<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended DECEMBER 31, 1997
------------------------------
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.)
2111 E 37TH STREET NORTH, WICHITA, KANSAS 67219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 316-832-2700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
SAME CLASS THE PACIFIC STOCK EXCHANGE
(unlisted trading privileges)
SAME CLASS MIDWEST STOCK EXCHANGE
(unlisted trading privileges)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock of the registrant held by
non-affiliates, based upon the closing sale price of the common stock on March
3, 1998, was approximately $307,672,838.
As of March 3, 1998, there were 53,610,950 shares of the registrant's
common stock outstanding, of which 44,067,520 shares were held by an indirect
wholly-owned subsidiary of Mafco Holdings Inc.
Exhibit Index at pages 39 through 45.
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I Page
----
Item 1. Business................................................... 3
Item 2. Properties................................................. 9
Item 3. Legal Proceedings.......................................... 10
Item 4. Submission of Matters to a Vote of Security Holders........ 11
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters............................... 12
Item 6. Selected Financial Data.................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 14
Item 8. Financial Statements and Supplementary Data................ 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 21
PART III
Item 10. Directors and Executive Officers of the Registrant......... 21
Item 11. Executive Compensation..................................... 25
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 36
Item 13. Certain Relationships and Related Transactions............. 37
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................. 39
Signatures................................................. 46
2
<PAGE>
PART I
ITEM 1. BUSINESS
OVERVIEW
The Coleman Company, Inc. ("Coleman" or the "Company") is a leading
manufacturer and marketer of consumer products for outdoor recreation and home
hardware use on a global basis. The Company's products have been sold
domestically and internationally under the Coleman brand name since the 1920s.
The Company believes its strong market position is attributable primarily to its
well-recognized trademarks, particularly the Coleman brand name, broad product
line, product quality and innovation, and marketing, distribution and
manufacturing expertise.
The Company has two primary classes of products, outdoor recreation and
hardware. The Company's principal outdoor recreation products include a
comprehensive line of lanterns and stoves, fuel-related products such as
disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags,
backpacks, daypacks, adventure travel gear, tents, outdoor folding furniture,
portable electric lights, spas, camping accessories and other products. The
Company's principal hardware products include portable generators, portable and
stationary air compressors, and safety and security products such as smoke
alarms, carbon monoxide detectors and thermostats. The Company has entered into
a Stock Purchase Agreement dated as of February 18, 1998 (the "CSS Sale
Agreement") with Ranco Incorporated of Delaware ("Ranco") and Siebe plc, the
parent of Ranco, for the sale of Coleman Safety & Security Products, Inc.
("CSS"), which manufactures such safety and security products. The Company's
products, which are mostly used for outdoor recreation, home improvement
projects, and emergency preparedness, are distributed predominantly through mass
merchandisers, home centers and other retail outlets.
BACKGROUND
Coleman is a subsidiary of Coleman Worldwide Corporation ("Coleman
Worldwide"). Coleman Worldwide is an indirect wholly-owned subsidiary of CLN
Holdings Inc. ("CLN Holdings"), an indirect wholly-owned subsidiary of New
Coleman Holdings Inc. ("Holdings"), an indirect wholly-owned subsidiary of
MacAndrews & Forbes Holdings Inc. ("MacAndrews Holdings"), a corporation wholly
owned through Mafco Holdings Inc. ("Mafco" and, together with MacAndrews
Holdings, "MacAndrews & Forbes") by Ronald O. Perelman. Coleman Worldwide owns
44,067,520 shares of the common stock of Coleman which represented approximately
82% of the outstanding Coleman common stock as of December 31, 1997.
On February 27, 1998, CLN Holdings and Coleman (Parent) Holdings Inc., the
parent company of CLN Holdings, entered into an Agreement and Plan of Merger
(the "CLN Holdings Merger Agreement") with Sunbeam Corporation ("Sunbeam") and a
wholly-owned subsidiary of Sunbeam ("Laser Merger Sub"). The CLN Holdings
Merger Agreement provides that, among other things, Laser Merger Sub will be
merged (the "CLN Holdings Merger") with CLN Holdings. Pursuant to the CLN
Holdings Merger Agreement, the shares of CLN Holdings' common stock issued and
outstanding immediately prior to the effective time of the CLN Holdings Merger
will be converted into the right to receive in the aggregate 14,099,749 shares
of Sunbeam's common stock and $159,957,756 in cash, without interest. In
addition, the outstanding $732.0 million principal amount at maturity of Senior
Secured Discount Exchange Notes due 2001 (the "Escrow Notes") of CLN Holdings
will remain an obligation of CLN Holdings following the CLN Holdings Merger.
Coincident with the execution of the CLN Holdings Merger Agreement, the
Company, Sunbeam and a wholly-owned subsidiary of Sunbeam ("Merger Sub"),
entered into an Agreement and Plan of Merger (the "Coleman Merger Agreement" and
with the CLN Holdings Merger Agreement, collectively the "Merger Agreements"),
providing that, among other things, Merger Sub will be merged (the "Coleman
Merger") with the Company. Pursuant to the Coleman Merger Agreement, each share
of the Company's common stock issued and
3
<PAGE>
outstanding immediately prior to the effective time of the Coleman Merger
(other than shares held by Coleman Worldwide and dissenting shares, if any)
will be converted into the right to receive (a) 0.5677 of a share of Sunbeam
common stock, with cash paid in lieu of fractional shares, and (b) $6.44 in
cash, without interest.
Consummation of the CLN Holdings Merger is subject to the expiration of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the satisfaction of certain other customary
conditions. It is currently anticipated that the CLN Holdings Merger will be
completed later this month or early next month. Consummation of the Company
Merger is subject to the completion of the CLN Holdings Merger at the filing of
certain definitive documents required in connection therewith with the
Securities and Exchange Commission. It is anticipated that the Company Merger
will be consummated later this Spring.
Following consummation of the CLN Holdings Merger, CLN Holdings will be a
direct wholly-owned subsidiary of Sunbeam. Following consummation of the Coleman
Merger, the Company will be an indirect wholly-owned subsidiary of Sunbeam.
The Company has made several acquisitions in recent years designed to
expand its product lines. In 1996, the Company ac quired the French company
Application des Gaz ("Camping Gaz") which is a leader in the European camping
equipment market and also acquired the assets of Seatt Corporation ("Seatt"), a
leading designer, manufacturer and distributor of smoke alarms, thermostats and
carbon monoxide detectors. In 1995, the Company acquired Sierra Corporation of
Fort Smith, Inc. ("Sierra"), a manufacturer of portable outdoor and recreational
folding furniture and accessories and substantially all of the assets of Active
Technologies, Inc. ("ATI"), a manufacturer of technologically advanced
lightweight generators and battery charging equipment. In 1994, the Company
acquired substantially all of the assets of Eastpak, Inc. and all of the capital
stock of M.G. Industries, Inc. (together, "Eastpak"), a leading designer,
manufacturer and distributor of branded daypacks, sports bags and related
products; and substantially all of the assets of Sanborn Manufacturing Company
("Sanborn"), a manufacturer of a broad line of portable and stationary air
compressors.
The Company also restructured certain operations. In 1994, the Company
completed the restructuring of its German manufacturing operations (the "German
Restructuring"), including selling its plastic cooler business located in
Inheiden, Germany and Loucka, Czech Republic. In 1996, the Company closed the
Brazilian manufacturing operations it had acquired from Metal Yanes, Ltda. in
1994. In 1997, the Company undertook further restructuring including (i) exiting
various low margin products, including pressure washers, (ii) closing and
relocating certain administrative and sales offices, and (iii) closing several
manufacturing facilities.
On February 18, 1998, the Company entered into the CSS Sale Agreement. The
sale price is approximately $105.0 million and is subject to adjustment. The
closing under the CSS Sale Agreement is expected to occur by the end of March
1998. In addition, the Company will license to Ranco the right to use the
"Coleman" name on retail smoke alarms and carbon monoxide detectors, and certain
other products.
BUSINESS STRATEGY
The Company's business strategy is to build upon its reputation as a
leading manufacturer and marketer of high quality brand name consumer products
for the outdoor recreation and hardware markets. The specific operating
strategies include:
FOCUS ON QUALITY AND SERVICE. Since the business of the Company
was founded in the early 1900's, Coleman has built a reputation for its
quality products and superior customer service. The Company is
committed to continuing, and building upon, this reputation.
INTRODUCING NEW PRODUCTS. The Company plans to continue
introducing new products. Management intends to focus on leveraging the
Company's existing technologies, processes and expertise to maximize the
speed and efficiency of new product development and introductions.
4
<PAGE>
DEVELOPING EXISTING BRANDS. The Company believes it has some of
the more prominent brand names for outdoor recreation and home hardware
use and plans to strengthen these brands through superior product
design, advertising, and promotion.
EXPANDING INTERNATIONAL MARKETS. Coleman is currently a market
leader in several product categories in various markets around the
world, including the United States, Europe and Japan. The Company plans
to utilize its well-established infrastructures in these markets to
expand its core product categories and to invest appropriately to
develop and build businesses in new geographic markets.
DEVELOPING HUMAN RESOURCES. The Company plans to continue
developing, training, and motivating its personnel at all levels to
achieve excellence, including developing and building its team of
experienced managers.
OPERATING EFFICIENCY. The Company plans to continue seeking ways
to further improve the quality and efficiency of its business processes
in order to ensure quality, realize cost savings, and improve customer
service.
Following the consummation of the CLN Holdings Merger, such business
strategy may change.
PRODUCTS
OUTDOOR RECREATION
The Company's principal products include a comprehensive line of lanterns
and stoves for outdoor recreational use, fuel-related products such as
disposable fuel cartridges, a broad range of coolers and jugs, sleeping bags,
backpacks, tents, outdoor folding furniture, portable electric lights, spas,
camping accessories and other products. These products are used predominantly
in outdoor recreation, but many products have applications in emergency
preparedness and some are also used in home improvement projects and are
distributed predominantly through mass merchandisers, home centers and other
retail outlets.
LANTERNS AND STOVES. Coleman believes it is the leading manufacturer of
lanterns and stoves for outdoor recreational use in the world. Coleman's liquid
fuel appliances include single and dual fuel-powered lanterns and stoves.
Coleman also manufactures a broad range of propane- and butane-fueled lanterns
and stoves, which allow the user to regulate the intensity of light or heat.
These products are manufactured at the Company's facilities located in the
United States and Europe and are marketed under the Coleman, Campingaz and Peak
1 brand names.
FUEL. The Company is a leading supplier to the worldwide camping and
outdoor recreation market of propane and butane cartridges and camping fuel.
In addition to manufacturing and filling disposable propane cartridges and
refillable liquid propane gas cylinders, Coleman sells camping fuel that is
refined and canned to its specifications by various suppliers, fills butane gas
cartridges and purchases butane-filled gas cartridges from third-party vendors
for sale to customers throughout the world. These products are marketed under
the Coleman, Campingaz and Peak 1 brand names.
COOLERS AND JUGS. The Company manufactures and sells a wide variety of
insulated coolers and jugs and reusable ice substitutes. The Company's cooler
line includes personal coolers for camping, picnics or lunch box use; large
coolers; beverage coolers for use at work sites and recreational and social
events; and soft-sided coolers. Coleman's cooler products are manufactured
predominantly at the Company's facilities located in the United States and are
marketed under the Coleman brand name worldwide and under the Campingaz brand
name in Europe.
RECREATIONAL SOFT GOODS. The Company designs, manufactures or sources, and
markets textile products, including tents, sleeping bags, backpacks, daysacks,
sports bags, duffle bags and rucksacks. These products are
5
<PAGE>
manufactured at the Company's facilities located in the United States
and Puerto Rico or sourced from third-party vendors who manufacture them
to the Company's specifications. The Company's tents and sleeping bags
are marketed under the Coleman and Peak 1 brand names, while its
daysacks, sport bags and related products are marketed under the
Coleman, Eastpak and the licensed Timberland brand names.
OUTDOOR FURNITURE. The Company manufactures and markets aluminum- and
steel-framed, portable, outdoor, folding furniture under the Coleman and Sierra
Trails brand names. These products are manufactured predominantly at the
Company's facilities located in the United States.
ELECTRIC LIGHTS. The Company designs and markets electric lighting
products that are manufactured by others and sold under the Coleman, Powermate,
Job-Pro and Campingaz brand names. These products include portable electric
lights such as hand held spotlights, flashlights and fluorescent lanterns and a
line of rechargeable lanterns and flashlights.
SPAS. The Company manufactures and markets a wide range of spas, which are
made primarily from acrylic, for residential applications. These products are
manufactured at the Company's facility located in the United States and are
distributed through a nationwide dealer network.
CAMPING ACCESSORIES. The Company designs, sources and markets a variety of
small accessories for camping and outdoor use, such as cookware and utensils.
These products are manufactured by third-party vendors to Coleman's
specifications and are marketed under the Coleman brand name.
HARDWARE
The Company's principal products include portable generators, portable and
stationary air compressors. In addition, through CSS, the Company manufactures
and markets safety and security products such as smoke alarms, carbon monoxide
detectors and thermostats. On February 18, 1998, the Company entered into the
CSS Sale Agreement and the closing under such agreement is expected to occur by
the end of March 1998.
GENERATORS. The Company is a leading manufacturer and distributor of
portable generators in the United States and worldwide. Generators are used
for home improvement projects, emergency preparedness and outdoor recreation.
These products are manufactured by the Company, using engines manufactured by
Tecumseh, Briggs & Stratton, Vanguard, Honda and Kawasaki, at its facilities
located in the United States, are marketed under the Coleman Powermate brand
name and are distributed predominantly through mass merchandisers and home
center chains. The Company also produces advanced, light-weight generators
incorporating proprietary technology.
AIR COMPRESSORS. The Company's air compressors are manufactured at its
facilities located in the United States, are marketed under the Coleman
Powermate brand name and are distributed predominantly through mass
merchandisers and home center chains.
SAFETY AND SECURITY PRODUCTS. The Company manufactures a range of safety
and security products for residential use, primarily smoke alarms, carbon
monoxide detectors and thermostats. The Company manufactures these products at
its facilities located in Mexico and markets them under the Firex, Code 1 and
Coleman Sheltra brand names. These products are distributed predominantly
through electrical wholesalers, mass merchandisers, and home center chains in
North America and selected foreign countries, primarily Australia and the United
Kingdom.
6
<PAGE>
SALES AND MARKETING
The following table sets forth the net revenues by class of products for
the years ended December 31, 1997, 1996 and 1995.
<TABLE>
1997 1996 1995
-------- -------- ------
(In millions)
<S> <C> <C> <C>
Outdoor Recreation $ 859.7 $ 859.6 $688.9
Hardware 294.6 360.6 244.7
-------- -------- ------
Total $1,154.3 $1,220.2 $933.6
-------- -------- ------
-------- -------- ------
</TABLE>
In the United States and Canada, the Company's outdoor recreation products
are sold by the Company's own sales force and, to a lesser extent, by sales
representatives that serve specialty markets and related distribution channels.
Spa products, however, are sold by independent sales representatives to a
nationwide dealer network and, to a lesser extent, by regional sales managers
employed by the Company. The Company's hardware products are sold by Company
and independent sales representatives that serve specialty markets and related
distribution channels.
The Company promotes its products through national and local advertising
campaigns, frequently coordinating with retailers' promotions to maximize the
benefits of its advertising efforts.
Coleman's major customers include Canadian Tire, Home Depot, Kmart,
Price/Costco, Target, and Wal-Mart. Wal-Mart and its affiliates accounted for
approximately 13% of the Company's 1997 consolidated net revenues. Although the
loss of Wal-Mart as a customer could have an adverse effect on the Company, the
Company believes its relationship with Wal-Mart is satisfactory and the Company
has no reason to believe Wal-Mart will not continue as a customer.
International sales represented 31%, 32% and 24% of net revenues for the
years ended December 31, 1997, 1996 and 1995, respectively. For 1997,
approximately 80% of the Company's international sales were in Japan and Europe,
with the balance in Latin America, Asia-Pacific, Africa and the Middle East.
The Company has sales administration offices and warehouse and distribution
facilities in Australia, Austria, Belgium, Brazil, the Czech Republic, France,
Germany, Hungary, Italy, Japan, The Netherlands, Portugal, Spain, Switzerland,
the United Arab Emirates and the United Kingdom. Each office is responsible for
sales and distribution of the Company's products in the territories assigned to
that office. The Company's direct export operations market its products
directly to international customers in certain other markets through Company
sales managers, independent distributors, and commissioned sales
representatives. In total, the Company sells its products in more than 100
countries.
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.
COMPETITION
The markets in which the Company operates are generally highly competitive,
based primarily on product quality, product innovation, price and customer
service and support. The Company's competitors vary according to product line.
The Company believes that no other company produces and markets the breadth of
camping and outdoor recreation products marketed by the Company. Lanterns and
stoves compete with, among others, products offered by Century Primus (a unit
of Century Tool & Manufacturing Inc.), American Camper (a unit
7
<PAGE>
of Brunswick Corporation) and Dayton Hudson Corporation. The Company's
insulated cooler and jug products compete with products offered by Rubbermaid
Incorporated, Igloo Products Corp. (a unit of Brunswick Corporation) and The
Thermos Company (a unit of Nippon Sanso KK). The Company's sleeping bags
compete with, among others, American Recreation and Slumberjack (units of
Kellwood Company), Academy Broadway Corp. and MZH Inc. (a unit of Brunswick
Corporation), as well as certain private label manufacturers. In the tent
market, the Company competes with, among others, Sears, Wenzel (a unit of
Kellwood Company), Eureka (a unit of Johnson Worldwide Associates, Inc.) and
Mountain Safety Research (a unit of Thaw Corporation), as well as certain
private label manufacturers. The Company's backpack products compete with,
among others, American Camper (a unit of Brunswick Corporation), JanSport (a
unit of VF Corporation), Nike, Outdoor Products and Kelty (a unit of Kellwood
Company), as well as certain private label manufacturers. The Company's
competition in the electric light business includes, among others, Eveready (a
unit of Ralston Purina Company) and Rayovac Corporation. The Company's spas
compete with, among others, Watkins Manufacturing Corporation (d.b.a. Hot
Springs, a unit of Masco Corporation) and Clark Manufacturing Company, Inc.
(d.b.a. Sundance Spas). The Company's camping accessories compete primarily
with Coughlan's. The Company's primary competitors in the generator business
are Generac Corporation, Honda Motor Co., Ltd., Kawasaki and Yamaha. Primary
competitors in the air compressor business include DeVilbiss and Campbell
Hausfield. The Company's safety and security products compete primarily with
First Alert, American Sensor and Nighthawk (a unit of Williams Holding PLC).
In addition, the Company competes with various other entities in international
markets.
PATENTS, TRADEMARKS, AND LICENSES
The Company's operations are not significantly dependent upon any single or
related group of patents. While the Company does not believe any single
trademark is material to its business other than the "Coleman" word mark and the
"Coleman in parallelogram with lantern symbol" logo mark and the "Eastpak"
trademark, it believes its trademarks taken as a whole are material to its
business. Accordingly, the Company has taken actions to protect its interests in
all such trademarks.
The Company licenses the Coleman name and logo under two types of licensing
arrangements: general merchandise licenses and licenses to purchasers of
businesses divested by the Company and Holdings. The Company's general
merchandise licensing activities involve licensing the Coleman name and logo,
for a royalty fee, to certain companies that manufacture and sell products that
complement the Company's product lines.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are linked to the process of
marketing its products. New products and improvements to existing products are
developed based upon the perceived needs and demands of consumers. The
Company's research and development is performed primarily by an in-house team of
marketing managers, engineers, draftsmen and product testers using tools such as
computer-assisted design and a variety of consumer research techniques.
Research and development expenditures are expensed as incurred. The amounts
charged against operations for the years ended December 31, 1997, 1996 and 1995
were $11.9 million, $11.1 million and $6.5 million, respectively.
INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS
The Company operates in a single business segment. Certain information
concerning geographic segments of the Company is set forth in Note 18 of the
Notes to Consolidated Financial Statements contained elsewhere in this Form 10-K
Annual Report.
EMPLOYEES
As of December 31, 1997 the Company employed approximately 3,700 persons
full time in the United States and 2,300 persons internationally. None of the
Company's United States employees are represented by unions. The Company's
Canadian warehouse employees are represented by a union. All of the
approximately
8
<PAGE>
525 production employees at the Company's operations in France and Italy
and the approximately 900 production employees at CSS's operations in
Mexico are represented by unions. The Company believes that its
relations with its employees are satisfactory.
ITEM 2. PROPERTIES
The Company's principal properties as of December 31, 1997 are as follows:
<TABLE>
Building
Square
Location Principal Use Footage
-------- ------------- --------
<S> <C> <C>
St Genis Laval, France Manufacture of lanterns and stoves, filling of gas 2,070,000
cylinders, and assembly of barbeques; office and
warehouse
Wichita, KS Manufacture of lanterns and stoves and insulated 1,197,000
coolers and jugs; research and development and design
operations; office and warehouse
New Braunfels, TX Manufacture of insulated coolers and other plastic 338,000
products
Lake City, SC Manufacture of sleeping bags 168,000
Springfield, MN Manufacture of air compressors 166,000
Cedar City, UT Manufacture of sleeping bags 160,000
Kearney, NE Manufacture/assembly of portable generators and pressure 155,000
washers; office and warehouse
Pocola, OK Manufacture of outdoor folding furniture 123,000
Maize, KS Manufacture of propane cylinders and machined parts 116,000
Chihuahua, Mexico * Manufacture of smoke alarms and carbon monoxide detectors 110,000
Morovis and Orocovis, Manufacture of daypacks, sports bags, and related 110,000
Puerto Rico products; office and warehouse
Chandler, AZ Manufacture of acrylic spas; office and warehouse 78,000
Centenaro di Lonato, Italy Manufacture of butane lanterns, stoves and heaters; 77,000
office and warehouse
</TABLE>
* To be disposed of as part of the CSS Sale Agreement.
The Wichita, Kansas; New Braunfels, Texas; Lake City, South Carolina;
Cedar City, Utah; Pocola, Oklahoma; Chandler, Arizona; Springfield,
Minnesota; and Centenaro di Lonato, Italy facilities are owned by the
Company. The owned facilities at Kearney, Nebraska reside on land leased
under three leases that expire in 2007 with options to extend for three
additional ten-year periods. The Maize, Kansas facility is leased by the
Company under leases that terminate in 2005. The Company has an option to
purchase this facility at the end of the lease period. The Puerto Rico
facilities in Morovis and Orocovis are leased for terms that expire in 1999
and 2007, respectively. The warehouse portion of St. Genis Laval, France is
leased for terms that expire in 1998, the remaining facility is owned; and
48,000 square feet of the Chihuahua, Mexico property are leased for terms
that expire in 2004, the remaining facility is owned. Company management
considers the Company's facilities to be well maintained, adequate, suitable
and satisfactory for the Company's operations, and believes that the
Company's facilities provide sufficient capacity for its production
requirements.
9
<PAGE>
PRODUCT LIABILITY AND INSURANCE
The Company is party to various product liability lawsuits relating to
its products and incidental to its business. The Company believes that many
of the personal injury and damage claims brought against it arise from the
misuse or misapplication of the Company's products. In such cases, the
Company vigorously defends against such actions. Since the beginning of
1986, in only one policy period did the Company have a product liability
award that exceeded the individual per occurrence self-insured retention
amount and product liability awards that exceeded the aggregate self-insured
retention amount. There can be no assurance, however, that the Company's
future product liability experience will be consistent with its past
experience. The Company believes that the ultimate conclusion of the various
pending product liability claims and lawsuits of the Company will not have a
material adverse effect on the financial position or results of operations of
the Company.
The Company participates in product liability insurance programs
maintained by Holdings and reimburses Holdings for its allocable share of the
cost of such coverage. Such liability insurance is written on a "claims
made" basis. A "claims made" policy generally insures the Company for any
claims made while such insurance coverage is in effect regardless of when the
incident or event occurred. There can be no assurance that the Company's
insurance carrier would not discontinue the Company's policy after the
occurrence of, but prior to a claims with respect to, an incident or event
giving rise to a claim. The Company believes that, in such event, it would
be able to obtain insurance coverage that would cover the particular incident
or event and replace the Company's existing policy, although there can be no
assurance that the Company could obtain such coverage or that it would be on
terms comparable to its existing coverage.
Under Holdings' product liability insurance coverages, the Company
retains liability in the amount of $2 million per occurrence and $4 million
in the aggregate for the policy year. The Company believes that this type and
level of coverage is adequate. For a discussion of the Company's policy on
accrual of reserves for the self-insured portions of the risks covered by the
insurance programs maintained by Holdings, see Notes 1 and 12 of the
Consolidated Financial Statements of the Company.
As a result of and effective with the consummation of the CLN Holdings
Merger, the Company will no longer participate in insurance programs
sponsored by Holdings (except for claims made prior to the consummation of
the CLN Holdings Merger), and will either obtain replacement insurance on its
own and/or obtain replacement insurance under policies maintained by Sunbeam.
ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
GILBERT AND MOSLEY SITE. As a result of investigations undertaken in
1986, the Kansas Department of Health and Environment ("KDHE") discovered
that groundwater in the downtown Wichita area (the "Gilbert and Mosley Site")
was contaminated with volatile organic chemicals ("VOCs"). Coleman occupied
a facility within the boundaries of the Gilbert and Mosley Site. Subsequent
investigations in the area, including investigations in November 1988 by
Coleman, indicated that the groundwater beneath the Coleman property is
contaminated with VOCs. Coleman is in the process of remediating the
contamination on its property.
The City of Wichita has entered into a voluntary agreement with KDHE in
which the City agreed to investigate and then remediate contamination in the
Gilbert and Mosley Site. Coleman has entered into an agreement with KDHE in
which Coleman agreed to perform a similar study for the Coleman property and
to implement remedial activities at its property. In addition, Coleman
entered into an agreement with the City of Wichita in which Coleman agreed to
fund its proportionate share of the City's study and remediation of the
Gilbert and Mosley site.
10
<PAGE>
All previously filed lawsuits alleging that properties in the downtown
Wichita area were diminished in value as a result of discharges of volatile
organic chemicals from Coleman's downtown Wichita facility have been settled
and dismissed.
MAIZE SITE. Coleman has undertaken a soil and groundwater investigation
at its facility in Maize, Kansas (the "Maize Site"). Results indicate that
limited VOC contamination is present in the groundwater under and to the
southeast of the facility. The data has been reported to the KDHE, and
Coleman has entered into an agreement with KDHE to implement appropriate
remedial actions. The remediation system has been installed, and Coleman is
in the process of remediating the contaminated groundwater.
NORTHEAST SITE. In 1990 Coleman undertook a soil and groundwater
investigation of its facility in northeast Wichita (the "Northeast Site").
Results indicated the presence of VOCs in the groundwater and soils.
Although some of the contamination may be a result of Coleman's operations at
the facility, the data also indicated that contamination was migrating onto
the Coleman property from up gradient sources. Coleman reported the initial
results of its study to KDHE. Coleman has also provided copies of all data
to the United States Environmental Protection Agency (the "EPA"), at its
request. The EPA has not initiated any actions against the Company with
respect to the Northeast Site. An agreement has been entered into with KDHE
to undertake additional investigatory activities, and an interim remediation
system has been installed.
LAKE CITY SITE. In 1992, Coleman undertook a soil and groundwater
investigation of its facility in Lake City, South Carolina (the "Lake City
Site"). Results indicated limited VOC and fuel oil contamination in the soil
and groundwater. In both instances, the contamination appeared to relate to
the activities of a previous occupant of the Lake City Site. The results of
the investigation were reported to the appropriate South Carolina
environmental agency and Coleman took legal action against the prior owner.
In early 1998, the lawsuit was settled and the prior owner agreed to take
over further site investigations and remediation actions and to reimburse
Coleman for a significant part of Coleman's past costs related to site
investigation.
The Company has not been named as a potentially responsible party
("PRP") by the EPA nor does it have joint and several liability with any
other PRP for remediation at any of the above sites.
The Company has adopted an environmental policy designed to ensure that
the Company operates in full compliance with applicable environmental
regulations and, where appropriate, the Company's own internal standards.
Coleman has also undertaken an environmental compliance audit program. The
Company makes expenditures that it believes are necessary to comply with
environmental management practices. Environmental expenditures that relate
to current operations are expensed or capitalized as appropriate and were not
significant in 1997 and are not expected to be significant in the foreseeable
future. Coleman has established reserves, which it believes are adequate,
for environmental matters, including the investigations, remedial activities
and litigation described above.
OTHER
GENERAL. The Company is involved in various claims and legal actions
arising in the ordinary course of business, including environmental matters
and product liability lawsuits that are incidental to its business. The
Company believes the ultimate disposition of these matters is not expected to
have a material adverse effect on the Company's consolidated financial
condition or results of operations. The Company has entered into a
cross-indemnification agreement with Holdings pursuant to which it will
indemnify Holdings against all liabilities related to businesses transferred
to the Company by Holdings, and Holdings will indemnify the Company against
all liabilities of Holdings other than liabilities related to the businesses
transferred to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1997.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed and traded on the New York Stock
Exchange under the symbol "CLN" and has unlisted trading privileges on the
Midwest Stock Exchange and the Pacific Stock Exchange. The following table
sets forth the high and low sales prices as reported on the NYSE Composite
Tape for the Company's common stock for each quarter in 1997 and 1996.
<TABLE>
High Low
---- ---
1997
----
<S> <C> <C>
First Quarter $16 1/8 $11 1/2
Second Quarter 19 1/8 12 7/8
Third Quarter 18 15 3/16
Fourth Quarter 16 13/16 12 3/8
1996
----
First Quarter $26 $16 5/16
Second Quarter 23 1/4 19 13/16
Third Quarter 21 8/0 13 3/4
Fourth Quarter 15 1/4 11 3/4
</TABLE>
As of the close of business on March 3, 1998, there were approximately
700 holders of record of the Company's common stock.
The Company has not declared a cash dividend on its common stock and
does not anticipate that any dividends will be declared on its common stock
in the foreseeable future. The declaration and payment of dividends are
subject to the discretion of the Board of Directors of the Company and
subject to certain limitations under Delaware law, and are also limited by
the terms of the Company's Credit Agreement which, among other things,
prohibits the Company from paying any dividends until on or after January 1,
1999 and limits the amount of dividends the Company may pay thereafter.
The Company did not sell any unregistered securities during 1997.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the years presented in the table below
have been derived from the Consolidated Financial Statements. The selected
financial data should be read in conjunction with the Consolidated Financial
Statements and the notes thereto included elsewhere in this Form 10-K Annual
Report.
<TABLE>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues $1,154,294 $1,220,216 $933,574 $751,580 $575,415
Cost of sales (a) 840,331 928,497 649,427 535,710 400,052
---------- ---------- -------- -------- --------
Gross profit 313,963 291,719 284,147 215,870 175,363
Selling, general and
administrative expenses (a) 266,283 291,669 174,688 128,466 102,038
Asset impairment charge (b) -- -- 12,289 -- --
Restructuring expense (c) -- -- -- 18,456 --
Interest expense, net 40,852 38,727 24,545 13,374 7,706
Amortization of goodwill and
deferred charges 11,338 10,473 7,745 6,209 5,330
Other expense, net 1,867 1,151 334 1,138 746
---------- ---------- -------- -------- --------
(Loss) earnings before income taxes,
minority interest and
extraordinary item (6,377) (50,301) 64,546 48,227 59,543
Income tax (benefit) expense (a) (5,227) (10,927) 24,479 14,747 24,569
Minority interest 1,386 1,872 -- -- --
---------- ---------- -------- -------- --------
(Loss) earnings before
extraordinary item (2,536) (41,246) 40,067 33,480 34,974
Extraordinary loss on early
extinguishment of debt, net of
income taxes -- (647) (787) (677) --
---------- ---------- -------- -------- --------
Net (loss) earnings $ (2,536) $ (41,893) $ 39,280 $ 32,803 $ 34,974
---------- ---------- -------- -------- --------
---------- ---------- -------- -------- --------
Basic (loss) earnings
per common share $ (0.05) $ (0.79) $ 0.74 $ 0.61 $ 0.65
---------- ---------- -------- -------- --------
---------- ---------- -------- -------- --------
Weighted average common
shares outstanding 53,344 53,197 53,226 53,436 53,909
---------- ---------- -------- -------- --------
---------- ---------- -------- -------- --------
</TABLE>
<TABLE>
DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets $1,041,764 $1,160,086 $844,487 $712,265 $526,706
Long-term debt
(including current portions) 477,799 583,613 355,257 291,175 168,858
Total stockholders' equity 240,469 252,945 292,342 253,363 228,104
</TABLE>
- ------------
(a) The Company recorded restructuring and certain other charges totaling
$22,501 and $52,516, net of tax for the years ended December 31, 1997 and
1996, respectively. Cost of sales includes pre-tax charges of $19,673 and
$44,005; selling, general and administrative expenses include pre-tax
charges of $16,746 and $30,195; and the provision for income tax benefit
includes $13,918 and $21,684 of net tax benefits in the years ended
December 31, 1997 and 1996, each respectively, resulting from these
charges.
(b) Asset impairment charge reflects primarily the non-recurring charge
taken in connection with the adoption of FAS 121.
(c) Restructuring expense reflects primarily the non-recurring charge taken
in connection with the German Restructuring which includes severance costs,
commitments to third parties and write-downs of leasehold improvements and
other assets to estimated realizable values.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and the notes thereto included elsewhere in
this Form 10-K Annual Report.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1996
Net revenues of $1,154.3 million in 1997 were $65.9 million or 5.4% less
than in 1996 with outdoor recreation products unchanged at $859.7 million and
hardware products decreasing $66.0 million or 18.3%. The outdoor recreation
products revenues were adversely affected by (i) a restructuring program
which eliminated certain low margin SKUs (stock keeping units), (ii) lower
sales in Japan and Korea due to weak market conditions, and (iii) a program
to reduce wholesaler inventories in Japan; however, growth in the core
products outside of Japan and Korea offset these declines. Hardware products
revenues decreased due to the Company's decision to exit the pressure washer
business and lower generator sales resulting from fewer storms on the East
Coast of the United States in the second half of 1997. Geographically,
United States and Canadian revenues decreased $24.0 million or 2.9% due to
lower hardware product sales while international revenues decreased $41.9
million or 10.6% primarily related to lower sales in Japan and Korea.
Results in the 1996 period include the Camping Gaz operations from the date
of acquisition.
The gross margin percentage of 28.9%, excluding the impact of
restructuring and other charges which are more fully described below,
increased from 27.5% in 1996. The improvement was driven by increased demand
for higher margin products and the elimination of certain low margin SKUs.
SG&A expenses, excluding the impact of restructuring and other charges
which are more fully described below, were $249.5 million in 1997 compared to
$261.5 million in 1996, a decrease of 4.5%. The inclusion of a full twelve
months of Camping Gaz SG&A costs in the 1997 period increased SG&A expenses;
however, these increases were more than offset by benefits resulting from the
integration of Camping Gaz operations and the restructuring initiatives.
During 1997, the Company recorded pre-tax restructuring and other
charges totaling $36.4 million of which $19.7 million was reflected in cost
of sales and $16.7 million in SG&A expenses. Tax benefits of $13.9 million
associated with these charges are reflected in income tax expense. The
restructuring and other charges consisted of (i) $15.7 million to exit
various low margin products, including pressure washers, (ii) $15.0 million
to close and relocate certain administrative and sales offices, and (iii)
$5.7 million to close several manufacturing facilities. Most of these
activities were substantially complete as of December 31, 1997, and remaining
actions are expected to be completed in 1998.
During 1996, the Company recorded restructuring charges of $66.2
million, certain other charges of $8.0 million and related net tax benefits
of $21.7 million. The 1996 pre-tax restructuring charges of $66.2 million
consisted of (i) $29.1 million to integrate the Camping Gaz and Coleman
operations into a global recreation products business, (ii) $19.0 million to
exit the low end electric pressure washer business, (iii) $14.1 million to
exit a portion of the Company's battery powered light business, and (iv) $4.0
million to settle certain litigation with respect to the battery powered
light business.
The 1996 pre-tax restructuring charges of $66.2 million included $64.4
million related to exiting products and facilities and $1.8 million of
termination costs for 174 administrative employees, of which $40.8 million
was reflected in cost of sales and $25.4 million in SG&A expenses. The
pre-tax charges for exit costs were comprised of (i) $41.3 million which
related primarily to writing down inventory, fixed assets, accounts
receivable and certain other receivable and prepaid amounts to estimated net
realizable value, and (ii) $23.1 million of other exit costs, including
carrying costs of idle facilities, relocation costs, and costs to exit the
pressure washer business.
14
<PAGE>
The 1996 other pre-tax charges of $8.0 million related primarily to certain
asset write-offs. These other charges, of which $3.2 million was reflected
in cost of sales and $4.8 million in SG&A expenses, were incurred in the
Company's normal course of business, although the amounts involved were
higher than similar charges the Company had recorded in prior periods. The
provision for income taxes included $21.7 million of tax benefits resulting
from these restructuring and other charges, net of an increase in the
valuation reserve related to certain foreign deferred tax assets and other
foreign tax charges totaling $5.6 million.
The components of the combined 1997 and 1996 restructuring and other
charges and an analysis of the amounts charged against the reserves are
outlined in the following table (dollars in millions):
<TABLE>
1996 Charges During 1997 Charges During
Original Year Ended Balance at Additional Year Ended Balance at
Reserve 12/31/96 12/31/96 Reserves 12/31/97 12/31/97
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Impairment of
fixed assets $10.0 $ (1.8) $ 8.2 $ 6.4 $ (6.5) $ 8.1
Inventory and other
asset impairments 38.3 (25.9) 12.4 11.0 (15.0) 8.4
Termination costs 2.0 (1.6) .4 12.1 (9.7) 2.8
Idle facilities, relocation and
other exit costs 23.9 (12.4) 11.5 6.9 (9.7) 8.7
----- ------ ----- ----- ------ -----
$74.2 $(41.7) $32.5 $36.4 $(40.9) $28.0
----- ------ ----- ----- ------ -----
----- ------ ----- ----- ------ -----
</TABLE>
The termination costs recognized in 1996 related to approximately
200 employees and the 1997 termination costs related to approximately 525
employees. As of December 31, 1997, $11.3 million of termination costs were
paid on behalf of the approximately 700 employees who were terminated as of
that date.
Interest expense was $40.9 million in 1997 compared with $38.7
million in 1996, an increase of $2.2 million. This increase was a result of
the effects of higher interest rates on the Company's variable rate debt
partially offset by the favorable effects of lower borrowings in 1997
resulting from the Company's working capital management programs.
Minority interest in the 1997 period reflects the minority
interests in certain subsidiary operations acquired with the Camping Gaz
business. On March 1, 1996, the Company acquired control of approximately
70% of Camping Gaz and in early July 1996 obtained control of the remaining
30% of Camping Gaz and, accordingly, in the 1996 period, minority interest
reflects the minority shareholders' approximate 30% proportionate share of
the results of operations of Camping Gaz for the period March through June of
1996 and also includes interests of other minority shareholders in certain
subsidiary operations acquired with the Camping Gaz business.
The Company recorded income tax benefits of $5.2 million in 1997
and $10.9 million in 1996, which includes the net tax benefits of $13.9
million in 1997 and $21.7 million in 1996 associated with restructuring and
other charges discussed above. Excluding the net tax benefits from the
restructuring and other charges, the provision for income tax expense would
have been $8.7 million or 28.9% of pre-tax earnings in 1997 as compared to a
provision for income tax expense of $10.8 million or 45.0% of pre-tax
earnings in 1996. This decrease is primarily due to the impact of increased
foreign tax rates on deferred tax assets and increased foreign earnings at
lower tax rates.
In 1996, in connection with the renegotiation of its credit
agreement, the Company recorded an extraordinary loss of $1.1 million ($0.6
million net of tax) which represented a write-off of the related unamortized
financing costs associated with its then existing credit agreement.
15
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1995
Net revenues in 1996 and 1995 were $1,220.2 million and $933.6
million, respectively, an increase of $286.6 million, or 30.7%, with outdoor
recreation products increasing by $170.7 million or 24.8% and hardware
products increasing $115.9 million or 47.4%.
The outdoor recreation products revenues increase included $152.5
million of revenues associated with the Camping Gaz operations acquired in
1996 and approximately $13.4 million of additional revenues associated with
the Sierra operations acquired in 1995. Excluding (i) the impact of the
Camping Gaz and Sierra acquisitions, (ii) the effect of a weaker yen in 1996
as compared to 1995, which reduced revenues approximately $21.1 million, and
(iii) the one-time 1995 thermo-electric cooler premium promotion revenue gain
of approximately $16.6 million, outdoor recreation product revenues increased
approximately $42.5 million or 6.4%. Increases in revenue were experienced in
the backpack, tent and sleeping bag businesses, primarily in international
markets. In addition, the Company successfully introduced a new line of
camping accessories and expanded its heater and light businesses. These
gains were substantially offset by poor weather conditions during the camping
season in North America and the economic downturn experienced in Japan, both
of which adversely affected the demand for the Company's camping products.
The hardware products revenues increase includes approximately $82.1 million
as a result of the acquisition of CSS (then named Seatt Corporation) in 1996.
Excluding the impact of the CSS acquisition, hardware products revenues
increased approximately $33.8 million or 13.8%, driven by increases in
generator and pressure washer sales. Geographically, United States and
Canada revenues increased $111.6 million or 15.6% primarily related to the
CSS acquisition, while international revenues increased $175.0 million or
79.5% primarily related to the Camping Gaz acquisition.
Gross margins, excluding the impact of restructuring and other
charges totaling $44.0 million which are more fully discussed below,
decreased as a percent of sales by 2.9 percentage points from 30.4% in 1995
to 27.5% in 1996. This decrease was primarily the result of lower margins
associated with the Company's backpack business and the unfavorable effects
of product mix including significantly higher sales of pressure washers at
lower gross margin percentages and lower sales of camping products which tend
to have higher gross margin percentages than the Company's average.
SG&A expenses, excluding $30.2 million of restructuring and other
charges as discussed more fully below, were $261.5 million in 1996 compared
to $174.7 million in 1995, an increase of 49.7%. The increase in SG&A
expenses primarily reflects SG&A expenses associated with the Camping Gaz and
CSS business acquisitions of approximately $60.3 million and increased
advertising and marketing expenses of approximately $16.6 million.
During 1996, the Company recorded restructuring charges of $66.2
million, certain other charges of $8.0 million and related net tax benefits
of $21.7 million. The pre-tax restructuring charges of $66.2 million
consisted of (i) $29.1 million to integrate the Camping Gaz and Coleman
operations into a global recreation products business, (ii) $19.0 million to
exit the low end electric pressure washer business, (iii) $14.1 million to
exit a portion of the Company's battery powered light business and (iv) $4.0
million to settle certain litigation with respect to the battery powered
light business.
The charges to integrate the Camping Gaz and Coleman operations
reflected primarily the cost to dispose of duplicate manufacturing,
distribution and administrative facilities and the related severance cost.
These actions are substantially completed at December 31, 1997 and are
expected to be fully completed in 1998. The exiting of the battery powered
light business was completed by July 1997 and the exiting of the low end
pressure washer business was substantially completed in 1997.
The pre-tax restructuring charges of $66.2 million included $64.4
million related to exiting products and facilities and $1.8 million of
termination costs for 174 administrative employees, of which $40.8 million
was reflected in cost of sales and $25.4 million in SG&A expenses. The
pre-tax charges for exit costs were comprised of (i) $41.3 million which
related primarily to writing down inventory, fixed assets, accounts
receivable and
16
<PAGE>
certain other receivable and prepaid amounts to estimated net realizable
value, and (ii) $23.1 million of other exit costs, including carrying costs
of idle facilities, relocation costs, and costs to exit the pressure washer
business. Other pre-tax charges of $8.0 million related primarily to certain
asset write-offs. These other charges, of which $3.2 million was reflected
in cost of sales and $4.8 million in SG&A expenses, were incurred in the
Company's normal course of business, although the amounts involved were
higher than similar charges the Company had recorded in prior periods. The
provision for income taxes includes $21.7 million of tax benefits resulting
from these restructuring and other charges, net of an increase in the
valuation reserve related to certain foreign deferred tax assets and other
foreign tax charges totaling $5.6 million.
The Company's interest expense was $38.7 million in 1996 compared
with $24.5 million in 1995, an increase of $14.2 million. This increase was
primarily the result of higher borrowings to fund business acquisitions and
support increased working capital.
The Company recorded an income tax benefit in 1996 of $10.9
million, which included net tax benefits of $21.7 million associated with
restructuring and other charges discussed above. Excluding the net tax
benefit from restructuring and other charges, the provision for income taxes
would have been $10.8 million or 45.0% of pre-tax earnings, excluding
restructuring and other charges, as compared to a provision for income tax
expense of $24.5 million or 37.9% of pre-tax earnings in 1995. The increase
was primarily due to losses of certain foreign subsidiaries for which the
Company has not recognized a tax benefit and the impact of non-deductible
goodwill amortization.
The Company obtained control of approximately 70% of Camping Gaz on
March 1, 1996 and obtained control of the remaining 30% in early July 1996.
Accordingly, the minority interest for 1996 primarily represents the minority
shareholders' approximate 30% proportionate share of the results of
operations of Camping Gaz for the period March through June of 1996 and also
includes interests of other minority shareholders in certain subsidiary
operations of Camping Gaz.
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. During the third
quarter of 1995, the Company completed a $200.0 million private placement
debt issue. In connection with the private placement, the Company
renegotiated its previous credit agreement and recorded an extraordinary
loss of $1.3 million ($0.8 million after taxes) which represents a write-off
of the related unamortized financing costs associated with its previous
credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities provided (used) $91.2 million,
($9.3) million, and $2.2 million of cash during the years ended December 31,
1997, 1996, and 1995, respectively. Improved management of receivables and
inventories and rationalization of product lines during 1997 as compared to
1996 led to the improvement in cash provided by operating activities. The
Company's net cash used for investing activities was $35.5 million, $200.3
million, and $61.5 million for the years ended December 31, 1997, 1996 and
1995, respectively. The Company used $161.9 million of cash for business
acquisitions during the year ended December 31, 1996 and an additional $14.3
million in 1997 related to contingent payments and transaction costs. The
Company's capital expenditures were $27.0 million and $41.3 million during
the years ended December 31, 1997 and 1996, respectively.
Net cash (used) provided by financing activities was ($55.5)
million, $210.5 million, and $64.8 million for the years ended December 31,
1997, 1996, and 1995, respectively, and consisted primarily of increases in
long-term borrowings during the years ended December 31, 1996 and 1995 and a
reduction in long-term borrowings during the year ended December 31, 1997.
17
<PAGE>
As part of its strategy to improve profitability, the Company
announced several restructuring initiatives during 1997. The Company
recognized 1997 pre-tax charges of $36.4 million associated with these
actions. These restructuring initiatives are expected to generate cost
savings in the future from reductions in personnel, production facilities and
administrative overhead. There can be no assurance as to the Company's
success in implementing its planned initiatives or the results therefrom, the
amount of future charges, or against any adverse impact of the Company's
restructuring initiatives.
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: a) provide a term
loan of French Franc 385.1 million ($64.9 million at December 31, 1997
exchange rates), b) provide an unsecured revolving credit facility in an
amount of $275.0 million, c) allow for the Camping Gaz acquisition and d)
extend the maturity of the credit agreement (as amended, the "Company Credit
Agreement").
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 December 31, 1997, $217.4
million would have been available for borrowings under the Company Credit
Agreement. The Company intends to use the net proceeds from the sale of CSS
to repay first the term loan portion of the Company Credit Agreement and use
the remaining proceeds to repay the revolving credit borrowings, which will
result in a dollar for dollar reduction in available revolving credit
commitments.
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 2.125% 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. 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, levels of consolidated net worth and profits, and certain
other provisions limiting the incurrence of additional debt, purchase or
redemption of the Company's common stock, issuance of preferred stock of the
Company, and also prohibits the Company from paying any dividends until on or
after January 1, 1999 and limits the amount of dividends the Company may pay
thereafter. The Company Credit Agreement also contains an event of default
upon a change of control of the Company (as defined in the Company Credit
Agreement) and other customary events of default. The consummation of the
CLN Holdings Merger will constitute a change of control under the Company
Credit Agreement. In addition, all of the shares of the Company's common
stock owned by Coleman Worldwide are pledged to secure indebtedness of
Coleman Worldwide and of its parent, CLN Holdings Inc.
The Company's ability to meet its current cash operating
requirements, including projected capital expenditures, tax sharing payments
and other obligations is dependent upon a combination of cash flows from
operations and borrowings under the Company Credit Agreement and foreign
lines of credit. The Company's ability to borrow under the terms of the
Company Credit Agreement is subject to the Company's continuing requirement
to meet the various restrictive covenants, including without limitation,
those described above, and the various covenants in the Company's senior
notes.
If the Company fails to meet the various restrictive covenants of
the Company Credit Agreement, or upon a change of control as a result of the
consummation of the CLN Holdings Merger, the Company will need to seek a
waiver of such provisions, renegotiate its current Company Credit Agreement,
and/or enter into alternative financing arrangements. There is no assurance
that the Company would be able to obtain such waiver, or that terms and
conditions of such waiver or alternative financing arrangements, if any,
would be as favorable as those now contained in the Company Credit Agreement.
18
<PAGE>
Coleman financed the acquisition of the shares of Camping Gaz with
the 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.
All of the shares of the Company's common stock owned by Coleman
Worldwide are pledged to secure indebtedness of Coleman Worldwide and CLN
Holdings. On May 20, 1997, CLN Holdings issued the Escrow Notes. A portion
of the net proceeds from the issuance of the Escrow Notes was contributed to
Coleman Holdings Inc. ("Coleman Holdings") and used by it to redeem, on July
15, 1997, its Senior Secured Discount Notes due 1998 (the "Holdings Notes").
Following the redemption of the Holdings Notes, Coleman Holdings was merged
into CLN Holdings. A portion of the net proceeds from the issuance of the
Escrow Notes was contributed to Coleman Worldwide and used by it to accept
for exchange, $554.1 million aggregate principal amount at maturity of Liquid
Yield Option Notes-TM- due 2013 (the "LYONs"-TM-). Coleman Worldwide plans
to redeem the remaining $7.5 million aggregate principal amount at maturity
of LYONs no later than May 27, 1998 with the remaining proceeds from the
issuance of the Escrow Notes. The LYONs and the Escrow Notes, to which the
Company is not a party, provide that it is an additional purchase right event
and an event of default, respectively, under these debt instruments if, among
other things, the amount of debt incurred by the Company exceeds certain
limitations or if there is a change of control of Coleman Worldwide or CLN
Holdings, as the case may be, or the Company. A change of control of CLN
Holdings or Coleman Worldwide would permit the holder of LYONs or Escrow
Notes, as the case may be, to sell such notes to the issuer of such notes.
Consummation of the CLN Holdings Merger would be an additional purchase right
under these debt instruments. There are expected to be sufficient funds in
escrow from the net proceeds of the Escrow Notes to repurchase the LYONs in
the event a holder of LYONs seeks to have such LYONs repurchased. CLN
Holdings may be required to borrow funds to repurchase the Escrow Notes if a
holder of Escrow Notes seeks to have such Escrow Notes repurchased.
Sunbeam has informed the Company that, following the consummation
of the CLN Holdings Merger, it plans to refinance existing revolving and term
debt of Coleman.
The Company's international operations are located primarily in
Japan, Europe, and Canada, which are not considered to be highly inflationary
environments. 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.
19
<PAGE>
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using
two digits rather than four to represent the applicable year. As a result,
those computer programs recognize a date represented by "00" as the year 1900
rather than the year 2000. This situation, known as the "Year 2000" issue,
could cause a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Based on ongoing assessments of the Company's operations, the
Company has determined it will be required to modify or replace portions of
its computer software so the computer systems will function properly with
respect to dates in the year 2000 and thereafter. The Company believes that,
in most instances, with minor modifications to existing software, the Year
2000 issue will not pose significant operational problems for its computer
systems. The Company has identified one location with significant Year 2000
software issues. Failure to complete a timely conversion of this location to
a Year 2000 compliant system could have a material impact on the operations
of the Company; however, the Company has begun to replace the software at
this location, and such replacement software is expected to be installed
prior to December 31, 1999.
The Company has initiated formal communications with some of its
significant suppliers and large customers to determine the extent to which
the Company's interface systems are vulnerable to those third parties'
failure to remediate their own Year 2000 issues. There can be no guarantee
that the systems of other companies on which the Company's systems rely will
be timely converted and would not have an adverse effect on the Company's
systems.
In 1996, the Company began a project to select and install a
Company-wide enterprise resource computer software system designed to improve
operational efficiency. The selected system is Year 2000 compliant and
complete installation of this software system is expected to take three
years. The cost of the purchase of the software and installation costs is
expected to range from $20.0 million to $25.0 million. The Company will
capitalize a significant portion of these costs and does not believe the
costs of this project will have a significant impact on the Company's
financial condition or results of operations.
The costs of the project and the date on which the Company believes
it will be Year 2000 compliant are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification
plans and other factors. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.
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. For the years ended
December 31, 1997, 1996 and 1995, second quarter sales comprised
approximately 33%, 37% and 33% of annual sales, respectively. Consequently,
the company's annual results are largely impacted by its results during the
second quarter.
INFLATION
In general, manufacturing costs are affected by inflation and the
effects of inflation may be experienced by the Company in future periods.
Management believes, however, that such effects have not been material to the
Company during the past three years.
20
<PAGE>
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for certain forward-looking statements. The forward-looking
statements contained in this Form 10-K are subject to certain risks and
uncertainties. Actual results could differ materially from current
expectations. Among the factors that could affect the Company's actual
results and could cause results to differ from those contained in the
forward-looking statements are (i) unanticipated costs or delays in
developing new products, (ii) a decrease in the public's interest in camping
and related activities, (iii) economic softness in Japan, Korea, and other
Asian countries, (iv) weather conditions which are adverse to the specific
businesses of the Company, (v) significant adverse market or economic
conditions which negatively affect demand for the Company's products, (vi)
disruptions or delays resulting from the transactions contemplated by the
Merger Agreements with Sunbeam for the acquisition of CLN Holdings and the
Company, and (vii) changes in operating philosophy following the consummation
of the CLN Holdings Merger and the Company Merger. Other factors could also
cause actual results to vary materially from the future results covered in
such forward-looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the consolidated financial statements listed in the
accompanying List of Financial Statements and Schedules on Page F-1 herein.
Information required by schedules called for under Regulation S-X is either
not applicable or is included in the consolidated financial statements or
notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The name, age, present principal occupation or employment, five year
employment history, selected biographical information, and period of service
as a director of the Company of each of the current directors of the Company
are set forth below.
Ronald O. Perelman, age 55, a director of the Company since 1989, has
been Chairman of the Board and Chief Executive Officer of Mafco, MacAndrews
Holdings and various of their affiliates since 1980. Mr. Perelman is also
Chairman of the Executive Committee of the Board of Consolidated Cigar
Holdings Inc. ("Cigar Holdings"), M&F Worldwide Corporation, and Revlon, Inc.
("Revlon") and Chairman of the Board of Meridian Sports Incorporated
("Meridian"). Mr. Perelman is also a director of the following corporations
which file reports pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"): California Federal Bank, A Federal Savings
Bank ("Cal Fed"), Cigar Holdings, CLN Holdings Inc. ("CLN Holdings"), Coleman
Worldwide Corporation ("Coleman Worldwide"), First Nationwide Holdings Inc.,
First Nationwide (Parent) Holdings Inc., Meridian, M&F Worldwide Corporation,
Revlon Consumer Products Corporation ("Revlon Products"), Revlon, and REV
Holdings Inc. ("REV Holdings"). (On December 27, 1996, Marvel Holdings Inc.,
Marvel (Parent) Holdings Inc., and Marvel Entertainment Group, Inc.
("Marvel"), of which Mr. Perelman was then a director, and Marvel III
Holdings Inc., of which Mr. Perelman is a director, and several of the
subsidiaries of Marvel filed voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code.)
Donald G. Drapkin, age 50, a director of the Company since 1989, has
been a director and Vice Chairman of Mafco and various of its affiliates
since 1987. Mr. Drapkin was a partner in the law firm of Skadden, Arps,
Slate, Meagher & Flom in New York for more than five years prior to March
1987. Mr. Drapkin is also a director
21
<PAGE>
of the following corporations which file reports pursuant to the Exchange
Act: Alogos Pharmaceutical Corporation, Black Rock Asset Investors, Cardio
Technologies, Inc., Coleman Worldwide, The Cosmetic Center, Inc., Genta,
Inc., Playboy Enterprises, Inc., Revlon, Revlon Products, VIMRx
Pharmaceuticals Inc., and Weider Nutrition International, Inc. (On December
27, 1996, Marvel Holdings Inc., Marvel (Parent) Holdings Inc., and Marvel, of
which Mr. Drapkin was then a director, and Marvel III Holdings Inc., of which
Mr. Drapkin is a director, and several of the subsidiaries of Marvel filed
voluntary petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code.)
Frank Gifford, age 67, has been a director of the Company since 1997.
Mr. Gifford has been a commentator with ABC Sports since 1971. (On December
27, 1996, Marvel, of which Mr. Gifford was a director, and several of its
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code.)
Lawrence M. Jones, age 66, has been a director of the Company since
1989. Mr. Jones was Chairman and Chief Executive Officer of the Company from
October 1990 to December 1993 and has been associated with the Company for
more than 36 years, including serving as President and Chief Executive
Officer from July 1989 to September 1990. Prior to rejoining the Company in
1989, Mr. Jones was Vice Chairman and Chief Financial Officer of Fleming
Companies, Inc. (a distributor of food products, health and beauty items)
from December 1987 to June 1989. Mr. Jones presently serves as director of
Union Pacific Resources, and was a director of Fourth Financial Corporation
until January 1996, of Fleming Companies, Inc. until December 1996, and of
Prince Sports Group, Inc. until March 1997. Mr. Jones also served as Chairman
of Rollerblade, Inc. from February 1996 to April 1997.
Ann D. Jordan, age 63, has been a director of the Company since June
1997. Ms. Jordan is a consultant and a director of Johnson & Johnson,
Automatic Data Processing, Inc., The Travelers Corporation, and Salant
Corporation. Ms. Jordan also serves on the Board of Directors of the
National Symphony Orchestra, Sloan Kettering Memorial Medical Center, Child
Welfare League, Sasha Bruce Youthworks, University of Chicago, Spellman
College, The John F. Kennedy Center for the Performing Arts and the SEC
Consumer Affairs Advisory Commission. She was formerly a Field Work
Associate Professor at the School of Social Service Administration of the
University of Chicago and served as Director of the Department of Social
Services for the University of Chicago Medical Center.
Jerry W. Levin, age 53, has been Chairman and Chief Executive officer of
the Company since February 1997, and a past Chairman of the Company from 1989
to 1991, and a director since 1989. Mr. Levin has been Chairman of the Board
of Revlon and of Revlon Products since their respective formations in 1992
and Chairman of the Board of The Cosmetic Center, Inc. since April 1997. Mr.
Levin served as Chief Executive Officer of Revlon and of Revlon Products from
1992 until January 1997, and President of Revlon and of Revlon Products from
their respective formations in 1992 to November 1995. Mr. Levin has been
Executive Vice President of MacAndrews Holdings since March 1989. For 15
years prior to joining MacAndrews Holdings, he held various senior positions
with The Pillsbury Company ("Pillsbury"). Mr. Levin is a director of the
following corporations which file reports pursuant to the Exchange Act:
Coleman Worldwide, The Cosmetic Center, Inc., Ecolab Inc., U.S. Bancorp Inc.,
Meridian, Revlon, Revlon Products, and REV Holdings.
John A. Moran, age 65, has been a director of the Company since July
1996. Mr. Moran currently serves as Chairman of Rutherford-Moran Oil
Corporation. From 1967, Mr. Moran was affiliated with Dyson-Kissner-Moran
Corporation, a private holding company, serving in various executive
positions including Chairman of the Board, President and Chief Executive
Officer, and Executive Vice President. He is a director of Bessemer
Securities Corporation. He is a member and former Chairman of the National
Advisory Council of the University of Utah, as well as a member of World
Presidents Organization, the Chief Executives Organization and The Foreign
Policy Association. He is a former director of the United Nations
Association and trustee of the Brooklyn Museum.
22
<PAGE>
James D. Robinson, age 62, has been a director of the Company since June
1997. Mr. Robinson is Chairman and Chief Executive Officer of RRE Investors,
LLC, a private venture investment firm, and Chairman of Violy, Byorum &
Partners Holdings, LLC, a private firm specializing in financial advisory and
investment banking activities in Latin America. He previously served as
Chairman, and Chief Executive Officer of the American Express Company from
1977 to 1993. Mr. Robinson is a director of Bristol-Myers Squibb Company,
Cambridge Technology Partners, Inc., The Coca-Cola Company, First Data
Corporation and Union Pacific Corporation.
Bruce Slovin, age 62, a director of the Company since February 1993, has
been President of MacAndrews Holdings and various of its affiliates since
1980. Mr. Slovin is also a director of the following corporations which file
reports pursuant to the Exchange Act: Cantel Industries, Inc., Coleman
Worldwide, Continental Health Affiliates, Inc., Infu-Tech, Inc., Meridian,
and M&F Worldwide Corporation.
William H. Spoor, age 75, has been a director of the Company since May
1992. Mr. Spoor retired in September 1985 as Chairman and Chief Executive
Officer of Pillsbury after 14 years in that position and 36 years with
Pillsbury. He returned to Pillsbury as Chairman of the Executive Committee
in September 1987, and resumed as Chairman, Chief Executive Officer and
President of Pillsbury in March 1988, from which he retired in August 1988.
Mr. Spoor now serves as Chairman Emeritus of Pillsbury, and is in the
business of personal investments. He is a director of L & L Holdings and
Inner City Tennis.
COMPENSATION OF DIRECTORS
Directors who are not currently receiving compensation as employees of
the Company or any of its affiliates are paid an annual $25,000 retainer fee
and are reimbursed for reasonable out-of-pocket expenses incurred in
connection with Company business. In addition, such directors receive a fee
of $1,000 for each meeting of the Board of Directors or any committee meeting
they attend.
EXECUTIVE OFFICERS
The following table sets forth certain information as of March 3, 1998,
concerning the executive officers of the Company. All executive officers
serve at the pleasure of the Board of Directors.
<TABLE>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jerry W. Levin 53 Chairman of the Board, and Chief Executive Officer
Mark Goldman 43 Executive Vice President
(Chairman - Eastpak)
Patrick McEvoy 47 Executive Vice President
(President - Coleman Safety & Security Products)
Joseph P. Page 44 Executive Vice President and
Chief Financial Officer
David A. Ramon 42 Executive Vice President
(President - Outdoor Recreation Group)
Paul E. Shapiro 56 Executive Vice President and General Counsel
David K. Stearns 50 Executive Vice President
(President - Coleman Powermate)
James L. Rasmus 45 Senior Vice President - Human Resources
Karen Clark 37 Vice President - Finance
</TABLE>
The following sets forth the position with the Company and selected
biographical information for the executive officers of the Company who are
not directors.
