company and Michael N.
Hammes.
10.5* First Amendment dated July 1, 1996 to the Consolidated
Supplemental Retirement Plan adopted January 1, 1996.
27 Financial Data Schedule
____________
* Management Contracts and Compensatory Plans
(b) Reports on Form 8-K
A report on Form 8-K was filed on June 14, 1996 to provide
information regarding the two-for-one stock split authorized by the Board
of Directors of the Company on May 31, 1996.
A report on Form 8-K was filed on July 1, 1996 to disclose certain
information with regard to the Company's acquisition of Application des
Gaz, S.A.
16
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE COLEMAN COMPANY, INC.
(Registrant)
Date: August 13, 1996 By: /s/ George Mileusnic
-----------------------------
George Mileusnic
Executive Vice President and
Chief Financial Officer
17
<PAGE>
Agreement
Effective as of the first day of May, 1996
by and between
The Coleman Company, Inc.
a Delaware corporation
with its principal place of business at
1526 Cole Boulevard, Suite 300
Golden, Colorado 80401
(the "Corporation")
and
Frederik van den Bergh
(the "Executive")
WITNESSETH
Whereas, the Corporation and the Executive mutually desire
to enter into this Agreement with respect to the Executive's
employment with the Corporation.
Now, therefore, in consideration of the mutual covenants
herein contained, the Corporation and the Executive agree as
follows:
1. EMPLOYMENT AND TERM. The Corporation agrees to employ the Executive
and the Executive agrees to serve the Corporation as a senior executive
officer for a term beginning on May 1, 1996 and ending on April 30, 1998,
unless sooner terminated in accordance with Section 5 hereof; PROVIDED, that
commencing on May 1, 1997 and each May 1 thereafter, the term of this
Agreement will automatically be extended for one additional year unless, not
later than October 31 of the preceding year, the Corporation or the Executive
will have given written notice to the other party not to extend this
Agreement (such notice of nonrenewal given by the Corporation to the
Executive being hereinafter referred to as a "Nonrenewal"); and FURTHER,
PROVIDED, that if a Change in Control (as defined in Section 8 hereof) occurs
during the term of
<PAGE>
this Agreement (including any extensions thereto), this Agreement will
continue in effect for a period of not less than two (2) years beyond the
month in which such Change in Control occurs.
2. DUTIES. The Executive agrees to serve the Corporation faithfully and
to the best of his ability; to devote his entire time, energy and skill during
regular business hours to such employment; and to use his best efforts, skill
and ability to promote its interest.
3. RESPONSIBILITIES; PLACE OF PERFORMANCE.
(a) During the term of this Agreement, the Executive shall have such
title and perform such duties as from time to time may be assigned to him by the
Board of Directors of the Corporation (the "Board") or any superior officer of
the Corporation; PROVIDED, that the title and the duties assigned to the
Executive shall not be inconsistent with his status as a senior executive
officer of the Corporation. The Executive shall at all times have executive
powers and authority as shall reasonably be required to enable him to discharge
his duties in an efficient manner, together with such facilities and services as
are suitable or customary to his position.
(b) Except for occasional travel on the Corporation's business, the
Executive will be required to perform his duties under this Agreement in the
Geneva, Switzerland metropolitan area or in such other geographic location
within the United States or Western Europe as the Corporation may determine, so
long as the Corporation provides the Executive with relocation benefits no less
favorable than the relocation benefits available under the Corporation's
executive relocation policy as in effect for the 1995 relocation of the
Corporation's executive offices to the Denver, Colorado metropolitan area.
4. COMPENSATION AND RELATED MATTERS.
(a) SALARY. During the term of the Executive's employment hereunder,
the Corporation will pay to the Executive a salary at the rate of $500,000 per
annum, in substantially equal installments in accordance with normal payroll
practices of the Corporation, but not less frequently than monthly. The base
salary may be increased by the Board from time to time, in its discretion,
2
<PAGE>
but in no event shall such base salary be reduced from the rate previously in
effect. The base salary in effect from time to time hereunder is referred to
as the "Base Salary."
(b) EXPENSES. The Executive will be entitled to receive prompt
reimbursement from the Corporation of all reasonable expenses incurred by the
Executive in performing services hereunder during the term of the Executive's
employment hereunder, including all expenses of travel and living expenses while
away from home on business or at the request of the Corporation, consistent with
expense policies applicable to other senior executive officers. The Executive
will furnish the Corporation with evidence that such expenses were incurred as
the Corporation may from time to time reasonably request.
(c) INCENTIVE BONUS. With respect to each calendar year during the
Term, the Executive will be granted an annual target incentive bonus opportunity
(the "Target Bonus") equal to no less than 70% of Base Salary. Payments of the
Executive's annual incentive bonus shall be made in accordance with the terms
and conditions set forth in the then current incentive bonus plan or arrangement
maintained by the Corporation (the "Incentive Plan"). The Target Bonus may be
increased from time to time, but may not be decreased below the percentage of
Base Salary previously in effect unless an adjustment is made in the Executive's
Base Salary such that the aggregate dollar amount of the Executive's Base Salary
and Target Bonus (after giving effect to the foregoing adjustments) is no less
than the aggregate dollar amount of such Base Salary and Target Bonus
(immediately prior to such adjustments). For the first twelve months of
Executive's employment by the Corporation, payment of the Target Bonus is
guaranteed. For l996 this guaranteed minimum bonus is $233,333. and for 1997
the guaranteed minimum bonus is $116,666.
(d) EMPLOYEE BENEFITS. The Executive will be entitled to participate
in all of the other employee benefit plans, programs and arrangements which are
presently or may hereafter be provided by the Corporation to its senior
executive officers including, without limitation, all retirement, health
insurance and life insurance plans, programs and arrangements (the "Benefit
Plans"), on a basis no less favorable than that of other senior executive
officers of the Corporation. In addition, the Executive will be entitled to
participate in all nonqualified employee
3
<PAGE>
pension plans or arrangements of the Corporation in which he is currently or
subsequently designated as a participant (the "Pension Plans"). The
Corporation agrees that it will not terminate Executive's participation in
any of the Pension Plans or amend any of the Pension Plans in any manner
adverse to the Executive without the Executive's prior written consent. In
the event that participation by Executive in any Benefit Plans or Pension
Plans is impractical because of the residence or citizenship of Executive,
then the Corporation shall provide alternative coverage or plan participation
as required to provide Executive with benefit entitlements substantially
equivalent to those that Executive would have received under the Benefit
Plans and Pension Plans. In addition, the Corporation shall create and
maintain for the benefit of the Executive a supplemental executive retirement
plan which shall provide such additional benefits as are required to provide
a combined pension at retirement on or after achieving age 62 (age 60 if the
retirement is at the request of the Corporation), which shall be equal to 50%
of the average annual base salary paid to Executive over the five years prior
to termination of employment with Corporation, but offset by all pension
benefits Executive is eligible to receive under other Corporation plans and
under the plans of Braun AG and other prior employers of Executive.
(e) VACATIONS. The Executive will be entitled to four (4) weeks of
vacation each calendar year, in accordance with the Corporation's vacation
policy as in effect from time to time. Vacation time which has not been used by
the end of each calendar year will be forfeited. In the event this vacation
entitlement shall be less than that to which similarly situated executive
employees are entitled to receive in the country in which Executive's primary
office is located, then Executive shall receive the greater vacation
entitlement.
(f) CORPORATION AUTOMOBILE. The Corporation will provide the
Executive with an automobile during the term of this Agreement. The Corporation
will pay all reasonable expenses associated with the operation of such
automobile in the same manner as is in effect from time to time with respect to
other senior executive officers of the Corporation, including, without
limitation, all reasonable maintenance and insurance expenses. The automobile
furnished by the Corporation will be a late model top-of-the-line Oldsmobile or
like vehicle to be selected by the
4
<PAGE>
Executive. At the expiration of the term of this Agreement, the Executive
will promptly return the automobile to the Corporation.
(g) OTHER. The Corporation will pay or promptly reimburse the
Executive for reasonable costs incurred by him in connection with his engagement
of professional estate planning and income tax assistance; PROVIDED, that such
amounts will not exceed $5,000 with respect to any calendar year.
5. TERMINATION.
(a) DEATH. The Executive's employment hereunder will terminate upon
his death.
(b) DISABILITY. The Executive's employment hereunder will terminate
upon his Disability. For purposes of this Agreement, the Executive will be
considered "Disabled" when eligible for benefits under the Corporation's long-
term disability plan as in effect from time to time (the "Disability Plan").
