<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the quarterly period ended MARCH 31, 1999
--------------
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission File Number: 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)
316-832-2700
------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirement for the past 90 days. X Yes No
----- -----
The number of shares outstanding of the registrant's par value $.01 common
stock was 55,827,490 shares as of May 12, 1999 of which 44,067,520 shares
were held by Coleman Worldwide Corporation, an indirect wholly-owned
subsidiary of Sunbeam Corporation.
Exhibit Index on Page 23
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION Page
----
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Operations
Three months ended March 31, 1999 and 1998....................................... 3
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998............................................. 4
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1999 and 1998....................................... 5
Notes to Condensed Consolidated Financial Statements................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................................... 23
Item 6. Exhibits and Reports on Form 8-K....................................................... 23
Signatures ........................................................................... 24
</TABLE>
2
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net revenues................................................................ $ 280,690 $ 244,499
Cost of sales............................................................... 198,371 175,777
------------ ------------
Gross profit................................................................ 82,319 68,722
Selling, general and administrative expenses................................ 61,360 74,855
Interest expense, net....................................................... 7,575 9,044
Amortization of goodwill and deferred charges............................... 2,564 2,934
Gain on sale of business.................................................... -- (26,137)
Other (income) expense, net................................................. (531) 1,861
------------ ------------
Earnings before income taxes,
minority interest and extraordinary item............................... 11,351 6,165
Income tax expense.......................................................... 4,540 7,518
Minority interest........................................................... 70 61
------------ ------------
Earnings (loss) before extraordinary item................................... 6,741 (1,414)
Extraordinary loss on early extinguishment
of debt, net of income tax benefit........................................ -- (1,232)
------------ ------------
Net earnings (loss)......................................................... $ 6,741 $ (2,646)
------------ ------------
------------ ------------
Basic and diluted earnings (loss) per share:
Earnings (loss) before extraordinary item................................. $ 0.12 $ (0.03)
Extraordinary item........................................................ -- (0.02)
------------ ------------
Net earnings (loss)..................................................... $ 0.12 $ (0.05)
------------ ------------
------------ ------------
Weighted average common shares outstanding:
Basic and diluted ........................................................ 55,827 53,732
------------ ------------
------------ ------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 18,508 $ 23,413
Accounts and notes receivable, less allowance
of $8,695 in 1999 and $8,894 in 1998............................... 222,453 162,108
Inventories.......................................................... 253,409 230,126
Deferred tax assets.................................................. 28,403 26,926
Prepaid expenses and other current assets............................ 17,524 19,627
------------- ------------
Total current assets............................................... 540,297 462,200
Property, plant and equipment, less accumulated depreciation
of $125,613 in 1999 and $122,868 in 1998............................. 141,028 145,823
Goodwill, net........................................................... 274,262 282,015
Deferred tax assets and other assets.................................... 36,645 43,219
------------- ------------
$ 992,232 $ 933,257
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable........................................... $ 160,619 $ 146,064
Other current liabilities............................................ 106,370 101,224
------------- ------------
Total current liabilities.......................................... 266,989 247,288
Debt payable to affiliate............................................... 407,771 365,063
Long-term debt.......................................................... 435 362
Other liabilities....................................................... 74,315 75,231
Minority interest....................................................... 8,000 6,698
Contingencies...........................................................
Stockholders' equity:
Common stock......................................................... 558 558
Additional paid-in capital........................................... 223,245 221,730
Retained earnings.................................................... 28,718 21,977
Accumulated other comprehensive loss................................. (17,799) (5,650)
------------- ------------
Total stockholders' equity......................................... 234,722 238,615
------------- ------------
$ 992,232 $ 933,257
------------- ------------
------------- ------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------------------
1999 1998
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)............................................................. $ 6,741 $ (2,646)
Adjustments to reconcile net earnings (loss) to net cash flows
from operating activities:
Depreciation and amortization.............................................. 8,138 9,508
Minority interest.......................................................... 70 61
Gain on sale of business................................................... -- (26,137)
Extraordinary loss on early extinguishment of debt......................... -- 2,038
Change in assets and liabilities, net of effects from sale of business:
Increase in receivables.............................................. (65,104) (34,531)
Increase in inventories.............................................. (28,832) (31,043)
Increase in accounts payable......................................... 15,466 4,177
Other, net........................................................... 14,541 (5,036)
------------- ------------
Net cash used by operating activities........................................... (48,980) (83,609)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................ (3,919) (9,698)
Net proceeds from sale of business and fixed assets............................. 568 98,264
------------- ------------
Net cash (used) provided by investing activities................................ (3,351) 88,566
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments of revolving credit agreement borrowings........................... -- (52,578)
Net change in short-term borrowings............................................. 5,468 (3,352)
Repayment of long-term debt, including redemption costs......................... (53) (63,416)
Net increase in borrowings from affiliate....................................... 42,708 90,711
Proceeds from stock options exercised including tax benefits.................... -- 31,805
------------- ------------
Net cash provided by financing activities....................................... 48,123 3,170
------------- ------------
Effect of exchange rate changes on cash......................................... (697) 340
------------- ------------
Net (decrease) increase in cash and cash equivalents............................ (4,905) 8,467
Cash and cash equivalents at beginning of the period............................ 23,413 13,031
------------- ------------
Cash and cash equivalents at end of the period.................................. $ 18,508 $ 21,498
------------- ------------
------------- ------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
1. 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 an indirect wholly-owned subsidiary of
Laser Acquisition Corp. ("Laser"), an indirect wholly-owned subsidiary of
Sunbeam Corporation ("Sunbeam"). Coleman Worldwide owns 44,067,520 shares of
the common stock of Coleman which represented approximately 79% of the
outstanding Coleman common stock as of March 31, 1999.
Coleman, Sunbeam and Camper Acquisition Corp. ("CAC"), a wholly-owned
subsidiary of Sunbeam, have entered into an Agreement and Plan of Merger (the
"Coleman Merger Agreement"), providing that among other things, CAC will be
merged with and into Coleman, with Coleman continuing as the surviving
corporation (the "Coleman Merger"). 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
indirectly by Sunbeam and shares, if any, for which appraisal rights have
been exercised) 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. In addition, unexercised stock
options at the time of the Coleman Merger will be cashed out by Sunbeam at a
price per share equal to the difference between $27.50 per share and the
exercise price of such options. In October 1998, Coleman and Sunbeam entered
into a memorandum of understanding to settle, subject to court approval,
certain class actions brought by minority shareholders of Coleman against
Coleman, Sunbeam and certain of their current and former officers and
directors challenging the proposed Coleman Merger. Under the terms of the
proposed settlement, if approved by the court, Sunbeam will issue to the
Coleman public shareholders five-year warrants to purchase up to 4.98 million
shares of Sunbeam common stock at $7.00 per share, subject to certain
anti-dilution provisions. Any shareholder who does not exercise his appraisal
rights under Delaware law will receive the warrants. These warrants will be
issued when the Coleman Merger is consummated, which is now expected to be
during the second half of 1999. There can be no assurance that the court will
approve the settlement as proposed, although such approval is not a condition
to the consummation of the Coleman Merger.
The consummation of the Coleman Merger is contingent upon several
conditions including, among other things, the filing of a registration
statement under the Securities Act of 1933 (the "Securities Act") for the
purpose of registering the shares of Sunbeam common stock to be issued in the
Coleman Merger (the "Registration Statement") and that the Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act. Sunbeam has filed a preliminary Registration Statement,
but is uncertain when the Registration Statement will become effective.
However, it is anticipated the Coleman Merger will be completed during the
second half of 1999. Upon consummation of the Coleman Merger, Coleman will
become an indirect wholly-owned subsidiary of Sunbeam.
6
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
2. BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of Coleman and its subsidiaries after elimination of all
material intercompany accounts and transactions, and have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, these statements
include all adjustments necessary for a fair presentation of results of
operations, financial position and cash flows. The balance sheet at December
31, 1998 has been derived from the audited financial statements for that date
but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998. Operating results for the three months
ended March 31, 1999 are not necessarily indicative of the results that may
be expected for future periods including the year ended December 31, 1999.
3. INVENTORIES
The components of inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------- ---------------
<S> <C> <C>
Raw material and supplies......................... $ 48,818 $ 45,395
Work-in-process................................... 8,370 6,539
Finished goods.................................... 196,221 178,192
--------------- ---------------
$ 253,409 $ 230,126
--------------- ---------------
--------------- ---------------
</TABLE>
4. DEBT PAYABLE TO AFFILIATE
Since Sunbeam's credit facility (the "Sunbeam Credit Facility") provides
that Sunbeam will not contribute capital to Coleman or, with some exceptions,
permit Coleman to borrow money from any source other than Sunbeam, the
Company's ability to meet its cash operating requirements, including capital
expenditures and other obligations, is dependent upon a combination of cash
flows from operations and loans to the Company from Sunbeam. Sunbeam has
informed the Company that it has the positive intent and ability to fund the
Company's requirements for borrowed funds through April 10, 2000. Amounts
loaned by Sunbeam are represented by a promissory note (the "Intercompany
Note") which totaled $407,771 at March 31, 1999 and until the amendment and
restatement of the Intercompany Note described below, were due on demand. For
1998 and through April 15, 1999, the Intercompany Note bore interest at a
floating rate equivalent to the weighted
7
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
average interest rate incurred by Sunbeam on its outstanding convertible debt
and borrowings under its bank credit facility. The weighted average interest
rate charged by Sunbeam on the Intercompany Note during the three months
ended March 31, 1999 was 7.3% and the total interest charged by Sunbeam to
Coleman was $7,173. Sunbeam also charged to Coleman a pro-rata share of
amortized debt issuance costs and unused bank credit facility commitment fees
totaling $277. Net amounts advanced from Sunbeam along with the related
unpaid interest and other costs are reflected as debt payable to affiliate in
the Company's condensed consolidated balance sheet. Coleman is also a
borrower under the Sunbeam Credit Facility for purposes of letters of credit
borrowings.
On April 15, 1999, Coleman, Sunbeam and, as to certain agreements, the
lenders under the Sunbeam Credit Facility entered into an amended and
restated Intercompany Note (the "Amended Intercompany Note"), intercompany
security and pledge agreements, an amendment to the Sunbeam Credit Facility
and certain other agreements (collectively, the "Agreements"). The Amended
Intercompany Note is due April 15, 2000. The Amended Intercompany Note bears
interest at an annual rate equal to (i) 4% if the three month London
Interbank Offering Rate ("LIBOR") quoted on the Telerate system is less than
6%, or (ii) 5% if the three month LIBOR quoted on the Telerate system is 6%
or higher, subject to increases during an event of default, and interest will
be payable by adding the amount of such interest to the principal balance of
the Amended Intercompany Note. In addition, the Amended Intercompany Note
provides an event of default under the Sunbeam Credit Facility will
constitute an event of default under the Amended Intercompany Note and in
certain circumstances the payment on the Amended Intercompany Note will be
subordinate to Coleman's obligations under the Sunbeam Credit Facility.
Pursuant to the Agreements, Coleman has pledged substantially all of its
domestic assets, other than its real property, including 66% of its ownership
interest in its direct foreign subsidiaries and domestic holding companies
for its foreign subsidiaries and all of its ownership interest in its other
domestic subsidiaries (but Coleman's subsidiaries have not pledged their
assets or stock of their subsidiaries), as security for the Amended
Intercompany Note. Sunbeam has pledged the Amended Intercompany Note as
security for the Sunbeam Credit Facility and assigned to such lenders the
security pledged by Coleman for the Amended Intercompany Note. Under the
Agreements, Coleman also agreed to give the lenders a direct pledge of the
assets securing the Amended Intercompany Note to secure the obligations under
the Sunbeam Credit Facility, subject to a cap equal to the balance due from
time to time on the Amended Intercompany Note.
The Sunbeam Credit Facility provides for a revolving credit facility in
an aggregate principal amount of up to $400,000 (subject to certain
reductions) maturing March 31, 2005. In addition, pursuant to the Sunbeam
Credit Facility, at March 31, 1999, Sunbeam had approximately $1,260,000
outstanding debt consisting of two tranches of term loans with scheduled
repayments through maturity on March 31, 2005 and September 30, 2006. As a
result of Sunbeam's operating losses, Sunbeam was not in compliance with the
financial covenants and other terms contained in the Sunbeam Credit Facility.
As of June 30, 1998, Sunbeam entered into an agreement with its bank lenders
which waived Sunbeam's compliance through December 31, 1998. On October 19,
1998, Sunbeam's bank lenders agreed to extend this waiver through April 10,
1999. In April 1999, the
8
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
waiver was extended to April 10, 2000, and the Sunbeam Credit Facility was
amended to add certain financial covenants and other terms. Interest accrues
at a rate selected at Sunbeam's option of: (i) LIBOR plus an interest rate
margin which varies depending upon the occurrence of specified events or,
(ii) the base rate of the administrative agent (generally the higher of the
prime commercial lending rate of the administrative agent or the Federal
Funds Rate plus one-half of 1%), plus an interest rate margin which varies
depending upon the occurrence of specified events.
Borrowings under the Sunbeam Credit Facility are secured by a pledge of
the stock of Sunbeam's material subsidiaries and by a security interest in
substantially all of the assets of Sunbeam and its material domestic
subsidiaries (other than Coleman and its subsidiaries, except as otherwise
described herein), including the Amended Intercompany Note. Sunbeam has
pledged its shares of Coleman common stock and its shares of Sunbeam
Corporation (Canada) Limited ("Sunbeam Canada") common stock owned by it as
security under the Sunbeam Credit Facility. In addition, borrowings under the
Sunbeam Credit Facility are guaranteed by a number of Sunbeam's wholly-owned
material United States subsidiaries (but not Coleman) and such subsidiary
guarantees are secured as described above. Coleman has pledged its inventory
(but not that of its subsidiaries) and the proceeds from the sale of such
inventory as collateral for its letter of credit borrowings under the Sunbeam
Credit Facility.
The Sunbeam Credit Facility contains covenants customary for credit
facilities of a similar nature, including limitations on the ability of
Sunbeam and its subsidiaries, including Coleman, to, among other things, (i)
declare dividends or repurchase stock, (ii) prepay, redeem or repurchase
debt, incur liens and engage in sale-leaseback transactions, (iii) make loans
and investments, (iv) incur additional debt and maintain revolving loan
balances, (v) amend or otherwise alter material agreements or enter into
restrictive agreements, (vi) make capital and Year 2000 testing and
remediation expenditures, (vii) engage in mergers, acquisitions and asset
sales, (viii) engage in transactions with affiliates, (ix) alter its fiscal
year or accounting policies, (x) enter into hedging agreements, (xi) settle
litigations, (xii) alter its cash management system and (xiii) alter the
businesses they conduct. Sunbeam is also required to comply with specified
financial covenants and ratios. The Sunbeam Credit Facility provides for
events of default customary for transactions of this type, including
nonpayment, misrepresentation, breach of covenant, cross-defaults, bankruptcy
and insolvency, ERISA, judgments and change of ownership and control. The
Sunbeam Credit Facility, as amended, also provides it is an event default if
the registration statement for the shares of Sunbeam common stock to be
issued in the Coleman Merger is not declared effective by October 30, 1999,
if Sunbeam fails to complete the Coleman Merger within 25 business days after
the related registration statement is declared effective by the SEC, or if
Sunbeam has to pay more than $87,500 (excluding expenses) in cash to complete
the merger (including any payments made with respect to appraisal rights).
9
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
5. RESTRUCTURING AND OTHER CHARGES
The Company continuously reviews the adequacy of its restructuring
reserves and adjusts the reserves as the various activities are completed or
additional information becomes available which allows the Company to refine
its estimates. During the three months ended March 31, 1999, the Company
reduced its reserves by $558 as a result of these reviews. During the three
months ended March 31, 1998, the Company increased its reserves by $715 as a
result of these reviews. In addition, during the three months ended March 31,
1998, the Company recorded other charges totaling $12,931 resulting from
expenses associated with the acquisition of the Company by Sunbeam including
advisory fees, abandoning a company-wide enterprise resource computer
software system, and terminating a licensing services agreement.
The following table provides an analysis of the changes in the Company's
restructuring reserves since December 31, 1998. For detailed information
regarding the Company's restructuring charges see Note 3 to the consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
<TABLE>
<CAPTION>
Inventory Idle
Impairment and Other Facilities
of Fixed Asset Termination and Other
Assets Impairments Costs Exit Costs Total
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998............... $ 8,066 $ 1,809 $ 8,656 $ 3,339 $ 21,870
1999 (Credits) Charges..................... (325) (602) -- 369 (558)
Activity................................... (663) (436) (2,502) (676) (4,277)
----------- ----------- ----------- ----------- ----------
Balance at March 31, 1999.................. $ 7,078 $ 771 $ 6,154 $ 3,032 $ 17,035
----------- ----------- ----------- ----------- ----------
----------- ----------- ----------- ----------- ----------
</TABLE>
Significant components of the restructuring reserves at March 31, 1999
are as follows:
IMPAIRMENT OF FIXED ASSETS - This primarily represents the reserve for
loss on disposition of an idle warehouse.
TERMINATION COSTS - This represents severance benefits associated with
the termination of employees following the acquisition of the Company by
Sunbeam (the "Sunbeam Acquisition") and for employees who were terminated as
part of the Company's restructuring plans during 1997 and 1998. All
termination benefits are expected to be paid by December 31, 2000.
IDLE FACILITIES AND OTHER EXIT COSTS - This primarily relates to costs
to be expended to complete the closing of two foreign facilities.
10
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
6. COMPREHENSIVE LOSS
The components of the Company's comprehensive loss are as follows:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------------------
1999 1998
------------- ------------
<S> <C> <C>
Net earnings (loss)............................................ $ 6,741 $ (2,646)
Foreign currency translation adjustment, net of tax............ (12,149) (2,418)
Minimum pension liability adjustment, net of tax............... -- (168)
------------- ------------
Comprehensive loss............................................. $ (5,408) $ (5,232)
------------- ------------
------------- ------------
</TABLE>
7. BASIC AND DILUTED EARNINGS PER COMMON SHARE
Basic earnings per share is computed using the weighted average number
of shares of outstanding common stock. Diluted earnings per share for the
three months ended March 31, 1999 is based only on the weighted average
number of common shares outstanding during the three months ended March 31,
1999 because there were no common share equivalents. Stock options to
purchase 923,670 shares of common stock were outstanding at March 31, 1999
but were not included in the computation of common share equivalents because
the option exercise price was greater than the average market price of
Coleman's common stock during each of the respective years. Diluted earnings
per share for the three months ended March 31, 1998 is based only on the
weighted average number of common shares outstanding during the three months
ended March 31, 1998 as the inclusion of 633,571 common share equivalents
would have been antidilutive.
8. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. It requires an entity
to recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. SFAS No.
133 will be effective for the Company's fiscal year beginning January 1,
2000. Earlier application of the provisions of SFAS No. 133 is encouraged;
however, the Company has not determined if it will apply the provisions of
SFAS No. 133 prior to January 1, 2000, nor has the Company estimated the
impact of applying the provision of SFAS No. 133 on the Company's statement
of financial position or on the statement of operations.