Mark Goldman has been Executive Vice President since April 1995 and
President of Eastpak since 1978. He joined Eastpak in 1976.
23
<PAGE>
Patrick McEvoy has been Executive Vice President since March 1996 and
President of Coleman Safety & Security Products, Inc. since January 1996. He
joined Coleman in April 1994 as the Senior Vice President of Product
Development and Operations for the Company's North American Recreation
business unit. Prior to joining Coleman, he served as Vice President of
Black & Decker Corporation from 1990 to 1994, and Vice President for the
Chrysler Corporation from 1988 to 1990.
Joseph P. Page joined the Company in August 1997 as Executive Vice
President and Chief Financial Officer. Since December 1993, Mr. Page has
served as Executive Vice President and Chief Financial Officer of Andrews
Group Incorporated ("Andrews Group"). From December 1993 through January
1997, Mr. Page was Executive Vice President and Chief Financial Officer of
New World Communications Group. Prior to his employment with Andrews Group,
Mr. Page was a partner in the accounting firm of Price Waterhouse for more
than five years.
David A. Ramon has been Executive Vice President since May 1997. Prior
to joining the Company, Mr. Ramon was a Director, President, and Chief
Operating Officer for New World Television Incorporated from 1995 to 1997,
and Executive Vice President and Chief Financial Officer for Gillett
Holdings, Inc. from 1985 to 1994.
Paul E. Shapiro has been Executive Vice President and General Counsel of
the Company since July 1997. Mr. Shapiro has been an Executive Vice
President of Andrews Group since 1994, and from January 1994 to June 1997,
served as the Executive Vice President and General Counsel of Marvel. Prior
to January 1994, Mr. Shapiro was a shareholder in the law firm of Greenberg,
Traurig, Hoffman, Lipoff, Rosen & Quental from 1991 to 1993, and is currently
Of Counsel to that firm. Mr. Shapiro is a director of Toll Brothers, Inc.
(On December 27, 1996, Marvel, of which Mr. Shapiro was an executive officer
and director, and several of the subsidiaries of Marvel, filed voluntary
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code.)
David K. Stearns has been Executive Vice President since January 1995,
and Senior Vice President - Marketing from October 1991 to January 1995. He
joined the Company in 1976 and has served in various positions, including
Vice President/General Manager - Import Division from 1985 to 1990.
James L. Rasmus joined the Company in April 1997 as Senior Vice
President - Human Resources. Prior to joining Coleman, Mr. Rasmus was the
Executive Project Director, Shared Services for Tenneco. He has also held
senior human resource positions with Case Corporation, United Technologies
and Xerox Corporation.
Karen Clark has been Vice President - Finance since July 1997. Prior to
joining Coleman, Ms. Clark served as Corporate Controller for Precision
Castparts Corp. from 1994 to 1997. She was also Manager - Corporate Planning
for Tektronix from 1990 to 1994. Ms. Clark is a member of the Financial
Executives Institute and the American Institute of Certified Public
Accountants.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10 percent of the Company
common stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission.
Based solely on the Company's review of the reporting forms received by
it, the Company believes that for 1997 all such filing requirements were
satisfied.
24
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning annual, long term
and other compensation of the Company's Chief Executive Officer and the next
four most highly-compensated executive officers, and three of its former
executive officers.
<TABLE>
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------------------------- ---------- ----------------------
Securities
Other Annual Underlying LTIP All Other
Name and Principal Position Year Salary Bonus Compensation Options Payouts Compensation
- --------------------------- ---- -------- -------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jerry W. Levin (1) 1997 $300,000 $300,000 $ 2,567 500,000 $ 0 $ 0
Chairman and Chief Executive
Officer
David A. Ramon (2) 1997 400,000 125,000 2,912 100,000 0 0
Executive Vice President
Mark Goldman (3) 1997 250,000 0 6,300 40,000 0 4,230
Executive Vice President 1996 250,000 0 0 0 0 4,270
1995 250,000 0 0 20,000 0 4,492
David K. Stearns (4) 1997 240,000 134,844 105,930 20,000 0 6,212
Executive Vice President 1996 225,500 0 16,899 25,000 0 4,455
1995 189,996 159,425 121,880 40,000 0 3,877
Patrick McEvoy (5) 1997 200,000 0 72,675 0 0 4,064
Executive Vice President 1996 200,000 0 190,114 15,000 0 3,717
1995 190,000 159,290 38,305 20,000 0 794
Michael N. Hammes (6) 1997 116,668 0 27,441 0 0 1,212,035
Former Chief Executive Officer 1996 625,000 0 0 80,000 0 3,270
1995 600,000 891,103 163,950 100,000 0 3,117
Frederik van den Bergh (7) 1997 250,000 0 22,769 10,000 0 641,409
Former Executive Vice President 1996 333,333 233,333 204,266 130,000 0 2,124
Steven Kaplan (8) 1997 186,666 180,666 1,713 10,000 0 175,686
Former Executive Vice President 1996 116,667 50,000 31,592 125,000 0 501
</TABLE>
- -----------------------
(1) "Bonus" in 1997 includes $300,000 paid in January 1998 for 1997
performance. "Other Annual Compensation" in 1997 includes $2,567 for
Company-paid parking expenses.
(2) "Bonus" in 1997 includes $125,000 paid in March 1998 for 1997
performance. "Other Annual Compensation" in 1997 includes Company-paid
expense of $2,912 related to relocation.
(3) "Other Annual Compensation" in 1997 includes $6,300 for car allowance.
"All Other Compensation" in 1997 includes $3,230 for the Company's 401(k)
match and $1,000 for premiums paid for term life insurance.
(4) "Bonus" in 1997 includes $60,000 bonus paid for relocation during 1997,
and $74,844 paid in March 1998 for 1997 performance. "Other Annual
Compensation" includes (i) for 1997, $82,500 ordinary income realized upon
the exercise/sale of certain stock options during 1997, $4,284 interest
differential housing allowance, $8,700 car allowance, $5,455 relocation
expenses and $4,991 tax gross-up thereon, (ii) for 1996, $10,155 for
interest differential housing allowance, $3,844 for personal use of
Company vehicle, $2,900 for car allowance, and (iii) for 1995, $113,561
for relocation costs. "All Other Compensation" includes (i) for 1997,
$3,230 and $2,982, respectively, for the Company's 401(k) match and
premiums paid for term life insurance, (ii) for 1996, $3,164 and $1,291,
respectively, for the Company's 401(k) match and premiums paid for term
life insurance, and (iii) in 1995, $3,077 and $800, respectively, for the
Company's 401(k) match and premiums paid for term life insurance.
25
<PAGE>
(5) "Bonus" for 1995 includes $159,290 paid in February 1996 for 1995
performance. "Other Annual Compensation" includes (i) for 1997,
$42,222 forgiveness of a loan, $21,753 interest differential housing
allowance, $8,700 car allowance, (ii) for 1996, $141,376 reimbursement
of capital loss due to relocation ($45,877 of which is a tax gross-up),
$20,844 for other payments related to relocation ($3,510 of which is a
tax gross-up), $19,194 interest differential housing allowance, $8,700
car allowance, and (ii) for 1995, $25,513 (which includes $4,402 tax
gross-up) related to the forgiveness of a loan, $8,700 car allowance,
and $4,092 related to various gifts ($1,410 of which is a tax gross-up
on the gifts). "All Other Compensation" includes (i) for 1997, $3,230
and $834, respectively, for the Company's 401(k) match and premiums
paid for term life insurance, (ii) for 1995, $3,183 and $534,
respectively, for the Company's 401(k) match and premiums paid for term
life insurance, and (iii) for 1995, $0 and $794, respectively, for the
Company's 401(k) match and premiums paid for term life insurance.
(6) Mr. Hammes ceased to be an employee of the Company in February 1997.
"Bonus" includes $591,103 paid in February 1996 for 1995 performance
pursuant to a predecessor incentive plan and a $300,000 special bonus paid
in 1995 pursuant to Mr. Hammes' employment agreement. "Other Annual
Compensation" includes (i) for 1997, $13,663 for personal use of a Company
vehicle, $10,853 for relocation costs ($4,912 of which is a tax gross-up),
and $2,925 interest differential housing allowance, and (ii) for 1995,
$137,703 for relocation costs. "All Other Compensation" includes (i) for
1997, $2,380 and $0, respectively, for the Company's 401(k) match and
premiums paid for term life insurance, and $1,209,655 for termination of
employment payments including but not limited to severance payments, lump
sum payments, and the value of benefits received pursuant to a severance
agreement entered into with Mr. Hammes as of February 28, 1997 (see
"Employment Agreements and Termination of Employment Arrangements"), (ii)
for 1996, $3,230 and $40, respectively, for the Company's 401(k) match and
premiums paid for term life insurance and (iii) for 1995, $3,077 and $40,
respectively, for the Company's 401(k) match and premiums paid for term
life insurance.
(7) Mr. van den Bergh ceased to be an employee of the Company in June 1997.
"Bonus" for 1996 includes $233,333 guaranteed incentive payment made in
1996 pursuant to Mr. van den Bergh's employment agreement. "Other
Annual Compensation" includes (i) for 1997, $9,630 for Company vehicle
expenses, $5,493 for tax preparation expenses, $6,822 for housing
allowance, and $824 for representation allowance, and (ii) for 1996,
includes a $153,100 payment made to Mr. van den Bergh to compensation
him for the loss of stock option price appreciation upon leaving his
former employer. "All Other Compensation" includes (i) for 1997,
$641,409 for termination of employment payments including, but not
limited to, severance payments, lump sum payments, and the value of
benefits received pursuant to a severance agreement entered into with
Mr. van den Bergh as of June 30, 1997 (see "Employment Agreements and
Termination of Employment Arrangements"), and (ii) for 1996, $2,124 for
premiums paid for term life insurance.
(8) Mr. Kaplan ceased to be an employee of the Company in August 1997.
"Bonus" includes (i) for 1997, $130,666 guaranteed incentive and
$50,000 (final installment) signing bonus payments made in 1997
pursuant to Mr. Kaplan's employment agreement and (ii) for 1996,
$50,000 payments made during 1996 for first installment of signing
bonus pursuant to Mr. Kaplan's employment agreement. "Other Annual
Compensation" includes (i) for 1997, $1,416 for the personal use of a
Company car, and $297 for relocation costs, and (ii) for 1996, $31,592
for relocation costs ($14,103 of which is a tax gross-up). "All Other
Compensation" includes (i) for 1997, $174,812 for payments including,
but not limited to, severance payments, lump sum payments and value of
benefits received pursuant to a termination agreement entered into with
Mr. Kaplan as of August 31, 1997 (see "Employment Agreements and
Termination of Employment Arrangements"), and $874 for premiums paid
for term life insurance, and (ii) for 1996, $501 for premiums paid for
term life insurance.
26
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants
of stock options during 1997 to the Company's Chief Executive Officer and the
next four most highly-compensated executive officers, and three of its former
executive officers. Pursuant to the Company Merger Agreement, each
outstanding option to acquire the Company's common stock, which is not
currently exercisable, will vest and become exercisable at the effective time
of the CLN Holdings Merger and, to the extent not exercised prior to the
effective time of the Company Merger, will be converted into the right to
receive cash in an amount equal to the excess, if any, of $27.50 over the per
share exercise price of such option.
<TABLE>
% of Total
Options
Granted to
Employees Expiration Grant Date
Options in Fiscal Exercise Date Present
Name Granted Year Price of Options Value (7)
- ------------------ ------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Jerry W. Levin (1) 200,000 9.27% $ 12.250 02/11/07 $ 1,257,120
300,000 13.91% 14.000 04/15/07 2,150,835
David A. Ramon (2) 62,500 2.89% 12.250 02/11/07 392,850
37,500 1.73% 16.875 05/13/07 334,558
Mark Goldman (3) 20,000 .92% 15.000 02/12/07 100,422
20,000 .92% 16.125 12/17/07 160,930
David K. Stearns (4) 20,000 .92% 16.125 12/17/07 158,532
Patrick McEvoy -- -- -- -- --
Michael N. Hammes -- -- -- -- --
Frederik van den Bergh (5) 10,000 .46% 14.000 4/15/07 67,527
Steven F. Kaplan (6) 10,000 .46% 14.000 4/15/07 67,527
</TABLE>
- --------------------
(1) Mr. Levin's options were granted on February 11, 1997 and April 15, 1997,
respectively. The February 11, 1997 and 200,000 of the April 15, 1997
options were granted pursuant to the 1996 Stock Option Plan. The remainder
of the April 15, 1997 option was granted pursuant to the 1993 Stock Option
Plan. The options are exercisable in installments of 50%. The earlier
option vested on April 15, 1997 and December 31, 1997. The later option
vested on April 15, 1997 and is scheduled to vest again on April 15, 1998.
(2) Mr. Ramon's options were granted on February 11, 1997 and May 13, 1997,
respectively. The February 11, 1997 and May 13, 1997 options were granted
pursuant to the 1996 Stock Option Plan. The options are exercisable in
installments of 50%. The earlier option vested on April 15, 1997 and
December 31, 1997. The later option vested on May 13, 1997 and December
31, 1997.
(3) Mr. Goldman's options were granted on February 12, 1997 and December 17,
1997, Respectively. ThE February 12, 1997 option was granted pursuant to
the 1996 Stock Option Plan and the December 17, 1997 option was granted
pursuant to the 1993 Stock Option Plan. The February 12, 1997 option is
exercisable in installments of 33%, 33% and 34%. This option is scheduled
to vest on February 12, 2000, February 12, 2001, and February 12, 2002,
respectively. The December 17, 1997 option is exercisable in installments
of 50%. This option is scheduled to vest on June 17, 1998 and December 17,
1998.
(4) Mr. Stearns' options were granted on December 17, 1997 pursuant to the 1996
Stock Option Plan. The option becomes exercisable in installments of 25%.
The option is scheduled to vest on December 17, 1998, December 17, 1999,
December 17, 2000, and December 17, 2001, respectively.
(5) Mr. van den Bergh's options were granted on April 15, 1997 pursuant to the
1996 Stock Option Plan. Pursuant to an agreement entered into with Mr. van
den Bergh as of June 30, 1997, Mr. van den Berg's options expired
unexercised.
(6) Mr. Kaplan's options were granted on April 15, 1997 pursuant to the 1996
Stock Option Plan. Pursuant to an agreement entered into with Mr. Kaplan
as of August 31, 1997, Mr. Kaplan's options expired unexercised.
27
<PAGE>
(7) The grant date present values were estimated using the Black-Scholes option
pricing model and the following weighted-average assumptions; risk-free
interest rates from 5.84% to 6.89%, dividend yield of 0%, volatility of the
expected market price of the Company's common stock from 27.25% to 35.43%,
and a weighted-average expected life of the options from 4.5 to 8.5 years.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth aggregated option exercises in the last
fiscal year and fiscal year-end option values for the Company's Chief
Executive Officer and the next four most highly-compensated executive
officers, and three of its former executive officers.
<TABLE>
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired FY-End FY-End (1)
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- -------------- -------- -------- -------------- -------------
<S> <C> <C> <C> <C>
Jerry W. Levin 0 0 350,000/ $ 1,071,875/
150,000 309,375
David A. Ramon 0 0 100,000/ 238,281/
0 0
Mark Goldman 0 0 0/ 0/
60,000 21,250
David K. Stearns 15,000 82,500 28,720/ 41,790/
110,280 46,253
Patrick McEvoy 0 0 21,900/ 35,989/
63,100 39,923
Michael N. Hammes 0 0 0/ 0/
580,000 (2) 0
Frederik van den Bergh 0 0 0/ 0/
130,000 (3) 0
Steven F. Kaplan 0 0 0/ 0/
135,000 (4) 0
</TABLE>
- --------------------
(1) Market closing price of $16.0625 per share on December 31, 1997 was used in
computing year-end values.
(2) Mr. Hammes' right to exercise the options expired on May 29, 1997, pursuant
to the agreement entered into with Mr. Hammes on February 28, 1997. The
options expired by their terms unexercised on May 29, 1997.
(3) Mr. van den Bergh was paid in lieu of the vested options that were
in-the-money on August 27, 1997, pursuant to the agreement entered into
with Mr. van den Bergh as of June 30, 1997. The options were allowed to
expire by their terms unexercised on September 30, 1997.
(4) Mr. Kaplan's right to exercise the options expired on November 30, 1997,
pursuant to the agreement entered into with Mr. Kaplan as of August 31,
1997. The options expired by their terms unexercised on November 30, 1997.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
The Company has an employment agreement with Mr. Levin effective for
the term October 1, 1997 through December 31, 2000. Pursuant to the Company
Merger Agreement, the Company will not have any responsibility for the Company's
obligations under Mr. Levin's employment agreement following consummation of the
CLN Holdings Merger, except for payment of the transaction bonus described
below. The employment agreement provides for a base salary of $1,000,000 per
annum, and participation in The Coleman Company, Inc. Executive Annual Incentive
Plan (the "Incentive Plan") with a 100% target bonus opportunity. The
employment agreement
28
<PAGE>
with Mr. Levin also provides for, among other things, participation in the
Company's other benefit plans, certain pension benefits and payments upon
death, disability, termination without cause and change of control of the
Company. Upon a termination of employment without cause, Mr. Levin would be
entitled, among other things, to receive payments equal to base salary for
the balance of the term of the agreement (but in any event not less than one
year). Upon a change of control Mr. Levin would be entitled to a lump sum
payment equal to base salary and target bonus payable for the remainder of
the term. In addition, Mr. Levin's employment agreement provides for a
gross-up for certain excise taxes resulting from payments and benefits under
the employment agreement. Pursuant to the employment agreement, Mr. Levin is
entitled to a transaction bonus equal to 1.5% of the enterprise value of
certain divestitures, up to a maximum aggregate amount of $1.5 million. The
consummation of the sale of CSS would result in a transaction bonus payable
to Mr. Levin of $1.5 million.
The Company has an employment agreement with Mr. Shapiro effective for
the term July 1, 1997 through June 30, 2000. Pursuant to the Company Merger
Agreement, the Company will not have any responsibility for the Company's
obligations under Mr. Shapiro's employment agreement following consummation
of the CLN Holdings Merger. The employment agreement provides for a base
salary of $350,000 per annum, and participation in the Incentive Plan with a
70% target bonus opportunity. The employment agreement with Mr. Shapiro also
provides for, among other things, participation in the Company's other
benefit plans and payments upon death, disability, termination without cause
and change of control of the Company. Upon termination of employment without
cause, Mr. Shapiro would be entitled, among other things, to receive payments
equal to base salary for the balance of the term of the agreement (but in any
event not less than one year). Upon a change of control, Mr. Shapiro would
be entitled to a lump sum payment equal to base salary and target bonus
payable for the remainder of the term. In addition, Mr. Shapiro's employment
agreement provides for a gross-up for certain excise taxes resulting from
payments and benefits under the employment agreement.
The Company has an employment agreement with Mr. McEvoy effective for
the term January 1, 1996 through December 31, 1998. Pursuant to the
employment agreement, Mr. McEvoy is paid a base salary of $200,000 per annum,
and is entitled to participate in the Incentive Plan with a 70% target bonus
opportunity. The employment agreement with Mr. McEvoy also provides for,
among other things, participation in the Company's other benefit plans and
payments upon death, disability, termination without cause, and subject to
certain conditions, change of control of the Company. Upon a termination of
employment without cause, or termination of employment upon a change of
control, Mr. McEvoy would be entitled, for two years, among other things, to
receive payments equal to base salary and target bonus and to participate in
the Company's medical plans. In addition, Mr. McEvoy's employment agreement
provides for a gross-up of certain excise taxes resulting from payments and
benefits under the employment agreement. In addition, in connection with the
sale of CSS, the Company and Mr. McEvoy entered into a retention agreement.
Pursuant to such retention agreement, Mr. McEvoy will receive, among other
things, a special bonus for one year in an amount equal to Mr. McEvoy's base
salary, provided that if Mr. McEvoy becomes entitled to severance payments
under his employment contracts as a result of a termination of employment
within three months of a sale of CSS, the severance payments to Mr. McEvoy
under his employment agreement will be reduced by the payments of the special
bonus.
Mr. Goldman had two employment agreements with the Company which became
effective November 1, 1994 and terminated December 31, 1997. Under the
agreements, which had identical material terms, Mr. Goldman's base salary was
$250,000 per year, and Mr. Goldman was eligible for a discretionary incentive
payment each year.
Mr. Hammes had an employment agreement with the Company effective
January 1, 1996, which provided for, among other things, a base salary of
$700,000 per annum. Mr. Hammes' employment was terminated February 28, 1997.
Effective such date, Mr. Hammes' entered into a severance agreement with the
Company having a severance period of two years. Pursuant to the severance
agreement, Mr. Hammes is entitled to, among other things, severance payments
during the severance period at the rate of $700,000 per annum, and continued
participation in the Company's medical plans during the severance period, and
is entitled to certain pension
29
<PAGE>
payments beginning March 1, 1999. In addition, pursuant to the severance
agreement, Mr. Hammes was paid a lump sum payment during 1997 of $450,000 and
is entitled to another $450,000 lump sum payment at the end of the severance
period.
Mr. van den Bergh had an employment agreement with the Company effective
as of May 1, 1996, which provided for, among other things, a base salary of
$500,000 per annum. Mr. van den Bergh's employment was terminated effective
June 30, 1997. Effective such date, Mr. van den Bergh entered into a
severance agreement with the Company having a severance period of one year.
Pursuant to the severance agreement, Mr. van den Bergh was paid two lump sum
payments during 1997 totaling $550,000 and is entitled to, among other
things, continued participation in the Company's medical plans during the
severance period.
Mr. Kaplan had an employment agreement with the Company effective as of
August 1, 1996, which provided for, among other things, a base salary of
$280,000 per annum. Mr. Kaplan's employment was terminated effective August
31, 1997. Effective such date Mr. Kaplan entered into a severance agreement
with the Company, having a severance period or two years. Pursuant to the
severance agreement, Mr. Kaplan is entitled to, among other things, severance
payments during the severance period at the rate of $426,000 per annum, and
continued participation in the Company's medical plans during the severance
period.
PENSION PLANS
RETIREMENT PLAN. The Company participates in the New Coleman Company,
Inc. Retirement Plan for Salaried Employees (the "Salaried Pension Plan")
which replaced a prior plan that was terminated on June 30, 1989.
Participants in the Salaried Pension Plan include participants under the
prior plan and certain salaried exempt employees who are at least 21 years
old and have completed at least one year of service with the Company.
Benefits to participants vest fully after five years of Vesting Service
(as defined in the Salaried Pension Plan) and such benefits are determined
primarily by a formula based on the average of the five consecutive years of
greatest compensation earned during the last ten years of the participant's
service to the Company, and the number of years of service attained by the
individual participant. Such compensation is composed primarily of regular
base salary and contributions to qualified deferred compensation plans and
does not include amounts paid pursuant to the Company's annual cash incentive
compensation plans. Participants make no contributions to the Salaried
Pension Plan.
EXCESS BENEFIT PLAN. The Company participates in the New Coleman
Holdings Inc. Excess Benefit Plan (the "Excess Benefit Plan") for designated
employees who are participants in the Salaried Pension Plan and whose
retirement income from the Salaried Pension Plan in the form of payment to be
made under the Salaried Pension Plan exceeds the maximum permissible under
the Employee Retirement Income Security Act, as amended, and certain
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
The Excess Benefit Plan supplements the Salaried Pension Plan by providing
additional retirement benefits to its participants in excess of the maximum
amount permitted under the Salaried Pension Plan, which benefits generally
are payable in conjunction with payments made under the Salaried Pension
Plan. Benefits payable under the Excess Benefit Plan have been included in
the estimated annual benefits payable listed on the table following
discussion of the Consolidated Supplemental Retirement Plan. The Excess
Benefit Plan was amended and restated effective January 1, 1995 to add a
provision allowing annual cash incentive compensation plan payments to
designated participants to be included as compensation in the formula used to
determine benefits under the Excess Benefit Plan. Thirteen executives
participated in this feature of the Excess Benefit Plan during 1997.
CONSOLIDATED SUPPLEMENTAL RETIREMENT PLAN. In addition to the obligation
of the Company under the Salaried Pension Plan and the Excess Benefit Plan,
the Company had committed to provide other supplemental retirement benefits
solely for Mr. Hammes, including credit for additional years of service and
certain other formula changes. Pursuant to an agreement entered into with
Mr. Hammes in February 1997, discussed above, Mr. Hammes is no longer a
participant in the Consolidated Supplemental Retirement Plan.
30
<PAGE>
The following table shows estimated annual benefits payable under the
Salaried Pension Plan and the Excess Benefit Plan, and reflects the straight
life benefit form of payment for employees, assumes normal retirement at age 65,
and reflects deductions for Social Security and other offset amounts:
<TABLE>
Estimated Annual Pension
----------------------------------------------------------------------
Final Average 10 Years 20 Years 30 Years 35 Years
Earnings of Service of Service of Service of Service
------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 100,000 $ 15,896 $ 31,792 $ 47,688 $ 55,636
200,000 35,896 71,792 107,688 125,636
300,000 55,896 111,792 167,688 195,636
400,000 75,896 151,792 227,688 265,636
500,000 95,896 191,792 287,688 335,636
600,000 115,896 231,792 347,688 405,636
700,000 135,896 271,792 407,688 475,636
800,000 155,896 311,792 467,688 545,636
900,000 175,896 351,792 527,688 615,636
1,000,000 195,896 391,792 587,688 685,636
1,100,000 215,896 431,792 647,688 755,636
1,200,000 235,896 471,792 707,688 825,636
1,300,000 255,896 511,792 767,688 895,636
1,400,000 275,896 551,792 827,688 965,636
1,500,000 295,896 591,792 887,688 1,035,636
1,600,000 315,896 631,792 947,688 1,105,636
1,700,000 335,896 671,792 1,007,688 1,175,636
1,800,000 355,896 711,792 1,067,688 1,245,636
</TABLE>
Benefits under the Salaried Pension Plan are payable upon normal
retirement at age 65, and at age 55 following vested termination, disability,
and death. A participant may elect to commence early benefit payments at any
time after the participant's 55th birthday or may retire with 30 years of
Vesting Service at amounts reduced from those payable upon normal retirement
age. As of December 31, 1997, credited years of service for each of the
individuals listed on the Summary Compensation Table are as follows: Mr.
Levin, 8.7 years; Mr. Ramon, 4.6 years; Mr. Goldman, 4 years; Mr. Stearns,
21.2 years; Mr. McEvoy, 3.8 years; Mr. Hammes, 3.4 years; Mr. van den Bergh,
zero years; and Mr. Kaplan, 1.1 years. In accordance with Mr. Hammes'
termination of employment agreement (see Employment Agreements and
Termination of Employment Arrangements), discussed above, Mr. Hammes will be
entitled to receive a pension of $15,110 per month commencing March 1, 1999.
Pursuant to the Company Merger Agreement, from and after the effective
time of the CLN Holdings Merger, Sunbeam has agreed to allow Company
employees to participate in Sunbeam benefit plans on substantially the same
basis as similarly situated Sunbeam employees, and has also agreed to cause
the Company to continue its employee benefit plans for a period of at least
six (6) months following such date. Sunbeam has also agreed to give Company
employees full credit for purposes of eligibility and vesting of benefits and
benefit accrual for service with the Company and its affiliates prior to the
effective time of the CLN Holdings Merger provided, however, that no such
crediting of service results in duplication of benefits.
31
<PAGE>
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE
The Compensation Committee is comprised entirely of directors who are
not officers or employees of the Company. The Compensation Committee is
composed of Messrs. Robinson (Chairman), Drapkin and Slovin, and Ms. Jordan.
The Compensation Committee is responsible for:
- Reviewing and approving the salary and annual incentive compensation
of the Company's executive officers;
- Reviewing, approving or modifying performance standards against which
annual incentive compensation awards will be made for executive
officers;
- Reviewing, approving or modifying annual incentive compensation
awards for executive officers;
- Reviewing, approving or modifying stock option awards for all
employees, including executive officers;
- Reviewing, approving or modifying supplemental benefit or
compensation plans which are available to designated executives;
- Reviewing and recommending to the Board of Directors changes to
current executive officer benefit plans or the adoption of new
executive compensation programs requiring shareholder approval; and
- Reviewing and acting as appropriate on any other issues relating to
executive compensation and brought to the Compensation Committee by
the Chairman for its consideration.
COMPENSATION PHILOSOPHY
In 1994, the compensation philosophy for the Company was developed
and adapted. The philosophy includes the following principles:
- Support the achievement of the Company's desired financial
performance and return to shareholders;
- Provide compensation that will attract and retain the required high
level talent; and
- Align executives officers' interest with the Company's success by
linking both annual incentive compensation and long-term incentive
compensation, in the form of stock option and/or stock appreciation
rights awards, with the Company's success in achieving performance
goals.
The executive compensation philosophy for the Company, as
approved and adopted by the Compensation Committee, provides for an overall
level of potential compensation opportunity that, if aggressive financial goals
are achieved and superior shareholder returns are realized, will be at a 75th
percentile level of competitiveness with consumer products companies of
comparable size. To determine pay level opportunities, the Compensation
Committee consulted with outside consultants and with the Company's officers
responsible for human resources.
The Compensation Committee intends, over time, to set salaries in
a manner consistent with the foregoing. Annual incentive and stock option
opportunities are intended to be set above predicted competitive norms. Actual
individual compensation levels may be greater or lesser than median competitive
levels, based upon annual and long-term Company performance. The Compensation
Committee, at its discretion, sets executive compensation at levels which it
judges are justified by external, internal and other circumstances.
32
<PAGE>
COMPLIANCE WITH FEDERAL TAX LEGISLATION
The Omnibus Budget Reconciliation Act of 1993 added Section
162(m) to the Code which, generally precludes the Company and other public
companies from taking a tax deduction for compensation over $1 million which is
not "performance-based" and is paid, or otherwise taxable, to executives named
in the Summary Compensation Table and employed by the Company at the end of the
applicable tax year. The Company attempts to preserve as much deduction as
possible without undercutting the compensation objectives set forth above. Each
director on the Compensation Committee is an "outside director" within the
meaning of Section 162(m) of the Code.
BASE COMPENSATION
During 1997, the base compensation of each executive officer was
reviewed and compared to median levels of competitiveness for similarly sized
consumer products companies. The Company has adopted the practice of base
compensation increases for executive officers based on an annual review of the
executive performance and to adjust compensation and to keep it approximately to
the standard described above.
ANNUAL CASH INCENTIVE COMPENSATION
The Chief Executive Officer was paid a bonus based on the targets
in the Incentive Plan, even though a certain condition to payment of the target
bonus was not satisfied. The other named executive officers who were employed
by Coleman at the end of the year were also paid a bonus based on the same
criteria. During 1997, no bonus was paid to the former Chief Executive Officer.
The bonuses were paid to recognize the substantial progress made in the
restructuring of Coleman.
LONG TERM INCENTIVES
In 1997, the Compensation Committee approved option grants to the
Chief Executive Officer of 200,000 shares on February 11, 1997, at an exercise
price of $12.25 and 300,000 shares on April 14, 1997 at an exercise price of
$14.00. It also approved grants totaling in the aggregate 160,000 shares to the
other named executive officers employed by the Company at the end of 1997. The
Compensation Committee believes that these grants, which were primarily made in
the first half of 1997, provide an appropriate link between the interest of
executives with those of the Company's shareholders.
OTHER BENEFITS
The Company provides medical and retirement benefits to executive
officers that are generally available to Company salaried employees, including
participation in medical and dental benefit plans, a qualified 401(k) employee
savings plan and a qualified defined benefit retirement plan. In addition, the
Company provides certain officers and key management employees a nonqualified
benefit equalization plan which is designed to make up for benefits that would
otherwise to lost due to various tax limitations. The Company's benefit plans
are intended to provide a median level of benefits when compared to similarly
sized consumer products companies. The Company also provides certain executive
officers with certain executive prerequisites which may be deemed to be a
personal benefit or constitute compensation to such executive officers,
including (for example) car allowances and reimbursements, and club membership
dues.
33
<PAGE>
The Compensation Committee believes the executive compensation
philosophy and programs are appropriate and serve the interest of the
shareholders and the Company.
Compensation Committee:
James D. Robinson, Chairman
Donald G. Drapkin
Ann D. Jordan
Bruce Slovin
CUMULATIVE SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph set forth below presents a comparison of cumulative
shareholder return for the Company's common stock for the five-year period
December 31, 1992 through December 31, 1997, on an indexed basis, as compared
with the S&P Midcap 400 stock index and a selected peer group of companies.
The group of companies selected for the peer group represents a
portfolio of companies which share certain characteristics considered relevant
to the earnings performance and related cumulative shareholder return for the
Company's common stock. Selection of the peer group for the performance line was
impacted by the fact that many of the Company's direct competitors are privately
held or are subsidiaries of much larger public companies. Selection criteria
applied in formulating the group of 12 companies, each of whose stock is
publicly traded, required each company to share one or more of the following
characteristics representative of the Company: (a) competitors with the Company
in one or more of its product lines; (b) companies which serve mass
merchandisers and their customers; (c) companies offering strong brand name
consumer products; and (d) companies serving recreational products consumers.
34
<PAGE>
The 12 companies selected as the peer group are as follows: Johnson
Worldwide Associates, Inc.; Anthony Industries, Inc.; Huffy Corporation;
Kellwood Company (parent of American Recreation Products, Inc.); Russell
Corporation; Snap-on Tools Corporation; Sunbeam; Brunswick Corporation; V.F.
Corporation (parent of JanSport, Inc.); Newell Co.; Rubbermaid Incorporated; and
Cooper Industries, Inc.
[GRAPH]
<TABLE>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Coleman $100 $ 98 $123 $123 $ 96 $113
S&P MidCap 400 $100 $114 $110 $143 $171 $226
Peer Group $100 $107 $100 $106 $124 $160
</TABLE>
35
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning beneficial ownership,
as of the close of business on March 3, 1998, of the Company's common stock by
its 5% beneficial owners, its directors, Chief Executive Officer and the next
four most highly-compensated executives, and of directors and executive
officers as a group.
<TABLE>
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ---------------- -------------------- --------
<S> <C> <C>
Ronald O. Perelman 44,067,520 (1) 82%
35 E. 62nd Street
New York, New York 10021
Sunbeam Corporation 44,067,520 (2) 82%
1615 South Congress Avenue, Suite 200
Delray Beach, Florida 33445
Donald G. Drapkin 30,000 (3) *
Frank Gifford 0 *
Lawrence M. Jones 40,512 *
Ann Jordan 0 *
Jerry W. Levin 373,000 (4) *
John A. Moran 10,000 *
James D. Robinson III 0 *
Bruce Slovin 52,600 (5) *
William H. Spoor 6,000 (6) *
David A. Ramon 100,000 (7) *
Mark Goldman 0 *
David K. Stearns 25,342 (8) *
Patrick McEvoy 0 *
Michael N. Hammes 0 (9) *
Steven Kaplan 0 (9) *
Frederik van den Bergh 11,000 (9) *
All Directors and Executive 44,768,474(10) 83%
Officers as a Group
(21 persons)
</TABLE>
* Less than 1%
- -------------
(1) Substantially all of the shares owned are pledged to secure obligations of
Coleman Worldwide and CLN Holdings and shares of intermediate holding
companies are or from time to time may be pledged to secure obligations of
MacAndrews & Forbes Holdings, Inc. or its affiliates.
(2) The Statement on Schedule 13D filed by Sunbeam on March 9, 1998 indicates
that Sunbeam may be deemed to be the beneficial owner of 44,067,520 shares
by reason of its execution of the CLN Holdings Merger Agreement.
(3) Includes 10,000 shares owned by trusts for the benefit of Mr. Drapkin's
children and as to which beneficial ownership is disclaimed.
(4) Includes 2,000 shares owned by trusts for the benefit of Mr. Levin's
children and as to which beneficial ownership is disclaimed. Includes
350,000 shares which may be acquired within 60 days pursuant to stock
options.
(5) Includes 46,300 shares held in trust for family members and as to which
beneficial ownership is disclaimed.
(6) Includes 4,000 shares held in trust for the benefit of Mr. Spoor pursuant
to the IDS Bank & Trust, Trustee, The Pillsbury Company 401(k) Savings
Plan.
36
<PAGE>
(7) Includes 100,000 shares which may be acquired within 60 days pursuant to
stock options.
(8) Includes 520 shares held by Mr. Stearns' spouse and as to which beneficial
ownership is disclaimed. Includes 20,720 shares which may be acquired
within 60 days pursuant to stock options.
(9) No current information is available as to share ownership. Reflects
information in the Company's records as of the date of termination of
employment.
(10) Includes an additional 52,500 shares which may be acquired within 60 days
by directors and executive officers as a group pursuant to stock options.
Excludes 1,002,380 shares which may be acquired by directors and executive
officers pursuant to stock options which will vest and become exercisable
upon consummation of the CLN Holdings Merger.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH MACANDREWS & FORBES
Ronald O. Perelman, through MacAndrews & Forbes, beneficially owns
indirectly 82% of Coleman's common stock. Due to its stock ownership,
MacAndrews & Forbes controls Coleman and is able to elect the entire board of
directors. On February 27, 1998, the CLN Holdings Merger Agreement and the
Company Merger Agreement were executed as described in further detail above. As
a result of the CLN Holdings Merger, CLN Holdings will become a wholly-owned
subsidiary of Sunbeam and Sunbeam will become the indirect owner of
approximately 82% of the outstanding Coleman common stock. Additionally, upon
consummation of the CLN Holdings Merger, all of the current members of Coleman's
board of directors will resign from their positions as directors, and five
individuals designated by Sunbeam will become directors of the Company.
MacAndrews & Forbes is a diversified holding company with interests in
several industries. The principal executive offices of MacAndrews & Forbes are
located at 35 East 62nd Street, New York, New York 10021.
CROSS-INDEMNIFICATION AGREEMENT
Coleman and Holdings are parties to a cross-indemnification agreement
(the "Cross-Indemnification Agreement"), pursuant to which Coleman has agreed to
indemnify Holdings against all liabilities related to the outdoor products
business transferred to Coleman by Holdings, and Holdings has agreed to
indemnify Coleman and its immediate corporate parent against all liabilities of
Holdings other than liabilities related to the outdoor products business
transferred by Holdings to Coleman. The liabilities that Coleman will indemnify
Holdings against include (i) asserted and potential product liability claims
arising out of products manufactured or sold by the outdoor products business,
and (ii) asserted and potential environmental claims and liabilities related to
facilities currently or formerly owned or used by the outdoor products business.
TAX SHARING AGREEMENT
The Company is included in the consolidated tax group of which Mafco
is the common parent and Coleman's tax liability will be included in the
consolidated Federal income tax liability of Mafco. Coleman is also included in
certain state and local tax returns of Mafco or its affiliates. Coleman
participates in a Tax Sharing Agreement (the "Tax Sharing Agreement") pursuant
to which it pays to Coleman Worldwide amounts equal to the taxes that Coleman
would otherwise have to pay if it were to file separate Federal, state or local
income tax returns (including any amounts determined to be due as a result of a
redetermination of the tax liability of Mafco arising from an audit or
otherwise). Under Federal law, Coleman is subject to liability for the
consolidated Federal income tax liabilities of the consolidated group of which
Mafco is the common parent, for any taxable period during which Coleman or a
subsidiary is a member of that consolidated group. Mafco has agreed, however,
to indemnify Coleman for any such Federal income tax liability (and certain
state and local tax liabilities) of Mafco or any of its subsidiaries that
Coleman is actually required to pay. Because the payments to be made by Coleman
under the Tax Sharing Agreement are determined by the amount of taxes that
Coleman would otherwise have to pay if it were to file separate Federal, state
or local income tax returns, the Tax Sharing Agreement will benefit Mafco to the
extent that Mafco can offset the taxable income generated by Coleman against
losses and tax credits
37
<PAGE>
generated by Mafco and its other subsidiaries. Following the consummation of
the CLN Holdings Merger, Coleman will no longer be included in the Mafco
consolidated tax group. The Tax Sharing Agreement will be terminated on the
date of the CLN Holdings Merger. The CLN Holdings Merger Agreement provides
for certain tax indemnities and tax sharing payments with respect to Mafco,
Coleman and their respective affiliates.
INSURANCE PROGRAMS
Coleman is insured under policies maintained by MacAndrews & Forbes or
its affiliates, including health and life insurance, workers compensation, and
liability insurance. The Company's expense represents its expected costs for
self-insured retentions and premiums for excess coverage insurance. For 1997,
such expense, including the Company's allocable share of premiums for such
insurance, was approximately $13.3 million. Management believes that the terms
for such insurance are at least as favorable as terms that could be obtained by
the Company were it separately insured.
SERVICES PROVIDED BY OTHER AFFILIATES
From time to time, Coleman purchases from affiliates, at negotiated
rates, specialized accounting and other services. Coleman also provides, at
negotiated rates, specialized accounting services and other services to an
affiliate. The net expense for such services was approximately $394,000 during
1997. Coleman believes that the terms of such arrangements are at least as
favorable to Coleman as those it could have negotiated with nonaffiliated
parties. In addition, certain employees of the Company have been paid by
MacAndrews & Forbes or other affiliates of the Company, and the Company
reimburses such affiliates for the compensation expense for such employees.
PURCHASE OF INACTIVE SUBSIDIARIES
During the first quarter of 1997, Coleman purchased an inactive
subsidiary from an affiliate for approximately $1.0 million, plus a portion of
certain tax benefits to the extent such benefits are realized by Coleman.
During the fourth quarter of 1997, Coleman purchased an inactive subsidiary from
an affiliate for which the Company agreed to pay 50% of the tax benefits
realized by Coleman when and if such benefits are realized. Coleman expects to
realize certain tax benefits from the tax losses of such subsidiaries.
OFFICE LEASE
Coleman subleases office space in New York City from an affiliate.
The rent paid by Coleman represents the allocable portion, based on the space
leased, of the rent paid by the affiliate to its third party landlord. The
expense for such rent during 1997 was approximately $158,000. Coleman believes
that the terms of the sublease are at least as favorable to Coleman as those it
could have negotiated with nonaffiliated parties.
PENSION PLANS
Holdings maintains pension and other retirement plans in various forms
covering employees of Coleman who meet eligibility requirements. Holdings also
has an unfunded excess benefit plan covering certain of Coleman's U.S. employees
whose benefits under the plans described above are limited by provisions of the
Code. Coleman pays to Holdings it allocable costs of maintaining such plans for
Coleman's employees. As part of the consummation of the CLN Holdings Merger,
such pension and other benefits plans will be assigned and assumed by Coleman.
OTHER ARRANGEMENTS
At the beginning of 1995, Mr. McEvoy, an Executive Vice President of
Coleman, had a noninterest-bearing loan from Coleman in the amount of $63,333.
At the end of 1997, the principal balance of the loan was $0.
38
<PAGE>
During 1997, Coleman purchased licensing services from an affiliate,
for which it paid approximately $650,000.
During 1997, Coleman sold products to an affiliate, for which it
received approximately $900,000.
During 1997, Coleman used an airplane owned by a corporation of which
a director of Coleman is a stockholder, for which Coleman paid approximately
$158,000.
During 1997, a subsidiary of Coleman paid approximately $254,000 for
warehouse space leased from a real estate partnership in which Mr. Goldman, an
Executive Vice President of Coleman, and three other immediate family members of
Mr. Goldman's are partners. A manufacturing business owned by Mr. Goldman's
father contracted with Coleman's subsidiary for the manufacture of goods sold to
the subsidiary, for which the subsidiary paid approximately $2.6 million during
1997. Pursuant to the agreement by which Coleman acquired the Eastpak business,
Mr. Goldman is entitled to certain additional payments from Coleman upon Eastpak
achieving certain operating targets. In accordance with such agreement, a final
additional payment of $12.0 million was paid to Mr. Goldman for 1997 financial
performance.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedule.
See List of Financial Statements and Schedules which appears
on page F-1 herein.
(3) Exhibits
EXHIBIT NO. DESCRIPTION
---------- -----------
2.1 Agreement and Plan of Merger among Sunbeam
Corporation, Camper Acquisition Corp. and The Coleman
Company, Inc. dated as of February 27, 1998
(incorporated by reference to Exhibit 2.1 to The
Coleman Company, Inc. Current Report on Form 8-K/A
filed on March 5, 1998).
2.2 Agreement and Plan of Merger among Sunbeam
Corporation, Laser Acquisition Corp, CLN Holdings Inc.
and Coleman (Parent) Holdings Inc. dated as of
February 27, 1998 (incorporated by reference to
Exhibit 10.1 to The Coleman Company, Inc. Current
Report on Form 8-K/A filed on March 5, 1998).
3.1 Certificate of Incorporation of The Coleman Company,
Inc., filed with the Secretary of State of Delaware on
December 17, 1991 (incorporated by reference to
Exhibit 3.1 to The Coleman Company, Inc. 1993 Annual
Report on Form 10-K).
3.2 Bylaws of The Coleman Company, Inc., as amended
(incorporated by reference to Exhibit 3.1 to The
Coleman Company, Inc. Form 10-Q for the period ended
June 30, 1997).
4.1 Amended and Restated Credit Agreement dated as of
August 3, 1995 among the Company, the Lenders party
thereto, the Issuing Bank, the Agent, and the
Co-Agents (incorporated by reference to Exhibit 4.2 to
The Coleman Company Inc. Form 10-Q for the period
ended June 30, 1995).
39
<PAGE>
4.2 Amendment No. 1 dated as of April 30, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent and
the Co-Agents (incorporated by reference to Exhibit
4.1 to The Coleman Company, Inc. Form 10-Q for the
period ended March 31, 1996).
4.3 Amendment No. 2 dated as of April 30, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent and
the Co-Agents (incorporated by reference to Exhibit
4.2 to The Coleman Company, Inc. Form 10-Q for the
period ended March 31, 1996).
4.4 Amendment No. 3 dated as of May 29, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent and
the Co-Agents (incorporated by reference to Exhibit
4.1 to The Coleman Company, Inc. Form 10-Q for the
period ended September 30, 1996).
4.5 Amendment No. 4 dated as of October 25, 1996 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent and
the Co-Agents (incorporated by reference to Exhibit
4.2 to The Coleman Company, Inc. Form 10-Q for the
period ended September 30, 1996).
4.6 Amendment No. 5 dated as of March 7, 1997 to the
Amended and Restated Credit Agreement, dated as of
August 3, 1995 among The Coleman Company, Inc., the
Lenders party thereto, the Issuing Bank, the Agent and
the Co-Agents (incorporated by reference to Exhibit
4.6 to The Coleman Company, Inc. 1996 Annual Report on
Form 10-K).
4.7 Note Purchase Agreement dated as of August 3, 1995
among The Coleman Company, Inc., and Purchasers party
thereto (incorporated by reference to Exhibit 4.3 to
The Coleman Company Inc. Form 10-Q for the period
ended June 30, 1995).
4.8 Note Purchase Agreement dated as of May 1, 1996 among
The Coleman Company, Inc., and Purchasers party
thereto (incorporated by reference to Exhibit 4.1 to
The Coleman Company, Inc., Current Report on Form 8-K
dated June 28, 1996).
4.9 Specimen copy of definitive certificate of common
stock of The Coleman Company, Inc., par value $.01 per
share (incorporated by reference to Exhibit 4.4 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.1 Cross-Indemnification Agreement dated as of February
26, 1992 among New Coleman Holdings Inc., Coleman
Finance Holdings Inc., The Coleman Company, Inc., and
certain subsidiaries of New Coleman Holdings Inc. and
The Coleman Company, Inc., (incorporated by reference
to Exhibit 10.1 to The Coleman Company, Inc. 1992
Annual Report on Form 10-K).
10.2 Amendment No. 1 dated as of December 30, 1992 to the
Cross-Indemnification Agreement (incorporated by
reference to Exhibit 10.2 to The Coleman Company, Inc.
1992 Annual Report on Form 10-K).
40
<PAGE>
10.3 Reimbursement Agreement dated as of February 26, 1992
between The Coleman Company, Inc., and MacAndrews
Holdings (incorporated by reference to Exhibit 10.4 to
The Coleman Company, Inc. 1992 Annual Report on Form
10-K).
10.4 Tax Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.29 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.5 Amendment No. 1 dated as of February 26, 1992 to the
Tax Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.30 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.6 Amendment No. 2 dated as of December 30, 1992 to the
Tax Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.31 to The
Coleman Company, Inc. 1992 Annual Report on Form 10-K).
10.7 Amendment No. 3 dated as of May 27, 1993 to the Tax
Allocation Agreement dated as of August 24, 1990
among MacAndrews Holdings, New Coleman Holdings Inc.
and subsidiaries of New Coleman Holdings Inc.
(incorporated by reference to Exhibit 10.45 to the
Coleman Holdings Inc. Registration Statement Form S-1
(File No. 33- 67058), filed on August 6, 1993.
10.8 Tax Sharing Agreement II dated as of February 26,
1992, among Mafco, Coleman Finance Holdings Inc., The
Coleman Company, Inc. and certain subsidiaries of The
Coleman Company, Inc. (incorporated by reference to
Exhibit 10.25 to The Coleman Company, Inc. 1992 Annual
Report on Form 10-K).
10.9 Amendment No. 1 dated as of December 30, 1992 to the
Tax Sharing Agreement II dated as of February 26,
1992, among Mafco, Coleman Finance Holdings Inc., The
Coleman Company, Inc. and certain subsidiaries of The
Coleman Company, Inc. (incorporated by reference to
Exhibit 10.26 to The Coleman Company, Inc. 1992 Annual
Report on Form 10-K).
10.10 Supplemental Tax Sharing Agreement dated as of
February 26, 1992, between The Coleman Company, Inc.
and MacAndrews and Forbes Holdings Inc. (incorporated
by reference to Exhibit 10.32 to The Coleman Company,
Inc. 1992 Annual Report on Form 10-K).
10.11 Tax Sharing Agreement III dated as of February 26,
1992 among Mafco, New Coleman Holdings Inc., Coleman
Finance Holdings Inc. and subsidiaries of Coleman
Finance Holdings Inc. (incorporated by reference to
Exhibit 10.27 to The Coleman Company, Inc. 1992 Annual
Report on Form 10-K).
10.12 Amendment No. 1 dated as of December 30, 1992 to the
Tax Sharing Agreement III dated as of February 26,
1992 among Mafco, New Coleman Holdings Inc., Coleman
Finance Holdings Inc. and subsidiaries of Coleman
Finance Holdings Inc. (incorporated by reference to
Exhibit 10.28 to The Coleman Company, Inc. 1992 Annual
Report on Form 10-K).
41
<PAGE>
10.13 Tax Sharing Agreement V dated as of May 27, 1993 among
Mafco, Coleman Worldwide Corporation, The Coleman
Company, Inc. and certain subsidiaries of The Coleman
Company, Inc. (incorporated by reference to Exhibit
10.38 to the Coleman Holdings Inc. Registration
Statement Form S-1 (File 33-67058), filed on August 6,
1993).
10.14 Tax Sharing Termination Agreement dated as of May 27,
1993 among Mafco, New Coleman Holdings Inc., Coleman
Finance Holdings Inc., The Coleman Company, Inc. and
subsidiaries of The Coleman Company, Inc. and Coleman
Finance Holdings Inc. (incorporated by reference to
Exhibit 10.40 to the Coleman Holdings Inc.
Registration Statement Form S-1 (File 33-67058), filed
on August 6, 1993).
10.15 Worldwide Registration Rights Agreement dated as of
May 27, 1993 among Coleman Worldwide Corporation, The
Coleman Company, Inc. the Lenders Party thereto and
the Agent (incorporated by reference to Exhibit 10.47
to the Coleman Holdings Inc. Registration Statement
Form S-1 (File 33-67058), filed on August 6, 1993).
10.16*X The Coleman Company, Inc. Executive Severance
Policy effective as of February 27, 1998.
10.17 Contingent Payment Agreement dated as of October 10,
1994, by and among E. Acquisition Corporation, M.
Acquisition Corporation, The Coleman Company, Inc. and
Mark Goldman (incorporated by reference to Exhibit
10.3 to The Coleman Company, Inc. Current Report on
Form 8-K dated November 2, 1994).
10.18 Share Purchase Agreement dated as of February 27, 1996
by and among Butagaz S.N.C. and Bafiges S.A.
(incorporated by reference to Exhibit 10.26 to The
Coleman Company, Inc. 1995 Annual Report on Form 10-K).
10.19 Amendment to the Share Purchase Agreement dated as of
February 27, 1996 by and among Bafiges S.A. and
Butagaz S.N.C. (incorporated by reference to Exhibit
10.27 to The Coleman Company, Inc. 1995 Annual Report
on Form 10-K).
10.20 Shareholders Agreement dated as of February 27, 1996
by and among Butagaz S.N.C., The Coleman Company, Inc.
and Bafiges S.A. (incorporated by reference to Exhibit
10.28 to The Coleman Company, Inc. 1995 Annual Report
on Form 10-K).
10.21 Agreement dated as of February 27, 1996 by and between
Shell International Petroleum Company Limited, Butagaz
S.N.C. on the first part, and Bafiges S.A. and The
Coleman Company, Inc. on the second part (incorporated
by reference to Exhibit 10.29 to The Coleman Company,
Inc. 1995 Annual Report on Form 10-K).
10.22* Letter Agreement dated as of February 28, 1997
between The Coleman Company, Inc. and Michael N.
Hammes (incorporated by reference to Exhibit 10.81
to The Coleman Company, Inc. 1996 Annual Report on
Form 10-K).
10.23* Employment Agreement dated as of January 1, 1996
between The Coleman Company, Inc. and Patrick
McEvoy (incorporated by reference to Exhibit 10.1
to The Coleman Company, Inc. Form 10-Q for the
period ended March 31, 1996).
10.24* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and
between The Coleman Company, Inc., and Patrick
McEvoy
42
<PAGE>
(incorporated by reference to Exhibit 10.6 to The
Coleman Company, Inc. Form 10-Q for the period ended
September 30, 1996).
10.25*X Retention Agreement dated September 22, 1997
between The Coleman Company, Inc. and Patrick
McEvoy.
10.26* Employment Agreement dated as of January 1, 1996
between The Coleman Company, Inc. and David
Stearns (incorporated by reference to Exhibit
10.50 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.27* First Amendment dated August 1, 1996 to Employment
Agreement effective as of January 1, 1996, by and
between The Coleman Company, Inc. and David
Stearns (incorporated by reference to Exhibit 10.4
to The Coleman Company, Inc. Form 10-Q for the
period ended September 30, 1996).
10.28* Letter Agreement dated as of June 30, 1997 between
The Coleman Company, Inc. and Frederik van den
Bergh (incorporated by reference to Exhibit 10.5
to The Coleman Company, Inc. Form 10-Q for the
period ended June 30, 1997).
10.29* Employment Agreement dated as of November 1, 1994
between E. Acquisition Corporation and Mark
Goldman (incorporated by reference to Exhibit
10.79 to The Coleman Company, Inc. 1996 Annual
Report on Form 10-K).
10.30* Employment Agreement dated as of November 1, 1994
between M. Acquisition Corporation and Mark
Goldman (incorporated by reference to Exhibit
10.80 to The Coleman Company, Inc. 1996 Annual
Report on Form 10-K).
10.31*X The Coleman Company, Inc. Executive Annual
Incentive Plan.
10.32* The Coleman Retirement Salaried Incentive Savings
Plan (incorporated by reference to Exhibit 10.3 to
The Coleman Company, Inc. Form 10-Q for the period
ended March 31, 1996).
10.33* The Coleman Retirement Incentive Savings Plan (the
"Savings Plan") (incorporated by reference to
Exhibit 10.54 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.34* First Amendment dated as of October 11, 1994 to
the Savings Plan (incorporated by reference to
Exhibit 10.55 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.35* Second Amendment dated as of January 1, 1995 to
the Savings Plan (incorporated by reference to
Exhibit 10.56 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.36* Third Amendment dated as of December 14, 1995 to
the Savings Plan (incorporated by reference to
Exhibit 10.57 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.37* Fourth Amendment dated as of December 14, 1995 to
the Savings Plan (incorporated by reference to
Exhibit 10.58 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
43
<PAGE>
10.38* Fifth Amendment dated as of January 1, 1996 to the
Savings Plan (incorporated by reference to Exhibit
10.59 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.39* Amendment dated as of December 14, 1995 to the
Savings Plan (incorporated by reference to Exhibit
10.60 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.40* Amendment dated as of December 14, 1995 to the
Savings Plan (incorporated by reference to Exhibit
10.61 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.41* Amendment dated as of January 1, 1996 to the
Savings Plan (incorporated by reference to Exhibit
10.62 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
10.42* New Coleman Holdings Inc. Excess Benefit Plan
dated as of January 1, 1995 (incorporated by
reference to Exhibit 10.1 to The Coleman Company,
Inc. Form 10-Q for the period ended June 30,
1996).
10.43* The New Coleman Company, Inc. Retirement Plan for
Salaried Employees (the "Retirement Plan")
(incorporated by reference to Exhibit 10.63 to The
Coleman Company, Inc. 1995 Annual Report on Form
10-K).
10.44* Amendment dated as of October 17, 1994 to the
Retirement Plan (incorporated by reference to
Exhibit 10.64 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.45* Amendment dated as of December 14, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.65 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.46* Amendment dated as of December 14, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.66 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.47* Amendment dated as of October 12, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.67 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.48* Amendment dated as of January 1, 1996 to the
Retirement Plan (incorporated by reference to
Exhibit 10.68 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.49* Amendment dated as of December 31, 1995 to the
Retirement Plan (incorporated by reference to
Exhibit 10.69 to The Coleman Company, Inc. 1995
Annual Report on Form 10-K).
10.50* The Coleman Company, Inc. Consolidated
Supplemental Retirement Plan, dated as of January
1, 1996 (incorporated by reference to Exhibit
10.73 to The Coleman Company, Inc. 1995 Annual
Report on Form 10-K).
44
<PAGE>
10.51* First Amendment dated July 1, 1996 to the
Consolidated Supplemental Retirement Plan adopted
January 1, 1996 (incorporated by reference to
Exhibit 10.5 to The Coleman Company, Inc. Form 10-Q
for the period ended June 30, 1996).
10.52* The Coleman Company, Inc. Executive Employees
Deferred Compensation Plan, as amended by the
First Amendment thereto (incorporated by reference
to Exhibit 10.11 to The Coleman Company, Inc.
Registration Statement on Form S-1 (File 33-44728),
filed on December 23, 1991).
10.53* The Coleman Company, Inc. 1992 Stock Option Plan,
as amended (incorporated by reference to Exhibit
10.3 to The Coleman Company, Inc. Form 10-Q for
the period ended June 30, 1997).
10.54* The Coleman Company, Inc. 1993 Stock Option Plan,
as amended (incorporated by reference to Exhibit
10.1 to The Coleman Company, Inc. Form 10-Q for
the period ended June 30, 1997).
10.55* The Coleman Company, Inc. 1996 Stock Option Plan,
as amended (incorporated by reference to Exhibit
10.53 to The Coleman Company, Inc. 1996 Annual
Report on Form 10-K).
10.56X Stock Purchase Agreement among The Coleman
Company, Inc., as Seller, Siebe plc, as Guarantor,
and Ranco Incorporated of Delaware, as Buyer,
dated as of February 18, 1998.
10.57*X Amendment No. 2 to The New Coleman Company, Inc.
Retirement Plan for Salaried Employees.
10.58*X Special Amendment to The New Coleman Company, Inc.
Retirement Plan for Salaried Employees.
10.59*X The New Coleman Company, Inc. Pension Plan for
Weekly Salaried and Hourly Paid Employees.
21.1X Subsidiaries of the Company.
23.1X Consent of Independent Auditors.
24.1X Powers of Attorney executed by Ronald O. Perelman,
Donald G. Drapkin, Frank Gifford, Lawrence M. Jones,
Ann D. Jordan, Jerry W. Levin, John A. Moran, James D.
Robinson, Bruce Slovin, William H. Spoor.
27X Financial Data Schedule
--------------------
* Management Contracts and Compensatory Plans
X Filed herewith
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on March 3, 1998 to
disclose certain information with regard to the acquisition of CLN
Holdings and the Company by Sunbeam Corporation.
A Current Report on Form 8-K/A was filed on March 5, 1998 to
amend and restate the Company's Current Report on Form 8-K filed on
March 3, 1998.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE COLEMAN COMPANY, INC.
(Registrant)
Date: March 18, 1998 By: /s/ Jerry W. Levin
-------------------- ------------------------------------
Jerry W. Levin
Chairman of the Board,
Chief Executive Officer, and Director
Date: March 18, 1998 By: /s/ Joseph P. Page
-------------------- ------------------------------------
Joseph P. Page
Executive Vice President and
Chief Financial Officer
Date: March 18, 1998 By: /s/ Karen Clark
-------------------- ------------------------------------
Karen Clark
Vice-President Finance
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 18, 1998 By: Ronald O. Perelman *
-------------------- ------------------------------------
Ronald O. Perelman
Director
Date: March 18, 1998 By: Donald G. Drapkin *
-------------------- ------------------------------------
Donald G. Drapkin
Director
Date: March 11, 1998 By: Frank Gifford *
-------------------- ------------------------------------
Frank Gifford
Director
Date: March 11, 1998 By: Lawrence M. Jones *
-------------------- ------------------------------------
Lawrence M. Jones
Director
Date: March 18, 1998 By: Ann D. Jordan *
-------------------- ------------------------------------
Ann D. Jordan
Director
46
<PAGE>
Date: March 18, 1998 By: Jerry W. Levin *
-------------------- ------------------------------------
Jerry W. Levin
Director
Date: March 14, 1998 By: John A. Moran *
-------------------- ------------------------------------
John A. Moran
Director
Date: March 11, 1998 By: James D. Robinson *
-------------------- ------------------------------------
James D. Robinson
Director
Date: March 18, 1998 By: Bruce Slovin *
-------------------- ------------------------------------
Bruce Slovin
Director
Date: March 18, 1998 By: William H. Spoor *
-------------------- ------------------------------------
William H. Spoor
Director
* Executed on behalf of the named director pursuant to a power of attorney.
Date: March 23, 1998 By: /s/ Paul E. Shapiro
-------------------- ------------------------------------
Paul E. Shapiro
Attorney-in-fact
47
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1997
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
The following consolidated financial statements of The Coleman Company,
Inc. and Subsidiaries are included in Item 8:
PAGE
----
Consolidated Balance Sheets as of December 31, 1997 and 1996........ F-3
Consolidated Statements of Operations
for the years ended December 31, 1997, 1996 and 1995............... F-4
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995............... F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996 and 1995............... F-6
Notes to Consolidated Financial Statements.......................... F-7
Consolidated financial statement schedules of The Coleman Company, Inc. and
Subsidiaries included in Item 14(d):
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been
omitted.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
The Coleman Company, Inc.