(c) CAUSE. The Executive's employment hereunder may be terminated for
Cause, as provided below. "Cause" means (i) the willful and continued failure
by the Executive to substantially perform the Executive's duties with the
Corporation (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness) or (ii) the willful engaging by
the Executive in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise. For purposes of the preceding sentence,
no act, or failure to act, on the Executive's part will be deemed "willful"
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Corporation. Upon the Corporation's determination that
Cause for the Executive's termination exists, the Corporation may elect to
terminate this Agreement upon sixty (60) days' prior written notice to the
Executive.
(d) GOOD REASON. The Executive may voluntarily terminate his
employment with the Corporation for Good Reason. Good Reason will exist upon
(I) the occurrence of any material breach of this Agreement on the part of the
Corporation (including, but not limited to, any breach of Section 3 or 4
hereof), (ii) the delivery to the Executive of a notice of Nonrenewal by the
Corpo-
5
<PAGE>
ration; PROVIDED, that the Executive delivers a Notice of Termination within
sixty (60) days of the delivery of such notice of Nonrenewal, or (iii) after
the occurrence of a Change in Control, (1) a substantial adverse alteration
in the Executive's title or in the nature or status of the Executive's
responsibilities from those in effect immediately prior to such Change in
Control or (2) any change to the manner in which the Incentive Plan is
administered (including, but not limited to, the process utilized in setting
performance goals and the relative difficulty of achieving such goals),
compared to the manner in which the Incentive Plan was administered
immediately prior to the Change in Control, which change results in a
significantly greater likelihood that the Executive will be unable to earn
the Target Bonus.
The Executive's right to terminate the Executive's employment for
Good Reason will not be affected by the Executive's incapacity due to physical
or mental illness. Except as provided above, the Executive's continued
employment will not constitute consent to, or a waiver of rights with respect
to, any act or failure to act constituting Good Reason hereunder.
(e) RESIGNATION. The Executive may voluntarily terminate his
employment hereunder at any time.
(f) TERMINATION BY THE CORPORATION WITHOUT CAUSE. The Corporation may
terminate the Executive's employment hereunder without Cause at any time.
(g) NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Corporation or by the Executive (other than termination
pursuant to Section 5(a) hereof) must be communicated by written Notice of
Termination to other party hereto. For purposes of this Agreement, a "Notice of
Termination" will mean a notice that indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(h) DATE OF TERMINATION. "Date of Termination" will mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive delivers a Notice of Termination within sixty (60) days of
delivery to the Executive of
6
<PAGE>
a notice of Nonrenewal from the Corporation, the date of delivery of such
Notice of Termination, and (iii) if the Executive's employment is terminated
for any other reason, the date specified in the Notice of Termination.
6. COMPENSATION UPON TERMINATION
(a) FOR CAUSE; OTHER THAN FOR GOOD REASON. In the event that the
Executive's employment is terminated by the Corporation for Cause or by the
Executive other than for Good Reason, the Corporation will pay the Executive
his Base Salary through the Date of Termination. In addition, the Executive
will be entitled to receive all accrued benefits to which the Executive is
entitled under the Benefit Plans, in accordance with the terms of such
Benefit Plans. The Executive will not be entitled to any portion of the
incentive bonus in respect of the calendar year in which occurs the Date of
Termination; PROVIDED, that if the Date of Termination occurs after the end
of a calendar year and prior to the determination of whether the Executive is
entitled to an incentive bonus for such year, such incentive bonus will be
paid, if and to the extent so determined.
(b) DEATH; DISABILITY. In the event that the Executive's employment
is terminated by reason of the Executive's death or Disability, the
Corporation will pay the Executive (or his estate or beneficiary if
applicable) his Base Salary through the Date of Termination. The Executive
(or his estate or beneficiary, if applicable) will be entitled to receive all
accrued benefits to which the Executive is entitled under the Benefit Plans,
in accordance with the terms of such Benefit Plans. The Executive (or his
estate or beneficiary, if applicable) will be entitled to receive (i) in a
lump sum as soon as practicable after the Date of Termination, any incentive
bonus accrued but not yet paid to the Executive, including for this purpose
any accumulated but unpaid excess amounts under the Incentive Plan in respect
of all calendar years ending prior to the Date of Termination, plus (ii) a
pro rata portion of the incentive bonus for the year in which occurs the Date
of Termination, such incentive bonus (A) to be calculated in accordance with
the terms of the Incentive Plan based on the actual results of the
Corporation for such year and then multiplied by a fraction the numerator of
which is the number of full and partial months worked by the Executive in
such calendar year and the denominator of which is twelve (12) and (B) to be
payable
7
<PAGE>
at the same time as incentive bonuses are paid to other participants in the
Incentive Plan for such year. If the Date of Termination occurs after the
end of a calendar year and prior to the determination of whether the
Executive is entitled to an incentive bonus for such year, such incentive
bonus will be paid, if and to the extent so determined, at the same time as
incentive bonuses are paid to other participants in the Incentive Plan for
such year. If such termination of employment is for reason of Disability,
the Executive will also be entitled to receive disability benefits, whether
or not then covered by the Disability Plan, comprised of monthly salary
continuation payments, in an amount calculated at two-thirds of Base Salary,
for a period of time ending no sooner than the earlier of the Executive's
attaining age 65 or his death; PROVIDED, that any such payments will be
offset by (i) any payments made to the Executive under the Disability Plan
and (ii) any disability benefits payable under Social Security in the United
States, and any disability benefits payable under any governmental program in
any other country. In the event Executive dies while employed by Corporation
under this Agreement, or becomes disabled and eligible for disability
benefits while employed by Corporation under this Agreement, and subsequently
dies before retirement age, his widow will receive an annual benefit equal to
60 percent, a dependent child (under age 25) will receive an annual benefit
equal to 10 percent, and an orphaned child (under age 25 and both parents are
deceased) will receive an annual benefit equal to 20 percent of the amount
which is 50 percent of the Executive's average salary for the five years
prior to becoming disabled. Such payments will cease upon the date Executive
would have attained age 65, or earlier upon the death of his widow or any
child, or the date any dependent child reaches age 25, but only with respect
to the person dying or achieving age 25.
(c) WITHOUT CAUSE OR DISABILITY; GOOD REASON. In the event that the
Executive's employment is terminated by the Corporation for any reason other
than for Cause or for Disability, or is terminated by the Executive for Good
Reason, then:
(1) The Corporation will pay to the Executive, in a lump sum on
the fifth day following the Date of Termination (i) any Base
Salary due the Executive through the Date of Termination, plus
(ii) any incentive bonus accrued but not yet paid to the Exec-
8
<PAGE>
utive under the Incentive Plan for all calendar years ending
prior to the Date of Termination, including for this purpose any
accumulated but unpaid excess amounts under the Incentive Plan;
PROVIDED, that if the Date of Termination occurs prior to the
determination of whether the Executive is entitled to an
incentive bonus for any such year, such incentive bonus will be
paid, if and to the extent so determined, at the same time as
incentive bonuses are paid to other participants in the Incentive
Plan for such year.
(2) The Corporation will pay to the Executive an amount equal to
a pro rata portion of the incentive bonus for the year in which
occurs the Date of Termination, such incentive bonus (A) to be
calculated in accordance with the terms of the Incentive Plan
based on the actual results of the Corporation and then
multiplied by a fraction the numerator of which is the number of
full and partial months worked by the Executive in such calendar
year and the denominator of which is twelve (12) and (B) to be
payable at the same time as incentive bonuses are paid to other
participants in the Incentive Plan for such year.
(3) The Corporation will pay to the Executive compensation
continuation payments, payable on a monthly basis for a period of
two years immediately following the Date of Termination, equal to
one-twelfth (1/12) of the sum of the Executive's Base Salary and
Target Bonus (each as in effect immediately prior to the Date of
Termination, without regard to any reductions thereto giving rise
to Good Reason); PROVIDED, that during the second year of such
compensation continuation, payments will be offset by any and all
salary and bonus amounts paid to or accrued in respect of the
Executive for services rendered to any other employer. The
Executive will promptly notify the Corporation of the receipt or
accrual of any such salary or bonus. The Corporation and the
Executive agree that the Executive is expected to seek employment
in order
9
<PAGE>
to attempt to offset payments provided under this Section 6(c)(3)
during the second year of compensation continuation but that the
Executive will not be required to accept any particular position
of employment.