11
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
9. SEGMENT INFORMATION
For detailed information regarding the Company's reportable segments,
see Note 18 to the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
INFORMATION ABOUT SEGMENT PROFITS AND SEGMENTS ASSETS
<TABLE>
<CAPTION>
Outdoor All
Recreation Powermate Eastpak International Other Total
---------- ---------- -------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended March 31, 1999:
Revenues from external customers..... $ 95,146 $ 64,518 $ 3,083 $ 116,497 $ 1,446 $ 280,690
Intersegment revenues................ 24,782 5,664 11,035 64 -- 41,545
Segment profit (loss)................ 9,545 9,324 (3,095) 9,317 (1,605) 23,486
Segment assets....................... 239,405 138,071 88,061 382,450 5,395 853,382
Three Months Ended March 31, 1998:
Revenues from external customers..... 75,062 51,154 3,457 90,287 24,539 244,499
Intersegment revenues................ 20,635 295 10,000 80 -- 31,010
Segment profit (loss)................ 1,963 3,269 (3,310) 6,500 2,230 10,652
Segment assets....................... 275,428 133,654 96,702 342,209 15,706 863,699
</TABLE>
RECONCILIATION OF SELECTED SEGMENT INFORMATION TO THE COMPANY'S CONSOLIDATED
TOTALS
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------------------
1999 1998
------------ -------------
<S> <C> <C>
REVENUES:
Total revenues for reportable segments..................................... $ 320,789 $ 250,970
Other revenues............................................................. 1,446 24,539
Elimination of intersegment revenues....................................... (41,545) (31,010)
------------ -------------
Total consolidated revenues.............................................. $ 280,690 $ 244,499
------------ -------------
------------ -------------
PROFIT OR LOSS:
Total segment profit....................................................... $ 23,486 $ 10,652
Unallocated items:
Corporate expenses....................................................... (3,079) (5,358)
Corporate restructuring credits (charges)................................ 552 (11,427)
Interest expense, net.................................................... (7,575) (9,044)
Amortization of goodwill and deferred charges............................ (2,564) (2,934)
Gain on sale of business................................................. -- 26,137
Other income (expense), net.............................................. 531 (1,861)
------------ -------------
Earnings before income taxes, minority interest
and extraordinary item............................................. $ 11,351 $ 6,165
------------ -------------
------------ -------------
</TABLE>
12
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
condensed consolidated financial statements and the related footnotes
included elsewhere in this quarterly report on Form 10-Q, as well as the
consolidated financial statements and related notes, and management's
discussion and analysis of financial condition and results of operations in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
RESULTS OF OPERATIONS
RESTRUCTURING AND OTHER CHARGES
The Company continuously reviews the adequacy of its restructuring
reserves and adjusts the reserves as the various activities are completed or
additional information becomes available which allows the Company to refine
its estimates. During the three months ended March 31, 1999, the Company
reduced its reserves by $0.6 million as a result of these reviews. During the
three months ended March 31, 1998, the Company increased its reserves by $0.7
million as a result of these reviews. In addition, during the three months
ended March 31, 1998, the Company recorded other charges totaling $12.9
million resulting from expenses associated with the Sunbeam Acquisition
including advisory fees, abandoning a company-wide enterprise resource
computer software system, and terminating a licensing services agreement.
The following table (dollars in millions) provides an analysis of the
changes in the Company's restructuring reserves since December 31, 1998. For
detailed information regarding the Company's restructuring charges see Note 3
to the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
<TABLE>
<CAPTION>
Inventory Idle
Impairment and Other Facilities
of Fixed Asset Termination and Other
Assets Impairments Costs Exit Costs Total
------ ----------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998............... $ 8.1 $ 1.8 $ 8.7 $ 3.3 $ 21.9
1999 (Credits) Charges..................... (0.3) (0.6) -- 0.3 (0.6)
Activity................................... (0.7) (0.4) (2.5) (0.7) (4.3)
------ ------- -------- ------- -------
Balance at March 31, 1999.................. $ 7.1 $ 0.8 $ 6.2 $ 2.9 $ 17.0
------ ------- -------- ------- -------
------ ------- -------- ------- -------
</TABLE>
Significant components of the restructuring reserves at March 31, 1999
are as follows:
IMPAIRMENT OF FIXED ASSETS - This primarily represents the reserve for
loss on disposition of an idle warehouse.
TERMINATION COSTS - This represents severance benefits associated with
the termination of employees following the Sunbeam Acquisition and for
employees who were terminated as part of the
13
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
Company's restructuring plans during 1997 and 1998. All termination benefits
are expected to be paid by December 31, 2000.
IDLE FACILITIES AND OTHER EXIT COSTS - This primarily relates to costs
to be expended to complete the closing of two foreign facilities.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THE THREE MONTHS ENDED MARCH
31, 1998
Net revenues of $280.7 million for the three months ended March 31, 1999
were $36.2 million or 14.8% greater than for the three months ended March 31,
1998. The outdoor recreation products revenues, reflecting both United States
and foreign non-hardware products, increased $33.6 million or 19.1% and
occurred in nearly all product categories, primarily reflecting strong retail
replenishment demand. The Company experienced unusually weak retail
replenishment demand in the first quarter of 1998. The hardware products
revenues increase of $2.6 million includes the impact of the loss of revenues
from the Company's safety and security business in 1999 due to the sale of
this business in March 1998. Excluding the revenues of this business, the
hardware products revenues reflected an increase of $18.9 million, or 36.2%,
over comparable 1998 revenues reflecting an increase in generator revenues
attributable to increased awareness of power shortages arising from poor
weather conditions and other events partially offset by a decline in
compressor revenues. Geographically, United States revenues increased $15.5
million, or 10.4%, and foreign revenues increased $20.7 million, or 21.6%.
The United States revenues for the 1998 period includes revenues from the
Company's safety and security business and spa business, both of which were
sold during 1998. Excluding these revenues from the 1998 period, United
States revenues in 1999 reflected an increase of $36.8 million or 28.9%.
Gross profit for the three months ended March 31, 1999 was $82.3 million
as compared to $68.7 million for the three months ended March 31, 1998.
Higher sales volume and favorable manufacturing efficiencies resulting from
higher production levels associated with the higher sales volume in the 1999
period accounted for primarily all of the increase in gross profit.
Selling, general and administrative ("SG&A") expenses, excluding the
impact of restructuring credits of $0.6 million in 1999 and restructuring and
other charges of $13.6 million in 1998, which are more fully described above,
were $61.9 million or 22.1% of net revenues in 1999 compared to $61.2 million
or 25.0% of net revenues in 1998. The overall dollar increase in SG&A
expenses is primarily due to increased selling costs associated with the
increase in 1999 sales partially offset by the reduction in SG&A expenses
associated with the Company's safety and security business and spa business,
both of which were sold during 1998, and whose total SG&A expenses during the
first quarter of 1998 were $5.4 million. SG&A expenses as a percent of net
revenues decreased to 22.1% in 1999 from 25.0% in 1998 as revenues grew
faster than SG&A expenses.
Interest expense was $7.6 million in 1999 compared with $9.0 million in
1998, a decrease of $1.4 million. The decrease in interest expense reflects
the favorable effects of lower borrowings.
Minority interest represents the interest of minority shareholders in
the Company's subsidiary operations in the Philippines, Indonesia, and Canada.
The Company recorded a provision for income tax expense of $4.5 million
or 40.0% of pre-tax earnings in 1999 compared to a provision for income tax
expense of $7.5 million in 1998. The
14
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
1998 income tax provision reflects, among other things, (i) the write-off of
approximately $1.7 million deferred tax assets that became unrealizable as a
result of the change of control in the Company at the time of the Sunbeam
Acquisition, (ii) $0.4 million of tax expense due to the impact of decreased
foreign tax rates on deferred tax assets, and (iii) the impact of $7.1
million non-deductible costs associated with the Sunbeam Acquisition.
Excluding these items, the 1998 effective income tax rate would have been
approximately 40.8%.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities during the three months ended March
31, 1999 was $49.0 million compared to $83.6 million for the three months
ended March 31, 1998. This decrease is attributable to higher earnings before
non-cash charges and gain on sale of business. During the three months ended
March 31, 1999, receivables increased $65.1 million and inventories increased
approximately $28.8 million as a result of the seasonality of the Company's
sales. The Company's capital expenditures were $3.9 million during the three
months ended March 31, 1999.
The Company's uses of cash for 1999 are expected to be primarily for
working capital and capital expenditure requirements. Since the Sunbeam
Credit Facility provides that Sunbeam will not contribute capital to Coleman
or, with some exceptions, permit Coleman to borrow money from any source
other than Sunbeam, the Company's ability to meet its cash operating
requirements, including capital expenditures and other obligations, is
dependent upon a combination of cash flows from operations and loans to the
Company from Sunbeam. Sunbeam has informed the Company that it has the
positive intent and ability to fund the Company's requirements for borrowed
funds through April 10, 2000. Amounts loaned by Sunbeam are represented by
the Intercompany Note which totaled $407.8 million at March 31, 1999 and,
until the amendment and restatement of the Intercompany Note described below,
were due on demand. For 1998 and through April 15, 1999, the Intercompany
Note bore interest at a floating rate equivalent to the weighted average
interest rate incurred by Sunbeam on its outstanding convertible debt and
borrowings under its bank credit facility which during the three months ended
March 31, 1999 was 7.3%. Coleman is a borrower under the Sunbeam Credit
Facility for purposes of letters of credit borrowings.
On April 15, 1999, Coleman, Sunbeam and, as to certain agreements, the
lenders under the Sunbeam Credit Facility entered into the Agreements,
including the Amended Intercompany Note, intercompany security and pledge
agreements, an amendment to the Sunbeam Credit Facility and certain other
agreements. The Amended Intercompany Note is due April 15, 2000. The Amended
Intercompany Note bears interest at an annual rate equal to (i) 4% if the
three month LIBOR quoted on the Telerate system is less than 6%, or (ii) 5%
if the three month LIBOR quoted on the Telerate system is 6% or higher,
subject to increases during an event of default, and interest will be payable
by adding the amount of such interest to the principal balance of the Amended
Intercompany Note. In addition, the Amended Intercompany Note provides an
event of default under the Sunbeam Credit Facility will constitute an event
of default under the Amended Intercompany Note and in certain circumstances
the payment on the Amended Intercompany Note will be subordinate to Coleman's
obligations under the Sunbeam Credit Facility. Pursuant to the Agreements,
Coleman has pledged substantially all of its domestic assets, other than its
real property, including 66% of its ownership interest in its direct foreign
subsidiaries and domestic holding companies for its foreign subsidiaries and
all of its ownership interest in its other domestic subsidiaries (but
Coleman's subsidiaries have
15
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
not pledged their assets or stock of their subsidiaries), as security for the
Amended Intercompany Note. Sunbeam has pledged the Amended Intercompany Note
as security for the Sunbeam Credit Facility and assigned to such lenders the
security pledged by Coleman for the Amended Intercompany Note. Under the
Agreements, Coleman also agreed to give the lenders a direct pledge of the
assets securing the Amended Intercompany Note to secure the obligations under
the Sunbeam Credit Facility, subject to a cap equal to the balance due from
time to time on the Amended Intercompany Note.
The Sunbeam Credit Facility provides for a revolving credit facility in
an aggregate principal amount of up to $400.0 million (subject to certain
reductions) maturing March 31, 2005. In addition, pursuant to the Sunbeam
Credit Facility, at March 31, 1999, Sunbeam had approximately $1,260.0
million outstanding debt consisting of two tranches of term loans with
scheduled repayments through maturity on March 31, 2005 and September 30,
2006. As a result of Sunbeam's operating losses, Sunbeam was not in
compliance with the financial covenants and other terms contained in the
Sunbeam Credit Facility. As of June 30, 1998, Sunbeam entered into an
agreement with its bank lenders which waived Sunbeam's compliance through
December 31, 1998. On October 19, 1998, Sunbeam's bank lenders agreed to
extend this waiver through April 10, 1999. In April 1999, the waiver was
extended to April 10, 2000, and the Sunbeam Credit Facility was amended to
add certain financial covenants and other terms. At the end of March 1999,
approximately $230.0 million was available to the Company under the Sunbeam
Credit Facility either through letters of credit borrowings or loans from
Sunbeam.
Borrowings under the Sunbeam Credit Facility are secured by a pledge of
the stock of Sunbeam's material subsidiaries and by a security interest in
substantially all of the assets of Sunbeam and its material domestic
subsidiaries (other than Coleman and its subsidiaries, except as otherwise
described herein), including the Amended Intercompany Note. Sunbeam has
pledged its shares of Coleman common stock and its shares of Sunbeam Canada
common stock owned by it as security under the Sunbeam Credit Facility. In
addition, borrowings under the Sunbeam Credit Facility are guaranteed by a
number of Sunbeam's wholly-owned material United States subsidiaries (but not
Coleman) and such subsidiary guarantees are secured as described above.
Coleman has pledged its inventory (but not that of its subsidiaries) and the
proceeds from the sale of such inventory as collateral for its letter of
credit borrowings under the Sunbeam Credit Facility.
The Sunbeam Credit Facility contains covenants customary for credit
facilities of a similar nature, and events of default customary for
transactions of this type. Sunbeam is also required to comply with specified
financial covenants and ratios. If an event of default occurs under the
Sunbeam Credit Facility or Sunbeam is unable to refinance the Sunbeam Credit
Facility or obtain another waiver or amendment of certain financial covenants
and other terms by the time its existing waiver expires on April 10, 2000,
the Company may be required to reduce, delay or cancel capital or other
expenditures and/or seek loans or capital contributions from, or sell assets
or capital stock to, lending institutions and/or other third parties or
affiliates. There can be no assurance that any of such transactions could be
consummated or if consummated, would be on favorable terms or in amounts
sufficient to permit the Company to meets its cash requirements, or that any
of such transactions would be permitted under Sunbeam's debt instruments then
in effect. See Note 13 to the
16
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
Consolidated Financial Statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
EXPOSURE TO MARKET RISK
QUALITATIVE INFORMATION
Coleman uses a variety of derivative financial instruments to manage its
foreign currency and interest rate exposures. Coleman 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. See also Note 11 to the Consolidated Financial Statements in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
The Company's international operations are located primarily in Europe,
Japan and Canada, which are not considered to be highly inflationary
environments. 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. Coleman is most vulnerable to
changes in United States dollar/Japanese yen (JPY), United States
dollar/Canadian dollar (CAD), United States dollar/German Deutschemark (DM),
and United States dollar/British Pound (GBP) exchange rates.
The Company's interest income and expense are most sensitive to changes
in the general level of U.S. interest rates. In this regard, changes in U.S.
interest rates affect the interest earned on the Company's cash equivalents
and short-term investments as well as interest paid on its debt. To mitigate
the impact of fluctuations in U.S. interest rates, the Company maintains a
portion of its debt as fixed rate in nature by entering into interest rate
swap transactions.
Coleman manages credit risk related to its derivative instruments
through credit approvals, exposure limits, threshold amounts and other
monitoring procedures.
QUANTITATIVE INFORMATION
Set forth below are tabular presentations of certain information related
to Coleman's investments in market risk sensitive instruments. All of the
instruments set forth in the following tables have been entered into by
Coleman for purposes other than trading.
INTEREST RATE SENSITIVITY. The table below provides information about
Coleman's derivative financial instruments and other financial instruments
that are sensitive to changes in interest rates, including interest rate
swaps and debt obligations.
17
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
For debt obligations, the table presents principal cash flows by
expected maturity date and related March 31, 1999 weighted average interest
rates. For interest rate swaps, the table presents notional amounts and
weighted average interest rates for the contracts at March 31, 1999. Notional
amounts are used to calculate the contractual payments to be exchanged under
the contracts.
<TABLE>
<CAPTION>
Expected Maturity Date
Balance -----------------------------------------------------------
at There- Fair
3/31/99 1999 2000 2001 2002 2003 after Total Value
------- ------ ----- ----- ---- ---- ------- ------ -----
(US$ Equivalent in Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Debt:
Fixed Rate.................. $ 0.6 $ 0.1 $ 0.2 $ 0.1 $ 0.1 $ 0.1 $ -- $ 0.6 $ 0.6
Average Interest Rate....... 2.91%
Interest Rate Derivatives:
Interest Rate Swaps:
Variable to Fixed (US$).. $ 25.0 $ -- $ -- $ -- $ -- $ 25.0 $ -- $ 25.0 $ (0.6)
Average Pay Rate......... 6.12%
Average Receive Rate..... 5.08%
</TABLE>
EXCHANGE RATE SENSITIVITY. The table below provides information about
Coleman's foreign currency derivative financial instruments and other
financial instruments, including forward exchange agreements, by functional
currency and presents such information in U.S. dollar equivalents. The table
summarizes information on instruments and transactions that are sensitive to
foreign currency exchange rates, including foreign currency variable rate
credit lines, foreign currency forward exchange agreements and foreign
currency purchased put option contracts. For debt obligations, the table
represents principal cash flows and related weighted average interest rates
by expected maturity dates. For foreign currency forward exchange agreements
and foreign currency put option contracts, the table presents the notional
amounts and weighted average exchange rates by expected (contractual)
maturity dates. These notional amounts generally are used to calculate the
contractual payments to be exchanged under the contract.
<TABLE>
<CAPTION>
Balance
at Fair
3/31/99 (1) Value
----------- -----
(US$ Equivalent in Millions)
<S> <C> <C>
Foreign Currency Short-Term Debt:
Variable Rate Credit Lines (Europe, Japan and Asia).......... $ 48.4 $ 48.4
Weighted Average Interest Rate............................... 2.8%
Forward Exchange Agreements:
(Receive US$/Pay DM)
Contract Amount........................................ $ 9.0 $ 9.9
Average Contractual Exchange Rate...................... 1.62
(Receive US$/Pay JPY)
Contract Amount........................................ $ 9.0 $ 9.2
Average Contractual Exchange Rate...................... 114.73
(Receive US$/Pay GBP)
Contract Amount........................................ $ 3.5 $ 3.6
Average Contractual Exchange Rate...................... .60
18
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
Purchased Put Option Agreements:
(Receive US$/Pay DM)
Contract Amount........................................ $ 15.8 $ 0.4
Average Strike Price................................... 1.80
(Receive US$/Pay JPY)
Contract Amount........................................ $ 12.4 $ 0.3
Average Strike Price................................... 125.0
(Receive US$/Pay GBP)
Contract Amount........................................ $ 1.4 $ 0.0
Average Strike Price................................... .62
(Receive US$/Pay CAD)
Contract Amount........................................ $ 15.0 $ 0.1
Average Strike Price................................... 1.54
</TABLE>
- ------------------
(1) None of the instruments listed in the table have maturity dates beyond
1999.
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 unseasonable weather conditions.
YEAR 2000 READINESS DISCLOSURE
The Company is continuing the process of assessing the impact of the
Year 2000 on its operations. The Company is being assisted in its review and
remediation work by Sunbeam's Year 2000 Program Management Office and
consulting firms employed by Sunbeam. The Company has completed an inventory
of its hardware and software systems, manufacturing equipment, electronic
data interchange, telecommunications and other technical assets potentially
subject to Year 2000 problems, such as security and telephone systems and
controls for lighting, heating, ventilation and facility access.
Additionally, the Company is assessing the effects of noncompliance by its
vendors, service providers, customers and financial institutions.
The Company relies on its information technology functions to perform
many tasks critical to its operations. Significant transactions that could be
impacted by Year 2000 noncompliance include, among others, purchases of
materials, production management, order entry and fulfillment, and payroll
processing. Systems and applications that have been identified by the Company
to date as not currently Year 2000 compliant that are critical to the
Company's operations include certain of its financial software systems, which
process the order entry, purchasing, production management, general ledger,
accounts receivable, and accounts payable functions, and critical
applications in the Company's manufacturing and distribution facilities.
The Company's corrective work to achieve Year 2000 compliance has
included the following: (i) installation of Year 2000 compliant JD Edwards
software which has recently been completed in one location and is scheduled
to be completed in another location in September of 1999; (ii) the
installation of Year 2000 compliant JBA software in one location which is
scheduled to be completed
19
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
by June 1999; and (iii) remediation of software codes for existing programs
in another location which is scheduled to be completed by July of 1999. The
Company has identified one of these locations as possessing significant Year
2000 issues. Coleman's failure to complete a timely conversion of this
location to a Year 2000 compliant system could have a material impact on the
Company's operations. Management believes, although there are significant
systems that are being or will be modified or replaced, Coleman's information
systems environment will be made Year 2000 compliant prior to January 1, 2000.
As of March 31, 1999, the Company had expended approximately $6.0
million related to remediation of Year 2000 issues, of which approximately
$5.0 million was recorded as SG&A expenses and the remainder as capital
expenditures. The Company's preliminary assessment of the total costs to
address and remedy Year 2000 issues is approximately $12.0 million. This
estimate includes the costs of software and hardware modifications and
replacements, and fees to third party consultants, but excludes the costs
associated with Company employees. The Company expects these expenditures to
be financed through operating cash flows or borrowings, as applicable. There
can be no assurance that these preliminary estimates will not change as the
Company completes its assessment of the Year 2000 issues. Additionally, the
Sunbeam Credit Facility does not permit Sunbeam and its subsidiaries,
including Coleman and its subsidiaries, to spend more than $50.0 million in
the aggregate on Year 2000 testing and remediation during the year ended
December 31, 1999. Sunbeam currently expects that for 1999, Year 2000 testing
and remediation spending for Sunbeam and its subsidiaries, including Coleman
and its subsidiaries, will total approximately $41.0 million.