We have audited the accompanying consolidated balance sheets of The Coleman
Company, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Coleman Company, Inc. and subsidiaries at December 31, 1997 and 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Wichita, Kansas
February 18, 1998
F-2
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
December 31,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 13,031 $ 17,299
Accounts receivable, less allowance of
$8,930 in 1997 and $11,512 in 1996............ 154,279 182,418
Notes receivable............................... 25,477 27,524
Inventories.................................... 236,327 287,502
Income tax refunds receivable - affiliate...... 14,860 21,661
Deferred tax assets............................ 26,378 40,466
Prepaid assets and other....................... 21,344 15,769
---------- ----------
Total current assets......................... 491,696 592,639
Property, plant and equipment, net............... 175,494 199,182
Intangible assets related to businesses
acquired, net................................... 332,468 341,715
Deferred tax assets and other.................... 42,106 26,550
---------- ----------
$1,041,764 $1,160,086
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.............. $ 523 $ 747
Short-term borrowings.......................... 64,207 33,935
Accounts payable............................... 91,846 98,628
Accounts payable - affiliates.................. 2,825 278
Accrued expenses............................... 93,796 112,906
---------- ----------
Total current liabilities.................... 253,197 246,494
Long-term debt................................... 477,276 582,866
Other liabilities................................ 69,586 76,173
Minority interest................................ 1,236 1,608
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share;
20,000,000 shares authorized, no shares issued
or outstanding................................ -- --
Common stock, par value $.01 per share;
80,000,000 shares authorized; 53,433,414
shares issued and outstanding in 1997; and
53,222,420 shares issued and outstanding in 1996 534 532
Additional paid-in capital..................... 172,072 166,690
Retained earnings.............................. 80,296 82,832
Currency translation adjustment................ (11,510) 3,176
Minimum pension liability adjustment........... (923) (285)
---------- ----------
Total stockholders' equity................... 240,469 252,945
---------- ----------
$1,041,764 $1,160,086
---------- ----------
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
Year Ended December 31,
--------------------------------------
1997 1996 1995
---------- ---------- --------
<S> <C> <C> <C>
Net revenues......................................... $1,154,294 $1,220,216 $933,574
Cost of sales........................................ 840,331 928,497 649,427
---------- ---------- --------
Gross profit......................................... 313,963 291,719 284,147
Selling, general and administrative expenses......... 266,283 291,669 174,688
Asset impairment charge.............................. -- -- 12,289
Interest expense, net................................ 40,852 38,727 24,545
Amortization of goodwill and deferred charges........ 11,338 10,473 7,745
Other expense, net................................... 1,867 1,151 334
---------- ---------- --------
(Loss) earnings before income taxes, minority
interest and extraordinary item.................... (6,377) (50,301) 64,546
Income tax (benefit) expense......................... (5,227) (10,927) 24,479
Minority interest.................................... 1,386 1,872 --
---------- ---------- --------
(Loss) earnings before extraordinary item............ (2,536) (41,246) 40,067
Extraordinary loss on early extinguishment of debt,
net of income tax benefit of $431 in 1996,
and $503 in 1995................................ -- (647) (787)
---------- ---------- --------
Net (loss) earnings $ (2,536) $ (41,893) $ 39,280
---------- ---------- --------
---------- ---------- --------
Basic (loss) earnings per share:
(Loss) earnings before extraordinary item.......... $ (.05) $ (0.78) $ 0.75
Extraordinary item................................. -- (0.01) (0.01)
---------- ---------- --------
Net (loss) earnings.............................. $ (.05) $ (0.79) $ 0.74
---------- ---------- --------
---------- ---------- --------
Diluted (loss) earning per share:
(Loss) earnings before extraordinary item.......... $ (.05) $ (0.78) $ 0.75
Extraordinary item................................. -- (0.01) (0.01)
---------- ---------- --------
Net (loss) earnings.............................. $ (.05) $ (0.79) $ 0.74
---------- ---------- --------
---------- ---------- --------
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
Common Stock
--------------------- Additional Currency Minimum
Number Paid-In Retained Translation Pension
of Shares Amount Capital Earnings Adjustment Liability
---------- ------ ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994.......... 53,071,532 $531 $162,873 $ 89,059 $ 900 $ --
Purchases of common stock........... (220,000) (2) (1,924) (2,160) -- --
Stock issued under stock
option plans....................... 325,748 3 3,935 -- -- --
Stock option tax benefits........... -- -- 582 -- -- --
Net earnings........................ -- -- -- 39,280 -- --
Currency translation adjustment..... -- -- -- -- (735) --
---------- ---- -------- -------- -------- -----
Balance at December 31, 1995.......... 53,177,280 532 165,466 126,179 165 --
Purchases of common stock........... (100,000) (1) (874) (1,454) -- --
Stock split issuance costs.......... -- -- (93) -- -- --
Stock issued under stock
option plans....................... 145,140 1 1,737 -- -- --
Stock option tax benefits........... -- -- 454 -- -- --
Net loss............................ -- -- -- (41,893) -- --
Currency translation adjustment..... -- -- -- -- 3,011 --
Minimum pension liability
adjustment, net of tax............. -- -- -- -- -- (285)
---------- ---- -------- -------- -------- -----
Balance at December 31, 1996.......... 53,222,420 532 166,690 82,832 3,176 (285)
Stock issued under stock
option plans....................... 210,994 2 2,358 -- -- --
Stock option tax benefits........... -- -- 225 -- -- --
Contribution to capital by parent... -- -- 2,799 -- -- --
Net loss............................ -- -- -- (2,536) -- --
Currency translation adjustment..... -- -- -- -- (14,686) --
Minimum pension liability
adjustment, net of tax............. -- -- -- -- -- (638)
---------- ---- -------- -------- -------- -----
Balance at December 31, 1997.......... 53,433,414 $534 $172,072 $80,296 $(11,510) $(923)
---------- ---- -------- -------- -------- -----
---------- ---- -------- -------- -------- -----
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
Year Ended December 31,
---------------------------------
1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings............................................... $ (2,536) $ (41,893) $ 39,280
-------- --------- --------
Adjustments to reconcile net (loss) earnings to net cash flows
from operating activities:
Depreciation and amortization.................................. 37,977 36,358 26,523
Non-cash restructuring and other charges....................... 17,325 48,269 12,289
Extraordinary loss on early extinguishment of debt............. -- 1,078 1,290
Minority interest.............................................. 1,386 1,872 --
Change in assets and liabilities:
Decrease (increase) in receivables........................... 23,296 976 (37,833)
Decrease (increase) in inventories........................... 35,250 (42,402) (49,396)
Increase (decrease) in accounts.payable...................... 1,226 (12,308) 13,825
Other, net................................................... (22,683) (1,279) (3,780)
-------- --------- --------
93,777 32,564 (37,091)
-------- --------- --------
Net cash provided (used) by operating activities.................. 91,241 (9,329) 2,189
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................................. (26,973) (41,334) (29,053)
Purchases of businesses, net of cash acquired..................... (14,300) (161,875) (33,385)
Proceeds from sale of fixed assets................................ 5,728 2,924 928
-------- --------- --------
Net cash used by investing activities............................. (35,545) (200,285) (61,510)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings............................... 37,071 (11,043) 3,106
Net payments of revolving credit agreement borrowings............. (91,498) (2,779) (61,289)
Proceeds from issuance of long-term debt.......................... -- 235,000 200,000
Repayment of long-term debt....................................... (2,867) (6,648) (73,884)
Debt issuance and refinancing costs............................... (766) (3,902) (3,569)
Purchases of Company common stock................................. -- (2,329) (4,086)
Proceeds from stock options exercised including tax benefits...... 2,585 2,192 4,520
-------- --------- --------
Net cash (used) provided by financing activities.................. (55,475) 210,491 64,798
-------- --------- --------
Effect of exchange rate changes on cash........................... (4,489) 4,357 (1,731)
-------- --------- --------
Net (decrease) increase in cash and cash equivalents.............. (4,268) 5,234 3,746
Cash and cash equivalents at beginning of the year................ 17,299 12,065 8,319
-------- --------- --------
Cash and cash equivalents at end of the year...................... $ 13,031 $ 17,299 $ 12,065
-------- --------- --------
-------- --------- --------
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BACKGROUND:
The Coleman Company, Inc. ("Coleman" or the "Company") is a global
manufacturer and marketer of consumer products for outdoor recreation and
home hardware use.
Coleman is a subsidiary of Coleman Worldwide Corporation ("Coleman
Worldwide"). Coleman Worldwide is a subsidiary of CLN Holdings Inc. ("CLN
Holdings"), an indirect wholly-owned subsidiary of New Coleman Holdings Inc.
("Holdings"), an indirect wholly-owned subsidiary of MacAndrews & Forbes
Holdings Inc. ("MacAndrews Holdings"), a corporation wholly owned through
Mafco Holdings Inc. ("Mafco" and, together with MacAndrews Holdings,
"MacAndrews & Forbes") by Ronald O. Perelman. Coleman Worldwide owns
44,067,520 shares of the common stock of Coleman which represent
approximately 82% of the outstanding Coleman common stock as of December 31,
1997.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the
Company and its subsidiaries after elimination of all material intercompany
accounts and transactions.
CASH AND CASH EQUIVALENTS:
All highly liquid investments with a maturity of three months or
less at the date of purchase are considered to be cash equivalents. The
Company's cash equivalents consist primarily of investments in money market
funds and commercial paper. The Company's cash equivalents are generally
held until maturity and are carried at cost, which approximates fair value.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is recorded at cost and depreciated
on a straight-line basis over the estimated useful lives of such assets as
follows: land improvements, 5 to 25 years; buildings and building
improvements, 7 to 45 years; and machinery and equipment, 3 to 15 years.
Leasehold improvements are amortized over their estimated useful lives or the
terms of the leases, whichever is shorter. Repairs and maintenance are
charged to operations as incurred, and significant expenditures for additions
and improvements are capitalized.
INTANGIBLE ASSETS:
Intangible assets primarily represent goodwill which is being
amortized on a straight-line basis over periods not in excess of 40 years.
The carrying amount of goodwill is reviewed if facts and circumstances
suggest it may be impaired. If this review indicates goodwill will not be
recoverable over the remaining amortization period, as determined based on
the estimated undiscounted cash flows of the entity acquired, the carrying
amount
F-7
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
of the goodwill is reduced to estimated fair value based on market value or
discounted cash flows, as appropriate. Accumulated amortization aggregated
$47,250 and $38,851 at December 31, 1997 and 1996, respectively.
REVENUE RECOGNITION:
The Company recognizes revenues at the time title passes to the
customer. Net revenues comprise gross revenues less provisions for estimated
customer returns and allowances.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are expensed as incurred.
The amounts charged against operations for the years ended December 31, 1997,
1996 and 1995 were $11,871, $11,082, and $6,548, respectively.
ADVERTISING AND PROMOTION EXPENSE:
Production costs of future media advertising are deferred until the
advertising occurs. All other advertising and promotion costs are expensed
when incurred. The amounts charged against operations for the years ended
December 31, 1997, 1996 and 1995 were $53,408, $58,823, and $37,544,
respectively.
INSURANCE PROGRAMS:
The Company obtains insurance coverage for catastrophic exposures
as well as those risks required to be insured by law or contract. It is the
policy of the Company to retain a significant portion of certain losses
related primarily to workers' compensation, employee health benefits,
physical loss and property, and product and vehicle liability. Provisions
for losses expected under these programs are recorded based upon the
Company's estimates of the aggregate liability for claims incurred.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of foreign operations are generally
translated into United States dollars at the rates of exchange in effect at
the balance sheet date. Income and expense items are generally translated at
the weighted average exchange rates prevailing during each period presented.
Gains and losses resulting from foreign currency transactions are included in
the results of operations. Gains and losses resulting from translation of
financial statements of foreign subsidiaries and branches operating in
non-highly inflationary economies are recorded as a component of
stockholder's equity. Foreign subsidiaries and branches operating in highly
inflationary economies translate nonmonetary assets and liabilities at
historical rates and include translation adjustments in the results of
operations.
DERIVATIVE FINANCIAL INSTRUMENTS:
The Company uses derivative financial instruments to reduce
interest rate and foreign exchange exposures. The Company maintains a
control environment which includes policies and procedures for risk
assessment and for the approval, reporting and monitoring of derivative
financial instrument activities. The Company does not hold or issue
derivative financial instruments for trading purposes.
F-8
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Amounts to be received or paid under interest rate swap and cap
contracts designated as hedges are recognized over the life of the contracts
as adjustments to interest expense. Gains and losses on terminations of
interest rate swap and cap contracts designated as hedges are deferred and
amortized as adjustments to interest expense over the remaining life of the
terminated contracts. Unrealized gains and losses on outstanding interest
rate contracts designated as hedges are not recognized.
Foreign currency forward contracts are marked to market and gains
and losses on foreign currency forward contracts to hedge firm foreign
currency commitments are deferred and accounted for as part of the related
foreign currency transaction. Gains and losses on all other forward
contracts to hedge third-party and intercompany transactions are recorded in
operations as foreign exchange gains and losses. Gains and losses on
purchased foreign currency option contracts are deferred and recognized as
adjustments to cost of sales upon the sale of the related inventory to the
third-party customers.
CREDIT RISK:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables and
derivative financial instruments. Credit risk on trade receivables is
minimized as a result of the large and diversified nature of the Company's
worldwide customer base. Although the Company has one significant customer
(See Note 15), there have been no credit losses related to this customer.
With respect to its derivative contracts, the Company is also subject to
credit risk of non-performance by counterparties and its maximum potential
loss may exceed the amount recognized in the financial statements. The
Company controls its exposure to credit risk through credit approvals, credit
limits and monitoring procedures. Collateral is generally not required for
the Company's financial instruments.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in
the balance sheet for cash and cash equivalents approximates
its fair value.
LONG- AND SHORT-TERM DEBT: The carrying amounts of the
Company's borrowings under its foreign bank lines of credit,
revolving credit agreement and other variable rate debt
approximate their fair value. The fair value of the
Company's senior notes issues (see Note 9) are estimated
using discounted cash flow analysis based on the Company's
estimated current borrowing rate for similar types of
borrowing arrangements.
FOREIGN CURRENCY EXCHANGE CONTRACTS: The fair values of the
Company's foreign currency contracts are estimated based on
quoted market prices of comparable contracts, adjusted
through interpolation where necessary for maturity
differences.
F-9
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The carrying amounts and fair values of the Company's financial
instruments are as follows:
<TABLE>
December 31, 1997 December 31, 1996
-------------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
of Asset/ of Asset/ of Asset/ of Asset/
(Liability) (Liability) (Liability) (Liability)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and cash equivalents............... $ 13,031 $ 13,031 $ 17,299 $ 17,299
Short-term debt......................... (64,207) (64,207) (33,935) (33,935)
Long-term debt excluding capital leases. (477,499) (445,792) (583,019) (578,921)
Foreign currency exchange ocntracts..... 128 128 940 1,629
</TABLE>
STOCK-BASED COMPENSATION:
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation", encourages, but does not require
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to account for stock-based
compensation plans using the intrinsic value method prescribed in Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and related Interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price
of Coleman's stock at the date of the grant over the amount an employee must
pay to acquire the stock.
F-10
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(LOSS) EARNINGS PER SHARE:
In 1997, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 128, "Earnings per Share". SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to SFAS No. 128
requirements. In 1997 and 1996, diluted loss per share does not include any
incremental shares that would have been outstanding assuming the exercise of any
stock options because the effect of these shares would have been antidilutive.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
Earnings Per Share
(Loss) Shares Amount
-------- ---------- ---------
<S> <C> <C> <C>
Year Ended December 31, 1995
Basic earnings before extraordinary item...... $ 40,067 53,225,746 $ 0.75
Effect of dilutive securities stock options... -- 361,269 ------
-------- ---------- ------
Diluted earnings.............................. $ 40,067 53,587,015 $ 0.75
-------- ---------- ------
-------- ---------- ------
Year Ended December 31, 1996
Basic loss before extraordinary item.......... $(41,246) 53,196,979 $(0.78)
Effect of dilutive securities stock options... -- -- ------
-------- ---------- ------
Diluted loss.................................. $(41,246) 53,196,979 $(0.78)
-------- ---------- ------
-------- ---------- ------
Year Ended December 31, 1997
Basic loss before extraordinary item.......... $ (2,536) 53,343,680 $ (.05)
Effect of dilutive securities stock options... -- -- ------
-------- ---------- ------
Diluted loss.................................. $ (2,536) 53,343,680 $ (.05)
-------- ---------- ------
-------- ---------- ------
</TABLE>
RECLASSIFICATIONS:
Certain prior year amounts in the financial statements have been
reclassified to conform to the current year presentation.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from those
estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS:
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in the financial statements. SFAS No.
130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required.
F-11
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131 establishes
standards for the way public business enterprises report information about
operating segments in annual financial statements and requires those enterprises
report selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. SFAS No. 131 is effective
for financial statements for fiscal years beginning after December 15, 1997.
Financial statement disclosures for prior periods are required to be restated.
In February 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits". SFAS No. 132
revises employers' disclosures about pension and other postretirement benefits
to the extent practicable. It also requires additional information on changes
in the benefit obligations and fair value of plan assets and eliminates certain
other disclosures. SFAS No. 132 is effective for financial statements for
fiscal years beginning after December 15, 1997. Financial statement disclosures
for prior periods are required to be restated.
The Company has not yet determined the impact of adoption of these
standards; however, the adoption of these standards will have no impact on
Coleman's consolidated results of operations, financial position or cash flows.
2. ACQUISITIONS AND DIVESTITURES
On November 2, 1994, the Company purchased substantially all the assets of
Eastpak, Inc. and all the capital stock of M.G. Industries, Inc. (collectively,
"Eastpak"), a leading designer, manufacturer and distributor of branded
daypacks, sports bags and related products. The Company also entered into an
agreement with the predecessor owner of Eastpak to make additional payments
based upon the achievement of certain annual sales levels of Eastpak products
and other products substantially similar to the Eastpak products during the
years ended December 31, 1995, 1996, and 1997. A total of $23,000 was earned by
the predecessor owner of Eastpak under the terms of this agreement. This amount
has been recorded as additional goodwill.
During 1995, the Company purchased all of the outstanding shares of capital
stock of Sierra Corporation of Fort Smith, Inc., a manufacturer of portable
outdoor and recreational folding furniture and accessories, and substantially
all of the assets of Active Technologies, Inc. ("ATI"), a manufacturer of
technologically advanced lightweight generators and battery charging equipment.
The aggregate purchase price for these acquisitions was $19,516 including fees
and expenses. These acquisitions were accounted for using the purchase method
of accounting. The purchase price and expenses associated with these
acquisitions exceeded the fair value of net assets acquired by $11,186 and the
excess has been assigned to goodwill and is being amortized over 20 to 30 years
on the straight-line method. In connection with the ATI purchase, the Company
may also be required to make payments to the predecessor owner of ATI of up to
$18,750 based on the Company's sales of ATI related products and royalties
received by the Company for licensing arrangements related to ATI patents. As
of December 31, 1997, the amounts recorded, as additional goodwill, under the
terms of this agreement have been immaterial. The results of operations of
these companies on a pro forma basis as if their acquisitions had occurred at
the beginning of 1995 individually and in the aggregate were not significant to
the Company.
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 safety and security related electronic products
for residential and commercial applications. The Seatt acquisition, which was
accounted for under the purchase method, was completed for approximately $65,300
including fees and expenses. The results
F-12
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
of operations of Seatt have been included in the consolidated financial
statements from the date of acquisition. In connection with the purchase price
allocation of the Seatt acquisition, the Company recorded goodwill of
approximately $38,800. The Company is amortizing this amount over 40 years on
the straight-line method.
On February 18, 1998, the Company announced an agreement was signed for the
sale of Coleman Safety & Security Products, Inc., the successor to Seatt, to
Ranco Incorporated of Delaware, a U.S. subsidiary of Siebe plc, a United Kingdom
diversified engineering group. The sale price is approximately $105,000 and is
subject to adjustment upon closing which is expected to occur by the end of
March 1998. Net assets of Coleman Safety & Security Products, Inc. at December
31, 1997 were approximately $73,000.
On February 28, 1996, the Company purchased approximately 70% of the
outstanding shares of Application des Gaz, S.A. ("ADG" or "Camping Gaz"), a
leading manufacturer and distributor of camping appliances in Europe. The
Company completed the necessary steps to acquire the remaining 30% of the
outstanding shares during the second quarter of 1996. The cost of acquiring all
the shares of ADG was approximately $100,000 including fees and expenses.
The acquisition of Camping Gaz was accounted for under the purchase method.
In connection with the final allocation of purchase price to the fair values of
assets acquired and liabilities assumed, the Company recorded goodwill of
approximately $78,900, which is being amortized over 40 years on the straight-
line method. At acquisition, the Company recognized liabilities in the amount
of $21,898 representing severance and other termination benefits for certain
production and administrative employees of Camping Gaz. As of December 31,
1997, the Company had paid termination costs of approximately $13,350 and
anticipates all remaining termination costs will be paid during 1998.
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 control of Camping Gaz, and has recognized minority interest
related to the remaining shares for the period March 1, 1996 through June 30,
1996.
The following summarized, unaudited pro forma results of operations for the
years ended December 31, 1996 and 1995 assume 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.
<TABLE>
Year Ended
December 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net revenues................................ $1,246,370 $1,193,295
(Loss) earnings before extraordinary item... (41,407) 39,153
Net (loss) earnings......................... (42,054) 38,366
Basic (loss) earnings per common share:
(Loss) earnings before extraordinary item. $ (0.78) $ 0.73
Net (loss) earnings....................... (0.79) 0.72
</TABLE>
F-13
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
3. RESTRUCTURING AND OTHER CHARGES
During 1997, the Company recorded restructuring charges of $32,791 and
certain other charges of $3,628, (collectively, the "1997 Restructuring
Charges") and related tax benefits of $13,918. The Company reflected $19,673 of
the 1997 Restructuring Charges in cost of sales and reflected $16,746 in
selling, general and administrative ("SG&A") expenses. The 1997 Restructuring
Charges of $36,419 consisted of (i) $15,735 to exit various low margin products,
including pressure washers, (ii) $14,943 to close and relocate certain
administrative and sales offices, and (iii) $5,741 to close several
manufacturing facilities. Most of these activities were substantially complete
as of December 31, 1997, and remaining actions are expected to be completed in
1998.
During 1996, the Company recorded restructuring charges of $66,202 and
certain other charges of $7,998 (collectively, the "1996 Restructuring Charges")
and related net tax benefits of $21,684. The Company reflected $44,005 of the
1996 Restructuring Charges in cost of sales and $30,195 in SG&A. The pre-tax
restructuring charges of $66,202 consisted of (i) $29,067 to integrate Camping
Gaz and Coleman operations into a global recreation products business, (ii)
$19,000 to exit the low end electric pressure washer business, (iii) $14,135 to
exit a portion of the Company's battery powered light business and (iv) $4,000
to settle certain litigation with respect to the battery-powered light business.
The charges to integrate the Camping Gaz and Coleman operations reflect
primarily the cost to dispose of duplicate manufacturing, distribution and
administrative facilities and the related severance costs, which actions were
substantially completed in 1997 and are expected to be fully completed in 1998.
The low end pressure washer and battery powered light businesses were exited by
discontinuing the manufacturing and distribution of these products in 1997. The
other pre-tax charges of $7,998 related primarily to certain asset write-offs.
These charges were incurred in the Company's normal course of business, although
the amounts involved were higher than similar charges the Company had recorded
in prior years. The provision for income taxes included $21,684 of tax benefits
resulting from these restructuring and other charges, net of an increase in the
valuation reserve related to certain foreign deferred tax assets and other
foreign tax charges totaling $5,595.
The components of the combined 1997 Restructuring Charges and 1996
Restructuring Charges and an analysis of the amounts charged against the reserve
are outlined in the following table:
<TABLE>
1996 Charges During 1997 Charges During
Original Year Ended Balance at Additional Year Ended Balance at
Reserve 12/31/96 12/31/96 Reserves 12/31/97 12/31/97
-------- -------------- ---------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Impairment of
fixed assets......... $10,012 $ (1,789) $ 8,223 $ 6,449 $ (6,530) $ 8,142
Inventory and other
asset impairments.... 38,257 (25,875) 12,382 10,961 (14,966) 8,377
Termination costs..... 2,018 (1,633) 385 12,146 (9,729) 2,802
Idle facilities,
relocation and
other exit costs..... 23,913 (12,429) 11,484 6,863 (9,656) 8,691
------- -------- ------- ------- -------- -------
$74,200 $(41,726) $32,474 $36,419 $(40,881) $28,012
------- -------- ------- ------- -------- -------
------- -------- ------- ------- -------- -------
</TABLE>
The termination costs recognized in 1996 related to approximately 200
employees and the 1997 termination costs related to approximately 525 employees.
As of December 31, 1997, $11,362 of termination costs were paid on behalf of
the approximately 700 employees who were terminated as of that date.
F-14
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
During 1995, the Company recognized an asset impairment charge of $12,289
related to its Brazilian operations. The Brazilian operations had not
performed to the Company's expectations since acquisition of this business in
April of 1994, and in the fourth quarter of 1995, the Company initiated
actions to reduce the operating losses in Brazil. These actions included
replacing management, increasing prices, downsizing the manufacturing
operations and reducing SG&A and other expenses. Because of these actions,
the Company performed an impairment review and concluded recognition of an
asset impairment charge was appropriate. The basis of the fair values used in
the computation of the charge were appraisals for property and equipment and
estimated discounted cash flows for goodwill. The charge has been included in
the statement of operations under the caption "Asset Impairment Charge".
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
December 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Raw material and supplies........... $ 59,406 $ 82,399
Work-in-process..................... 7,813 12,878
Finished goods...................... 169,108 192,225
-------- --------
$236,327 $287,502
-------- --------
-------- --------
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consisted of the following:
<TABLE>
December 31,
---------------------
1997 1996
--------- --------
<S> <C> <C>
Land and land improvements.......... $ 7,700 $ 8,772
Buildings and building improvements. 79,101 78,760
Machinery and equipment............. 192,650 194,714
Construction-in-progress............ 10,076 15,519
--------- --------
289,527 297,765
Accumulated depreciation............ (114,033) (98,583)
--------- --------
$ 175,494 $199,182
--------- --------
--------- --------
</TABLE>
Depreciation expense was $26,956, $25,770, and $19,142 for the years ended
December 31, 1997, 1996 and 1995, respectively.
F-15
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
6. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
December 31,
------------------------
1997 1996
----------- ----------
<S> <C> <C>
Compensation and related benefits......... $ 20,385 $ 29,331
Other..................................... 73,411 83,575
---------- ----------
$ 93,796 $ 112,906
---------- ----------
---------- ----------
</TABLE>
7. OTHER LIABILITIES
Other liabilities consisted of the following:
<TABLE>
December 31,
------------------------
1997 1996
----------- ----------
<S> <C> <C>
Pensions and other postretirement benefits. $ 49,121 $ 52,229
Other...................................... 20,465 23,944
---------- ----------
$ 69,586 $ 76,173
---------- ----------
---------- ----------
</TABLE>
8. SHORT-TERM BORROWINGS
The Company maintained short-term bank lines of credit at December 31, 1997
and 1996 aggregating approximately $115,249, and $119,101, respectively, of
which approximately $64,207 and $33,935 were outstanding at December 31, 1997
and 1996, respectively. The weighted average interest rate on amounts borrowed
under these short-term lines was approximately 2.7% and 2.4% at December 31,
1997 and 1996, respectively.
Outstanding letters of credit aggregated approximately $37,208 and $32,897
at December 31, 1997 and 1996, respectively.
F-16
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
9. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
December 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
7.26% Senior Notes due 2007 (a)... $ 200,000 $ 200,000
7.10% Senior Notes due 2006 (b)... 85,000 85,000
7.25% Senior Notes due 2008 (c)... 75,000 75,000
Revolving credit facility (d)..... 52,127 146,350
Term loan (d)..................... 64,894 73,478
Other............................. 778 3,785
---------- ----------
477,799 583,613
Less current portion.............. 523 747
---------- ----------
$ 477,276 $ 582,866
---------- ----------
---------- ----------
</TABLE>
(a) On August 8, 1995, the Company completed a private placement
issuance and sale of $200,000 aggregate principal amount of 7.26%
Senior Notes due 2007 (the "2007 Notes"). Interest on the 2007
Notes is payable semiannually, and the principal is payable in
annual installments of $40,000 each commencing August 8, 2003,
with a final installment payment of $40,000 due on August 8,
2007. If there is a default, the interest rate will be the
greater of (i) 9.26% or (ii) 2.0% above the prime interest rate.
The 2007 Notes 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.
(b) On June 13, 1996, the Company completed a private placement
issuance and sale of $85,000 aggregate principal amount of 7.10%
Senior Notes due 2006 (the "2006 Notes"). Interest on the 2006
Notes is payable semiannually, and the principal is payable in
annual installments of $12,143 each commencing June 13, 2000,
with a final installment payment of $12,143 due on June 13, 2006.
If there is a default, the interest rate will be the greater of
(i) 9.10% or (ii) 2.0% above the prime interest rate.
The 2006 Notes 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.
(c) On June 13, 1996, the Company completed a private placement
issuance and sale of $75,000 aggregate principal amount of 7.25%
Senior Notes due 2008 (the "2008 Notes"). Interest on the 2008
Notes is payable semiannually, and the principal is payable in
annual installments of $15,000 each commencing June 13, 2004,
with a final installment payment of $15,000 due on June 13, 2008.
If there is a default, the interest rate will be the greater of
(i) 9.25% or (ii) 2.0% above the prime interest rate.
F-17
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The 2008 Notes 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.
(d) In April 1996, the Company amended its credit agreement to: a)
provide a term loan of French Franc 385,125 ($64,894 at December
31, 1997 exchange rates) (the "Term Loan"), b) provide a $275,000
unsecured revolving credit facility line (the "Credit Facility"),
c) allow for the Camping Gaz acquisition and d) extend the
maturity of the credit agreement (as amended, the "Company Credit
Agreement"). In connection with the Company recording the
restructuring and other charges as discussed in Note 3 and lower
than expected operating results, the Company further amended the
Company Credit Agreement in October 1996 and again in March 1997.
The Company Credit Agreement 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 2.125% 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. The Company Credit
Agreement also bears an overall facility fee ranging from .15% to
.375% based on the Company's financial performance.
In addition, the Company Credit Agreement provides, subject to
certain exceptions, for the net cash proceeds from disposition of
assets other than in the ordinary course of business, to be used
to prepay any outstanding Term Loan balances with any remaining
excess net cash proceeds to be applied to outstanding borrowings
under the Credit Facility with a corresponding reduction in the
overall amount of the Credit Facility line.
The Company Credit Agreement contains various restrictive
covenants including, without limitation, requirements for the
maintenance of specified financial ratios, levels of consolidated
net worth and profits, and certain other provisions limiting the
incurrence of additional debt, purchase or redemption of the
Company's common stock, issuance of preferred stock of the
Company, and also prohibits the Company from paying any dividends
until on or after January 1, 1999 and limits the amount of
dividends the Company may pay thereafter. The Company Credit
Agreement also contains an event of default upon a change of
control of the Company (as defined in the Company Credit
Agreement) and other customary events of default. In addition,
substantially all of the shares of the Company's common stock
owned by Coleman Worldwide are pledged to secure indebtedness of
Coleman Worldwide and of its parent, CLN Holdings Inc. The
indentures governing this indebtedness contain various covenants
including a covenant placing certain limitations on the
Company's indebtedness.
The aggregate scheduled amounts of long-term debt maturities in the years
1998 through 2002 are $523, $78, $12,207 $129,204, and $12,159, respectively.
F-18
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
10. DERIVATIVE FINANCIAL INSTRUMENTS
The Company periodically enters into a variety of foreign currency exchange
contracts to reduce its foreign currency exposure resulting primarily from firm
commitments, intercompany foreign sales transactions expected to occur within
the next twelve months, and intercompany accounts receivable and payable.
At December 31, 1997 and December 31, 1996, the Company did not have any
outstanding foreign currency exchange contracts related to firm commitments.
During the fourth quarter of 1995, the Company elected to adopt the
provisions of the Emerging Issues Task Force Issue No. 95-2, "Determination of
What Constitutes a Firm Commitment for Foreign Currency Transactions Not
Involving a Third Party" ("EITF 95-2") which narrowed the scope of intercompany
foreign currency commitments eligible to be hedged for financial reporting
purposes. As a result of this change, the Company increased net income by
$3,796 in the fourth quarter of 1995. Prior to the adoption of EITF 95-2, the
gains and losses associated with these contracts were accounted for under the
deferral method. At December 31, 1997, the Company did not have any outstanding
foreign currency forward contracts related to intercompany foreign sales
transactions. At December 31, 1996, the Company had forward exchange contracts
to sell $8,500 in Canadian dollars maturing on February 28, 1997, for which the
Company has recognized a net gain of $40 as a component of cost of sales.
At December 31, 1997, the Company did not have any outstanding option
contracts. At December 31, 1996, the Company had outstanding option contracts
for the sale of Japanese yen at fixed exchange rates totaling $20,038 for
specified periods of time which expired during 1997. Net unrealized gains
deferred at December 31, 1996 were $653.
With respect to intercompany accounts receivable and payable, at December
31, 1997, the Company had foreign currency forward contracts to sell $1,580 in
foreign currencies, which contracts matured in February 1998, and had deferred a
net gain of $128. At December 31, 1996, the Company had foreign currency
forward contracts to sell $26,623 and to buy $3,898 in foreign currencies, which
contracts matured at various dates in 1997, and had deferred a net gain of $185.
At December 31, 1997, $25,000 of the Company's outstanding long-term debt
was subject to an interest rate swap agreement and $25,000 of the Company's
outstanding long-term debt was subject to an interest rate cap. Under the
interest rate swap agreement, the Company pays the counterparty interest at a
fixed rate of 6.115%, and the counterparty pays the Company interest at a
variable rate equal to the three month LIBOR for a seven-year period commencing
January 2, 1996. The agreement is with a major financial institution which is
expected to fully perform under the terms of the agreement, thereby mitigating
the credit risk from the transaction. The interest rate cap agreement entitles
the Company to receive from a major financial institution the amount, if any, by
which the Company's interest payments on $25,000 of its variable rate debt
exceed 7.35%. The $509 premium paid for this interest rate cap agreement is
included in other assets and was amortized to interest expense over the
three-year term of the cap, which commenced January 3, 1995.
11. INCOME TAXES
The Company is included in the consolidated federal income tax return of
Mafco and certain state tax returns of Mafco or its affiliates. For all periods
presented, federal and state income taxes are provided as if the Company filed
its own income tax returns. The accompanying consolidated balance sheet
includes approximately
F-19
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
$14,860 and $21,661 of federal and state income taxes receivable from
affiliates at December 31, 1997 and 1996, respectively.
For financial reporting purposes, (loss) earnings before income taxes,
minority interest and extraordinary item include the following components:
<TABLE>
Year Ended December 31,
------------------------------------
1997 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
(Loss) earnings before income taxes, minority
interest and extraordinary item:
Domestic.................................. $ (14,129) $ (29,532) $ 78,980
Foreign................................... 7,752 (20,769) (14,434)
---------- ----------- ----------
$ (6,377) $ (50,301) $ 64,546
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
Significant components of the provision for income tax (benefit) expense
were as follow:
<TABLE>
Year Ended December 31,
------------------------------------
1997 1996 1995
---------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal........................... $ (11,045) $ (709) $ 18,415
State............................. -- (334) 3,825
Foreign........................... 1,485 3,454 3,853
---------- ----------- ----------
Total current................. (9,560) 2,411 26,093
---------- ----------- ----------
Deferred:
Federal........................... 7,851 (10,686) (3,104)
State............................. (1,493) (2,178) (725)
Foreign........................... (2,025) (474) 2,215
---------- ----------- ----------
Total deferred................ 4,333 (13,338) (1,614)
---------- ----------- ----------
$ (5,227) $ (10,927) $ 24,479
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
The effective tax rate on (loss) earnings before income taxes, minority
interest and extraordinary item varies from the current statutory federal
income tax rate as follows:
<TABLE>
Year Ended December 31,
---------------------------
1997 1996 1995
------- ------- -----
<S> <C> <C> <C>
(Benefit) provision at statutory rate.. (35.0)% (35.0)% 35.0%
State taxes, net....................... (15.2) (4.6) 2.5
Nondeductible amortization............. 37.1 5.0 2.9
Foreign operations..................... (66.4) 4.3 (0.1)
Change in tax rates.................... (20.8) -- --
Valuation allowance.................... 37.0 7.0 --
Puerto Rico operations................. (12.9) 0.4 (2.6)
Other, net............................. (5.8) 1.2 0.2
------- ------- -----
Effective tax rate (benefit) provision. (82.0)% (21.7)% 37.9%
------- ------- -----
------- ------- -----
</TABLE>
F-20
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
December 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Postretirement benefits other than pensions..... $ 12,964 $ 12,370
Reserves for self-insurance and warranty costs.. 4,898 6,678
Pension liabilities............................. 7,377 8,828
Inventory....................................... 6,626 8,245
Net operating loss carryforwards................ 56,739 47,013
Other, net...................................... 12,728 24,026
---------- ----------
Total deferred tax assets.................... 101,332 107,160
Valuation allowance............................. (39,990) (39,639)
---------- ----------
Net deferred tax assets.................. 61,342 67,521
---------- ----------
---------- ----------
Deferred tax liabilities:
Depreciation.................................... 19,872 18,248
Other, net...................................... 10,676 7,675
---------- ----------
Total deferred tax liabilities.............. 30,548 25,923
---------- ----------
Net deferred tax assets.................. $ 30,794 $ 41,598
---------- ----------
---------- ----------
</TABLE>
The deferred tax account balance at December 31, 1997 differs from the
account balance at December 31, 1996 due primarily to the 1997 deferred tax
provision, the tax effects of the foreign exchange gain recorded as a component
of stockholder's equity, the tax effects of adjustments related to the
finalization of the purchase accounting related to the acquisition of Camping
Gaz, and the deferred tax asset recorded related to the acquisition in 1997 of
inactive companies which were recorded as a capital contribution (see Note 12).
During 1997, the Company increased the valuation allowance related to
certain foreign deferred tax assets due to uncertainties over realization. At
December 31, 1997, the Company had net operating loss carryforwards ("NOL's") of
approximately $107,229 for certain foreign income tax purposes. These NOL's
expire beginning in 1998.
The Company has not provided for taxes on undistributed foreign earnings
of approximately $20,860 at December 31, 1997, as the Company intends to
permanently reinvest these earnings in the future growth of the business.
Determination of the amount of unrecognized deferred U.S. income tax liability
is not practicable because of the complexities associated with its hypothetical
calculation.
12. RELATED PARTY TRANSACTIONS
CAPITAL CONTRIBUTIONS:
As of March 31, 1997, the Company purchased an inactive subsidiary
from an affiliate for net cash consideration of $1,031, including transaction
costs. The Company expects to realize certain foreign tax benefits
F-21
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
from this transaction in future years. Under certain circumstances, a
portion of these tax benefits will be payable to the affiliate to the extent
such tax benefits are realized by the Company. During the fourth quarter of
1997, the Company purchased an inactive subsidiary from an affiliate in a
transaction in which the Company expects to realize certain foreign tax
benefits in future years and for which the Company agreed to pay 50% of those
realized benefits to the affiliate. The Company has recorded a liability to
the affiliate in the amount of $219 which represents 50% of the estimated
amount of future tax benefits. The Company has accounted for these
transactions in a manner similar to a pooling-of-interests due to the Mafco
Holdings Inc. common control over each of the parties involved in the
transactions. The $2,799 excess value of estimated realizable tax benefits
acquired over the total acquisition costs have been accounted for as a
capital contribution.
INSURANCE PROGRAMS:
The Company participates in certain of Holdings' insurance programs,
including health and life insurance, workers compensation, and liability
insurance. The Company's expense represents its expected costs for self-insured
retentions and premiums for excess coverage insurance. The expense was $13,339,
$13,923 and $9,875 for the years ended December 31, 1997, 1996 and 1995,
respectively.
SERVICES AGREEMENT:
From time to time, Coleman purchases, at negotiated rates, specialized
accounting and other services provided by an affiliate. Coleman also provides,
at negotiated rates, services to an affiliate. The net expense for such
services was $394 during 1997 and was immaterial in prior years.
MANAGEMENT AGREEMENT:
The Company provided management services to certain affiliates
pursuant to a management agreement through June 30, 1995. The consolidated
financial statements reflect the management fees as a reduction in selling,
general and administration expenses. For the year ended December 31, 1995,
management fees earned by the Company were $2,400.
LICENSING AGREEMENT:
During 1997, the Company engaged an affiliate of MacAndrews & Forbes
to provide licensing services. The Company recorded expenses of $650 related to
these services in 1997.
OTHER:
In 1996, the Company entered into an agreement with an affiliate in
which the Company realized approximately $1,800 of net tax benefits associated
with certain foreign tax net operating loss carryforwards that had not
previously been recognized.
The Company purchases and sells products from and to certain
affiliates. These amounts are not, in the aggregate, material.
The Company subleases six thousand square feet of office space in New
York City from an affiliate pursuant to a month-to-month occupancy memorandum
(the "Lease") entered into during 1997. The rent paid by the Company during the
year ended December 31, 1997 pursuant to the Lease was $158.
F-22
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
During 1997, Coleman used an airplane owned by a corporation of
which a director of Coleman is a stockholder, for which Coleman paid
approximately $158.
13. EMPLOYEE BENEFIT PLANS
PENSION PLANS:
Holdings maintains pension and other retirement plans in various
forms covering employees of the Company who meet eligibility requirements.
The U.S. salaried retirement plan is a non-contributory defined benefit plan
and provides benefits based on a formula of each participant's final average
pay and years of service. The U.S. hourly pension plan is a non-contributory
defined benefit plan and contains a flat benefit formula. The salaried and
hourly plans provide reduced benefits for early retirement and the salaried
plan takes into account offsets for Social Security benefits. The Company's
policy is to contribute annually the minimum amount required pursuant to the
Employee Retirement Income Security Act, as amended. Under certain
circumstances, the Company may make additional contributions to the pension
plans up to the maximum deductible amounts for income tax purposes.
Holdings also has an unfunded excess benefit plan covering certain
of the Company's U.S. employees whose benefits under the plans described
above are limited by provisions of the Internal Revenue Code. The following
table reconciles the funded status of the pension plans with the amount
recognized in the Company's consolidated balance sheets as of the dates
indicated:
<TABLE>
December 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested
benefits of $24,296 and $18,686...................... $(27,843) $(21,933)
-------- --------
-------- --------
Projected benefit obligation for service
rendered to date..................................... $(43,246) $(37,092)
Plan assets at fair value................................ 23,102 16,197
-------- --------
Projected benefit obligation in excess of plan assets.... (20,144) (20,895)
Unrecognized prior service cost.......................... 130 50
Unrecognized net loss.................................... 6,259 7,999
-------- --------
Accrued pension cost..................................... (13,755) (12,846)
Amount reflected as an intangible asset.................. (143) (288)
Amount reflected as minimum pension liability adjustment. (1,526) (470)
-------- --------
Amount reflected as pension liability.................... $(15,424) $(13,604)
-------- --------
-------- --------
</TABLE>
The weighted-average discount rate used in determining the
actuarial present value of the projected benefit obligation was 7.5% as of
December 31, 1997 and 1996. The rate of increase in future compensation
levels reflected in such determination was 5% as of December 31, 1997 and
1996. The expected long-term rate of return on assets was 9% as of December
31, 1997, 1996 and 1995. Plan assets consist primarily of common stock,
mutual funds and fixed income securities stated at fair market value, and
cash equivalents stated at cost, which approximates fair market value.
Unrecognized items are being recognized over the estimated remaining service
lives of active employees.
F-23
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Net pension expense includes the following components:
<TABLE>
Year Ended December 31,
------------------------------
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Service cost-benefits attributed to
service during the year.............. $3,081 $ 3,098 $ 2,125
Interest cost on projected
benefit obligation................... 2,813 2,442 2,004
Curtailment loss....................... 972 -- --
Actual return on plan assets........... (2,908) (1,490) (1,347)
Net amortization and deferrals......... 1,537 844 834
------ ------- -------
Net pension expense.................. $5,495 $ 4,894 $ 3,616
------ ------- -------
------ ------- -------
</TABLE>
Net pension expense for the year ended December 31, 1997 includes
$972 of curtailment loss associated with certain executive officer changes
during the year.
SAVINGS PLAN:
Holdings maintains an employee savings plan under Section 401(k) of
the Internal Revenue Code. This plan covers substantially all of the
Company's full-time U.S. employees and allows employees to contribute up to
10% of their salary to the plan. The Company matches, at a 34% rate,
employee contributions of up to 6% of their salary. Amounts charged to
expense for matching contributions were $1,401, $1,314, and $1,165 for the
years ended December 31, 1997, 1996 and 1995, respectively.
RETIREE HEALTH CARE AND LIFE INSURANCE:
The Company, through Holdings, provides certain unfunded health and
life insurance benefits for certain retired employees. Approximately 55% of
the Company's U.S. employees may become eligible for these benefits if they
reach retirement age while working for the Company.
The following table reconciles the funded status of the Company's
allocable portion of Holdings' postretirement benefit plans with the amount
recognized in the Company's consolidated balance sheets as of the dates
indicated:
<TABLE>
December 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................ $ (6,852) $ (6,682)
Fully eligible active plan participants............. (3,308) (3,015)
Other active plan participants...................... (10,322) (10,664)
-------- --------
Total accumulated postretirement benefit obligation... (20,482) (20,361)
Unrecognized transition benefit....................... (3,707) (3,973)
Unrecognized prior service cost....................... (404) (492)
Unrecognized net gain................................. (2,415) (976)
-------- --------
Net postretirement benefit liability.................. $(27,008) $(25,802)
-------- --------
-------- --------
</TABLE>
F-24
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Net periodic postretirement benefit expense includes the following
components:
<TABLE>
Year Ended December 31,
-------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost-benefits attributed to service
during the year.............................. $ 927 $1,044 $ 756
Interest cost on accumulated postretirement
benefit obligation........................... 1,453 1,454 1,352
Amortization of transition benefit
and other net gains.......................... (358) (354) (455)
------ ------ ------
Net periodic postretirement benefit expense.... $2,022 $2,144 $1,653
------ ------ ------
------ ------ ------
</TABLE>
The discount rate used in determining the accumulated
postretirement benefit obligation ("APBO") was 7.5% as of December 31, 1997
and 1996. At December 31, 1997, the assumed health care cost trend rate used
in measuring the APBO was 7.5% starting in 1998 then gradually decreasing to
5% by the year 2003 and remaining at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amount of the
obligation and periodic benefit expense reported. An increase in the assumed
health care cost trend rates by 1% in each year would increase the APBO as of
December 31, 1997 by approximately 19% and the service and interest cost
components of net periodic postretirement benefit expense by approximately
22%.
STOCK OPTION PLANS:
The Company adopted The Coleman Company, Inc. 1992 Stock Option
Plan (the "1992 Stock Option Plan") in 1992. During 1993, the shareholders
approved the 1993 Stock Option Plan (the "1993 Stock Option Plan") and during
1996, the shareholders approved The Coleman Company, Inc. 1996 Stock Option
Plan (the "1996 Stock Option Plan"). Under the terms of the 1992 Stock
Option Plan, the 1993 Stock Option Plan and the 1996 Stock Option Plan
(collectively the "Stock Option Plans"), incentive stock options ("ISOs"),
non-qualified stock options ("NQSOs") and stock appreciation rights may be
granted to key employees of the Company and any of its affiliates from time
to time. Stock options have been granted under the Stock Option Plans with
vesting terms and maximum terms of approximately five years and ten years,
respectively. The aggregate number of shares of common stock as to which
options and rights may be granted under the Stock Option Plans may not exceed
4,700,000.
F-25
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
The following table summarizes the stock option transactions under
the Stock Option Plans:
<TABLE>
1997 1996 1995
--------------------------- --------------------------- ---------------------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Price Options Exercise Price Options Exercise Price
----------- -------------- --------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding - January 1, 3,017,630 $15.84 2,572,930 $15.25 2,310,888 $14.03
Granted:
at market price......... 2,081,000 14.77 294,000 19.73 637,000 17.89
above market price...... 75,000 15.00 381,000 15.00 - -
Exercised................. (220,750) 11.42 (154,890) 12.17 (325,748) 12.09
Forfeited................. (1,605,330) 16.49 (75,410) 14.19 (49,210) 13.14
----------- --------- ----------
Outstanding - December 31,.. 3,347,550 15.14 3,017,630 15.84 2,572,930 15.25
----------- --------- ----------
----------- --------- ----------
Exercisable - December 31,.. 927,000 14.02 513,440 13.25 413,526 12.84
----------- --------- ----------
----------- --------- ----------
Weighted-average fair value
of options granted during
the year:
at market price......... $ 7.43 $ 6.62 $ 7.13
----------- --------- ----------
----------- --------- ----------
above market price...... $ 5.28 $ 3.21 $ --
----------- --------- ----------
----------- --------- ----------
</TABLE>
The following table summarizes information concerning currently
outstanding and exercisable options at December 31, 1997:
<TABLE>
Options Outstanding Options Exercisable
- -------------------------------------------------------------- -----------------------------
Range Weighted-Average
of Exercise Number Remaining Weighted-Average Number Weighted-Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- ------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$12.25-$13.82 543,030 5.26 years $12.96 425,230 $12.79
$13.83-$14.00 878,500 9.29 14.00 181,250 14.00
$14.01-$16.12 806,520 6.66 15.38 226,020 15.24
$16.13-$20.38 1,119,500 9.20 16.92 94,500 16.67
--------- -------
$12.25-$20.38 3,347,550 7.97 15.14 927,000 14.02
--------- -------
--------- -------
</TABLE>
As described in Note 1, the Company follows APB Opinion No. 25 in
accounting for stock compensation arrangements. Pro forma financial
information regarding net income and earnings per share has been determined
as if the Company had accounted for its employee stock options under the fair
value method of SFAS No. 123. The fair value of ISOs and NQSOs granted during
1997, 1996 and 1995 were estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rates of 6.53%, 6.11% and 5.91% for 1997,
1996 and 1995, respectively, dividend yield of 0.0%, volatility of the
expected market price of the Company's common stock of 31.3%, 20.2% and 30.8%
for 1997, 1996 and 1995, respectively, and a weighted-average expected life
of the option of 7.7, 5.5 and 5.5 years for 1997, 1996 and 1995, respectively.
F-26
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
SFAS No. 123 requires the use of option valuation models, one of which
is the Black-Scholes model, that were not developed for use valuing ISOs or
NQSOs. Further, these option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. In
management's opinion, based on the above, the existing models do not necessarily
provide a reliable single measure of the fair value of its ISOs or NQSOs.
The following summarized, unaudited pro forma results of operations
assume the estimated fair value of the ISOs and NQSOs granted during the years
ended December 31, 1997, 1996 and 1995 is amortized to expense over the ISOs'
and NQSOs' vesting period. SFAS No. 123 does not require disclosure of the
effect of any grants of stock based compensation prior to 1995 and, therefore,
the pro forma effect of SFAS No. 123 on net earnings is not representative of
the pro forma effect on net earnings in future years.
<TABLE>
Year Ended December 31,
------------------------------
1997 1996 1995
-------- --------- -------
<S> <C> <C> <C>
Pro forma net (loss) earnings......... $(6,069) $(42,760) $39,009
Pro forma basic net (loss) earnings
per common share.................... (0.11) (0.80) 0.73
Pro forma diluted net (loss) earnings
per common share.................... (0.11) (0.80) 0.73
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
LEASES:
The Company leases manufacturing, administrative and sales facilities
and various types of equipment under operating lease agreements expiring through
2007. Rental expense was $15,620, $14,164, and $11,526 for the years ended
December 31, 1997, 1996 and 1995, respectively. Minimum rental commitments
under all noncancellable operating leases with remaining lease terms in excess
of one year from December 31, 1997, aggregated $31,506; such commitments for
each of the five years subsequent to December 31, 1997 are $7,571, $6,683,
$4,622, $2,848, and $3,560, respectively, and $6,222 thereafter.
The Company leases its former corporate office building in Denver,
Colorado under agreements which give the Company the right, subject to certain
qualifications, to renew or terminate the lease, or purchase the property. Upon
termination, the Company has guaranteed the lessor certain residual values.
ENVIRONMENTAL MATTERS:
GILBERT AND MOSLEY SITE. As a result of investigations undertaken in
1986, the Kansas Department of Health and Environment ("KDHE") discovered that
groundwater in the downtown Wichita area (the "Gilbert and Mosley Site") was
contaminated with volatile organic chemicals ("VOCs"). Coleman occupied a
facility within the boundaries of the Gilbert and Mosley Site. Subsequent
investigations in the area, including investigations in November 1988 by
Coleman, indicated the groundwater beneath the Coleman property is contaminated
with VOCs. Coleman is in the process of remediating the contamination on its
property.
The City of Wichita has entered into a voluntary agreement with KDHE
in which the City agreed to investigate and then remediate contamination in the
Gilbert and Mosley Site. Coleman has entered into an
F-27
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
agreement with KDHE in which Coleman agreed to perform a similar study for
the Coleman property and to implement remedial activities at its property.
In addition, Coleman entered into an agreement with the City of Wichita in
which Coleman agreed to fund its proportionate share of the City's study and
remediation of the Gilbert and Mosley site.
MAIZE SITE. Coleman has undertaken a soil and groundwater
investigation at its facility in Maize, Kansas (the "Maize Site"). Results
indicate that limited VOC contamination is present in the groundwater under and
to the southeast of the facility. The data has been reported to the KDHE, and
Coleman has entered into an agreement with KDHE to implement appropriate
remedial actions. The remediation system has been installed, and Coleman is in
the process of remediating the contaminated groundwater.
NORTHEAST SITE. In 1990, Coleman undertook a soil and groundwater
investigation of its facility in northeast Wichita (the "Northeast Site").
Results indicated the presence of VOCs in the groundwater and soils. Although
some of the contamination may be a result of Coleman's operations at the
facility, the data also indicated that contamination was migrating onto the
Coleman property from up gradient sources. Coleman reported the initial results
of its study to KDHE. Coleman has also provided copies of all data to the
United States Environmental Protection Agency (the "EPA"), at its request. The
EPA has not initiated any actions against the Company with respect to the
Northeast Site. An agreement has been entered into with KDHE to undertake
additional investigatory activities, and an interim remediation system has been
installed.
The Company has not been named as a potentially responsible party
("PRP") by the EPA nor does it have joint and several liability with any other
PRP for remediation at any of the above sites.
The Company has adopted an environmental policy designed to ensure the
Company operates in full compliance with applicable environmental regulations
and, where appropriate, the Company's own internal standards. Coleman has also
undertaken an environmental compliance audit program. The Company makes
expenditures it believes are necessary to comply with environmental management
practices. Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate and were not significant in 1997 and are
not expected to be significant in the foreseeable future. The Company accrues
for losses associated with environmental remediation obligations when such
losses are probable and reasonably estimable. Accruals for estimated losses from
environmental remediation obligations generally are recognized no later than
completion of the remedial feasibility study. Such accruals are adjusted as
further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are not discounted to
their present value. Recoveries of environmental remediation costs from other
parties are recognized as assets when their receipt is deemed probable.
While it is possible the Company reserves may change in the near term,
the Company believes the reserves established for environmental matters are
adequate. This belief is based on results of environmental investigations of
the groundwater and soils at the manufacturing facilities operated by Coleman
conducted by independent consultants specializing in environmental
investigations and remediation and estimates provided by such independent
consultants, together with estimates provided by Coleman's environmental
engineering staff.
OTHER:
The Company and Holdings are involved in various claims and legal
actions arising in the ordinary course of business. The Company believes the
ultimate disposition of these matters is not expected to have a material adverse
effect on the Company's consolidated financial condition or results of
operations. The Company has
F-28
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
entered into a cross-indemnification agreement with Holdings pursuant to
which it will indemnify Holdings against all liabilities related to
businesses transferred to the Company by Holdings, and Holdings will
indemnify the Company against all liabilities of Holdings other than
liabilities related to the businesses transferred to the Company.
The Company is party to a license agreement which requires payments
of minimum guaranteed royalties aggregating to $11,778 at December 31, 1997;
such commitments for each of the five years remaining under the agreement
subsequent to December 31, 1997 are $1,040, $1,745, $2,434, $3,010, and $3,549,
respectively.
15. SIGNIFICANT CUSTOMERS
The Company's U.S. and Canadian operations have one significant customer
which accounted for approximately 13%, 15%, and 19% of net revenues in the years
ended December 31, 1997, 1996 and 1995, respectively.
16. CASH FLOW REPORTING
The Company uses the indirect method to report cash flows from operating
activities. Interest paid was $42,217, $37,608, and $23,976 and net income taxes
(refunded) paid were $(16,138), $7,041, and $12,246 for the years ended December
31, 1997, 1996 and 1995, respectively. Certain non-cash transactions relating
to acquisitions and the issuance of long-term debt have been reported in Notes 2
and 9.
17. PREFERRED STOCK
The Company has authorized 20,000,000 shares of preferred stock, par value
$0.01 per share. The Company's Certificate of Incorporation authorizes the Board
of Directors to provide for the issuance of a series of preferred stock, to
establish the number of shares of each such series and to fix the designation,
powers, preferences and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof.
18. GEOGRAPHIC SEGMENTS
The Company designs, manufactures and markets a wide variety of multiuse
products and accessories, which are primarily marketed through independent
retail markets, for the outdoor recreation and hardware consumers. The Company
is a leading manufacturer and marketer of brand name consumer products for the
camping and related outdoor recreation markets in the United States, Canada,
Europe, and Japan.
Operating profit, as indicated below, represents net revenues less
operating expenses and amortization of goodwill. Generally, sales between
geographic areas are made at cost plus a share of operating profit. Identifiable
assets are those used by each geographic segment. Corporate assets are
principally cash, certain property and equipment, income tax refunds receivable
- - affiliate, and deferred charges.
F-29
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Information related to the Company's geographic segments is as follows:
<TABLE>
Year Ended December 31,
----------------------------------
1997 1996 1995
---------- ---------- --------
<S> <C> <C> <C>
Net revenues:
Domestic - U.S.................................. $ 855,365 $ 916,260 $716,018
- Export............................... 78,120 91,125 90,434
Europe.......................................... 217,863 168,780 52,233
Other foreign................................... 167,119 219,350 169,836
Eliminations.................................... (164,173) (175,299) (94,947)
---------- ---------- --------
$1,154,294 $1,220,216 $933,574
---------- ---------- --------
---------- ---------- --------
Operating profit:
Domestic (a).................................... $ 34,754 $ 19,915 $120,915
Europe (b)...................................... 1,299 (17,505) (3,241)
Other foreign (c)............................... 26,384 4,027 (10,540)
---------- ---------- --------
62,437 6,437 107,134
Corporate expenses (d).......................... (27,962) (18,011) (18,043)
Interest expense................................ (40,852) (38,727) (24,545)
---------- ---------- --------
(Loss) earnings before income taxes, minority
interest and extraordinary item.................. $ (6,377) $ (50,301) $ 64,546
---------- ---------- --------
---------- ---------- --------
Identifiable assets:
Domestic........................................ $ 681,325 $ 782,373 $696,681
Europe.......................................... 216,816 247,412 70,478
Other foreign................................... 91,192 83,033 59,107
Corporate....................................... 52,431 47,268 18,221
---------- ---------- --------
$1,041,764 $1,160,086 $844,487
---------- ---------- --------
---------- ---------- --------
</TABLE>
- ---------------
(a) Includes restructuring and other charges of $21,025 in 1997 and $49,257
in 1996.
(b) Includes restructuring and other charges of $114 in 1997 and $20,002
in 1996.
(c) Includes restructuring and other charges of $4,151 in 1997 and $4,941
in 1996; and $12,289 of asset impairment charges in 1995.
(d) Includes restructuring and other charges of $11,129 in 1997.
F-30
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
19. QUARTERLY FINANCIAL SUMMARIES (UNAUDITED)
Summarized quarterly financial data for 1997 and 1996 are as follow:
<TABLE>
Quarter Ended
---------------------------------------------------
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
1997
- ----
Net revenues........................ $295,464 $383,514 $252,434 $222,882
Gross profit (a).................... 81,042 101,913 69,867 61,141
Net earnings (loss) (a)............. 699 10,119 (8,077) (5,277)
Basic earnings (loss) per share..... $ 0.01 $ 0.19 $ (0.15) $ (0.10)
1996
- ----
Net revenues........................ $273,560 $452,654 $269,607 $224,395
Gross profit (a).................... 80,966 137,538 39,894 33,321
Earnings (loss) before
extraordinary item (a)............. 15,039 28,046 (48,458) (35,873)
Net earnings (loss) (a)............. 15,039 27,399 (48,458) (35,873)
Basic earnings (loss) per share:
Earnings (loss) before
extraordinary item............... $ 0.28 $ 0.53 $ (0.91) $ (0.67)
Net earnings (loss)............... 0.28 0.52 (0.91) (0.67)
- --------------
(a) Includes restructuring and other charges (credits) as follows:
1997
----
Gross profit................... $ (425) $ 11,402 $ 9,010 $ (314)
Net earnings................... 2,435 11,547 9,433 (914)
1996
----
Gross profit.................. -- -- 33,567 10,438
Earnings before
extraordinary item........... -- -- 44,495 8,021
Net earnings.................. -- -- 44,495 8,021
</TABLE>
20. SUBSEQUENT EVENT (UNAUDITED)
On February 27, 1998, CLN Holdings and Coleman (Parent) Holdings Inc.,
the parent company of CLN Holdings, entered into an Agreement and Plan of Merger
(the "CLN Holdings Merger Agreement") with Sunbeam Corporation ("Sunbeam") and a
wholly-owned subsidiary of Sunbeam ("Laser Merger Sub"). The CLN Holdings
Merger Agreement provides that, among other things, Laser Merger Sub will be
merged (the "CLN Holdings Merger") with CLN Holdings. Pursuant to the CLN
Holdings Merger Agreement, the shares of CLN Holdings' common stock issued and
outstanding immediately prior to the effective time of the CLN Holdings Merger
will be converted into the right to receive in the aggregate 14,099,749 shares
of Sunbeam's common stock and $159,957 in cash, without interest. In addition,
the outstanding debt of CLN Holdings will remain an obligation of CLN Holdings
following the CLN Holdings Merger.
F-31
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
(IN THOUSANDS, EXCEPT SHARE DATA)
Coincident with the execution of the CLN Holdings Merger Agreement, the
Company, Sunbeam and a wholly-owned subsidiary of Sunbeam ("Merger Sub"),
entered into an Agreement and Plan of Merger (the "Coleman Merger Agreement"
and with the CLN Holdings Merger Agreement, collectively the "Merger
Agreements"), providing that, among other things, Merger Sub will be merged
(the "Coleman Merger") with the Company. Pursuant to the Coleman Merger
Agreement, each share of the Company's common stock issued and outstanding
immediately prior to the effective time of the Coleman Merger (other than
shares held by Coleman Worldwide and dissenting shares, if any) will be
converted into the right to receive (a) 0.5677 of a share of Sunbeam common
stock, with cash paid in lieu of fractional shares, and (b) $6.44 in cash,
without interest.