(4) The Corporation will allow the Executive to continue to
participate, for two (2) years beginning as of the Date of
Termination, in any and all of the welfare benefit plans
maintained by the Corporation in which the Executive was entitled
to participate immediately prior to such Date of Termination, to
the same extent and upon the same terms as the Executive
participated in such plans prior to the Date of Termination;
PROVIDED, that the Executive's continued participation is
permissible or otherwise practicable under the general terms and
provisions of such plans. To the extent that continued
participation is neither permissible nor practicable, the
Corporation shall take such action as may be necessary to provide
the Executive with substantially comparable benefits (without
additional cost to the Executive) outside the scope of such plan.
If the Executive engages in regular employment after his
termination of employment (whether as an executive or as a self-
employed person), any employee welfare benefits received by the
Executive in consideration of such employment which are similar
in nature to the employee welfare benefits provided by the
Corporation will relieve the Corporation of its obligation under
this Section 6(c)(4) to provide comparable benefits to the extent
of the benefits so received. The Executive will promptly notify
the Corporation of his receipt of any such benefits.
(5) The Corporation will pay or promptly reimburse the Executive
for all reasonable expenses incurred by him for professional
outplacement services for a period of one year (the "Outplacement
Payment"); PROVIDED, that the Outplacement Payment does not
exceed in the aggregate $25,000, and will pay an additional
amount to reimburse the Executive for
10
<PAGE>
any federal, state and local income taxes imposed on the Executive
by virtue of the Outplacement Payment and the additional payment
hereunder, such that the net amount retained by the Executive,
after deduction of any such taxes on the Outplacement Payment and
any such taxes on any additional payment provided by this Section
6(c)(5), shall be equal to the Outplacement Payment.
(6) Any and all stock options granted to the Executive under the
stock option plans of the Corporation (the "Option Plans") will
be treated as follows: (i) each stock option originally granted
with a term of five and one-half years or less under any Option
Plan will become immediately and fully vested as of the Date of
Termination, and (ii) each stock option originally granted with a
term of more than five and one-half years under any Option Plan
will become vested as of the Date of Termination on the basis of
the following vesting schedule, if more favorable than the
vesting schedule otherwise applicable to such stock option: the
number of shares of Corporation common stock subject to each such
stock option multiplied by the percentage obtained by multiplying
1.67% by the number of full and partial months of the Executive's
service during the term of such stock option through and
including the Date of Termination. The vested portion of stock
options under this Section 6(c)(6) shall remain exercisable for a
period of ninety (90) days after the Date of Termination (but not
beyond its normal expiration date). Any portion of any stock
option which does not vest under this Section 6(c)(6) (or under
the vesting schedule otherwise applicable to such stock option)
shall be forfeited as of the Date of Termination.
(7) All accrued benefits of the Executive under the Pension Plans
will immediately vest as of the Date of Termination.
7. EXCISE TAX.
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(a) In the event that any payment or benefit received or to be
received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Corporation, any person whose actions result in a Change in Control or any
person affiliated with the Corporation or such person) (all such payments and
benefits being hereinafter called "Total Payments") will be subject (in whole
or part) to the excise tax (the "Excise Tax") imposed under Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), then, subject to
the provisions of Section (7)(b) hereof, the Corporation will pay to the
Executive an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive, after deduction of any Excise Tax on the
Total Payments and any federal, state and local income tax and Excise Tax
upon the payment provided for by this Section 7, will be equal to the Total
Payments. For purposes of determining the amount of the Gross-Up Payment,
the Executive will be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the
Executive's residence on such date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(b) In the event that, after giving effect to any redeterminations
described in Section 7(d) hereof, a reduction in the Total Payments to the
largest amount that would result in no portion of the Total Payments being
subject to the Excise Tax (after taking into account any reduction in the
Total Payments provided by reason of Section 280G of the Code in such other
plan, arrangement or agreement) would produce a net amount (after deduction
of the net amount of federal, state and local income tax on such reduced
Total Payments) that would be greater than the net amount of unreduced Total
Payments (after deduction of the net amount of federal, state and local
income tax and the amount of Excise Tax to which the Executive would be
subject in respect of such Total Payments), then Section 7(a) hereof will not
apply and the Total Payments will be so reduced.
(c) For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of
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such Excise Tax, (i) all of the Total Payments will be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, unless in the
opinion of tax counsel selected by the Corporation's independent auditors and
reasonably acceptable to the Executive ("Tax Counsel"), such other payments
or benefits (in whole or in part) do not constitute parachute payments,
including by reason of Section 280G(b)(4)(A) of the Code, (ii) all "excess
parachute payments" within the meaning of Section 280G(b)(l) of the Code will
be treated as subject to the Excise Tax, unless in the opinion of Tax Counsel
such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, in excess of the base amount (as defined in
Section 280G(b)(3) of the Code) allocable to such reasonable compensation, or
are otherwise not subject to the Excise Tax, and (iii) the value of any
noncash benefits or any deferred payment or benefit will be determined by the
Corporation's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. The Corporation will provide the
Executive with its calculation of the amounts referred to in this Section 7
and such supporting materials as are reasonably necessary for the Executive
to evaluate the Corporation's calculations. If the Executive disputes the
Corporation's calculations (in whole or in part), the reasonable opinion of
Tax Counsel with respect to the matter in dispute will prevail.
(d) In the event that (i) the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time of payment of
the Total Payments and (ii) after giving effect to such redetermination, the
Total Payments are reduced pursuant to Section 7(b) hereof, the Executive will
repay to the Corporation, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income tax imposed
on the Gross-Up Payment being repaid by the Executive to the extent that such
repayment results in a reduction in the Excise Tax and/or a federal, state or
local income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that (x) the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment (including by reason
of
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any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment) and (y) after giving effect to
such redetermination, the Total Payments are not reduced pursuant to
Section 7(b) hereof, the Corporation will make an additional
Gross-Up Payment in respect of such excess and in respect of any
portion of the Excise Tax with respect to which the Corporation had
not previously made a Gross-Up Payment (plus any interest, penalties
or additions payable by the Executive with respect to such excess
and such portion) at the time that the amount of such excess is
finally determined.
8. CHANGE IN CONTROL. (a) For purposes of this Agreement, a Change
in Control will be deemed to have taken place upon the occurrence of any of the
following events:
(i) any "person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as modified in
Sections 13(d) and 14(d) of the Exchange Act) other than (A) the
Corporation or any of its subsidiaries, (B) any employee benefit plan of
the Corporation or one of its subsidiaries, (C) MacAndrews & Forbes
Holdings Inc. or any affiliate thereof (collectively, "MAFCO"), (D) a
corporation owned, directly or indirectly, by stockholders of the
Corporation in substantially the same proportions as their ownership of the
Corporation, or (E) an underwriter temporarily holding securities pursuant
to an offering of such securities (a "Person"), becomes the "beneficial
owner" (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Corporation representing 20% or more of
the shares of common stock of the Corporation then outstanding, and such
Person's beneficial ownership level then exceeds the percentage of the
Corporation's outstanding shares beneficially owned by MAFCO;
(ii) the consummation of any merger or consolidation of the
Corporation or one of its subsidiaries with or into any other corporation,
other than a merger or consolidation which would result in the holders of
the voting securities of the Corporation outstanding immediately prior
thereto holding securities which represent immediately after such merger or
consolidation more than 80% of the combined voting power of the voting
securities of the Corporation or the sur-
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viving corporation or the parent of such surviving corporation;
(iii) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets; or
(iv) a majority of the Board votes in favor of a decision that a
Change in Control has occurred.
(b) Notwithstanding anything in Section 8(a) hereof to the contrary,
any event or transaction which would otherwise constitute a Change in Control (a
"Transaction") shall not constitute a Change in Control for purposes of this
Agreement if, in connection with the Transaction, the Executive participates as
an equity investor in the acquiring entity or any of its affiliates (the
"Acquiror"). For purposes of the preceding sentence, the Executive shall not be
deemed to have participated as an equity investor in the Acquiror by virtue of
(i) obtaining beneficial ownership of any equity interest in Acquiror as a
result of the grant to the Executive of incentive compensation awards under one
or more incentive plans of Acquiror, on terms and conditions substantially
equivalent to those applicable to other executives of the Corporation
immediately prior to the Transaction, after taking into account normal
differences attributable to job responsibilities, title and the like, or (ii)
obtaining beneficial ownership of any equity interest in Acquiror on terms and
conditions substantially equivalent to those obtained in the Transaction by all
other stockholders of the Corporation.
(c) Upon the occurrence of a Change in Control during the term of
this Agreement, whether or not the Executive's employment within the Corporation
is terminated in connection with such event, any and all stock options granted
to the Executive under the Option Plans will become immediately vested.