With the exception of certain aspects of the Company's Year 2000
readiness program, the Company did not engage an independent third party to
verify the program's overall approach or total cost. However, the Company
believes through its use of various external consulting firms which perform
significant roles within the program, the Company's exposure in this regard
is mitigated. In addition, through the use of external third party diagnostic
tools which helped to identify potential Year 2000 issues in the software
code which the Company is remediating, the Company believes it has also
mitigated its risk by validating and verifying key program components.
The Company has contacted its major vendors and suppliers of products
and services to determine their Year 2000 readiness, and is continuing to
monitor their status with respect to such plans. This review includes third
party providers to whom the Company has outsourced the processing of its cash
receipt and cash disbursement transactions and its payroll. The Company is
currently assessing the vendor responses and will conduct additional reviews,
including on-site meetings, if deemed necessary, with any major suppliers who
have not indicated their readiness for the Year 2000. The failure of certain
of these third party suppliers to become Year 2000 compliant could have a
material adverse impact on the Company. The Company will also contact its
customers to determine if they are prepared for Year 2000 issues. Their
failure to evaluate and prepare for Year 2000 issues could have a material
adverse effect on Coleman's operations.
The Company plans to establish a contingency plan for addressing any
effects of the Year 2000 on its operations, whether due to noncompliance of
the Company's systems or those of third parties. The Company expects to
complete such contingency plan by September 30, 1999 and expects such
contingency plan will include an analysis of the Company's worst case
scenario and will address
20
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
alternative processes, such as manual procedures to replace those processed
by noncompliant systems, potential alternative service providers, and plans
to address compliance issues as they arise. At this time, the Company
believes the most likely "worst-case" scenario relating to Year 2000 issues
generally involves potential disruptions in areas in which the Company's
operations must rely on vendors, suppliers and customers whose systems may
not work properly after January 1, 2000. While such failures could either
directly or indirectly affect important operations of the Company and its
subsidiaries in a significant manner, the Company cannot at present estimate
either the likelihood or the potential cost of such failures. However,
subject to the nature of the systems and applications of the Company or third
parties which are not made Year 2000 compliant, the impact of such
non-compliance on the Company's operations could be material if appropriate
contingency plans cannot be developed prior to January 1, 2000.
Because Year 2000 readiness is critical to the business, the Company has
redeployed some resources from non-critical system enhancements to address
Year 2000 issues. In addition, due to the importance of information systems
to the Company's business, management has deferred non-mission-critical
systems enhancements as much as possible. The Company does not expect these
redeployments and deferrals to have a material impact on the Company's
financial condition or results of operations.
CAUTIONARY STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q may constitute
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995, as the same may be amended from time to time
(the "Act") and in releases made by the Securities and Exchange Commission
from time to time. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Statements that are not historical facts,
including statements about the Company's beliefs and expectations, are
forward-looking statements. Forward-looking statements can be identified by,
among other things, the use of forward-looking language, such as "believe,"
"expects," "estimates", "projects", "may," "will," "should," "seeks,"
"plans," "scheduled to," "anticipates" or "intends" or the negative of those
terms, or other variations of those terms or comparable language, or by
discussions of strategy or intentions. Forward-looking statements speak only
as of the date they are made, and the Company undertakes no obligation to
update them. These forward-looking statements were based on various factors
and were derived utilizing numerous important assumptions and other important
factors that could cause actual results to differ materially from those in
the forward-looking statements. These cautionary statements are being made
pursuant to the Act, with the intention of obtaining the benefits of the
"Safe Harbor" provisions of the Act. The Company cautions investors that any
forward-looking statements made by the Company are not guarantees of future
performance. Important assumptions and other important factors that could
cause actual results to differ materially from those contained in the
forward-looking statements with respect to the Company include, but are not
limited to risks associated with:
- high leverage,
21
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
- Sunbeam having sufficient borrowing capacity or other funds to lend to
the Company to satisfy the Company's cash needs,
- unavailability of sufficient cash flows from operations and borrowings
from Sunbeam, and the inability of the Company to secure loans or
capital contributions from, or sell assets or capital stock to, lending
institutions and/or other third parties or affiliates,
- Sunbeam's ability to comply with the terms of the Sunbeam Credit
Facility, or to continue to obtain waivers from its bank lenders with
respect to compliance with the existing covenants contained in the
Sunbeam Credit Facility, and to continue to have access to its
revolving credit facility,
- Coleman's ability to maintain and increase market shares for its
products at acceptable margins,
- Coleman's ability to successfully introduce new products and to provide
on-time delivery and a satisfactory level of customer service,
- changes in domestic and/or foreign laws and regulations, including
changes in tax laws, accounting standards, environmental laws,
occupational, health and safety laws,
- access to foreign markets together with foreign economic and political
conditions, including currency fluctuations, and trade, monetary,
fiscal and/or tax policies,
- uncertainty as to the effect of competition in existing and potential
future lines of business,
- fluctuations in the cost and/or availability of raw materials and/or
products,
- changes in the availability and/or costs of labor,
- effectiveness of advertising and marketing programs,
- product quality, including excess warranty costs, product liability
expenses and costs of product recalls,
- weather conditions which are adverse to the specific businesses of
Coleman,
- the possibility of a recession in the United States or other countries
resulting in a decrease in consumer demands for Coleman's products,
- ability of third party service providers that have been engaged to
provide services such as factory maintenance and certain back office
administrative services to timely and accurately provide their services
to the Company,
- changes in consumer preferences or a decrease in the public's interest
in camping and related activities,
- combinations or other actions by retail customers that adversely affect
sales or profitability,
- actions by competitors including business combinations, new product
offerings and marketing and promotional activities, and
- failure of Coleman and/or its customers and suppliers of goods or
services to timely complete the remediation of computer systems to
effectively process Year 2000 information.
Other factors and assumptions not included in the foregoing may cause
the Company's actual results to materially differ from those projected. The
Company assumes no obligation to update any forward-looking statements or
these cautionary statements to reflect actual results or changes in other
factors affecting such forward-looking statements.
22
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
4.1 /X/ Intercompany Pledge and Security Agreement, dated as
of April 15, 1999, between The Coleman Company, Inc.
and Sunbeam Corporation.
4.2 /X/ Intercompany Security Agreement dated as of April 15,
1999, between The Coleman Company, Inc. and Sunbeam
Corporation.
27 /X/ Financial Data Schedule, submitted electronically to
the Securities and Exchange Commission for
information only and only and not filed.
------------------
/X/ Filed herewith
</TABLE>
(b) Report on Form 8-K
No reports on Form 8-K were filed during the quarter ended March
31, 1999.
23
<PAGE>
THE COLEMAN COMPANY, INC. AND SUBSIDIARIES
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.
Date: May 19, 1999 By: /s/ Gwen C. Wisler
------------------------- -----------------------------------------
Gwen C. Wisler
Executive Vice President and
Chief Financial Officer
24
<PAGE>
INTERCOMPANY PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT"), dated as of April
15, 1999, between THE COLEMAN COMPANY, INC. (with its successors, the
"GRANTOR") and SUNBEAM CORPORATION (the "PARENT").
W I T N E S S E T H :
WHEREAS, the Parent and the Grantor are parties to the Credit
Agreement, dated as of March 30, 1998 (as amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"), among the Parent, the
subsidiary borrowers referred to therein (including the Grantor, the
"SUBSIDIARY BORROWERS"), the lenders party thereto (the "LENDERS"), Morgan
Stanley Senior Funding, Inc., as Syndication Agent, Bank of America National
Trust and Savings Association, as Documentation Agent, and First Union
National Bank, as administrative agent (the "ADMINISTRATIVE AGENT");
WHEREAS, in connection with the Credit Agreement, the Parent
executed a Parent Pledge and Security Agreement, dated as of March 30, 1998
(as amended, supplemented or otherwise modified from time to time, the
"PARENT PLEDGE AND SECURITY AGREEMENT"), between the Parent and the
Administrative Agent, pursuant to which, among other things, all Pledged
Instruments (as defined in the Parent Pledge and Security Agreement) in favor
of the Parent, including the Parent Intercompany Note (as hereafter defined),
are pledged to the Administrative Agent, for the benefit of the Lenders, to
secure the Secured Obligations (as defined in the Parent Pledge and Security
Agreement), including without limitation, the obligations of the Parent under
the Credit Agreement;
WHEREAS, the Grantor has executed an Amended and Restated
Subordinated Intercompany Note, dated April 6, 1998 (as amended, supplemented
or otherwise modified from time to time, the "COLEMAN INTERCOMPANY NOTE"), in
favor of the Parent;
WHEREAS, in order to secure its obligations under the Coleman
Intercompany Note, the Grantor has agreed to grant a continuing security
interest in and to the Collateral (as hereafter defined) to secure the
Secured Intercompany Obligations (as hereafter defined); and
WHEREAS, pursuant to this Agreement and the Parent Pledge and
Security Agreement under which the Coleman Intercompany Note has been pledged
to the Administrative Agent, the security interests in the Collateral granted
by the Grantor pursuant to this Agreement, including all of the right, title
and interest of the Parent, as Secured Party (as hereafter defined)
hereunder, have been pledged and collaterally assigned to the Administrative
Agent, for the
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benefit of the Lenders, to secure the Secured Obligations (as hereafter
defined) in accordance with the terms of the Parent Pledge and Security
Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS. Terms defined in the Coleman Intercompany
Note and not otherwise defined herein have, as used herein, the respective
meanings provided for therein. The following additional terms, as used
herein, have the following respective meanings:
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City or Charlotte, North
Carolina are authorized or required by law to remain closed.
"COLEMAN COLLATERAL DOCUMENTS" has the meaning set forth in the
Credit Agreement.
"COLEMAN MERGER EFFECTIVE DATE" has the meaning set forth in the
Credit Agreement.
"COLLATERAL" has the meaning assigned to such term in Section 3(A).
"DIRECT DOMESTIC SUBSIDIARY" means a Direct Subsidiary organized
under the laws of the United States of America or a state thereof.
"DIRECT DOMESTIC SUBSIDIARY SHARES" means the shares of capital
stock, membership or limited liability company interests or other equity
interests of each Direct Domestic Subsidiary listed on Schedule I opposite
such Direct Domestic Subsidiary's name.
"DIRECT FOREIGN SUBSIDIARY" means a Direct Subsidiary organized
under the laws of any jurisdiction outside the United States.
"DIRECT FOREIGN SUBSIDIARY SHARES" means the shares of capital
stock, membership or limited liability company interest or other equity
interests of each Direct Foreign Subsidiary listed on Schedule II opposite
such Direct Foreign Subsidiary's name.
"DIRECT SUBSIDIARY" means a Subsidiary of the Grantor, the capital
stock or other equity interests of which is held directly by the Grantor.
"DIRECT SUBSIDIARY INTERCOMPANY AGREEMENT" means all instruments,
listed on Schedule I or Schedule II that are owned by the Grantor evidencing
Indebtedness owed to the Grantor by its Direct Subsidiaries.
"FOREIGN HOLDING COMPANY" means Direct Domestic Subsidiary of the
Grantor whose sole assets (exclusive of assets consisting of advances or
loans to Grantor or any of its
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Subsidiaries and assets with an aggregate book value not exceeding
$1,000,000) consist primarily of capital stock, membership or limited
liability interest or other equity interests of one or more Foreign
Subsidiaries or other Foreign Holding Companies.
"FOREIGN SUBSIDIARY" means any Subsidiary of the Grantor organized
under the laws of any jurisdiction outside the United States.
"INDEBTEDNESS" has the meaning set forth in the Credit Agreement.
"INDIRECT SUBSIDIARY" means a Subsidiary of the Grantor which is
not a Direct Subsidiary.
"INDIRECT SUBSIDIARY INTERCOMPANY AGREEMENTS" means all
instruments, other than Direct Subsidiary Intercompany Agreements, listed on
Schedule I or Schedule II that are owned by the Grantor evidencing
Indebtedness owed to the Grantor by its Indirect Subsidiaries.
"INVESTMENT PROPERTY" means all "investment property" as such term
is defined in Section 9-115 of the Uniform Commercial Code.
"INVESTMENTS" has the meaning set forth in the Credit Agreement.
"PLEDGED INSTRUMENTS" means (i) the Direct Subsidiary Intercompany
Agreement, (ii) the Indirect Subsidiary Intercompany Agreements, and (iii)
any instrument required to be pledged to the Administrative Agent pursuant to
Section 3(B), Section 3(C) or Section 3(D).
"PLEDGED SECURITIES" means the Pledged Instruments and the Pledged
Stock.
"PLEDGED STOCK" means (i) the Direct Domestic Subsidiary Shares
(other than with respect to any Foreign Holding Company), (ii) 66% of (A) the
Direct Domestic Subsidiary Shares of any Foreign Holding Company including,
without limitation, the Direct Domestic Subsidiary Shares of the Foreign
Holding Companies represented by the certificates identified with respect to
such companies on Schedule 1 hereto and (B) the Direct Foreign Subsidiary
Shares and (iii) any other capital stock, membership or limited liability
interest or other equity interests required to be pledged to the Secured
Party pursuant to Section 3(B) and Section 3(C).
"SECURED INTERCOMPANY OBLIGATIONS" means the obligations of the
Grantor to the Parent secured under this Agreement, including without
limitation, (i) all principal of and interest (including without limitation,
any interest which accrues after or would accrue but for the commencement of
any case, proceeding or other action relating to the bankruptcy, insolvency
or reorganization of the Grantor, whether or not allowed or allowable as a
claim in any such proceeding) on the Coleman Intercompany Note, (ii) all
other amounts payable by the Grantor under the Coleman Intercompany Note and
(iii) any renewals or extensions of any of the foregoing.
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"SECURED OBLIGATIONS" means, collectively, the Secured Obligations
under and as defined in the Parent Pledge and Security Agreement.
"SECURED OBLIGATIONS REPAYMENT DATE" means the date on which all of
the following shall have occurred: (A) the payment in full of the Secured
Obligations, (B) the termination of the Commitments under and as defined in
the Credit Agreement and (C) the expiration or termination of all Letters of
Credit issued pursuant to and as defined in the Credit Agreement.
"SECURED PARTY" means the Parent; PROVIDED that until the Secured
Obligations Repayment Date the Security Interests and the Secured Party's
powers, rights, remedies, benefits, protections, authority and functions of
the Secured Party have been collaterally assigned by the Parent to the
Administrative Agent to the extent set forth in Section 13(B) hereof and the
Parent Pledge and Security Agreement.
"SECURITY INTERESTS" means the security interests in the Collateral
granted hereunder securing the Secured Intercompany Obligations.
"SUNBEAM (CANADA)" means Sunbeam Corporation (Canada) Limited.
"UNIFORM COMMERCIAL CODE": the Uniform Commercial Code as in
effect from time to time in the State of New York.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the Uniform Commercial
Code shall have the meanings therein stated.
Section 2. REPRESENTATIONS AND WARRANTIES. The Grantor represents
and warrants as follows:
(A) TITLE TO PLEDGED SECURITIES. The Grantor owns all of the Pledged
Securities, free and clear of any Liens other than the Security Interests.
The Pledged Stock includes (i) all of the issued and outstanding capital
stock of each Direct Domestic Subsidiary (other than any Foreign Holding
Company), (ii) 66% of (x) the issued and outstanding stock of each Direct
Foreign Subsidiary and (y) the issued and outstanding capital stock,
membership or limited liability company interest or other equity interests
of each Foreign Holding Company and (iii) 23% of the issued and outstanding
capital stock of Sunbeam (Canada). The Pledged Instruments include all
instruments owned by the Grantor evidencing Indebtedness owed to it by the
Parent or any of its Subsidiaries (other than any Foreign Holding Company
or Foreign Subsidiary). All of the Pledged Stock has been duly authorized
and validly issued, and is fully paid and non-assessable, and is subject to
no options to purchase or similar rights of any Person. The Grantor is not
and will not become a party to or otherwise become bound by any agreement,
other than this Agreement and the Coleman Collateral Documents, which
restricts in any manner the rights of any present or future holder of any
of the Pledged Securities with respect thereto.
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(B) VALIDITY, PERFECTION AND PRIORITY OF SECURITY INTERESTS. Upon
the delivery of the Pledged Instruments and certificates representing the
Pledged Stock to the Secured Party in accordance with Section 4 hereof, and
the filing of UCC financing statements with the collateral description in
the form specified in Exhibit A in the appropriate filing office in the
jurisdiction specified on Schedule III, the Secured Party will have valid
and perfected security interests in the Collateral subject to no prior Lien
other than (i) Permitted Liens under and as defined in the Credit Agreement
and (ii) on and after the Coleman Merger Effective Date, the Liens in favor
of the Administrative Agent under the Coleman Collateral Documents. Except
for the filing of the UCC financing statements described in the immediately
preceding sentence, no registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of this Agreement or necessary for the validity or
enforceability hereof or for the perfection or enforcement of the Security
Interests. Neither the Grantor nor any of its Subsidiaries has performed
or will perform any acts which might prevent the Secured Party from
enforcing any of the terms and conditions of this Agreement or which would
limit the Secured Party in any such enforcement other than the execution
and delivery of the Coleman Collateral Documents. Other than financing
statements or other similar or equivalent documents or instruments with
respect to the Security Interests, no financing statement, mortgage,
security agreement or similar or equivalent document or instrument covering
all or any part of the Collateral is on file or of record in any
jurisdiction in which such filing or recording would be effective to
perfect a Lien on such Collateral. No Collateral is in the possession of
any Person (other than the Grantor) asserting any claim thereto or security
interest therein, except that (x) the Secured Party or the Administrative
Agent as its designee may have possession of Collateral as contemplated
hereby and (y) on and after the Coleman Merger Effective Date, the
Administrative Agent also may have possession of Collateral in its own
right as contemplated by the Coleman Collateral Documents.
(C) UCC FILING LOCATIONS. The chief executive office of the Grantor
is located at its address set forth on the signature pages hereto. The
State of incorporation of the Grantor is the State of Delaware. Under the
Uniform Commercial Code as in effect in the State in which such office is
located, no local filing is required to perfect a security interest in
collateral consisting of accounts, Investment Property or general
intangibles.
(D) PLEDGED INSTRUMENTS. Each Pledged Instrument and each document
and instrument that secures or guarantees payment of such Pledged
Instrument constitutes the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law. As
of the date of the grant of the Security Interests in any Pledged
Instrument, such Pledged Instrument was not subject to any right of
counterclaim or offset whatsoever.
Section 3. THE SECURITY INTERESTS. In order to secure the full
and punctual payment of the Secured Intercompany Obligations in accordance
with the terms thereof, and to
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secure the payment and performance of all the obligations of the Grantor
hereunder and under the Coleman Intercompany Loan Documents:
(A) The Grantor hereby assigns and pledges to the Parent, as Secured
Party, and grants to the Parent, as Secured Party, security interests in
all of the following property of the Grantor (collectively, the
"COLLATERAL"):
(1) the Pledged Securities, and all organizational documents,
together with all of its rights and privileges thereunder, with
respect to the Pledged Securities, and all income and profits thereon,
and all interest, dividends and other payments and distributions with
respect thereto;
(2) all Indebtedness now or hereafter owed to the Grantor by the
Parent or any of its Subsidiaries (whether or not evidenced by
instruments (as defined in the Uniform Commercial Code));
(3) all Investments made by the Grantor in any of its
Subsidiaries;
(4) all Investment Property; and
(5) all proceeds of all or any of the collateral described in
clauses (1) through (4) hereof, including without limitation, all
dividends or other income from the Investment Property or the Pledged
Securities, collections thereon or distributions or payments with
respect thereto, and all collateral security and guarantees given by
any person with respect to all or any of the collateral described in
clauses (1) through (4) hereof.
Contemporaneously with the execution and delivery hereof, the Grantor is
delivering the Direct Subsidiary Intercompany Agreement, the Indirect
Subsidiary Intercompany Agreements and certificates representing the Direct
Domestic Subsidiary Shares and the Direct Foreign Subsidiary Shares in pledge
hereunder.