Following consummation of the CLN Holdings Merger, CLN Holdings will
be a direct wholly-owned subsidiary of Sunbeam. Following consummation of the
Coleman Merger, the Company will be an indirect wholly-owned subsidiary of
Sunbeam.
The CLN Holdings Merger is subject to the expiration of antitrust
waiting periods and certain other customary conditions. The Coleman Merger
Agreement is subject to consummation of the CLN Holdings Merger. These
transactions will constitute a change in control as defined in the Company
Credit Agreement. Per the terms of the Merger Agreements, certain arrangements
with related parties may be altered or terminated. In addition, outstanding,
unvested Company stock options immediately vest upon consummation of the CLN
Holdings Merger.
F-32
<PAGE>
THE COLEMAN COMPANY, INC.
EXECUTIVE SEVERANCE POLICY
Effective Date: February 27, 1998
I. POLICY
It is the intent of this Policy to provide guidelines for the granting of
severance pay and certain other benefits to certain Participants separated
from the The Coleman Company, Inc. (the "Company") and its subsidiaries.
II. APPLICATION AND ELIGIBILITY
This Policy applies to certain terminations of employment of employees
of the Company and its subsidiaries who as of the Effective Date of
the Policy are participants in the Company's management incentive plan
or who are in the positions of country general managers/presidents and
above (the "Participants"). For purposes of this Policy, continued
employment by a Participant with any entity controlled by, controlling
or under common control with the Company (whether before or after a
Change of Control) shall be treated as employment and service with the
Company. This Policy supersedes any and all prior policies or
practices relating to severance pay for such Participants. The
acceptance of any severance pay or benefits under this Policy shall
constitute a waiver of any severance pay the Participant would have
been entitled to under any such superseded policies or practices.
III. ADMINISTRATION
A. EXCLUSIONS
Severance pay or other benefits will not be granted under any
circumstances to a Participant who leaves the Company under the
following circumstances:
1. Resignation without "Good Reason" (as defined below).
2. Retirement under the terms of the Company Retirement Plan, or any
other pension plan that might be provided by the Company (other
than a termination for "Good Reason").
3. Termination by the Company for "Cause" (as defined below).
For purposes of this Policy, with respect to any Participant, "Good
Reason" shall
1
<PAGE>
mean (i) the assignment to the Participant of any duties
inconsistent in any material respect with the Participant's
position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities
immediately before the Change of Control, or any other action
by the Company which results in a significant diminution in
such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by the Participant; (ii) any material reduction
in the Participant's annual base salary, opportunity to earn
annual bonuses, or other compensation or employee benefits,
other than as a result of an isolated and inadvertent action
not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Participant; (iii) the Company's requiring the Participant to
relocate his or her principal place of business to a location
which is more than 25 miles from his or her previous principal
place of business; (iv) any purported termination of this
Policy otherwise than as expressly permitted by this Policy;
or (v) any failure by the Company to comply with and satisfy
Section V of this Policy. For purposes of this Policy, any
good faith determination of "Good Reason" made by the
Participant shall be conclusive.
For purposes of this Policy, with respect to any Participant,
"Cause" shall mean (i) the willful and continued failure of
the Participant to perform substantially the Participant's
duties with the Company or one of its affiliates (other than
any such failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial
performance is delivered to the Participant which specifically
identifies the manner in which the Company believes that the
Participant has not substantially performed the Participant's
duties, (ii) the willful engaging by the Participant in
illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company, or (iii) the
Participant's conviction of, or plea of guilty or nolo
contendere to, a felony. For purposes of this definition, no
act or failure to act on the part of the Participant shall be
considered "willful" unless it is done, or omitted to be done,
by the Participant in bad faith or without reasonable belief
that the Participant's action or omission was in the best
interests of the Company. Any act or failure to act based
upon authority given pursuant to a resolution duly adopted by
the Board of Directors of the Company or upon the instructions
of the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be
done, by the Participant in good faith and in the best
interests of the Company.
Severance pay and benefits under this Policy are not granted
where following a Change of Control, the Company or the
acquiror in the Change of Control sells or otherwise disposes
of the business in which the Participant was employed, and the
buyer of the business agrees to continue the Policy as if it
was the Company and either (i) the Participant accepts
employment with the buyer of the business or (ii) the
Participant rejects an offer of employment by the buyer
involving compensation and benefits substantially equivalent,
taken as a whole, to the Participant's compensation
2
<PAGE>
and benefits with the Company, and an employment location within 25
miles from the Participant's previous principal place of business.
3. B. SEVERANCE PAY
The following schedule determines the number of months of severance
pay ("Severance Period") eligible Participants will receive if they
are terminated without Cause by the Company or terminate for Good
Reason during the 3-year period immediately following a Change of
Control, or are terminated by the Company without Cause prior to a
Change of Control, but following the execution of an agreement,
consummation of which would constitute a Change of Control, if a
Change of Control subsequently occurs (each, a "Severance
Termination").
EXECUTIVE SEVERANCE
GROUP PERIOD
--------- ---------
Group A 12 months
Group B 9 months
Group C 6 months
Group A Participants are Participants with a target incentive level at
50% of base salary and above under the Company's management incentive
plans; Group B Participants are Participants with a target incentive
level at 30% to 49% of base salary; and Group C Participants are other
participants in the Company's management incentive plans, and country
general managers, presidents and higher ranking executives.
For purposes of this Policy, a "Change of Control" of the Company
shall be deemed to occur if Ronald O. Perelman, individually, or his
estate, heirs, personal representatives or any trust created for the
benefit of his wife or children, or any corporation or other entity
which such persons control, directly or indirectly, cease to maintain
beneficial ownership (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended), individually or in the aggregate,
of securities of the Company sufficient to designate a majority of the
members of the Company's Board of Directors.
Eligible Participants will receive severance pay to which they are
entitled semi-monthly (or monthly) at their base rate of pay in effect
as of the date of employment termination (without giving effect to any
reduction in base salary that otherwise constitutes Good Reason under
this Policy).
Anything in this Policy to the contrary notwithstanding, in the event
it shall be determined that any payment, award, benefit or
distribution by the Company (or any of its affiliated entities) to or
for the benefit of Participant (whether pursuant to this
3
<PAGE>
Policy or otherwise, but determined without regard to any
additional payments required under this paragraph) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or any
corresponding provisions of state or local tax laws, or any
interest or penalties are incurred by the Participant with respect
to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as
the "Excise Tax"), then the Participant shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Participant of all taxes (including
any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Participant retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions, if it shall be
determined that the Participant is entitled to a Gross-Up Payment,
but that the portion of the Payments that would be treated as
"parachute payments" under Section 280G of the Code does not exceed
110% of the greatest amount (the "Safe Harbor Amount") that could
be paid to the Participant such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be
made to the Participant and the amounts payable under this Policy
shall be reduced so that the Payments, in the aggregate, are
reduced to the Safe Harbor Amount. For purposes of reducing the
Payments to the Safe Harbor Amount, only amounts payable under this
Policy (and no other Payments) shall be reduced. If the reduction
of the amounts payable under this Policy would not result in a
reduction of the Payments to the Safe Harbor Amount, no amounts
payable under this Policy shall be so reduced.
All determinations required to be made, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination,
shall be made by Ernst & Young which shall provide detailed supporting
calculations both to the Company and the Participant within 15
business days of the receipt of notice from the Participant an
anticipated Payment may give rise to Excise Tax, or such earlier time
as is requested by the Company. In the event that the Accounting Firm
is serving as accountant or auditor for the individual, entity or
group effecting the Change of Control, the Company shall appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses
of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, shall be paid by the Company to the Participant
within five days of the event giving rise to the Excise Tax. Any
determination by the Accounting Firm shall be binding upon the Company
and the Participant.
C. CONTINUATION OF MEDICAL/DENTAL BENEFITS
If a Participant has a Severance Termination, the Participant will be
permitted to continue participation in the Company's group medical
and/or dental benefit plans under COBRA at the contribution level in
effect for active Participants until the end
4
<PAGE>
of the Severance Period (or if longer, the maximum required period
for continuation coverage under applicable federal law, generally
18 months); PROVIDED, that the Company will continue to pay the
portion of the premiums it was paying prior to the Change of
Control during the Severance Period. However, the Participant will
cease to be eligible for these benefits when the Participant
becomes covered by medical or dental plans of another employer or
becomes eligible for Medicare. Continued participation in the
Company's group plans will be governed by the terms and conditions
of the plans as in effect when employment terminates, provided that
if such plans are amended as to the group of Participants in which
the Participant was included at the time of termination, the newer
provisions shall apply.
In order to remain eligible for continued medical or dental
benefits during the Severance Period, the Participant must
make timely premium payments in the same amount paid by then
current Participants, which amounts will be deducted from the
Participant's severance pay, and must submit such evidence of
non-coverage as the Company may reasonably require. If the
Participant is entitled and elects under applicable federal
law to continue such benefits under COBRA after the Severance
Period, the Participant must make timely COBRA premium
payments as required.
D. PRO RATA ANNUAL BONUS
In the event a Participant has a Severance Termination under
this Policy prior to December 31, 1998, the Participant shall
be paid a pro rata bonus payment under the Company management
incentive plan, upon the earlier of February 28, 1999 or the
date on which Company employees are paid bonuses for 1998
under such plan, equal to the product of (x) the bonus the
Participant would have earned under the management incentive
plan based upon performance had the Participant remained
employed through the plan year, and (y) a fraction, the
numerator of which is the number of days in such year through
the date of termination, and the denominator of which is 365.
E. PENSION CREDIT
In the event a Participant has a Severance Termination under
this Policy, the Company shall pay such Participant, within
fifteen days following the Participant's date of termination,
an amount equal to the excess of (a) the aggregate benefit
under the Company's qualified defined benefit retirement plans
(collectively, the "Retirement Plan") and any excess or
supplemental defined benefit retirement plans in which the
Participant participates (collectively, the "SERP") which the
Participant would have accrued (whether or not vested) if the
Participant's employment had continued for the Separation
Period, over (b) the actual vested benefit, if any, of the
Participant under the Retirement Plan and the SERP, determined
as of the date of termination (with the foregoing amounts to
be computed on an actuarial present value basis, using
actuarial assumptions no less favorable to the Participant
than the most favorable of those in effect for purposes of
computing benefit entitlements under the Retirement Plan and
the SERP at any time from the day before the Effective Date
through the date of
5
<PAGE>
termination).
F. OTHER EMPLOYEE BENEFITS
The provisions of other Participant benefit and/or
compensation programs (other than severance policies and
practices), including, but not limited to, vacation pay and
the Company's management incentive plan, with respect to
benefits available upon termination of employment will apply;
provided, that upon a Severance Termination the Participant
shall be paid out his or her accrued vacation. This Policy is
not intended to describe the provisions or administrative
practices of any other Participant benefit and/or compensation
program, policy or plan. Any benefits that may be available
under any other such program, policy or plan must be
determined solely in accordance with the terms and
administrative provisions of such program, policy or plan.
G. EMPLOYMENT CONTRACTS OR OTHER WRITTEN AGREEMENTS IN EFFECT
If on the date of termination an employment contract or other
written agreement between an eligible Participant and the
Company is in effect, then unless otherwise provided by the
terms of such written agreement the Participant will be
permitted to choose between (i) the severance pay and benefits
provided in such employment contract or agreement, or (ii) the
severance pay and benefits payable in accordance with this
Policy.
H. NO MITIGATION
The obligations of the Company to pay the severance benefits
under this Policy shall be absolute and unconditional and
shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company or any of its subsidiaries may
have against any Participant. In no event shall a Participant
be obligated to seek other employment or take any other action
by way of mitigation of the amounts payable to a Participant
under any of the provisions of this Plan, nor shall the amount
of any payment hereunder be reduced by any compensation earned
by a Participant as a result of employment by another
employer, except as specifically provided in this Policy. The
Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which a
Participant may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the
Participant or others as to the validity or enforceability of,
or liability or entitlement under, any provision of this
Policy.
IV. AMENDMENT OR TERMINATION OF POLICY
The Company reserves the right to amend, modify or terminate this
Policy or any portion of it at any time, and for any reason, by action
of the Company's Board of Directors (or officers expressly authorized
by the Board); provided, that this Policy may not be terminated or
amended in any manner that could adversely affect the rights of any
Participant (i) following
6
<PAGE>
a Change of Control, (ii) at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control, or
(iii) otherwise in connection with or in anticipation of a Change of
Control.
V. SUCCESSOR TO COMPANY
This Policy shall bind any successor of the Company, its assets or its
businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise), in the same manner and to the same extent
that the Company would be obligated under this Policy if no succession
had taken place.
In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Policy,
the Company shall require such successor expressly and unconditionally
to assume and agree to perform the Company's obligations under this
Policy, in the same manner and to the same extent that the Company
would be required to perform if no such succession had taken place.
The term "Company," as used in this Policy, shall mean the Company as
hereinbefore defined and any successor or assignee to the business or
assets which by reason hereof becomes bound by this Policy.
VI. OTHER IMPORTANT INFORMATION
A. SOURCE OF PLAN BENEFITS
This Plan is intended to be an unfunded plan maintained
primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated
employees, within the meaning of Section 401 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
All payments under this Policy will be made from the Company's
general assets. Benefits under this Policy are not insured
under Title IV of ERISA.
B. PROCEDURE FOR CLAIMING BENEFITS
Severance benefits are awarded in appropriate circumstances
without application. However, if a Participant believes that
he or she is entitled to severance benefits under this Policy
and such benefits are not awarded, the Participant must
present a written claim for such benefits to the Company as
the "Plan Administrator". If the Plan Administrator
determines that the claim should be denied, the Plan
Administrator must provide the Participant with notice of the
denial, written in clear and precise terms and giving specific
reasons for the denial within 30 days. Within 90 days after
the Participant is notified of the denial of his or her
application, the Participant also has the right to appeal to
the Plan Administrator for a full and fair review of any such
denial. The Participant also has the right to review any
relevant documents and to submit issues and comments in
writing to the Plan Administrator. If the Participant needs
more time, the Plan Administrator may allow the Participant
more than 90 days to file a request for review. The Plan
Administrator shall conduct a hearing and/or
7
<PAGE>
take such other steps as the Plan Administrator deems
appropriate for a full and fair review of the appeal from the
denial of a claim. The Plan Administrator will issue, within
60 days after the request for review is received, a written
decision which shall include specific reasons for the decision
and references to the pertinent plan provisions on which the
decision is based. This decision shall be written in a manner
calculated to be understood by the Participant. Nothing
herein shall prevent the Participant from contesting any
decision by the Plan Administrator in a court of appropriate
jurisdiction.
C. GOVERNING LAW
The validity, interpretation, construction and performance of
this Policy shall be governed by the laws of the State of
Delaware, without reference to principles of conflicts of law,
except to the extent pre-empted by federal law.
8
<PAGE>
September 22, 1997
Mr. Patrick McEvoy
c/o Coleman Safety and Security Products, Inc.
2820 Thatcher Road
Downers Grove, Illinois 60515
Dear Patrick:
The Coleman Company, Inc. ("Coleman") has determined at this time to
seek a buyer for, and to sell (a "Sale"), its interest in Coleman Safety and
Security Products, Inc. (the "CSS"), through a sale of CSS' capital stock,
all or substantially all of its assets or by other means. You have agreed to
assist and to provide support to Coleman in this regard. We greatly
appreciate your willingness to take on the additional challenge in assisting
in Coleman's efforts along with your ongoing job of continuing to manage the
CSS' success.
In consideration of your agreement to actively assist in bringing about
and concluding a Sale and your agreement to remain an active employee of CSS
in your current capacity through the conclusion of any such Sale and subject
to your performance of these agreements, Coleman will provide you with the
following additional benefits:
1. STAY BONUS
In order to induce you to continue the successful operations of CSS
through the closing of any Sale, Coleman will pay you a special bonus
(the "Special Bonus") equal to one years base salary at your current
level of salary within 15 days after the date of the closing of a Sale
("Closing Date"). In the event that, within 3 months of the closing
date of a Sale, Coleman terminates your employment with Coleman (other
than as a result of your acceptance of employment with a Buyer in a
Sale) such that you are entitled to receive payments pursuant to
Section 6(c) of your Employment Agreement, dated as of January 1, 1996,
as amended, with Coleman (the "Employment Agreement"), then the monthly
compensation continuation payments payable pursuant to Section 6(c)(3)
of the Employment Agreement shall, for the first year of such payments,
be reduced by 1/12 of the Special Bonus.
<PAGE>
2. STOCK OPTIONS
In the event that, within 3 months of the closing date of a Sale,
Coleman terminates your employment with Coleman or you terminate your
employment with Coleman as a result of your acceptance of employment
with a Buyer in a Sale, to the extent that you have stock options for
the purchase of Common Stock of Coleman ("Coleman Common Stock") the
exercise of which has not vested by the date of such termination of
your employment, such options will become vested at that time and you
will be entitled to exercise those options according to their terms for
90 days beginning with the first calendar day following the date of
such termination of your employment; PROVIDED, HOWEVER, that prior to
any such exercise you give Coleman three business days prior written
notice of any intended exercise and Coleman shall have the option to
purchase for cash any or all of those options which your notice
indicates you intend to exercise at a price equal to the difference
between (i) the closing price for the Coleman Company Stock on the New
York Stock Exchange on the intended day of exercise set forth in your
notice and (ii) the applicable exercise price. Coleman will notify you
no later than 10:30 a.m. New York time on the intended day of exercise
whether it will exercise its option and, if it so elects, the closing
of its purchase shall be completed within five business days of the
intended exercise day.
3. MISCELLANEOUS
This agreement will terminate on June 30, 1998 (unless a Sale has
previously occurred), provided that in the event you are terminated for
cause prior to June 30, 1998, this agreement shall terminate on the
date of such termination for cause. This agreement amends the
Employment Agreement.
For purposes of this Agreement, in no event shall a Sale include any
transaction with an affiliate (whether a natural person or a legal
entity) of Coleman or any transaction which is part of or consistent
with the conduct in the ordinary course of Coleman's or CSS' business.
This agreement is binding upon you and Coleman as well as to our
respective legal representatives and successors.
You shall keep the existence and the contents of this agreement, as
well as the fact that Coleman and CSS are contemplating a Sale and the
terms of any such Sale confidential and shall not disclose any of such
information to any other person. You hereby acknowledge that you are
aware that the United States securities laws prohibit any person who
has received from an issuer material, non-public information concerning
an issuer from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances
in which it is reasonably foreseeable that such person is likely to
purchase or sell such securities.
If you are in agreement with contents of this letter, kindly sign
the bottom of this letter in the space provided therefor, at which time
this letter will become the binding agreement of you and Coleman.
Very truly yours.
THE COLEMAN COMPANY, INC.
By: Jerry Levin
------------------------------
Jerry Levin
Chairman
By: Patrick McEvoy
-----------------------------
Patrick McEvoy
<PAGE>
THE COLEMAN COMPANY, INC.
EXECUTIVE ANNUAL INCENTIVE PLAN
i. PURPOSE.
The purpose of The Coleman Company, Inc. Executive Annual Incentive
Plan is to encourage behaviors that create superior financial performance and
to strengthen the commonality of interests between Plan Participants and
owners in creating superior shareholder value.
ii. DEFINITIONS.
The following terms, as used herein, shall have the following
meanings:
(i) "Award" shall mean an annual incentive
compensation award, granted pursuant to the Plan,
which is contingent upon the attainment of
Performance Factors with respect to a Performance
Period.
(ii) "Board" shall mean the Board of Directors of the
Company.
(iii) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(iv) "Committee" shall mean the Committee of the Board
appointed to administer the Plan in accordance
with Section 3.
(v) "Company" shall mean, collectively, the Coleman
Company, Inc. and its subsidiaries.
(vi) "Covered Employee" shall have the meaning set
forth in Section 162(m)(3) of the Code.
(vii) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(viii) "Executive Officer" shall mean an officer
<PAGE>
of the Company who is an "executive officer"
within the meaning of Rule 3b-7 promulgated
under the Exchange Act.
(ix) "Participant" shall mean an officer, employee or
other associate of the Company who is, pursuant to
Section 4 of the Plan, selected to participate
herein.
(x) "Performance Factors" shall mean the criteria and
objectives, determined by the Committee, which
must be met during the applicable Performance
Period as a condition of the Participant's receipt
of payment with respect to an Award. Performance
Factors may include any or all of the following:
revenue; net sales; operating income; earnings
before all or any of interest, taxes, depreciation
and/or amortization ("EBIT", "EBITA" or "EBITDA");
cash flow; working capital and components thereof;
return on equity; return on assets; market share;
sales (net or gross) measured by product line,
territory, customer(s), or other category;
earnings per share; earnings from continuing
operations; net worth; levels of expense, cost or
liability by category, operating unit or any other
delineation; or any increase or decrease of one or
more of the foregoing over a specified period.
Such Performance Factors may relate to the
performance of the Company, a business unit,
product line, territory, or any combination
thereof. With respect to Participants who are not
Executive Officers, Performance Factors may also
include such objective or subjective performance
goals as the Committee may, from time to time,
establish. Subject to Section 5(c) hereof, the
Committee shall have the sole discretion to
determine whether, or to what extent, Performance
Factors are achieved.
(xi) "Performance Period" shall mean the
<PAGE>
Company's fiscal year.
(xii) "Plan" shall mean The Coleman Company, Inc.
Executive Annual Incentive Plan.
iii. ADMINISTRATION.
The Plan shall be administered by the Management Compensation and
Stock Option Committee of the Board of Directors. The Committee shall have
the authority in its sole discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise
all the powers and authorities either specifically granted to it under the
Plan or necessary or advisable in the administration of the Plan, including,
without limitation, the authority to grant Awards; to determine the persons
to whom and the time or times at which Awards shall be granted; to determine
the terms, conditions, restrictions and performance criteria, including
Performance Factors, relating to any Award; to determine whether, to what
extent, and under what circumstances an Award may be settled, canceled,
forfeited, or surrendered; to make adjustments in the Performance Factors in
recognition of unusual or non-recurring events affecting the Company or the
financial statements of the Company, or in response to changes in applicable
laws, regulations, or accounting principles; to construe and interpret the
Plan and any Award; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of Awards; and to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
The Committee shall consist of two or more persons each of whom
shall be an "outside director" within the meaning of Section 162(m) of the
Code. All decisions, determinations and interpretations of the Committee
shall be final and binding on all persons, including the Company and the
Participant (or any person claiming any rights under the Plan from or through
any Participant).
No member of the Board or the Committee shall be liable for any
action taken or determination made in good faith with respect to the Plan or
any Award granted hereunder.
iv. ELIGIBILITY.
Awards may be granted to Participants in the sole discretion of the
Committee. Subject to Section 5(b) below, in determining the persons to whom
Awards shall be granted and the Performance Factors relating to each Award,
the Committee shall take into account such factors as the Committee shall
deem relevant in connection with accomplishing the purposes of the Plan.
v. TERMS OF AWARDS.
Awards granted pursuant to the Plan shall be communicated to
Participants in such form as the Committee shall from time to time approve
and the terms and conditions of such Awards shall be set forth therein.
<PAGE>
(i) IN GENERAL. The Committee shall specify with
respect to a Performance Period the Performance
Factors applicable to each Award. Performance
Factors may include a level of performance
below which no payment shall be made and levels
of performance at which specified percentages
of the Award shall be paid as well as a maximum
level of performance above which no additional
award will be paid. Unless otherwise provided
by the Committee in connection with specified
terminations of employment, payment in respect
of Awards shall be made only if and to the
extent the Performance Factors with respect to
such Performance Period are attained.
(ii) SPECIAL PROVISIONS REGARDING AWARDS.
Notwithstanding anything to the contrary
contained in this Section 5, in no event shall
payment in respect of Awards granted for a
Performance Period be made to a Participant in
an amount that exceeds $2,000,000 (two million)
and in no event may the Committee increase at
its discretion the amount of an Award payable
to a Covered Employee upon attainment of the
specified Performance Factors.
(iii) TIME AND FORM OF PAYMENT. Unless otherwise
determined by the Committee, all payments in
respect of Awards granted under this Plan shall
be made, in cash, within a reasonable period
after the end of the Performance Period. In
the case of Participants who are Covered
Employees, unless otherwise determined by the
Committee, such payments shall be made only
after achievement of the Performance Factors
has been certified by the Committee.
vi. GENERAL PROVISIONS.
(i) COMPLIANCE WITH LEGAL REQUIREMENTS. The Plan
and the granting and payment of Awards, and the
other obligations of the Company under the Plan
shall be subject to all applicable federal and
state laws, rules and regulations, and to such
approvals by any regulatory or governmental
<PAGE>
agency as may be required.
(ii) NONTRANSFERABILITY. Awards shall not be
transferable by a Participant except upon the
Participant's death following the end of the
Performance Period but prior to the date
payment is made, in which case the Award shall
be transferable by will or the laws of descent
and distribution.
(iii) NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in the
Plan or in any Award granted pursuant hereto
shall confer upon any Participant the right to
continue in the employ of the Company or to be
entitled to any remuneration or benefits not set
forth in the Plan or to interfere with or limit
in any way the right of the Company to terminate
such Participant's employment.
(iv) WITHHOLDING TAXES. Where a Participant or
other person is entitled to receive a payment
pursuant to an Award hereunder, the Company
shall have the right to require the Participant
or such other person to pay to the Company the
amount of any taxes that the Company may be
required to withhold before delivery to such
Participant or other person of such payment.
(v) AMENDMENT, TERMINATION AND DURATION OF THE PLAN.
The Board or the Committee may at any time and from
time to time alter, amend, suspend, or
terminate the Plan in whole or in part;
PROVIDED THAT, no amendment that requires
shareholder approval in order for the Plan to
continue to comply with Code Section 162(m)
shall be effective unless the same shall be
approved by the requisite vote of the
shareholders of the Company. Notwithstanding
the foregoing, no amendment shall affect
adversely any of the rights of any Participant
under any Award following the end of the
Performance Period to which such Award relates.
(vi) PARTICIPANT RIGHTS. No Participant shall have
any claim to be granted any Award under the Plan,
and
<PAGE>
there is no obligation for uniformity of treatment
for Participants.
(vii) TERMINATION OF EMPLOYMENT. Unless otherwise
provided by the Committee in connection with
specified terminations of employment, if a
Participant's employment terminates for any reason
prior to the end of a Performance Period, no Award
shall be payable to such Participant for that
Performance Period. A Participant who is
terminated for gross misconduct after the end of
the Performance Period shall forfeit participation
in the Plan, and no Award shall be payable to such
a Participant.
(viii) UNFUNDED STATUS OF AWARDS. The Plan is intended
to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any
payments not yet made to a Participant pursuant to
an Award, nothing contained in the Plan or any
Award shall give any such Participant any rights
that are greater than those of a general creditor
of the Company.
(ix) GOVERNING LAW. The Plan and all determinations
made and actions taken pursuant hereto shall be
governed by the laws of the State of Delaware
without giving effect to the conflict of laws
principles thereof.
(x) EFFECTIVE DATE. The Plan shall take effect
upon its adoption by the Board; PROVIDED,
HOWEVER, that the Plan shall be subject to the
requisite approval of the shareholders of the
Company in order to comply with Section 162(m)
of the Code. In the absence of such approval,
the Plan (and any Awards made pursuant to the
Plan prior to the date of such approval) shall
be null and void.
<PAGE>
(xi) BENEFICIARY. A Participant may file with the
Committee a written designation of a
beneficiary on such form as may be prescribed
by the Committee and may, from time to time,
amend or revoke such designation. If no
designated beneficiary survives the Participant
and an Award is payable to the Participant's
beneficiary pursuant to Section 6(b), the
executor or administrator of the Participant's
estate shall be deemed to be the grantee's
beneficiary.
(xii) INTERPRETATION. The Plan is designed and
intended to comply, to the extent applicable,
with Section 162(m) of the Code, and all
provisions hereof shall be construed in a
manner to so comply.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
AMONG
THE COLEMAN COMPANY, INC.,
AS SELLER,
SIEBE PLC,
AS GUARANTOR,
AND
RANCO INCORPORATED OF DELAWARE,
AS BUYER
DATED AS OF FEBRUARY 18, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
PAGE
ARTICLE I PURCHASE AND SALE
<S> <C> <C>
Section 1.1 Purchase and Sale of Shares . . . . . . . . . . . . . . . . 2
Section 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Deliveries at Closing . . . . . . . . . . . . . . . . . . . 3
Section 1.4 Purchase Price Adjustment . . . . . . . . . . . . . . . . . 4
Section 1.5 Intercompany Accounts . . . . . . . . . . . . . . . . . . . 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER
Section 2.1 Organization and Qualification. . . . . . . . . . . . . . . 9
Section 2.2 Authority Relative to This Agreement. . . . . . . . . . . . 11
Section 2.3 Capitalization; Title . . . . . . . . . . . . . . . . . . . 12
Section 2.4 Consents and Approvals; No Violation. . . . . . . . . . . . 14
Section 2.5 Financial Statements. . . . . . . . . . . . . . . . . . . . 16
Section 2.6 Assets Necessary to Business. . . . . . . . . . . . . . . . 18
Section 2.7 Title to Properties; Encumbrances . . . . . . . . . . . . . 18
Section 2.8 Contracts and Commitments . . . . . . . . . . . . . . . . . 20
Section 2.9 Absence of Certain Changes or Events. . . . . . . . . . . . 24
Section 2.10 Absence of Litigation . . . . . . . . . . . . . . . . . . . 24
Section 2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . 25
Section 2.12 ERISA Compliance. . . . . . . . . . . . . . . . . . . . . . 27
Section 2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.14 Environmental Matters . . . . . . . . . . . . . . . . . . . 33
Section 2.15 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . 35
Section 2.16 Transactions with Affiliates. . . . . . . . . . . . . . . . 36
Section 2.17 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.19 Labor Difficulties. . . . . . . . . . . . . . . . . . . . . 37
Section 2.20 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 38
Section 2.21 Customer Accounts Receivable; Inventories . . . . . . . . . 39
Section 2.22 Information . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR
Section 3.1 Organization and Qualification. . . . . . . . . . . . . . . 41
Section 3.2 Authority Relative to This Agreement. . . . . . . . . . . . 41
i
<PAGE>
Section 3.3 Consents and Approvals; No Violation. . . . . . . . . . . . 42
Section 3.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 3.6 No Representation Regarding Future Prospects. . . . . . . . 44
Section 3.7 Investment. . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 3.8 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE IV COVENANTS OF THE PARTIES
Section 4.1 Conduct of the Business . . . . . . . . . . . . . . . . . . 45
Section 4.2 HSR Act Compliance. . . . . . . . . . . . . . . . . . . . . 49
Section 4.3 Post-Closing Collections. . . . . . . . . . . . . . . . . . 49
Section 4.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.5 Severance Arrangements. . . . . . . . . . . . . . . . . . . 50
Section 4.6 Public Announcements. . . . . . . . . . . . . . . . . . . . 51
Section 4.7 Transaction Costs . . . . . . . . . . . . . . . . . . . . . 52
Section 4.8 Further Assurances. . . . . . . . . . . . . . . . . . . . . 52
Section 4.9 Product Liability . . . . . . . . . . . . . . . . . . . . . 52
Section 4.10 Use of Name . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 4.11 Books and Records . . . . . . . . . . . . . . . . . . . . . 55
Section 4.12 Transfer of Nominee Share . . . . . . . . . . . . . . . . . 57
ARTICLE V CERTAIN EMPLOYEE AND BENEFIT MATTERS
Section 5.1 Continued Employment; Service Credit. . . . . . . . . . . . 57
Section 5.2 Continuation of Benefits. . . . . . . . . . . . . . . . . . 59
Section 5.3 Severance Pay . . . . . . . . . . . . . . . . . . . . . . . 59
Section 5.4 Indemnification of Buyer for Plans Not Assumed. . . . . . . 61
Section 5.5 Company Defined Contribution Plan . . . . . . . . . . . . . 61
ARTICLE VI TAXES
Section 6.1 Tax Indemnification . . . . . . . . . . . . . . . . . . . . 62
Section 6.2 Procedures Relating to Indemnification of Tax Claims. . . . 65
Section 6.3 Section 338(h)(10) Election . . . . . . . . . . . . . . . . 69
Section 6.4 Survival of Tax Provisions. . . . . . . . . . . . . . . . . 73
Section 6.5 Return Filings, Refunds and Credits . . . . . . . . . . . . 73
Section 6.6 Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . 80
Section 6.7 Termination of Tax Sharing Agreements . . . . . . . . . . . 80
Section 6.8 Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . 80
ii
<PAGE>
Section 6.9 Determination and Characterization of Payments. . . . . . . 81
ARTICLE VII CONDITIONS TO CLOSING
Section 7.1 Conditions to the Obligations of All Parties. . . . . . . . 82
Section 7.2 Conditions to the Obligations of Seller . . . . . . . . . . 83
Section 7.3 Conditions to the Obligations of Buyer. . . . . . . . . . . 84
ARTICLE VIII TERMINATION
Section 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 85
ARTICLE IX INDEMNIFICATION
Section 9.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 9.2 Indemnification by Seller . . . . . . . . . . . . . . . . . 87
Section 9.3 Indemnification by Buyer. . . . . . . . . . . . . . . . . . 88
Section 9.4 Limitations of Claims . . . . . . . . . . . . . . . . . . . 88
Section 9.5 Procedures. . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 9.6 Exclusivity of Remedies . . . . . . . . . . . . . . . . . . 97
ARTICLE X MISCELLANEOUS PROVISIONS
Section 10.1 Disclosure Schedules; Exhibits . . . . . . . . . . . . . . 98
Section 10.2 Amendment and Modification . . . . . . . . . . . . . . . . 99
Section 10.3 Waiver of Compliance . . . . . . . . . . . . . . . . . . . 99
Section 10.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 10.5 Parties in Interest; Assignment. . . . . . . . . . . . . .102
Section 10.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . .102
Section 10.7 Construction; Interpretation . . . . . . . . . . . . . . .103
Section 10.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . .104
Section 10.9 Severability . . . . . . . . . . . . . . . . . . . . . . .104
Section 10.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . .105
Section 10.11 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . .105
EXHIBIT A License Agreement
iii
<PAGE>
Index of Defined Terms
DEFINED TERM WHERE DEFINED
Adjusted GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(b)
Affected Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.1
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.3(b)
appropriate Seller or Company personnel. . . . . . . . . . . . . . . .Section 10.7(b)
Article. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c)
Auditor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(d)
Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.2
Closing Statement of Company Business Net Worth. . . . . . . . . . . . Section 1.4(b)
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.12(a)
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Company Business Net Worth . . . . . . . . . . . . . . . . . . . . . . Section 1.4(a)
Company DC Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.5
Company Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . Section 2.12
Company ERISA Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . Section 2.12
Confidentiality Agreement. . . . . . . . . . . . . . . . . . . . . . . . .Section 8.2
Confidential Memorandum. . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.6
December 31, 1996 Financial Statements . . . . . . . . . . . . . . . . Section 2.5(a)
December 31, 1997 Statement of Company Business Net Worth. . . . . . . Section 2.5(a)
December 31, 1997 Financial Statements . . . . . . . . . . . . . . . . Section 2.5(a)
Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(a)
Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 4.11(a)
Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1(a)
Employment Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.3
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.14
Environmental Permits. . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.14
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.12
Estimated Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(a)
Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 4.5
Exhibit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c)
Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.5
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.4(b)
Governmental Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.4
Guarantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
iv
<PAGE>
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.4
Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a)
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a)
Indemnity Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.4(d)
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.11
Intercompany Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.5
knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(b)
License Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3(a)
Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.3
Limitations Period . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 9.1
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 9.2
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.1
Nominee Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(c)
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a)
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.7
Pre-Closing Tax Period . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1(a)
Predecessor Policies . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.9(c)
Private Placement Notes. . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(a)
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 1.1
Retention Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 4.5
Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c)
Section. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 10.7(c)
Section 338 Statement. . . . . . . . . . . . . . . . . . . . . . . . . Section 6.3(b)
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Seller Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . . Section 2.3(a)
Seller DC Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 5.5
Seller Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.16
Separate Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.5(a)
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Introductory Clause
Straddle Period . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1(c)
subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.1
Tax Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.4(d)
Tax Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a)
Tax Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a)
Tax Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a)
Tax Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(a)
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.13(h)
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.13(h)
Taxing Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 2.13(h)
Third Party Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.5(a)
Year 2000 Compliant. . . . . . . . . . . . . . . . . . . . . . . . . . . .Section 3.8
</TABLE>
v
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 18, 1998 (the
"Agreement"), among The Coleman Company, Inc., a Delaware corporation
("Seller"), Siebe plc, an English corporation ("Guarantor"), and Ranco
Incorporated of Delaware, a Delaware corporation and a wholly-owned
subsidiary of Guarantor ("Buyer").
WHEREAS, Seller owns all of the issued and outstanding shares (the
"Shares") of common stock, par value $1.00 per share (the "Common Stock"), of
Coleman Safety & Security Products, Inc., a Delaware corporation (the
"Company"), which, together with its subsidiaries, engages in designing,
manufacturing, marketing and selling smoke alarms and carbon monoxide alarms
which it markets to home builders and remodelers principally via the
electrical wholesale distribution channel and to individual consumers via
retail distribution channels and a broad range of other electronic products
for residential homes and commercial buildings, including electronic
<PAGE>
and mechanical thermostats and duct smoke detectors; and
WHEREAS, Seller desires to sell and transfer to Buyer, and Buyer
desires to purchase and accept from Seller, all of the Shares;
NOW, THEREFORE, in consideration of the foregoing and the agreements
set forth herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
Section 1.1 PURCHASE AND SALE OF SHARES. Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing (as
hereinafter defined) Seller shall sell, assign and transfer to Buyer, and
Buyer shall purchase and accept from Seller, the Shares for an aggregate
purchase price of $105,000,000 in immediately available funds, adjusted as
provided in Sections 1.4(a) and (e) hereof (the "Purchase Price").
Section 1.2 CLOSING. Upon the terms and
2
<PAGE>
subject to the conditions of this Agreement, the closing with respect to the
transactions provided for herein (the "Closing") shall take place at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York on the fifth business day following the satisfaction or waiver
of all of the conditions to each party's obligations to close hereunder,
other than those conditions which can only be satisfied at the Closing or
such other date as the parties shall agree (the "Closing Date").
Section 1.3 DELIVERIES AT CLOSING. (a) At the Closing, Seller shall
deliver to Buyer:
(i) a certificate or certificates representing all of the
Shares, endorsed in blank or accompanied by stock powers executed in blank
and any other instruments necessary to transfer to Buyer good and marketable
title to such Shares;
(ii) the License Agreement (the "License Agreement") in the form
attached hereto as Exhibit A, duly executed by Seller and the Company;
3
<PAGE>
(iii) evidence of the release of the Shares and the Company as a
guarantor under the Seller Credit Agreement (as hereinafter defined) and the
Private Placement Notes (as hereinafter defined); and
(iv) the certificate required by Section 7.3(c) hereof.
(b) At the Closing, Buyer shall deliver to Seller:
(i) the Purchase Price as adjusted pursuant to Section 1.4(a)
hereof, by wire transfer to an account or accounts identified by Seller not
later than three business days prior to the Closing Date;
(ii) the License Agreement, duly executed by Buyer; and
(iii) the certificate required by Section 7.2(c) hereof.
Section 1.4 PURCHASE PRICE ADJUSTMENT. (a) ADJUSTMENT AT CLOSING.
Not later than three business days prior to the Closing, Seller shall deliver
to Buyer a statement of the consolidated tangible net worth of the
4
<PAGE>
Company and its subsidiaries, adjusted by the accounting adjustments set
forth in Section 1.4(a) of the disclosure schedule delivered by Seller to
Buyer on or prior to the date hereof (the "Disclosure Schedule") (the
"Company Business Net Worth") estimated as of the close of business on the
Closing Date (the "Estimated Net Worth"), determined on a basis consistent
with that used for the December 31, 1997 Statement of Company Business Net
Worth (as hereinafter defined), accompanied by a certificate of the Chief
Financial Officer of Seller to the effect that such estimate represents a
good faith estimate of the Estimated Net Worth in accordance with this
Agreement. At the Closing, (i) if the Estimated Net Worth exceeds the
Company Business Net Worth as of December 31, 1997, the Purchase Price shall
be increased by the amount of such excess and (ii) if the Estimated Net Worth
is less than the Company Business Net Worth as of December 31, 1997, the
Purchase Price shall be decreased by the amount of such deficit; provided
that the amount to be paid by Buyer at the Closing shall not exceed
$105,000,000.
5
<PAGE>
(b) CLOSING STATEMENT OF COMPANY BUSINESS NET WORTH. As promptly
as practicable, but in any event not later than 60 days after the Closing,
Seller shall cause to be prepared and delivered to Buyer an audited
consolidated statement of Company Business Net Worth and the notes thereto as
of the Closing Date (the "Closing Statement of Company Business Net Worth")
determined in accordance with Adjusted GAAP (as hereinafter defined) applied
on a basis consistent with the December 31, 1997 Statement of Company
Business Net Worth. The Closing Statement of Company Business Net Worth
delivered pursuant to this Section 1.4(b) shall be accompanied by a
special-purpose report of Ernst & Young LLP to the effect that such statement
and any related notes thereto were prepared in accordance with Adjusted GAAP.
"Adjusted GAAP" shall mean United States generally accepted accounting
principles in effect on the date hereof ("GAAP") applied on a basis
consistent with the December 31, 1997 Statement of Company Business Net
Worth, as adjusted by the accounting adjustments in Section 1.4(a) of the
Disclo-
6
<PAGE>
sure Schedule.
(c) COOPERATION BY BUYER. Buyer shall make available to Seller and
its representatives (at no cost to Seller) such books, records and employees
of Buyer, the Company or any of the Company's subsidiaries as may be
necessary for Seller's preparation of the Closing Statement of Company
Business Net Worth. Buyer and its representatives shall have the right to
observe any inventory count and, after the delivery of the Closing Statement
of Company Business Net Worth pursuant to Section 1.4(b) above, to review the
work papers, schedules, memoranda and other documents and information
prepared or reviewed by Seller and to communicate with the persons who
conducted such preparation, review or count.
(d) DISPUTE RESOLUTION. Within 45 days after the delivery of the
Closing Statement of Company Business Net Worth to Buyer, Buyer shall notify
Seller of any objections to the Closing Statement of Company Business Net
Worth, specifying in reasonable detail any such
7
<PAGE>
objections, and if Buyer fails to notify Seller of any objections within such
period, Buyer shall be deemed to have agreed to the Closing Statement of
Company Business Net Worth as prepared by Seller. If Buyer has no objections
or if Seller and Buyer agree on the resolution of all such objections, the
Closing Statement of Company Business Net Worth (with any such changes as may
be agreed) shall be final and binding. Seller and Buyer shall each have the
right, at any time, to unilaterally terminate, in writing, all discussions
with respect to such objections or changes. Not later than 10 business days
after either Seller or Buyer shall have terminated such discussions, all such
disputed items shall be submitted for resolution to a certified public
accounting firm of national standing designated by Seller and Buyer (the
"Auditor"), which Auditor must be independent of and have no ongoing business
relationship with Seller, Buyer or their respective affiliates. Seller and
Buyer shall use reasonable efforts to cause the report of the Auditor to be
rendered within 30 days of its appointment, and the
8
<PAGE>
Auditor's determination as to the appropriateness and extent of changes (if
any) to the Closing Statement of Company Business Net Worth shall be final
and binding.
(e) POST-CLOSING NET WORTH ADJUSTMENT.
(i) If the Company Business Net Worth as finally determined
pursuant to subsection (d) of this Section 1.4 is less than the Estimated Net
Worth, the Purchase Price shall be reduced by the amount of such deficit. If
the Company Business Net Worth as finally determined pursuant to subsection
(d) of this Section 1.4 is greater than the Estimated Net Worth, the Purchase
Price shall be increased by the amount of such excess.
(ii) If the Purchase Price, as adjusted pursuant to this
subsection (e), is less than the amount paid by Buyer at the Closing, Seller
shall pay to Buyer, in immediately available funds, the amount of such
deficit with interest from the Closing Date through the date of payment at
the rate of 6% per annum. If the Purchase Price, as adjusted pursuant to
this subsection (e), is greater than the amount paid by Buyer at the Closing,
9
<PAGE>
Buyer shall pay to Seller, in immediately available funds, the amount of such
excess with interest from the Closing Date through the date of payment at the
rate of 6% per annum.
(iii) Any sums payable pursuant to this subsection (e) shall
be paid within five business days after the final determination of Company
Business Net Worth pursuant to subsection (d) hereof.
(f) FEES OF AUDITOR. The fees and expenses of the Auditor shall be
shared equally by Seller and Buyer.
Section 1.5 INTERCOMPANY ACCOUNTS. On or prior to the Closing
Date, all intercompany account balances between the Company and Seller or any
of its subsidiaries (as defined below) ("Intercompany Accounts") shall be
cancelled, effective immediately prior to the Closing Date. No adjustment
shall be made to the Purchase Price as a result of any such cancellation,
except to the extent provided in Section 1.4 hereof.
10
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
Section 2.1 ORGANIZATION AND QUALIFICATION. Section 2.1 of the
Disclosure Schedule contains a complete list of each of the subsidiaries of
the Company and jurisdictions in which they and the Company are qualified (to
the extent such concepts are applicable in such jurisdictions) to conduct
their business. Each of the Company and its subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (to the extent such
concepts are applicable in such jurisdictions), has all requisite corporate
power and corporate authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which such concepts are
applicable and the nature of the business conducted by it or the ownership,
lease or operation of its proper-
11
<PAGE>
ties makes such qualification necessary, other than where the failure to be
so duly qualified and in good standing have not had, prior to the Closing, a
Material Adverse Effect. (For purposes of this Agreement, "Material Adverse
Effect" means any condition, event, circumstance, change or effect that,
individually or in the aggregate, would result in a material adverse effect
on the business, assets or results of operations of the Company and its
subsidiaries, taken as a whole. A "subsidiary" of any entity means any
corporation, partnership, joint venture or other business entity of which the
specified entity, directly or indirectly, beneficially owns, 50% or more of
the equity interests, or holds the voting control of 50% or more of the
equity interests). Seller has heretofore delivered to Buyer a true and
correct copy of the constituent documents of the Company and each subsidiary
of the Company as in effect on the date hereof.
Section 2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has full
corporate power and authority to execute and deliver this Agreement and to
consummate the
12
<PAGE>
transactions contemplated hereby. The execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by Seller and no other corporate proceedings on the part
of Seller (or any other person) are necessary to authorize the execution of
this Agreement by Seller or the consummation by Seller of the transactions
contemplated hereby. This Agreement has been duly and validly executed by
Seller and (assuming the valid execution of this Agreement by Buyer)
constitutes a valid and binding agreement of Seller, enforceable against
Seller in accordance with its terms, except (a) that such enforcement may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be
13
<PAGE>
brought.
Section 2.3 CAPITALIZATION; TITLE. (a) The authorized capital
stock of the Company consists of 1,000 shares of Common Stock all of which
are issued and outstanding. Each of the Shares has been duly authorized and
validly issued, and is fully paid and non-assessable, and all of the Shares
are owned by Seller, free and clear of any and all liens, encumbrances,
security interests, mortgages, pledges, claims, options or restrictions of
any kind whatsoever ("Liens"). Except as expressly contemplated by this
Agreement and except for the obligations of the Company pursuant to (i) the
Amended and Restated Credit Agreement, dated as of August 3, 1995, among
Seller, certain subsidiaries of Seller named therein, the banks named
therein, as Lenders, and Credit Suisse, as Agent (the "Seller Credit
Agreement") and (ii) the Note Purchase Agreement, dated August 3, 1995,
relating to the 7.26% Senior Notes due 2007, and the Note Purchase Agreement,
dated May 1, 1996, relating to the 7.10% Senior Notes, Series A, due 2006 and
7.25% Senior
14
<PAGE>
Notes, Series B, due 2008 (collectively, the "Private Placement Notes"),
which obligations will terminate on or prior to the Closing Date without any
continuing liability or obligation to the Company or any of its subsidiaries
as a result thereof, there is no subscription, option, warrant, call, right,
contract, agreement, commitment, understanding or arrangement of any kind,
direct or indirect, relating to (x) the issuance, purchase, acquisition,
sale, pledge, delivery or transfer of any shares of capital stock of the
Company (including the Shares), including any right of direct or indirect
conversion or exchange under any security or other instrument, or (y) the
voting or control of any such capital stock, security or other instrument
(including the Shares).
(b) Upon consummation of the transactions contemplated by this
Agreement, Buyer will acquire good and marketable title to the Shares, free
and clear of all Liens.
(c) All of the outstanding shares of capital stock, or other equity
interests, of each of the Com-
15
<PAGE>
pany's subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable and are owned by either the Company or another of its
subsidiaries (except for one share of Series A stock of Coleman Manufacturing
de Mexico, S.A. de C.V., of which an employee of the Seller is the record
owner as nominee of the Company's subsidiary Jasan Products Ltd. (the
"Nominee Share")), free and clear of all Liens. Except as expressly
contemplated by this Agreement and except for the obligations of the Company
with respect to its subsidiaries pursuant to (i) the Seller Credit Agreement
and (ii) the Private Placement Notes, which obligations will terminate on or
prior to the Closing Date without any continuing liability or obligation to
the Company or any of its subsidiaries as a result thereof, there is no
subscription, option, warrant, call, right, contract, agreement, commitment,
understanding or arrangement of any kind, direct or indirect, relating to (x)
the issuance, purchase, acquisition, sale, pledge, delivery or transfer of
any shares of capital stock, or other equity
16
<PAGE>
interests, of any of the Company's subsidiaries, including any right of
direct or indirect conversion or exchange under any security or other
instrument, or (y) the voting or control of any such capital stock, security
or other instrument.
Section 2.4 CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) require Seller to file or register
with, notify, or obtain any permit, authorization, consent, or approval of or
from, any Governmental Entity (as defined below), with the exception of
filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder (together,
the "HSR Act") and filings with the Mexican Comision Federal de Competencia
(if any), (ii) conflict with or breach any provision of the certificate of
incorporation or by-laws (or other similar charter documents) of Seller or
any of its subsidiaries, including the Company and its subsidiaries, (iii)
violate or
17
<PAGE>
breach any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result
in the creation of a Lien on the Shares or any asset of the Company or any of
its subsidiaries pursuant to, any agreement or other obligation to which
Seller or any of its subsidiaries, including the Company and its
subsidiaries, is a party, or by which any of them may be bound, except for
those listed in Section 2.4 of the Disclosure Schedule as to which Seller
will use its best efforts to obtain requisite waivers or consents prior to
the Closing, or (iv) violate any material order, writ, injunction, decree,
judgment, statute, law or ruling of any Governmental Entity applicable to
Seller or any of its subsidiaries, including the Company and its
subsidiaries, excluding from the foregoing clauses (i) and (iii) such
requirements, defaults, rights or violations which would not have a Material
Adverse Effect or would not have a material adverse effect on the ability of
Seller to consummate the transactions contemplated by this Agreement, or
18
<PAGE>
which become applicable as a result of any acts or omissions by Buyer (other
than the execution and performance of this Agreement by Buyer) or the status
of Buyer. For purposes of this Agreement, "Governmental Entity" means any
nation or government, any state or other political subdivision thereof, any
entity, authority or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including any governmental authority, agency, department, board, commission
or instrumentality of the United States, any state of the United States or
any political subdivision thereof, or any nation, or any court, or legally
constituted tribunal or arbitrator.
Section 2.5 FINANCIAL STATEMENTS. (a) Seller has previously
delivered to Buyer the audited consolidated statement of Company Business Net
Worth and consolidated statement of operations as of and for the year ended
December 31, 1996 (collectively, the "December 31, 1996 Financial
Statements") which were prepared in accordance with Adjusted GAAP and are
included in Section
19
<PAGE>
2.5(a) of the Disclosure Schedule. Seller has also delivered to Buyer an
unaudited consolidated statement of Company Business Net Worth as of December
31, 1997 with the review report of Ernst & Young LLP (the "December 31, 1997
Statement of Company Business Net Worth") and an unaudited consolidated
statement of operations for the year ended December 31, 1997 for the Company
and its subsidiaries with the review report of Ernst & Young LLP (together
with the December 31, 1997 Statement of Company Business Net Worth, the
"December 31, 1997 Financial Statements"), which were prepared in accordance
with Adjusted GAAP, applied on a basis consistent with the December 31, 1996
Financial Statements (except for the accounting adjustments set forth in
Section 2.5(a) of the Disclosure Schedule) and are included in Section 2.5(a)
of the Disclosure Schedule. The December 31, 1996 Financial Statements and
the December 31, 1997 Financial Statements fairly present, in all material
respects, the Company Business Net Worth and the results of operations of the
Company and its subsidiaries as of the respective
20
<PAGE>
dates and for the respective periods then ended on the basis described in the
notes thereto.
(b) The Closing Statement of Company Business Net Worth when
delivered will have been prepared in accordance with Adjusted GAAP applied on
a basis consistent with the December 31, 1997 Statement of Company Business
Net Worth as adjusted by the accounting adjustments in Section 1.4(a) of the
Disclosure Schedule and will fairly present, in all material respects, the
Company Business Net Worth as of the Closing Date on the basis described in
the notes thereto.
Section 2.6 ASSETS NECESSARY TO BUSINESS. Except for the
"Coleman" trademark and tradename, the Company and its subsidiaries
collectively have good and marketable title to or valid leasehold interest in
all of the assets, properties and rights which are necessary to carry on the
business of the Company and its subsidiaries as presently conducted. From
January 1, 1997 until the date hereof, neither the Company nor any of its
subsidiaries have disposed of any assets, properties or rights
21
<PAGE>
of the business of the Company and its subsidiaries necessary for the conduct
of the Company's business as conducted during such period, except in the
ordinary course of business, including but not limited to dispositions and/or
replacements of obsolete assets.
Section 2.7 TITLE TO PROPERTIES; ENCUMBRANCES. Section 2.7 of the
Disclosure Schedule sets forth a complete list of all real property owned,
leased or otherwise occupied by the Company or any of its subsidiaries.
Except as otherwise contemplated by this Agreement (and, since December 31,
1997, other than any of such properties or assets sold or otherwise disposed
of in the ordinary course of business or with respect to which any lease
relating thereto has terminated) at the Closing, the Company and its
subsidiaries will have good and marketable title to, or a valid leasehold
interest in, all of the properties and assets (real, personal and mixed,
tangible and intangible, wherever located) reflected in the December 31, 1997
Statement of Company Business Net Worth or acquired after the date thereof.
22
<PAGE>
All such properties and assets are owned or held under lease, in each case,
free and clear of all Liens, except for Permitted Liens and, to the actual
knowledge of the Senior Vice President of Operation of Seller, there are no
material defects in the buildings, improvements and structures located on any
of the owned property of the Company or its subsidiaries which would
substantially impair the conduct of the business of the Company and its
subsidiaries immediately following the Closing as compared with the conduct
of the business of the Company and its subsidiaries immediately prior to the
Closing. For purposes of this Agreement, "Permitted Liens" means (i)
mechanics', carriers', workmen's, repairmen's or other similar Liens arising
or incurred in the ordinary course of business with respect to liabilities
that are not yet due or delinquent, (ii) Liens for Taxes (as defined below),
assessments and other governmental charges not yet due and payable or, if due
and payable, for which adequate reserves have been made, and (iii) Liens that
do not, individually or in the aggregate, materially impair
23
<PAGE>
the use, or materially detract from the value, of the property to which they
relate. Permitted Liens have been accrued to the extent required by GAAP.
Section 2.8 CONTRACTS AND COMMITMENTS. (a) Section 2.8 of the
Disclosure Schedule sets forth, with respect to the Company and its
subsidiaries, a complete and accurate list of: (i) all contracts or
agreements, whether oral or written (including, without limitation,
mortgages, leases, indentures and loan agreements), except (x) such contracts
and agreements which are required to be set forth in the Disclosure Schedule
pursuant to clauses (ii) through (xiii) of this Section 2.8 or are listed on
other Disclosure Schedules required by this Agreement, (y) contracts and
agreements which involve, or which may reasonably be expected to involve, the
payment by or to any one or more of the Company and its subsidiaries of less
than $50,000 with respect to any one contract or agreement or $75,000 with
respect to any related group of contracts or agreements and (z) contracts or
agreements in the nature of purchase and sales
24
<PAGE>
orders entered into by the Company or any subsidiary in the ordinary course
of business and containing normal terms and conditions, (ii) all sales
agency, distribution or dealership contracts that are not cancellable on
notice of not less than 90 days and without liability, penalty or premium for
such cancellation under such contract; (iii) all employment and consulting
agreements or other agreements with employees that contain any severance or
termination pay liabilities or obligations that are not cancellable on notice
of not less than 90 days without liability, penalty or premium for such
cancellation under such contract; (iv) all collective bargaining or union
contracts or agreements; (v) all non-competition or other agreements between
the Company or any of its subsidiaries and any third party preventing or
restricting the Company or any of its subsidiaries from carrying on their
respective businesses anywhere in the world; (vi) all debt obligations,
mortgages, notes or indentures for borrowed money, including guaranties of or
agreements to acquire any such debt obligation of others
25
<PAGE>
(other than obligations to be extinguished at or before the Closing)
including the amount of any credit line or commitment and the names of all
persons authorized to borrow or to discount debt obligations or otherwise act
on behalf of the Company or any subsidiary in any dealings with any bank or
financial institution; (vii) the name of each bank or other financial
institution in which the Company or any subsidiary has an account or safe
deposit box, the numbers of such accounts or boxes and the names of all
persons authorized to draw thereof or have access thereto; (viii) the names
of the ten largest suppliers to, and the ten largest customers of, the
Company and its subsidiaries as a whole for the year ended December 31, 1997
together with the approximate dollar volume by supplier and customer and a
general description of the goods or services provided by each supplier; (ix)
all loans to, or guarantees of loans to, employees of the Company or any
subsidiary made by the Company or any subsidiary; (x) all outstanding
commitments by the Company or any subsidiary to make a capital
26
<PAGE>
expenditure, capital addition or capital improvement involving an amount in
excess of $50,000, together with any Capital Expenditure Report by the
Company or any subsidiary related to making or committing to make any capital
expenditure, capital addition or capital improvement subsequent to the date
hereof involving an amount in excess of $50,000; (xi) all contracts or
agreements under which the Company or any subsidiary has granted, or is
obligated to grant, rights to others to use, reproduce, market or exploit any
United States or foreign patents, trademarks, trade names, service marks,
service names, technology, copyrights, logos, brand names, designs,
industrial designs, inventions, trade secrets, secret processes or know-how
involving an amount in excess of $50,000; (xii) the names and current annual
compensation rates of all employees of the Company or any subsidiary whose
current annual rate of compensation (including bonuses) is $75,000 or more;
and (xiii) the names of all retired employees of the Company or any
subsidiary who are receiving or are entitled to receive any pension or
27
<PAGE>
other benefits under any unfunded plan not qualified under Section 401 of the
Internal Revenue Code of 1954, as amended, their ages and their current
annual unfunded pension rates.
(b) True and complete copies of all documents referred to in
Section 2.8 of the Disclosure Schedule have been heretofore made available to
the Buyer. Neither the Company nor any of its subsidiaries is in default
under any document listed or required to be listed on Section 2.8 of the
Disclosure Schedule and, to the knowledge of Seller, after due inquiry, no
other person is in breach thereof.
(c) All such contracts have been entered into lawfully and
individually and collectively do not violate the provisions of any federal,
state or local, statute, rule, regulation or ordinance, including without
limitation, with respect to pricing, except for such violations which,
individually or collectively, would not have a Material Adverse Effect.
Section 2.9 ABSENCE OF CERTAIN CHANGES OR
28
<PAGE>
EVENTS. Except as set forth in Section 2.9 of the Disclosure Schedule, since
December 31, 1997 neither the Company nor any of its subsidiaries (a) has
taken any of the actions set forth in Sections 4.1(a) through (j) hereof or
entered into any transaction, or conducted its business or operations other
than in the ordinary and usual course of business or (b) has suffered a
material adverse change in its business or financial condition.
Section 2.10 ABSENCE OF LITIGATION. Except as set forth in
Section 2.10 of the Disclosure Schedule, there is no action, suit or
proceeding of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), by or before any Governmental Entity pending or,
to the knowledge of Seller after due inquiry of appropriate Seller or Company
personnel, threatened against the Company or any of its subsidiaries. None
of such actions, suits or proceedings, if adversely determined, would have a
Material Adverse Effect or would have a material adverse effect on Seller's
ability to consummate the transactions contem-
29
<PAGE>
plated hereby.
Section 2.11 INTELLECTUAL PROPERTY. For purposes hereof,
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof, (b) all trademarks, service
marks, trade names and corporate names, including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (c) all copyrights and all applications, registrations and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information and business and marketing plans
and proposals), (f) all computer
30
<PAGE>
software (including data and related document) and (g) all other proprietary
rights. Section 2.11 of the Disclosure Schedule sets forth all patents,
registered trademarks and registered copyrights (and applications for any of
the foregoing) and material common law trademarks owned by the Company. To
the knowledge of Seller, after due inquiry of appropriate Seller or Company
personnel, in addition to the items set forth in Section 2.11 of the
Disclosure Schedule, the Company and its subsidiaries own, free and clear of
all Liens, all right, title and interest in and to the Intellectual Property
necessary to the conduct of the business of the Company and its subsidiaries
as now being conducted, other than the "Coleman" trademark and tradename and
other than such Intellectual Property which the Company has the right to use
pursuant to a license, sublicense, agreement or permission, set forth, where
applicable, in Section 2.8 of the Disclosure Schedule. With respect to any
such license, sublicense, agreement or permission, to the knowledge of
Seller, (i) the underlying item of Intellec-
31
<PAGE>
tual Property is not subject to any outstanding injunction, judgment, order,
decree, ruling or charge, and (ii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or is threatened
which challenges the legality, validity or enforceability of the underlying
item of Intellectual Property. Except for the matters set forth in Section
2.11 of the Disclosure Schedule, there is no claim, action, proceeding, suit,
complaint, or, to the knowledge of Seller, investigation pending or
threatened that (i) the operations, products, Intellectual Property or
manufacturing processes of the Company or any of its subsidiaries infringe
upon or conflict with the intellectual property rights of any other person,
or (ii) challenges the legality, validity, enforceability, use or ownership
of the Intellectual Property owned by the Company. To the knowledge of
Seller, no third party has interfered with, infringed upon or misappropriated
any Intellectual Property rights of the Company or its subsidiaries.