9. INVENTIONS; CONFIDENTIAL INFORMATION; COMPETITORS.
(a) All inventions, whether or not patentable, conceived or developed
by Executive, alone or with others, during his employment by the Corporation
will be the property of the Corporation and will be promptly and fully disclosed
by Executive to the Corporation. Executive will perform all necessary acts to
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<PAGE>
vest title fully to any such invention in the Corporation and to enable the
Corporation, at its expense, to secure and maintain domestic and/or foreign
patents or any other rights for such inventions.
(b) Without the express prior written consent of the Corporation,
Executive will not disclose or make available to anyone outside the Corporation,
its subsidiaries, or affiliated corporations or entities any confidential or
proprietary information of, or concerning, the Corporation, including, without
limitation, trade secrets, know how, customer lists, inventions or other
information not generally known to any competitor of the Corporation, its
subsidiaries or affiliated corporations or entities. Upon termination of his
employment, Executive will promptly deliver to the Corporation all documents
containing any such confidential or proprietary information without retaining
any copies or extracts thereof.
(c) During the time he is employed by the Corporation or serves the
Corporation as a consultant, Executive will not serve as officer, director or
employee or be associated in any other capacity with any corporation,
partnership or other entity or person which is a competitor of the Corporation,
its subsidiaries, or affiliated corporations or entities. During such period
Executive will have no financial interest in any corporation, partnership or
other entity which is a competitor of the Corporation, its subsidiaries, or
affiliated corporations or entities, except participation solely as a
stockholder owning not more than 5% of the outstanding shares of a publicly
owned business.
(d) Executive acknowledges that his services are special, unique,
unusual and extraordinary, giving them peculiar value, the loss of which cannot
be reasonably or adequately compensated for by damages and, in the event of
Executive's breach of this Section 9, the Corporation will be entitled to
equitable relief by way of injunction or otherwise.
10. TERMINATION OF PRIOR AGREEMENTS. This Agreement expressly supersedes
all agreements and understandings between the parties with respect to
Executive's employment and any such agreement is hereby terminated as of the
date first above written.
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11. BINDING EFFECT. This Agreement will be binding upon and inure to the
benefit of the parties hereto, their respective legal representatives and to any
successor of the Corporation, which successor will be deemed substituted for the
Corporation under the terms of this Agreement. As used in this Agreement, the
term "successor" will include any person, firm, corporation, or other business
entity which at any time, whether by merger, purchase or otherwise, acquires all
or substantially all of the assets or business of the Corporation.
12. WAIVER OF BREACH. The waiver by the Corporation of a breach of any
provision of this Agreement by the Executive will not operate or be construed as
a waiver of any subsequent breach.
13. NOTICES. Any notice required or permitted to be given will be
sufficient, if in writing, and if sent by registered or certified mail to the
Executive at his residence or to the Corporation at its principal place of
business.
14. ENTIRE AGREEMENT. This document contains the entire agreement of the
parties and may not be changed except in a written modification signed by both
parties.
15. INDEMNIFICATION. The Corporation will indemnify the Executive, to the
maximum extent permitted by applicable law, against all costs, charges and
expenses incurred or sustained by the Executive in connection with any action,
suit or proceeding to which the Executive may be made a party by reason of the
Executive being an officer, director or employee of the Corporation or of any
subsidiary or affiliate of the Corporation.
16. LEGAL FEES. The Corporation will pay or promptly reimburse the
Executive for the reasonable legal fees and expenses incurred by the Executive,
in good faith, in connection with enforcing or defending any right of the
Executive pursuant to this Agreement.
17. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Colorado, as applied to contracts
executed and performed wholly within the State of Colorado.
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18. SURVIVORSHIP. Any rights and obligations of the parties set forth in
Sections 4(d), 6, 7 and 9 of this Agreement will survive any termination of this
Agreement.
19. ARBITRATION. All disputes or controversies arising under or in
connection with this Agreement, including for this purpose any claims by the
Executive relating to any Pension Plan, will be settled exclusively by
arbitration, in Denver, Colorado, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, that the
Executive will be entitled to seek specific performance of the Executive's right
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
below.
THE COLEMAN COMPANY, INC.
By: M.N. Hammes
----------------------------
Date: May 30, 1996
Frederik van den Bergh
--------------------------------
EXECUTIVE
Date: May 30, 1996
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Agreement
Effective as of the 1st day of August, 1996
by and between
The Coleman Company, Inc.
a Delaware corporation
with its principal place of business at
1526 Cole Blvd. Suite 300
Golden, Colorado 80401
(the "Corporation")
and
Steven F. Kaplan
(the "Executive")
WITNESSETH
Whereas, the Corporation and the Executive mutually desire
to enter into this Agreement with respect to the Executive's
employment with the Corporation.
Now, therefore, in consideration of the mutual covenants
herein contained, the Corporation and the Executive agree as
follows:
(i) 1. EMPLOYMENT AND TERM. The Corporation agrees to employ
the Executive and the Executive agrees to serve the Corporation
as a senior executive officer for a term beginning on August 1,
1996 and ending on July 31, 1998, unless sooner terminated in
accordance with Section 5 hereof; PROVIDED, that commencing on
August 1, 1997 and each August 1 thereafter, the term of this
Agreement will automatically be extended for one additional year
unless, not later than January 31 of that year, the Corporation
or the Executive will have given written notice to the other
party not to extend this Agreement (such notice of nonrenewal
given by the Corporation to the Executive being hereinafter
referred to as a "Nonrenewal"); and
<PAGE>
FURTHER, PROVIDED, that if a Change in Control (as defined in
Section 8 hereof) occurs during the term of this Agreement
(including any extensions thereto), this Agreement will continue
in effect for a period of not less than two (2) years beyond the
month in which such Change in Control occurs.
2. DUTIES. The Executive agrees to serve the Corporation faithfully
and to the best of his ability; to devote his entire time, energy and skill
during regular business hours to such employment; and to use his best
efforts, skill and ability to promote its interest.
3. RESPONSIBILITIES; PLACE OF PERFORMANCE.
(a) During the term of this Agreement, the Executive shall have
such title and perform such duties as from time to time may be assigned to
him by the Board of Directors of the Corporation (the "Board") or the Chief
Executive Officer of the Corporation; PROVIDED, that the title and the duties
assigned to the Executive shall include the title and the duties of Chief
Financial Officer and shall not be inconsistent with his status as a senior
executive officer of the Corporation. The Executive shall at all times
report directly to the Chief Executive Officer and shall have executive
powers and authority as shall reasonably be required to enable him to
discharge his duties in an efficient manner, together with such facilities
and services as are suitable or customary to his position.
(b) Except for occasional travel on the Corporation's business, the
Executive will be required to perform his duties under this Agreement in the
Denver, Colorado metropolitan area.
4. COMPENSATION AND RELATED MATTERS.
(a) SALARY. During the term of the Executive's employment
hereunder, the Corporation will pay to the Executive a salary at the rate of
$280,000 per annum, in substantially equal installments in accordance with
normal payroll practices of the Corporation, but not less frequently than
monthly. The base salary may be increased by the Board from time to time, in
its discretion, but in no event shall such base salary be reduced from the
rate
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<PAGE>
previously in effect. The base salary in effect from time to time hereunder
is referred to as the "Base Salary."
(b) EXPENSES. The Executive will be entitled to receive prompt
reimbursement from the Corporation of all reasonable expenses incurred by the
Executive in performing services hereunder during the term of the Executive's
employment hereunder, including all expenses of travel and living expenses
while away from home on business or at the request of the Corporation,
consistent with expense policies applicable to other senior executive
officers. The Executive will furnish the Corporation with evidence that such
expenses were incurred as the Corporation may from time to time reasonably
request.
(c) INCENTIVE BONUS. With respect to each calendar year during the
term of this agreement, the Executive will be granted an annual target
incentive bonus opportunity (the "Target Bonus") equal to no less than 70% of
Base Salary. Payments of the Executive's annual incentive bonus shall be made
in accordance with the terms and conditions set forth in the then current
incentive bonus plan or arrangement maintained by the Corporation (the
"Incentive Plan"). The Target Bonus may be increased from time to time, but
may not be decreased below the percentage of Base Salary previously in effect
unless an adjustment is made in the Executive's Base Salary such that the
aggregate dollar amount of the Executive's Base Salary and Target Bonus
(after giving effect to the foregoing adjustments) is no less than the
aggregate dollar amount of such Base Salary and Target Bonus (immediately
prior to such adjustments).