(B) In the event that at any time any Person becomes a Direct
Domestic Subsidiary, or any Direct Domestic Subsidiary issues any
additional or substitute shares of capital stock of any class, any
membership or limited liability company interest or any other equity
interests or any substitute note, or instrument evidencing any other
Indebtedness to the Grantor, or the Grantor makes any other Investment in
any Direct Domestic Subsidiary, the Grantor will immediately pledge and
deposit with the Secured Party certificates representing all such shares,
any membership or limited liability company interests or other equity
interests and such note or an instrument evidencing such other Indebtedness
or other investment as additional security for the Secured Intercompany
Obligations. All such shares, interests, notes and instruments constitute
Pledged Securities and are subject to all provisions of this Agreement.
(C) In the event that at any time any Person becomes a Direct Foreign
Subsidiary, or any Direct Foreign Subsidiary issues any additional or
substitute shares of
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capital stock of any class, any membership or limited liability company
interest or any other equity interests to the Grantor, the Grantor will
immediately pledge and deposit with the Secured Party certificates
representing additional shares, membership or limited liability company
interests or equity interests sufficient to cause the Secured Party to
have a security interest in 66% (but not more than 66%) of all the
outstanding capital stock of, membership or limited liability company
interests or other equity interests in, such Direct Foreign Subsidiary as
additional security for the Secured Intercompany Obligations. All such
shares and interests constitute Pledged Securities and are subject to all
provisions of this Agreement.
(D) In the event that at any time the Parent or any Indirect
Subsidiary issues any substitute note or instrument evidencing any other
Indebtedness to the Grantor, the Grantor will immediately pledge and
deposit with the Secured Party such note or an instrument evidencing such
other Indebtedness as additional security for the Secured Intercompany
Obligations. All such notes and instruments constitute Pledged Securities
and are subject to all provisions of this Agreement.
(E) The Security Interests are granted as security only and shall not
subject the Secured Party to, or transfer or in any way affect or modify,
any obligation or liability of the Grantor or any of its Direct
Subsidiaries or Indirect Subsidiaries with respect to any of the Collateral
or any transaction in connection therewith.
(F) Notwithstanding anything to the contrary herein, Grantor shall
not be required to pledge (i) any capital stock, membership or limited
liability interest or other equity interests issued by any Foreign
Subsidiary or Foreign Holding Company if the aggregate portion of capital
stock, membership or limited liability interest or other equity interests
of such Person that is Pledged Stock would (x) in the case of Sunbeam
(Canada), exceed 66% of the outstanding capital stock, membership or
limited liability interest or other equity interests of Sunbeam (Canada)
when taken together with the percentage of the outstanding capital stock,
membership or limited liability interest or other equity interests of
Sunbeam (Canada) pledged to the Administrative Agent under the Pledge and
Security Agreements (as defined in the Credit Agreement) or (y) in the case
of any other Foreign Subsidiary or Foreign Holding Company, exceed 66% of
the outstanding capital stock, membership or limited liability interest or
other equity interests of such Person or (ii) any Direct Subsidiary
Intercompany Agreement, Indirect Subsidiary Intercompany Agreement or
instrument owned by the Grantor evidencing Indebtedness owed to the Grantor
by any Foreign Subsidiary or Foreign Holding Company.
Section 4. DELIVERY OF PLEDGED SECURITIES. All Pledged
Instruments shall be delivered to the Parent by the Grantor pursuant hereto
indorsed to the order of the Secured Party, and accompanied by any required
transfer tax stamps, all in form and substance satisfactory to the Secured
Party. All certificates representing the Pledged Stock delivered to the
Parent by the Grantor pursuant hereto shall be in suitable form for transfer
by delivery, or shall be accompanied by duly executed instruments of transfer
or assignment in blank, with signatures appropriately guaranteed, and
accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Parent. It is understood and agreed that, upon its
receipt thereof, the
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Parent will immediately deliver to the Administrative Agent in accordance
with Section 13(A) hereof all certificates representing such Pledged Stock in
suitable form for transfer by delivery, or accompanied by duly executed
instruments of transfer or assignment in blank, and all Pledged Instruments
indorsed to the order of the Administrative Agent or in blank.
Section 5. FURTHER ASSURANCES.
(A) The Grantor agrees that it will from time to time, at its expense
and in such manner and form as the Secured Party may require, execute,
deliver, file and record any financing statement, specific assignment or
other paper and take any other action that may be necessary or desirable,
or that the Secured Party may request, in order to create, preserve,
perfect, confirm or validate any Security Interest or to enable the Secured
Party to exercise and enforce any of its rights, powers or remedies
hereunder with respect to any of the Collateral (including without
limitation, in the case of Investment Property, taking any actions
reasonably deemed necessary to enable the Secured Party to obtain "control"
(within the meaning of the applicable Uniform Commercial Code) with respect
thereto). The Grantor hereby authorizes the Secured Party to execute and
file, to the extent not prohibited by applicable law, in the name of the
Grantor or otherwise, Uniform Commercial Code financing statements (which
may be carbon, photographic, photostatic or other reproductions of this
Agreement or of a financing statement relating to this Agreement) which the
Secured Party in its sole discretion may deem necessary or appropriate to
further perfect the Security Interests.
(B) The Grantor agrees that it will not change (i) its name, identity
or corporate structure in any manner unless it shall have given the Secured
Party not less than 10 days' prior notice thereof or (ii) the location of
its chief executive office unless it shall have given the Secured Party not
less than 30 days' prior notice thereof.
Section 6. RECORD OWNERSHIP OF PLEDGED STOCK. Upon the occurrence
and during the continuance of any Default, the Secured Party may at any time
or from time to time, in its sole discretion, cause any or all of the Pledged
Stock to be transferred of record into the name of the Secured Party or its
nominee. The Grantor will promptly give to the Secured Party copies of any
notices or other communications received by it with respect to Pledged Stock
registered in the name of the Grantor and the Secured Party will promptly
give to the Grantor copies of any notices and communications received by the
Secured Party with respect to Pledged Stock registered in the name of the
Secured Party or its nominee.
Section 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL. The
Secured Party shall have the right to receive and, during the continuance of
any Default, to retain as Collateral hereunder all dividends, interest and
other payments and distributions made upon or with respect to the Collateral
and the Grantor shall take all such action as the Secured Party may deem
necessary or appropriate to give effect to such right. All such dividends,
interest and other payments and distributions which are received by the
Grantor shall be received in trust for the benefit of the Secured Party and,
if the Secured Party so directs during the continuance of a Default, shall be
segregated from other funds of the Grantor and shall, forthwith upon demand
by the Secured Party during the continuance of a Default, be paid over to the
Secured Party as
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Collateral in the same form as received (with any necessary endorsement).
After all Defaults have been cured, the Secured Party's right to retain
dividends, interest and other payments and distributions under this Section 7
shall cease and the Secured Party shall pay over to the Grantor any such
Collateral retained by it during the continuance of a Default.
Section 8. RIGHT TO VOTE PLEDGED STOCK. Unless a Default shall
have occurred and be continuing, the Grantor shall have the right, from time
to time, to vote and to give consents, ratifications and waivers with respect
to the Pledged Stock and the Investment Property, and the Secured Party
shall, upon receiving a written request from the Grantor accompanied by a
certificate signed by its principal financial officer stating that no Default
has occurred and is continuing, deliver to the Grantor or as specified in
such request such proxies, powers of attorney, consents, ratifications and
waivers in respect of any of the Pledged Stock and the Investment Property
which is registered in the name of the Secured Party or its nominee as shall
be specified in such request and be in form and substance satisfactory to the
Secured Party.
If a Default shall have occurred and be continuing, the Secured
Party shall have the right, to the extent not prohibited by applicable law,
to vote and to give consents, ratifications and waivers, and take any other
action with respect to any or all of the Pledged Stock with the same force
and effect as if the Secured Party were the absolute and sole owner thereof
and the Grantor shall take all such action as may be necessary or appropriate
to give effect to such right.
Section 9. GENERAL AUTHORITY. The Grantor hereby irrevocably
appoints the Secured Party its true and lawful attorney, with full power of
substitution, in the name of the Grantor, the Secured Party or otherwise,
for the sole use and benefit of the Secured Party, but at the expense of the
Grantor, to the extent not prohibited by applicable law, to exercise, at any
time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of
the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually as if the
Secured Party were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
PROVIDED that the Secured Party shall give the Grantor not less than ten
days' prior notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. Such notice constitutes "REASONABLE
NOTIFICATION" within the meaning of Section 9-504(3) of the Uniform
Commercial Code. The Grantor hereby ratifies and
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confirms all that the Secured Party, as said attorney, shall do or cause to
be done by virtue of this Section 9 and the other provisions of this
Agreement. All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and shall be irrevocable until the
Secured Intercompany Obligations are paid in full.
Section 10. REMEDIES UPON EVENT OF DEFAULT. If any Event of
Default shall have occurred and be continuing, the Secured Party may exercise
all the rights of a secured party under the Uniform Commercial Code (whether
or not in effect in the jurisdiction where such rights are exercised) and, in
addition, the Secured Party may, without being required to give any notice,
except as herein provided or as may be required by mandatory provisions of
law, (i) apply the cash, if any, then held by it as Collateral and (ii) if
there shall be no such cash or if such cash shall be insufficient to pay all
the Secured Intercompany Obligations in full, sell the Collateral or any part
thereof at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at
such price or prices as the Secured Party may deem satisfactory. Any Lender
or Sunbeam Entity may be the purchaser of any or all of the Collateral so
sold at any public sale (or, if the Collateral is of a type customarily sold
in a recognized market or is of a type which is the subject of widely
distributed standard price quotations, at any private sale). The Secured
Party is authorized, in connection with any such sale, if it deems it
advisable so to do, (i) to restrict the prospective bidders on or purchasers
of any of the Pledged Securities to a limited number of sophisticated
investors who will represent and agree that they are purchasing for their own
account for investment and not with a view to the distribution or sale of any
of such Pledged Securities, (ii) to cause to be placed on certificates for
any or all of the Pledged Securities or on any other securities pledged
hereunder a legend to the effect that such security has not been registered
under the Securities Act of 1933 and may not be disposed of in violation of
the provisions of said Act, and (iii) to impose such other limitations or
conditions in connection with any such sale as the Secured Party deems
necessary or advisable in order to comply with said Act or any other law. The
Grantor will execute and deliver such documents and take such other action as
the Secured Party deems necessary or advisable in order that any such sale
may be made in compliance with law. Upon any such sale the Secured Party
shall have the right to deliver, assign and transfer to the purchaser thereof
the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Grantor which may be
waived, and the Grantor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted. The notice (if any) of such
sale shall (1) in the case of a public sale, state the time and place fixed
for such sale, (2) in the case of a sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof so being
sold, will first be offered for sale at such board or exchange, and (3) in
the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Secured Party may
fix in the notice of such sale. At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels, as the Secured Party may
determine. The Secured Party shall not be obligated to make any such sale
pursuant to any such notice. The Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the same
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may be so adjourned. In the case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Secured Party until the selling price is paid by the
purchaser thereof, but the Secured Party shall not incur any liability in the
case of the failure of such purchaser to take up and pay for the Collateral
so sold and, in the case of any such failure, such Collateral may again be
sold upon like notice. The Secured Party, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
Section 11. EXPENSES. The Grantor agrees that it will forthwith
upon demand pay to the Secured Party:
(i) the amount of any taxes which the Secured Party may have been
required to pay by reason of the Security Interests or to free any of the
Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses, including the
fees and disbursements of counsel and of any other experts, which the
Secured Party may incur in connection with (w) the administration or
enforcement of this Agreement, including such expenses as are incurred to
preserve the value of the Collateral and the validity, perfection, rank and
value of any Security Interest, (x) the collection, sale or other
disposition of any of the Collateral, (y) the exercise by the Secured Party
of any of the rights conferred upon it hereunder or (z) any Default or
Event of Default.
Any such amount not paid on demand shall bear interest at the rate applicable
to the Coleman Intercompany Note plus 2% and shall be an additional Secured
Intercompany Obligation hereunder.
Section 12. APPLICATION OF PROCEEDS. Upon the occurrence and
during the continuance of an Event of Default, the proceeds of any sale of,
or other realization upon, all or any part of the Collateral and any cash
held shall be applied by the Secured Party in the following order of
priorities:
FIRST, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Secured
Party, and all expenses, liabilities and advances incurred or made by
the Secured Party in connection therewith, and any other unreimbursed
expenses for which the Secured Party is to be reimbursed pursuant to
Section 11 hereof;
SECOND, to the payment of unpaid principal (including all capitalized
interest) of the Secured Intercompany Obligations in accordance with the
provisions of the Coleman Intercompany Note;
THIRD, to the payment of accrued but unpaid interest on the Secured
Intercompany Obligations in accordance with the provisions of the Coleman
Intercompany Note;
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FOURTH, to the ratable payment of all other Secured Intercompany
Obligations, until all Secured Intercompany Obligations shall have been
paid in full; and
FINALLY, to payment to the Grantor or its successors or assigns, or as
a court of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
The Secured Party may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof.
Section 13. APPOINTMENT OF ADMINISTRATIVE AGENT AS BAILEE;
ASSIGNMENT TO ADMINISTRATIVE AGENT; ACKNOWLEDGMENT OF GRANTOR.
(A) In order to further perfect and protect the security
interests granted to the Administrative Agent under the Parent Pledge and
Security Agreement, including the Parent's pledge thereunder of the Security
Interests, the Parent hereby authorizes and appoints the Administrative Agent
to hold on the Parent's behalf and as its agent all Collateral granted
hereunder for purposes of possession and control under the Uniform Commercial
Code or other applicable law. The Administrative Agent, for itself and its
successors, hereby accepts such authorization and appointment and the Parent
hereby releases the Administrative Agent from any liability whatsoever (other
than liability resulting from the Administrative Agent's willful misconduct
or gross negligence) in connection with such authorization and appointment.
This authorization and appointment are a power coupled with an interest and
are irrevocable. It is understood and agreed that the Administrative Agent
may also hold collateral for its own benefit.
(B) Effective immediately following the grant of the Security
Interests in the Collateral pursuant to Section 3 hereof and the foregoing
authorization and appointment of the Administrative Agent as its nominee and
agent, and as more fully provided in the Parent Pledge and Security
Agreement, the Parent pledges and collaterally assigns, until the Secured
Obligations Repayment Date, to the Administrative Agent all of its right,
title and interest as the Secured Party hereunder, including, without
limitation, all of the powers, rights, remedies, benefits, protections,
authority and functions (but not the obligations) of the Secured Party
hereunder and the Administrative Agent, for itself and its successors, hereby
accepts such pledge and collateral assignment. The foregoing pledge and
collateral assignment are powers coupled with an interest and shall be
irrevocable until the Secured Obligations Repayment Date. In furtherance of
such pledge and assignment, the Parent will not exercise any of the rights or
remedies under this Agreement without the prior written consent of the
Administrative Agent and will exercise any of the powers, rights, remedies,
benefits, protections, authority and functions of the Secured Party under
this Agreement as directed to do so by the Administrative Agent; PROVIDED
that after the occurrence and during the continuance of a Default or an Event
of Default, all such powers, rights, remedies, benefits, protections,
authority and functions shall be for the sole use and benefit of, and shall
be exercised solely by, the Administrative Agent for the benefit of the
Lenders and any conflict between the interests of the Lenders and the
interests of the Parent hereby is waived by the Parent.
(C) The Grantor hereby acknowledges (i) receipt of a copy of
the Parent Pledge and Security Agreement; (ii) that pursuant to the Parent
Pledge and Security Agreement
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and this Agreement, the Parent has assigned to the Administrative Agent, as
collateral security for the Secured Obligations, all of its right, title and
interest in (A) the Secured Intercompany Obligations, (B) the Coleman
Intercompany Note and this Agreement and (C) the Security Interests and any
other collateral for the Secured Intercompany Obligations now or hereafter
granted by the Grantor to or for the benefit of the Parent under this
Agreement or any other Coleman Intercompany Loan Document; and (iii) that
pursuant to this Agreement and the Parent Pledge and Security Agreement, the
Administrative Agent is authorized, in accordance with the terms of this
Agreement and the Parent Pledge and Security Agreement, to exercise the
powers, rights, remedies, benefits, protections, authority and functions of
the Secured Party against the Grantor under this Agreement and otherwise in
respect of the Secured Intercompany Obligations.
(D) Notwithstanding anything to the contrary contained in
this Agreement, the Grantor hereby consents to the foregoing and
independently acknowledges and agrees, for the direct benefit of the
Administrative Agent and the Lenders, until the Secured Obligations Repayment
Date, as follows:
(i) the representations and warranties made by the Grantor in this
Agreement shall inure to the benefit of the Administrative Agent and the
Lenders and each reference in such representations and warranties to the
Secured Party shall be deemed to be references to the Administrative Agent
for such purpose;
(ii) upon the occurrence and continuance of an Event of Default, the
Administrative Agent as the assignee and delegee of the Parent and as the
Secured Party hereunder shall have the exclusive right to enforce all of
the covenants and agreements made by the Grantor under this Agreement and
to exercise all of the powers, rights, remedies, benefits, protections,
authority and functions of the Secured Party hereunder;
(iii) without the prior written consent of the Administrative Agent,
the Grantor shall not enter into any amendment, waiver or other
modification of the Secured Intercompany Obligations, the Coleman
Intercompany Note or the Coleman
Intercompany Loan Documents;
(iv) the Grantor shall comply with all payment instructions delivered
by the Administrative Agent with respect to the Secured Intercompany
Obligations, if such instructions are accompanied by a written
representation that a Default or an Event of Default has occurred and is
continuing; and
(v) all of the indemnification, expense reimbursement,
authorizations and exculpatory provisions contained in this Agreement in
favor of the Secured Party shall also inure to the benefit of the
Administrative Agent.
(E) In accordance with Section 5(A), and in furtherance of the
Grantor's acknowledgments and agreements contained in Section 13(C) and Section
13(D), the Grantor and the Secured Party shall as promptly as practicable after
the date hereof execute and deliver to the Administrative Agent an amendment to
this Agreement, and such other additional documents and instruments (and cause
to be delivered in connection therewith an opinion of counsel), in
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each case as reasonably requested by, and in form and substance reasonably
satisfactory to, the Administrative Agent, pursuant to which the Grantor
shall grant directly to the Administrative Agent, for the benefit of the
Lenders, security interests in the Collateral to secure the Secured
Obligations, PROVIDED that the amount of the Secured Obligations so secured
(and any recourse to the Collateral, whether to collect the Secured
Obligations or the Secured Intercompany Obligations) shall in no event exceed
the amount of the Secured Intercompany Obligations outstanding from time to
time.
Section 14. EXCULPATORY PROVISIONS
(A) The Secured Party is irrevocably authorized to take all such
action as is provided to be taken by it as Secured Party hereunder and all other
action reasonably incidental thereto. As to any matters not expressly provided
for herein (including, without limitation, the timing and methods of realization
upon the Collateral) the Secured Party shall act or refrain from acting in
accordance with its discretion.
(B) Beyond the exercise of reasonable care in the custody
thereof, the Secured Party shall have no duty as to any Collateral in its
possession or control or in the possession or control of any agent or bailee
or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto. The Secured Party shall be
deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and shall not
be liable or responsible for any loss or damage to any of the Collateral, or
for any diminution in the value thereof, by reason of the act or omission of
any warehouseman, carrier, forwarding agency, consignee or other agent or
bailee selected by the Secured Party in good faith. Neither the Secured
Party nor any of its officers, directors, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for
any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Grantor or any other Person
or to take any other action whatsoever with regard to the Collateral or any
part thereof. The powers conferred on the Secured Party hereunder are solely
to protect the Secured Party's interests in the Collateral and shall not
impose any duty upon the Secured Party to exercise any such powers. The
Secured Party shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers, and neither it nor any of its
officers, directors, employees or agents shall be responsible to the Grantor
for any act or failure to act hereunder.
Section 15. TERMINATION OF SECURITY INTERESTS; RELEASE OF COLLATERAL.
(A) Upon the repayment in full of all Secured Intercompany
Obligations, the Security Interests shall terminate and all rights to the
Collateral shall revert to the Grantor. Prior to such termination of the
Security Interests and the Secured Obligations Repayment Date, the Secured
Party may release any of the Collateral with the prior written consent of
the Lenders.