Section 2.12 ERISA COMPLIANCE. (a) Section
32
<PAGE>
2.12 of the Disclosure Schedule sets forth a true and complete list of all
employee benefit and compensation plans, programs or agreements maintained
for the benefit of the current or former employees or directors of the
Company or any of its subsidiaries, which employee benefit and compensation
plans, programs or agreements are sponsored, maintained or contributed to by
the Company or any affiliate of the Company, or with respect to which the
Company or any affiliate of the Company has any liability, including any such
plan that is an "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA") (collectively, the
"Company Employee Benefit Plans"). Except as set forth in Section 2.12 of
the Disclosure Schedule, all Company Employee Benefit Plans have been
maintained in compliance with all applicable requirements of law, including
but not limited to ERISA and the Internal Revenue Code of 1986, as amended
(the "Code"), except to the extent where the failure to be so maintained
would not have, individually or in the aggregate, a Material
33
<PAGE>
Adverse Effect.
(b) None of the Company Employee Benefit Plans is a "defined
benefit plan" (within the meaning of Section 3(35) of ERISA) or a
"multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA), and
neither the Company nor any of its subsidiaries has maintained, sponsored or
contributed to any such plan within the previous six (6) years.
(c) Each Company Employee Benefit Plan that is intended to qualify
under Section 401 of the Code, and each trust maintained pursuant thereto,
has been determined to be exempt from federal income taxation under Section
501 of the Code by the Internal Revenue Service, and, to the Seller's
knowledge, nothing has occurred that would cause the loss of such
qualification or exemption. With respect to each Company Employee Benefit
Plan, (i) no "prohibited transaction" (within the meaning of Section 406 of
ERISA and Section 4975 of the Code) has occurred, and (ii) no audit or
investigation has been commenced by the Internal Revenue Service or the
Depart-
34
<PAGE>
ment of Labor, and no such audit or investigation is pending or, to the
Seller's knowledge, threatened. No material liability under Title IV of
ERISA has been or is reasonably expected to be incurred by the Company or any
entity which is considered one employer with the Company under Section
4001(a)(15) of ERISA or Section 414 of the Code (each, a "Company ERISA
Affiliate").
(d) The Company does not maintain or contribute to any "employee
benefit plan" as defined in Section 3(3) of ERISA which provides or has any
liability to provide life insurance or medical or other employee welfare
benefits to any employee or former employee upon retirement or termination of
employment.
(e) Except as set forth in Section 2.12 of the Disclosure Schedule,
the execution of, and performance of the transactions contemplated by, this
Agreement will not (either alone or in combination with another event)
constitute an event under any Company Employee Benefit Plan that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of
35
<PAGE>
indebtedness, vesting, distribution, increase in benefits or compensation or
obligation to fund benefits or compensation with respect to any current or
former employee or director.
Section 2.13 TAXES. Except as set forth in Section 2.13 of the
Disclosure Schedule:
(a) All Tax Returns required to be filed by or with respect to or
which includes or included the Company and each of its subsidiaries have been
filed in accordance with all applicable laws with the appropriate Taxing
Authorities on or before the due date thereof (including extensions), other
than those Tax Returns which the failure to file would not have a Material
Adverse Effect. All material Taxes of the Company and each of its
subsidiaries due and payable by them (whether or not shown to be due on such
Tax Returns) have been paid in full, other than Taxes being contested in good
faith in appropriate proceedings and for which adequate provision has been
made therefor.
(b) There are no Liens for Taxes upon the
36
<PAGE>
assets of the Company or any of its subsidiaries except for statutory Liens
for Taxes not yet due and payable.
(c) There are no audits or proceedings pending, proposed or in
progress with respect to liabilities for Taxes of the Company or any of its
subsidiaries, and neither the Company nor any of its affiliates has received
any written notice of a pending, proposed or asserted deficiency or
assessment from any Taxing Authority with respect to liabilities for Taxes of
the Company or any of its subsidiaries which has not been paid or finally
settled or is not being contested in good faith in appropriate proceedings
and for which adequate reserves have been made.
(d) Except with respect to the person identified on Section 4.5(ii)
of the Disclosure Schedule, no payment (whether in cash, property or the
vesting of property) made by the Company or the Buyer to an Affected
Employee, in connection with the execution of, and performance of the
transactions contemplated in, this Agreement (whether alone or upon the
occurrence of any other
37
<PAGE>
event) could be characterized as an "excess parachute payment" within the
meaning of Section 280G of the Code.
(e) No extension of time within which to file any Tax Returns
required to be filed by the Company or any of its subsidiaries (which Tax
Returns shall not under any circumstances include Tax Returns that relate to
an affiliated, consolidated, combined or unitary group which includes a
company other than the Company and any of its subsidiaries) has been
requested which Tax Return has not since been filed.
(f) There are no waivers or extensions of any applicable statute of
limitations for the assessment or collection of Taxes with respect to any Tax
Returns required to be filed by the Company or any of its subsidiaries which
waivers or extensions are pending or remain in effect.
(g) The Company and its subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor, stock-
38
<PAGE>
holder or other third party.
(h) For purposes of this Agreement: (i) "Taxes" means all federal,
state, local and foreign net income, gross income, sales, use, franchise,
profits, service, withholding, payroll, employment, excise, gross receipts,
capital stock, occupation, net worth, transfer, stamp, estimated, ad valorem,
gains, property taxes, asset tax, value added tax, and other similar taxes,
charges, duties, tariffs, levies, fees, or assessments together with any
interest, penalties, and additions to tax or additional amounts thereon,
imposed by any Taxing Authority, (ii) "Taxing Authority" means any federal,
state, local or foreign governmental authority responsible for the imposition
of any Taxes; and (iii) "Tax Returns" means any return, report, declaration,
estimate or other information filed or required to be supplied to a Taxing
Authority in connection with Taxes.
Section 2.14 ENVIRONMENTAL MATTERS. (a) The Company and its
subsidiaries hold, and are in material compliance with, all permits, licenses
and other govern-
39
<PAGE>
ment authorizations ("Environmental Permits") required for the Company and
its subsidiaries to conduct their respective businesses under Environmental
Laws. (For purposes of this Agreement, "Environmental Laws" means all
applicable foreign, federal, state and local, laws, statutes, ordinances,
rules, regulations, orders, judgments and decrees relating to pollution or
the protection of the environment.) The Company and its subsidiaries are in
material compliance with all such Environmental Laws and have no liability
under any indemnity agreement or other contractual obligations relating to
pollution or the protection of the environment or human health or safety.
(b) Except as set forth in Section 2.14 of the Disclosure Schedule,
the Company has not received any written or, to the Company's knowledge, oral
request for information, or been notified or the subject of any claim that it
is or may be a potentially responsible party or otherwise is or may be
responsible for the investigation or cleanup of hazardous substances, under
the federal
40
<PAGE>
Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended, or any other Environmental Law with respect to any on-site or
off-site location, whether or not currently or previously owned, leased, used
or occupied by the Company.
(c) The Company is not subject to, nor has it received any notice
that it may be subject to, any judgment, decree, order or other agreement
relating to compliance with, or the cleanup of regulated substances under,
any applicable Environmental Laws.
(d) There has been no release or disposal as a result of the
Company's or any of its subsidiaries' operations or, to the Company's
knowledge, operations by others, at any time of any regulated substances at,
on, under, from or affecting any real property currently or formerly owned,
leased or operated by the Company or any of its subsidiaries or any of their
predecessors-in-interest (other than pursuant to and in accordance with
Environmental Permits held by the Company, its subsidiaries or any of their
predecessors, or that will not give
41
<PAGE>
rise to liability under Environmental Laws).
(e) To the knowledge of Seller, Seller has made available to Buyer
true and complete copies of all environmental reports, studies, audits and
assessments which are in the possession or control of the Company relating to
any real property or facilities currently or formerly owned, leased or
operated by the Company or any of its subsidiaries or any of their
predecessors-in-interest.
Section 2.15 NO UNDISCLOSED LIABILITIES. Except as and to the
extent set forth in the December 31, 1997 Statement of Company Business Net
Worth, neither the Company nor any of its subsidiaries had, at December 31,
1997, any undisclosed liabilities except for those liabilities which,
separately or in the aggregate, are not expected to have a Material Adverse
Effect. Except as and to the extent set forth in Section 2.15 of the
Disclosure Schedule, neither the Company nor any of its subsidiaries has
incurred any liabilities (absolute, accrued, contingent or otherwise) which
would be required
42
<PAGE>
by Adjusted GAAP to be included in a consolidated statement of the Company
Business Net Worth dated as of the date hereof, except liabilities incurred
since December 31, 1997 in the ordinary course of business and liabilities
incurred in connection with this Agreement.
To the knowledge of Seller, after due inquiry, there is no latent
or overt design, manufacturing or other defect in any products of the Company
or its subsidiaries which could reasonably be expected to result in a series
of liability claims which would have a Material Adverse Effect.
Section 2.16 TRANSACTIONS WITH AFFILIATES. Except as set forth in
Section 2.16 of the Disclosure Schedule, none of the Company or any of its
subsidiaries has any outstanding contract, agreement or other arrangement
with any member of the Seller Group (as defined below) which will continue in
effect subsequent to the Closing. "Seller Group" means Seller and its
affiliates, other than the Company and its subsidiaries.
43
<PAGE>
Section 2.17 BROKERS. No broker, finder or investment banker,
including any director, officer, employee, affiliate or associate of Seller,
is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement by reason of
any action taken by Seller, except for BancAmerica ROBERTSON STEPHENS, the
fees and expenses of which shall be paid by Seller.
Section 2.18 INSURANCE. Section 2.18 of the Disclosure Schedule
contains an accurate and complete list as of the date hereof of all material
policies, currently in force, of fire, liability, workmen's compensation,
public and product liability, title and other forms of insurance owned, held
by or applicable to the Company or any of its subsidiaries or their
respective assets or businesses. All such policies are in full force and
effect. Seller has heretofore delivered to Buyer an accurate summary
description of all such policies.
Section 2.19 LABOR DIFFICULTIES. Except as
44
<PAGE>
set forth in Section 2.10 or Section 2.19 of the Disclosure Schedule, (a)
there is no unfair labor practice complaint or charge of discrimination or
other employee claim against the Company or any of its subsidiaries pending
or, to the knowledge of Seller after due inquiry of appropriate Seller or
Company personnel, threatened, (b) there is no labor strike, dispute,
slowdown, stoppage or other labor difficulty actually pending or, to the
knowledge of the Seller after due inquiry of appropriate Seller or Company
personnel, threatened against or affecting the Company or any of its
subsidiaries and (c) there are no pending union negotiations relating to
employees of the Company or any of its subsidiaries.
Section 2.20 COMPLIANCE WITH LAWS. Except as set forth in Section
2.20 of the Disclosure Schedule or as provided for in Sections 2.10, 2.12,
2.13 and 2.14 hereof, the Company and its subsidiaries have operated their
respective businesses in compliance with all laws, ordinances, regulations
and orders of all Governmental Entities except for violations of such laws,
ordinances,
45
<PAGE>
regulations and orders which do not and are not expected to have a Material
Adverse Effect. The Company and its subsidiaries have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of their respective businesses, except those
the absence of which does not and are not expected to have a Material Adverse
Effect. No notice has been received by, and, to the knowledge of the Seller
after due inquiry of appropriate Seller or Company personnel, no
investigation or review is pending or threatened by, any Governmental Entity
with respect to (i) any alleged violation by the Company of any law,
ordinance, regulation or order of any Governmental Entity which may have a
Material Adverse Effect or (ii) any alleged failure to have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of the respective businesses of the Company and
its subsidiaries which may have a Material Adverse Effect.
Section 2.21 CUSTOMER ACCOUNTS RECEIVABLE;
46
<PAGE>
INVENTORIES. (a) All customer accounts receivable of the Company and its
subsidiaries, whether reflected on the December 31, 1997 Financial Statements
or subsequently created, have arisen from bona fide transactions in the
ordinary course of business. Except as set forth in Section 2.21(a) of the
Disclosure Schedule, to the knowledge of the Seller, after due inquiry, all
such customer accounts receivable are, in the aggregate, good and collectible
at the aggregate recorded amounts thereof, net of any applicable reserves for
doubtful accounts returns or credits as the ordinary course of business
reflected on the December 31, 1997 Financial Statements.
(b) Except as set forth in Section 2.21(b) of the Disclosure
Schedule, to the knowledge of Seller, after due inquiry, the cost of
inventories, net of any revenues, of the Company and its subsidiaries
reflected on the December 31, 1997 Financial Statements or subsequently
acquired prior to the Closing Date, represent inventory which are generally
of a quality and quantity usable and salable in all material respects in
accordance
47
<PAGE>
with past practice of the Company (except as otherwise noted in the December
31, 1997 Financial Statements or the Closing Statement of Company Business
Net Worth). No representation is made under this Section with respect to the
inventory relating to the DC carbon monoxide detectors existing on December
31, 1997, the date hereof or the Closing Statement of Company Business Net
Worth.
Section 2.22 INFORMATION. To the knowledge of the Seller, after
due inquiry and subject to the limitations contained in Section 3.6, none of
the information provided by Seller to Buyer in connection with transactions
contemplated by this Agreement contains any material misstatement of fact or
omits to state any material fact necessary to be stated in order to make the
statements therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR
Buyer and Guarantor hereby jointly and severally represent and
warrant to Seller as to the matters set
48
<PAGE>
forth in Sections 3.1, 3.2 and 3.3 hereof, and Buyer hereby represents and
warrants to Seller as to the matters set forth in Sections 3.4, 3.5, 3.6, 3.7
and 3.8 hereof, as follows:
Section 3.1 ORGANIZATION AND QUALIFICATION. Each of Buyer and
Guarantor is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization.
Section 3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Buyer
and Guarantor has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution of this Agreement and the consummation of the transactions
contemplated hereby has been duly and validly authorized by each of Buyer and
Guarantor and no other corporate proceedings on the part of each of Buyer and
Guarantor (or any other person) are necessary to authorize the execution of
this Agreement by each of Buyer
49
<PAGE>
and Guarantor or the consummation by each of Buyer and Guarantor of the
transactions contemplated hereby. This Agreement has been duly and validly
executed by each of Buyer and Guarantor, and (assuming the valid execution of
the Agreement by Seller) constitutes a valid and binding agreement of each of
Buyer and Guarantor, enforceable against each of Buyer and Guarantor in
accordance with its terms, except (a) that such enforcement may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought.
Section 3.3 CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) require Buyer or Guarantor to file
or register with, notify, or obtain any permit, authoriza-
50
<PAGE>
tion, consent, or approval of or from, any Governmental Entity, with the
exception of filings pursuant to the HSR Act and filings with the Mexican
Comision Federal de Competencia (if any), (ii) conflict with or breach any
provision of the Certificate of Incorporation, By-Laws or other
organizational documents of Buyer or Guarantor, (iii) violate or breach any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, any agreement or
other obligation to which Buyer or Guarantor is a party, or by which it may
be bound, or (iv) violate any order, writ, injunction, decree, judgment,
statute, law or ruling of any Governmental Entity applicable to Buyer or
Guarantor, excluding from the foregoing clauses (i), (iii) and (iv) such
requirements, defaults, rights or violations which would not, individually or
in the aggregate, have a material adverse effect on the ability of Buyer or
Guarantor to consummate the transactions contemplated by this Agreement, or
which become applicable as a result of any acts or omissions by, or the
status of,
51
<PAGE>
Seller.
Section 3.4 FINANCING. Buyer has on the date of execution of this
Agreement and will have at the Closing sufficient immediately available
funds, in cash or pursuant to credit agreements in effect on the date of this
Agreement, to pay the Purchase Price and any other amounts payable pursuant
to this Agreement and to effect the transactions contemplated hereby.
Section 3.5 BROKERS. No broker, finder or investment banker
("Finder"), including any director, officer, employee, affiliate or associate
of Buyer, is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement by reason
of any action taken by Buyer. Buyer has not dealt with any Finder except
BancAmerica ROBERTSON STEPHENS, whose fees are payable by Seller.
Section 3.6 NO REPRESENTATION REGARDING FUTURE PROSPECTS. Buyer
acknowledges and agrees that neither the representations and warranties of
Seller contained in
52
<PAGE>
Article II hereof nor any other information contained in the documents to be
delivered at the Closing, the Confidential Offering Memorandum relating to
the Company and its subsidiaries prepared by BancAmerica ROBERTSON STEPHENS
and previously distributed to Buyer (the "Confidential Memorandum") or
otherwise provided to Buyer, shall be construed as a representation or
warranty with respect to any projections, estimates or budgets heretofore
delivered to or made available to Buyer regarding future revenues, future
expenses or expenditures, future results of operations, future cash flows,
future financial condition, the future business and operations of the Company
and its subsidiaries, or future relationships with customers or suppliers,
including any such information as may have been set forth in the Confidential
Memorandum.
Section 3.7 INVESTMENT. Buyer is acquiring the Shares for its own
account, for investment, and without a view to the public distribution
thereof and will not sell or transfer the Shares in violation of the
53
<PAGE>
Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder.
Section 3.8 YEAR 2000. Buyer acknowledges that Seller's software,
hardware and other information technologies, whether owned or licensed by
Seller, are not Year 2000 Compliant. For purposes of this Agreement, "Year
2000 Compliant" means that any applicable hardware, software or other
information technologies can properly process dates after the date December
31, 1999.
ARTICLE IV
COVENANTS OF THE PARTIES
Section 4.1 CONDUCT OF THE BUSINESS. Seller agrees that, during
the period from the date of this Agreement to the Closing, except as (i)
otherwise contemplated by this Agreement, (ii) set forth in Section 4.1 of
the Disclosure Schedule or (iii) consented to by Buyer in writing, Seller
shall cause the business operations of the Company and its subsidiaries to be
conducted in the ordinary course. Without limitation to the generality of
54
<PAGE>
the foregoing, Seller shall not permit the Company, and, as applicable, the
Company shall not permit any of its subsidiaries, to:
(a) (i) amend their respective certificates of incorporation or
by-laws (or other charter documents), (ii) split, combine or reclassify any
shares of their respective outstanding capital stock, or (iii) directly or
indirectly redeem or otherwise acquire any shares of its capital stock or
shares of the capital stock of any of their respective subsidiaries;
(b) authorize for issuance, issue or sell or agree to issue or sell
any shares of, or rights to acquire any shares of, their respective capital
stock (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise);
(c) (i) merge, combine or consolidate with another entity, (ii)
acquire or purchase an equity interest in or a substantial portion of the
assets of another corporation, partnership or other business organization
55
<PAGE>
or otherwise acquire any assets outside the ordinary course of business or
otherwise enter into any contract, commitment or transaction outside the
ordinary course of business, or (iii) sell, lease, license, waive, release,
transfer, encumber (except for Liens which will be removed prior to or at the
Closing) or otherwise dispose of any of their respective assets outside the
ordinary course of business;
(d) (i) incur, assume or prepay any indebtedness or any other
liabilities other than, in each case, in the ordinary course of business or
indebtedness or liabilities which can be prepaid or repaid at any time
without penalty, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person, in each case, other than in the ordinary course of
business or other than those which will be removed at or prior to the
Closing, or (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than between the Compa-
56
<PAGE>
ny and its subsidiaries);
(e) modify or amend, or waive any benefit of, any non-competition
agreement to which the Company or any of its subsidiaries is a party;
(f) authorize or make capital expenditures in excess of $100,000
individually, or in excess of $300,000 in the aggregate;
(g) cancel or terminate any insurance policy naming the Company or
any of its subsidiaries as a beneficiary or a loss payee other than in the
ordinary course of business;
(h) (i) adopt, enter into, terminate or amend in any material
respect (except as may be required by applicable law) any plan for the
current or future benefit or welfare of any officer, director or employee of
the Company or any of its subsidiaries, (ii) enter into amend, waive, modify
or renew any employment or consulting agreement, (iii) increase in any manner
the compensation or fringe benefits of, or pay any bonus to, any officer,
director or employee (except for normal increas-
57
<PAGE>
es in salaries, compensation and bonuses and payment of bonuses, in each case
in the ordinary course of business or as required by contract), or (iv) take
any action to fund or in any other way secure, or to accelerate or otherwise
remove restrictions with respect to, the payment of compensation or benefits
under any employee plan, agreement, contract, arrangement or plan other than
in the ordinary course of business;
(i) make any material change in its accounting or Tax policies or
procedures, except as required by law or to comply with mandatory principles
of accounting; or
(j) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing.
Section 4.2 HSR ACT COMPLIANCE AND OTHER GOVERNMENTAL FILINGS.
Each party hereto agrees to use its best efforts to file as expeditiously as
possible (i) a completed notification report under the HSR Act in connection
with the transactions contemplated by this Agreement and (ii) filings with or
required by the Mexi-
58
<PAGE>
can Comision Federal de Competencia (if any), and upon the request of the
Mexican Comision Federal de Competencia, the Federal Trade Commission or the
Department of Justice, as the case may be, to supply such entity with any
additional requested information as expeditiously as possible. Each party
shall promptly inform the other of any such request and shall cooperate with
the other in responding to such request.
Section 4.3 POST-CLOSING COLLECTIONS. Seller and its affiliates
shall promptly pay over to Buyer all amounts received by Seller or its
affiliates on or after the Closing Date in respect of the accounts receivable
or other assets of the Company and its subsidiaries, and Buyer shall promptly
pay over to Seller all amounts received by Buyer on or after the Closing Date
that are not related to the accounts receivable or other assets of the
Company and its subsidiaries.
Section 4.4 EXPENSES. Each of Seller and Buyer shall pay all of
its own costs and expenses associated with the negotiation and conclusion of
this Agree-
59
<PAGE>
ment and the consummation of the transactions contemplated hereby.
Section 4.5 SEVERANCE ARRANGEMENTS. Buyer shall, or shall cause
the Company to, honor and be solely responsible for payment of the amounts
described in the section entitled "Severance Arrangements" in each of the
letter agreements between the Company and certain of its officers (each, an
"Executive") set forth in Section 4.5(i) of the Disclosure Schedule (the
"Retention Agreements") in accordance with the terms and conditions regarding
such payment set forth in such Retention Agreements, except to the extent
modified or superseded by any separate agreement which may be entered into by
the Executive and Buyer or any of its subsidiaries. Seller shall honor and be
solely responsible for payment of the amounts described in the sections of
such Retention Agreements entitled "Stay Bonus" and shall take any actions
required to be taken by such Retention Agreements with respect to stock
options granted by Seller in such Retention Agreements, subject to and in
accordance with
60
<PAGE>
the terms and conditions regarding such payment or actions set forth in the
Retention Agreements. Seller shall be solely responsible for payment of any
amounts which arise pursuant to the employment agreement referred to in
Section 4.5(ii) of the Disclosure Schedule.
Section 4.6 PUBLIC ANNOUNCEMENTS. No party hereto shall make or
issue, or cause to be made or issued, any announcement or written statement
concerning this Agreement or the transactions contemplated hereby for
dissemination to the media or the public without the prior written consent of
the other party. The preceding sentence shall not apply, however, to any
announcement or written statement required to be made by applicable law or
administrative or legal process or pursuant to any securities exchange rules,
except that the party required to make the announcement shall, whenever
practicable, consult with the other parties prior to the making of any such
announcement concerning the timing and content thereof.
61
<PAGE>
Section 4.7 TRANSACTION COSTS. Seller shall pay all sales, use,
transfer, documentary stamp and other similar Taxes with respect to the sale
and purchase of the Shares.
Section 4.8 FURTHER ASSURANCES. Each of Seller and Buyer shall
use its best efforts to take all action and to do all things necessary to
consummate and make effective the transactions contemplated by this
Agreement; PROVIDED, HOWEVER, that neither Seller nor Buyer nor their
respective affiliates shall be required to dispose of any part of its
business or the assets pertaining thereto. In the event that, at any time
after the Closing, any further action is necessary or desirable to carry out
the purposes of this Agreement, each party to this Agreement shall take, and
shall cause its officers and directors, as the case may be, to take, all such
necessary action including, without limitation, the execution and delivery of
such further instruments and documents as may reasonably be requested by the
parties hereto for such purposes or otherwise to complete the
62
<PAGE>
transactions contemplated hereby.
Section 4.9 PRODUCT LIABILITY. (a) Seller is and shall be solely
responsible for any and all claims for injury (including, without limitation,
death) or claims for damage, direct or consequential, resulting from or
connected with goods manufactured or sold or products-related services
provided by the Company or any of its subsidiaries on or before the Closing
Date, to the extent that such claims are delivered to Seller on or before the
first anniversary of the Closing Date.
(b) Buyer is and shall be solely responsible for any and all
claims for injury (including, without limitation, death) or claims for
damage, direct or consequential, resulting from or connected with goods
manufactured or sold or products-related services provided by the Company on
or prior to the Closing Date, to the extent that such claims are not
delivered to Seller on or before the first anniversary of the Closing Date,
and shall be solely responsible for all claims for all products manufactured
after the Closing Date. If the parties
63
<PAGE>
hereto cannot determine, in good faith, whether a product was manufactured on
or before the Closing Date, then all claims with respect to that product
shall be the responsibility of Buyer.
(c) Buyer acknowledges that prior to Seller's ownership of the
Company certain insurance policies which included coverage for product
liability were purchased by the Company's predecessor (the "Predecessor
Policies"). Such Predecessor Policies are in the name of predecessor
companies to the Company and are assets of the Company. Buyer and the
Company hereby grant Seller the authority to file claims with the insurers
under the Predecessor Policies and pursue the benefits of such coverage to
the extent that such Predecessor Policies provide coverage for product
liability claims retained by Seller pursuant to Section 4.9(a) above. Buyer
assigns to Seller all benefits of the insurance under the Predecessor
Policies to the extent such benefits are actually received for the product
liability claims retained by Seller pursuant to Section 4.9(a) above and
turned over to Buyer to the
64
<PAGE>
extent required by Section 4.9. Buyer agrees to aid and support Seller in
pursuit of the insurance under the Predecessor Policies which shall include,
but not be limited to, supplying records, personnel, and, if necessary,
filing lawsuits or claims against insurers to collect the insurance under the
Predecessor Policies and Seller shall reimburse Buyer for its third party
costs incurred in connection with such assistance to Seller. Seller shall be
entitled to control the proceedings for any such lawsuits or claims.
Section 4.10 USE OF NAME. Promptly after the Closing but in no
event more than 30 days following the Closing Date, Buyer shall file an
amendment to the certificate of incorporation or other charter documents of
the Company and, to the extent applicable, its subsidiaries, and each
qualification to do business in each jurisdiction in which the Company and
its subsidiaries is so qualified changing the name of the Company and any
applicable subsidiary to a name which does not include or resemble in any way
"Coleman" or any other trade name or
65
<PAGE>
trademark owned or used by Seller or its affiliates.
Section 4.11 BOOKS AND RECORDS. (a) Seller will deliver to Buyer
as promptly as practicable on or after the Closing Date all books and records
of the Company and its subsidiaries (collectively, the "Documents"),
PROVIDED, HOWEVER, that Seller may retain copies of Documents and certain
Documents related to Taxes, product liability claims, insurance or required
by law to be kept by Seller. Each party hereto agrees to make reasonably
available to the other party, at the other party's expense (including, with
respect to clause (i) below, the right to make copies) (i) any and all such
Documents (other than Documents relating to liabilities for which Seller is
indemnifying Buyer and its subsidiaries, including Taxes as set forth in
Article VI hereof), and including, without limitation, those reasonably
necessary to respond to inquiries regarding the Company or any of its
subsidiaries from Governmental Entities or any customer or supplier of the
Company or any of its subsidiaries or to defend claims or otherwise indemnify
66
<PAGE>
Seller or Buyer, as the case may be, under the terms of this Agreement and
(ii) in connection with another party's review of any such Documents, any and
all personnel as are reasonably requested by such other party, who will
render all assistance as may reasonably be requested in that regard.
(b) Subject to (x) the provisions of Section 6.5(c) hereof, (y)
the following four sentences and (z) damage or destruction beyond Buyer's or
Seller's reasonable control, as applicable, Buyer shall maintain and keep all
Documents delivered to Buyer pursuant to this Agreement. In the event that
Buyer determines that it does not wish to keep certain Documents, Buyer shall
notify Seller of its intent to ship such Documents to Seller, and of the
approximate amount of such Documents to be shipped, no later than 30 days
before the date of shipment. At the request of Seller made prior to the
scheduled shipment date, Buyer shall permit Seller to inspect such Documents
at Buyer's usual location for the same on a mutually convenient date and
shall permit
67
<PAGE>
Seller to destroy any or all of such Documents at such site. Any of such
Documents not so destroyed (or all such Documents if no such request is
timely made) shall be shipped to Seller at Seller's expense. Seller has no
obligation to retain any Document so shipped to it.
Section 4.12 TRANSFER OF NOMINEE SHARE. At or immediately prior
to the Closing, Seller will cause the Nominee Share to be transferred to an
employee of the Company.
ARTICLE V
CERTAIN EMPLOYEE AND BENEFIT MATTERS
Section 5.1 CONTINUED EMPLOYMENT; SERVICE CREDIT. Buyer shall on
the Closing Date continue the employment of all employees of the Company and
its subsidiaries as of the Closing Date (the "Affected Employees"). The
Affected Employees shall be given credit for all service with the Company or
its subsidiaries (and service credited by the Company or such subsidiary), to
the same extent as such service was credited for such
68
<PAGE>
purpose by the Company or such subsidiary, under (a) all employee benefit
plans, programs and policies, and fringe benefits of Buyer in which they
become participants for purposes of eligibility and vesting (but not for
purposes of benefit accrual), and (b) severance plans for purposes of
calculating the amount of each Affected Employee's severance benefits;
PROVIDED, HOWEVER, that no Executive who is a party to a Retention Agreement
that provides for Severance Arrangements shall be eligible to participate in
any severance plan of the Buyer or any affiliate of the Buyer while such
Retention Agreement remains in effect. To the extent permissible under the
terms thereof and required by applicable law, Buyer shall (i) waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plans that such employees may be eligible
to participate in after the Closing Date, other than limitations or waiting
periods that are already in effect with respect to such employees and that
69
<PAGE>
have not been satisfied as of the Closing Date under any welfare benefit plan
maintained for the Affected Employees immediately prior to the Closing Date,
and (ii) provide each Affected Employee with credit for any co-payments and
deductibles paid prior to the Closing Date in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Closing Date. Nothing in
this Section shall be deemed to require the employment of any Affected
Employee to be continued for any particular period of time after the Closing
Date.
Section 5.2 CONTINUATION OF BENEFITS. Buyer will maintain for a
period of at least one year after the Closing Date, without interruption,
such employee compensation and benefit plans (other than stock option plans),
programs, policies and fringe benefits as will, in the aggregate, provide
benefits to the Affected Employees that are no less favorable than those
provided pursuant to such employee compensation and benefit plans, programs,
policies and fringe benefits of the Company and
70
<PAGE>
its subsidiaries, as in effect on the Closing Date.
Section 5.3 SEVERANCE PAY. In addition to and notwithstanding the
provisions of Section 4.5 hereof, Buyer will bear, and will indemnify, defend
and hold harmless Seller from and against, all losses, damages, deficiencies,
suits, claims, demands, judgments, costs, expenses or other liabilities,
including without limitation reasonable expenses and fees of counsel, arising
from or relating to claims made by or on behalf of any Affected Employee in
respect of employment agreements and corporate policy pertaining to payroll,
severance pay, accrued vacation and similar obligations ("Employment Losses")
relating to the termination of any Affected Employee's employment with the
Company or any of its subsidiaries as a result of actions by Buyer or the
Company at or after the Closing; PROVIDED, HOWEVER, that nothing in this
Section 5.3 shall (i) be construed to cause any person other than Seller to
be responsible for payment of any amounts which arise pursuant to the
employment agreement referred to in Section 4.5(ii) of the
71
<PAGE>
Disclosure Schedule and (ii) affect Buyer's right in respect of Seller's
representations, warranties and covenants. Seller agrees that all Employment
Losses with respect to employees (other than Affected Employees) terminated
from employment with the Company or any of its subsidiaries arising before
the Closing Date will be discharged in full to the extent required prior to
the Closing Date; PROVIDED, HOWEVER, that Seller will indemnify Buyer from
and against Employment Losses with respect to employees other than Affected
Employees to the extent such Employment Losses are not either discharged
prior to the Closing Date or accrued on the Closing Statement of Company
Business Net Worth.
Section 5.4 INDEMNIFICATION OF BUYER FOR PLANS NOT ASSUMED.
Seller shall indemnify and hold harmless Buyer, the Company and all of the
Company's subsidiaries against any and all Losses (as defined in Section 9.2)
arising under Title IV of ERISA, Section 302 of ERISA and Sections 412 and
4971 of the Code which may be incurred by any of them arising out of or
relating to any employee
72
<PAGE>
benefit plan sponsored by the Seller or any Company ERISA Affiliate, other
than the Company Employee Benefit Plans, whether such Losses arise out of or
relate to any event or state of facts occurring or existing before, on or
after the Closing Date.
Section 5.5 COMPANY DEFINED CONTRIBUTION PLAN. Effective as of
the Closing Date, Buyer shall make available (or cause one of its affiliates
to make available) a defined contribution plan for the benefit of the
Affected Employees (the "Company DC Plan"). As promptly as practicable after
the Closing Date, the Seller shall cause the trustee of the Coleman Monthly
Salaried Retirement Income Savings Plan and the Coleman Retirement Incentive
Savings Plan (collectively, the "Seller DC Plans") to transfer to the trustee
of the Company DC Plan the account balances of each Affected Employee with
respect to whom the Seller DC Plans maintain an account as of the close of
business on the Closing Date. Such transfers shall be equal to the value of
the transferred account balances as of the close of business on the day
preceding
73
<PAGE>
the date of transfer and shall be in cash (or, in the case of participant
loans granted prior to the Closing Date, if any, such loans and any
promissory notes or other documents evidencing such loans).
ARTICLE VI
TAXES
Section 6.1 TAX INDEMNIFICATION. Independent, and without
duplication of the indemnification provisions set forth in Article IX of this
Agreement:
(a) Seller shall indemnify Buyer, the Company and the Company's
subsidiaries and hold them harmless from and against, without duplication,
(i) all liability for all Taxes (except as provided in paragraph (b) of this
Section 6.1) of the Company and its subsidiaries for all taxable periods
ending on or before the Closing Date and the portion ending on the Closing
Date of any taxable period that includes (but does not end on) the Closing
Date ("Pre-Closing Tax Period"), (ii) all liability for Taxes resulting from
a valid, timely and effective elec-
74
<PAGE>
tion under Section 338(h)(10) of the Code and Section 1.338(h)(10)-1 of the
Treasury Regulations and any comparable election under state or local tax law
with respect to the Company and the subsidiaries set forth in Section 6.1 of
the Disclosure Schedule (collectively, the "Election"), as contemplated by
Section 6.3 hereof, (iii) any and all liability for Taxes of any member of an
affiliated, consolidated, combined or unitary group of which the Company or
any of its subsidiaries (or any predecessor of any of the foregoing) is or
was a member on or prior to the Closing Date, including by reason of the
liability of the Company or any of its subsidiaries (or any predecessor of
any of the foregoing) pursuant to Treasury Regulation Section 1.1502-6 or any
analogous or similar state, local or foreign law or regulation, (iv) any
payments required to be made after the Closing Date under any Tax sharing,
Tax indemnity, Tax allocation or similar contracts (whether or not written)
to which the Company was obligated, or was a party, on or prior to the
Closing Date, and (v) all liability for Taxes of any person
75
<PAGE>
(other than the Company and its subsidiaries) imposed on the Company or any
of its subsidiaries as a transferee or successor, by contract or pursuant to
any law, rule or regulation, which Taxes relate to an event or transaction
occurring before the Closing; PROVIDED, HOWEVER, that in the case of clauses
(i), (ii), (iii), (iv) and (v) above, Seller shall be liable only to the
extent that such Taxes are in excess of the amount, if any, reserved for such
Taxes on the Closing Statement of Company Business Net Worth. Subject to the
specific allocation of expenses set forth in Article VI and any provision
relating to expenses to be borne by Buyer set forth in this Article VI,
Seller shall indemnify Buyer, the Company and the Company's subsidiaries for
Losses (as defined in Section 9.2) incurred in defense of any Tax Claim that
is initiated by any Taxing Authority against the Buyer, the Company or the
Company's subsidiaries that relates to liabilities for Taxes described in
clauses (i), (ii), (iii), (iv) and (v) above.
(b) Buyer shall, and shall cause the Company
76
<PAGE>
to, indemnify Seller and its affiliates and hold them harmless from and
against all liability for Taxes of Company or any of its subsidiaries for any
taxable period ending after the Closing Date (except to the extent such
taxable period began before the Closing Date, in which case Buyer's indemnity
will cover only that portion of any such Taxes that do not relate to the
Pre-Closing Tax Period).
(c) In the case of any taxable period that includes (but does not
end on) the Closing Date (a "Straddle Period"), the Taxes of the Company and
its subsidiaries for the Pre-Closing Tax Period shall be determined based on
an interim closing of the books as of the close of business on the Closing
Date (and for such purpose, the taxable period of any partnership or other
pass-through entity in which the Company or any subsidiary holds a beneficial
interest shall be deemed to terminate at such time), except that the amount
of any such Taxes that are imposed on a periodic basis and are not based on
or measured by income or receipts shall be
77
<PAGE>
determined by reference to the relative number of days in the pre-Closing and
post-Closing portions of such Straddle Period. All determinations necessary
to effect the foregoing allocations shall be made in a manner consistent with
prior practice of the Company and its subsidiaries.
Section 6.2 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim for Taxes shall be made by any Taxing Authority in writing,
which, if successful, could reasonably result in an indemnity payment
pursuant to Section 6.1 hereof, the party seeking indemnification (the "Tax
Indemnified Party") shall upon receipt thereof promptly notify the other
party (the "Tax Indemnifying Party") in writing of such claim (a "Tax
Claim"). If the Tax Claim is delivered to the party that would be the Tax
Indemnifying Party for such Tax Claim, the Tax Indemnifying Party shall
promptly notify the Tax Indemnified Party, in writing, of the existence of
such claim. If notice of a Tax Claim ("Tax Notice") is not given to the Tax
Indemnifying Party by the Tax Indemni-
78
<PAGE>
fied Party within a reasonably sufficient period of time to allow the Tax
Indemnifying Party effectively to contest such Tax Claim, or in reasonable
detail to notify the Tax Indemnifying Party of the nature of the Tax Claim,
taking into account the facts and circumstances with respect to such Tax
Claim, the Tax Indemnifying Party shall not be liable to the Tax Indemnified
Party or any of its affiliates to the extent that the Tax Indemnifying
Party's position is actually prejudiced as a result thereof.
(b) With respect to any Tax Claim which might result in Seller
being obligated to make an indemnity payment to Buyer pursuant to Section
6.1(a) hereof (other than a Tax Claim relating to Taxes of the Company or any
of its subsidiaries for a Straddle Period) or any Tax Claim involving
Seller's Tax gain pursuant to the Election, Seller shall at its sole expense
control all proceedings in connection with such Tax Claim (including, without
limitation, selection of counsel) and without limiting the foregoing, may in
its sole discretion and at
79
<PAGE>
its sole expense pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing Authority with respect
thereto, and may, in its sole discretion, either pay the Tax claimed and sue
for a refund where applicable law permits such refund suits or contest such
Tax Claim in any permissible manner. Buyer and the Company may participate
in, but not control, all proceedings relating to such Tax Claim at their sole
expense; PROVIDED, HOWEVER, that such participation shall not, under any
circumstances, require the disclosure of any Tax Return relating to a
Pre-Closing Tax Period of an affiliated, consolidated, combined or unitary
group which includes a company other than the Company and any of its
subsidiaries or any work papers relating thereto. In no case shall Buyer or
the Company settle or otherwise compromise any Tax Claim referred to in the
preceding sentence without Seller's prior written consent, which consent will
not be unreasonably withheld. In no case shall Seller settle or otherwise
compromise any Tax Claim referred to above which could have an
80
<PAGE>
adverse effect which is material to the Company and any of its subsidiaries
with respect to Taxes owed for any taxable period beginning after the Closing
Date or post-Closing portion of a Straddle Period, without Buyer's prior
written consent, which consent will not be unreasonably withheld. Buyer, the
Company and their affiliates shall reasonably cooperate with Seller in
contesting such Tax Claim, which cooperation shall include, without
limitation, the reasonable retention and (upon Seller's request) the
provision to Seller of copies of records and information which are reasonably
relevant to such Tax Claim, and making employees reasonably available to
provide additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such Tax Claim, all at
Seller's expense.
(c) The contest of any Tax Claim that relates to Taxes of the
Company or any of its subsidiaries for a Straddle Period shall be conducted
and controlled jointly by Buyer and Seller, with either party having the
option with the other party's consent of
81
<PAGE>
ceding the entire defense to the other, and each party shall reasonably
cooperate (which cooperation shall not, under any circumstances, require the
disclosure of any Tax Return relating to a Pre-Closing Tax Period of an
affiliated, consolidated, combined or unitary group which includes a company
other than the Company and its subsidiaries or any work papers relating
thereto) and consult with the other party at its own expense and there shall
be no settlement or closing or other agreement with respect thereto without
the consent of the other party, which consent shall not be unreasonably
withheld.
Section 6.3 SECTION 338(h)(10) ELECTION. (a) Seller and Buyer
shall jointly make the Election on a timely basis in accordance with all
rules and regulations applicable to the Election. As soon as practicable
after the Closing, Seller and Buyer shall mutually prepare a Form 8023-A,
with all attachments, and Seller shall sign such Form 8023-A. Also, Buyer
and Seller shall cooperate with each other to take all actions necessary and
appropriate (including timely filing such additional forms,
82
<PAGE>
returns, elections, schedules and other documents on a joint or separate
basis) as may be required to effect and preserve a timely Election in
accordance with the provisions of Section 1.338(h)(10)-1 of the Treasury
Regulations (or any comparable provisions of state or local tax law) or any
successor provisions. Seller and Buyer shall report the purchase by Buyer of
the Shares pursuant to this Agreement consistent with the Election and shall
take no position inconsistent therewith in any Tax Return or any proceeding
before any Taxing Authority.
(b) In connection with the Election, not later than 70 days after
the Closing, Seller and Buyer shall, together and in good faith, determine
and agree upon the "Modified Aggregate Deemed Sale Price" of the assets of
the Company and the subsidiaries set forth in Section 6.1 of the Disclosure
Schedule (within the meaning of, and in accordance with Section
1.338(h)(10)-1(f) of the Treasury Regulations and any comparable provisions
of state or local tax law). Each of Seller and Buyer can terminate in
writing at any time negotiations with respect to
83
<PAGE>
the "Modified Aggregate Deemed Sale Price" within 70 days after the Closing.
In the event of such termination, Seller and Buyer shall, not later than 10
days after such termination, submit all such disputed items for resolution to
the Auditor which shall resolve the disputed items within 20 days thereafter.
The parties' agreement on the amount of "Modified Aggregate Deemed Sales
Price" and the Auditor's resolution of disputed items with respect thereto
shall be final and binding on the parties. In connection with the Election,
not later than 60 days after the later of the parties' agreement as to the
amount of the "Modified Aggregate Deemed Sales Price" or the Auditor's
resolution of disputed items with respect thereto, Buyer shall reasonably
determine the proper allocations (the "Allocations") of the "Modified
Aggregate Deemed Sale Price" among the assets of the Company and such
subsidiaries (in accordance with Section 338(b)(5) of the Code and the
Treasury Regulations promulgated thereunder and comparable provisions of
state or local tax law) and shall submit a statement (the "Section
84
<PAGE>
338 Statement") to Seller setting forth the foregoing. Seller may dispute
Buyer's determination of the Allocations within 40 days ("40 Day Review") of
delivery of the Section 338 Statement to Seller if Seller reasonably believes
that Buyer's determinations are unreasonable. In the event of such a
dispute, the parties shall commence negotiations (which either party may
terminate at any time) and shall attempt in good faith to resolve any such
dispute and any resolution of such dispute by them shall be final and binding
on them. If either party terminates such negotiations, or if the parties
cannot resolve any such dispute within 40 days of such delivery by Buyer to
Seller, the dispute shall be submitted no later than 10 days thereafter for
resolution to the Auditor which shall make its determination within 20 days
after submission to it of the dispute. Buyer and Seller shall be bound by
Buyer's determinations of the Allocations unless the Auditor determines that
they are unreasonable. The "Modified Aggregate Deemed Sales Price" and
Allocations shall be adjusted as appropriate to reflect
85
<PAGE>
the final and binding Closing Statement of Company Net Worth. In the event
that the parties cannot resolve any disputes over such adjustments within 20
days after the receipt of the final and binding Closing Statement of Company
Net Worth, the disputes shall be submitted no later than 10 days thereafter
for resolution to the Auditor which shall make its determination within 20
days after submission to it of the dispute. Seller and Buyer shall (i) be
bound by the final determination of the "Modified Aggregate Deemed Sale
Price" and such Allocations for purposes of determining any Taxes, unless
otherwise required by law, (ii) prepare and file their Tax Returns on a basis
consistent with such final determination of the "Modified Aggregate Deemed
Sale Price" and such Allocations, subject to adjustment to reflect (x)
Seller's selling expenses as a reduction of sales proceeds, and (y) Buyer's
acquisition expenses as an adjustment to Purchase Price, and (iii) take no
position inconsistent with such determination of the "Modified Aggregate
Deemed Sales Price" and Allocations on any
86
<PAGE>
applicable Tax Return or in any proceeding before any Taxing Authority. No
Tax Returns reflecting the Allocations shall be filed prior to the later of
(i) the last day of the 40 Day Review and (ii) if any items with respect to
the Allocations are in dispute, the Auditor's resolution of such disputed
items, except as otherwise required by law. In the event that any of the
Allocations is disputed by any Taxing Authority, the party receiving notice
of the dispute shall promptly notify the other party hereto concerning
resolution of the dispute.
Section 6.4 SURVIVAL OF TAX PROVISIONS. Any claim to be made
pursuant to this Article VI hereof must be made within 15 days of the
expiration (with valid extensions) of the applicable statutes of limitations
relating to the Taxes at issue. Buyer shall notify Seller in writing in the
event that Buyer extends the statute of limitations for any period that
begins prior to the Closing Date; PROVIDED, HOWEVER, the failure of Buyer to
provide such notification shall not affect the rights of Buyer, the Company
or any subsidiaries of the
87
<PAGE>
Company to indemnification under Section 6.1(a).
Section 6.5 RETURN FILINGS, REFUNDS AND CREDITS. (a) Seller shall
prepare or cause to be prepared and file or cause to be filed on a timely
basis all Tax Returns with respect to the Company and its subsidiaries for
taxable periods ending on or prior to the Closing Date. Seller shall timely
pay or cause to be paid all Taxes shown on all such Tax Returns and Buyer
and/or the Company shall pay to Seller from the reserves, if any, on the
Closing Statement of Company Business Net Worth for such Taxes an amount not
in excess of the amount paid by the Seller in respect of such Taxes. Such
Tax Returns shall be prepared in a manner consistent with past practices and
such Tax Returns which do not relate to or include a company other than the
Company and any of its subsidiaries ("Separate Returns") shall be provided to
Buyer to allow for Buyer's review prior to filing. Seller and Buyer agree to
consult and resolve in good faith any issue arising as a result of the review
of such Separate Returns. In the event the parties are unable to
88
<PAGE>
resolve any dispute within ten days following the delivery of such Separate
Returns, the parties shall jointly request the Auditor to resolve any issue
at least five days before the due date of any such Separate Return, in order
that such Separate Return may be timely filed. The Seller and Buyer shall
each pay one-half of the Auditor's fees and expenses.
(b) Buyer shall prepare or cause to be prepared and shall file or
cause to be filed on a timely basis all Tax Returns with respect to the
business of the Company and its subsidiaries other than those set forth in
clause (a) of this Section 6.5. Buyer shall cause to be timely paid all
Taxes shown on all such Tax Returns related to Straddle Periods, except that
Seller shall be responsible for and shall pay any Taxes for which Seller has
agreed to indemnify Buyer pursuant to Section 6.1 hereof. Buyer shall
provide Seller with copies of any such Tax Returns covering Taxes for which
Seller has agreed to indemnify Buyer pursuant to Section 6.1 hereof at least
20 days prior to the due date thereof (giving
89
<PAGE>
effect to any extensions thereto), accompanied by a statement calculating
Seller's indemnification obligation pursuant to Section 6.1 hereof. Seller
shall pay to Buyer the amount of Seller's indemnification obligation within
10 days of receiving copies of such Tax Returns unless Seller objects to the
calculation of Seller's indemnification obligation in the statement provided
by Buyer. In the event of an objection, the parties will commence
negotiations to resolve such disagreement (which negotiations either party
may terminate at any time) and if necessary resolve any disputes in
accordance with Section 6.8 hereof.
(c) Seller, Buyer and the Company shall reasonably cooperate, and
shall cause their respective affiliates, officers, employees, agents,
auditors and representatives reasonably to cooperate, in preparing and filing
all Tax Returns (including amended returns and claims for refund), including
maintaining and making reasonably available to each other all records
necessary in connection with Taxes with respect to, and in resolv-
90
<PAGE>
ing all disputes and audits relating to Taxes with respect to, all taxable
periods ending on or prior to or which include the Closing Date; provided
however, that cooperation as required by this clause (c) of Section 6.5 shall
not, under any circumstances, require the disclosure of any Tax Return
relating to a Pre-Closing Tax Period of an affiliated, consolidated, combined
or unitary group which includes a company other than the Company and its
subsidiaries or any work papers relating thereto. Buyer and Seller recognize
that Seller and its affiliates will need access, from time to time, after the
Closing Date, to certain accounting and Tax records and information held by
the Company or its subsidiaries to the extent such records and information
pertain to events occurring prior to the Closing Date; therefore, Buyer
agrees that (i) from and after the Closing Date until the seventh anniversary
of the Closing Date, Buyer shall, and shall cause the Company to, (A) use all
reasonable efforts to properly retain and maintain such records until such
time as Seller agrees that such retention and main-
91
<PAGE>
tenance is no longer necessary, and (B) allow Seller and its agents and
representatives (and agents or representatives of any of its affiliates), to
inspect, review and make copies of such records as Seller may reasonably deem
necessary or appropriate from time to time, such activities to be conducted
during normal business hours and at Seller's expense and (ii) from and after
the seventh anniversary of the Closing Date, Buyer shall not, and shall cause
the Company and its subsidiaries not to, dispose of any of such records
without first providing Seller with an opportunity to take possession of such
records or to make copies thereof, at Seller's expense, prior to such
disposal.
(d) Any refunds or credits of Taxes of the Company or any of its
subsidiaries for any taxable period ending on or before the Closing Date
shall be for the account of Seller but only to the extent that the amount of
any such refund or credit is in excess of the amount of such refund or credit
reflected on the Closing Statement of Company Business Net Worth. If such
Tax refunds
92
<PAGE>
or credits are received or used by or on behalf of Buyer or any affiliate or
successor thereto including the Company or any of its subsidiaries, then
Buyer shall, within 10 days of such receipt, pay the amount of such Tax
refund or credit to the Seller (reduced by any Taxes that the Buyer, the
Company or any of the Company's subsidiaries shall be required to pay with
respect thereto; PROVIDED, HOWEVER, that Buyer, the Company or any subsidiary
shall use its reasonable best efforts to minimize such Taxes if and to the
extent that any such efforts will not have an adverse effect which is
material to the Company and any of its subsidiaries with respect to Taxes
owed in any taxable period beginning after the Closing Date or the
post-Closing portion of a Straddle Period). Any refunds or credits of Taxes
of the Company or any of its subsidiaries for any taxable period beginning
after the Closing Date shall be for the account of Buyer. If such Tax refunds
or credits are received by or on behalf of Seller or any affiliate or
successor thereto, then Seller shall within 10 days of such receipt, pay
93
<PAGE>
the amount of such Tax refund or credit to Buyer (reduced by any Taxes that
the Seller shall be required to pay with respect thereto; PROVIDED, HOWEVER,
that the amount of such Tax refund or credit shall be net of Taxes only if
Seller uses its best efforts to minimize such Taxes). Any refunds or credits
of Taxes of the Company or any of its subsidiaries for any Straddle Period
shall be apportioned between Seller and Buyer on the same basis on which such
Taxes were apportioned under Section 6.1 hereof between Buyer and Seller.
Buyer shall, if Seller so requests and at Seller's sole expense, cause the
Company or any of its subsidiaries, as appropriate, to file for and use its
reasonable best efforts to obtain any refunds or credits to which Seller is
entitled under this Section 6.5 provided that the seeking of any such refund
or credit shall not have any adverse effect which is material to the Company
and any of its subsidiaries with respect to Taxes owed in any taxable period
beginning after the Closing Date or the post-Closing portion of a Straddle
Period. Buyer shall permit Seller to
94
<PAGE>
participate in, but not control, the prosecution of any such refund claim.
Buyer shall cause the Company or such subsidiary to forward to Seller any
such refund within 10 days after the refund is received (or reimburse Seller
for any such credit within 10 days after the relevant Tax Return is filed in
which the credit is actually applied against the Company or such subsidiary's
liability for Taxes).
Section 6.6 TRANSFER TAXES. Notwithstanding any other provisions
of this Agreement to the contrary, Seller shall prepare or cause to be
prepared and timely file or cause to be timely filed with the appropriate
Taxing Authority all Tax Returns with respect to all transfer, stamp,
duties, recording, value added tax and similar taxes imposed in connection
with Buyer's purchase of the Shares pursuant to this Agreement. As provided
in Section 4.7 hereof, Seller shall pay or cause to be paid all such Taxes.
Section 6.7 TERMINATION OF TAX SHARING AGREEMENTS. Seller hereby
agrees and covenants that any Tax
95
<PAGE>
sharing, indemnity, allocation, or similar agreements to which the Company or
any of its subsidiaries is a party will cease to apply to the Company or any
of its subsidiaries as of the Closing Date and, after the Closing Date, the
Buyer, the Company and its subsidiaries will not be bound by or have any
liability thereunder.
Section 6.8 DISPUTES. If the parties disagree as to (i) the
calculation of any Tax or (ii) the amount of or liability for any Tax-related
payment to be made under this Article VI or (iii) the definition of "adverse
effect which is material to the Company and any of its subsidiaries" as used
in Sections 6.2(b) and 6.5(d), the parties shall cooperate in good faith to
resolve any such dispute, and any agreed-upon amount shall be paid to the
appropriate party. A party may, at any time, terminate, in writing,
discussions with respect to such dispute. Not later than 10 business days
after either Seller or Buyer shall have terminated such discussion, all such
disputed items set forth in clauses (i) and (ii) above shall be submitted for
resolution to the Auditor. The
96
<PAGE>
decision of such firm shall be final and binding. The fees and expenses
incurred in connection with such decision shall be shared by Seller and Buyer
in accordance with the final allocation of the Tax liability in dispute.
Following the decision of the Auditor, the parties shall each take or cause
to be taken any action that is necessary or appropriate to implement such
decision, including, without limitation, the filing of amended Tax Returns
and the prompt payment of underpayment or overpayment, with interest
calculated on such underpayment or overpayment at the interest rate specified
in Section 6621(a)(2) of the Code (or such successor provision) from the date
such payment was due.
Section 6.9 DETERMINATION AND CHARACTERIZATION OF PAYMENTS. The
payments made pursuant to this Article VI shall be treated as adjustments to
the Purchase Price.
97
<PAGE>
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES. The
obligations of Seller and Buyer to effect the transactions contemplated by
this Agreement are subject to the satisfaction or waiver, on or before the
Closing Date, of each of the following conditions:
(a) no statute, rule or regulation shall have been enacted or
promulgated and no injunction or other order shall have been entered, and not
vacated, by a court or administrative agency of competent jurisdiction in any
proceeding or action, which enjoins, restrains, makes illegal or prohibits
consummation of the transactions contemplated hereby;
(b) all waiting periods under any law, regulation, rule or order
applicable to, or deemed to be applicable to, any of the transactions
contemplated by this Agreement, including without limitation the HSR Act,
shall have expired or been terminated, and all approvals required thereunder
shall have been granted, including
98
<PAGE>
but not limited to any approvals required from the Mexican Comision Federal
de Competencia; if approval under any such law is subject to the satisfaction
of any material conditions, then each such condition shall have been approved
by the party affected by such condition, which approval shall not be
unreasonably withheld; and
(c) Seller shall have received (i) all necessary consents or
waivers required under the Seller Credit Agreement and (ii) the release of
the Company as a guarantor under the Private Placement Notes and the Seller
Credit Agreement.
Section 7.2 CONDITIONS TO THE OBLIGATIONS OF SELLER. The
obligations of Seller to effect the transactions contemplated by this
Agreement are subject to the satisfaction or waiver by Seller, on or before
the Closing Date, of the following conditions:
(a) the representations and warranties of Buyer contained herein
shall have been true and correct in all material respects when made and as of
the Closing Date, as if made on the Closing Date;
99
<PAGE>
(b) Buyer shall have performed or complied in all material respects
with all agreements, covenants and conditions required by this Agreement to
be performed or complied with by it at or prior to the Closing; and
(c) Seller shall have been furnished with a certificate of an
executive officer of Buyer, dated the Closing Date, certifying to the
foregoing.
Section 7.3 CONDITIONS TO THE OBLIGATIONS OF BUYER. The
obligations of Buyer to effect the transactions contemplated by this
Agreement are subject to the satisfaction or waiver by Buyer, on or before
the Closing Date, of the following conditions:
(a) the representations and warranties of Seller contained herein
shall have been true and correct in all material respects when made and as of
the Closing Date, as if made on the Closing Date;
(b) Seller shall have performed or complied in all material
respects with all agreements, covenants and conditions required by this
Agreement to be performed or
100
<PAGE>
complied with by it at or prior to the Closing; and
(c) Buyer shall have been furnished with a certificate of an executive
officer of Seller, dated the Closing Date, certifying to the foregoing.
ARTICLE VIII
TERMINATION
Section 8.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual consent of Seller and Buyer;
(b) by Buyer after April 30, 1998 (which date shall be
automatically extended to June 30, 1998 if the conditions set forth in
Section 7.1(b) or (c) have not been satisfied or waived and are still capable
of being satisfied) if any of the conditions provided for in Sections 7.1 or
7.3 hereof shall not have been met or waived in writing by Buyer prior to or
on such date; or
(c) by Seller after April 30, 1998 (which date shall be
automatically extended to June 30, 1998 if the conditions set forth in
Section 7.1(b) or (c) have not
101
<PAGE>
been satisfied or waived and are still capable of being satisfied) if any of
the conditions provided for in Sections 7.1 or 7.2 hereof shall not have been
met or waived in writing by Seller prior to or on such date.
If any party has caused a delay in closing the transactions
contemplated hereby by its failure to perform any covenant hereunder, which
failure has resulted in the failure of a condition contained in Article VII
hereof, such party shall not be entitled to terminate this Agreement pursuant
to subsections (b) or (c) of this Section, as the case may be, until the
expiration of a period following the date specified in such subsection
corresponding to the period of delay so caused.
Section 8.2 EFFECT OF TERMINATION. In the event of termination of
this Agreement pursuant to this Article VIII, this Agreement shall
immediately terminate and be of no further force and effect, and there shall
be no liability on the part of Buyer or Seller (except for liabilities
arising from willful breach of this Agreement prior to such termination);
PROVIDED, HOWEVER, that
102
<PAGE>
Sections 4.4, 4.5, 10.4, 10.8 and 10.10 hereof and this Article VIII shall
survive the termination hereof; PROVIDED FURTHER, that all information
received by Buyer with respect to the Company and its subsidiaries shall be
treated in accordance with the Confidentiality Agreement dated November 17,
1997 between Buyer and BancAmerica ROBERTSON STEPHENS (the "Confidentiality
Agreement"), which shall remain in full force and effect notwithstanding the
execution or termination of this Agreement.
ARTICLE IX
INDEMNIFICATION
Section 9.1 SURVIVAL. The representations and warranties: (i)
contained in this Agreement (except for those set forth in Sections 2.13 and
2.14 hereof) shall survive the Closing and shall continue in full force and
effect for a period of eighteen months (18) months thereafter; (ii) contained
in Section 2.13 hereof shall not survive the Closing and (iii) contained in
Section 2.14 hereof shall survive the Closing and shall continue in
103
<PAGE>
full force and effect for a period of three (3) years, after which such
representations and warranties shall terminate and have no further force or
effect. The periods set forth in clauses (i), (ii) and (iii) above are
collectively referred to herein as the "Limitations Period." No action or
proceeding may be brought with respect to any of the representations and
warranties hereunder unless written notice thereof, setting forth in
reasonable detail the claimed misrepresentation or breach of warranty, shall
have been delivered prior to the expiration of the applicable Limitations
Period to the party alleged to have breached such representation or warranty.
The covenants and agreements contained herein to be performed or complied
with after the Closing shall survive indefinitely or for such shorter term as
is specified in such covenants and agreements.
Section 9.2 INDEMNIFICATION BY SELLER. Seller shall indemnify,
defend and hold harmless Buyer and its affiliates against any and all losses,
damages, deficiencies, suits, claims, demands, judgments, costs, expenses
104
<PAGE>
or other liabilities including, without limitation, reasonable attorneys'
fees and related expenses ("Losses") resulting from, arising from, or
relating to (i) any breach of a representation or warranty of Seller
contained in Article II of this Agreement except those representations and
warranties of Seller contained in Section 2.13 hereof, and (ii) any failure
by Seller to perform or comply with any agreement or obligation contained in
this Agreement.
Section 9.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify,
defend and hold harmless Seller against any and all Losses resulting, arising
from, or relating to (i) any breach of a representation or warranty of Buyer
contained in Article III of this Agreement, (ii) any failure by Buyer to
perform or comply with any agreement or obligation contained in this
Agreement, and (iii) all liabilities and obligations relating to the Company
and its subsidiaries, except to the extent that Seller is required to
indemnify Buyer in respect thereof (without regard to any deductible or cap
on the dollar amount of
105
<PAGE>
indemnity).
Section 9.4 LIMITATIONS OF CLAIMS. (a) Indemnification pursuant to
this Article IX with respect to a breach of the representations and
warranties set forth in Article II or Article III hereof shall be available
to any party only (i) if any such Loss or series of related Losses is greater
than $10,000 and (ii) to the extent such party's aggregate Losses exceed the
sum of $1,500,000; provided that, for purposes of computing Losses in respect
of this Article IX, any reference to materiality or Material Adverse Effect
in the representations and warranties shall be disregarded, and, provided,
further, that indemnification with respect to a breach of the representations
and warranties set forth in Section 2.14 hereof shall be available to Buyer
and its affiliates to the extent Buyer's aggregate Losses exceed the sum of
$500,000.
(b) Anything to the contrary herein notwithstanding, the aggregate
indemnification to be provided by any party pursuant to Article VI hereof or
this Article
106
<PAGE>
IX shall not exceed the Purchase Price, as adjusted by any payments pursuant
to Section 1.4 hereof.