(d) EMPLOYEE BENEFITS. The Executive will be entitled to
participate in all of the other employee benefit plans, programs and
arrangements which are presently or may hereafter be provided by the
Corporation to its senior executive officers including, without limitation,
all retirement, health insurance and life insurance plans, programs and
arrangements (the "Benefit Plans"), on a basis no less favorable than that of
other senior executive officers of the Corporation. In addition, the
Executive will be entitled to participate in all nonqualified employee
pension plans or arrangements of the Corporation in which he is currently or
subsequently designated as a participant (the "Pension Plans"). The
Corporation agrees that it will not terminate Executive's participation in
any of the Pension Plans or amend any
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<PAGE>
of the Pension Plans in any manner adverse to the Executive without the
Executive's prior written consent.
(e) VACATIONS. The Executive will be entitled to four (4) weeks of
vacation each calendar year, in accordance with the Corporation's vacation
policy as in effect from time to time. Vacation time which has not been used
by the end of each calendar year will be forfeited.
(f) CORPORATION AUTOMOBILE. The Corporation will provide the
Executive with an automobile during the term of this Agreement. The
Corporation will pay all reasonable expenses associated with the operation of
such automobile in the same manner as is in effect from time to time with
respect to other senior executive officers of the Corporation, including,
without limitation, all reasonable maintenance and insurance expenses. The
automobile furnished by the Corporation will be a late model top-of-the-line
Oldsmobile or like vehicle to be selected by the Executive. At the
expiration of the term of this Agreement, the Executive will promptly return
the automobile to the Corporation.
(g) OTHER. The Corporation will pay or promptly reimburse the
Executive for reasonable costs incurred by him in connection with his
engagement of professional estate planning and income tax assistance;
PROVIDED, that such amounts will not exceed $3,000 with respect to any
calendar year.
5. TERMINATION.
(a) DEATH. The Executive's employment hereunder will terminate
upon his death.
(b) DISABILITY. The Executive's employment hereunder will
terminate upon his Disability. For purposes of this Agreement, the Executive
will be considered "Disabled" beginning when first eligible for benefits
under the Corporation's long-term disability plan as in effect from time to
time (the "Disability Plan").
(c) CAUSE. The Executive's employment hereunder may be terminated
for Cause, as provided below. "Cause" means (i) the willful and continued
(after written notice and a reasonable opportunity to cure) failure by the
Executive to substantially
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<PAGE>
perform the Executive's duties with the Corporation (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness) or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Corporation, monetarily or
otherwise. For purposes of the preceding sentence, no act, or failure to
act, on the Executive's part will be deemed "willful" unless done, or omitted
to be done, by the Executive not in good faith and without reasonable belief
that the Executive's act, or failure to act, was in the best interest of the
Corporation. Upon the Corporation's determination that Cause for the
Executive's termination exists, the Corporation may elect to terminate this
Agreement upon sixty (60) days' prior written notice to the Executive.
(d) GOOD REASON. The Executive may voluntarily terminate his
employment with the Corporation for Good Reason. Good Reason will exist upon
(i) the occurrence of any material breach of this Agreement on the part of
the Corporation (including, but not limited to, any breach of Section 3 or 4
hereof), (ii) the delivery to the Executive of a notice of Nonrenewal by the
Corporation; PROVIDED, that the Executive delivers a Notice of Termination
within sixty (60) days of the delivery of such notice of Nonrenewal, or (iii)
after the occurrence of a Change in Control, (1) a substantial adverse
alteration in the Executive's title or in the nature or status of the
Executive's responsibilities from those in effect immediately prior to such
Change in Control or (2) any change to the manner in which the Incentive Plan
is administered (including, but not limited to, the process utilized in
setting performance goals and the relative difficulty of achieving such
goals), compared to the manner in which the Incentive Plan was administered
immediately prior to the Change in Control, which change results in a
significantly greater likelihood that the Executive will be unable to earn
the Target Bonus. A good faith determination by the Executive that,
following a Change in Control, there has been a material breach of this
Agreement on the part of the Corporation, a substantial adverse alteration in
Executive's title or the nature or status of Executive's responsibilities, or
there is a significantly greater likelihood that Executive will be unable to
earn the Target Bonus, shall be binding on the Corporation, and any finder of
fact shall be limited in its inquiry to whether the Executive acted in good
faith in making such determination. A transition of the Corporation from a
public company to a private company shall not, in
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<PAGE>
itself, be a change which would allow a good faith determination by Executive
that there has been a substantial adverse alteration in Executive's title, or
the nature or status of Executive's responsibilities.
The Executive's right to terminate the Executive's employment
for Good Reason will not be affected by the Executive's incapacity due to
physical or mental illness. Except as provided above, the Executive's
continued employment will not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good Reason hereunder.
(e) RESIGNATION. The Executive may voluntarily terminate his
employment hereunder at any time.
(f) TERMINATION BY THE CORPORATION WITHOUT CAUSE. The Corporation
may terminate the Executive's employment hereunder without Cause at any time,
provided however, and notwithstanding the termination of Executive's
employment hereunder without Cause, if Executive should become Disabled under
the Disability Plan during any continuation of Executive's participation in
the Corporation's welfare benefit plans under Section 6, then Executive shall
thereafter be treated in all respects as though terminated for Disability and
not as terminated without Cause.
(g) NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Corporation or by the Executive (other than termination
pursuant to Section 5(a) hereof) must be communicated by written Notice of
Termination to other party hereto. For purposes of this Agreement, a "Notice
of Termination" will mean a notice that indicates the specific termination
provision in this Agreement relied upon and sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(h) DATE OF TERMINATION. "Date of Termination" will mean (i) if
the Executive's employment is terminated by his death, the date of his death,
(ii) if the Executive delivers a Notice of Termination within sixty (60) days
of delivery to the Executive of a notice of Nonrenewal from the Corporation,
the date of delivery of such Notice of Termination, and (iii) if the
Executive's
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<PAGE>
employment is terminated for any other reason, the date specified in the Notice
of Termination.
6. COMPENSATION UPON TERMINATION
(a) FOR CAUSE; OTHER THAN FOR GOOD REASON. In the event that the
Executive's employment is terminated by the Corporation for Cause or by the
Executive other than for Good Reason, the Corporation will pay the Executive his
Base Salary through the Date of Termination. In addition, the Executive will be
entitled to receive all accrued benefits to which the Executive is entitled
under the Benefit Plans, in accordance with the terms of such Benefit Plans.
The Executive will not be entitled to any portion of the incentive bonus in
respect of the calendar year in which occurs the Date of Termination; PROVIDED,
that if the Date of Termination occurs after the end of a calendar year and
prior to the determination of whether the Executive is entitled to an incentive
bonus for such year, such incentive bonus will be paid, if and to the extent
earned under the applicable plan.
(b) DEATH; DISABILITY. In the event that the Executive's employment
is terminated by reason of the Executive's death or Disability, the Corporation
will pay the Executive (or his estate or beneficiary if applicable) his Base
Salary through the Date of Termination. The Executive (or his estate or
beneficiary, if applicable) will be entitled to receive all accrued benefits to
which the Executive is entitled under the Benefit Plans, in accordance with the
terms of such Benefit Plans. The Executive (or his estate or beneficiary, if
applicable) will be entitled to receive (i) in a lump sum as soon as practicable
after the Date of Termination, any incentive bonus accrued but not yet paid to
the Executive, including for this purpose any accumulated but unpaid excess
amounts under the Incentive Plan in respect of all calendar years ending prior
to the Date of Termination, plus (ii) a pro rata portion of the incentive bonus
for the year in which occurs the Date of Termination, such incentive bonus (A)
to be calculated in accordance with the terms of the Incentive Plan based on the
actual results of the Corporation for such year and then multiplied by a
fraction the numerator of which is the number of full and partial months worked
by the Executive in such calendar year and the denominator of which is twelve
(12) and (B) to be payable at the same time as incentive bonuses are paid to
other participants in the Incentive Plan for such year. If the Date of
Termi-
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<PAGE>
nation occurs after the end of a calendar year and prior to the determination
of whether the Executive is entitled to an incentive bonus for such year,
such incentive bonus will be paid, if and to the extent earned under the
applicable plan, at the same time as incentive bonuses are paid to other
participants in the Incentive Plan for such year. If such termination of
employment is for reason of Disability, the Executive will also be entitled
to receive disability benefits, whether or not then covered by the Disability
Plan, comprised of monthly salary continuation payments, in an amount
calculated at two-thirds of Base Salary, for a period of time ending no
sooner than the earlier of the Executive's attaining age 65 or his death;
PROVIDED, that any such payments will be offset by (i) any payments made to
the Executive under the Disability Plan and (ii) any disability benefits
payable under Social Security.