(B) Unless an Event of Default shall have occurred and be continuing,
the Secured Party shall upon an Asset Sale or other disposition permitted
under the Credit
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Agreement release the portion of the Collateral so sold (but not any
proceeds of such sale).
(C) Upon any termination of the Security Interests or release of
Collateral in accordance with this Section, the Secured Party will, at the
expense of the Grantor, execute and deliver to the Grantor such documents
as the Grantor shall reasonably request to evidence the termination of the
Security Interests or the release of such Collateral, as the case may be.
Section 16. NOTICES. All notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopy to the address and telecopy number of such party and the
Administrative Agent set forth on the signature pages hereof. Each party
shall provide copies of all such notices and other communications in a like
manner to the Administrative Agent. Any party hereto and the Administrative
Agent may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices
and other communications given to any party hereto in accordance with the
provisions of this Agreement shall be deemed to have been given on the date
of receipt.
Section 17. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the
part of the Secured Party to exercise, and no delay in exercising and no
course of dealing with respect to, any right under this Agreement or any
other Coleman Intercompany Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise by the Secured Party of any right
under this Agreement or any other Coleman Intercompany Loan Document preclude
any other or further exercise thereof or the exercise of any other right.
The rights in this Agreement and the other Coleman Intercompany Loan
Documents are cumulative and are not exclusive of any other remedies provided
by law.
Section 18. SUCCESSORS AND ASSIGNS. This Agreement is for the
benefit of the Secured Party and its successors and assigns (including the
Administrative Agent for the benefit of the Lenders pursuant to the Parent
Pledge and Security Agreement and Section 13(B) hereof). This Agreement
shall be binding on the Grantor and its successors and assigns.
Section 19. CHANGES IN WRITING. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing, signed by the Grantor, the Parent and the Administrative
Agent.
Section 20. NEW YORK LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, except as
otherwise required by mandatory provisions of law and except to the extent
that remedies provided by the laws of any jurisdiction other than New York
are governed by the laws of such jurisdiction.
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Section 21. SEVERABILITY. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Parent,
the Administrative Agent and the Lenders in order to carry out the intentions
of the parties hereto as nearly as may be possible; and (ii) the invalidity
or unenforceability of any provision hereof in any jurisdiction shall not
affect the validity or enforceability of such provision in any other
jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
THE COLEMAN COMPANY, INC.
By Ronald R. Richter
-----------------
Name: Ronald R. Richter
Title: Vice President & Treasurer
Address for Notices:
2381 Executive Center Drive
Boca Raton, Florida 33431
Attention: Ms. Gwen Wisler
telecopy: (561) 912-4303
SUNBEAM CORPORATION
By Bobby Jenkins
-------------
Name: Bobby G. Jenkins
Title: Executive Vice President
Address for Notices:
2381 Executive Center Drive
Boca Raton, Florida 33431
Attention: Mr. Bobby Jenkins
telecopy: (561) 912-4263
<PAGE>
ACKNOWLEDGED AND ACCEPTED:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By T. M. Molitor
-------------
Name: T. M. Molitor
Title: Senior Vice President
Address for Notices:
One First Union Center
301 South College Street, DC-5
Charlotte, North Carolina 28288
Attention: Thomas M. Molitor
telecopy: (704) 374-3300
<PAGE>
INTERCOMPANY SECURITY AGREEMENT
SECURITY AGREEMENT (this "AGREEMENT"), dated as of April 15, 1999,
between THE COLEMAN COMPANY, INC. (with its successors, the "GRANTOR") and
SUNBEAM CORPORATION (the "PARENT").
W I T N E S S E T H :
WHEREAS, the Parent and the Grantor are parties to the Credit
Agreement, dated as of March 30, 1998 (as amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT"), among the Parent, the
subsidiary borrowers referred to therein (including the Grantor, the
"SUBSIDIARY BORROWERS"), the lenders party thereto (the "LENDERS"), Morgan
Stanley Senior Funding, Inc., as Syndication Agent, Bank of America National
Trust and Savings Association, as Documentation Agent, and First Union
National Bank, as administrative agent (the "ADMINISTRATIVE AGENT");
WHEREAS, in connection with the Credit Agreement, the Parent
executed a Parent Pledge and Security Agreement, dated as of March 30, 1998
(as amended, supplemented or otherwise modified from time to time, the
"PARENT PLEDGE AND SECURITY AGREEMENT"), between the Parent and the
Administrative Agent, pursuant to which, among other things, all Pledged
Instruments (as defined in the Parent Pledge and Security Agreement) in favor
of the Parent, including the Coleman Intercompany Note (as hereafter
defined), are pledged to the Administrative Agent, for the benefit of the
Lenders, to secure the Secured Obligations (as defined in the Parent Pledge
and Security Agreement), including without limitation, the obligations of the
Parent under the Credit Agreement;
WHEREAS, the Grantor has executed an Amended and Restated
Subordinated Intercompany Note, dated April 6, 1998 (as amended, supplemented
or otherwise modified from time to time, the "COLEMAN INTERCOMPANY NOTE"), in
favor of the Parent;
WHEREAS, in order to secure its obligations under the Coleman
Intercompany Note, the Grantor has agreed to grant a continuing security
interest in and to the Collateral (as hereafter defined) to secure the
Secured Intercompany Obligations (as hereafter defined); and
WHEREAS, pursuant to this Agreement and the Parent Pledge and
Security Agreement under which the Coleman Intercompany Note has been pledged
to the Administrative Agent, the security interests in the Collateral granted
by the Grantor pursuant to this Agreement, including all of the right, title
and interest of the Parent, as Secured Party (as hereinafter defined)
hereunder, have been pledged and collaterally assigned to the Administrative
Agent, for the benefhereunder, have been pledged and collaterally assigned to
the Administrative Agent, for the benefit of the Lenders, to secure the
Secured Obligations (as hereafter defined) it of the Lenders, to secure the
Secured Obligations (as hereafter defined) in accordance with the terms of
the Parent Pledge and Security Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS. Terms defined in the Coleman Intercompany
Note and not otherwise defined herein have, as used herein, the respective
meanings provided for therein. The following additional terms, as used
herein, have the following respective meanings:
"ACCOUNTS" means all "ACCOUNTS" (as defined in the Uniform
Commercial Code) now owned or hereafter acquired by the Grantor, and shall
also mean and include all accounts receivable, contract rights, book debts,
notes, drafts and other obligations or indebtedness owing to the Grantor
arising from the sale, lease or exchange of goods or other property by it
and/or the performance of services by it (including, without limitation, any
such obligation which might be characterized as an account, contract right or
general intangible under the Uniform Commercial Code in effect in any
jurisdiction) and all of the Grantor's rights in, to and under all purchase
orders for goods, services or other property, and all of the Grantor's rights
to any goods, services or other property represented by any of the foregoing
(including returned or repossessed goods and unpaid sellers' rights of
rescission, replevin, reclamation and rights to stoppage in transit) and all
monies due to or to become due to the Grantor under all contracts for the
sale, lease or exchange of goods or other property and/or the performance of
services by it (whether or not yet earned by performance on the part of the
Grantor), in each case whether now in existence or hereafter arising or
acquired including, without limitation, the right to receive the proceeds of
said purchase orders and contracts and all collateral security and guarantees
of any kind given by any Person with respect to any of the foregoing.
"COLEMAN COLLATERAL DOCUMENTS" has the meaning set forth in the
Credit Agreement.
"COLEMAN MERGER EFFECTIVE DATE" has the meaning set forth in the
Credit Agreement.
"COLLATERAL" has the meaning set forth in Section 3.
"COPYRIGHT LICENSE" means any written agreement now or hereafter in
existence granting to the Grantor any right to publication as to which a
Copyright is in existence, including, without limitation, the material
license agreements described in Schedule 1 to Exhibit D hereto.
"COPYRIGHT SECURITY AGREEMENT" means the Copyright Security
Agreement executed and delivered by the Grantor in favor of the Parent,
substantially in the form of Exhibit D hereto, as the same may be amended
from time to time.
"COPYRIGHTS" means all the following: (i) all copyrights under the
laws of the United States or any other country, all registrations and
recordings thereof, and all applications for copyrights under the laws of the
United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Copyright
Office or in
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any similar office or agency of the United States or any other country or any
political subdivision thereof, including, without limitation, those
registered copyrights described in Schedule 1 to Exhibit E hereto, and (ii)
all extensions thereof.
"DOCUMENTS" means all "DOCUMENTS" (as defined in the Uniform
Commercial Code) or other receipts covering, evidencing or representing
goods, now owned or hereafter acquired by the Grantor.
"EQUIPMENT" means all "EQUIPMENT" (as defined in the Uniform
Commercial Code) now owned or hereafter acquired by the Grantor, including
without limitation all motor vehicles, trucks, trailers, railcars and barges,
and all accessions thereto.
"GENERAL INTANGIBLES" means all "general intangibles" (as defined
in the Uniform Commercial Code) now owned or hereafter acquired by the
Grantor, including, without limitation, (i) all obligations or indebtedness
owing to the Grantor (other than Accounts) from whatever source arising, (ii)
all Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks,
Trademark Licenses, rights in intellectual property, goodwill, trade names,
service marks, trade secrets, permits and licenses, (iii) all rights or
claims in respect of refunds for taxes paid and (iv) all rights in respect of
any pension plan or similar arrangement maintained for employees of an ERISA
Affiliate (as defined in the Credit Agreement).
"INSTRUMENTS" means all "INSTRUMENTS", "CHATTEL PAPER" or "LETTERS
OF CREDIT" (each as defined in the Uniform Commercial Code) evidencing,
representing, arising from or existing in respect of, relating to, securing
or otherwise supporting the payment of, any of the Accounts, including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances, now owned or hereafter acquired by the Grantor.
"INVENTORY" means all "INVENTORY" (as defined in the Uniform
Commercial Code), now owned or hereafter acquired by the Grantor, wherever
located, and shall also mean and include, without limitation, all raw
materials and other materials and supplies, work-in-process and finished
goods and any products made or processed therefrom and all substances, if
any, commingled therewith or added thereto.
"LIEN" has the meaning set forth in the Credit Agreement.
"PATENT LICENSE" means any written agreement now or hereafter in
existence granting to the Grantor any right to practice any invention on
which a Patent is in existence, including, without limitation, the material
license agreements described in Schedule 1 to Exhibit B hereto.
"PATENT SECURITY AGREEMENT" means the Patent Security Agreement
executed and delivered by the Grantor in favor of the Parent, substantially
in the form of Exhibit B hereto, as the same may be amended from time to time.
"PATENTS" means all of the following: (i) all letters patent of the
United States or any other country, all registrations and recordings thereof,
and all applications for letters patent
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<PAGE>
of the United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States or
any other country or any political subdivision thereof, including, without
limitation, those described in Schedule 1 to Exhibit C hereto, and (ii) all
reissues, continuations, continuations-in-part or extensions thereof.
"PERFECTION CERTIFICATE" means a certificate substantially in the
form of Exhibit A, completed and supplemented with the schedules and
attachments contemplated thereby to the satisfaction of the Parent, and duly
executed by the chief legal officer of the Grantor.
"PROCEEDS" means all proceeds of, and all other profits, products,
rents or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing or other disposition of, or other
realization upon, collateral, including without limitation all claims of the
Grantor against third parties for loss of, damage to or destruction of, or
for proceeds payable under, or unearned premiums with respect to, policies of
insurance in respect of, any collateral, and any condemnation or requisition
payments with respect to any collateral, in each case whether now existing or
hereafter arising.
"SECURED INTERCOMPANY OBLIGATIONS" means the obligations of the
Grantor to the Parent secured under this Agreement, including without
limitation, (i) all principal of and interest (including, without limitation,
any interest which accrues after or would accrue but for the commencement of
any case, proceeding or other action relating to the bankruptcy, insolvency
or reorganization of the Grantor, whether or not allowed or allowable as a
claim in any such proceeding) on the Coleman Intercompany Note, (ii) all
other amounts payable by the Grantor under the Coleman Intercompany Note and
(iii) any renewals or extensions of any of the foregoing.
"SECURED OBLIGATIONS" means the Secured Obligations under and as
defined in the Parent Pledge and Security Agreement.
"SECURED OBLIGATIONS REPAYMENT DATE" means the date on which all of
the following shall have occurred: (A) the payment in full of the Secured
Obligations, (B) the termination of the Commitments under and as defined in
the Credit Agreement and (C) the expiration or termination of all Letters of
Credit issued pursuant to and as defined in the Credit Agreement.
"SECURED PARTY" means the Parent; PROVIDED that until the Secured
Obligations Repayment Date the Security Interests and the Secured Party's
power, rights, remedies, benefits, protections, authority and functions as
the Secured Party have been collaterally assigned by the Parent to the
Administrative Agent to the extent set forth in Section 8(b) hereof and the
Parent Pledge and Security Agreement.
"SECURITY INTERESTS" means the security interests in the Collateral
granted hereunder securing the Secured Intercompany Obligations.
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<PAGE>
"SUBSIDIARY BORROWER SECURITY AGREEMENT" means the Subsidiary
Borrower Security Agreement, dated as of February 12, 1999, between the
Grantor and the Administrative Agent, as the same may be amended from time to
time.
"TRADEMARK LICENSE" means any written agreement now or hereafter in
existence granting to the Grantor any right to use any Trademark, including,
without limitation, the material license agreements described in Schedule 1
to Exhibit D hereto.
"TRADEMARK SECURITY AGREEMENT" means the Trademark Security
Agreement executed and delivered by the Grantor in favor of the Parent,
substantially in the form of Exhibit C hereto, as the same may be amended
from time to time.
"TRADEMARKS" means all of the following: (i) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, other source or business
identifiers, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and recordings hereof, and
all applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof,
including, without limitation, those trademark registrations and applications
described in Schedule 1 to Exhibit C hereto, and (ii) all reissues,
extensions or renewals thereof.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in
effect from time to time in the State of New York; PROVIDED that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the Security Interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to
such perfection or effect of perfection or non-perfection.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the Uniform Commercial
Code shall have the meanings therein stated.
Section 2. REPRESENTATIONS AND WARRANTIES. The Grantor
represents and warrants as follows:
(a) The Grantor has good and marketable title to all of the
Collateral, free and clear of any Liens, other than (i) Permitted Liens
under and as defined in the Credit Agreement and (ii) on and after the
Coleman Merger Effective Date, the Liens in favor of the Administrative
Agent under the Coleman Collateral Documents. The Grantor has taken all
actions necessary under the Uniform Commercial Code to perfect its interest
in any Accounts purchased or otherwise acquired by it, as against its
assignors and creditors of its assignors.
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(b) The Grantor has not performed any acts which might prevent the
Secured Party from enforcing any of the terms and conditions of this
Agreement or which would limit the Secured Party in any such enforcement
other than the execution and delivery of the Subsidiary Borrower Security
Agreement and the Coleman Collateral Documents. Other than financing
statements or other similar or equivalent documents or instruments with
respect to (i) the Security Interests, (ii) the Liens granted to the
Administrative Agent under the Subsidiary Borrower Security Agreement,
(iii) Liens granted to a Subsidiary of the Parent in connection with the
Existing Receivables Program and (iv) on and after the Coleman Merger
Effective Date, the Liens in favor of the Administrative Agent under the
Coleman Collateral Documents, no financing statement, mortgage, security
agreement or similar or equivalent document or instrument covering all or
any part of the Collateral is on file or of record in any jurisdiction in
which such filing or recording would be effective to perfect a Lien on such
Collateral. No Collateral is in the possession of any Person (other than
the Grantor) asserting any claim thereto or security interest therein,
except that (x) the Secured Party or its designee may have possession of
Collateral as contemplated hereby and (y) on and after the Coleman Merger
Effective Date, the Administrative Agent also may have possession of
Collateral in its own right as contemplated by the Coleman Collateral
Documents.
(c) The information set forth in the Perfection Certificate delivered
to the Secured Party prior to the execution of this Agreement is correct
and complete. Not later than 60 days following the date of such delivery,
the Grantor shall furnish to the Secured Party file search reports from
each Uniform Commercial Code filing office set forth in Schedule 7 to its
Perfection Certificate confirming the filing information set forth in such
Schedule.
(d) The Security Interests constitute valid security interests under
applicable law securing the Secured Intercompany Obligations. When Uniform
Commercial Code financing statements with the collateral description in the
form specified in Exhibit B shall have been filed in the offices specified
in the Perfection Certificate, the Security Interests shall constitute
perfected security interests in the Collateral (except Inventory in
transit) to the extent that a security interest therein may be perfected by
filing pursuant to the Uniform Commercial Code, prior to all other Liens
and rights of others therein other than (i) Permitted Liens under and as
defined in the Credit Agreement and (ii) on and after the Coleman Merger
Effective Date, the Liens in favor of the Administrative Agent under the
Coleman Collateral Documents. With respect to the collateral granted to
the Administrative Agent under the Subsidiary Borrower Security Agreement,
the Security Interests granted under this Agreement on such collateral
shall constitute perfected second priority security interests. To the
extent that the federal patent and trademark laws are applicable to the
perfection of security interests in patents and trademarks, respectively,
when the Patent Security Agreement and the Trademark Security Agreement
have been filed with the United States Patent and Trademark Office within 3
months of the date hereof, the Security Interests shall constitute valid
and perfected security interests in all right, title and interest of the
Grantor in Patents and Trademarks which are the subject of issued U.S.
Patents or patent applications or U.S. federal trademark registrations or
applications, prior to all other Liens and rights of others
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therein except for (i) Permitted Encumbrances under and as defined in the
Credit Agreement and (ii) on and after the Coleman Merger Effective Date,
the Liens in favor of the Administrative Agent. When the Copyright
Security Agreement has been filed with the United States Copyright Office,
the Security Interests shall constitute valid and perfected security
interests in all right, title and interest of the Grantor in Copyrights
which are the subject of registrations in the United States Copyright
Office, prior to all other Liens and rights of others therein except for
(i) Permitted Encumbrances under and as defined in the Credit Agreement and
(ii) on and after the Coleman Merger Effective Date, the Liens in favor of
the Administrative Agent.
(e) The Inventory and Equipment are insured by insurance, with
financially sound and reputable insurance companies or through programs of
self-insurance (including levels of self-insured retention), in such
amounts and against such risks and, in the case of self-insurance, at such
levels and in such amounts (including without limitation comprehensive
general liability insurance and product liability insurance) as are
customarily maintained by companies engaged in the same or similar
businesses of the Grantor operating in the same or similar locations, which
insurance shall name the Secured Party as the loss payee for the proceeds
of any policy relating to such insurance covering damage to tangible
property of the Grantor.
(f) All Inventory manufactured by the Grantor has or will have been
produced in compliance with the applicable requirements of the Fair Labor
Standards Act, as amended.
Section 3. THE SECURITY INTERESTS. (a) In order to secure the full
and punctual payment of the Secured Intercompany Obligations in accordance with
the terms thereof, and to secure the payment and performance of all the
obligations of the Grantor hereunder and under the Coleman Intercompany Loan
Documents, the Grantor hereby assigns and pledges to the Parent, as Secured
Party, a continuing security interest in and to all of the following property of
the Grantor, whether now owned or existing or hereafter acquired or arising and
regardless of where located (all being collectively referred to as the
"COLLATERAL"):
(i) Accounts;
(ii) Inventory;
(iii) General Intangibles;
(iv) Documents;
(v) Instruments;
(vi) Equipment;
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(vii) All books and records (including, without limitation,
customer lists, credit files, computer programs, printouts and other
computer materials and records) of the Grantor pertaining to any of the
Collateral; and
(viii) All Proceeds of all or any of the Collateral described
in clauses 3(a)(i) through 3(a)(vii) hereof and all collateral security and
guarantees given by any Person with respect to all or any of the Collateral
described in clauses 3(a)(i) through 3(a)(vii) hereof.
(b) The Security Interests are granted as security only and shall not
subject the Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of the Grantor with respect to any of the Collateral or
any transaction in connection therewith.
(c) Notwithstanding the foregoing, the Collateral shall not include
any contracts or agreements, including without limitation, any Copyright
License, Patent License or Trademark License to the extent the inclusion thereof
would violate a prohibition on assignment that is effective under relevant law.