(c) The amount of any Loss for which indemnification is provided
under this Article IX shall be net of (i) any amounts recovered by the
Indemnified Party (as defined below) pursuant to any indemnification by or
indemnification agreement with any third party and (ii) any insurance
proceeds or other cash receipts or sources of reimbursement received as an
offset against such Loss (and no right of subrogation shall accrue to any
third party indemnitor, insurer or reimburser hereunder); provided that the
Indemnified Party shall use its best efforts (at the sole cost and expense of
the Indemnifying Party, which shall reimburse third party expenses as they
are incurred) to receive the benefits of any such indemnification and
insurance and, upon such receipt, to pay such funds over to the Indemnifying
Party as reimbursement of any indemnification payment hereunder. If the
amount to be netted hereunder from any payment required under Sections 9.2 or
9.3 above is determined after
107
<PAGE>
payment by the Indemnifying Party (as defined below) of any amount required
to be paid to an Indemnified Party pursuant to this Article IX, the
Indemnified Party shall repay to the Indemnifying Party, promptly after such
determination, any amount that the Indemnifying Party would not have had to
pay pursuant to this Article IX had such determination been made at the time
of such payment. Indemnification payments hereunder shall be treated as
adjustments to the Purchase Price.
(d) Anything to the contrary herein notwithstanding, if an amount
with respect to which any claim is made under Article VI or Article IX (an
"Indemnity Claim") gives rise to a current Tax deduction to the party (the
"Indemnified Party") making the Indemnity Claim (as opposed to an increase in
the Tax basis of the Indemnified Party's assets), then the amount of the
related indemnity payment shall be (x) reduced by the amount of any Tax
Benefit whenever utilized by the Indemnified Party as a result of such Tax
deduction in respect of such Indemnity Claim, and (y) increased by the amount
108
<PAGE>
of any Tax Detriment whenever suffered by the Indemnified Party as a result
of the receipt of such indemnity payment (including by reason of a reduction
in the Tax basis of the Indemnified Party's assets). For purposes of this
Section 9.4, a "Tax Benefit" means an amount by which the Tax liability or
Tax sharing liability of a party is reduced (including, without limitation,
by deduction, reduction of income by virtue of increased Tax basis or
otherwise, entitlement to refund, credit or otherwise) plus any related
interest received from the relevant Taxing Authority, and a "Tax Detriment"
means an amount by which the Tax liability or Tax sharing liability of a
party is increased plus any related interest paid to the relevant Taxing
Authority. For purposes of determining Tax detriment, the "amount by which
the Tax liability or Tax sharing liability of a party is increased" in the
case where such increase is attributable to a reduction in the Tax basis of
assets shall be the present value of the Amount amortized or depreciated over
the Adjustment Period (properly weighted to take into account the rele-
109
<PAGE>
vant amortization or depreciation method) using the Interest Rate. The
Amount shall mean the amount that Tax basis is reduced by reason of the
receipt of an indemnity payment in respect of an Indemnity Claim. The
Adjustment Period shall mean the remaining life of the asset or assets whose
Tax basis has been so reduced at the time of such reduction using the
amortization or depreciation method applicable to such asset or assets at
such time. The Interest Rate shall mean the prime rate as reported in the
Wall Street Journal on the date which is three business days prior to the
date such indemnity payment in respect of such Indemnity Claim is made.
Where a party has other losses, deductions, credits or items available to it
such that it would not have any Tax liability or Tax sharing liability for a
Tax year, the determination of any Tax Benefit or Tax Detriment (as the case
may be) of such party for such Tax year shall be calculated by comparing (A)
the Tax liability or Tax sharing liability of such Party, computed without
regard to any income, gains, losses, credits, deductions, or items relating
to
110
<PAGE>
such Indemnity claim and such indemnity payment (as applicable), to (B) the
Tax liability or Tax sharing liability of such party, computed after taking
into account any income, gains, losses, deductions, credits or items relating
to such Indemnity Claim and such indemnity payment (as applicable). In the
event that there shall be a determination disallowing all or any portion of a
Tax Benefit or a Tax Detriment, the amount of the related indemnity payment
shall be recalculated in accordance with the terms of this Section 9.4(d),
taking into account such disallowance, and the Indemnifying Party shall be
liable to pay to the Indemnified Party the amount of any resulting upward
adjustment to the amount of the related indemnity payment, and the
Indemnified Party shall be liable to pay to the Indemnifying Party the amount
of any resulting downward adjustment to the amount of the related indemnity
payment.
(e) Any claim made under or with respect to this Agreement or the
subject matter hereof, including statutory and common law claims, shall be
subject to the
111
<PAGE>
provisions set forth in this Section 9.4 or, with respect to Taxes, Article VI
hereof.
Section 9.5 PROCEDURES. (a) A party seeking indemnification
pursuant to Sections 9.2 or 9.3 above or Section 4.9 hereof (an "Indemnified
Party") shall give prompt notice to the party from whom such indemnification
is sought (the "Indemnifying Party") of the assertion of any claim or
assessment, or the commencement of any action, suit, audit or proceeding, by
a third party in respect of which indemnity may be sought hereunder (a "Third
Party Claim") and will give the Indemnifying Party such information with
respect thereto as the Indemnifying Party may reasonably request, but no
failure to give such notice shall relieve the Indemnifying Party of any
liability hereunder (except to the extent the Indemnifying Party has
suffered actual prejudice thereby). Thereafter, the Indemnified Party shall
deliver to the Indemnifying Party, within five business days after the
Indemnified Party's receipt thereof, copies of all notices and documents
(including court papers) received by the Indem-
112
<PAGE>
nified Party relating to the Third Party Claim. The Indemnifying Party shall
have the right, exercisable by written notice (the "Notice") to the
Indemnified Party within 10 days of receipt of notice from the Indemnified
Party of the commencement of or assertion of any Third Party Claim, to assume
the defense of such Third Party Claim, using counsel selected by the
Indemnifying Party and reasonably acceptable to the Indemnified Party.
Should the Indemnifying Party so elect to assume the defense of a Third Party
Claim, the Indemnifying Party will not be liable to the Indemnified Party for
legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof. If the Indemnifying Party shall fail to assume the
defense of the Third Party Claim within such 10-day period, the Indemnified
Party shall have the right to undertake the defense of such Third Party Claim
on behalf of the Indemnifying Party. If the Indemnifying Party elects to
assume the defense of any such Third Party Claim, the Indemnified Party shall
not admit any liability with respect to, or
113
<PAGE>
settle, compromise or discharge, such Third Party Claim without the
Indemnifying Party's prior written consent. If the Indemnifying Party does
not elect to assume the defense of any such Third Party Claim, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the Indemnifying
Party's prior written consent, which consent will not be unreasonably
withheld; provided that, if the Indemnifying Party fails to reaffirm its
obligations to provide indemnification in respect of such Third Party Claim
if requested to do so by the Indemnified Party, the Indemnified Party may
settle, compromise or discharge such Third Party Claim on commercially
reasonable terms without the consent of the Indemnifying Party.
(b) The Indemnifying Party or the Indemnified Party, as the case
may be, shall in any event have the right to participate, at its own expense,
in the defense of any Third Party Claim which the other is defending.
(c) The Indemnifying Party, if it shall have
114
<PAGE>
assumed the defense of any Third Party Claim in accordance with the terms
hereof, shall have the right, upon five days prior written notice to the
Indemnified Party, to consent to the entry of judgment with respect to, or
otherwise settle such Third Party Claim provided the Indemnifying Party
agrees that as between the Indemnifying Party and the Indemnified Party, the
Indemnifying Party shall be solely obligated to satisfy and discharge such
judgment or settlement unless the Third Party Claim involves equitable or
other non-monetary damages. In the event such judgment or settlement
involves equitable or non-monetary damages and in the reasonable judgment of
the Indemnified Party such judgment or settlement would have a continuing
material adverse effect on the Indemnified Party's business (including any
material impairment of its relationships with customers and suppliers), the
consent to the entry of such judgment or such settlement may only be made
with the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
115
<PAGE>
(d) Whether or not the Indemnifying Party chooses to defend or
prosecute any Third Party Claim, all the parties hereto shall cooperate in
the defense or prosecution thereof and shall furnish such records,
information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested in
connection therewith. Such cooperation shall include access during normal
business hours afforded to the Indemnifying Party to, and reasonable
retention by the Indemnified Party of, records and information which are
reasonably relevant to such Third Party Claim, and making employees available
on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder, and the Indemnifying Party
shall reimburse the Indemnified Party for all its reasonable out-of-pocket
expenses in connection therewith.
Section 9.6 EXCLUSIVITY OF REMEDIES. As between Seller, on the
one hand, and Buyer, on the other hand, the remedies set forth in this
Article IX and
116
<PAGE>
Article VI hereof shall be the exclusive remedies with respect to all claims
for which indemnification may be sought, except for claims relating to fraud
or deceit under common law. As of the Closing, each party will release and
forever discharge the other party's officers, directors, employees, agents
and affiliates (other than Buyer's or Seller's subsidiaries), and such
affiliates' officers, directors, employees and agents from any and all rights
to seek reimbursement for or to make any claim against such other person in
respect of any Losses incurred in connection with the execution, delivery and
performance of this Agreement (including the accuracy of the representations
and warranties contained herein) and the transactions contemplated hereby,
provided that such release and discharge shall not apply to any other
matters. This Section 9.6 shall not restrict the rights of either party to
seek and obtain injunctive relief to specifically enforce the other party's
obligations hereunder or constitute a release or waiver of any person or
entity for actions taken by such person or entity after
117
<PAGE>
the Closing.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 DISCLOSURE SCHEDULES; EXHIBITS. Matters reflected in
the Schedules and Exhibits hereto are not necessarily limited to those
matters that Seller believes are required by this Agreement to be disclosed
herein or therein. Such additional matters are provided for informational
purposes only, and such inclusion shall not be deemed to be an acknowledgment
by Seller that such items would have a Material Adverse Effect, nor shall
such inclusion be applied to affect or modify the definition of the term
Material Adverse Effect for purposes of this Agreement.
Section 10.2 AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified or supplemented only by written agreement of the parties
hereto.
Section 10.3 WAIVER OF COMPLIANCE. Any party hereto may waive
compliance by the other party or parties
118
<PAGE>
with any of the agreements or conditions contained herein. Any such waiver
shall be valid only if set forth in a written instrument signed by the party
or parties to be bound thereby.
Section 10.4 NOTICES. All notices and other communications given
or made pursuant hereto shall be in writing and shall be deemed to have been
duly given on the date delivered, if delivered personally, on the fifth
business day after being mailed by registered or certified mail (postage
prepaid, return receipt requested) or on the business day after being sent by
reputable overnight courier (delivery prepaid), in each case, to the parties
at the following addresses, or on the date sent and confirmed by electronic
transmission to the facsimile number specified below (or at such other
address or
119
<PAGE>
facsimile number for a party as shall be specified by notice given in
accordance with this Section 11.4):
(a) if to Seller, to:
The Coleman Company, Inc.
625 Madison Avenue
New York, New York 10022
Attention: Chief Executive Officer
Tel: (212) 527-4000
Fax: (212) 527-4150
with a copy to:
The Coleman Company, Inc.
3600 North Hydraulic
Wichita, Kansas 67219
Attention: Corporate Secretary
Tel: (316) 832-2700
Fax: (316) 832-2634
and
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Stephen M. Banker, Esq.
Tel: (212) 735-2760
Fax: (212) 735-2000
120
<PAGE>
(b) if to Buyer, to:
Ranco Incorporated of Delaware
300 Delaware Avenue, Suite 1704
Wilmington, Delaware 19804-1612
Attention: President
Tel: (302) 427-5779
Fax: (302) 738-7210
with a copy to:
Siebe plc
Saxon House
2-4 Victoria Street
Windsor, Berkshire SL4 1EN
Attention: Chief Legal Officer
Tel: 011-41-1753-839-296
Fax: 011-44-1753-622-030
with a copy to:
Fried Frank Harris Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Sanford Krieger, Esq.
Tel: (212) 859-8230
Fax: (212) 859-4000
(c) if to Guarantor, to:
Siebe plc
Saxon House
2-4 Victoria Street
Windsor, Berkshire SL4 1EN
Attention: Chief Legal Officer
121
<PAGE>
Tel: 011-44-1753-839-296
Fax: 011-44-1753-622-030
with a copy to:
Fried Frank Harris Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Sanford Krieger, Esq.
Tel: (212) 859-8230
Fax: (212) 859-4000
Section 10.5 PARTIES IN INTEREST; ASSIGNMENT. This Agreement
shall be binding upon and inure to the benefit of each party hereto and its
respective successors and permitted assigns, and no provision of this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, except as provided in Article IX hereof. Neither
this Agreement nor any of the rights, interests or obligations hereunder may
be assigned, directly or indirectly, by any party hereto without the prior
written consent of the other parties hereto. Notwithstanding the foregoing,
Seller may assign any or all of its rights or
122
<PAGE>
interests under this Agreement to a wholly-owned subsidiary; PROVIDED,
HOWEVER, Seller may not so assign any of its obligations hereunder, and Buyer
may assign its rights hereunder (but such assignment will not relieve it of
any of its obligations) to any wholly-owned subsidiary of Guarantor.
Section 10.6 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which when executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
Section 10.7 CONSTRUCTION; INTERPRETATION. (a) Any rule of law
that would require interpretation of any claimed ambiguities in this
Agreement against the party that drafted it shall have no application and is
expressly waived.
(b) For purposes of this Agreement, all references to the
"appropriate Seller or Company personnel" shall refer solely to the
appropriate corporate officer of Seller or the Company listed in Section
10.7(b) of the
123
<PAGE>
Disclosure Schedule of whom due inquiry was made and "knowledge" of Seller
shall be deemed to include only the actual current knowledge of such
corporate officer of Seller or the Company.
(c) References made to an "Exhibit" or a "Schedule," unless
otherwise specified, refer to an Exhibit or Schedule, respectively, attached
to this Agreement, and references made to an "Article" or a "Section," unless
otherwise specified, refer to an Article or Section, respectively, of this
Agreement or the Disclosure Schedule. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
(d) As used herein, the plural form of any noun shall include the
singular and the singular shall include the plural, unless the context
requires otherwise. Each of the masculine, neuter and feminine forms of any
pronoun shall include all such forms unless the
124
<PAGE>
context requires otherwise.
Section 10.8 ENTIRE AGREEMENT. Except for the Confidentiality
Agreement, this Agreement (together with the Disclosure Schedule, Exhibits,
and the further agreements expressly referred to herein) and the License
Agreement constitute the entire agreement of the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
undertakings, both written and oral, between or among the parties, or any of
them, with respect to the subject matter hereof.
Section 10.9 SEVERABILITY. If any term or other provision of this
Agreement, or any portion thereof, is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other terms and provisions
of this Agreement, or the remaining portions thereof, shall nevertheless
remain in full force and effect. Upon such determination that any such term
or other provision, or any portion thereof, is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this
125
<PAGE>
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated hereby are consummated to the fullest possible extent.
Section 10.10 GOVERNING LAW. This Agreement shall be governed by
the laws of the State of New York as to all matters, without regard to the
conflict of laws principles thereof.
Section 10.11 GUARANTEE. Guarantor hereby unconditionally and
irrevocably guarantees all of the obligations and liabilities of Buyer under
this Agreement, including but not limited to the full and prompt payment of
all sums that now are or may hereafter become due and payable from Buyer to
Seller under this Agreement and the full and prompt performance of all
present and future obligations and liabilities of Buyer to Seller under this
Agreement. Guarantor further promises to pay all such sums due Seller under
this guarantee promptly on demand, without deduction for any claim or set-off
or counterclaim and regardless of whether recourse has first
126
<PAGE>
been sought against Buyer. This is a guarantee of payment and not of
collection.
127
<PAGE>
IN WITNESS WHEREOF, Seller, Guarantor and Buyer have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
THE COLEMAN COMPANY, INC.
By: Paul Shapiro
----------------------------------
Name: Paul Shapiro
Title: Executive Vice President/
General Counsel
SIEBE PLC
By: JAMES F. MUELLER
----------------------------------
Name: James F. Mueller
Title: Director
RANCO INCORPORATED OF DELAWARE
By: TIMOTHY J. DOLAN
----------------------------------
Name: Timothy J. Dolan
Title: Vice President
<PAGE>
EXHIBIT A
LICENSE AGREEMENT
THIS AGREEMENT, made and entered into as of [___________], 1998 by
and among THE COLEMAN COMPANY, INC., a Delaware corporation (hereinafter
referred to as "Licensor"), SIEBE PLC, an English corporation (hereinafter
referred to as "Guarantor"), and RANCO INCORPORATED OF DELAWARE, a Delaware
corporation and a wholly-owned subsidiary of Guarantor (hereinafter referred
to as "Licensee").
WITNESSETH:
WHEREAS Licensee desires to obtain a license to use the Licensed
Mark (as defined below) in connection with the manufacture, merchandising,
promotion, advertising, sale and distribution of the Merchandise (as defined
below), and Licensor is willing to grant such license subject to all the
terms of this Agreement:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, Licensor and Licensee agree as follows:
I DEFINITIONS
The following definitions shall be applicable throughout this
Agreement:
1.1 The term "Licensed Mark" shall mean the trademark "COLEMAN,"
and the variations thereof and associated logos set forth in Schedule A.
1.2 The term "Licensed Merchandise" shall mean Merchandise (as
that term is defined in Section 1.C below) that is approved by Licensor in
accordance with
<PAGE>
Section 4 hereof and is sold or promoted by Licensee under the Licensed Mark.
1.3 The term "Merchandise" shall mean smoke alarms, carbon
monoxide detectors, heat detectors, flammable gas detectors and indoor air
quality monitors.
1.4 The term "Territory" shall mean the world.
1.5 The term "Net Sales" shall mean the total invoiced price of
the Licensed Merchandise shipped by Licensee to its customers, less federal,
state and local sales, use and excise taxes, freight and insurance (if
separately stated), and actual returns. Net Sales in any quarter shall be
reduced by returns made in such quarter, regardless of when the sales of such
returned items were made. For purposes of calculating Net Sales in the case
of "direct ship", "first-cost" or F.O.B. sales made by Licensee hereunder,
any Licensed Merchandise shipped by Licensee's contract manufacturer directly
to a customer of Licensee shall be valued at Licensee's customary wholesale
price to its trade customers, regardless of the actual invoiced price to the
customer.
1.6 The term "Stock Purchase Agreement" shall mean the Stock
Purchase Agreement between Licensor and Licensee dated February 18, 1998.
1.7 The term ("Term") shall mean the duration of this Agreement,
as set forth in Section 3, and shall include any renewal period(s) as
described therein.
II LICENSE GRANT
2.1 Licensor hereby grants to Licensee an exclusive license
throughout the Territory during the Term to all of Licensor's right, title
and interest in and to the Licensed Mark for use as a trademark and service
mark, solely in conjunction with the term "Sheltra," for use solely in
connection with the manufacture, advertising, merchandising, promotion,
publicity,
2
<PAGE>
use, sale, distribution and servicing of Licensed Merchandise, subject to all
the terms and conditions of this Agreement. It is agreed that during the
Term, Licensor shall not grant to any other entity, nor shall Licensor have,
the right to use the word "Coleman" alone, or with other terms or symbols, in
connection with Merchandise. It is further agreed that should the Term last
through, and end upon the conclusion of, a Second Renewal Term, then for one
(1) year following the end of the Term, Licensor shall not use the word
"Coleman" alone, or with other terms or symbols, in connection with the
advertising, promotion, publicity, distribution or sale of Merchandise, nor
license any other entity to so use the word or otherwise allow such use in
return for compensation.
2.2 Licensee accepts said grant, and agrees to use its reasonable
efforts to exploit the rights granted herein including, without limitation,
maintaining a sales force or distribution network sufficient to provide
effective distribution of the Licensed Merchandise, and assisting with
Licensor's advertising program. It is agreed that nothing herein shall
require Licensee to sell Licensed Merchandise at a loss or shall interfere
with Licensee's right to sell Merchandise which is not Licensed Merchandise.
2.3 Licensee may use the Licensed Mark only in connection with the
manufacture, advertising, merchandising, promotion, publicity, use, sale,
distribution and servicing of Licensed Merchandise. No license is granted
hereunder for the use of the Licensed Mark for any purpose other than upon or
in connection with the Licensed Merchandise.
2.4 Licensor makes no representation or warranty as to any rights
to use the Licensed Mark outside of the United States and Canada.
3
<PAGE>
2.5 Licensee shall have no right to sublicense the Licensed Mark,
except that Licensee may sublicense the Licensed Mark to any wholly-owned
subsidiary of Guarantor, so long as such subsidiary remains a wholly-owned
direct or indirect subsidiary of Guarantor. In the event that Licensee shall
grant a sublicense as permitted hereby, Licensee shall be jointly and
severally liable along with any such authorized sublicensee to comply in all
respects with all requirements of this Agreement. In addition, Licensor
shall have the direct right under any such sublicense agreement to exercise
direct control over the quality of Licensed Merchandise and related materials
to the same extent as it has under this Agreement.
III TERM
3.1 This Agreement shall become effective as of the date first
above written (the "Effective Date") and shall continue for a period of five
(5) years, terminating on the fifth anniversary of the Effective Date (the
"Initial Term"), unless terminated prior thereto in accordance with the terms
and conditions hereof.
3.2 Licensee shall have the option to renew this Agreement for two
additional five (5) year periods (the "First Renewal Term" and "Second
Renewal Term," respectively) by giving Licensor written notice at least one
hundred and twenty (120) days prior to the end of the Initial Term or the
First Renewal Term, respectively; PROVIDED that Licensee is in compliance in
all material respects with all terms and conditions of this Agreement. The
First Renewal Term shall commence upon the date of expiration of the Initial
Term and shall terminate on the fifth anniversary of such date; the Second
Renewal Term shall commence upon the date of expiration of the First Renewal
Term and shall terminate on the fifth anniversary of such date.
IV LICENSED MERCHANDISE AND QUALITY CONTROL
4
<PAGE>
4.1 Licensee agrees that Licensed Merchandise and its Packaging
will be designed, manufactured, advertised, promoted, publicized, distributed
and sold only in a manner which (i) is consistent with Licensor's standards
for the Licensed Merchandise in the six (6) months prior to the date hereof,
(ii) is consistent with the safety and quality standards of the industry
standards for the Licensed Merchandise, and (iii) is commensurate with the
prestige and reputation of the Licensed Mark.
4.2 Licensee must obtain the prior written approval of Licensor
for all material changes in designs, specifications, colors, materials and
contract manufacturers of all Merchandise and components thereof intended to
be sold as Licensed Merchandise, including any labels, instructions,
packaging, containers and displays (said labels, instructions, packaging,
containers and displays hereinafter collectively "Packaging") intended to be
utilized in connection with the Licensed Merchandise, to the extent that any
such changes affect the safety, performance or quality standards of such
Licensed Merchandise and Packaging or the use of the Licensed Mark thereon.
The designs, specifications, colors, materials and contract manufacturers for
the Merchandise and Packaging sold by Licensor immediately prior to the date
hereof shall be deemed pre-approved.
4.3 From time to time during the Term, Licensee shall submit to
Licensor design change proposals for any items or styles of Licensed
Merchandise and Packaging proposed by Licensee, which materially differ from
the Licensed Merchandise and Packaging sold by Licensor immediately prior to
the date hereof, to the extent such design change proposals or Packaging
affect the safety, performance or quality standards of the Licensed
Merchandise or Packaging or the use of the Licensed Mark thereon. Within
ten (10) business days of Licensor's receipt of such design proposals of the
Li-
5
<PAGE>
censed Merchandise and Packaging, Licensor will review them and Licensee will
provide its full assistance and cooperation to Licensor in such review,
including making available a qualified person(s) appointed by Licensee to
meet with Licensor and assist Licensor in its review. Not later than the end
of such ten (10) business day period, Licensor shall notify Licensee of which
if any of the design proposals or Packaging Licensor has approved and of
objections, if any, to any aspect of the design proposals or Packaging.
Failure to notify Licensee of approval or objections within said ten (10)
business day period shall be deemed an approval.
4.4 The Licensed Merchandise and Packaging manufactured, sold,
advertised or promoted by Licensee shall be identical to the Licensed
Merchandise and Packaging approved by Licensor pursuant to Section 4.B with
respect to the safety, performance or quality standards of such Licensed
Merchandise and Packaging and the use of the Licensed Mark thereon.
Immediately upon commencement of commercial production of any Licensed
Merchandise and Packaging, Licensee shall notify Licensor and permit Licensor
to inspect a production sample of each stock keeping unit (an "SKU") of the
Licensed Merchandise and Packaging. If, in Licensor's judgment, the
production sample is "Nonconforming" (i.e., not substantially identical to
the previously-approved Licensed Merchandise and Packaging in the
above-mentioned respects), Licensor shall promptly notify Licensee and shall
specify in which respects the sample is Nonconforming. Upon receipt of such
notice, Licensee shall immediately stop production and sale of the
Nonconforming Licensed Merchandise and Packaging until a production sample is
submitted and approved by Licensor.
4.5 For purposes of monitoring quality, Licensee agrees to permit
Licensor to inspect samples of each SKU of Licensed Merchandise and related
Packaging
6
<PAGE>
from time to time, upon request throughout the Term. In addition, upon
request Licensee shall provide to Licensor, free of charge, at least one
sample of each SKU (not including color variations) of Licensed Merchandise
and related Packaging for presenting Licensor's licensing activities to
corporate and business constituencies and for display purposes at Licensor's
headquarters.
4.6 Licensee will comply with all laws, rules, regulations and
requirements of any governmental or administrative body (including, without
limitation, the Federal Trade Commission and the Consumer Product Safety
Commission), which may be applicable to the manufacture, advertising,
merchandising, packaging, publicity, promotion, sale, distribution, shipment,
import and export of the Licensed Merchandise, its Packaging and its
componentry.
4.7 Licensor and its duly authorized representatives shall have
the right, during normal business hours and upon reasonable notice and the
execution of a confidentiality agreement with Licensee substantially in the
form attached hereto as Exhibit 1, once per quarter during the Term to
inspect all manufacturing facilities utilized by Licensee (and its
contractors and suppliers to the extent Licensee may use the same) and to
examine all processes and records relating to the manufacturing, packaging,
warehousing and distribution of the Licensed Merchandise and Packaging
including, without limitation, the right to open and inspect shipping
cartons, and make such other tests and inspections as it shall deem necessary
to insure the quality of the Licensed Merchandise and Packaging. Licensee
shall take all necessary steps requested by Licensor to correct any
deficiencies that might affect the quality of the Licensed Merchandise and
Packaging.
4.8 Licensee agrees to use its best efforts to safeguard the
prestige of the Licensed Mark for the
7
<PAGE>
benefit of Licensor. Licensee shall not market any of the Licensed
Merchandise as close-outs or irregulars, in excess of 5% of total unit sales
during any calendar year, except as approved in advance by Licensor in
writing on a case-by-case basis. In the event Licensor approves the sale of
Licensed Merchandise as close-outs, Licensor shall have the absolute right to
determine the appropriate close-out outlets.
4.9 All Licensed Merchandise and/or Packaging will bear at least
one label or display with the Licensed Mark in a form approved by Licensor in
advance in accordance with Section 4.B hereof and will bear no label or
display of the Licensed Mark unless previously approved by Licensor.
4.10 The Licensed Merchandise shall be sold by Licensee only to (i)
retail outlets to which Licensor has sold Licensed Merchandise immediately
prior to the date hereof in its ordinary course of business and not for
closeout, or such other outlets as are specified on Schedule B hereto, (ii)
such other retail outlets as may be expressly approved by Licensor in writing
prior to any sale of Licensed Merchandise to such outlet, and (iii) such
retail outlets as are established in the future that are of at least the same
quality and reputation as those described in clauses (i) and (ii) above
(collectively, the "Approved Retail Outlets"). Licensee shall not sell the
Licensed Merchandise other than to Approved Retail Outlets, unless, and then
only to the extent that, such sale has been previously approved in writing by
Licensor. Licensee shall upon notice immediately stop selling to any
previously approved customer or other approved entity which becomes engaged
in reselling Licensed Merchandise otherwise than to consumers at retail in
the Territory.
8
<PAGE>
V PUBLIC RELATIONS, ADVERTISING AND PROMOTION
5.1 Licensee shall submit to Licensor for its prior written
approval any and all public statements, press releases and responses to press
inquiries relating in any way to this Agreement.
5.2 Licensor shall have the right to approve in advance any and
all advertising, marketing and promotions to be conducted by Licensee and all
trade materials, business cards, invoices, stationery and other printed
matter prepared by or for Licensee using or referring to the Licensed Mark.
Licensee shall submit to Licensor for its prior approval copies of all of the
foregoing. Such approval shall not be unreasonably withheld and shall be
deemed granted if Licensor does not respond within ten (10) business days of
receipt of such submission.
5.3 At least once each year, Licensee will submit for Licensor's
information a presentation detailing Licensee's plans to market, promote and
advertise the Licensed Merchandise.
VI ROYALTY PAYMENTS
6.1 Licensee shall pay Licensor on a quarterly basis, for the
duration of the Initial Term, and First Renewal Term and Second Renewal Term,
if any, a royalty of five percent (5%) of Net Sales (the "Royalties").
6.2 Royalties shall be paid within thirty (30) days of the close
of each calendar quarter. Each royalty payment shall be accompanied by a
statement signed and certified by the Chief Financial Officer of Licensee
that the accompanying remittance is the full amount due hereunder. Each such
accounting statement shall be in such form as Licensor may specify and shall
show the Net Sales by customer made during the preceding quarter, and a
9
<PAGE>
computation of the amount of Royalties payable hereunder in respect of such
Net Sales for such period (the "Royalty Report"). Such Royalty Report shall
be furnished to Licensor whether or not any Royalty payments are payable for
such period. The first Royalty Report due under this Agreement shall be for
the quarter ending March 31, 1998. Upon request by Licensor, Licensee shall
submit invoices, credit memoranda, factor statements and/or computer
printouts substantiating the reported information, in addition to a summary
by customer and product code and invoices and other supporting documentation.
Receipt or acceptance by Licensor of any Royalty Report furnished, or of any
sums paid by Licensee, shall not preclude Licensor from questioning their
correctness at any time.
6.3 In the event Licensee exercises its option pursuant to Section
13.B hereof to extend the license herein granted for purposes of liquidating
its inventory of Licensed Merchandise, Licensee shall pay all Royalties with
the accompanying Royalty Report quarterly within thirty (30) days following
the close of each calendar quarter during the extension period following
termination.
6.4 As soon as practicable, but not later than ninety (90) days
after the end of each year during the Term, and within ninety (90) days after
the expiration or termination of the Term, Licensee shall submit to Licensor
a statement signed and certified by the Chief Financial Officer of Licensee
that the quarterly statements furnished by Licensee hereunder as well as
Licensee's related books of account and other records and that such quarterly
statements have been prepared in accordance with generally accepted
accounting principles (except as provided in Section 6.H) applied on a basis
consistent with Licensee's audited financial statements and that such
statements and report are correct. At the same time, Licensee shall also
submit to Licensor a copy of the audited financial statements of Guarantor
for its
10
<PAGE>
most recently completed fiscal year.
6.5 All royalty payments and accounting statements are to be
directed as provided in Section 16.A, below.
6.6 In the event that payment of Royalties to Licensor hereunder
gives rise to any taxes, duties and other governmental charges in the
Territory, including, without limitation, any withholding taxes, stamp duties
or documentary taxes, turnover, sales or use taxes, value added taxes, excise
taxes, customs or exchange control duties or any charges, Licensee and
Licensor shall each be responsible for one half of such taxes, duties or
charges, except that Licensor shall be responsible for any tax imposed on
Licensor's income by the jurisdictions in which it conducts business.
6.7 All royalty payments shall accrue upon the sale of the
Licensed Merchandise regardless of the time of collection by Licensee. For
purposes of this Agreement, Licensed Merchandise shall be considered "sold"
upon the date of invoicing.
6.8 Royalty payments shall be based on U.S. dollar calculations
and paid by Licensee in U.S. dollars. Local currency sales shall be
converted to U.S. dollars on a monthly basis using the average exchange rates
of New York banks as published in the WALL STREET JOURNAL during the month in
which sales are made, in accordance with generally accepted accounting
principles as the same may be amended from time to time.
6.9 If any governmental entity restricts or prohibits, by exchange
controls or otherwise, the payment to Licensee of any sums due it on sales of
Licensed Merchandise hereunder, Licensee shall, notwithstanding any such
restriction, pay to Licensor in the United States any and all such sums due
Licensor hereunder in
11
<PAGE>
U.S. dollars, as and when due in accordance with the terms hereof.
VII USE OF LICENSED MARK
7.1 Licensee shall use and display the Licensed Mark only in such
forms detailed in the standards and specifications guidelines provided by
Licensor, as the same may be changed from time to time, or otherwise approved
by Licensor in writing; provided, however, that Licensor shall provide thirty
(30) days' advance notice of any such change to the guidelines, but Licensee
may continue to use the Packaging, stationery and other items containing the
previously approved forms of the Licensed Mark to the extent such items are
held in inventory on the date of such notice, but in no event for more than
nine (9) months following such notice.
7.2 Licensee will not use the Licensed Mark as a corporate name or
as a trade name, in whole or in part, or in such a way as, in Licensor's sole
judgment, may give the impression that the Licensed Mark is the property of
Licensee. No name or names shall be conjoined or used by Licensee in
connection with the Licensed Mark in or on any advertising, publicity, trade
or promotional material or Packaging utilized by Licensee in connection with
the Licensed Merchandise except as required by Section 2.A or to the extent
that such is specifically required by law to indicate the source of
manufacture or distribution of the Licensed Merchandise. Licensee shall not
use any name which, in Licensor's judgment, may be confusingly similar to the
Licensed Mark on Merchandise or otherwise, during the Term or thereafter.
7.3 Licensee acknowledges that the Licensed Mark has acquired
valuable goodwill with the public and that any products bearing the Licensed
Mark have acquired a reputation of high quality. Licensee acknowledges that
Licensor is the owner of all right, title and interest in
12
<PAGE>
and to the Licensed Mark, and is also the owner of the goodwill attached to
the Licensed Mark including that which arises from the sale of Licensed
Merchandise hereunder. All use by Licensee of the Licensed Mark shall be
deemed to have been made by and for the benefit of Licensor for the purposes
of securing and maintaining trademark rights, applications and/or
registrations, and all uses of the Licensed Mark by Licensee, or by any
sublicensee or assignee, and any goodwill arising therefrom, shall inure to
the sole and exclusive benefit of Licensor.
7.4 Licensee hereby assigns to Licensor any rights to the Licensed
Mark which may, by operation of law or otherwise, vest in Licensee as a
consequence of Licensee's activities under this Agreement, and any goodwill
arising therefrom, which shall in any event inure to the sole and exclusive
benefit of Licensor. Licensee will not, at any time, do or suffer to be done
any act or thing which will, in any way, impair or adversely affect the
ownership or the rights of Licensor in or to the Licensed Mark or its
reputation, and Licensee will make no applications nor seek any registration
or ownership rights in or to the Licensed Mark in the Territory or elsewhere.
7.5 Licensee acknowledges that only Licensor may file or prosecute
trademark applications to register the Licensed Mark. Licensee will
cooperate with Licensor in connection with the filing and prosecution by
Licensor of any such applications, and the maintenance or renewal of any
trademark registration for the Licensed Mark, and will supply Licensor with
Merchandise bearing the Licensed Mark, including samples, Packaging and other
uses of the Licensed Mark, as may reasonably be requested by Licensor in
connection herewith. Licensee shall execute all documents, including, but
not limited to, registered user agreements and any cancellations thereof,
which Licensor may request in order to obtain or maintain a
13
<PAGE>
registration or to establish or to maintain Licensor's ownership of the
Licensed Mark.
7.6 Licensor currently owns registrations and applications for
registration of the Licensed Mark for Merchandise in the jurisdictions listed
on Schedule A hereto. Licensee will give Licensor reasonable advance notice
prior to using any of the Licensed Marks in any jurisdiction not covered by a
registration or application for registration licensed hereunder. Licensor
will (i) file and prosecute applications for registration of the Licensed
Mark for use for Merchandise in such other jurisdictions as Licensee
reasonably deems appropriate at Licensee's cost, and (ii) if Licensor elects
not to maintain or renew any trademark registration of the Licensed Mark,
Licensee may request that Licensor do so and Licensor will so renew or
maintain such registration at Licensee's expense; provided that in either
case, Licensee shall be entitled to deduct Licensee's costs and expenses from
the Royalties payable to Licensor hereunder on account of sales of Licensed
Merchandise in such jurisdiction.
7.7 Licensee agrees and undertakes to use the Licensed Mark in
compliance with any and all applicable trademark and other laws and to use
such legends, markings or notices in connection therewith as are required by
law or otherwise reasonably required by Licensor to protect its rights. Upon
expiration or termination of this Agreement for any reason whatsoever,
Licensee will execute and file any and all documents acknowledging that it no
longer has rights in the Licensed Mark which Licensor shall require.
Licensor shall bear all expenses reasonably incurred in preparing and
recording any such documents.
7.8 Licensee agrees not (i) to challenge the validity of or
Licensor's ownership of the Licensed Mark when used separately or in
composite form with other
14
<PAGE>
trademarks, logos, or designs, or any application for registration thereof,
or any trademark registration thereof, in any jurisdiction, or (ii) to
contest the fact that Licensee's rights under this Agreement terminate upon
termination or expiration of this Agreement. The provisions of this Section
7.H shall survive termination or expiration of this Agreement.
7.9 Licensee shall promptly notify Licensor of any infringement,
imitation or act inconsistent with Licensor's ownership of the Licensed Mark
by third parties, or any act of unfair competition by third parties relating
to the Licensed Mark, wherever and whenever such infringement or act shall
come to the attention of the executive of Licensee responsible for licensing
matters or the general manager of Licensee's business, and any successors
thereto or replacements therefor. After receipt of such notice from
Licensee, Licensor shall in its sole discretion decide whether to take action
with respect to such infringement or act, and Licensee shall fully cooperate
with Licensor in such action and, if so requested by Licensor, shall join
with Licensor as a party to any such action brought by Licensor. Licensor
shall bear all expenses in connection with the foregoing. Any recovery as a
result of such action shall belong solely to Licensor. Licensee agrees that
Licensor shall have the sole power to take legal or other action before any
court or governmental authority with respect to the infringement and the
protection of the Licensed Mark. If Licensor decides not to take action with
respect to such infringement or act, Licensee may request that Licensor so
act and upon such request, Licensor shall take all reasonable steps to stop
the infringement, imitation or act, provided that Licensee reimburse Licensor
for all costs incurred by Licensor (net of amounts recovered by Licensor).
7.10 Licensee shall not at any time use the Licensed Mark or the
Licensed Merchandise, or any materi-
15
<PAGE>
al utilizing or reproducing the Licensed Mark or Licensed Merchandise, in a
manner that is reasonably likely to derogate the value, reputation or
goodwill associated with the Licensed Mark.
VIII BOOKS AND RECORDS
Licensee shall maintain, at its main offices, true and accurate
books and records, in accordance with generally accepted accounting
principles, containing all particulars which may be necessary for the purpose
of verifying compliance with the terms and conditions hereof and for
determining all amounts payable to Licensor hereunder, which books and
records shall be separate and distinct from those relating to Licensee's
businesses other than the sale of Licensed Merchandise. Licensee shall make
such books and records available to Licensor and its designated
representatives during regular business hours and upon reasonable notice once
per quarter throughout the Term, including any renewal terms, and a period of
twelve (12) months thereafter, for the purpose of auditing Licensee's
reports, accounting statements and royalty payments hereunder. Licensor
shall be entitled to make copies, at its expense, of any such records.
Without limitation of Licensor's rights under Section 12, if Licensor
uncovers an error in Net Sales or royalty computation or in the computation
of any other amounts due to Licensor or payable by Licensee, Licensee agrees
to pay immediately all sums due (with interest at the prime rate from the
date payment was due hereunder), and if such error exceeds 5% of the amount
properly payable by Licensee, Licensee will at the same time reimburse
Licensor for its reasonable costs of conducting such audit.
IX REPRESENTATIONS AND WARRANTIES OF LICENSEE AND GUARANTOR
9.1 ORGANIZATION. Each of Licensee and Guar-
16
<PAGE>
antor is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization.
9.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Licensee and
Guarantor has full corporate power and authority to execute, perform and
deliver this Agreement. The execution, delivery and performance of this
Agreement has been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of Licensee or
Guarantor are necessary to authorize this Agreement. This Agreement has been
duly and validly executed and delivered by each of Licensee and Guarantor and
constitutes a valid and binding agreement of each of Licensee and Guarantor,
enforceable in accordance with its terms, except that (i) such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
9.3 NO VIOLATION. The execution, performance and delivery of this
Agreement by each of Licensee and Guarantor will not (i) violate any
provision of the Certificate of Incorporation, By-Laws or other
organizational documents of Licensee or Guarantor, (ii) violate, or be in
conflict with, or constitute a default or termination event (or an event
which, with notice or lapse of time or both, would constitute a default or a
termination event) under, any agreement or commitment to which Licensee or
Guarantor is a party, or (iii) violate any applicable statute or law or any
judgment, decree, order, regulation or rule of any court or governmental
authority binding on Licensee or Guarantor.
9.4 CONSENTS AND APPROVALS. No consent,
17
<PAGE>
approval or authorization of, or declaration, filing or registration with,
any governmental or regulatory authority is required in connection with the
execution, delivery and performance of this Agreement by Licensee or
Guarantor. No consent of any person is necessary for the execution,
performance or delivery of this Agreement by Licensee or Guarantor,
including, without limitation, consents from parties to loans, contracts,
leases or other agreements to which Licensee or Guarantor is a party.
X REPRESENTATION AND WARRANTIES OF LICENSOR
10.1 ORGANIZATION. Licensor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
10.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Licensor has full
corporate power and authority to execute, perform and deliver this Agreement.
The execution, delivery and performance of this Agreement has been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of Licensor are necessary to authorize this
Agreement. This Agreement has been duly and validly executed and delivered
by Licensor and constitutes a valid and binding agreement of Licensor,
enforceable in accordance with its terms, except that (i) such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
10.3 NO VIOLATION. The execution, performance and delivery of this
Agreement by Licensor will not (i) violate any provision of the Certificate
of Incorporation
18
<PAGE>
or By Laws of Licensor, (ii) violate, or be in conflict with, or constitute a
default or termination event (or an event which, with notice or lapse of time
or both, would constitute a default or a termination event) under, any
agreement or commitment to which Licensor is a party, or (iii) violate any
applicable statute or law or any judgment, decree, order, regulation or rule
of any court or governmental authority binding on Licensor.
10.4 CONSENTS AND APPROVALS. No consent, approval or authorization
of, or declaration, filing or registration with, any governmental or
regulatory authority is required in connection with the execution, delivery
and performance of this Agreement by Licensor. No consent of any person is
necessary for the execution, performance or delivery of this Agreement by
Licensor, including, without limitation, consents from parties to loans,
contracts, leases or other agreements to which Licensor is a party.
10.5 LICENSED MARK. To the knowledge of Licensor after due inquiry
of appropriate Licensor personnel, Licensor owns all right, title and
interest in and to the Licensed Mark in the United States and Canada. There
is no claim, action, proceeding, suit, complaint or, to the knowledge of
Licensor, investigation pending or, to the knowledge of Licensor, threatened
that (i) the use of the Licensed Mark in connection with the Merchandise
infringes upon or conflicts with the intellectual property rights of any
other person, or (ii) challenges the legality, validity, enforceability, use
or ownership of the Licensed Mark. To the knowledge of Licensor, no third
party has interfered with, infringed upon or misappropriated the Licensed
Mark.
XI INDEMNIFICATION AND INSURANCE
11.1 Licensor hereby agrees to indemnify and hold harmless
Licensee, its affiliates and each of their
19
<PAGE>
respective shareholders, officers, directors, employees and agents against
any and all liability, claims, causes of action, suits, damages and expenses
(including reasonable attorneys' fees), for which they or any of them may
become liable or may incur or be compelled to pay in any action or claim
against them or any of them arising from infringement of statutory or common
law trademark or trade name rights of others through the use of the Licensed
Mark by Licensee in the United States, Canada or Mexico in compliance with
all of the terms and conditions of this Agreement, provided that Licensee:
(i) gives Licensor written notice of each such action or claim promptly
following its receipt thereof, (ii) gives Licensor the opportunity to
undertake and to control the defense and settlement of such claim through
counsel of its own choosing, and (iii) fully cooperates with Licensor in the
investigation, defense and settlement of any such claim. Licensee shall have
the right to participate in (but not to control) any such defense through
counsel of its choice, but at Licensee's expense. If Licensor fails or
refuses to undertake the defense of any such claim within a reasonable period
after notice from Licensor, Licensee shall be entitled to defend such claim
through counsel of its choice, and Licensor shall be responsible for
reimbursing Licensee for any expenses incurred by Licensee, including but not
limited to reasonable attorneys', accountants', and other experts' fees and
expenses in the investigation, defense and settlement of such claim and in
enforcing its rights pursuant to this Section 11.A, in addition to any
damages and penalties ultimately awarded against Licensee which are
indemnifiable hereunder.
11.2 Licensee agrees to indemnify and hold harmless Licensor, its
affiliates and each of their respective shareholders, officers, directors,
employees and agents against any and all liability, claims, causes of action,
suits, damages and expenses for which they or any of them may become liable
or may incur or be com-
20
<PAGE>
pelled to pay in any action or claim against them or any of them by any
persons other than Licensor for or by reason of (a) the infringement of
design rights, patents, trade secret rights or rights to any intellectual
property of third persons (other than trademark rights infringed by use of
the Licensed Mark in accordance with all the terms hereof, or resulting from
a breach by Licensee of its representations and warranties in the Stock
Purchase Agreement) as a result of the manufacture, warehousing, marketing,
promotion, publicity, advertising, sale or distribution of Licensed
Merchandise by Licensee or any of its agents, representatives, contractors,
sublicensees or assigns, (b) any acts, whether of omission or commission,
that may be committed or suffered by Licensee or any of its agents,
representatives, contractors, sublicensees or assigns in connection with this
Agreement, (c) any liability (including, without limitation, any personal
injury or property damage) arising out of the manufacture, warehousing,
marketing, promotion, publicity, sale, advertising, or distribution of or the
use by any professional or consumer of, Licensed Merchandise, or any
violation of any warranty, representation or agreement made or deemed made by
Licensee or any of its agents, representatives, contractors, sublicensees or
assigns with respect to the Licensed Merchandise, or (d) the breach by
Licensee of any of its representations, warranties or covenants in this
Agreement. Licensor shall give Licensee written notice of any such claim
promptly following its receipt thereof. Licensee shall have the opportunity
to undertake and to control the defense and settlement thereof through
attorneys selected by Licensee after notice to and consultation with Licensor
and good faith negotiations regarding alternative counsel if Licensor has
reasonable objections to Licensee's choice of counsel. Notwithstanding the
foregoing, Licensee shall not, without the consent of Licensor, settle or
compromise any claim or consent to the entry of any judgment which includes a
remedy other than the payment of money by Licensee. Licensor will cooperate
21
<PAGE>
with Licensee in the investigation, defense and settlement of any such claim
and shall have the right to participate in (but not to control) any such
defense through counsel of its own choice, but at Licensor's own expense. If
Licensee elects not to undertake the defense of any such claim, it will be
responsible for reimbursing Licensor for any expenses incurred by Licensor,
including but not limited to reasonable attorneys', accountants', and other
experts' fees and expenses in the investigation, defense and settlement of
such claim and in enforcing its rights pursuant to this Section 11.B, in
addition to any damages and penalties ultimately awarded against Licensor
which are indemnifiable hereunder.
11.3(i) Without limiting the indemnification provided in Section
11.B above and in addition to it, Guarantor agrees to carry and maintain,
throughout the Term (including all renewal terms, if any) and for five years
thereafter, with an insurance carrier authorized to do business in all
jurisdictions in which Licensee is qualified to do business and having a
rating of "A" Class "X" or better according to Best's Insurance Reports and a
rating of classification "A" or better according to Standard and Poor's, the
following insurance coverage:
(1) a broad form Comprehensive General Liability Insurance Policy
or, if such policy is not reasonably available, such other policy
as would provide substantially the same protection to Licensor and
Licensee or Guarantor written on occurrence basis covering
Licensee's activities with respect to the Licensed Merchandise
which includes but is not limited to coverage for contractual
liability, premises operations, products liability, personal injury
and advertising injury liability and broad form property damage
liability, which shall provide protection to Licensor of at least
Ten Mil-
22
<PAGE>
lion Dollars ($10,000,000) per occurrence and Ten Million Dollars
($10,000,000) in the annual aggregate;
(2) statutory workers' compensation and employers liability
insurance with a limit for Bodily Injury by Accident of not less
than One Million Dollars ($1,000,000) each accident and for Bodily
Injury by Disease of not less than One Million Dollars ($1,000,000)
policy limit and of not less than One Million Dollars ($1,000,000)
for each employee; and
(3) automobile liability insurance covering all owned, non-owned,
and hired vehicles to be used in the performance of this Agreement
with minimum limits of Two Million Dollars ($2,000,000) combined
single limit.
These stipulated limits of coverage shall not be construed as a
limitation of any potential liability of Licensee or Guarantor. Guarantor
shall have Licensor, its parents, subsidiaries, affiliated companies and
their respective officers, directors, employees, and agents named as
additional insureds on such policies. Guarantor shall, within thirty (30)
days after the date first above written, provide to Licensor a Certificate of
Insurance and certified copies of endorsements to such policies from the
insurance carrier which evidences each insurance coverage required, the
limits of liability stated above, without any provision for deductibles or
self-insured retentions, and further provides that the policies may not be
materially changed or canceled without at least sixty (60) days prior written
notice to Licensor. Not less than thirty (30) days prior to any such
cancellation or expiration of the policies, Guarantor shall provide Licensor
with a Certificate of Insurance and certified copies of endorsements
evidencing that a new insurance policy with the same coverage and terms
described above will be in place prior to such termination. Upon reason-
23
<PAGE>
able request by Licensor during the Term, Guarantor shall deliver to Licensor
evidence in form and substance reasonably satisfactory to Licensor, of the
maintenance and renewal of the required insurance, including, without
limitation, renewal certificates and copies of those portions of policies,
riders and endorsements pertaining to this Agreement. Any insurance policy
purchased by or carried by Licensor or any of its affiliates shall not be
required to contribute in case of any loss by any person, including Licensor
or Licensee and their affiliates, relating to the Licensed Merchandise and
either the Certificate of Insurance to be provided hereunder or an
endorsement to such policy shall state the same, with a certified copy of
such endorsement accompanying the Certificate of Insurance to be delivered to
Licensor. Guarantor's failure to deliver said insurance certificate or
renewals thereof and/or Licensor's failure to request said insurance
documentation shall not be construed as a waiver of Guarantor's obligation to
provide the required insurance.
(ii) Each of Licensee and Guarantor hereby waives all rights
to claim against Licensor with respect to any bodily injury, personal injury
losses or damages to real or personal property, or any other loss arising
from any claim however so caused covered by Licensee's indemnification
obligation hereunder and agrees to obtain a waiver of subrogation from any
insurance company insuring its interests in favor of Licensor, its parents,
subsidiaries, affiliated companies, and their respective officers, directors,
employees and agents.
(iii) Guarantor shall require all subcontractors for whom
Guarantor or Licensee does not furnish insurance to carry and maintain
throughout their performance of services in connection with this Agreement
the insurance coverage required under this Section 11.C with the appropriate
endorsements as required hereunder.
24
<PAGE>
(iv) Should Guarantor fail to obtain the insurance coverage
and provide the documentation required by this Section 11.C, Licensor shall
have the right itself to obtain such coverage, at Guarantor's expense.
XII TERMINATION
Notwithstanding the terms and conditions of Section 3 hereof, this
Agreement may be terminated in accordance with the following provisions:
12.1 Licensor may terminate this Agreement immediately by giving
notice in writing to Licensee in the event Licensee fails to make payment of
royalties and any other amounts due hereunder as and when due, and fails to
cure such default (i) for the first or third calendar quarter, within thirty
(30) working days, or (ii) for the second or fourth calendar quarter, within
ten (10) working days, after delivery of written notice of such default by
Licensor.
12.2 Either party may terminate this Agreement immediately by
giving notice in writing to the other party in the event the other party
materially fails to perform its obligations hereunder (including, without
limitation, the obligations to submit timely its quarterly reports; to obtain
prior approvals as required hereby; to distribute only through approved
distribution channels; to maintain adequate insurance and to use only as
expressly permitted hereunder the Licensed Mark) or otherwise materially
breaches any of its covenants, representations or warranties as set forth in
this Agreement and such party fails to cure such default within thirty (30)
days after delivery of written notice of such default from the other party.
12.3 If Licensee or Guarantor shall make an assignment for the
benefit of creditors, or shall generally not pay its debts as they become
due, or shall file
25
<PAGE>
a petition commencing a voluntary case under the Bankruptcy Reform Act of
1978, 11 U.S.C. Section 101 et seq., as amended or any successor thereto (the
"Bankruptcy Code"), or shall be adjudicated an insolvent, or shall file any
petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under
any present or future statute, law or regulations, or shall file any answer
admitting or shall fail to deny the material allegations of such petition
filed against it for such relief, or consent to the filing of any such
petition or shall seek or consent to or acquiesce in the appointment of any
agent, trustee, receiver, custodian, liquidator or similar officer for it or
of all or any substantial part of its assets or properties, or its directors
or majority stockholders shall take any action authorizing any of the
foregoing or looking to its dissolution or liquidation, or it shall cease
doing business as a going concern, or an order for relief shall be entered
against it under any chapter of the Bankruptcy Code, or if, within sixty (60)
days after the filing of any petition or the commencement of any proceeding
against either party seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the Bankruptcy
Code or any other similar present or future statute, law or regulation, such
proceeding shall not have been dismissed, or a decree or order of a court
having competent jurisdiction shall have been entered approving as properly
filed any such petition, or if, within sixty (60) days after the appointment,
without the consent or acquiescence of such party, of any agent, trustee,
receiver, custodian, liquidator or similar officer for it or of all or any
substantial part of its properties, such appointment shall not have been
vacated this Agreement shall automatically, without notice or any further act
or deed of any party, terminate and be of no further force or effect, except
that any and all liabilities and obligations of Licensee or Guarantor at the
time outstanding under or in connec-
26
<PAGE>
tion with this Agreement shall automatically, without notice or any
creditor's act or deed of any party, become due and payable.
12.4 In the event Licensee assigns or sublicenses any of its rights
hereunder, or otherwise engages in a transfer prohibited by Section 16.C,
without the prior written approval of Licensor, Licensor may, at its option,
terminate this Agreement pursuant to Section 12.B.
12.5 Notwithstanding anything to the contrary herein, in the event
that Licensor terminates this Agreement pursuant to this Section 12, Licensor
does not waive and shall have and reserves all rights and remedies provided
under this Agreement and available at law and in equity, and in addition
shall be entitled to accelerate payment to Licensor of all unpaid Royalties
due up through the date of termination of the Agreement, which shall be
payable to Licensor in full within thirty (30) days of the effective date of
termination.
12.6 If this Agreement shall be determined by a court,
administrative or governmental body or authority to be in violation of any
applicable law, or to require any material change to be in compliance with
any judicial or administrative decision or ruling, the parties shall
negotiate in good faith to revise the offending provision, and if either
party in good faith determines that such offending provision cannot be
revised without adversely affecting the material benefits to it of this
Agreement, either party may elect to terminate this Agreement upon thirty
(30) days' written notice to the other party.
27
<PAGE>
XIII EFFECT OF EXPIRATION OR TERMINATION
13.1 Except to the extent provided in Section 13.B hereof, upon the
expiration or termination of this Agreement for any reason, neither Licensee
nor its receivers, representatives, agents, successors or assigns shall have
any right to exploit or in any way use the Licensed Mark. Except to the
extent provided in Section 13.B hereof, upon such expiration or termination
of this Agreement, Licensee shall forthwith discontinue all use of the
Licensed Mark and shall not thereafter use the Licensed Mark or any variation
or simulation thereof, and Licensee hereby irrevocably releases and disclaims
any right or interest in or to the Licensed Mark. Within thirty (30) days of
the expiration or termination of this Agreement, Licensee shall provide
Licensor with an accurate schedule of all work in process and finished
inventory of Licensed Merchandise to which the Licensed Mark is affixed,
which is on hand as of the close of business on the date of such expiration
or termination (hereinafter the "Inventory").
13.2 If, upon the expiration or termination of this Agreement,
Licensee shall have on hand any Inventory of the Licensed Merchandise and if
Licensee is not otherwise in default under this Agreement, Licensee may
continue to use the Licensed Mark solely in connection with the advertising,
merchandising, promotion and sale of the Inventory of Licensed Merchandise
for a period of up to nine (9) months following the expiration or termination
of this Agreement. During such nine (9) month period, Licensee shall be
obligated to continue to pay Licensor the Royalties, if any, provided for in
Section 6.A. If Licensee elects to continue to use the Licensed Mark as
provided under this paragraph, it shall notify Licensor of its election at
least ninety (90) days prior to the expiration or termination of this
Agreement. Such notice shall include a complete and accurate schedule of
Inventory of Licensed Merchandise which is projected to be on
28
<PAGE>
hand as of the close of business on the date of such expiration or
termination and shall reflect Licensee's actual cost of each such item as set
forth or reflected on the balance sheet contained in Licensee's latest
quarterly report on Form 10-Q or annual report on Form 10-K.
13.3 Upon the expiration or termination of this Agreement or, if
applicable, upon the expiration of the period provided for in Section 13.B
hereof, Licensee shall, at its own expense, remove all uses of or references
to the Licensed Mark from all Inventory or destroy such Inventory, Packaging,
advertising and promotional materials bearing the Licensed Mark or prepared
for use in connection with the Licensed Merchandise.
XIV CONFIDENTIALITY
14.1 In connection with the performance of this Agreement, Licensor
and Licensee will have access to certain confidential and proprietary
information of the other party, including, but not limited to, business
plans, proposed advertising, designs, sales records, financial data and
manufacturer's know-how, and also including the business terms of this
Agreement. Recognizing that such information represents valuable assets and
property of the disclosing party, and the harm that may befall such party if
any of such information is disclosed, the recipient agrees to hold all such
information in strict confidence and not to use or otherwise disclose any
such information to third parties without having received the prior written
consent of the disclosing party and a written agreement from such third party
to maintain such information in strict confidence. The obligation of
confidentiality created herein shall survive the expiration or termination of
this Agreement.
14.2 The obligations of confidentiality created herein shall cease
to apply:
29
<PAGE>
(i) to information which comes into the public domain,
provided it did not come into the public domain through the unauthorized
acts of the receiving party;
(ii) to information which was in the receiving party's
possession prior to its disclosure, or was later disclosed to the receiving
party by a third party who is lawfully in possession of such and, to the
receiving party's knowledge, was under no obligation to keep such information
confidential;
(iii) to information which, in the opinion of the receiving
party's counsel, is required to be disclosed by law, but only to the extent
so required and only upon prior written notice to the other party hereto; and
(iv) to information of Licensee which Licensor may be
required to disclose in order to enforce its rights under this Agreement.
XV BANKRUPTCY
15.1 Notwithstanding the provisions of Section 12.C, in the event
that it is determined by any court or bankruptcy trustee that this Agreement
may be assumed or assigned in connection with a case commenced by or against
either party under the Bankruptcy Code, Licensor and Licensee hereby
acknowledge that adequate assurance of future performance under this
Agreement (within the meaning of the Bankruptcy Code) shall include, INTER
ALIA, adequate assurance:
(i) that any and all royalty payments and other consideration
due from Licensee to Licensor under or pursuant to this Agreement shall be
duly and timely paid;
30
<PAGE>
(ii) that the assumption or assignment of this Agreement will
not result in the breach by either party of any provision in any other
license, contract, or agreement relating to the Licensed Mark or otherwise;
(iii) that any person or entity that assumes this Agreement or
to which this Agreement is assigned shall fully and faithfully assume,
observe and comply with all of the covenants, requirements and restrictions
provided for under this Agreement and that termination rights for breach of
this Agreement shall continue to apply without change; and
(iv) that the value of the Licensed Mark to Licensor shall
not be materially diminished by reason of the assumption or assignment of
this Agreement.
Notwithstanding the foregoing, the parties recognize that circumstances may
give rise to additional considerations, and nothing contained herein shall be
construed to mean that considerations other than those set forth above shall
not be deemed relevant to adequate assurance.
15.2 Any person or entity to which this Agreement is assigned
pursuant to the provisions of the Bankruptcy Code shall be deemed without
further act or deed to have assumed all of the obligations arising under this
Agreement on and after the date of such assignment. Any such assignees shall
upon demand execute and deliver to Licensor or Licensee, as the case may be,
an instrument confirming such assumption.
XVI MISCELLANEOUS
16.1 All notices required or permitted by this Agreement to be
given to a party shall be in writing and shall be deemed to be duly given on
the date delivered if delivered personally, on the fifth business day after
being mailed by certified or registered mail (postage
31
<PAGE>
prepaid, return receipt requested) or on the next business day after being
sent by reputable overnight courier (delivery prepaid), in each case, to the
parties at the following addresses, or on the date sent and confirmed by
electronic transmission to the facsimile number specified below (or at such
other address or facsimile number for a party as shall be specified by notice
given in accordance with this Section):
If to Licensor:
The Coleman Company, Inc.
3600 North Hydraulic
Wichita, KS 67219
Attention: Corporate Secretary
Telephone: (316) 832-2700
Facsimile: (316) 832-2634
with a copy to:
The Coleman Company, Inc.
625 Madison Avenue
New York, NY 10022
Attention: Chief Executive Officer
Telephone: (212) 527-4000
Facsimile: (212) 527-4150
and:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Stephen M. Banker, Esq.
Telephone: (212) 735-2760
Facsimile: (212) 735-2000
If to Licensee:
Ranco Incorporated of Delaware
32
<PAGE>
300 Delaware Avenue, Suite 1704
Wilmington, DE 19804-1612
Attention: President
Telephone: (302) 427-5779
Facsimile: (302) 738-7210
with a copy to:
Siebe plc
Saxon House
2-4 Victoria Street
Windsor, Berkshire SL4 1EN
Attention: Chief Legal Officer
Telephone: 011-44-1753-839-296
Facsimile: 011-44-1753-622-030
and:
Fried, Frank, Harris, Shriver and Jacobson
One New York Plaza
New York, NY 10004
Attention: Sanford Krieger
Telephone: (212) 859-8230
Facsimile: (212) 859-4000
Either party may change the address to which such notice and
communications shall be sent by written notice to the other party, provided
that any notice of change of address shall be effective only upon receipt.
16.2 This Agreement (including Schedules) and the Stock Purchase
Agreement set forth the entire agreement and understanding between the
parties hereto relating in any way to the use of the Licensed Mark on the
Licensed Merchandise, and to any other subject matter contained herein and
merges all prior discussions between them. Neither party shall be bound by
any definition, condition, warranty or representation other than as
33
<PAGE>
expressly stated in this Agreement, and this Agreement may not be amended or
modified except by a written instrument signed by the party against whom such
modification or amendment is to be enforced.