(c) WITHOUT CAUSE OR DISABILITY; GOOD REASON. In the event that the
Executive's employment is terminated by the Corporation for any reason other
than for Cause or for Disability, or is terminated by the Executive for Good
Reason, then:
(1) The Corporation will pay to the Executive, in a lump sum on
the fifth day following the Date of Termination (i) any Base
Salary due the Executive through the Date of Termination, plus
(ii) any incentive bonus accrued but not yet paid to the
Executive under the Incentive Plan for all calendar years ending
prior to the Date of Termination, including for this purpose any
accumulated but unpaid excess amounts under the Incentive Plan;
PROVIDED, that if the Date of Termination occurs prior to the
determination of whether the Executive is entitled to an
incentive bonus for any such year, such incentive bonus will be
paid, if and to the extent earned under the applicable plan, at
the same time as incentive bonuses are paid to other participants
in the Incentive Plan for such year.
(2) The Corporation will pay to the Executive an amount equal to
a pro rata portion of the incentive bonus for the year in which
occurs the Date of Termination, such incentive bonus (A) to be
calculated in accordance with the terms of the Incentive Plan
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<PAGE>
based on the actual results of the Corporation and then
multiplied by a fraction the numerator of which is the number of
full and partial months worked by the Executive in such calendar
year and the denominator of which is twelve (12) and (B) to be
payable at the same time as incentive bonuses are paid to other
participants in the Incentive Plan for such year.
(3) The Corporation will pay to the Executive compensation
continuation payments, payable on a monthly basis for a period of
two years immediately following the Date of Termination, equal to
one-twelfth (1/12) of the sum of the Executive's Base Salary and
Target Bonus (each as in effect immediately prior to the Date of
Termination, without regard to any reductions thereto giving rise
to Good Reason); PROVIDED, that during the second year of such
compensation continuation, payments will be offset by any and all
salary and bonus amounts paid to or accrued in respect of the
Executive for services rendered to any other employer. The
Executive will promptly notify the Corporation of the receipt or
accrual of any such salary or bonus. The Corporation and the
Executive agree that the Executive is expected to seek employment
in order to attempt to offset payments provided under this
Section 6(c)(3) during the second year of compensation
continuation but that the Executive will not be required to
accept any particular position of employment.
(4) The Corporation will allow the Executive to continue to
participate, for two (2) years beginning as of the Date of
Termination, in any and all of the welfare benefit plans
maintained by the Corporation in which the Executive was entitled
to participate immediately prior to such Date of Termination, to
the same extent and upon the same terms as the Executive
participated in such plans prior to the Date of Termination;
PROVIDED, that the Executive's continued participation is
permissible or otherwise practicable under the general
9
<PAGE>
terms and provisions of such plans. To the extent that continued
participation is neither permissible nor practicable, the
Corporation shall take such action as may be necessary to provide
the Executive with substantially comparable benefits (without
additional cost to the Executive) outside the scope of such plan.
If the Executive engages in regular employment after his
termination of employment (whether as an executive or as a self-
employed person), any employee welfare benefits received by the
Executive in consideration of such employment which are similar
in nature to the employee welfare benefits provided by the
Corporation will relieve the Corporation of its obligation under
this Section 6(c)(4) to provide comparable benefits to the extent
of the benefits so received. The Executive will promptly notify
the Corporation of his receipt of any such benefits.
(5) The Corporation will pay or promptly reimburse the Executive
for all reasonable expenses incurred by him for professional
outplacement services for a period of one year (the "Outplacement
Payment"); PROVIDED, that the Outplacement Payment does not
exceed in the aggregate $25,000, and will pay an additional
amount to reimburse the Executive for any federal, state and
local income taxes imposed on the Executive by virtue of the
Outplacement Payment and the additional payment hereunder, such
that the net amount retained by the Executive, after deduction of
any such taxes on the Outplacement Payment and any such taxes on
any additional payment provided by this Section 6(c)(5), shall be
equal to the Outplacement Payment.
(6) Any and all stock options granted to the Executive under the
stock option plans of the Corporation (the "Option Plans") will
be treated as follows: (i) each stock option originally granted
with a term of five and one-half years or less under any Option
Plan will become immediately and fully vested as of the Date of
Termination, and (ii) each stock option originally granted with a
term of more
10
<PAGE>
than five and one-half years under any Option Plan will
become vested as of the Date of Termination on the basis of
the following vesting schedule, if more favorable than the
vesting schedule otherwise applicable to such stock option: the
number of shares of Corporation common stock subject to each such
stock option multiplied by the percentage obtained by multiplying
1.67% by the number of full and partial months of the Executive's
service during the term of such stock option through and
including the Date of Termination. The vested portion of stock
options under this Section 6(c)(6) shall remain exercisable for a
period of ninety (90) days after the Date of Termination (but not
beyond its normal expiration date). Any portion of any stock
option which does not vest under this Section 6(c)(6) (or under
the vesting schedule otherwise applicable to such stock option)
shall be forfeited as of the Date of Termination.
(7) All accrued benefits of the Executive under the Pension
Plans will immediately vest as of the Date of Termination.
7. EXCISE TAX.
(a) In the event that any payment or benefit received or to be
received by the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Corporation, any
person whose actions result in a Change in Control or any person affiliated with
the Corporation or such person) (all such payments and benefits being
hereinafter called "Total Payments") will be subject (in whole or part) to the
excise tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), then, subject to the provisions of
Section (7)(b) hereof, the Corporation will pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Payments and any
federal, state and local income tax and Excise Tax upon the payment provided for
by this Section 7, will be equal to the Total Payments. For purposes of
determining the amount of the
11
<PAGE>
Gross-Up Payment, the Executive will be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the
Executive's residence on such date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(b) In the event that, after giving effect to any redeterminations
described in Section 7(d) hereof, a reduction in the Total Payments to the
largest amount that would result in no portion of the Total Payments being
subject to the Excise Tax (after taking into account any reduction in the Total
Payments provided by reason of Section 280G of the Code in such other plan,
arrangement or agreement) would produce a net amount (after deduction of the net
amount of federal, state and local income tax on such reduced Total Payments)
that would be greater than the net amount of unreduced Total Payments (after
deduction of the net amount of federal, state and local income tax and the
amount of Excise Tax to which the Executive would be subject in respect of such
Total Payments), then Section 7(a) hereof will not apply and the Total Payments
will be so reduced.
(c) For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of
the Total Payments will be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, unless in the opinion of tax counsel selected by
the Corporation's independent auditors and reasonably acceptable to the
Executive ("Tax Counsel"), such other payments or benefits (in whole or in part)
do not constitute parachute payments, including by reason of Section
280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within the
meaning of Section 280G(b)(l) of the Code will be treated as subject to the
Excise Tax, unless in the opinion of Tax Counsel such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of
the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such
reasonable compensation, or are otherwise not subject to the Excise Tax, and
(iii) the value of any noncash benefits or any deferred payment or benefit will
be determined by the Corporation's independent auditors in
12
<PAGE>
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
The Corporation will provide the Executive with its calculation of the
amounts referred to in this Section 7 and such supporting materials as are
reasonably necessary for the Executive to evaluate the Corporation's
calculations. If the Executive disputes the Corporation's calculations (in
whole or in part), the reasonable opinion of Tax Counsel with respect to the
matter in dispute will prevail.
(d) In the event that (i) the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time of payment
of the Total Payments and (ii) after giving effect to such redetermination, the
Total Payments are reduced pursuant to Section 7(b) hereof, the Executive will
repay to the Corporation, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the Gross-Up Payment
attributable to such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income tax imposed
on the Gross-Up Payment being repaid by the Executive to the extent that such
repayment results in a reduction in the Excise Tax and/or a federal, state or
local income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that (x) the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of the Executive's employment (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment) and (y) after giving effect to such redetermination,
the Total Payments are not reduced pursuant to Section 7(b) hereof, the
Corporation will make an additional Gross-Up Payment in respect of such excess
and in respect of any portion of the Excise Tax with respect to which the
Corporation had not previously made a Gross-Up Payment (plus any interest,
penalties or additions payable by the Executive with respect to such excess and
such portion) at the time that the amount of such excess is finally determined.