Section 4. FURTHER ASSURANCES; COVENANTS. (a) The Grantor will
not change (i) its name, identity or corporate structure in any manner unless
it shall have given the Secured Party not less than 10 days' prior notice
thereof and delivered an opinion of counsel with respect thereto in
accordance with Section 4(l); (ii) the location of its chief executive
office or chief place of business from a location described in its Perfection
Certificate to a location not described in its Perfection Certificate unless
it shall have given the Secured Party not less than 30 days' prior notice
thereof and delivered an opinion of counsel with respect thereto in
accordance with Section 4(l); or (iii) the locations where it keeps or holds
any Collateral (other than Inventory in transit) or any records relating
thereto from a location described in its Perfection Certificate to a location
not described in its Perfection Certificate unless it gives the Secured Party
notice within 10 days thereof and delivers an opinion of counsel with respect
thereto in accordance with Section 4(l). The Grantor shall not in any event
change the location of any Collateral if such change would cause the Security
Interests in such Collateral to lapse or cease to be perfected.
(b) The Grantor will, from time to time, at its expense, execute,
deliver, file and record any statement, assignment, instrument, document,
agreement or other paper and take any other action (including, without
limitation, any filings of financing or continuation statements under the
Uniform Commercial Code and any filings with the United States Patent and
Trademark Office or the United States Copyright Office) that from time to
time may be necessary or desirable, or that the Secured Party may request, in
order to create, preserve, perfect, confirm or validate the Security
Interests or to enable the Secured Party (including the Administrative Agent
as collateral assignee) to obtain the full benefits of this Agreement, or to
enable the Secured Party to exercise and enforce any of its rights, powers
and remedies hereunder with respect to any of the Collateral; PROVIDED that
with respect to foreign intellectual property, the Grantor shall only be
required to take such action as is reasonably requested by the Secured Party,
taking into account the value of the foreign intellectual property and the
expense associated with complying with the foregoing. To the extent
permitted by applicable law, the
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Grantor hereby authorizes the Secured Party to execute and file financing
statements or continuation statements without the Grantor's signature
appearing thereon. The Grantor agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement. The Grantor shall pay the
costs of, or incidental to, any recording or filing of any financing or
continuation statements concerning the Collateral.
(c) If any Collateral is at any time in the possession or control
of any warehouseman, bailee or any of the Grantor's agents or processors upon
the occurrence and during the continuance of an Event of Default and upon the
written request of the Secured Party, the Grantor shall notify such
warehouseman, bailee, agent or processor of the Security Interests created
hereby and to hold all such Collateral for the Secured Party's account
subject to the Secured Party's instructions.
(d) The Grantor shall keep full and accurate books and records
relating to the Collateral, and stamp or otherwise mark such books and
records in such manner as the Secured Party may reasonably require in order
to reflect the Security Interests.
(e) The Grantor will immediately deliver and pledge each
Instrument to the Secured Party, appropriately endorsed to the Secured Party,
PROVIDED that so long as no Event of Default shall have occurred and be
continuing, the Grantor may retain for collection in the ordinary course any
Instruments (other than checks and drafts constituting payments in respect of
Accounts, as to which the provisions of Section 4(f) shall apply) received by
it in the ordinary course of business and the Secured Party shall, promptly
upon request of the Grantor, make appropriate arrangements for making any
other Instrument pledged by the Grantor available to it for purposes of
presentation, collection or renewal (any such arrangement to be effected, to
the extent deemed appropriate to the Secured Party, against trust receipt or
like document).
(f) The Grantor shall use its best efforts to cause to be
collected from its account debtors, as and when due, any and all amounts
owing under or on account of each Account (including, without limitation,
Accounts which are delinquent, such Accounts to be collected in accordance
with lawful collection procedures) and shall apply forthwith upon receipt
thereof all such amounts as are so collected to the outstanding balance of
such Account. Subject to the rights of the Secured Party hereunder if an
Event of Default shall have occurred and be continuing, the Grantor may allow
in the ordinary course of business as adjustments to amounts owing under its
Accounts (1) an extension or renewal of the time or times of payment, or
settlement for less than the total unpaid balance, which the Grantor finds
appropriate in accordance with sound business judgment and (2) a refund or
credit due as a result of returned or damaged merchandise, all in accordance
with the Grantor's ordinary course of business consistent with its historical
collection practices. The costs and expenses (including, without limitation,
attorneys' fees) of collection, whether incurred by the Grantor or the
Secured Party, shall be borne by the Grantor.
(g) Upon the occurrence and during the continuance of any Event of
Default, upon request of the Secured Party, the Grantor will promptly notify
(and the Grantor hereby authorizes the Secured Party so to notify) each
account debtor in respect of any Account or Instrument that such Collateral
has been assigned to the Secured Party hereunder, and that any
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payments due or to become due in respect of such Collateral are to be made
directly to the Secured Party or its designee.
(h) The Grantor shall, (i) as soon as practicable after the date
hereof, in the case of any single piece of Equipment in excess of $250,000
now owned constituting goods in which a security interest is perfected by a
notation on the certificate of title or similar evidence of the ownership of
such goods, and (1) within 10 days of acquiring any other similar Equipment
(x) having a value in excess of $250,000 or (y) having a value in excess of
$100,000, if the aggregate of all such items owned by the Grantor at any time
is greater than $1,000,000, deliver to the Secured Party any and all
certificates of title, applications for title or similar evidence of
ownership of such Equipment and shall cause the Secured Party to be named as
lienholder on any such certificate of title or other evidence of ownership.
The Grantor shall promptly inform the Secured Party of any additions to or
deletions from the Equipment for any single piece of Equipment in excess of
$500,000 and shall not permit any such items to become a fixture to real
estate or an accession to other personal property.
(i) Without the prior written consent of the Secured Party, the
Grantor will not sell, lease, exchange, assign or otherwise dispose of, or
grant any option with respect to, any Collateral except that, subject to the
rights of the Secured Party hereunder if an Event of Default shall have
occurred and be continuing, the Grantor may (x) sell, lease or exchange
Inventory and surplus or worn-out Equipment in the ordinary course of
business and (y) consummate any Asset Sale or other disposition permitted by
the terms of the Credit Agreement.
(j) Within 10 days following the execution of this Agreement, the
Grantor will cause the Secured Party to be named as an insured party and loss
payee on each insurance policy covering risks relating to any of its
Inventory and Equipment. The Grantor will deliver to the Secured Party, upon
request of the Secured Party, the insurance policies for such insurance or
certificates of insurance evidencing such coverage. Each such insurance
policy shall include effective waivers by the insurer of all claims for
insurance premiums against the Secured Party or the Lenders, provide for
coverage to the Secured Party regardless of the breach by the Grantor of any
warranty or representation made therein, not be subject to co-insurance,
provide that upon the occurrence and during the continuation of an Event of
Default, all insurance proceeds in excess of $200,000 per claim shall be
adjusted with and payable to the Secured Party and provide that no
cancellation, termination or material modification thereof shall be effective
until at least 30 days after receipt by the Secured Party of notice thereof.
The Grantor hereby appoints the Secured Party as its attorney-in-fact to make
proof of loss, claim for insurance and adjustments with insurers, and to
execute or endorse all documents, checks or drafts in connection with
payments made as a result of any insurance policies.
(k) The Grantor will, promptly upon request, provide to the
Secured Party all information and evidence it may reasonably request
concerning the Collateral to enable the Secured Party to enforce the
provisions of this Agreement.
(l) In the event the Grantor proposes to take any action
contemplated by Section 4(a)(i), 4(a)(ii) or 4(a)(iii), at the request of the
Secured Party, the Grantor shall, at the Grantor's cost and expense, and
prior to taking any such proposed action cause to be delivered to
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the Administrative Agent an opinion of counsel, satisfactory to the
Administrative Agent, substantially in the form of Exhibit F or otherwise in
form and substance, and covering such matters relating to such actions,
reasonably satisfactory to the Administrative Agent.
(m) The Grantor shall notify the Secured Party immediately if it
knows, or has reason to know, that any application or registration relating
to any Copyright, Patent or Trademark which is material to the Grantor's
business may become abandoned or dedicated, or of any adverse determination
or development (including, without limitation, the institution of, or any
such determination or development in, any proceeding in the United States
Copyright Office, the United States Patent and Trademark Office, or any
court) regarding the Grantor's ownership of any Copyright, Patent or
Trademark which is material to the Grantor's business, its right to register
the same, or to keep and maintain the same. In the event that any material
Copyright, Patent, or Trademark is infringed, misappropriated or diluted in
any material respect by a third party, the Grantor shall notify the Secured
Party promptly after it learns thereof and shall, unless the Grantor shall
reasonably determine that any of the following actions would be unsuccessful
or not commercially reasonable (without accounting for any liens on the
proceeds of any recovery), promptly sue for infringement, misappropriation or
dilution and to recover any and all damages for such infringement,
misappropriation or dilution, and take such other actions as the Grantor
shall reasonably deem appropriate under the circumstances to protect such
Copyright, Patent or Trademark. The Grantor will give the Secured Party
quarterly notice of its filing of any application for the registration of any
Copyright with the United States Copyright Office or any Patent or Trademark
with the United States Patent and Trademark Office, or with any similar
office or agency in any other country or any political subdivision thereof,
either itself or through any agent, employee or licensee. The Grantor will
execute and deliver any and all agreements, instruments, documents and papers
the Secured Party may reasonably request to evidence the Security Interests
in such Copyright, Patent or Trademark and the goodwill and general
intangibles of the Grantor relating thereto or represented thereby, and the
Grantor hereby constitutes the Secured Party its attorney-in-fact to execute
and file all such writings for the foregoing purposes to the extent that the
Grantor fails or refuses to do so within 10 days of a request from the
Secured Party, all acts of such attorney being hereby ratified and confirmed;
such power, being coupled with an interest, shall be irrevocable until the
Secured Intercompany Obligations are paid in full.
Section 5. GENERAL AUTHORITY. The Grantor hereby irrevocably
appoints the Secured Party its true and lawful attorney, with full power of
substitution, in the name of the Grantor, the Secured Party or otherwise, for
the sole use and benefit of the Secured Party, but at the Grantor's expense,
to the extent not prohibited by applicable law, to exercise, at any time and
from time to time while an Event of Default has occurred and is continuing
and the Secured Party has notified the Grantor of its decision to so
exercise, all or any of the following powers with respect to all or any of
the Collateral:
(a) to demand, sue for, collect, receive and give acquittance for any and
all monies due or to become due upon or by virtue thereof,
(b) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
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(c) to sell, transfer, assign or otherwise deal in or with the same or
the proceeds or avails thereof, as fully and effectually as if the Secured
Party were the absolute owner thereof, and
(d) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto;
PROVIDED that the Secured Party shall give the Grantor not less than ten
days' prior notice of the time and place of any sale or other intended
disposition of any of the Collateral, except any Collateral which is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market. Such notice constitutes "REASONABLE
NOTIFICATION" within the meaning of Section 9-504(3) of the Uniform
Commercial Code. The Grantor hereby ratifies and confirms all that the
Secured Party, as said attorney, shall do or cause to be done by virtue of
this Section 5 and the other provisions of this Agreement. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and shall be irrevocable until the Secured Intercompany Obligations
are paid in full.
Section 6. REMEDIES UPON EVENT OF DEFAULT. (a) If any Event of
Default shall have occurred and be continuing, the Secured Party may exercise
all the rights of a secured party under the Uniform Commercial Code (whether
or not in effect in the jurisdiction where such rights are exercised) and, in
addition, the Secured Party may, without being required to give any notice,
except as herein provided or as may be required by mandatory provisions of
law, (i) apply the cash, if any, then held by it as Collateral and (ii) if
there shall be no such cash or if such cash shall be insufficient to pay all
the Secured Intercompany Obligations in full, sell the Collateral or any part
thereof at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices as the Secured Party may deem
satisfactory. Any Lender or Sunbeam Entity may be the purchaser of any or
all of the Collateral so sold at any public sale (or, if the Collateral is of
a type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, at any private
sale). The Grantor will execute and deliver such documents and take such
other action as the Secured Party deems necessary or advisable in order that
any such sale may be made in compliance with law. Upon any such sale the
Secured Party shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale
shall hold the Collateral so sold absolutely and free from any claim or right
of whatsoever kind, including any equity or right of redemption of the
Grantor which may be waived, and the Grantor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which
it has or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale shall (1) in the case of a public sale, state
the time and place fixed for such sale, and (2) in the case of a private
sale, state the day after which such sale may be consummated. Any such
public sale shall be held at such time or times within ordinary business
hours and at such place or places as the Secured Party may fix in the notice
of such sale. At any such sale the Collateral may be sold in one lot as an
entirety or in separate parcels, as the Secured Party may determine. The
Secured Party shall not be obligated to make any such sale pursuant to any
such notice. The Secured Party may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In
the case of any sale of all or any part of the
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Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Secured Party until the selling price is paid by the
purchaser thereof, but the Secured Party shall not incur any liability in the
case of the failure of such purchaser to take up and pay for the Collateral
so sold and, in the case of any such failure, such Collateral may again be
sold upon like notice. The Secured Party, instead of exercising the power of
sale herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) For the purpose of enforcing any and all rights and remedies
under this Agreement the Secured Party may, at any time when an Event of
Default has occurred and is continuing, (i) require the Grantor to, and the
Grantor agrees that it will, at the Grantor's expense and upon the request of
the Secured Party, forthwith assemble all or any part of the Collateral as
directed by the Secured Party and make it available at a place designated by
the Secured Party which is, in its opinion, reasonably convenient to the
Secured Party and the Grantor, whether at the premises of the Grantor or
otherwise, (ii) to the extent permitted by applicable law, enter, with or
without process of law and without breach of the peace, any premises where
any of the Collateral is or may be located, and without charge or liability
to it seize and remove such Collateral from such premises, (iii) have access
to and use the Grantor's books and records relating to the Collateral and
(iv) prior to the disposition of the Collateral, store or transfer it without
charge in or by means of any storage or transportation facility owned or
leased by the Grantor, process, repair or recondition it or otherwise prepare
it for disposition in any manner and to the extent the Secured Party deems
appropriate and, in connection with such preparation and disposition, use
without charge any Trademark, trade name, Copyright, Patent or technical
process used by the Grantor. The Secured Party may also render any or all of
the Collateral unusable at the Grantor's premises and may dispose of such
Collateral on such premises without liability for rent or costs.
(c) Without limiting the generality of the foregoing, if any Event
of Default has occurred and is continuing,
(i) the Secured Party may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any Copyrights, Patents or Trademarks included in
the Collateral throughout the world for such term or terms, on such
conditions and in such manner as the Secured Party shall in its sole
discretion determine; PROVIDED that such licenses and or sublicenses
do not violate the terms of any other license to which the Grantor is
a party;
(ii) the Secured Party may (without assuming any obligations
or liability thereunder), at any time and from time to time, enforce
(and shall have the exclusive right to enforce) against any licensee
or sublicensee all rights and remedies of the Grantor in, to and under
any Copyright Licenses, Patent Licenses or Trademark Licenses and take
or refrain from taking any action under any thereof, and the Grantor
hereby releases the Secured Party from, and agrees to hold the Secured
Party free and harmless from and against any claims arising out of,
any lawful action so taken or omitted to be taken with respect
thereto; and
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(iii) upon request by the Secured Party, the Grantor will
execute and deliver to the Secured Party a power of attorney, in form
and substance satisfactory to the Secured Party, for the
implementation of any lease, assignment, license, sublicense, grant of
option, sale or other disposition of a Copyright, Patent or Trademark.
In the event of any such disposition pursuant to this Section, the
Grantor shall, upon request, and upon the execution of reasonable
confidentiality agreements, supply its know-how and expertise relating
to the manufacture and sale of the products bearing Trademarks or the
products or services made or rendered in connection with Patents, and
its customer lists and other records relating to such Patents or
Trademarks and to the distribution of said products, to the Secured
Party.
Section 7. APPLICATION OF PROCEEDS. (a) Upon the occurrence and
during the continuance of an Event of Default, the proceeds of any sale of,
or other realization upon, all or any part of the Collateral and any cash
held shall be applied by the Secured Party in the following order of
priorities:
FIRST, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Secured
Party, and all expenses, liabilities and advances incurred or made by the
Secured Party in connection therewith, and any other unreimbursed expenses
for which the Secured Party is to be reimbursed pursuant to Section 11
hereof;
SECOND, to the payment of unpaid principal (including all capitalized
interest) of the Secured Intercompany Obligations in accordance with the
provisions of the Coleman Intercompany Note;
THIRD, to the payment of accrued but unpaid interest on the Secured
Intercompany Obligations in accordance with the provisions of the Coleman
Intercompany Note;
FOURTH, to the ratable payment of all other Secured Intercompany
Obligations, until all Secured Intercompany Obligations shall have been
paid in full; and
FINALLY, to payment to the Grantor or its successors or assigns, or as
a court of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
(b) The Secured Party may make distributions hereunder in cash or in
kind or, on a ratable basis, in any combination thereof.
Section 8. APPOINTMENT OF ADMINISTRATIVE AGENT AS BAILEE;
ASSIGNMENT TO ADMINISTRATIVE AGENT; ACKNOWLEDGEMENT OF GRANTOR.
(a) In order to further perfect and protect the security interests
granted to the Administrative Agent under the Parent Pledge and Security
Agreement, including the Parent's pledge thereunder of the Security
Interests, the Parent hereby authorizes and appoints the Administrative Agent
to hold on the Parent's behalf and as its agent all Collateral granted
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hereunder for purposes of possession and control under the Uniform Commercial
Code or other applicable law. The Administrative Agent, for itself and its
successors, hereby accepts such authorization and appointment and the Parent
hereby releases the Administrative Agent from any liability whatsoever (other
than liability resulting from the Administrative Agent's willful misconduct
or gross negligence) in connection with such authorization and appointment.
This authorization and appointment are a power coupled with an interest and
are irrevocable. It is understood and agreed that the Administrative Agent
may also hold Collateral for its own benefit.
(b) Effective immediately following the grant of the Security
Interests pursuant to Section 3 hereof and the foregoing authorization and
appointment of the Administrative Agent as its nominee and agent, and as more
fully provided in the Parent Pledge and Security Agreement, the Parent
pledges and collaterally assigns, until the Secured Obligations Repayment
Date, to the Administrative Agent all of its right, title and interest as the
Secured Party hereunder, including, without limitation, all of the powers,
rights, remedies, benefits, protections, authority and functions (but not the
obligations) of the Secured Party hereunder and the Administrative Agent, for
itself and its successors, hereby accepts such pledge and collateral
assignment. The foregoing pledge and collateral assignment are powers
coupled with an interest and shall be irrevocable until the Secured
Obligations Repayment Date. In furtherance of such pledge and collateral
assignment, the Parent will not exercise any rights or remedies under this
Agreement without the prior written consent of the Administrative Agent and
will exercise any of such powers, rights, remedies, benefits, protections,
authority and functions of the Secured Party under this Agreement as directed
to do so by the Administrative Agent; PROVIDED that after the occurrence and
during the continuance of a Default or an Event of Default, all such powers,
rights, remedies, benefits, protections, authority and functions shall be for
the sole use and benefit of, and shall be exercised solely by, the
Administrative Agent for the benefit of the Lenders and any conflict between
the interests of the Lenders and the interests of the Parent is hereby waived
by the Parent.
(c) The Grantor hereby acknowledges (i) receipt of a copy of the
Parent Pledge and Security Agreement; (ii) that pursuant to the Parent Pledge
and Security Agreement and this Agreement, the Parent has assigned to the
Administrative Agent, as collateral security for the Secured Obligations, all
of its right, title and interest in (A) the Secured Intercompany Obligations,
(B) the Coleman Intercompany Note and this Agreement and (C) the Security
Interests and any other collateral for the Secured Intercompany
Obligations now or hereafter granted by the Grantor to or for the benefit of
the Parent under this Agreement or any other Coleman Intercompany Loan
Document; and (iii) that pursuant to this Agreement and the Parent Pledge and
Security Agreement, the Administrative Agent is authorized, in accordance
with the terms of this Agreement and the Parent Pledge and Security
Agreement, to exercise the powers, rights, remedies, benefits, protections,
authority and functions of the Secured Party against the Grantor under this
Agreement and otherwise in respect of the Secured Intercompany Obligations.