16.3 The rights granted to Licensee hereunder are strictly personal
to Licensee. Other than pursuant to Section 2.E, neither this Agreement nor
any of the rights granted to Licensee hereunder may be assigned or
sublicensed by Licensee or otherwise transferred (voluntarily or by operation
of law), to any person, firm or corporation without the prior written
approval of Licensor (which shall be in Licensor's sole discretion).
16.4 In any review or consultation conducted by or on behalf of
Licensor hereunder, Licensor is acting solely on its behalf and not as a
consultant or advisor, and shall have no responsibility for the operation of
Licensee's business or its manufacturing, distribution, sales or facilities
used in connection therewith, whether upon the recommendation of Licensor or
otherwise. Nothing herein contained shall be construed to constitute the
parties hereto as partners or as joint venturers, or either as an employee or
agent of the other.
16.5 This Agreement shall be deemed to be a contract made under the
laws of the State of New York and shall be governed by and construed in
accordance with the laws of such State, as if both parties were residents of
such State. The parties hereby consent to the exclusive jurisdiction of any
court of competent jurisdiction sitting in the State of Delaware and hereby
waive any objection to venue in such court.
16.6 The headings in this Agreement are for the convenience of the
parties only and shall not affect the meaning or interpretation of this
Agreement or any provisions thereof.
34
<PAGE>
16.7 No waiver by either party, whether expressed or implied, of
any provision of this Agreement, or of any breach or default, shall
constitute a continuing waiver of such provision or a waiver of any other
provision of this Agreement. Acceptance of payments by Licensor shall not be
deemed a waiver of any violation of, or default in, any of the provisions of
this Agreement by Licensee.
16.8 Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the parties, their successors and
permitted assigns.
16.9 Guarantor hereby unconditionally and irrevocably guarantees
all of the obligations and liabilities of Licensee under this Agreement,
including but not limited to the full and prompt payment of all sums that now
are or may hereafter become due and payable from Licensor to Licensee under
this Agreement and the full and prompt performance of all present and future
obligations and liabilities of Licensee to Licensor under this Agreement.
Guarantor further promises to pay all such sums due Licensor under this
guarantee promptly on demand, without deduction for any claim or set-off or
counterclaim and regardless of whether recourse has first been sought against
Licensee. This is a guarantee of payment and not of collection.
16.10 This Agreement may be executed in one or more counterparts,
each of which shall be an original, but all of which, together, shall be
deemed to constitute a single document.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date and year first above written.
THE COLEMAN COMPANY, INC.
By:
---------------------------------------------
Name: PAUL SHAPIRO
-------------------------------------------
Title: EXECUTIVE VICE PRESIDENT/GENERAL COUNSEL
------------------------------------------
RANCO INCORPORATED OF DELAWARE
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
SIEBE PLC
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
<PAGE>
AMENDMENT NO. 2
TO THE
NEW COLEMAN COMPANY, INC.
RETIREMENT PLAN FOR SALARIED EMPLOYEES
WHEREAS, New Coleman Holdings Inc. (the "Employer") maintains the New
Coleman Company, Inc. Retirement Plan for Salaried Employees (the "Plan");
WHEREAS, the Employer has reserved the right to amend the Plan; and
WHEREAS, it is desirable to make certain amendments to the Plan.
NOW, THEREFORE, in consideration of the above stated premises, the Plan
shall be amended to read as follows:
FIRST: Section 2.21 of the Plan shall be amended by adding a new
paragraph at the end of said section to read as follows:
Effective January 1, 1997, the term Highly Compensated
Employee means any Employee who was a 5% owner at anytime during
the current or preceding Plan Year or for the preceding Plan Year
received compensation from the Employee in excess of $80,000 (as
adjusted and defined in Section 414(q)) and, if the Employer so
elects, was in the top-paid 20% of Employees. The provisions of
subsection E. above shall apply in determining who is a Highly
Compensated Employee.
SECOND: Section 5.1(d) shall be amended by adding a new paragraph at the
end of said section to read as follows:
Effective January 1, 1997, the term "required beginning
date" means the later of (i) the calendar year in which the
Employee attains age 70 1/2 or (ii) the calendar year in which the
Employee retires, PROVIDED that clause (ii) shall not apply to
any Employee who is a 5% owner in the Plan Year in which the
Employee attains age 70 1/2.
IN WITNESS WHEREOF, the Employer has caused this Amendment is executed
on its behalf as of the 10th day of October, 1997.
NEW COLEMAN HOLDINGS INC.
By Kyle Wendt
-------------------------------------
Its Secretary, Retirement and Benefits Committee
---------------------------------------------
<PAGE>
ATTEST:
Elizabeth Heinemann
- ----------------------------
<PAGE>
SPECIAL AMENDMENT REGARDING TRANSFERS TO
THE NEW COLEMAN COMPANY, INC.
RETIREMENT PLAN FOR SALARIED EMPLOYEES
WHEREAS, New Coleman Holdings, Inc. ("Company" or "Employer") sponsors
and maintains the New Coleman Company, Inc. Retirement Plan for Salaried
Employees ("Plan") for the exclusive benefit of participants in the Plan and
their beneficiaries; and
WHEREAS, the Company wishes to amend the New Coleman Company, Inc.
Retirement Plan for Salaried Employees ("Plan") in order to provide specific
provisions for employees transferred within the MacAndrews and Forbes Group
of Companies; and
WHEREAS, Plan Section 10.1 as amended provides that the Company may
amend the Plan from time to time.
NOW, THEREFORE, in consideration of the above stated premises, the Plan
shall be amended as follows:
FIRST: A new "Appendix C" shall be created which shall set forth a
list of "Associated Plans" as that term is defined in amended Section 5.5.
SECOND: Effective December 1, 1997, Plan Section 5.5 of the Plan shall
be amended to read as follows:
5.5 TRANSFERS: CORRELATION WITH OTHER PLANS AND MAXIMUM SERVICE.
(a) RETIREMENT BENEFIT OFFSET BY ASSOCIATED PLAN BENEFIT. In the event
that a benefit described in this Article is payable to a Member who is
entitled to a benefit under an "Associated Plan" (listed on Appendix C),
such Member's retirement benefit shall be payable only to the extent
that the actuarial value of said retirement benefit (determined as of
his Annuity Starting Date) exceeds the actuarial value of his accrued
benefit under such Associated Plan (determined as if such accrued
benefit were first payable as of the Member's Annuity Starting Date).
For purposes of applying this Section 5.5(a), service under an
Associated Plan will be considered Credited Service (as defined in
Article III) under this Plan.
(b) RETIREMENT PENSION LIMITED BY BENEFITS UNDER OTHER PLANS. In the
event that a retirement benefit is payable to a Member who is not
covered by Appendix A applicable to Canadian Coleman Transferred Members
and who is entitled to benefits under (i) any other funded pension,
retirement, annuity or defined benefit retirement plan contributed to or
maintained by an Employer or Affiliate (other than any Associated Plan,
the Revlon Employees' Savings and Investment Plan, The Revlon Management
Corporation Benefit Plan, the Coleman Retirement Income Savings Plan,
the Coleman Monthly Salaried Retirement Income Savings Plan), or (ii)
any unfunded plan contributed to or maintained by an Employer or
Affiliate outside of the United States:
(1) NONDUPLICATION OF BENEFITS. If his benefits under such other
plans are determined with reference to any period for which he is
entitled to benefits under this Plan, he shall be
-1-
<PAGE>
deemed to have accepted the benefits provided under such other
plans with respect to such period in discharge of the actuarially
equivalent value of his benefits provided under this Plan with
respect to the same period; and
(2) LIMITATION ON COMBINED BENEFITS. The Member's retirement
benefit under this Plan shall in no event exceed the retirement
benefit which would have been payable under this Plan if all
service credited for benefit accrual purposes under such other
plans were treated as Credited Service under this Plan, reduced by
the actuarial equivalent of the benefits payable under all such
other plans.
(c) TRANSFERS FROM UNION SERVICE. Subject to Section 5.5(b), in the
event that on or after January 1, 1996, an individual shall be
transferred to employment as an Eligible Employee form employment which
is subject to union jurisdiction and which is not taken into account
under Sections 2.16(c) and 3.5(b) ("excludable employment"), his Service
completed prior to such transfer shall be deemed Credited Service to the
extent that it would qualify as Credited Service but for the provisions
of Sections 2.16(c) and 3.5(b), if:
(1) He shall complete at least five (5) years of Credited Service
subsequent to such transfer (determined without regard to this
Section 5.5(c)); and
(2) He shall be an Eligible Employee at his termination of
employment and shall then have vested rights to a retirement
benefit pursuant to Sections 5.1 through 5.4.
Notwithstanding the foregoing, remuneration paid during such
excludable employment shall in no event be considered Compensation.
(d) TEMPORARY EMPLOYMENT WITH AFFILIATE. Subject to Section 5.5(b),
except for individuals covered by Appendix A, in the event that an
Eligible Employee shall be transferred to employment with an Affiliate
on or after January 1, 1996, and if he shall subsequently be directly
transferred back to employment as an Eligible Employee, his Service
completed and remuneration paid while so employed by such Affiliate
shall be deemed Credited Service and Compensation to the extent they
would be so treated if such employment with an Affiliate had been in
employment with an Employer.
(e) TRANSFERS FROM OTHER PLANS.
(1) Except in the case of individuals covered by Appendix A, if
(i) on or after January 1, 1996 an individual shall be transferred
to employment as an Eligible Employee from employment with an
Affiliate or an Employer other than as an Eligible Employee
("Excluded Employment") (or such a transfer occurred prior to 1996
with respect to an individual employed as an Eligible Employee on
January 1, 1996), (ii) such individual was, immediately prior to
such transfer, an active participant in a Related Benefit Plan (as
hereinafter defined) maintained by such Affiliate or Employer, and
(iii) such individual completes at least two (2) years of Credited
Service following such transfer:
(A) There shall be taken into account as Credited Service
under this Plan: (i) his prior Service in Excluded Employment
with such Employer or Affiliate which is taken into account
for purposes of benefit accrual under such Related Benefit
Plan, and (ii) if provided for by resolution of the Executive
Committee of the Company, his prior employment with an entity
which was not an Employer or Affiliate and which is recognized
for purposes of benefit accrual under the provisions of such
Related Benefit Plans.
-2-
<PAGE>
(B) His benefits under such Related Benefit Plan shall be
disregarded in applying the provisions of Sections 5.5(b)(1)
and 5.5(b)(2);
(C) Remuneration paid by his prior employer during any period
which is taken into account as Credited Service under this
Section 5.5(e)(1) shall be taken into account in determining
the amount of his Compensation under this Plan (subject to the
applicable provisions of Section 2.10); and
(D) To the extent that his benefits (whether or not vested)
under such Related Benefit Plan, determined as of the date of
transfer, are (i) determined with reference to any period
taken into account as Credited Service under this Plan, and
(ii) are not attributable to voluntary employee contributions,
he shall be deemed to have accepted such benefits with respect
to such period in discharge of the actuarially equivalent
value of his benefits provided under this Plan with respect to
the same period.
(2) Except as the Committee shall otherwise provide, the
provisions of this Section 5.5(e) shall not apply to: (i) any
transfer of employment to which Section 5.5(d) applies; (ii) any
transfer of employment to which Section 5.5(c) would apply if the
employee complied with the requirements of Sections 5.5(c)(1) and
5.5(c)(2); (iii) any transfer of employment incident to a transfer
of assets and liabilities from another plan or the merger of
another plan into this Plan; (iv) any transfer of employment
incident to any merger, liquidation, reorganization, or transfer of
assets by or between any trade or business (whether or not
incorporated), or incident to the creation or transfer of an
operating division; and (v) any transfer of employment covered by a
supplement to this Plan, unless and to the extent that such
Supplement expressly states that this Section shall apply. In
addition, the provisions of this Section 5.5(e) shall not apply to
any transfer of employment to the extent expressly excluded from
operation of this Section 5.5(e) by action of the Committee within
one (1) year of the individual's transfer of employment.
(3) For purposes of this Section 5.5(e), a Related Benefit Plan
means a pension, annuity, retirement, superannuation or similar
plan (other than this Plan, a defined contribution plan, an
Associated Plan, the Revlon Employees' Savings and Investment Plan,
the Revlon Pension Equalization Plan, the Revlon Supplemental
Retirement Plan for Key Employees, the Coleman Retirement Incentive
Savings Plan, the Monthly Salaried Coleman Retirement Incentive
Savings Plan, the Coleman Executive Deferred Compensation Plan, the
Coleman Excess Benefit Plan, a plan maintained pursuant to a
collective bargaining agreement and such other plans as the
Committee may designate), funded or unfunded, which is sponsored or
maintained or to which contributions are or have been made by an
Employer or Affiliate.
(4) For purposes of Section 5.5(e)(1)(D), in determining the
amount of a Participant's benefits under a Related Benefit Plan as
of the date of transfer, there shall be taken into account the
amount of: (i) any distribution from such Related Benefit Plan to
or in respect of a Participant prior to the date he first began
participating in this Plan (other than benefits derived from
voluntary employee contributions), and (ii) benefits accrued,
payable or paid under any other plan which reduce the Participant's
benefits under such Related Benefit Plan.
(5) In the case of a Related Benefit Plan benefits payable in
other than United States currency, the Committee shall determine
the appropriate conversion factor to be used in applying the
provisions of this Section 5.5.
-3-
<PAGE>
(f) NO REDUCTION IN ACCRUED BENEFITS. This Section 5.5 shall be
interpreted in a manner not to decrease a Member's accrued benefit.
(g) NONDISCRIMINATION. In no event shall any benefits accrue under
this Section 5.5 if and to the extent such benefits are discriminatory
under the Code.
(h) MAXIMUM SERVICE. The maximum combined benefit paid from this Plan
and The New Coleman Company, Inc. Pension Plan for Weekly Salaried and
Hourly Paid Employees (and their respective "Prior Plans") to any Member
who retires under this Plan, and has 35 or more total years of Credited
Service under both plans, shall be a benefit equal to what the Member
would have received under this Plan had the Member had 35 years of
Credited Service under this Plan.
(i) CANADIAN COLEMAN TRANSFERS. Except for Section 5.5(h), this
Section 5.5 shall not be applied to Members who at any time have been
Employees of the Canadian Coleman Company, Limited and who, as of
January 1, 1983 or thereafter, are employed by either the Company or
Canadian Coleman. The Plan benefits of such individuals shall be
calculated in accordance with the provisions of Appendix A.
(j) THE PRIOR PLAN. Except for Section 5.5(h), this Section 5.5 shall
not be applied to restrict consideration of a Member's service under the
Prior Plan when calculating the benefit payable under this Plan.
THIRD: Except to the extent provided herein, the Plan is not amended in
any other respect.
IN WITNESS WHEREOF, the Employer has caused this Special Amendment to be
executed on its behalf and adopted this 15th day of December, 1997.
NEW COLEMAN HOLDINGS, INC.
By: J. W. Levin
-----------------------------------
<PAGE>
THE NEW COLEMAN COMPANY, INC.
PENSION PLAN FOR WEEKLY SALARIED
AND HOURLY PAID EMPLOYEES
(Amended and Restated as of
January 1, 1996)
<PAGE>
THE NEW COLEMAN COMPANY, INC.
PENSION PLAN FOR WEEKLY SALARIED
AND HOURLY PAID EMPLOYEES
(Amended and Restated as of
January 1, 1996)
TABLE OF CONTENTS
PAGE
----
ARTICLE I. THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 ESTABLISHMENT AND AMENDMENT OF THE PLAN.. . . . . . . . . . 1
1.2 APPLICABILITY OF THE PLAN . . . . . . . . . . . . . . . . . 1
ARTICLE II. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 "ACTUARIAL EQUIVALENT". . . . . . . . . . . . . . . . . . . 1
2.2 "AFFILIATE" . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 "ANNUITY STARTING DATE" . . . . . . . . . . . . . . . . . . 2
2.4 "BASE HOURLY WAGE". . . . . . . . . . . . . . . . . . . . . 2
2.5 "BENEFICIARY" . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 "BOARD" . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 "BREAK IN SERVICE". . . . . . . . . . . . . . . . . . . . . 3
2.8 "CODE". . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 "COMMITTEE" . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 "COMPANY" . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.11 "CREDITED SERVICE". . . . . . . . . . . . . . . . . . . . . 3
2.12 "DISABILITY". . . . . . . . . . . . . . . . . . . . . . . . 3
2.13 "EARLIEST RETIREMENT AGE" . . . . . . . . . . . . . . . . . 3
2.14 "EARLY RETIREMENT AGE". . . . . . . . . . . . . . . . . . . 4
2.15 "ELIGIBLE EMPLOYEE" . . . . . . . . . . . . . . . . . . . . 4
2.16 "EMPLOYEE". . . . . . . . . . . . . . . . . . . . . . . . . 4
2.17 "EMPLOYER". . . . . . . . . . . . . . . . . . . . . . . . . 4
2.18 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.19 "FINAL AVERAGE COMPENSATION". . . . . . . . . . . . . . . . 4
2.20 "HIGHLY COMPENSATED EMPLOYEE" . . . . . . . . . . . . . . . 5
2.21 "INACTIVE PARTICIPANT". . . . . . . . . . . . . . . . . . . 6
2.22 "MEMBER". . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.23 "NORMAL RETIREMENT AGE" . . . . . . . . . . . . . . . . . . 6
2.24 "ONE-YEAR BREAK IN SERVICE" . . . . . . . . . . . . . . . . 6
2.25 "PARTICIPANT" . . . . . . . . . . . . . . . . . . . . . . . 6
2.26 "PLAN". . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.27 "PLAN YEAR" . . . . . . . . . . . . . . . . . . . . . . . . 6
2.28 "PRIOR PLAN". . . . . . . . . . . . . . . . . . . . . . . . 6
2.29 "QUALIFIED JOINT AND SURVIVOR ANNUITY". . . . . . . . . . . 6
2.30 "RETIREMENT DATE" . . . . . . . . . . . . . . . . . . . . . 7
-i-
<PAGE>
2.31 "RETIREMENT FUND" . . . . . . . . . . . . . . . . . . . . . 7
2.32 "SOCIAL SECURITY RETIREMENT AGE". . . . . . . . . . . . . . 7
2.33 "TERMINATION OF SERVICE". . . . . . . . . . . . . . . . . . 8
2.34 "TRUST AGREEMENT" . . . . . . . . . . . . . . . . . . . . . 8
2.35 "TRUSTEE" . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.36 "TRUST FUND". . . . . . . . . . . . . . . . . . . . . . . . 8
2.37 "VESTING SERVICE" . . . . . . . . . . . . . . . . . . . . . 8
2.38 "YEAR OF ELIGIBILITY SERVICE" . . . . . . . . . . . . . . . 8
ARTICLE III. SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 HOUR OF SERVICE . . . . . . . . . . . . . . . . . . . . . . 8
3.2 BREAK IN SERVICE. . . . . . . . . . . . . . . . . . . . . . 10
3.3 ONE-YEAR BREAK IN SERVICE . . . . . . . . . . . . . . . . . 11
3.4 VESTING SERVICE . . . . . . . . . . . . . . . . . . . . . . 11
3.5 CREDITED SERVICE. . . . . . . . . . . . . . . . . . . . . . 11
3.6 LEASED EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV. PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 DATE OF PARTICIPATION . . . . . . . . . . . . . . . . . . . 12
4.2 REENTRY INTO THE PLAN FOLLOWING A BREAK IN SERVICE. . . . . 13
4.3 DURATION. . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 EMPLOYEES OF NEWLY ACQUIRED BUSINESSES. . . . . . . . . . . 13
ARTICLE V. BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.1 NORMAL RETIREMENT BENEFITS. . . . . . . . . . . . . . . . . 13
5.2 EARLY RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . 15
5.3 DISABILITY RETIREMENT BENEFITS. . . . . . . . . . . . . . . 15
5.4 VESTED RETIREMENT BENEFITS. . . . . . . . . . . . . . . . . 17
5.5 ADJUSTMENT TO BENEFITS. . . . . . . . . . . . . . . . . . . 17
5.6 NORMAL FORM OF PENSION FOR MARRIED MEMBERS. . . . . . . . . 18
5.7 OPTIONAL METHODS OF PAYMENT . . . . . . . . . . . . . . . . 19
5.8 INCIDENTAL DEATH BENEFITS . . . . . . . . . . . . . . . . . 20
5.9 PAYMENT OF SMALL AMOUNTS. . . . . . . . . . . . . . . . . . 20
5.10 MAXIMUM ANNUAL BENEFITS . . . . . . . . . . . . . . . . . . 22
5.11 WITHHOLDING TAXES . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI. SUSPENSION OF BENEFITS UPON CERTAIN EMPLOYMENT OR
REEMPLOYMENT. . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 REEMPLOYMENT BEFORE NORMAL RETIREMENT DATE. . . . . . . . . 23
6.2 CONTINUED EMPLOYMENT OR REEMPLOYMENT ON OR AFTER NORMAL
RETIREMENT DATE . . . . . . . . . . . . . . . . . . . . . 24
6.3 SUSPENSION OF BENEFITS NOTICE PROCEDURES. . . . . . . . . . 24
ARTICLE VII. DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . 25
-ii-
<PAGE>
7.1 PRERETIREMENT DEATH BENEFITS FOR MARRIED MEMBERS. . . . . . 25
7.2 NO REDUCTION TO OTHER BENEFITS. . . . . . . . . . . . . . . 25
7.3 ADDITIONAL DEATH BENEFITS . . . . . . . . . . . . . . . . . 25
ARTICLE VIII. FINANCING. . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1 FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . 26
8.3 NONREVERSION. . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IX. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 COMMITTEE AND FIDUCIARY . . . . . . . . . . . . . . . . . . 27
9.2 COMPENSATION AND EXPENSES . . . . . . . . . . . . . . . . . 28
9.3 MANNER OF ACTION. . . . . . . . . . . . . . . . . . . . . . 28
9.4 CHAIRMAN, SECRETARY, AND SPECIALISTS. . . . . . . . . . . . 28
9.5 RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.6 ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 28
9.7 APPEALS FROM DENIAL OF CLAIMS . . . . . . . . . . . . . . . 29
9.8 NOTICE OF ADDRESS AND MISSING PERSONS . . . . . . . . . . . 29
9.9 DATA AND INFORMATION FOR BENEFITS . . . . . . . . . . . . . 30
9.10 INDEMNITY FOR LIABILITY . . . . . . . . . . . . . . . . . . 30
9.11 EFFECT OF A MISTAKE . . . . . . . . . . . . . . . . . . . . 30
9.12 SELF INTEREST . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE X. AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . 30
10.1 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . 30
10.2 DISTRIBUTION ON TERMINATION . . . . . . . . . . . . . . . . 31
10.3 MERGER, CONSOLIDATION, OR TRANSFER. . . . . . . . . . . . . 31
ARTICLE XI. RESTRICTIONS ON BENEFITS. . . . . . . . . . . . . . . . . . . 31
11.1 TEMPORARY RESTRICTIONS ON BENEFITS FOR
MEMBERS OF EACH EMPLOYER. . . . . . . . . . . . . . . . . 31
ARTICLE XII. TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . 32
12.1 APPLICATION OF TOP-HEAVY PROVISIONS . . . . . . . . . . . . 32
12.2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 33
12.3 VESTING REQUIREMENTS. . . . . . . . . . . . . . . . . . . . 34
12.4 MINIMUM BENEFIT . . . . . . . . . . . . . . . . . . . . . . 34
12.5 LIMIT ON ANNUAL ADDITIONS: COMBINED PLAN LIMIT . . . . . . 35
12.6 COLLECTIVE BARGAINING AGREEMENTS. . . . . . . . . . . . . . 36
ARTICLE XIII. PARTICIPATION IN AND WITHDRAWAL FROM THE PLAN BY AN
AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . . 36
-iii-
<PAGE>
13.1 PARTICIPATION IN THE PLAN . . . . . . . . . . . . . . . . . 36
13.2 WITHDRAWAL FROM THE PLAN. . . . . . . . . . . . . . . . . . 36
ARTICLE XIV. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 37
14.1 INCOMPETENCY. . . . . . . . . . . . . . . . . . . . . . . . 37
14.2 NONALIENATION OF BENEFITS . . . . . . . . . . . . . . . . . 37
14.3 NO GUARANTEE OF EMPLOYMENT. . . . . . . . . . . . . . . . . 37
14.4 APPLICABLE LAW. . . . . . . . . . . . . . . . . . . . . . . 37
14.5 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . 38
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
-iv-
<PAGE>
THE NEW COLEMAN COMPANY, INC.
PENSION PLAN FOR WEEKLY SALARIED
AND HOURLY PAID EMPLOYEES
(Amended and Restated as of
January 1, 1996)
ARTICLE I. THE PLAN
1.1 ESTABLISHMENT AND AMENDMENT OF THE PLAN. The Coleman Company, Inc.
previously established a defined benefit pension plan for certain eligible
employees of the Company and any Affiliates that had adopted the plan. This
plan was known as The Coleman Company, Inc. Pension Plan for Weekly Salaried
and Hourly Paid Employees ("Prior Plan"). The Prior Plan was initially
effective on May 9, 1955 and was terminated on June 30, 1989.
New Coleman Holdings, Inc. (the "Company") established a replacement
defined benefit plan for the employees who previously participated in the
Prior Plan. This replacement plan, known as The New Coleman Company, Inc.
Pension Plan for Weekly Salaried and Hourly Paid Employees (the "Plan") was
initially effective as of July 1, 1989. This Plan is hereby amended and
restated as of January 1, 1996.
1.2 APPLICABILITY OF THE PLAN. The provisions of this Plan are
generally applicable only to Employees who are employed by an Employer on or
after July 1, 1989. Any person who was covered by the Prior Plan as in
effect before July 1, 1989, and who had a Termination of Service before July
1, 1989, shall continue to be entitled to the retirement benefits (if any)
provided under the Prior Plan.
ARTICLE II. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings
set forth below unless otherwise expressly provided. When the defined meaning
is intended, the term is capitalized. The definition of any term in the
singular shall also include the plural and any masculine terminology shall be
deemed to refer to either a male or a female.
2.1 "ACTUARIAL EQUIVALENT" means a benefit having the same value as the
benefit it replaces, determined as follows:
(a) GENERAL RULE. Except as otherwise provided in subsection (b),
Actuarial Equivalence shall be based on:
(1) the 1971 male Group Annuity Table with a two-year setbacks; and
(2) 6 percent interest, compounded annually.
-1-
<PAGE>
(b) For the purpose of determining the value of a single sum distribution
under section 5.9, Actuarial Equivalence shall be determined under
either subsection (a) or this subsection (b), whichever produces the
greater benefit. Actuarial Equivalence under this subsection (b)
shall be based on:
(1) the 1984 Unisex Pension Mortality Table; and
(2) the immediate and deferred interest rates which would be used by
the Pension Benefit Guaranty Corporation (as of the first day of
the Plan Year of distribution) for the purpose of determining
the present value of a single sum distribution upon the distress
termination of a trusteed single-employer.
2.2 "AFFILIATE" means:
(a) any corporation while it is a member of the same "controlled group" of
corporations (within the meaning of Code section 414(b)) as the
Company;
(b) any other trade or business (whether or not incorporated) while it is
under "common control" (within the meaning of Code section 414(c))
with the Company;
(c) any organization during any period in which it (along with the
Company) is a member of an "affiliated service group" (within the
meaning of Code section 414(m)); or
(d) any other entity during any period in which it is required to be
aggregated with the Company under Code section 414(o).
2.3 "ANNUITY STARTING DATE" mean the following:
(a) BENEFITS PAYABLE IN THE FORM OF AN ANNUITY. In the case of benefits
payable in the form of an annuity, Annuity Starting Date means the
first day of the first period for which an amount is payable under
the Plan.
(b) BENEFITS PAYABLE IN THE FORM OF A SINGLE SUM PAYMENT. In the case of
a benefit payable in the form of as single sum payment, Annuity
Starting Date means the date on which all events have occurred that
entitle the Member to the benefit.
(c) BENEFITS FOR DISABLED MEMBERS. In the case of a Member who is
receiving a disability benefit under section 5.3(a), Annuity Starting
Date means the first day of the month coinciding with or next
following the Member's attainment of Normal Retirement Age.
2.4 "BASE HOURLY WAGE" for a Plan Year means a Participant's base rate
of pay from an Employer determined for each Plan Year on the date of the
Participant's Termination of Service occurring within that Plan Year, or if
no Termination of Service occurred, on December 31 of the Plan Year. In
determining the Base Hourly Wage for Plan Years beginning after December 31,
1988, the Compensation of each Participant taken into account under the Plan
for each Plan Year shall not exceed the Compensation Limitation prescribed by
Code Section 401(a)(17). The Compensation Limitation is $200,000 for the
1989 Plan Year, a higher indexed amount for the 1990 through 1993 Plan Years,
and $150,000 for the 1994 Plan Year. For Plan Years beginning after December
31, 1994, the Compensation Limitation is the adjusted dollar amount
determined in accordance with Code Section
-2-
<PAGE>
401(a)(17). Prior to January 1, 1997, in determining the Compensation of a
Participant for purposes of this limitation, the rules of Code Section
414(q)(6) shall apply, except in applying such rules, the term family shall
include only the spouse of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the close of the year. If,
as a result of the application of the family aggregation rules, the
Compensation of a Participant is limited, then the limitation shall be
prorated among the individuals affected in proportion to each such
individual's Compensation as determined under this Section prior to the
application of the limitation.
2.5 "BENEFICIARY" means the person designated by the Participant to
receive a survivor benefit under Section 5.7 or 7.3. For distributions under
Section 5.7, the Beneficiary of a married Member shall be his or her spouse
unless the spouse has consented to the designation of a different Beneficiary
under Section 5.6(b). Subject to the consent requirements contained in
Section 5.6(b), a Member may change his or her Beneficiary at any time by
filing written notice with the Committee at a time and manner determined by
the Committee.
If the Member's Beneficiary does not survive the Member or if the Member
dies without designating a beneficiary, any benefits payable on the Member's
behalf after his or her death shall be paid to the Member's surviving spouse;
or if there is no surviving spouse, to the Member's estate.
2.6 "BOARD" means the Company's Board of Directors.
2.7 "BREAK IN SERVICE" means an absence from employment as described in
section 3.2.
2.8 "CODE" means the Internal Revenue Code of 1986, as amended, or as
it may be amended from time to time. A reference to a particular section of
the Code shall also be deemed to refer to the regulations under that Code
section.
2.9 "COMMITTEE" means the administrative committee appointed by the
Board under Article IX.
2.10 "COMPANY" means New Coleman Holdings, Inc., or any successor
thereto which agrees to assume and continue the Plan. Whenever the Company
under the terms of this Plan is permitted or required to do or perform any
act or matter or thing, it shall be authorized by the Company's governing
board or body or shall be performed by an officer or other delegate thereunto
duly authorized by such governing board or body.
2.11 "CREDITED SERVICE" means the period of employment described in
section 3.5.
2.12 "DISABILITY" means any physical or mental condition other than
alcoholism or the current use of illegal drugs which, on the basis of medical
evidence satisfactory to the Committee, renders the Member totally and
permanently unable to engage in any employment for wage or profit. To
constitute a Disability under the Plan, the physical or mental condition must
not have resulted from the Member's participation in a felonious criminal act
or an intentionally self-inflicted injury.
2.13 "EARLIEST RETIREMENT AGE" means the earliest date on which, under
the Plan, a Member could elect to receive a retirement benefit.
-3-
<PAGE>
2.14 "EARLY RETIREMENT AGE" means a Member's age prior to Normal
Retirement Age, but after:
(a) attaining age 55 and completing one year of Credited Service; or
(b) completing 30 years of Vesting Service.
2.15 "ELIGIBLE EMPLOYEE" means any Employee who is employed and
compensated (by a payroll check issued directly from the Employer to the
Employee or direct payroll deposit made to the Employee's account) by an
Employer on an hourly or weekly salaried basis. An Employee shall not be an
Eligible Employee if he is:
(a) in a newly acquired group to which this Plan has not been extended
under section 4.4; or
(b) covered by a collective bargaining agreement between employee
representatives and an Employer under which retirement benefits were
the subject of good faith bargaining (unless the collective bargaining
agreement provides for such Employee's participation in the Plan).
2.16 "EMPLOYEE" means any person who is employed by the Company or an
Affiliate.
2.17 "EMPLOYER" means the Company and any Affiliate which elects to
become an Employer by adopting the Plan for the benefit of its Employees in
the manner described in Article XIII. Participating Employers (other than the
Company) are listed in the Appendix.
2.18 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or as it may be amended from time to time. A reference to a
particular section of ERISA shall also be deemed to refer to the regulations
under that section.
2.19 "FINAL AVERAGE COMPENSATION" shall be determined as follows:
(a) GENERAL RULE. For purposes of the formula in Section 5.1(b)(1), and
the offset in Section 5.1(b)(2)(B), "Final Average Compensation"
means the monthly average of a Participant's Compensation for the
period of 60 consecutive months, selected from the Participant's last
120 months of participation, during which the Participant received
the largest total Compensation. However, if the Participant has
fewer than 60 months of Plan participation, his Final Average
Compensation shall be determined over his longest period of
uninterrupted participation in the Plan.
(b) EXCEPTION. For purposes of calculating the offset described in
section 5.1(b)(2)(A), Three-Year Final Average Compensation means
the monthly average of a Participant's Compensation for the 36-month
period ending on the Participant's Termination of Service. However,
if the Participant has fewer than 36 months of service, Three-Year
Final Average Compensation under this subsection (b) will be based on
the Participant's full period of Vesting Service.
(c) HOUR OF SERVICE means each hour described in section 3 1.
-4-
<PAGE>
2.20 "HIGHLY COMPENSATED EMPLOYEE" means prior to January 1, 1997, with
respect to any Plan Year, any employee who at any time during the preceding
year (or such other period as the Company may elect pursuant to Treasury
Regulations):
(a) received Compensation (as defined in Code Section 414(q)(7)) from the
Employer and all affiliates in excess of $75,000;
(b) received Compensation (as defined in Code Section 414(q)(7)) from the
Employer and all affiliates in excess of $50,000 and was in the
top-paid 20% of Employees;
(c) was an officer and received Compensation (as defined in Code Section
414(q)(7)) from the Employer and all affiliates in excess of $45,000,
or, if greater, one-half of the amount in effect under Code Section
415(b)(1)(A) for the preceding Plan Year; or
(d) was a 5% owner.
Unless the Company makes the election under Treasury Regulations, Highly
Compensated Employee also means, with respect to any Plan Year, any Employee
who, at any time during such Plan Year, met the descriptions contained in
paragraphs (a), (b), or (c) and was among the top-paid 100 Employees or any
Employee who was a 5% owner. A family member of a Highly Compensated
Employee and a former employee shall be treated as a Highly Compensated
Employee to the extent required by Code Section 414(q)(6) and (9) and the
Regulations thereunder. The dollar limits described in paragraphs (a), (b),
and (c) will be adjusted to reflect increases in the cost of living, in the
manner and at the times prescribed by the Secretary of the Treasury.
In determining who is a Highly Compensated Employee, the following rules
shall apply:
(e) for purposes of determining the number of Employees in the top-paid
20%, the following Employees are excluded:
1. Employees who have not completed six months of Service;
2. Employees who normally work less than 17 1/2 hours per week;
3. Employees who normally work during not more than six months
during any Plan Year;
4. Employees who have not attained age 21; and
5. to the extent allowable under Treasury Regulation 1.414(q)-1T,
Employees covered by a collective bargaining agreement between
Employee representatives and the Company or an affiliate.
(f) The number of officers is limited to 50 (or, if lesser, the greater
of 3 Employees or 10% of Employees), excluding those Employees
described in (e)1, (e)2, (e)3, (e)4, or (e)5 above.
(g) When no officer has Compensation in excess of the dollar limit
described in C above (as adjusted for increases in the cost of living
as prescribed by the Secretary of the Treasury), the highest paid
officer is treated as Highly Compensated.
(h) A Highly Compensated Former Employee shall mean a former Employee who
separated from service prior to the Plan Year and who was an active
Highly Compensated Employee for either (i) the year the Employee
separated from service, or (ii) any Plan Year ending on or after the
Employee's 55th birthday. If the Employee separated from service
before January 1, 1987, such an Employee shall be included as a
Highly Compensated Former Employee only if the Employee
-5-
<PAGE>
was a 5% owner or received Compensation in excess of $50,000 during
(I) the Employee's year of separation or the year preceding such
year, (II) any year ending on or after such Employee's 55th birthday,
or (III) the last year ending on or after such Employee's 55th
birthday.
As an alternative to the above method of identifying Highly Compensated
Employees, the Plan Administrator may elect to use the simplified
identification method of IRS Revenue Procedure 93-42, which is incorporated
by reference herein, including the use of a snapshot day if applicable.
Effective January 1, 1997, the term Highly Compensated Employee means
any Employee who was a 5% owner at anytime during the current or preceding
Plan Year or for the preceding Plan Year received compensation from the
Employee in excess of $80,000 (as adjusted and defined in Section 414(q))
and, if the Employer so elects, was in the top-paid 20% of Employees. The
provisions of subsection (e) above shall apply in determining who is a Highly
Compensated Employee.
2.21 "INACTIVE PARTICIPANT" means an Employee who was a Participant, but
who is transferred to and is in a position of employment where he is no
longer an Eligible Employee.
2.22 "MEMBER" means a Participant, Inactive Participant, or former
Employee receiving or entitled to receive benefits under the Plan.
2.23 "NORMAL RETIREMENT AGE" means the Member's sixty-fifth birthday.
2.24 "ONE-YEAR BREAK IN SERVICE" means a period of absence from
employment as described in section 3.3.
2.25 "PARTICIPANT" means an Eligible Employee who has met and continues
to meet the eligibility requirements of Article IV.
2.26 "PLAN" means The New Coleman Company, Ice. Pension Plan for Weekly
Salaried and Hourly Paid Employees, as amended from time to time.
2.27 "PLAN YEAR" means initially the six-month period beginning July 1,
1989 and ending December 31, 1989. Thereafter, the Plan Year shall mean the
calendar year.
2.28 "PRIOR PLAN" means The Coleman Company, Inc. Pension Plan for
Weekly Salaried and Hourly Paid Employees which was terminated on June 30,
1989.
2.29 "QUALIFIED JOINT AND SURVIVOR ANNUITY" means an annuity which
provides reduced payments for the lifetime of the Members with a survivor
annuity for the lifetime of the Member's spouse. This survivor annuity shall
be 50 percent of the annuity which is payable during the joint lives of the
Member and his spouse. The Qualified Joint and Survivor Annuity is the
Actuarial Equivalent of the single life annuity determined under section 5.1,
5.2, 5.3, or 5.4, whichever is applicable.
-6-
<PAGE>
2.30 "RETIREMENT DATE" means the date as of which retirement benefit
payments under the Plan begin. The Retirement Dates under the Plan shall be
defined as follows:
(a) "NORMAL RETIREMENT DATE" means the first day of the month coinciding
with or next following the date on which the Member actually retires
on or after his Normal Retirement Age.
(b) "EARLY RETIREMENT DATE" means, for a Member who incurs a Termination
of Service after attaining Early Retirement Age, but before attaining
Normal Retirement Age, the first day of any month elected by the
Member following such Termination of Service. However, a Member's
Early Retirement Date may not be later than the first day of the
month coinciding with or next following the Member's sixty-fifth
birthday.
(c) "DISABILITY RETIREMENT DATE" means, for a Member who is eligible for a
disability benefit under section 5.3, the later of:
(1) the first day of the sixth month coinciding with or next
following the Member's Termination of Service on account of
Disability;
(2) the first day of the month coinciding with or next following the
expiration of any temporary disability benefits payable under a
sickness and accident plan sponsored by the Company or an
Affiliate; or
(3) the first day of the month coinciding with or next following
the date on which an eligible Member makes application for a
disability benefit under the Plan.
(d) "VESTED RETIREMENT DATE" means, for a Member who has a Termination of
Service before his Normal Retirement Date or Early Retirement Date,
but after completing at least five years of Vesting Service, the
first day of the month coinciding with or next following the date on
which the Member attains age 65. However, a Member who has completed
one year of Credited Service may elect as a Vested Retirement Date
the first day of any month coinciding with or following the Member's
fifty-fifth birthday, but no later than the first day of the month
coinciding with or next following the Member's sixty-fifth birthday.
2.31 "RETIREMENT FUND" means the Trust Fund or any insurance fund
established and maintained under any Trust Agreement or any group annuity
contract designated as a part of this Plan to finance the benefits under this
Plan.
2.32 "SOCIAL SECURITY RETIREMENT AGE" means:
(a) age 65 for a Member born before January 1, 1938;
(b) age 66 for a Member born after December 31, 1937, but before January
1, 1955; and
(c) age 67 for a Member born after December 31, 1954.
2.33 "TERMINATION OF SERVICE" means an Employee's death or resignation,
discharge, or retirement from the Company and its Affiliates.
-7-
<PAGE>
2.34 "TRUST AGREEMENT" means any agreement in the nature of a trust
established to form a part of this Plan to receive, hold, invest, and dispose
of the Trust Fund.
2.35 "TRUSTEE" means the corporation, individual, individuals, or
combination thereof, acting as trustee under the Trust Agreement at any time
of reference.
2.36 "TRUST FUND" means the assets of every kind and description held
under any Trust Agreement forming a part of this Plan.
2.37 "VESTING SERVICE" means the period of employment described in
section 3.4.
2.38 "YEAR OF ELIGIBILITY SERVICE" means either:
(a) the first anniversary of the date on which an Employee performs his
first Hour of Service upon employment or reemployment, provided that
the Employee is credited with at least 1,000 Hours of Service during
such one-year period; or
(b) any Plan Year (starting with the Plan Year in which the anniversary
described in subsection (a) occurs) during which the Employee
completes at least 1,000 Hours of Service.
ARTICLE III. SERVICE
3.1 HOUR OF SERVICE. "Hours of Service" are used to determine an
Employee's Years of Eligibility Service, Vesting Service, and Credited
Service. Hours of Service shall be determined as follows:
(a) FOR THE PERFORMANCE OF DUTIES. An Employee shall receive an Hour of
Service for each hour for which he is paid or entitled to payment by
the Company or an Affiliate for the performance of duties. Hours of
Service under this subsection shall be credited to the Employee in
the calendar year in which the duties are performed.
(b) PERIODS DURING WHICH NO DUTIES ARE PERFORMED. An Employee shall
receive an Hour of Service for each hour for which he is directly or
indirectly paid or entitled to payment by the Company or an Affiliate
on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated)
due to vacation, holidays, illness, incapacity (including
disability), layoff, jury duty, military duty, or leave of absence.
Hours of Service under this subsection shall be credited to the
Employee in the calendar year for which the Employee is paid or
entitled to payment. Such hours shall be credited on the basis of
the Employee's regular work schedule, or if the Employee has no
regularly scheduled working hours, on the basis of eight hours per day
or 40 hours per week.
(c) BACK PAY. An Employee shall receive an Hour of Service for each hour
for which back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Company or an Affiliate. Hours of
Service under this subsection shall be credited to the Employee in
the calendar
-8-
<PAGE>
year to which the award or agreement relates. Such hours shall be
credited on the basis of the Employee's regular work schedule, or if
the Employee has no regularly scheduled working hours, on the basis
of eight hours per day or 40 hours per week.
(d) HOURS NOT COUNTED. This subsection limits the Hours of Service
credited for periods during which no duties are performed. This
subsection applies whether or not Hours of Service otherwise would
have been counted for such periods under subsection (b) or (c).
(1) NONDUPLICATION. No hour shall be credited as an Hour of Service
more than once under this section 3.1.
(2) UNPAID TIME. An hour for which an Employee is not paid, either
directly or indirectly, shall not be credited, except as
provided in subsection (e) (regarding maternity and paternity
leaves), subsection (f) (regarding other unpaid leaves), and
subsection (g) (regarding military leaves).
(3) WORKERS' COMPENSATION, DISABILITY INSURANCE, OR UNEMPLOYMENT
COMPENSATION. Except as otherwise provided in subsection (f),
an hour for which an Employee is directly or indirectly paid or
entitled to payment on account of a period during which he
performs no duties shall not be credited as an Hour of Service
if such payment is made or due under a plan maintained solely
for the purpose of complying with applicable workers'
compensation, disability insurance, or unemployment compensation
laws.
(4) MEDICAL REIMBURSEMENT. Hours of Service shall not be credited
for a payment which solely reimburses the Employee for medical or
medically-related expenses.
(5) 501 HOUR LIMITATION. Except as otherwise provided in
subsections (f) and (g), no more than 501 Hours of Service shall
be credited on account of any single continuous period during
which no duties are performed.
(e) MATERNITY/PATERNITY LEAVE. Solely for the purpose of determining
whether a One-Year Break in Service has occurred, an Employee shall
receive Hours of Service for each day of an Employee's absence from
employment for maternity or paternity reasons. An absence for maternity
or paternity reasons shall mean an absence by reason of:
(1) the Employee's pregnancy;
(2) the birth of the Employee's child;
(3) the placement of a child with the Employee in connection
with the adoption of the child; or
(4) the caring for a child for a period immediately following
such birth or placement.
If the number of hours that would have been credited to the
Employee cannot be determined, 8 Hours of Service shall be credited
per day of such absence. No more than 501 Hours of Service shall
be credited under this subsection for any such absence. Hours of
Service under this subsection shall be credited in the Plan Year in
which the absence from employment commences if necessary
-9-
<PAGE>
to prevent a One-Year Break in Service; in all other cases, these
Hours of Service shall be credited in the following Plan Year.
Effective as of August 5, 1993, the foregoing definition shall also
apply to an absence from employment, not to exceed 12 weeks, for
which an Employee is entitled to leave under Section 102(a) of the
Family and Medical Leave Act of 1993 for maternity or paternity
reasons stated above or (i) for purposes of caring for a spouse,
child, or parent (but not parent-in-law) who has a serious health
condition; or (ii) because of the Employee's own serious health
condition.
(f) UNPAID LEAVE. An Employee shall receive Hours of Service for the
following periods of unpaid absence:
(1) ABSENCE ON ACCOUNT OF DISABILITY; leave of absence authorized
by an Employer; or
(2) ABSENCE ON ACCOUNT OF LAYOFF; hours under this subsection (f)
shall be credited at the rate of eight hours per day or 40 hours per
week. However, an Employee shall not earn more than two years of
Vesting Service for Hours of Service that are credited under
paragraphs (2) and (3)
(g) MILITARY LEAVE. An Employee shall receive an Hour of Service for
each hour of the normally scheduled work week for each week during any
period he is absent from work with the Company or an Affiliate for
voluntary or involuntary military service with the armed forces of the
United States, but not to exceed the period required under the law
pertaining to veterans' reemployment rights. However, if the Employee
fails to report for work at the end of this absence before his
reemployment rights expire, he shall not receive credit for hours during
the leave.
(h) CONSTRUCTION. For purposes of crediting Hours of Service, the
Committee shall follow Department of Labor Regulation Sections 2530
200b-2(b) and (c).
3.2 BREAK IN SERVICE means the cessation of crediting Hours of Service
when the Employee:
(a) resigns;
(b) is discharged;
(c) fails to report for work within the period required under the law
pertaining to veterans' reemployment rights after release from
military duty with the armed forces of the United States, in which
case his Break in Service shall be deemed to have occurred on the
first day of his leave for duty;
(d) fails to return to employment after an authorized leave of absence; or
(e) retires or dies.
3.3 ONE-YEAR BREAK IN SERVICE means a Plan Year in which an Employee
who has had a Break in Service has fewer than 425 Hours of Service.
3.4 VESTING SERVICE is used to determine a Member's eligibility to
receive benefits. Vesting Service is also used to determine if a former
Employee's Vesting Service and Credited, Service prior to a Break in Service
shall be reinstated if he is reemployed. An Employee shall receive credit for
Vesting Service for his period of employment with the Company and its
Affiliates as follows:
-10-
<PAGE>
(a) Except as otherwise provided in subsection (c), Vesting Service shall
be determined in completed full years of service as calculated under
subsection (c).
(b) For employment before July 1, 1989, an Employee shall be credited with
Vesting Service equal to the "Vested Service" he had under the terms
of the Prior Plan as of June 30, 1989. (See the Appendix for service
dates for participating Employers.)
(c) For employment on and after July 1, 1989, an Employee shall receive
credit for one full year of Vesting Service for each Plan Year in
which he completes at least 425 Hours of Service. (No Employee may
accrue more than one year of Vesting Service during the 12-month
period which begins on January 1, 1989 and ends on December 31, 1989.)
If an Employee has less than 425 Hours of Service in the Plan Year in
which he was hired (or rehired following a break in service), or the
Plan Year in which he incurred a Termination of Service, he shall
receive credit for one month of Vesting Service for each completed
month of employment during such Plan Year.
(d) If an Employee who has had a Break in Service is subsequently
reemployed as an Employee, he shall be considered a new Employee for
purposes of the Plan, except:
(1) if at such Break in Service he became eligible for a benefit
under Article V, the Vesting Service he had at such Break in
Service shall be reinstated upon the completion of one year of
Vesting Service following his reemployment;
(2) if he is reemployed before he has incurred a One-Year Break in
Service, his prior Vesting Service shall be reinstated upon his
reemployment; or
(3) if neither paragraph (1) nor (2) above is applicable and if the
number of consecutive One-Year Breaks in Service ending after a
Break in Service does not equal or exceed the greater of (A) five
or (B) the number of years of Vesting Service he had prior to
such Break in Service, his prior Vesting Service shall be
reinstated upon the completion of one year of Vesting Service
following his reemployment.
Notwithstanding the above, any service before January 1, 1985 that was
properly disregarded on account of an earlier absence under the Prior
Plan shall not be reinstated under this Plan.
3.5 CREDITED SERVICE is used to determine the amount of a Member's
benefit under section 5.1(b) and a Member's eligibility to begin receiving
early retirement benefits under sections 2.14 and 2.29(b). Credited Service
shall be determined as follows:
(a) SERVICE BEFORE JULY 1, 1989. For employment before July 1, 1989, an
Employee shall be credited with Credited Service equal to the
"Credited Service" he had under the terms of the Prior Plan as of
June 30, 1989. (See the Appendix for service dates for participating
Employers.)
(b) SERVICE AFTER JUNE 30, 1989. For employment after June 30, 1989, a
Member shall receive credit for Credited Service for each Plan Year
under the following table:
<TABLE>
HOURS OF SERVICE CREDITED SERVICE
---------------- ----------------
<S> <C> <C>
</TABLE>
-11-
<PAGE>
<TABLE>
<S> <C> <C>
1,700 or more 1 year
1,275 - 1,699 3/4 year
850 - 1,274 1/2 year
425 - 849 1/4 year
Less than 425 none
</TABLE>
For purposes of this subsection (b), a Member's Hours of Service shall not
include hours attributable to:
(1) employment as an Inactive Participant; and
(2) employment in a position where he is not an Eligible Employee.
(In no event shall a Member receive credit for more than one year
of Credited Service for the 12-month period which begins on
January 1, 1989 and ends on December 31, 1989.)
(c) REINSTATEMENT OF CREDITED SERVICE. If a Member incurs a Break in
Service and is then reemployed as an Eligible Employee, his prior
Credited Service shall be reinstated only to the extent that his
Vesting Service is reinstated under section 3.4(d).
3.6 LEASED EMPLOYEES. A person who is a "leased employee" (as defined
in Code section 414(n)) of the Company or an Affiliate shall not be
considered an Employee for purposes of the Plan. However, if such a person
participates in the Plan as a result of subsequent employment with the
Company or an Affiliate, he shall receive Vesting Service and Years of
Eligibility Service, but not Credited Service, for his employment as a leased
employee.
Notwithstanding the preceding provisions of this section, a leased
employee shall be included as an Employee for purposes of applying the
requirements described in Code section 414(n)(3).
ARTICLE IV. PARTICIPATION
4.1 DATE OF PARTICIPATION. Each Employee who was a participant in the
Prior Plan on June 30, 1989 shall automatically become a Participant in this
Plan on July 1, 1989, if he is still an Eligible Employee. Each other
Employee shall become a Participant in this Plan on the first working day of
the month coinciding with or next following the latest of the date on which
the Employee:
(a) completes one Year of Eligibility Service;
(b) attains age 21: or
(c) becomes an Eligible Employee.
4.2 REENTRY INTO THE PLAN FOLLOWING A BREAK IN SERVICE. A rehired
Employee who was previously a Participant shall again become a Participant
upon completing his first Hour of Service following his reemployment
-12-
<PAGE>
as an Eligible Employee. If the rehired Employee was not previously a
Participant, he shall become a Participant on the date described in section 4.1
4.3 DURATION. An Eligible Employee who becomes a Participant shall
continue to be a Participant or Inactive Participant until he has a Break in
Service. Such an individual shall continue to be a Member thereafter for as
long as he is entitled to receive any benefits under the Plan.
4.4 EMPLOYEES OF NEWLY ACQUIRED BUSINESSES. Notwithstanding any
provision of this Plan to the contrary, a person employed by another company,
corporation, or business enterprise which was acquired, purchased, or
operated by, or merged with or consolidated into the Company or any other
Employer after July 1, 1989, shall not be eligible to become a Participant in
this Plan unless this Plan is extended to such person or class of persons by
instrument in writing duly adopted and executed by the Committee acting on
behalf of the Company (or any other Employer).
Until and unless provided in that writing, participation shall be denied
for the period of time such person is employed in relation to such business
operation. The Committee shall make such rules, regulations, and other
determinations as shall be necessary to determine what constitutes employment
in relation to that business operation. Unless otherwise provided in the
instrument extending participation under this section 4.4, no service shall
be counted under this Plan for any period prior to the date of such
acquisition, purchase or operation by or merger with or consolidation into
the Company or any other Employer. Additionally, no Credited Service shall be
granted prior to the date the Plan is extended to such person or class of
persons unless specifically provided to the contrary in the writing extending
the Plan.
ARTICLE V. BENEFITS
5.1 NORMAL RETIREMENT BENEFITS.
(a) ELIGIBILITY. A Member who attains Normal Retirement Age while
employed by the Company or an Affiliate shall be eligible for a normal
retirement benefit under this Plan. Except as otherwise provided in
sections 5.6 and 5.7, this normal retirement benefit shall be
calculated and paid as a single life annuity commencing on the
Member's Normal Retirement Date. If a Member remains employed or is
reemployed after his Normal Retirement Date, his benefit payments
under this section may be suspended under Article VI. At Normal
Retirement Age, a Member's right to his normal retirement benefit
shall be 100 percent vested and nonforfeitable except upon death or
reemployment.
(b) AMOUNT. Subject to section 5.5, a Member who is eligible for a normal
retirement benefit under subsection (a) shall be entitled to a monthly
benefit equal to (1), reduced by (2) where:
(1) is the sum of the monthly benefit determined from the following
table for each year of Credited Service:
-13-
<PAGE>
<TABLE>
MEMBER'S BASE HOURLY MONTHLY ACCRUAL FOR FULL
WAGE FOR THE PLAN YEAR YEAR OF CREDITED SERVICE
---------------------- ------------------------
<S> <C>
$5.00 or less $10.00
$5.01 - $5.50 $11.00
$5.51 - $6.00 $12.00
$6.01 - $6.50 $13.00
$6.51 - $7.00 $14.00
$7.01 - $7.50 $15.00
$7.51 - $8.00 $16.00
etc. by $.50 increments etc. by $1.00 increments
</TABLE>
(The accrual under this subsection (b) shall be reduced proportionately for
each Plan Year in which the Member is credited with less than a full year
of Credited Service); and
(2) is the retirement benefit (or the Actuarial Equivalent thereof)
previously paid or payable to the Member under the Prior Plan as
of his Normal Retirement Date.
(c) MINIMUM BENEFIT. Notwithstanding any provision to the contrary, in no
event shall a monthly normal retirement benefit determined under this
section 5.1 be less than the largest early retirement benefit the
Member would have been entitled to receive under section 5.2 by
retiring at any time after his Early Retirement Age, but before Normal
Retirement Age.
(d) AGE 70-1/2 COMMENCEMENT. Notwithstanding any provision in this
section 5.1 to the contrary, monthly normal retirement benefits must
commence no later than April 1 of the year following the year in which
the Member attains age 70-1/2. However, a Member who is employed and
who has attained age 70-1/2 as of January 1, 1988 (and who was not a
5 percent owner (as defined in Code section 416(i)) at any time during
the Plan Year in which he attained age 66-1/2, or during any
subsequent Plan Year) may defer commencement of his distribution to
April 1 of the year following the year in which he retires.
The date described above shall be referred to as the Member's
"required beginning date."
In the event that the Member continues his employment beyond his
required beginning date, the required beginning date shall be his
Annuity Starting Date for purposes of waiving the Qualified Joint
and Survivor Annuity and electing an optional form of payment under
sections 5.6 and 5.7. If a Member remains in employment after his
required beginning date, his monthly retirement benefit shall be
recalculated and adjusted as of the end of each Plan Year to reflect
the additional accrual for such Plan Year. These additional accruals
shall be offset (but not below zero) by the Actuarial Equivalent of
any benefits distributed to the Member after his required beginning
date.
Effective January 1, 1997, the term "required beginning date" means
the later of (i) the calendar year in which the Employee attains age
70-1/2 or (ii) the calendar year in which the Employee retires,
PROVIDED that this clause (ii) shall not apply to any Employee who is
a 5% owner in the Plan Year in which the Employee attains age 70-1/2.
-14-
<PAGE>
5.2 EARLY RETIREMENT BENEFITS.
(a) ELIGIBILITY. A Member who attains his Early Retirement Age while
employed by an Employer or an Affiliate, but who has not yet reached
Normal Retirement Age, shall be eligible for an early retirement
benefit under the Plan. Except as otherwise provided in sections 5.6
and 5.7, this early retirement benefit shall be calculated and paid as
a single life annuity commencing on the Member's Early Retirement
Date. If a Member is reemployed after his Early Retirement Date, his
benefit payments under this section may be suspended under Article VI.
(b) AMOUNT. If the Member's Early Retirement Date is on or after the
Member's sixty-second birthday, the monthly benefit payable under
subsection (a) shall equal the benefit calculated under section 5.1(b)
as of the Member's Termination of Service. If the Member's Early
Retirement Date is before his sixty-second birthday, the monthly
benefit payable under subsection (a) shall be reduced by six-tenths
of 1 percent for each month by which the Member's Early Retirement
Date precedes the first day of the month coinciding with or next
following his sixty-second birthday.
The early retirement benefit under this subsection (b) will in no
event be less than the largest early retirement benefit which the
Member would have been entitled to receive under this section by
retiring at any time after reaching his Early Retirement Age.
5.3 DISABILITY RETIREMENT BENEFITS.
(a) ELIGIBILITY. A Member who has completed at least 15 years of Vesting
Service, and who incurs a Termination of Service before reaching
Normal Retirement Age on account of Disability, shall be eligible for
a disability benefit under the Plan.
Prior to the Member's Annuity Starting Date (as defined in section
2.3(c)), this disability benefit shall be calculated and paid as a
single life annuity commencing on the Member's Disability Retirement
Date. If a Member remains disabled until the first day of the month
coinciding with or next following his attainment of Normal Retirement
Age, the disability benefit shall be converted into a normal
retirement benefit which shall be calculated and paid as a single life
annuity (except as otherwise provided in section 5.6). If a Member is
reemployed after benefits begin under this section 5.3, these payments
may be suspended under Article VI.
(b) AMOUNT.
(1) AT DISABILITY RETIREMENT DATE. The monthly benefit payable to a
Member on his Disability Retirement Date shall be the amount
determined under section 5.1(b) based on Credited Service
determined as of the Member's Disability Retirement Date. Except
as otherwise provided in subsection (c), this amount shall
continue to be paid to the disabled Member through the month
which immediately precedes the month in which the Member attains
Normal Retirement Age.
(2) UPON NORMAL RETIREMENT AGE. If the Member remains disabled
through the first day of the month coinciding with or next
following his attainment of Normal Retirement Age, the benefit
determined under paragraph (1) shall be recalculated using the
benefit formula in
-15-
<PAGE>
effect when the Member incurred a Termination of Service on
account of Disability, assuming
(A) the Member continued to earn Credited Service through the
date on which he attained Normal Retirement Age; and
(B) the Member's Base Hourly Wage for each Plan Year following
his Termination of Service on account of Disability is the
same as his Base Hourly Wage at the time he became disabled.
(3) MINIMUM DISABILITY BENEFIT FOR CERTAIN MEMBERS. Notwithstanding
the provisions of Sections 5.3(b)(1) or 5.3(b)(2), the monthly
Disability Retirement Benefit payable under either Section
5.3(b)(1) or 5.3(b)(2) to a Member who incurs a Termination of
Service due to Disability within the 5-year period prior to
Normal Retirement Age shall not be less than the monthly
Disability Retirement Benefit calculated under this Section
5.3(b)(3).
The minimum monthly Disability Retirement Benefit under this
Section 5.3(b)(3) shall be determined in the same manner as the
amount of the monthly Disability Retirement Benefit is determined
under Section 5.3(b)(1). However, if a Member remains disabled
after attaining Normal Retirement Age, one Year of Credited
Service shall be added for each Plan Year after Normal Retirement
Age during which the Member remains disabled but in no event
shall the total Years of Credited Service for purposes of
computing the minimum monthly Disability Retirement under this
Section 5.3(b)(3) exceed 5.
Any increase in a member's monthly Disability Retirement Benefit
as a result of the application of this Section 5.3(b)(3) shall
commence as of the first day of the Plan Year following the plan
Year in which the additional Year of Credited Service due to
remaining disabled after Normal Retirement Age is recognized.
(c) RECOVERY FROM DISABILITY. If a Member recovers from his Disability
before reaching Normal Retirement Age, any benefit being paid under
this section 5.3 shall be terminated. The Member shall then be
entitled to a benefit under section 5.1, 5.2, or 5.4, whichever is
applicable. This subsequent benefit shall be based on Credited
Service up to the date on which the Disability was incurred, plus
Credited Service for the period of Disability.
A Member shall be treated as having recovered from Disability if:
(1) the Member engages in any employment for remuneration or profit
(except employment which has been approved by the Committee for
purposes of rehabilitation);
(2) on the basis of medical evidence satisfactory to the Committee,
the Member has sufficiently recovered to resume active
employment, and declines an offer of employment by an Employer;
or
(3) the Member refuses to submit to a medical examination requested
by the Committee, provided that the Committee may not request the
Member to undergo a medical examination more than once every six
months.
5.4 VESTED RETIREMENT BENEFITS.
-16-
<PAGE>
(a) ELIGIBILITY. A Member who has completed at least five years of
Vesting Service prior to his Termination of Service, but who is not
yet eligible for a normal or early retirement benefit, shall be
eligible for a vested retirement benefit under the Plan. Except as
otherwise provided in section 5.6, this vested retirement benefit
shall be calculated and paid as a single life annuity commencing on
the Member's Vested Retirement Date. If a Member is reemployed after
his Vested Retirement Date, his benefit payments under this section
may be suspended under Article VI.