8. CHANGE IN CONTROL. (a) For purposes of this Agreement, a Change
in Control will be deemed to have taken place upon the occurrence of any of the
following events:
(i) any "person" (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Ex-
13
<PAGE>
change Act"), and as modified in Sections 13(d) and 14(d) of the Exchange
Act) other than (A) the Corporation or any of its subsidiaries, (B) any
employee benefit plan of the Corporation or one of its subsidiaries, (C)
MacAndrews & Forbes Holdings Inc. or any affiliate thereof (collectively,
"MAFCO"), (D) a corporation owned, directly or indirectly, by
stockholders of the Corporation in substantially the same proportions as
their ownership of the Corporation, or (E) an underwriter temporarily
holding securities pursuant to an offering of such securities (a
"Person"), becomes the "beneficial owner" (as defined in Rule 13d-3 of
the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the shares of common stock of the
Corporation then outstanding, and such Person's beneficial ownership
level then exceeds the percentage of the Corporation's outstanding shares
beneficially owned by MAFCO;
(ii) the consummation of any merger or consolidation of the
Corporation or one of its subsidiaries with or into any other corporation,
other than a merger or consolidation which would result in the holders of
the voting securities of the Corporation outstanding immediately prior
thereto holding securities which represent immediately after such merger or
consolidation more than 80% of the combined voting power of the voting
securities of the Corporation or the surviving corporation or the parent of
such surviving corporation;
(iii) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets; or
(iv) a majority of the Board votes in favor of a decision that a
Change in Control has occurred.
(b) Notwithstanding anything in Section 8(a) hereof to the contrary,
any event or transaction which would otherwise constitute a Change in Control (a
"Transaction") shall not constitute a Change in Control for purposes of this
Agreement if, in connection with the Transaction, the Executive participates as
an equity investor in the acquiring entity or any of its affiliates (the
"Acquiror"). For purposes of the preceding sentence, the
14
<PAGE>
Executive shall not be deemed to have participated as an equity investor in
the Acquiror by virtue of (i) obtaining beneficial ownership of any equity
interest in Acquiror as a result of the grant to the Executive of incentive
compensation awards under one or more incentive plans of Acquiror, on terms
and conditions substantially equivalent to those applicable to other
executives of the Corporation immediately prior to the Transaction, after
taking into account normal differences attributable to job responsibilities,
title and the like, or (ii) obtaining beneficial ownership of any equity
interest in Acquiror on terms and conditions substantially equivalent to
those obtained in the Transaction by all other stockholders of the
Corporation.
(c) Upon the occurrence of a Change in Control during the term of
this Agreement, whether or not the Executive's employment within the Corporation
is terminated in connection with such event, any and all stock options granted
to the Executive under the Option Plans will become immediately vested.
9. INVENTIONS; CONFIDENTIAL INFORMATION; COMPETITORS.
(a) All inventions, whether or not patentable, conceived or developed
by Executive, alone or with others, during his employment by the Corporation
will be the property of the Corporation and will be promptly and fully disclosed
by Executive to the Corporation. Executive will perform all necessary acts to
vest title fully to any such invention in the Corporation and to enable the
Corporation, at its expense, to secure and maintain domestic and/or foreign
patents or any other rights for such inventions.
(b) Without the express prior written consent of the Corporation,
Executive will not disclose or make available to anyone outside the Corporation,
its subsidiaries, or affiliated corporations or entities any confidential or
proprietary information of, or concerning, the Corporation, including, without
limitation, trade secrets, know how, customer lists, inventions or other
information not generally known to any competitor of the Corporation, its
subsidiaries or affiliated corporations or entities. Upon termination of his
employment, Executive will promptly deliver to the Corporation all documents
containing any such confidential or proprietary information without retaining
any copies or extracts thereof.
15
<PAGE>
(c) During the time he is employed by the Corporation or serves the
Corporation as a consultant, Executive will not serve as officer, director or
employee or be associated in any other capacity with any corporation,
partnership or other entity or person which is a competitor of the Corporation,
its subsidiaries, or affiliated corporations or entities. During such period
Executive will have no financial interest in any corporation, partnership or
other entity which is a competitor of the Corporation, its subsidiaries, or
affiliated corporations or entities, except participation solely as a
stockholder owning not more than 5% of the outstanding shares of a publicly
owned business.
(d) Executive acknowledges that his services are special, unique,
unusual and extraordinary, giving them peculiar value, the loss of which cannot
be reasonably or adequately compensated for by damages and, in the event of
Executive's breach of this Section 9, the Corporation will be entitled to
equitable relief by way of injunction or otherwise.
10. TERMINATION OF PRIOR AGREEMENTS. This Agreement expressly supersedes
all agreements and understandings between the parties with respect to
Executive's employment and any such agreement is hereby terminated as of the
date first above written.
11. BINDING EFFECT. This Agreement and the Addendum hereto will be
binding upon and inure to the benefit of the parties hereto, their respective
legal representatives and to any successor of the Corporation, which successor
will be deemed substituted for the Corporation under the terms of this
Agreement. As used in this Agreement, the term "successor" will include any
person, firm, corporation, or other business entity which at any time, whether
by merger, purchase or otherwise, acquires all or substantially all of the
assets or business of the Corporation.
12. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other party will not operate or be construed
as a waiver of any subsequent breach.
13. NOTICES. Any notice required or permitted to be given will be
sufficient, if in writing, and if sent by registered or certified mail to the
Executive at his residence or to the Corporation at its principal place of
business.
16
<PAGE>
14. ENTIRE AGREEMENT. This document, and the Addendum hereto, contains
the entire agreement of the parties and may not be changed except in a written
modification signed by both parties.
15. INDEMNIFICATION. The Corporation will indemnify the Executive, to the
maximum extent permitted by applicable law, against all costs, charges and
expenses incurred or sustained by the Executive, including the cost of legal
counsel selected and retained by the executive, in connection with any action,
suit or proceeding to which the Executive may be made a party by reason of the
Executive being an officer, director or employee of the Corporation or of any
subsidiary or affiliate of the Corporation.
16. LEGAL FEES. The Corporation will pay or promptly reimburse the
Executive for the reasonable legal fees and expenses incurred by the Executive,
in good faith, in connection with enforcing or defending any right of the
Executive pursuant to this Agreement.
17. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Colorado, as applied to contracts
executed and performed wholly within the State of Colorado.
18. SURVIVORSHIP. Any rights and obligations of the parties set forth in
Sections 4(d), 6, 7 and 9 of this Agreement and in the Addendum to this
Agreement will survive any termination of this Agreement.
19. ARBITRATION. Excluding only requests for equitable relief by the
Corporation under Section 9 of this Agreement, all disputes or controversies
arising under or in connection with this Agreement, including for this purpose
any claims by the Executive relating to any Pension Plan, will be settled
exclusively by arbitration, in Denver, Colorado, in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction; PROVIDED, that the
Executive will be entitled to seek specific performance of the Executive's right
to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
below.
THE COLEMAN COMPANY, INC.
By: Michael N. Hammes
-------------------------
Date: August 3, 1996
Steven F. Kaplan
-----------------------------
EXECUTIVE
Date: August 3, 1996
18
<PAGE>
Addendum to Employment Agreement
This Addendum is for the purpose of making certain modifications and additions
to the Agreement (the "Employment Agreement") entered into between Steven F.
Kaplan and The Coleman Company, Inc. with an effective date of August 1, 1996.
Words defined in the Employment Agreement shall have the same definition when
used in this Addendum. In the event of conflict between the Employment
Agreement and this Addendum, the terms and conditions of this Addendum shall
prevail.
In view of the above, the Corporation and the Executive agree as follows:
1. With respect to the remainder of calendar year 1996 and all of
calendar year 1997, the Corporation agrees that Executive will receive
a guaranteed annual incentive equal to no less than 70% of Base
Salary, with such incentive for 1996 to be paid in February of 1997
and such incentive for 1997 to be paid in February of 1998. This
guaranteed incentive is a minimum only, and Executive shall receive
the greater of the guaranteed incentive amount or the amount
determined under the terms of the Executive Incentive Plan.
2. Executive shall be a participant in the New Coleman Company, Inc.
Retirement Plan for Salaried Employees, and in The Coleman Company,
Inc. Executive Retirement Plan, and notwithstanding the vesting
requirements of such plans, if Executive's employment with
Corporation shall terminate prior to August 1, 2001, for any reason
other than termination by the Corporation for Cause, termination by
Executive other than for Good Reason, or the death or disability of
the Executive, then Executive shall be entitled to receive from
Corporation a guaranteed retirement benefit under the provisions of
such plans equivalent to that which would result from five years of
credited/vested service based on Executive's Base Salary and Target
Bonus as if paid over the full five year period. This provision for
special retirement benefits shall not result in a stacking of benefits
and shall be without further force and effect upon Executive achieving
five years of credited/vested service under the terms of the New
Coleman Company, Inc. Retirement Plan for Salaried Employees.