(d) Notwithstanding anything to the contrary contained in this
Agreement, the Grantor hereby consents to the foregoing and independently
acknowledges and agrees, for the direct benefit of the Administrative Agent
and the Lenders, until the Secured Obligations Repayment Date, as follows:
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(i) the representations and warranties made by the Grantor in this
Agreement shall inure to the benefit of the Administrative Agent and the
Lenders and each reference in such representations and warranties to the
Secured Party shall be deemed to be references to the Administrative Agent
for such purpose;
(ii) upon the occurrence and continuance of an Event of Default, the
Administrative Agent shall have the exclusive right to enforce , in the
name and stead of the Parent, all of the covenants and agreements made by
the Grantor under this Agreement and to exercise all of the powers, rights,
remedies, benefits, protections, authority and functions of the Secured
Party hereunder;
(iii) without the prior written consent of the Administrative Agent,
the Grantor shall not enter into any amendment, waiver or other
modification of the Secured Intercompany Obligations, the Coleman
Intercompany Note or the Coleman Intercompany Loan Documents;
(iv) the Grantor shall comply with all payment instructions delivered
by the Administrative Agent with respect to the Secured Intercompany
Obligations, if such instructions are accompanied by a written
representation that a Default or an Event of Default has occurred and is
continuing; and
(v) all of the indemnification, expense reimbursement,
authorizations and exculpatory provisions contained in this Agreement in
favor of the Secured Party shall also inure to the benefit of the
Administrative Agent.
(e) In accordance with Section 4(b), and in furtherance of the
Grantor's acknowledgments and agreements contained in Section 8(c) and
Section 8(d), the Grantor and the Secured Party shall as promptly as
practicable after the date hereof execute and deliver to the Administrative
Agent an amendment to this Agreement, and such other additional documents and
instruments (and cause to be delivered in connection therewith an opinion of
counsel), in each case as reasonably requested by, and in form and substance
reasonably satisfactory to, the Administrative Agent, pursuant to which the
Grantor shall grant directly to the Administrative Agent, for the benefit of
the Lenders, security interests in the Collateral to secure the Secured
Obligations, PROVIDED that the amount of the Secured Obligations so secured
(and any recourse to the Collateral, whether to collect the Secured
Obligations or the Secured Intercompany Obligations) shall in no event exceed
the amount of the Secured Intercompany Obligations outstanding from time to
time.
Section 9. EXCULPATORY PROVISIONS
(a) The Secured Party is irrevocably authorized to take all such
action as is provided to be taken by it as Secured Party hereunder and all
other action reasonable incidental thereto. As to any matters not expressly
provided for herein (including, without limitation, the timing and methods of
realization upon the Collateral) the Secured Party shall act or refrain from
acting in accordance with its discretion.
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(b) Beyond the exercise of reasonable care in the custody thereof,
the Secured Party shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent or bailee or any
income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto. The Secured Party shall be deemed to
have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and shall not
be liable or responsible for any loss or damage to any of the Collateral, or
for any diminution in the value thereof, by reason of the act or omission of
any warehouseman, carrier, forwarding agency, consignee or other agent or
bailee selected by the Secured Party in good faith. Neither the Secured
Party nor any of its officers, directors, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for
any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Grantor or any other Person
or to take any other action whatsoever with regard to the Collateral or any
part thereof. The powers conferred on the Secured Party hereunder are solely
to protect the Secured Party's interests in the Collateral and shall not
impose any duty upon the Secured Party to exercise any such powers. The
Secured Party shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers, and neither it nor any of its
officers, directors, employees or agents shall be responsible to the Grantor
for any act or failure to act hereunder.
Section 10. EXPENSES. In the event that any Grantor fails to
comply with the provisions of this Agreement, such that the value of any
Collateral or the validity, perfection, rank or value of any Security
Interest is thereby diminished or potentially diminished or put at risk, the
Secured Party may, but shall not be required to, effect such compliance on
behalf of the Grantor, and the Grantor shall reimburse the Secured Party for
the costs thereof on demand. All insurance expenses and all expenses of
protecting, storing, warehousing, appraising, insuring, handling,
maintaining, and shipping the Collateral, any and all excise, property,
sales, and use taxes imposed by any state, federal, or local authority on any
of the Collateral, or in respect of periodic appraisals and inspections of
the Collateral to the extent the same may be requested by the Secured Party
from time to time, or in respect of the sale or other disposition thereof,
shall be borne and paid by the Grantor; and if the Grantor fails to promptly
pay any portion thereof when due, the Secured Party may, at its option, but
shall not be required to, pay the same and charge the Grantor's account
therefor, and the Grantor agrees to reimburse the Secured Party therefor on
demand. All sums so paid or incurred by the Secured Party for any of the
foregoing and any and all other sums for which the Grantor may become liable
hereunder and all costs and expenses (including attorneys' fees, legal
expenses and court costs) reasonably incurred by the Secured Party in
enforcing or protecting the Security Interests or any of their rights or
remedies under this Agreement, shall, together with interest thereon until
paid at the rate applicable to the Coleman Intercompany Note plus 2%, be
additional Secured Obligations hereunder.
Section 11. TERMINATION OF SECURITY INTERESTS; RELEASE OF
COLLATERAL. (a) Upon the repayment in full of all Secured Intercompany
Obligations, the Security Interests shall terminate and all rights to the
Collateral shall revert to the Grantor.
(b) Upon the consummation of any sale or exchange of Collateral
permitted by clause (x) of Section 4(i), the Security Interests created
hereby in the Collateral subject to such
17
<PAGE>
sale or exchange (but not in any Proceeds arising from such sale or exchange)
shall cease immediately without any further action on the part of the Secured
Party.
(c) Except as provided otherwise in the Credit Agreement, upon the
consummation of any Asset Sale or other disposition permitted by the terms of
the Credit Agreement, the Secured Party shall release the Collateral (but not
any Proceeds thereof) sold pursuant to such Asset Sale or other disposition.
(d) Other than the releases of Collateral effected by subsection
(b) or permitted pursuant to subsection (c), prior to the Secured Obligations
Repayment Date, the Secured Party shall not release any of the Collateral
without the prior written consent of the Administrative Agent and the
Lenders.
(e) Upon any termination of the Security Interests or release of
Collateral in accordance with this Section, the Secured Party will, at the
expense of the Grantor, execute and deliver to the Grantor such documents as
the Grantor shall reasonably request to evidence the termination of the
Security Interests or the release of such Collateral, as the case may be.
Section 12. NOTICES. All notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopy to the address and telecopy number of such party and the
Administrative Agent set forth on the signature pages hereof. Each Party
shall provide copies of all such notices and other communications in a like
manner to the Administrative Agent. Any party hereto and the Administrative
Agent may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto and the
Administrative Agent. All notices and other communications given to any
party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
Section 13. WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the
part of the Secured Party to exercise, and no delay in exercising and no
course of dealing with respect to, any right under this Agreement or any
other Coleman Intercompany Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise by the Secured Party of any right
under this Agreement or any other Coleman Intercompany Loan Document preclude
any other or further exercise thereof or the exercise of any other right.
The rights in this Agreement and the Coleman Intercompany Loan Documents are
cumulative and are not exclusive of any other remedies provided by law.
Section 14. SUCCESSORS AND ASSIGNS. This Agreement is for the
benefit of the Parent and its successors and assigns (including the
Administrative Agent for the benefit of the Lenders pursuant to the Parent
Pledge and Security Agreement and Section 8 hereof). This Agreement shall be
binding on the Grantor and its successors and assigns.
Section 15. CHANGES IN WRITING. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing, signed by the Grantor, the Parent and the Administrative
Agent.
18
<PAGE>
Section 16. NEW YORK LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, except as
otherwise required by mandatory provisions of law and except to the extent
that remedies provided by the laws of any jurisdiction other than New York
are governed by the laws of such jurisdiction.
Section 17. SEVERABILITY. If any provision hereof is invalid or
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Parent,
the Administrative Agent and the Lenders in order to carry out the intentions
of the parties hereto as nearly as may be possible; and (ii) the invalidity
or unenforceability of any provision hereof in any jurisdiction shall not
affect the validity or enforceability of such provision in any other
jurisdiction.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
THE COLEMAN COMPANY, INC.
By /s/ Ronald R. Richter
---------------------
Name: Ronald R. Richter
Title: Vice President & Treasurer
Address for Notices:
2381 Executive Center Drive
Boca Raton, Florida 33431
Attention: Ms. Gwen Wisler
telecopy: (561) 912-4303
SUNBEAM CORPORATION
By /s/ Bobby Jenkins
---------------------
Name: Bobby G. Jenkins
Title: Executive Vice President
Address for Notices:
2381 Executive Center Drive
Boca Raton, Florida 33431
Attention: Mr. Bobby Jenkins
telecopy: (561) 912-4263
<PAGE>
ACKNOWLEDGED AND AGREED:
FIRST UNION NATIONAL BANK,
as Administrative Agent
By /s/ T. M. Molitor
-----------------
Name: T. M. Molitor
Title: Senior Vice President
Address for Notices:
One First Union Center
301 South College Street, DC-5
Charlotte, North Carolina 28288
Attention: Thomas M. Molitor
telecopy: (704) 374-3300
<PAGE>
EXHIBIT A
PERFECTION CERTIFICATE
The undersigned, the chief legal officer of THE COLEMAN COMPANY,
INC., a Delaware corporation (the "GRANTOR"), hereby certifies with reference
to the Intercompany Security Agreement dated as of April __, 1999 between the
Grantor and SUNBEAM CORPORATION, (terms defined therein being used herein as
therein defined), to each Secured Party, the Administrative Agent and each
Lender as follows:
1. NAMES. (a) The exact company name of the Grantor as it appears
in its certificate of incorporation or certificate of formation is as follows:
(b) Set forth below is each other company name the Grantor has had
within the past five years, together with the date of the relevant change:
(c) Except as set forth in Schedule 1, the Grantor has not changed
its identity or company structure in any way within the past five years.
[Changes in identity or company structure would include mergers, consolidations
and acquisitions, as well as any change in the form, nature or jurisdiction of
organization. If any such change has occurred, include in Schedule 1 the
information required by paragraphs 1, 2 and 3 of this certificate as to each
acquiree or constituent party to a merger or consolidation.]
(d) The following is a list of all other names (including trade
names or similar appellations) used by the Grantor or any of its divisions or
other business units at any time during the past five years:
2. Current Locations. (a) The chief executive office of the
Grantor is located at the following address:
MAILING ADDRESS COUNTY STATE
<PAGE>
(b) The following are all the locations where the Grantor
maintains any books or records relating to any Accounts:
MAILING ADDRESS COUNTY STATE
(c) The following are all the places of business of the Grantor
not identified above:
MAILING ADDRESS COUNTY STATE
(d) The following are all the locations where the Grantor
maintains any Inventory not identified above:
MAILING ADDRESS COUNTY STATE
(e) The following are the names and addresses of all Persons other
than the Grantor which have possession of any of the Grantor's Inventory:
MAILING ADDRESS COUNTY STATE
3. PRIOR LOCATIONS. (a) Set forth below is the information
required by subparagraphs 2(a), 2(b) and 2(c) above with respect to each
location or place of business maintained by the Grantor at any time during
the past five years:
(b) Set forth below is the information required by subparagraphs
2(d) and 2(e) above with respect to each location or bailee where or with
whom Inventory has been lodged at any time during the past four months:
4. UNUSUAL TRANSACTIONS. Except as set forth in Schedule 4, all
Accounts have been originated by the Grantor and all Inventory and Equipment
has been acquired by the Grantor in the ordinary course of its business.
5. FILE SEARCH REPORTS. Attached hereto as Schedule 5(A) is a
true copy of a file search report conducted by [Lexis] in each jurisdiction
identified in paragraph 2 or 3 above with respect to each name set forth in
paragraph 1 above. Attached hereto as Schedule 5(B) is a
2
<PAGE>
true copy of each financing statement or other filing identified in such file
search reports as supplied to us by [Lexis].
6. UNIFORM COMMERCIAL CODE FILINGS. A duly signed financing
statement on Form UCC-1 in substantially the form of Schedule 6(A) hereto
will be duly filed in the Uniform Commercial Code filing office in each
jurisdiction identified in paragraph 2 hereof.
7. SCHEDULE OF FILINGS. Within 30 days of the date hereof a
schedule in the form of Schedule 7 hereto setting forth filing information
with respect to the filings described in paragraph 6 above will be delivered
to the Secured Party.
8. FILING FEES. All filing fees and taxes payable in connection
with the filings described in paragraph 6 above have been or will be paid.
IN WITNESS WHEREOF, we have hereunto set our hands this __ day of
April, 1999.
THE COLEMAN COMPANY, INC.
By
Name:
Title:
3
<PAGE>
EXHIBIT B
DESCRIPTION OF COLLATERAL
<PAGE>
EXHIBIT A
TO
UCC FINANCING STATEMENT
<TABLE>
<S> <C> <C>
DEBTOR: SECURED PARTY: ASSIGNEE:
The Coleman Company, Inc. Sunbeam Corporation First Union National Bank, as
2381 Executive Center Drive 2381 Executive Center Drive Administrative Agent
Boca Raton, Florida 33431 Boca Raton, Florida 33431 One First Union Center
301 South College Street, DC-5
Charlotte, North Carolina 28288
</TABLE>
All of the following property now owned or at any time hereafter
acquired by the Debtor or in which the Debtor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"COLLATERAL"):
1. Accounts;
2. Inventory;
3. General Intangibles;
4. Documents;
5. Instruments;
6. Equipment;
7. the Pledged Securities, and all organizational documents,
together with all of its rights and privileges thereunder, with respect to
the Pledged Securities, and all income and profits thereon, and all
interest, dividends and other payments and distributions with respect
thereto;
8. all indebtedness now or hereafter owed to the Debtor by any of
its Subsidiaries (whether or not evidenced by Instruments);
9. all investments made by the Debtor in any of its Subsidiaries;
10. all Investment Property;
11. all books and records (including, without limitation, customer
lists, credit files, computer programs, printouts and other computer
materials and records) of the Debtor pertaining to any of the Collateral;
and
12. all Proceeds of all or any of the collateral described in clauses
1 through 11 hereof, including without limitation, all dividends or other
income from the Investment Property or the Pledged Securities, collections
thereon or distributions or payments with respect thereto, and all
collateral security and guarantees given by any Person with respect to all
or any of the collateral described in clauses 1 through 11 hereof.
As used herein, the following terms shall have the following meanings:
"ACCOUNTS " means all "ACCOUNTS" (as defined in the Uniform
Commercial Code) now owned or hereafter acquired by the Debtor, and shall
also mean and include all accounts receivable, contract rights, book debts,
notes, drafts and other obligations or indebtedness owing
<PAGE>
2
to the Debtor arising from the sale, lease or exchange of goods or other
property by it and/or the performance of services by it (including,
without limitation, any such obligation which might be characterized as
an account, contract right or general intangible under the Uniform
Commercial Code in effect in any jurisdiction) and all of the Debtor's
rights in, to and under all purchase orders for goods, services or other
property, and all of the Debtor's rights to any goods, services or other
property represented by any of the foregoing (including returned or
repossessed goods and unpaid sellers' rights of rescission, replevin,
reclamation and rights to stoppage in transit) and all monies due to or
to become due to the Debtor under all contracts for the sale, lease or
exchange of goods or other property and/or the performance of services
by it (whether or not yet earned by performance on the part of the
Debtor), in each case whether now in existence or hereafter arising or
acquired including, without limitation, the right to receive the
proceeds of said purchase orders and contracts and all collateral
security and guarantees of any kind given by any Person with respect to
any of the foregoing.
"COPYRIGHT LICENSE" means any written agreement now or hereafter in
existence granting to the Debtor any right to publication as to which a
Copyright is in existence.
"COPYRIGHTS" means all the following: (i) all copyrights under the
laws of the United States or any other country, all registrations and
recordings thereof, and all applications for copyrights under the laws of
the United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Copyright
Office or in any similar office or agency of the United States or any other
country or any political subdivision thereof and (ii) all extensions
thereof.
"DOCUMENTS" means all "DOCUMENTS" (as defined in the Uniform
Commercial Code) or other receipts covering, evidencing or representing
goods, now owned or hereafter acquired by the Debtor.
"EQUIPMENT" means all "EQUIPMENT" (as defined in the Uniform
Commercial Code) now owned or hereafter acquired by the Debtor, including
without limitation all motor vehicles, trucks, trailers, railcars and
barges, and all accessions thereto.
"GENERAL INTANGIBLE" means all "general intangibles" (as defined in
the Uniform Commercial Code) now owned or hereafter acquired by the Debtor,
including, without limitation, (i) all obligations or indebtedness owing to
the Debtor (other than Accounts) from whatever source arising, (ii) all
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks,
Trademark Licenses, rights in intellectual property, goodwill, trade names,
service marks, trade secrets, permits and licenses, (iii) all rights or
claims in respect of refunds for taxes paid and (iv) all rights in respect
of any pension plan or similar arrangement maintained for employees.
"GOVERNMENTAL AUTHORITY" means the government of the United States of
America, any other nation or any political subdivision thereof, whether
state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.
"INSTRUMENTS" means all "INSTRUMENTS", "CHATTEL PAPER" or "LETTERS OF
CREDIT" (each as defined in the Uniform Commercial Code) evidencing,
representing, arising from or existing in respect of, relating to, securing
or otherwise supporting the payment of, any of the Accounts, including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances, now owned or hereafter acquired by the Debtor.
"INTERCOMPANY PLEDGE AND SECURITY AGREEMENT" means the Intercompany
Pledge and Security Agreement, dated as of April 15, 1999, between the
Debtor and the Secured Party, as amended, supplemented or otherwise
modified from time to time.
<PAGE>
3
"INVENTORY" means all "INVENTORY" (as defined in the Uniform
Commercial Code), now owned or hereafter acquired by the Debtor, wherever
located, and shall also mean and include, without limitation, all raw
materials and other materials and supplies, work-in-process and finished
goods and any products made or processed therefrom and all substances, if
any, commingled therewith or added thereto.
"INVESTMENT PROPERTY" means all "INVESTMENT PROPERTY" as such term is
defined in Section 9-115 of the Uniform Commercial Code.
"PATENT LICENSE" means any written agreement now or hereafter in
existence granting to the Debtor any right to practice any invention on
which a Patent is in existence.
"PATENTS" means all of the following: (i) all letters patent of the
United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or
any other country, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States or any other country or any
political subdivision thereof, and (ii) all reissues, continuations,
continuations-in-part or extensions thereof.
"PERSON" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"PLEDGED INSTRUMENTS" means any instrument pledged or required to be
pledged to the Secured Party pursuant to the Intercompany Pledge and
Security Agreement.
"PLEDGED SECURITIES" means the Pledged Instruments and the Pledged
Stock.
"PLEDGED STOCK" means any capital stock, membership or limited
liability interest or other equity interests required to be pledged to the
Secured Party pursuant to the Intercompany Pledge and Security Agreement.
"PROCEEDS" means all proceeds of, and all other profits, products,
rents or receipts, in whatever form, arising from the collection, sale,
lease, exchange, assignment, licensing or other disposition of, or other
realization upon, collateral, including without limitation all claims of
the Debtor against third parties for loss of, damage to or destruction of,
or for proceeds payable under, or unearned premiums with respect to,
policies of insurance in respect of, any collateral, and any condemnation
or requisition payments with respect to any collateral, in each case
whether now existing or hereafter arising.
"SUBSIDIARY" means any subsidiary of the Debtor.
"TRADEMARK LICENSE" means any written agreement now or hereafter in
existence granting to the Debtor any right to use any Trademark.
"TRADEMARKS" means all of the following: (i) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, other source or business
identifiers, designs and general intangibles of like nature, now existing
or hereafter adopted or acquired, all registrations and recordings hereof,
and all applications in connection therewith, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, and (ii) all reissues, extensions or renewals thereof.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as in
effect from time to time in the State of New York.