(b) AMOUNT. A terminated Member who is eligible for a vested retirement
benefit under subsection (a) shall be entitled to a monthly benefit
equal to the benefit calculated under section 5.1(b) as of the
Member's Termination of Service. However, if the Member's Vested
Retirement Date precedes the first day of the month coinciding with
or next following the Member's sixty-fifth birthday, the benefit
payable to the Member shall be reduced by six-tenths of 1 percent for
each month that the Member's Vested Retirement Date precedes the first
day of the month coinciding with or next following his sixty-fifth
birthday.
5.5 ADJUSTMENT TO BENEFITS.
(a) NONDUPLICATION. Except as otherwise provided with respect to benefits
under the Prior Plan, a Member shall not be entitled to any benefits
under this Article V with respect to any period of service with the
Company or an Affiliate during which the Member is accruing benefits
under any other qualified defined benefit plan contributed to by the
Company or an Affiliate.
(b) COORDINATION OF BENEFITS. The maximum combined benefit paid from this
Plan and The New Coleman Company, Inc. Retirement Plan for Salaried
Employees (and their respective "Prior Plans") to any Member who
retires under this Plan, and has 35 or more total years of Credited
Service under both plans, shall be a benefit equal to what the Member
would have received under The New Coleman Company, Inc. Retirement
Plan for Salaried Employees had the Member retired with 35 years of
Credited Service under such plan.
-17-
<PAGE>
5.6 NORMAL FORM OF PENSION FOR MARRIED MEMBERS.
(a) NORMAL FORM. Subject to sections 5.3(a) and 5.7 through 5.9, the form
of pension payable to a Member who is entitled to a benefit under
section 5.1, 5.2, 5.3, or 5.4, and who is married on his Annuity
Starting Date, shall be a Qualified Joint and Survivor Annuity.
(b) WAIVER PROCEDURES.
(1) GENERAL RULE. A married Member who is entitled to a normal or
early retirement benefit under section 5.1 or 5.2, may elect in
writing, on a form supplied by the Committee, to waive the
Qualified Joint and Survivor Annuity, and to receive benefits in
accordance with an optional form of payment under section 5.7.
Any election by a Member pursuant to this paragraph (1) must be
filed with the Committee within the 90-day period ending on the
Member's Annuity Starting Date. For such an election to be
effective:
(A) the Member's spouse must consent in writing to such
election;
(B) such election must designate a Beneficiary (if applicable);
(C) the Member's spouse must acknowledge the financial
consequences of such consent; and
(D) such spouse's consent must be witnessed by a Plan
representative or notary public.
(2) EXCEPTION TO CONSENT REQUIREMENT. The consent of a Member's
spouse shall not be required where:
(A) the Member elects a joint and survivor annuity option under
section 5.7(a) with his spouse as Beneficiary;
(B) the Committee determines that the required consent cannot be
obtained because there is no spouse or the Member's spouse
cannot be located;
(C) the Committee determines that the Member is legally
separated;
(D) the Committee determines that the Member has been abandoned
within the meaning of local law and there is a court order
to that effect; or
(E) there exists any other circumstance (as determined by the
Committee) prescribed by law as an exception to the consent
requirement.
(3) REVOCATION AND MODIFICATION. An election by a Member under
paragraph (1) to waive the Qualified Joint and Survivor Annuity
may be revoked by the Member in writing without the consent of
his spouse at any time during the election period. Any subsequent
election by a Member to waive the Qualified Joint and Survivor
Annuity, or any subsequent modification of a prior election
(other than a revocation of a waiver of the Qualified Joint and
Survivor Annuity or a change in the form of payment or
designation of Beneficiary where there is in effect a valid
"general consent"), must comply with the requirements in
-18-
<PAGE>
paragraph (1) above. A spouse's consent shall be considered a
"general consent" if the following requirements are satisfied:
(A) the consent permits the Member to waive the Qualified Joint
and Survivor Annuity;
(B) the consent permits the Member to change the optional form
of benefit payment and/or the Beneficiary without any
requirement of further consent by the spouse; and
(C) the spouse acknowledges in the consent that:
(i) he has the right to limit consent to a specific
optional form of benefit and/or Beneficiary (as
applicable), and
(ii) he voluntarily relinquishes either or both of such
rights (as applicable).
(c) NOTICE AND EXPLANATION TO MEMBERS. The Committee shall provide to
each Member (by mail or personal delivery), between 30 and 90 days
before the Member's Annuity Starting Date, a written explanation of
the Qualified Joint and Survivor Annuity. This explanation shall
describe the terms and conditions of the benefit, the material
features and relative values of other optional forms of benefit
available under the Plan, the Member's right to make (and the effect
of) an election to waive the benefit, the right of the Member's
spouse to consent in writing to the waiver, and the right to make
(and the effect of) a revocation of an election to waive the benefit.
5.7 OPTIONAL METHODS OF PAYMENT. In lieu of the normal form of benefit
otherwise payable under section 5.1, 5.2, or 5.6, a Member who is entitled to
a normal or early retirement benefit may elect to receive his benefit under
an optional method of payment. Any such election made by a married Member
must comply with the requirements of section 5.6(b). Any such election by an
unmarried Member shall be valid only if the Member is furnished with an
explanation of the material features of the optional forms of payment within
the notice period described in section 5.6(e). Instead of a Qualified Joint
and Survivor Annuity, a Member who is married on his Annuity Starting Date
may elect a single life annuity or one of the optional payment forms
described in this section 5.7. Instead of a single life annuity, a Member
who is not married on his Annuity Starting Date may elect one of the optional
payment forms described in this section 5.7. Each optional payment form
described below shall be the Actuarial Equivalent of a single life annuity
payable for the lifetime of the Member.
(a) JOINT AND SURVIVOR ANNUITY OPTION. A joint and survivor annuity
option is a reduced monthly retirement benefit payable to the
Member for life and to the Member's surviving Beneficiary for the
lifetime of such Beneficiary in an amount equal to either 50 percent
or 100 percent (as elected by the Member) of the amount payable
during the Member's lifetime. (Any election under this subsection
(a) shall be null and void if the Beneficiary designated by the Member
dies before the Member's Annuity Starting Date.)
(b) CERTAIN AND LIFE ANNUITY OPTION. A certain and life annuity option
is a reduced monthly retirement benefit payable to the Member for
life, and if he dies before receiving 60 or 120 monthly payments (as
elected by the Member), such payments shall continue to the Member's
Beneficiary until a total of 60 or 120 monthly payments have been
made.
-19-
<PAGE>
If a Member elects an optional form of payment under this section 5.7
and dies before his Annuity Starting Date, his election shall be null and
void, and any benefits with respect to the Member shall be payable in
accordance with Article VII (regarding preretirement death benefits).
5.8 INCIDENTAL DEATH BENEFITS. No optional forms of retirement
benefits shall be granted under section 5.7 above that would extend the
payment period longer than (i) the lifetime of the Member or the joint lives
of the Member and his Beneficiary or (ii) the Member's life expectancy or the
joint life expectancies of the Member and his Beneficiary. In addition, no
optional method of payment in the form of an annuity shall be permitted
unless the minimum distribution incidental benefit rule is satisfied. This
rule will automatically be satisfied if distribution is in the form of a
Qualified Joint and Survivor Annuity or if the Member's spouse is his
designated Beneficiary. Otherwise, this rule is satisfied if the distribution
satisfies subsection (a) or (b) below.
(a) ANNUITY OPTION. If distribution is made in the form of a nonspouse
annuity, the periodic annuity payments payable to the Beneficiary may
not exceed the "applicable percentage" of the annuity payments payable
to the Member. The "applicable percentage" shall be determined under
regulations under Code section 401(a)(9), and in particular pursuant
to the appropriate table in section 1.401(a)(9)-2 of these
regulations.
(b) PERIOD CERTAIN AND LIFE ANNUITY. If distribution is made in the form
of a nonspouse period certain and life annuity, the "period certain"
may not exceed the "applicable period" determined under regulations
under Code section 401(a)(9), and in particular pursuant to the
appropriate table in section 1.401(a)(9)-2 of these regulations.
5.9 PAYMENT OF SMALL AMOUNTS.
(a) GENERAL RULE. If the single sum value of the benefit payable to a
Member under this Article V (or the benefit payable to a surviving
spouse under section 7.1) does not exceed $3,500, the benefit shall
be paid in a single sum as soon as practicable following the Member's
Retirement Date, Termination of Service, or death (whichever is
applicable).
A Member who has a Termination of Service and whose vested benefit
is zero shall be deemed to have received an immediate single sum
payment of his benefit and shall thereupon cease to be a Member.
(b) DIRECT ROLLOVERS. In the event a single sum distribution shall become
available to a Member (or a Member's surviving spouse) after December
31, 1992, the Distributee may elect, subject to the provisions of this
subsection 5.9(b), at the time and in the manner prescribed by the
Committee, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover.
(1) DEFINITIONS.
(A) ELIGIBLE ROLLOVER DISTRIBUTION. An Eligible Rollover
Distribution is any distribution of all or any portion of
the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include: any
distribution that is one of a series of substantially equal
-20-
<PAGE>
periodic payments (not less frequently than annually) made
for the life (or life expectancy of the Distributee or the
joint lives (or joint life expectancies) of the Distributee
and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to
the extent such distribution is required under Section
401(a)(9) of the Code; and the portion of any distribution
that is not includable in gross income (determined without
regard to the exclusion for net unrealized appreciation with
respect to employer securities).
The Committee will not permit a Distributee to elect a
Direct Rollover of his or her distributions during a Plan
Year if such distributions are reasonably expected to total
less than $200 (regardless of whether such distributions
might qualify as Eligible Rollover Distributions).
(B) ELIGIBLE RETIREMENT PLAN. An Eligible Retirement Plan is an
individual retirement account described in Section 408(a) of
the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described
in Section 401(a) of the Code, that accepts the
Distributee's Eligible Rollover Distribution. However, in
the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is an
individual retirement account or individual retirement
annuity.
(C) DISTRIBUTEE. A Distributee includes an employee or former
employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's
spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in Section
414(p) of the Code, are Distributees with regard to the
interest of the spouse or former spouse.
(D) DIRECT ROLLOVER. A Direct Rollover is a payment by the plan
to the Eligible Retirement Plan specified by the
Distributee.
(E) DIVIDED DISTRIBUTIONS. The Committee shall permit a
Distributee to elect to have a portion of his or her
eligible Rollover Distribution paid to an Eligible
Retirement Plan in a Direct Rollover and to have the
remainder of that distribution paid to the Distributee,
PROVIDED, HOWEVER, if the Distributee elects to have only a
portion of an Eligible Rollover paid to an Eligible
Retirement Plan in a Direct Rollover, that portion must
equal at least $500. If the entire amount of the Eligible
Rollover Distribution is $500 or less, the distributee is
not permitted to divide the distribution.
A Member who has a Termination of Service and whose vested
benefit is zero shall be deemed to have received an immediate
single sum payment of his benefit and shall thereupon cease to
be a Member.
5.10 MAXIMUM ANNUAL BENEFITS.
-21-
<PAGE>
(a) Notwithstanding any other provision of this Plan to the contrary, in
no event may the annual benefit provided under this Plan (together
with that provided by all other defined benefit plans of the Company
and all Affiliates) for any Member for a limitation year exceed the
lesser of:
(1) $90,000, or
(2) 100 percent of the Member's average annual compensation (as
defined in Treasury regulation section 1.415-2(d)) over the
three consecutive years during which he had the greatest
aggregate compensation from the Company and all Affiliates.
For purposes of the Plan, the limitation year shall be the Plan Year.
If a Member has fewer than ten years of participation in the Plan,
the dollar limit described in paragraph (1) shall be multiplied by a
fraction (not to be less than 1/10 or greater than one), the
numerator of which is the Member's years of participation in the
Plan and the denominator of which is ten.
If a Member has fewer than ten years of Vesting Service, the
compensation limit described in paragraph (2) shall be multiplied by
a fraction (not to be less than 1/10 or greater than one), the
numerator of which is the Member's years of Vesting Service and the
denominator of which is ten.
(b) The limits of subsection (a) shall be adjusted to reflect the form
of benefits described in section 5.7. The limits shall also be
adjusted if a Member's Annuity Starting Date does not coincide with
the Member's attaining Social Security Retirement Age. These
adjustments shall be made as specified in Code section 415(b)(2).
(c) The limit in subsection (a)(l), and the limit in subsection (a)(2)
for a Member who has incurred a Termination of Service, shall be
adjusted for increases in the cost of living in the manner specified
in applicable regulations.
(d) In applying the limitations on benefits hereunder, the qualified
plans of any employer that is not the Company or an Affiliate shall
be aggregated with the Plan or any other plan of the Company or an
Affiliate if the employer would be an Affiliate if the phrase "at
least 80 percent" in Code section 1563(a)(1), in applying such
section to Code section 414(b) or (c), were replaced with "more than
50 percent."
(e) If any Member is a participant in a defined contribution plan of the
Company or any Affiliate, the sum of the "defined benefit plan
fraction" and the "defined contribution plan fraction" (as such
terms are defined in Code section 415(e)) for any Plan Year with
respect to the Member shall not exceed one. (This defined
contribution plan fraction shall be adjusted to the extent permitted
by section 1106(i)(4) of the Tax Reform Act of 1986. Any annual
additions made for Plan Years beginning before January 1, 1987 shall
be determined in the manner prescribed by the Code prior to the
enactment of the Tax Reform Act of 1986.) Effective January 1,
1993, if this sum would otherwise exceed one, the Member's
retirement benefits shall be reduced in the following order to
comply with the requirements of this subsection:
(1) benefits under this Plan shall be reduced first;
-22-
<PAGE>
(2) if additional reductions are required to comply with this
subsection, the Member's benefits under any other defined
benefit plan maintained by the Company or an Affiliate shall
then be reduced; and
(3) if the reductions in paragraphs (1) and (2) are not sufficient
to comply with this subsection, the Member's allocations to any
defined contribution plan shall then be reduced.
(However, in no event will a benefit adjustment under this
subsection (e) cause a Member's accrued benefit under this Plan to
be reduced below that which had accrued as of December 31, 1992.)
(f) If a Member was a participant in any other defined benefit plan
maintained by the Company or an Affiliate before January 1, 1983, or
January 1, 1987, nothing in this section 5.10 shall limit or
prohibit payment under those plans of benefits accrued prior to
those dates.
5.11 WITHHOLDING TAXES. The Company or Affiliate may withhold from a
Member's compensation, and the Trustee may withhold from any payment under
this Plan, any taxes required to be withheld with respect to contributions or
benefits under this Plan and such sum as the Company, Affiliate, or Trustee
may reasonably estimate as necessary to cover any taxes for which they may be
liable and which may be assessed with respect to contributions or benefits
under this Plan.
ARTICLE VI. SUSPENSION OF BENEFITS UPON CERTAIN
EMPLOYMENT OR REEMPLOYMENT
6.1 REEMPLOYMENT BEFORE NORMAL RETIREMENT DATE. If a Member is
reemployed by the Company or an Affiliate before his Normal Retirement Date,
but after he has begun to receive a benefit under the Plan:
(a) benefit payments under the Plan shall cease during the period of his
reemployment;
(b) upon the Member's subsequent Termination of service, benefits under
the Plan shall be redetermined as if he then first retires, based on
Credited Service and Compensation earned before and after his
absence;
(c) this redetermined benefit shall then be reduced by the Actuarial
Equivalent value of all payments previously received prior to the
Member's reemployment (but not below the amount of benefits paid on
account of his prior retirement); and
(d) the Member shall be entitled during his period of reemployment
(subject to the election procedures of sections 5.6 and 5.7) to
revise any prior election affecting the form in which benefits are
paid.
6.2 CONTINUED EMPLOYMENT OR REEMPLOYMENT ON OR AFTER NORMAL RETIREMENT
DATE. In the case of a Member who remains employed or is reemployed by the
Company or an Affiliate after his Normal Retirement Date:
(a) no benefits shall be paid under the Plan for any month in which he is
compensated for 40 or more Hours of Service;
-23-
<PAGE>
(b) for periods of employment or reemployment described in subsection
(a), Department of Labor regulation section 2530.203-3, including
the notice procedures described in section 6.3, shall be followed;
(c) benefits paid after a subsequent Termination of Service shall not be
adjusted on account of payments suspended during period of
employment or reemployment; and
(d) in the case of a Member who is reemployed after his Normal
Retirement Date:
(1) benefits under the Plan shall be redetermined upon the Member's
subsequent Termination of Service as if he then first retired,
based on Credited Service and Compensation earned before and
after his absence;
(2) this redetermined benefit shall then be reduced by the
Actuarial Equivalent value of all payments previously received
prior to the Member's reemployment (but not below the amount of
benefits paid on account of his prior retirement); and
(3) the Member shall be entitled during such period of reemployment
(subject to the election procedures of sections 5.6 and 5.7) to
revise any prior elections affecting the form in which benefits
are paid.
In no event shall benefits payable to a Member after his "required
beginning date" (as defined in section 5.1(d)) be suspended under this Article
VI.
6.3 SUSPENSION OF BENEFITS NOTICE PROCEDURES. If a Member's benefits
are suspended after Normal Retirement Age under this Article VI, the Committee
shall notify the Member of such suspension. This notice shall be by personal
delivery or first class mail during the first calendar month for which
payments are withheld. This notice shall contain:
(a) a general description of the reasons why payments are suspended;
(b) a general description of the Plan provisions relating to the
suspension of benefits;
(c) a copy of such Plan provisions;
(d) a statement that applicable Department of Labor regulations may be
found in section 2530.203-3 of the Code of Federal Regulations; and
(e) a statement that a review of the suspension may be requested under the
claims procedure found in section 9.7.
ARTICLE VII. DEATH BENEFITS
7.1 PRERETIREMENT DEATH BENEFITS FOR MARRIED MEMBERS.
-24-
<PAGE>
(a) ELIGIBILITY. The surviving spouse of a married Member who has a
nonforfeitable right to a retirement benefit under Article V, and
who dies prior to his Annuity Starting Date, shall be entitled to a
preretirement survivor annuity in an amount determined under
subsection (b).
(b) AMOUNT OF BENEFITS. Except as provided below, the monthly payments
to a surviving spouse under this section 7.1 shall equal the amounts
which would have been payable as a survivor annuity under the
Qualified Joint and Survivor Annuity under the Plan if
(1) in the case of a Member who dies after his Earliest Retirement
Age, such Member had retired with an immediate Qualified Joint
and Survivor Annuity on the day before his death, or
(2) in the case of a Member who dies on or before attaining his
Earliest Retirement Age, such Member had terminated employment
on the date of death (if his employment had not yet
terminated), survived to his Earliest Retirement Age, retired
with an immediate Qualified Joint and Survivor Annuity on his
Earliest Retirement Age, and died on the day after the day on
which he would have attained his Earliest Retirement Age.
If, pursuant to subsection (c) below, a spouse elects to defer the
commencement of the preretirement survivor annuity, the amount of the
benefit payable thereunder shall be increased (as if the Member had
deferred commencement of his benefit) to reflect such deferral.
(c) COMMENCEMENT. Unless the spouse elects a later commencement date,
payment of the preretirement death benefit under this section 7.1
shall commence on the first day of the month coinciding with or
immediately following
(1) the date of the Member's death, in the case of a Member who
dies on or after attaining his Earliest Retirement Age; or
(2) the date the Member would have attained his Earliest Retirement
Age, in the case of a Member who dies before attaining such
age. In no event, however, may the surviving spouse defer the
commencement of benefits under this subsection (c) beyond the
first day of the month coinciding with or next following the
Member's Normal Retirement Age.
7.2 NO REDUCTION TO OTHER BENEFITS. The monthly retirement benefits
payable to a Member if he does not die prior to his Annuity Starting Date, and
the amount payable to his surviving spouse under this Article VII, shall not
be reduced to reflect the cost of coverage under this Article VII.
7.3 ADDITIONAL DEATH BENEFITS. Effective October 11, 1994 solely with
respect to Members employed at Soniform, Inc. (Soniform Member), in addition
to any other benefits payable on account of a Soniform Member's death under
Article V or Article VII, the Beneficiary of a Soniform Member who either dies:
(a) after his Annuity Starting Date; or
(b) while actively employed, but after reaching Early Retirement Age
shall be entitled to an additional death benefit under this Section 7.3. The
additional benefit for the Beneficiary of a Soniform Member described in
subsection (a) shall be paid in a lump sum and such additional post annuity
starting
-25-
<PAGE>
date death benefit shall equal the amount that would have been paid over a
period limited to twelve months, calculated as if the Soniform Member had
elected a single life annuity regardless of which benefit option the Soniform
Member actually elected.
The additional benefit for the Beneficiary of a Soniform Member described in
subsection (b) shall be paid in a lump-sum and such additional post-Early
Retirement Age death benefit shall equal the amount that would have been paid
over a period limited to twelve months, calculated as if the Soniform Member
had retired as of the first day of the month in which his death occurred and
had elected a single life annuity. In addition, the Beneficiary of Soniform
Member described in subsection (b) shall receive a lump sum payment equal to
the amount that would have been paid in a single month, calculated as if the
Soniform Member had elected a 50% Qualified Joint and Survivor Annuity.
ARTICLE VIII. FINANCING
8.1 FINANCING. The Company shall maintain a Retirement Fund as a part
of the Plan to implement the provisions of the Plan and to finance the
benefits under the Plan. The Company shall enter into one or more Trust
Agreements or insurance contracts, or shall cause insurance contracts to be
held under a Trust Agreement. Any Trust Agreement 80 designated shall
constitute a part of this Plan. All rights that may accrue to any person
under this Plan shall be subject to all the terms and provisions of the Trust
Agreement.
The Company, by action of the Board, may modify any Trust Agreement or
insurance contract from time to time to accomplish the purposes of the Plan.
The Company may replace any insurance company or appoint a successor Trustee
or Trustees. By entering into Trust Agreements or insurance contracts, the
Company shall establish a funding policy for the Plan. The Company shall vest
in the Trustee and/or in one or more investment managers appointed under the
Trust Agreement responsibility for the management and control of the
Retirement Fund pursuant to such funding policy. If the Company appoints any
investment manager, the Trustee shall not be liable for the acts or omissions
of this investment manager or have any responsibility to invest or otherwise
manage any portion of the Retirement Fund subject to the management and
control of the investment manager.
8.2 CONTRIBUTIONS. The Employers shall make contributions to the
Retirement Fund which, under accepted actuarial principles, are at least
sufficient to maintain the Plan as a qualified employee defined benefit plan
meeting the minimum funding standard requirements of the Code. All
contributions made by the Employers hereunder are strictly conditioned on
their deductibility under Code section 404. (Employee contributions are
neither required nor permitted.)
Except as provided in Title I and Title IV of ERISA, all benefits payable
under the Plan shall be payable only from the Retirement Fund. No liability
for the payment of benefits under the Plan shall be imposed on the Company,
Affiliates, Trustees, or officers, directors, or shareholders of the Company
or the Affiliates.
Forfeitures arising under the Plan for any reason shall be used as soon
as possible to reduce the contributions of the Employers.
8.3 NONREVERSION. The Employers shall not have any right, title, or
interest in the contributions made to the Retirement Fund under the Plan. No
part of the Retirement Fund shall revert to the Employers except as follows:
-26-
<PAGE>
(a) If the Internal Revenue Service initially determines that the Plan
does not meet the requirements of Code section 401(a), the Plan
shall be null and void from July 1, 1989, and any contributions
shall be returned to all Employers within one year following such
determination (unless the Employers elect to change the Plan as
necessary to obtain a determination from the Internal Revenue
Service that the Plan meets the requirements of Code section 401(a)).
(b) Upon complete termination of the Plan and the allocation and
distribution of the Retirement Fund under section 10.2, any funds
remaining in the Retirement Fund after the satisfaction of all fixed
and contingent liabilities under the Plan shall revert to the
Employers at that time.
(c) An Employer contributes to the Retirement Fund on the condition its
contribution is not due to a mistake of fact and the Revenue Service
will not disallow its deduction for that contribution. The Trustee,
upon written request from an Employer, must return to the Employer
the amount of the Employer's contribution made by the Employer by
mistake of fact or the amount of the Employer's contribution
disallowed as a deduction under Code Section 404. The Trustee will
not return any portion of the Employer's contribution under the
provisions of this Subsection more than one year after:
(1) the Employer made the contribution by mistake of fact; or
(2) the disallowance of the contribution as a deduction, and
then, only to the extent of the disallowance.
Furthermore, the Trustee will not increase the amount of the Employer
contribution returnable under this Subsection for any earnings
attributable to the contribution, but the Trustee will decrease the
Employer contribution returnable for any losses attributable to it.
The Trustee may require the Employer to furnish it whatever evidence
the Trustee deems necessary to enable the Trustee to confirm the
amount the Employer has requested be returned is properly returnable
under ERISA.
ARTICLE IX. ADMINISTRATION
9.1 COMMITTEE AND FIDUCIARY. The Company shall be responsible for the
general administration of the Plan. The Company shall be the "administrator"
within the meaning of ERISA section 3(16)(A) and the "named fiduciary" under
ERISA section 402. The Committee shall act on behalf of the Company with
respect to all matters relating to Plan administration.
The Committee shall be composed of as many members as the Board may
appoint from time to time and shall hold office at the pleasure of the Board.
Any member of the Committee may resign by delivering his written resignation
to the Board. Vacancies in the Committee arising by resignation, death,
removal, or otherwise shall be filled by the Board.
9.2 COMPENSATION AND EXPENSES. A member of the Committee shall serve
without compensation for services as such if he is receiving full-time pay
from the Company or an Affiliate as an Employee. Any member of
-27-
<PAGE>
the Committee may receive reimbursement from the Retirement Fund, to the
extent not paid by an Employer in its sole and absolute discretion, for
expenses properly and actually incurred.
9.3 MANNER OF ACTION. A majority of the members of the Committee at the
time in office shall constitute a quorum for the transaction of business. All
resolutions adopted and other actions taken by the Committee at any meeting
shall be by a majority vote of those present at any such meeting. Upon the
unanimous concurrence of the members at the time in office, action of the
Committee may be taken other that at a meeting.
9.4 CHAIRMAN, SECRETARY, AND SPECIALISTS. The members of the Committee
may elect one of their number as chairman and may elect a secretary who may,
but need not, be a member of the Committee. They may authorize one or more of
their number or any agent to execute or deliver any instrument or instruments
on their behalf. The Committee may employ any counsel, auditors, and other
specialists, and any clerical, actuarial, and other services as it may require
in carrying out the provisions of the Plan. These expenses shall be paid by
the Retirement Fund to the extent not paid by the Employers in their sole and
absolute discretion.
9.5 RECORDS. All resolutions, proceedings, acts, and determinations of
the Committee shall be recorded by the secretary thereof or under his
supervision. All such records, together with any documents and instruments as
may be necessary for the administration of the Plan, shall be preserved in the
custody of the secretary.
9.6 ADMINISTRATION. Except with respect to duties delegated under the
terms of the Plan, the Committee shall be responsible for the administration
of the Plan. The Committee shall have all powers necessary or appropriate to
carry out the provisions of the Plan. It may, from time to time, establish
rules for the administration of the Plan and the transaction of the Plan's
business.
In making any determination or rule, the Committee shall pursue uniform
policies established by the Committee. It shall not discriminate in favor of
or against any Member. The Committee shall have the exclusive right to make
any finding of fact necessary or appropriate for any purpose under the Plan
including, but not limited to the exclusive right and discretionary authority
to make determination of the eligibility for and the amount of any benefit
payable under the Plan. The Committee shall have the exclusive right and
discretionary authority to interpret the terms and provisions of the Plan and
to determine any and all questions arising under the Plan or in connection
with the administration thereof, including, without limitations the right to
remedy or resolve possible ambiguities, inconsistencies, or omissions, by
general rule or particular decision. The Committee shall make, or cause to be
made, all reports or other filings necessary to meet the reporting,
disclosure, and other filing requirements of ERISA that are the responsibility
of "plan administrators" under ERISA.
To the extent permitted by law, all findings of fact, determinations,
interpretations, and decisions of the Committee shall be conclusive and
binding upon all persons having or claiming to have any interest or right
under the Plan.
In carrying out its responsibilities hereunder, the Committee shall have
the utmost discretion permitted by law.
9.7 APPEALS FROM DENIAL OF CLAIMS. If any claim for benefits under the
Plan is wholly or partially denied, the claimant shall be given notice in
writing of the denial. This notice shall be given, within a reasonable period
of time after receipt of the claim by the Committee (not to exceed 90 days
after receipt of the claim, except
-28-
<PAGE>
that if special circumstances require an extension of time, written notice of
the extension shall be furnished to the claimant, and an additional 90 days
will be considered reasonable).
This notice shall be written in a manner calculated to be understood by the
claimant and shall set forth the following information:
(a) the specific reasons for the denial;
(b) specific reference to the Plan provisions on which the denial is
based;
(c) a description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why this
material or information is necessary; and
(d) an explanation that a full and fair review by the Committee of the
decision denying the claim may be requested by the claimant or his
authorized representative by filing with the Committee, within 60
days after the notice has been received, a written request for the
review; and
(e) if such request is so filed, the claimant or his authorized
representative may review pertinent documents and submit issues and
comments in writing within the same 60-day period specified in
sub-section (d) above.
The decision of the Committee upon review shall be made promptly, and not
later than 60 days after the Committee's receipt of the request for review,
unless special circumstances require an extension of time for processing. In
such a case the claimant shall be so notified and a decision shall be rendered
as soon as possible, but not later than 120 days after receipt of the request
for review. If the claim is denied, wholly or in part, the claimant shall be
given a copy of the decision promptly. The decision shall be in writing,
shall include specific reasons for the denial, shall include specific
references to the pertinent Plan provisions on which the denial is based, and
shall be written in a manner calculated to be understood by the claimant.
9.8 NOTICE OF ADDRESS AND MISSING PERSONS. Each person entitled to
benefits under the Plan must file with the Committee or its agent, in writing,
his post office address and each change of post office address. Any
communication, statement, or notice addressed to such a person at his latest
reported post office address will be binding upon him for all purposes of the
Plan. The Committee, the Company, Affiliates, or Trustee shall not be obliged
to search for or ascertain his whereabouts. If a person cannot be located,
the Committee may direct that his benefit and all further benefits with
respect to him shall be discontinued and all liability for the payment thereof
shall terminate. However, in the event of the subsequent reappearance of the
Member or Beneficiary prior to termination of the Plan, the benefits that were
due and payable shall be paid in a single sum, and the future benefits due
such person shall be reinstated in full.
-29-
<PAGE>
9.9 DATA AND INFORMATION FOR BENEFITS. All persons claiming benefits
under the Plan must furnish to the Committee or its designated agent such
documents, evidence, or information as the Committee or its designated agent
consider necessary or desirable to administer the Plan. Any such person must
furnish this information promptly and sign any documents the Committee or its
designated agent may require before any benefits become payable under the Plan.
9.10 INDEMNITY FOR LIABILITY. The Company shall indemnify each member of
the Committee against any and all claims, losses, damages, and expenses
(including counsel fees) incurred by the Committee. The Company shall
indemnify the Committee members against any liability (including any amounts
paid in settlement with the Committee's approval) arising from the member's or
Committee's action or failure to act. The Company is not liable to indemnify
these persons against claims, losses, damages, expenses, or liabilities when
the same is judicially determined to be attributable to gross negligence or
willful misconduct. The Company shall pay the premiums on any bond secured
under this section and shall be entitled to reimbursement by the other
Employers for their proportionate share.
9.11 EFFECT OF A MISTAKE. In the event of a mistake or misstatement as
to the eligibility, participation, or service of any Member, or the amount of
payments made or to be made to a Member or Beneficiary, the Committee shall,
if possible, cause such payment amounts to be withheld, accelerated, or
otherwise adjusted as will in its sole judgment result in the Member or
Beneficiary receiving the proper amount of payments under this Plan.
9.12 SELF INTEREST. A member of the Committee who is also a Member shall
not vote on any question relating specifically to himself.
ARTICLE X. AMENDMENT AND TERMINATION
10.1 AMENDMENT AND TERMINATION. The Company hereby reserves the right,
at will, to amend or modify in any respect, or to terminate, the Plan at any
time, for any reason whatsoever. The Company may make any modifications or
amendments to the Plan, retroactively if necessary or appropriate, to qualify
or maintain the Plan as a plan meeting the requirements of Code Section 401(a)
and ERISA.
No amendment of the Plan shall cause any part of the Retirement Fund to
be used for or diverted to purposes other than the exclusive benefit of the
Members or Beneficiaries. No plan amendment may (a) eliminate or exclude an
early retirement benefit or a retirement-type subsidy (as defined in Treasury
Regulations) or (b) eliminate an optional form of benefit with respect to
benefits attributable to service before the amendment, except as permitted
under Code Section 411(d)(6). Retroactive plan amendments may not decrease the
monthly normal retirement benefit of any Member determined as of the time the
amendment was adopted (except to the extent permitted under Code Section
412(c)(8)).
10.2 DISTRIBUTION ON TERMINATION. Upon termination or partial
termination of the Plan, the rights of the Members who are employed by the
Company or an Affiliate on the date of termination (and who in the case of a
partial termination are affected thereby) to their monthly normal retirement
benefit as of the date of such termination shall be nonforfeitable to the
extent then funded. However, in no event shall any Member or Beneficiary have
recourse to other than the Retirement Fund and, if applicable, the Pension
Benefit Guaranty Corporation.
-30-
<PAGE>
In the case of a complete termination of the Plan, the assets then held
in the Retirement Fund shall be allocated, after payment of all expenses of
administration or liquidation, in the manner prescribed by ERISA section
4044. If any assets remain, they shall revert to the Employers as provided
in section 8.3.
At the Committee's discretion, distribution may be implemented through
the continuance of the Retirement Fund, the creation of a new retirement
fund, the purchase of nontransferable annuity contracts, a cash distribution,
or a combination thereof, subject to the requirements of the Pension Benefit
Guaranty Corporation.
10.3 MERGER, CONSOLIDATION, OR TRANSFER. In the case of any merger or
consolidation of the Plan with--or in the case of any transfer of assets or
liabilities of the Plan to or from--any other plan, each Member in the Plan
shall (if the Plan then terminated) receive a benefit immediately after the
merger, consolidation, or transfer that is equal to or greater than the
benefit he would have been entitled to receive immediately before the merger,
consolidation, or transfer (if the Plan had then terminated). Subject to the
provisions of this Section, the Plan may be amended to provide for the merger
of the Plan, in whole or in part, a spinoff of a portion of the Plan, or a
transfer of all of a part of the Plan's assets to any other qualified plan
within the meaning of Section 401(a) or 403(a) of the Code, including such a
merger, spinoff or transfer in lieu of a distribution which might otherwise
be required under the Plan.
ARTICLE XI. RESTRICTIONS ON BENEFITS
11.1 TEMPORARY RESTRICTIONS ON BENEFITS FOR MEMBERS OF EACH EMPLOYER.
(a) Notwithstanding any other provisions in the Plan to the contrary,
in the event of the termination of the Plan, the benefit of any Highly
Compensated Employee (and any former Highly Compensated Employee) is
limited to a benefit that is nondiscriminatory under Code Section
401(a)(4).
(b) In any year, the annual benefits payable under the Plan for the 25
highest paid Members described in (a) above will be restricted to an
amount equal to the payments that would be restricted to an amount equal
to the payments that would be made on the Member's behalf under a single
life annuity that is the actuarial equivalent of the sum of the Member's
accrued benefit and the Member's other benefits (if any) under the Plan.
(c) The restriction of Subsection (b) above will not apply, however, if:
(1) after payment to such a Member of all benefits described in
Regulation Section 1.401(a)(4)-5(b)(3)(iii), the value of Plan
assets equals or exceeds 110% of the value of current liabilities
as defined in Code Section 412(l)(7);
(2) the value of the benefits described in Regulation Section
1.401(a)(4)-5(b)(3)(iii) for such a Member is less than 1% of the
value of current liabilities before distribution;
(3) the value of the benefits described in Regulation Section
1.401(a)(4)-5(b)(3)(iii) is $3,500 or less; or
-31-
<PAGE>
(4) the Commissioner of Internal Revenue determines that such
restrictions are not necessary to prevent the prohibited
discrimination that may occur in the event of an early
termination of the Plan.
(d) In the event the Plan ever provides a benefit which would otherwise
be payable under the Plan to a Member or former Member but which would
be restricted by the provisions of this Section 11.1, the Committee may
authorize the Trustees to enter into an escrow agreement, bond, or
letter of credit with the affected Member or former Member and a
suitable financial institution so that benefits can be distributed to
such Member or former Member without regard to the limitations which
would otherwise be applicable under this Section 11.1. Any such escrow,
bond, or letter of credit shall be structured in accordance with Rev.
Rul. 92-76 (or other applicable Treasury Department guidance) so that
the Trust shall have a legally enforceable right and guarantee to
additional assets (other than assets already owned by the Trust) in the
event the plan terminates and the applicable provisions of this Section
would restrict the distribution of a portion of the Participant's
payment.
ARTICLE XII. TOP-HEAVY PROVISIONS
12.1 APPLICATION OF TOP-HEAVY PROVISIONS.
(a) SINGLE PLAN DETERMINATION. Except as provided in subsection (b)(2)
below, if as of a Determination Date the sum of the Section 416
Benefits of Key Employees and the Beneficiaries of deceased Key
Employees exceeds 60 percent of the Section 416 Benefits of all
Members and Beneficiaries of other than former Key Employees, the
Plan is top-heavy. In this event, the provisions of this Article
shall become applicable.
(b) AGGREGATION GROUP DETERMINATION.
(1) If as of a Determination Date the Plan is part of a top-heavy
Aggregation Group, the provisions of this Article shall become
applicable. Top heavy status for the purpose of this subsection
shall be determined with respect to the Aggregation Group in
the same manner as described in subsection (a) above.
(2) If the Plan is top-heavy under subsection (a) above, but the
Aggregation Group is not top-heavy, this Plan shall not be
top-heavy, and this Article shall not be applicable.
(c) COMMITTEE RESPONSIBILITY. The Committee shall have responsibility to
make all calculations to determine whether the Plan is top-heavy.
12.2 DEFINITIONS.
(a) "AGGREGATION GROUP" means the Plan and all other plans maintained by
the Company and all Affiliates that cover a Key Employee, and any
other plan that enables a plan covering a Key Employee to satisfy
Code section 401(a)(4) or 410. In addition, at the election of the
Committee,
-32-
<PAGE>
the Aggregation Group may include any other qualified plan maintained
by the Company or an Affiliate if this expanded Aggregation Group
satisfies Code sections 401(a)(4) and 410.
(b) "DETERMINATION DATE" means the last day of the Plan Year immediately
preceding the Plan Year for which top-heaviness is to be determined.
(c) "KEY EMPLOYEE" means a Member who is a "key employee" under Code
section 416(i) and for purposes of such determination, a Key
Employee's compensation shall mean compensation as defined in Code
Section 415(c)(3) but including employer contributions made to a
salary reduction agreement.
(d) "SECTION 416 BENEFIT" means the sum of:
(1) the present value of the benefit credited as of a Determination
Date to a Member or Beneficiary under the Plan and any other
qualified defined benefit plan that is part of an Aggregation
Group determined under a uniform accrual method applicable to
all defined benefit plans in the Aggregation Group, or, where
there is no such method, as if such benefit accrued not more
rapidly than the slowest rate of accrual permitted under the
fractional rule of Code Section 411(b)(1)(C).
(2) the amount credited to a Member's or Beneficiary's account
under a qualified defined contribution plan that is part of an
Aggregation Group; and
(3) the amount of distributions to the Member or Beneficiary during
the five-year period ending on the Determination Date. Such
distributions shall not include any tax-free rollover
contribution (or similar transfer) which is not initiated by the
Member or which is contributed to a plan maintained by the
Company or an Affiliate;
reduced by
(4) the amount of rollover contributions (or similar transfer) and
earnings thereon credited as of a Determination Date under the
Plan or a plan forming part of an Aggregation Group that is
attributable to a rollover contribution (or similar transfer)
initiated by the Member and derived from a plan not maintained
by the Company or an Affiliate.
The present value of the benefits shall be determined as of the most
recent valuation date used for Code section 412 that is within the 12-month
period ending on the Determination Date. The benefit of a current Member
shall be determined as if the Member terminated service as of the valuation
date. In valuing benefits under this Article XII, the Committee shall be
able to use any reasonable actuarial assumptions permitted under Code section
416 provided that if an Aggregation Group includes two or more defined
benefit plans, the same actuarial assumptions must be used with respect to
all such plans and those actuarial assumptions must be specified in such
plans.
The account or benefit of a Member who was a Key Employee and who
subsequently is not a Key Employee for the Plan Year containing the
Determination Date, is not a Section 416 Benefit. This accrual or account
balance shall be excluded from all computations under this Article.
Furthermore, if a Member has not received any compensation from the Company
or an Affiliate (other than benefits under the Plan) during the five-year
period ending on the Determination Date, any benefit for the Member (and any
account of the Member) shall not be taken into account.
-33-
<PAGE>
12.3 VESTING REQUIREMENTS. If the Plan is determined to be top-heavy
with respect to a Plan Year under the provisions of section 12.1, a Member's
interest in his benefit shall vest in accordance with the following schedule:
<TABLE>
YEARS OF VESTING SERVICE VESTING PERCENTAGE
------------------------ ------------------
<S> <C> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 or more 100%
</TABLE>
The vesting provisions described in this section shall not apply to a
Member who does not have an Hour of Service after the Plan becomes top-heavy.
If in a subsequent Plan Year the Plan is no longer top-heavy, the vesting
provisions that were in effect prior to the time the Plan became top-heavy
shall be reinstated. Any portion of a Member's benefit which was vested prior
to the time the Plan was no longer top-heavy shall remain vested, and a
Member who has at least three years of Vesting Service at the start of such
Plan Year shall have the option of remaining under the vesting schedule in
effect while the Plan was top-heavy.
12.4 MINIMUM BENEFIT.
(a) MINIMUM ACCRUAL FORMULA. If the Plan is determined to be top-heavy
under the provisions of section 12.1 with respect to a Plan Year, the
benefit, when expressed as an Annual Retirement Benefit (as defined
below), of a Member who is not a Key Employee shall not be less than
the difference between paragraphs (1) and (2) where:
(1) is the product of:
(A) the number of Years of Top-Heavy Service (as defined
below); and
(B) 2 percent of the Member's average compensation (as defined
in Income tax regulations 1.415-2(d)) during the period of
the five consecutive Years of Top-Heavy Service during
which the Member had the greatest aggregate compensation;
but this product shall not exceed 20 percent of the average
compensation; and
(2) is the amount of the Annual Retirement Benefit that would be
provided by the Member's account balance attributable to
Employer contributions under a defined contribution plan which
is included in an Aggregation Group.
(b) DEFINITIONS.
(1) ANNUAL RETIREMENT BENEFIT means a benefit payable annually in
the form of a single life annuity commencing at age 65. If the
benefit is payable in another form or commences at another time,
the amount described in subsection (a) above shall be adjusted
on an
-34-
<PAGE>
actuarial basis. Preretirement death benefits shall not cause a
reduction in the amount of the benefit.
(2) YEAR OF TOP-HEAVY SERVICE means each year of Vesting Service
that is credited with respect to a Plan Year in which the Plan
is top-heavy.
12.5 LIMIT ON ANNUAL ADDITIONS: COMBINED PLAN LIMIT.
(a) GENERAL. If the Plan is determined to be top-heavy under section
12.1, Code section 415(e) shall be applied to the Plan by
substituting "1.0" for "1.25" each place "1.25" appears in Code
section 415(e)(2)(B) and 415(e)(3)(B).
(b) EXCEPTION. Subsection (a) above shall not be applicable if:
(1) section 12.4 is applied by substituting "3 percent" for "2
percent";
(2) section 12.4 is applied by increasing (but not by more than 10
percentage points) "20 percent" by 1 percentage point for each
year for which such plan was taken into account under this
subsection; and
(3) the Plan would not be top-heavy if "90 percent" is substituted
for "60 percent" in section 12.1.
(c) TRANSITION RULE. If, but for this subsection, subsection (a) above
would begin to apply with respect to the Plan, the application of
subsection (a) above shall be suspended with respect to a Member as
long as there are:
(1) no Employer contributions, forfeitures, or voluntary
nondeductible contributions allocated to the Member; and
(2) no accruals under a qualified defined benefit plan for the
Member.
12.6 COLLECTIVE BARGAINING AGREEMENTS. The requirements of sections
12.3 and 12.4 shall not apply with respect to any Employee included in a unit
of Employees covered by a collective bargaining agreement between Employee
representatives and an Employer if retirement benefits were the subject of
good faith bargaining between such Employee representatives and the Employer.
ARTICLE XIII. PARTICIPATION IN AND WITHDRAWAL
FROM THE PLAN BY AN AFFILIATE
13.1 PARTICIPATION IN THE PLAN. Any Affiliate that desires to become an
Employer hereunder may elect, with the consent of the Committee, to become a
party to the Plan. Such Affiliate shall adopt the Plan for the benefit of
its eligible Employees, effective as of the date specified in the adoption
resolution:
-35-
<PAGE>
(a) by filing with the Committee a written resolution to that effect,
and any other instruments as the Committee may require; and
(b) by the Committee filing with the Trustee a copy of such resolution,
together with a copy of resolution of the Committee approving the
adoption.
The adoption resolution shall contain specific provisions regarding
Vesting Service, Credited Service, and eligibility for initial participation
that apply to the adopting Affiliate and its Employees.
However, the sole, exclusive right of any other amendment of whatever
kind or extent to the Plan is reserved by the Board. The Board may not amend
specific changes and variations in the Plan provisions as adopted by the
Affiliate in its adoption resolution without the consent of the Affiliate.
The adoption resolution shall become, as to the Affiliate and its Employees,
a part of this Plan as then amended or thereafter amended. To the extent of
any conflict between the adoption resolution and this Plan, the adoption
resolution shall control. It shall not be necessary for the adopting
Affiliate to sign or execute the original or then amended Plan.
The effective date of the Plan for any adopting Affiliate shall be that
stated in the resolution of adoption. From and after the effective date, the
adopting Affiliate shall assume all the rights, obligations, and liabilities
of an individual Employer entity hereunder. The administrative powers and
control of the Company and Board, as provided in the Plan, including the sole
right to amendment, and of appointment and removal of the Committee, the
Trustee, and their successors, shall not be diminished by reason of the
participation of any adopting Affiliate in the Plan.
13.2 WITHDRAWAL FROM THE PLAN. Any Employer, by action of its board of
directors or other governing authority, may withdraw from the Plan after
giving notice to the Company. In the event such withdrawal constitutes a
partial termination of this Plan, the affected Members in the part of the
Plan that is terminated shall have fully vested and nonforfeitable rights to
their accrued benefits.
Distribution upon such a withdrawal may be implemented through
continuation of the Retirement Fund, or transfer to a trust fund exempt from
tax under Code section 501, or to a group annuity contract qualified under
Code section 401. However, no such action shall divert any part of such fund
to any purpose other than the exclusive benefit of the Employees of the
Employer prior to the satisfaction of all liabilities under the Plan as
provided under section 8.3.
ARTICLE XIV. GENERAL PROVISIONS
14.1 INCOMPETENCY. Every person receiving or claiming benefits under
the Plan shall be conclusively presumed to be mentally competent and of age
until the Committee receives written notice, in a form and manner acceptable
to it, that the person is incompetent or a minor, and that a guardian,
conservator, or other person legally vested with the care of his estate has
been appointed. If the Committee finds that any person to whom a benefit is
payable under the Plan is unable to care properly for his affairs, or is a
minor, any payment due (unless a prior claim therefor shall have been made by
a duly appointed legal representative) may be paid to the spouse, a child, a
parent, a brother, or a sister, or to any person deemed by the Committee to
have incurred expense for such person otherwise entitled to payment.
-36-
<PAGE>
If a guardian or conservator of the estate of any person receiving or
claiming benefits under the Plan is appointed by a court of competent
jurisdiction, payments shall be made to such guardian or conservator if
proper proof of the appointment is furnished in a form and manner suitable to
the Committee.
To the extent permitted by law, any payment made under the provisions of
this section shall be a complete discharge of liability under the Plan.
14.2 NONALIENATION OF BENEFITS. Except as provided in Code section
401(a)(13), no benefit payable at any time under the Plan shall be subject in
any manner to alienation, sale, transfer, assignment, pledge, attachment,
garnishment, or encumbrance of any kind. Any attempt to alienate, sell,
transfer, assign, pledge, or otherwise encumber any such benefit, whether
presently or thereafter payable, shall be void. The Retirement Fund under
the Plan shall not in any manner be liable for or subject to the debts or
liabilities of any Member or Beneficiary entitled to any benefit.
The preceding paragraph shall also apply to the creation, assignment, or
recognition of a right to any interest or benefit payable with respect to a
Member pursuant to a domestic relations order, unless the order is determined
to be a qualified domestic relations order (as defined in Code section
414(p)). The Committee shall establish reasonable procedures to determine
the qualified status of domestic relations orders and to administer
distributions under such qualified orders.
14.3 NO GUARANTEE OF EMPLOYMENT. Nothing contained in the Plan shall be
deemed to give any Employee the right to be retained in the service of the
Company or an Affiliate or to interfere with the right of the Company or an
Affiliate to discharge or retire any Employee at any time.
14.4 APPLICABLE LAW. To the extent not preempted by ERISA, the Plan
shall be governed by and construed according to the laws of Kansas.
14.5 SEVERABILITY. If a provision of this Plan shall be held illegal or
invalid, the illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the illegal or
invalid provision had not been included in this Plan.
IN WITNESS WHEREOF, NEW COLEMAN HOLDINGS, INC. has caused this Plan to be
signed and its corporate seal to be hereunto affixed by its duly authorized
officers, effective as of the dates provided herein.
NEW COLEMAN HOLDINGS, INC.
By: Glenn Dickes
----------------------------------------------
Title: Vice President and Assistant Secretary
-------------------------------------------
-37-
<PAGE>
ATTEST:
(Seal)
By:
-----------------------------------------
Title:
--------------------------------------
APPENDIX
The Prior Plan was extended, as of the dates listed in the following
table, to cover former employees of the companies therein listed who have
become Employees of the Company through acquisition by the Company of part or
all of the business of such companies and who are otherwise eligible for
coverage under the Plan. Credited Service for any such Employee shall not
include any period prior to the later of the dates set forth on the table or
his actual date of employment.
<TABLE>
NAME OF COMPANY DATE OF ACQUISITION
--------------- -------------------
<S> <C>
Boise Cascade Corporation August 1, 1965
Canvas Specialty Manufacturing Co. October 1, 1965
</TABLE>
Certain Employees included in Payroll Group 6, whose effective date of
coverage under the Prior Plan was January 1, 1975, were at one time employed
by Powerhouse Manufacturing Company, Inc., LaSalle Lighting Inc., or Sattler
Manufacturing, Inc. and became employees of the Company when the Company
acquired portions of the business of such former employers. For purposes of
the Plan, the seniority date of any such Employee shall be deemed to be his
date of employment by the Company, even though such seniority date was prior
to the date of acquisition by the Company of the business in which he was
originally employed.
Effective January 1, 1980, the Company extended coverage under the Prior
Plan to the weekly salaried and hourly paid Employees of its wholly-owned
subsidiary O'Brien International, Inc. For the purposes of determining the
Vesting Service of an O'Brien International, Inc. weekly salaried or hourly
paid Employee, an Employee's date of employment will be considered to be the
later of January 1, 1980, or his actual date of employment.
The following are Employers under this Plan:
<TABLE>
ADOPTING EMPLOYER SERVICE DATE *
----------------- --------------
<S> <C>
O'Brien International, Inc. 1-1-80
Master Craft Boat Company 1-1-84 for Vesting Service; 4-1-85 for Credited Service
SoniForm, Inc. 1-1-82 for Vesting Service; 1-1-84 for Credited Service
Western Cutlery Company 1-1-85
Tennessee Acquisition Corp. 4-1-93
MasterCraft Acquisition Corp. 4-1-93
Skeeter Products, Inc. 1-1-83 for Vesting Service; 1-1-87 for Credited Service
Coleman Spas, Inc. Date of employment with the Company (or Adopting Employer) for Vesting Service; 1-1-92 for
Credited Service
Coleman Powermate, Inc. 1-1-90 for Credited Service and 11-15-86 for Vesting Service
The Coleman Company, Inc. 1-1-55 for Credited Service; date of employment with the Company
</TABLE>
-38-
<PAGE>
<TABLE>
<S> <C>
for Vesting Service
Coleman Outdoor Products, Inc. Date of employment with the Company (or the Adopting Employer)
Coleman Recreational Vehicles, Inc. Date of employment with the Company (or the Adopting Employer) through December 28, 1989
Inc. (for weekly salaried
employees only)
</TABLE>
* Service Date refers to both Credited Service and Vesting Service unless
otherwise indicated.
Effective at the end of December 31, 1995, (a) all employees, former
employees and beneficiaries of employees and former employees of Meridian
Sports Incorporated and the following subsidiaries: Skeeter Products, Inc.,
MasterCraft Acquisition Corp., O'Brien International Inc. and Soniform, Inc.
(together with Meridian Sports Incorporated, "the Meridian Group") shall
cease to accrue any benefits under the Plan, (b) all liabilities, as well as
the assets relating to such liabilities, with respect to the accrued benefits
as of such date of such employees, former employees and beneficiaries of the
Meridian Group shall be transferred to the defined benefit plan established
by Meridian Sports Incorporated, and (c) such employees, former employees and
beneficiaries shall have no further rights under this Plan.
-39-
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
The following is a list of all the subsidiaries of The Coleman Company, Inc.
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
Application des Gaz, S.A. France
Australian Coleman, Inc. Kansas
Bafiges S.A. France
Beacon Exports, Inc. Kansas
C C Outlet, Inc. Delaware Camp Coleman
Camping Gaz do Brasil Brazil
Camping Gaz Great Britian Limited United Kingdom
Camping Gaz (Poland) Poland
Camping Gaz Suisse AG Switzerland
Camping Gaz CS, Spol. SRO Czech Republic
Camping Gaz GmbH Austria
Camping Gaz International
Deutschland GmbH Germany
Camping Gaz Hellas Greece
Camping Gaz International
(Portugal) Ltd. Portugal
Camping Gaz Kft Hungary
Camping Gaz Philippines, Inc. Philippines
<PAGE>
SUBSIDIARIES, CONTINUED
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
Camping Gaz Italie Srl Italy
Campiran SA Iran
The Canadian Coleman
Company, Limited Ontario (Canada) La Compagnie
Canadien Coleman
Coleman Argentina, Inc. Delaware
Coleman Asia Limited Hong Kong
Coleman Country, Ltd. Kansas Coleman Dubai
Coleman (Deutschland) GmbH Germany
Coleman do Brasil Ltda. Brazil
Coleman Europe N.V. Belgium
Coleman Holland B.V. The Netherlands
Coleman Japan Co., Ltd. Japan
Coleman International SARL Switzerland
Coleman Lifestyles K.K. Japan
Coleman Manufacturing de Mexico,
S.A. de C.V. Mexico
Coleman Mexico S. A. de C.V. Mexico
Coleman Powermate Compressors, Inc. Delaware
Coleman Powermate, Inc. Nebraska
Coleman Puerto Rico, Inc. Delaware
Coleman Safety & Security
Products, Inc. Delaware
Coleman SARL France
<PAGE>
SUBSIDIARIES, CONTINUED
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
Coleman Spas, Inc. California
Coleman SVB S.r.l. Italy
Coleman Taymar Limited United Kingdom
Coleman U.K. Holdings Limited United Kingdom
Coleman U.K. PLC United Kingdom
Coleman Venture Capital, Inc. Kansas
Eastpak Corporation Delaware American Lifestyles
Group
Eastpak Manufacturing Corporation Delaware
Epigas International Limited United Kingdom
General Archery Industries, Inc. Arkansas
Jasan Products Ltd. Bermuda
Kansas Acquisition Corp. Delaware
Nippon Coleman, Inc. Kansas
Pearson Holdings, Inc. Arkansas
Productos Coleman, S.A. Spain
PT Camping Gaz Indonesia Indonesia
River View Corporation of
Barling, Inc. Arkansas
Sierra Corporation of
Fort Smith, Inc. Arkansas
TCCI Management Inc. Delaware
Taymar Gas Limited United Kingdom
<PAGE>
SUBSIDIARIES, CONTINUED
JURISDICTION OF ASSUMED
NAME INCORPORATION NAME
---- --------------- -------
Tsana Internacional, S.A. Costa Rica
Woodcraft Equipment Company Missouri
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference (i) in the Registration Statement
dated May 20, 1993 (Form S-3 No. 33-61346) of The Coleman Company, Inc. and in
the related Prospectus, (ii) in the Registration Statement dated February 25,
1993 (Form S-8 No. 33-58726) pertaining to The Coleman Company, Inc. 1992 Stock
Option Plan and in the Related Prospectus, (iii) in the Registration Statement
dated January 18, 1994 (Form S-8 No. 33-74144) pertaining to The Coleman
Company, Inc. 1993 Stock Option Plan and in the related Prospectus, and (iv) in
the registration Statement dated May 12, 1997 (Form No. 333-26907) pertaining to
The Coleman Company, Inc. 1996 Stock Option Plan and in the related Prospectus,
of our report dated February 18, 1998, with respect to the consolidated
financial statements of The Coleman Company, Inc. included in the Annual Report
(Form 10-K) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
Ernst & Young LLP
Wichita, Kansas
March 20, 1998
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp and Karen Clark or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, in connection
with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1997 under the Securities Exchange Act of
1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name of and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument,
contract, document or other writing, of or in connection with the Form 10-K
or amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, including this power of attorney,
with the Securities and Exchange Commission and any applicable securities
exchange or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
18th day of March, 1998.
Ronald O. Perelman
----------------------------------------------
Ronald O. Perelman
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp and Karen Clark or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, in connection
with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1997 under the Securities Exchange Act of
1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name of and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument,
contract, document or other writing, of or in connection with the Form 10-K
or amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, including this power of attorney,
with the Securities and Exchange Commission and any applicable securities
exchange or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
18th day of March, 1998.
Donald G. Drapkin
---------------------------------------------
Donald G. Drapkin
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp and Karen Clark or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, in connection
with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1997 under the Securities Exchange Act of
1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name of and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument,
contract, document or other writing, of or in connection with the Form 10-K
or amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, including this power of attorney,
with the Securities and Exchange Commission and any applicable securities
exchange or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
11th day of March, 1998.
Frank Gifford
--------------------------------------------
Frank Gifford
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp and Karen Clark or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, in connection
with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1997 under the Securities Exchange Act of
1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name of and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument,
contract, document or other writing, of or in connection with the Form 10-K
or amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, including this power of attorney,
with the Securities and Exchange Commission and any applicable securities
exchange or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
11th day of March, 1998.
Lawrence M. Jones
--------------------------------------------
Lawrence M. Jones
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp and Karen Clark or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, in connection
with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1997 under the Securities Exchange Act of
1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name of and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument,
contract, document or other writing, of or in connection with the Form 10-K
or amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, including this power of attorney,
with the Securities and Exchange Commission and any applicable securities
exchange or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
18th day of March, 1998.
Ann Jordan
--------------------------------------------
Ann Jordan
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp and Karen Clark or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, in connection
with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1997 under the Securities Exchange Act of
1934, as amended, including, without limiting the generality of the
foregoing, to sign the Form 10-K in the name of and on behalf of the
Corporation or on behalf of the undersigned as a director or officer of the
Corporation, and any amendments to the Form 10-K and any instrument,
contract, document or other writing, of or in connection with the Form 10-K
or amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, including this power of attorney,
with the Securities and Exchange Commission and any applicable securities
exchange or securities self-regulatory body, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
18th day of March, 1998.
Jerry W. Levin
--------------------------------------------
Jerry W. Levin
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp and Karen Clark or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, in connection
with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1997 under the Securities Exchange Act of 1934,
as amended, including, without limiting the generality of the foregoing, to
sign the Form 10-K in the name of and on behalf of the Corporation or on
behalf of the undersigned as a director or officer of the Corporation, and
any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, each
acting alone, or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
14th day of March, 1998.
John A. Moran
---------------------------------
John A. Moran
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp and Karen Clark or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, in connection
with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1997 under the Securities Exchange Act of 1934,
as amended, including, without limiting the generality of the foregoing, to
sign the Form 10-K in the name of and on behalf of the Corporation or on
behalf of the undersigned as a director or officer of the Corporation, and
any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, each
acting alone, or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
11th day of March, 1998.
James D. Robinson
---------------------------------
James D. Robinson
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp and Karen Clark or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, in connection
with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1997 under the Securities Exchange Act of 1934,
as amended, including, without limiting the generality of the foregoing, to
sign the Form 10-K in the name of and on behalf of the Corporation or on
behalf of the undersigned as a director or officer of the Corporation, and
any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, each
acting alone, or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
18th day of March, 1998.
Bruce Slovin
---------------------------------
Bruce Slovin
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
constitutes and appoints each of Paul E. Shapiro, Steven R. Isko, Lynn E.
Feldkamp and Karen Clark or any of them, each acting alone, his true and
lawful attorney-in-fact and agent, with full power of substitution, for him
and in his name, place and stead, in any and all capacities, in connection
with THE COLEMAN COMPANY, INC. (the "Corporation") Annual Report on Form 10-K
for the year ended December 31, 1997 under the Securities Exchange Act of 1934,
as amended, including, without limiting the generality of the foregoing, to
sign the Form 10-K in the name of and on behalf of the Corporation or on
behalf of the undersigned as a director or officer of the Corporation, and
any amendments to the Form 10-K and any instrument, contract, document or
other writing, of or in connection with the Form 10-K or amendments thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including this power of attorney, with the Securities
and Exchange Commission and any applicable securities exchange or securities
self-regulatory body, granting unto said attorneys-in-fact and agents, each
acting alone, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, each
acting alone, or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed these presents this
18th day of March, 1998.
William H. Spoor
---------------------------------
William H. Spoor
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS FILED IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 13,031
<SECURITIES> 0
<RECEIVABLES> 188,686
<ALLOWANCES> 8,930
<INVENTORY> 236,327
<CURRENT-ASSETS> 491,696
<PP&E> 289,527
<DEPRECIATION> 114,033
<TOTAL-ASSETS> 1,041,764
<CURRENT-LIABILITIES> 253,197
<BONDS> 477,276
0
0
<COMMON> 534
<OTHER-SE> 239,935
<TOTAL-LIABILITY-AND-EQUITY> 1,041,764
<SALES> 1,143,349
<TOTAL-REVENUES> 1,154,294
<CGS> 840,331
<TOTAL-COSTS> 840,331
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,200
<INTEREST-EXPENSE> 40,852
<INCOME-PRETAX> (6,377)
<INCOME-TAX> (5,227)
<INCOME-CONTINUING> (2,536)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,536)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