3. As an alternative to the provisions for compensation upon termination
by the Corporation without Cause or by the Executive for Good Reason
as contained in Section 6(c)(3) of the Employment Agreement, and
having application only following a Change of Control, Executive shall
be eligible to receive special severance payments, to be made on the
following basis. In the event a Change of Control of the Corporation
occurs within the first eighteen months of Executive's employment with
the Corporation, and the Executive's employment is then terminated
within one year of such Change of Control (other than by the
Corporation for Cause, by Executive other than for Good Reason, or by
the death or disability of the Executive) then Executive shall be
entitled to receive from
<PAGE>
Corporation a severance payment equal to three years of Executive's
Base Salary and Target Bonus, to be paid in a lump sum at the time
of termination. In the event a Change of Control of the Corporation
occurs within the second eighteen months of Executive's employment
with the Corporation, and the Executive's employment is then
terminated within one year of such Change of Control (other than by
the Corporation for Cause, by Executive other than for Good Reason,
or the death or disability of the Executive) then Executive shall be
entitled to receive from Corporation a severance payment equal to
two years of Executive's Base Salary and Target Bonus, to be paid in
a lump sum at the time of termination. This provision for special
severance benefits shall not result in a stacking of benefits and
shall be without further force and effect upon the later of August
1, 1999, or the first anniversary of a Change of Control occurring
prior to August 1, l999.
4. Executive shall receive a signing bonus of $100,000 to be paid in two
equal installments. The first payment of $50,000 will be made within
10 days of the date Executive begins employment with the Corporation.
The second payment will be made on the first anniversary of
Executive's employment with the Corporation and is contingent on
Executive being actively employed by the Corporation as of the
payment date (unless Executive's employment is terminated by the
Corporation without cause or by Executive for Good Reason prior to
that date, in which event the second payment would be due on the date
of Executive's termination.)
5. Executive will receive upon commencing employment with the
Corporation, an initial stock option grant of 100,000 shares, with the
grant to be made at market price on the grant date. The option shares
to be granted will vest in 33.33% increments at the end of years 3, 4,
and 5 following the grant date, and shall have an overall term of ten
years. Grants are made by the Compensation Committee of the Board of
Directors of the Corporation, and the grant process will be initiated
on the Executive's start date. Executive will also be eligible to
participate on the same basis as other similarly situated executive
employees of the Corporation in the 1996 stock option grant which is
expected to occur in October of 1996.
6. The Corporation will waive all waiting periods with respect to
commencement of participation by Executive in health, dental, and
disability insurance plans.
7. The Corporation will retain the services of a third party relocation
firm to assist in the relocation of Executive's family to the Denver
metropolitan area. The services to be provided will include an
appraisal based purchase and/or equity advance on Executive's current
residence. The Corporation will pay all reasonable expenses incurred
by Executive in such relocation in accordance with its normal
relocation policy. As a part of the relocation, Corporation will pay
the cost of providing suitable temporary housing for Executive in the
Denver metropolitan area and will also reimburse Executive reasonable
travel costs incurred by Executive and by
<PAGE>
Executive's spouse and children for travel between Boston and Denver
during the time prior to the permanent relocation of Executive's
principle residence. It is agreed between Executive and Corporation
that such permanent relocation will be concluded no later than June
30, 1997. In the event any reimbursement of relocation expenses by
the Corporation is taxable to the Executive, then the Corporation
will "gross up" such reimbursements as required to offset such taxes.
8. In the event Executive's employment by Corporation is terminated at
any time within the first 36 months from Executive's start date, but
excluding termination of the Executive by the Corporation for Cause,
or termination by the Executive other than for Good Reason, then the
Corporation will pay the reasonable costs incurred by Executive in
relocating the Executive's primary residence from the Denver
metropolitan area to the Boston, Massachusetts metropolitan area
(consistent with the Corporation's reimbursement of Executive's costs
to relocate to the Denver metropolitan area).
9. The Corporation has been advised by Executive that Executive currently
serves as a Director of two companies, neither of which is a
competitor of the Corporation or its affiliates. The Corporation
consents to the continuation by Executive of such board service and
agrees to look favorably on other board service by Executive so long
as the time required will not unreasonably interfere with Executive's
responsibilities to the Corporation, and that any such board service
is approved in advance by the Chief Executive Officer of the
Corporation.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the date
below.
THE COLEMAN COMPANY, INC.
By: Michael N. Hammes
--------------------------
Date: August 3, 1996
Steven F. Kaplan
------------------------------
Executive
Date: August 3, 1996
<PAGE>
AMENDMENT TO
EMPLOYMENT AGREEMENT
FIRST AMENDMENT dated July 1, 1996 to Employment Agreement effective
as of January 1, 1996, by and between The Coleman Company, Inc., a Delaware
corporation (the "Company") and Michael N. Hammes (the "Executive").
WHEREAS, the parties entered into an Employment Agreement effective
as of January 1, 1996 (the "Employment Agreement"); and
WHEREAS, the parties wish to amend the Employment Agreement as set
forth herein.
NOW THEREFORE, the parties agree as follows:
1. Section 4(a) is hereby amended by replacing "$600,000" where it
appears with "$600,000 commencing the date hereof, $650,000 commencing July
1, 1996 and $700,000 commencing January 1, 1997".
2. Section 5(e) of the Employment Agreement is hereby amended by
deleting the second sentence thereof in its entirety.
3. The Employment Agreement is hereby amended by adding the
following Section 5(i) thereto:
"If (1) the Executive is terminated without Cause, (2) the Executive
terminates his employment for Good Reason or (3) the Executive voluntarily
terminates his employment by retiring with the consent of the Company's Board
of Directors (the mere acceptance of a resignation shall not be deemed
consent for this purpose), the Executive shall be entitled to receive a
minimum retirement benefit as specified in the Consolidated Supplement
Retirement Plan of not less than 40% of annual cash compensation not to
exceed $500,000 per annum."
4. The parties agree that as expect as expressly amended hereby,
the Agreement shall be in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment to the
Employment Agreement as of the date first above written.
THE COLEMAN COMPANY, INC.
By: Larry E. Sanford
-----------------------------
Name: Larry E. Sanford
Title: Executive Vice President
Michael N. Hammes
---------------------------------
Michael N. Hammes
<PAGE>
The Coleman Company, Inc.
Consolidated Supplemental Retirement Plan
First Amendment
WITNESSETH: That,
WHEREAS, The Coleman Company, Inc. ("Coleman") adopted The Coleman Company,
Inc. Consolidated Retirement Plan (the "Plan"); and
WHEREAS, Coleman wishes to amend the Plan as set forth herein;
NOW, THEREFORE, Coleman amends the Plan as follows:
Subsection 4(a) of the Plan is hereby amended by replacing the first
sentence thereof with the following:
"The amount of each monthly benefit payment under the Supplemental Benefit,
before any reductions described above and below, shall equal one-twelfth (1/12)
of the greater of (i) three percent (3%) times Service (up to ten (10) years)
plus two percent (2%) times any additional Service (to a maximum of ten (10)
years), multiplied by the Participant's Final Average Compensation or (ii) forty
percent (40%), multiplied by the Participant's Final Average Compensation,
PROVIDED, HOWEVER, that notwithstanding the foregoing the Supplemental Benefit
(before reduction as described herein) shall not exceed $500,000."
This Amendment to the Consolidated
Supplemental Retirement Plan
Adopted by The Coleman Company, Inc.
The 1st day of July 1996
Larry E. Sanford
-----------------------------------
Larry E. Sanford
Executive Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated financial statements as filed in the Company's Form 10-Q
for the quarter ended June 30, 1996 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> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,364
<SECURITIES> 0
<RECEIVABLES> 374,739
<ALLOWANCES> 4,575
<INVENTORY> 291,995
<CURRENT-ASSETS> 714,671
<PP&E> 290,104
<DEPRECIATION> 77,847
<TOTAL-ASSETS> 1,281,753
<CURRENT-LIABILITIES> 317,451
<BONDS> 558,537
0
0
<COMMON> 532
<OTHER-SE> 333,931
<TOTAL-LIABILITY-AND-EQUITY> 1,281,753
<SALES> 724,333
<TOTAL-REVENUES> 726,214
<CGS> 507,710
<TOTAL-COSTS> 507,710
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,906
<INTEREST-EXPENSE> 18,813
<INCOME-PRETAX> 68,237
<INCOME-TAX> 23,201
<INCOME-CONTINUING> 43,085
<DISCONTINUED> 0
<EXTRAORDINARY> (647)
<CHANGES> 0
<NET-INCOME> 42,438
<EPS-PRIMARY> .80<F1>
<EPS-DILUTED> .80<F1>
<FN>
<F1>Per share amounts have been adjusted to reflect the two-for-one stock split
paid July 15, 1996. Financial Data Schedules for prior periods have not been
restated for this stock split.
</FN>
</TABLE>