<PAGE>
EXHIBIT C
PATENT SECURITY AGREEMENT
(PATENTS, PATENT APPLICATIONS AND PATENT LICENSES)
WHEREAS, THE COLEMAN COMPANY (the "GRANTOR"), owns, or in the case
of licenses, is party to, the Patent Collateral (as defined below);
WHEREAS, the Grantor has executed an Amended and Restated
Subordinated Intercompany Note, dated April 6, 1998, as amended, in favor of
Sunbeam Corporation (the "COLEMAN INTERCOMPANY NOTE");
WHEREAS, pursuant to the terms of an Intercompany Security
Agreement, dated as of the date hereof (as such agreement may be further
amended from time to time, the "SECURITY AGREEMENT"; unless otherwise
specifically defined herein, each term used herein which is defined in the
Security Agreement has the meaning assigned to such term in the Security
Agreement), between the Grantor and Sunbeam Corporation, together with its
successors and assigns, the "GRANTEE"), the Grantor has granted to the
Grantee, a continuing security interest in substantially all the assets of
the Grantor, including all right, title and interest of the Grantor in, to
and under the Patent Collateral (as defined herein), whether now owned or
existing or hereafter acquired or arising, to secure the Secured Intercompany
Obligations, including without limitation, the obligations of the Grantor
under the Coleman Intercompany Note;
WHEREAS, pursuant to the Security Agreement and the Parent Pledge
and Security Agreement under which the Coleman Intercompany Note has been
pledged to the Administrative Agent, the Security Interests in the Collateral
granted by the Grantor pursuant to this Agreement and the Security Agreement,
including all of the Grantee's right, title and interest as Secured Party,
have been collaterally assigned to the Administrative Agent, for the benefit
of the Lenders, to secure the Secured Obligations in accordance with the
terms of the Parent Pledge and Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, in order to secure the full
and punctual payment of the Secured Intercompany Obligations in accordance
with the terms thereof and to secure the performance of all the obligations
of the Grantor hereunder and under the Coleman Intercompany Loan Documents,
the Grantor hereby grants the Grantee, a continuing security interest in all
of the Grantor's right, title and interest in and to all of the following
(all of the following items or types of property being herein collectively
referred to as the "PATENT COLLATERAL"), whether now owned or existing or
hereafter acquired or arising:
(i) each Patent owned by Grantors, including, without
limitation, each Patent referred to in Schedule 1 hereto;
(ii) each Patent License, including, without limitation, each
Patent License identified in Schedule 1 hereto; and
<PAGE>
(iii) all proceeds of and revenues from the foregoing, including,
without limitation, all proceeds of and revenues from any claim by the
Grantor against third parties for past, present or future infringement
of any Patent owned by the Grantor, including, without limitation, any
Patent referred to in Schedule 1 hereto (including, without
limitation, any such Patent issuing from any application referred to
in Schedule I hereto), and all rights and benefits of the Grantor
under any Patent License, including, without limitation, any Patent
License identified in Schedule 1 hereto.
The Grantor hereby irrevocably constitutes and appoints Grantee and
any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full power and authority in the name of the
Grantor or in its name, from time to time, in the Grantee's discretion, so
long as any Event of Default has occurred and is continuing, to take with
respect to the Patent Collateral any and all appropriate action which the
Grantor might take with respect to the Patent Collateral and to execute any
and all documents and instruments which may be necessary or desirable to
carry out the terms of this Patent Security Agreement and to accomplish the
purposes hereof.
Except to the extent permitted by the Credit Agreement, the Grantor
agrees not to sell, license, exchange, assign or otherwise transfer or
dispose of, or grant any rights with respect to, or mortgage or otherwise
encumber, any of the Patent Collateral, except (i) for licenses issued to
contract manufacturers in the ordinary course of business and (ii) to the
extent such activities would not adversely effect the value of the Patent
Collateral taken as a whole.
The foregoing security interest is granted in conjunction with the
security interests granted to the Grantee pursuant to the Security Agreement.
The Grantor does hereby further acknowledge and affirm that the rights and
remedies of the Grantee with respect to the security interest in the Patent
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
The Grantor hereby further acknowledges and agrees that all of the
Grantee's right, title and interest as Grantee under this Agreement and as
"Secured Party" under the Security Agreement, and all of the Collateral
granted pursuant to the Coleman Intercompany Collateral Documents, have been
collaterally assigned by the Grantee pursuant to the Parent Pledge and
Security Agreement to the Administrative Agent, for the benefit of the
Lenders and that contemporaneously herewith the Grantee shall execute and
deliver a separate patent security agreement in the form attached as Exhibit
A hereto in favor of the Administrative Agent to further evidence such
collateral assignment.
2
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Patent Security
Agreement to be duly executed by its officer thereunto duly authorized as of
the ____ day of April, 1999.
THE COLEMAN COMPANY, INC.
By
----------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
SUNBEAM CORPORATION,
as Secured Party
By
----------------------------
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, ______________________, a Notary Public in and for said
County, in the State aforesaid, DO HEREBY CERTIFY, that ______________________,
_______________ of THE COLEMAN COMPANY, INC., personally known to me to be the
same person whose name is subscribed to the foregoing instrument as such
_________________, appeared before me this day in person and acknowledged that
(s)he signed, executed and delivered the said instrument as her/his own free
and voluntary act and as the free and voluntary act of said Company, for the
uses and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of April,
1999.
[Seal]
Signature of notary public
My Commission expires __________
<PAGE>
EXHIBIT D
TRADEMARK SECURITY AGREEMENT
(TRADEMARKS, TRADEMARK REGISTRATIONS, TRADEMARK
APPLICATIONS AND TRADEMARK LICENSES)
WHEREAS, THE COLEMAN COMPANY, INC. (the "GRANTOR"), owns, or in the
case of licenses, is party to, the Trademark Collateral (as defined below);
WHEREAS, the Grantor has executed an Amended and Restated
Subordinated Intercompany Note, dated April 6, 1998, as amended, in favor of
Sunbeam Corporation ("COLEMAN INTERCOMPANY NOTE");
WHEREAS, pursuant to the terms of an Intercompany Security
Agreement, dated as of the date hereof (as such agreement may be further
amended from time to time, the "SECURITY AGREEMENT"; unless otherwise
specifically defined herein, each term used herein which is defined in the
Security Agreement has the meaning assigned to such term in the Security
Agreement), between the Grantor and Sunbeam Corporation, together with its
successors and assigns, the "GRANTEE"), the Grantor has granted to the
Grantee, a continuing security interest in substantially all the assets of
the Grantor, including all right, title and interest of the Grantor in, to
and under the Trademark Collateral (as defined herein), whether now owned or
existing or hereafter acquired or arising, to secure the Secured Intercompany
Obligations, including without limitation, the obligations of the Grantor
under the Coleman Intercompany Note;
WHEREAS, pursuant to the Security Agreement and the Parent Pledge
and Security Agreement under which the Coleman Intercompany Note has been
pledged to the Administrative Agent, the Security Interests in the Collateral
granted by the Grantor pursuant to this Agreement and the Security Agreement,
including all of the Grantee's right, title and interest as Secured Party,
have been collaterally assigned to the Administrative Agent, for the benefit
of the Lenders, to secure the Secured Obligations in accordance with the
terms of the Parent Pledge and Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, in order to secure the full
and punctual payment of the Secured Intercompany Obligations in accordance
with the terms thereof and to secure the performance of all the obligations
of the Grantor hereunder and under the Coleman Intercompany Loan Documents,
the Grantor hereby grants the Grantee, a continuing security interest in all
of the Grantor's right, title and interest in and to all of the following
(all of the following items or types of property being herein collectively
referred to as the "TRADEMARK COLLATERAL"), whether now owned or existing or
hereafter acquired or arising:
(i) each Trademark owned by the Grantor, including, without
limitation, each Trademark registration and application referred to in
Schedule 1 hereto, and all of the goodwill of the business connected
with the use of, or symbolized by, each Trademark;
<PAGE>
(ii) each Trademark License including, without limitation, each
Trademark License identified in Schedule 1 hereto; and
(iii) all proceeds of and revenues from the foregoing, including,
without limitation, all proceeds of and revenues from any claim by the
Grantor against third parties for past, present or future unfair
competition with, or violation of intellectual property rights in
connection with or injury to, or infringement or dilution of, any
Trademark owned by the Grantor, or for injury to the goodwill
associated with any such Trademark, including, without limitation, any
Trademark referred to in Schedule 1 hereto, and all rights and
benefits of the Grantor under any Trademark License, including,
without limitation, any Trademark License identified in Schedule 1
hereto.
The Grantor hereby irrevocably constitutes and appoints the Grantee
and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full power and authority in the name of
the Grantor or in its name, from time to time, in the Grantee's discretion,
so long as any Event of Default has occurred and is continuing, to take with
respect to the Trademark Collateral any and all appropriate action which the
Grantor might take with respect to the Trademark Collateral and to execute
any and all documents and instruments which may be necessary or desirable to
carry out the terms of this Trademark Security Agreement and to accomplish
the purposes hereof.
Except to the extent permitted by the Credit Agreement, the Grantor
agrees not to sell, license, exchange, assign or otherwise transfer or
dispose of, or grant any rights with respect to, or mortgage or otherwise
encumber, any of the foregoing Trademark Collateral except for (i) licenses
issued to contract manufacturers in the ordinary course of business and (ii)
to the extent such activities would not adversely affect the value of the
Trademark Collateral taken as a whole.
The foregoing security interest is granted in conjunction with the
security interests granted to the Grantee pursuant to the Security Agreement.
The Grantor does hereby further acknowledge and affirm that the rights and
remedies of the Grantee with respect to the security interest in the
Trademark Collateral granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.
The Grantor hereby further acknowledges and agrees that all of the
Grantee's right, title and interest as Grantee under this Agreement and as
Secured Party under the Security Agreement, and all of the Collateral granted
pursuant to the Coleman Intercompany Collateral Documents, have been
collaterally assigned by the Grantee pursuant to the Parent Pledge and
Security Agreement to the Administrative Agent, for the benefit of the
Lenders and that contemporaneously herewith the Grantee shall execute and
deliver a separate trademark security agreement in the form attached as
Exhibit A hereto in favor of the Administrative Agent to further evidence
such collateral assignment.
2
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Trademark Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
____ day of April, 1999.
THE COLEMAN COMPANY, INC.
By
Name:
Title:
ACKNOWLEDGED AND AGREED:
SUNBEAM CORPORATION,
as Secured Party
By
-----------------------------------
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, ______________________, a Notary Public in and for said County, in
the State aforesaid, DO HEREBY CERTIFY, that _________________________,
_______________ of THE COLEMAN COMPANY, INC., personally known to me to be the
same person whose name is subscribed to the foregoing instrument as such
_________________, appeared before me this day in person and acknowledged that
(s)he signed, executed and delivered the said instrument as her/his own free and
voluntary act and as the free and voluntary act of said Company, for the uses
and purposes therein set forth being duly authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of April, 1999.
[Seal]
Signature of notary public
My Commission expires __________
<PAGE>
EXHIBIT E
COPYRIGHT SECURITY AGREEMENT
(COPYRIGHTS, COPYRIGHT REGISTRATIONS, COPYRIGHT
APPLICATIONS AND COPYRIGHT LICENSES)
WHEREAS, THE COLEMAN COMPANY, INC. (the "GRANTOR"), owns, or in the
case of licenses, is party to, the Copyright Collateral (as defined below);
WHEREAS, the Grantor has executed an Amended and Restated
Subordinated Intercompany Note, dated April 6, 1998, as amended, in favor of
Sunbeam Corporation ("COLEMAN INTERCOMPANY NOTE");
WHEREAS, pursuant to the terms of an Intercompany Security
Agreement, dated as of the date hereof (as such agreement may be further
amended from time to time, the "SECURITY AGREEMENT"; unless otherwise
specifically defined herein, each term used herein which is defined in the
Security Agreement has the meaning assigned to such term in the Security
Agreement), between the Grantor and Sunbeam Corporation, together with its
successors and assigns, the "GRANTEE"), the Grantor has granted to the
Grantee, a continuing security interest in substantially all the assets of
the Grantor, including all right, title and interest of the Grantor in, to
and under the Copyright Collateral (as defined herein), whether now owned or
existing or hereafter acquired or arising, to secure the Secured Intercompany
Obligations, including without limitation, the obligations of the Grantor
under the Coleman Intercompany Note;
WHEREAS, pursuant to the Security Agreement and the Parent Pledge
and Security Agreement under which the Coleman Intercompany Note has been
pledged to the Administrative Agent, the security interests in the Collateral
granted by the Grantor pursuant to this Agreement and the Security Agreement,
including all of the Grantee's right, title and interest as Secured Party
have been collaterally assigned to the Administrative Agent, for the benefit
of the Lenders, to secure the Secured Obligations in accordance with the
terms of the Parent Pledge and Security Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, in order to secure the full
and punctual payment of the Secured Intercompany Obligations in accordance
with the terms thereof and to secure the performance of all the obligations
of the Grantor hereunder and under the Coleman Intercompany Loan Documents,
the Grantor hereby grants the Grantee, a continuing security interest in all
of the Grantor's right, title and interest in and to all of the following
(all of the following items or types of property being herein collectively
referred to as the "COPYRIGHT COLLATERAL"), whether now owned or existing or
hereafter acquired or arising:
(i) each Copyright owned by the Grantor, including, without
limitation, each Copyright registration or application therefor
referred to in Schedule 1 hereto;
(ii) each Copyright Licenses, including, without limitation,
each Copyright License identified in Schedule 1 hereto; and
<PAGE>
(iii) all proceeds of and revenues from, accounts and general
intangibles arising out of, the foregoing, including, without
limitation, all proceeds of and revenues from any claim by the Grantor
against third parties for past, present or future infringement of any
Copyright, including, without limitation, any Copyright owned by the
Grantor referred to in Schedule 1 annexed hereto, and all rights and
benefits of the Grantor under any Copyright License, including,
without limitation, any Copyright License identified in Schedule 1
hereto.
The Grantor hereby irrevocably constitutes and appoints the Grantee
and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full power and authority in the name of
the Grantor or in its name, from time to time, in the Grantee's discretion,
so long as any Event of Default has occurred and is continuing, to take with
respect to the Copyright Collateral any and all appropriate action which the
Grantor might take with respect to the Copyright Collateral and to execute
any and all documents and instruments which may be necessary or desirable to
carry out the terms of this Copyright Security Agreement and to accomplish
the purposes hereof.
Except to the extent permitted by the Credit Agreement, the Grantor
agrees not to sell, license, exchange, assign or otherwise transfer or
dispose of, or grant any rights with respect to, or mortgage or otherwise
encumber, any of the foregoing Copyright Collateral, except (i) with respect
to the issuance of copyright licenses and (ii) to the extent such activities
would not adversely affect the value of the Copyright Collateral taken as a
whole.
The foregoing security interest is granted in conjunction with the
security interests granted to the Grantee pursuant to the Security Agreement.
The Grantor does hereby further acknowledge and affirm that the rights and
remedies of the Grantee with respect to the security interest in the
Copyright Collateral granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.
The Grantor hereby further acknowledges and agrees that all of the
Grantee's right, title and interest as Grantee under this Agreement and as
"Secured Party" under the Security Agreement, and all of the Collateral
granted pursuant to the Coleman Intercompany Collateral Documents, have been
collaterally assigned by the Grantee pursuant to the Parent Pledge and
Security Agreement to the Administrative Agent, for the benefit of the
Lenders and that contemporaneously herewith the Grantee shall execute and
deliver a separate copyright security agreement in the form attached as
Exhibit A hereto in favor of the Administrative Agent to further evidence
such collateral assignment.
2
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Copyright Security
Agreement to be duly executed by its officer thereunto duly authorized as of
the _____ day of April, 1999.
THE COLEMAN COMPANY, INC.
By
Name:
Title:
ACKNOWLEDGED AND AGREED:
SUNBEAM CORPORATION,
as Secured Party
By
--------------------------------
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
I, ______________________, a Notary Public in and for said
County, in the State aforesaid, DO HEREBY CERTIFY, that
_________________________, _______________ of THE COLEMAN COMPANY, INC.,
personally known to me to be the same person whose name is subscribed to the
foregoing instrument as such _________________, appeared before me this day in
person and acknowledged that (s)he signed, executed and delivered the said
instrument as her/his own free and voluntary act and as the free and voluntary
act of said Company, for the uses and purposes therein set forth being duly
authorized so to do.
GIVEN under my hand and Notarial Seal this ___ day of April,
1999.
[Seal]
Signature of notary public
My Commission expires __________
<PAGE>
EXHIBIT F
OPINION OF COUNSEL FOR GRANTOR
* * * *
1. The Security Agreement creates a valid security interest, for
the benefit of the Secured Party, in all Collateral (as defined in the
Intercompany Security Agreement) to the extent the Uniform Commercial Code,
the United States Copyright Act (the "CA"), the United States Patent Act (the
"PA") or the United States Trademark Act (the "TA") is applicable thereto
(the "SECURITY INTEREST").
2. Uniform Commercial Code financing statements and amendments
thereto (collectively, the "FINANCING STATEMENTS") have been filed in the
filing offices listed in Schedule 7 to the Perfection Certificate (the
"FILING JURISDICTIONS"), which are all of the offices in which filings are
required to perfect the Security Interest, to the extent the Security
Interest may be perfected by filing under the Uniform Commercial Code, and no
further filing or recording of any document or instrument or other action
will be required so to perfect the Security Interest, except that (i)
continuation statements with respect to each Financing Statement must be
filed within six months prior to the last day of each consecutive five-year
period beginning on the filing date; (ii) additional filings may be necessary
if the Grantor changes its name, identity or company structure or the
jurisdiction in which its places of business, its chief executive office or
the Collateral are located; and (iii) we express no opinion on the perfection
of, or need for further filing or recording to perfect, the Security Interest
in goods now or hereafter located in any jurisdiction other than the Filing
Jurisdictions.
3. Based solely upon our review of the search report dated ______
of [search firm], a copy of which is attached hereto, there are
(a) no Uniform Commercial Code financing statements which name
the Grantor as debtor or seller and cover any of the Collateral, other
than the Financing Statements and the financing statements with
respect to (i) Permitted Liens annexed as Schedule 5(A) to the
Perfection Certificate, (ii) the Liens granted to the Administrative
Agent under the Subsidiary Borrower Security Agreement and (iii) Liens
granted to a Subsidiary of the Parent in connection with the Existing
Receivables program, listed in the available records in the Uniform
Commercial Code filing offices set forth in paragraphs 2 and 3 of the
Perfection Certificate, which include all of the offices prescribed
under the Uniform Commercial Code as the offices in which filings
should have been made to perfect security interests in the Collateral;
and
(b) no notices of the filing of any federal tax lien (filed
pursuant to Section 6323 of the Internal Revenue Code) or any lien of
the Pension Benefit Guaranty Corporation (filed pursuant to Section
4068 of ERISA) covering any of the Collateral listed in the available
records in the Uniform Commercial Code filing office in state of
Grantor's chief executive office, which is the only office having
files which must be searched in order to fully determine the existence
of notices of the filing of federal tax liens (filed pursuant to
Section 6323 of the
<PAGE>
Internal Revenue Code) and liens of the Pension Benefit Guaranty
Corporation (filed pursuant to Section 4068 of ERISA) on the
Collateral.
4. The Security Interest validly secures the payment of all
future loans made by the Parent to the Grantor pursuant to the Coleman
Intercompany Note after the date hereof, whether or not at the time such
loans are made an Event of Default or any event not within the control of the
Parent has relieved or may relieve the Parent from their obligations to make
such loans, and is perfected to the extent set forth in paragraph 2 above
with respect to such future loans. Insofar as the priority thereof is
governed by the Uniform Commercial Code, the Security Interest has the same
priority with respect to such future loans as it does with respect to loans
made on the date hereof.
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS FILED IN THE COMPANY'S FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 18,508
<SECURITIES> 0
<RECEIVABLES> 230,129
<ALLOWANCES> 8,695
<INVENTORY> 253,409
<CURRENT-ASSETS> 540,297
<PP&E> 266,641
<DEPRECIATION> 125,613
<TOTAL-ASSETS> 992,232
<CURRENT-LIABILITIES> 266,989
<BONDS> 435
0
0
<COMMON> 558
<OTHER-SE> 234,164
<TOTAL-LIABILITY-AND-EQUITY> 992,232
<SALES> 280,451
<TOTAL-REVENUES> 280,690
<CGS> 198,371
<TOTAL-COSTS> 198,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,892
<INTEREST-EXPENSE> 7,575
<INCOME-PRETAX> 11,351
<INCOME-TAX> 4,540
<INCOME-CONTINUING> 6,741
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,741
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
