SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended JUNE 30, 1995
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 1-10177
WINDMERE CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 59-1028301
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5980 MIAMI LAKES DRIVE, MIAMI LAKES, FLORIDA 33014
(Address of principal executive offices) (Zip Code)
(305) 362-2611
(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 report(s), and (2) has been subject to such filing requirement
for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Number of Shares Outstanding
Class on August 8, 1995
Common Stock, $.10 Par Value 16,767,867
WINDMERE CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Statements of Earnings for
Second Quarters Ended June 30, 1995 and
1994
Consolidated Statements of Earnings for
Six Months Ended June 30, 1995 and 1994
Consolidated Balance Sheets as of
June 30, 1995, December 31, 1994
and June 30, 1994
Consolidated Statements of Cash Flows
for Six Months Ended June 30, 1995
and 1994
Notes to Consolidated Financial State-
ments
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WINDMERE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Second Quarter Ended
June 30, 1995 June 30, 1994
Sales $42,102,100 100.0% $41,962,000 100.0%
Cost of Goods Sold 31,715,500 75.3 29,722,000 70.8
Gross Profit 10,386,600 24.7 12,240,000 29.2
Selling, General and
Administrative Expenses 10,265,700 24.4 10,031,100 23.9
Unusual or Non-Recurring
Items (Note 4) 0 .0 (7,810,500) (18.6)
Operating Profit 120,900 .3 10,019,400 23.9
Other (Income) Expense
Interest Expense 186,100 .5 185,000 .4
Interest and Other Income (960,000) (2.3) (563,900 ) (1.3)
(773,900) (1.8) (378,900 ) (.9)
Earnings Before Equity in Net
Earnings (Loss) of Joint Venture
and Income Taxes 894,800 2.1 10,398,300 24.8
Equity in Net Earnings (Loss)
of Joint Venture 145,600 .3 355,300 .8
Earnings Before Income Taxes 1,040,400 2.4 10,753,600 25.6
Income Taxes
Current 176,700 .4 695,600 1.6
Deferred (72,300) (.2) 117,200 .3
104,400 .2 812,800 1.9
Net Earnings $ 936,000 2.2% $9,940,800 23.7%
Earnings Per Common Share
and Common Equivalent Share $.05 $.57
Average Number of Common
Shares and Common Equivalent
Shares Outstanding 17,425,900 17,933,800
Dividends Per Common Share $.05 $.05
The accompanying notes are an integral part of these statements.
WINDMERE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Six Months Ended
June 30, 1995 June 30, 1994
Sales $80,032,200 100.0% $73,153,600 100.0%
Cost of Goods Sold 59,428,900 74.3 51,832,400 70.9
Gross Profit 20,603,300 25.7 21,321,200 29.1
Selling, General and
Administrative Expense 20,367,700 25.4 19,103,500 26.1
Unusual or Non-Recurring
Items (Note 4) 0 .0 (7,810,500 )(10.7)
Operating Profit 235,600 .3 10,028,200 13.7
Other (Income) Expense
Interest Expense 316,400 .4 321,000 .4
Interest and Other Income (1,554,400) (1.9) (1,080,100 ) (1.4)
(1,238,000) (1.5) (759,100 ) (1.0)
Earnings Before Equity in Net
Earnings (Loss) of Joint
Venture, Income Taxes and
Minority Interest 1,473,600 1.8 10,787,300 14.7
Equity in Net Earnings (Loss)
of Joint Venture 130,600 .2 448,600 .6
Earnings Before Income Taxes
and Minority Interest 1,604,200 2.0 11,235,900 15.3
Income Taxes
Current 859,500 1.0 724,600 1.0
Deferred (496,500) (.6) 124,300 .1
363,000 .4 848,900 1.1
Earnings Before Minority
Interest 1,241,200 1.6 10,387,000 14.2
Minority Interest 0 .0 1,200 .0
Net Earnings $ 1,241,200 1.6% $10,388,200 14.2%
Earnings Per Common Share
and Common Equivalent Share $.07 $.60
Average Number of Common
Shares and Common Equivalent
Shares Outstanding 17,430,300 17,244,500
Dividends Per Common Share $.10 $.05
The accompanying notes are an integral part of these statements.
WINDMERE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS 6/30/95 12/31/94 6/30/94
CURRENT ASSETS
Cash & Cash Equivalents $ 6,903,600 $12,988,300 $31,705,600
Short-Term Investments 0 2,500,000 0
Accounts and Notes Receivable,
less allowances of $1,385,000 at
6/30/95; $1,338,100 at 12/31/94;
and $1,374,500 at 6/30/94 31,288,200 38,733,300 32,310,400
Receivables from Affiliates 10,288,300 12,444,300 8,739,600
Inventories
Raw Materials 24,986,100 18,993,200 19,231,200
Work-in-process 16,434,000 15,155,900 15,592,400
Finished Goods 46,059,000 40,129,300 36,894,900
Total Inventories 87,479,100 74,278,400 71,718,500
Prepaid Expenses (Note 3) 7,743,000 8,020,500 8,078,300
Future Income Tax Benefits 2,143,500 1,883,400 2,623,000
Total Current Assets 145,845,700 150,848,200 155,175,400
INVESTMENTS (Note 2) 0 0 0
PROPERTY, PLANT & EQUIPMENT -
AT COST, less accumulated
depreciation of $37,686,200
at 6/30/95; $35,404,100 at
12/31/94; and $32,727,700 at
6/30/94 29,488,200 28,449,100 24,203,000
OTHER ASSETS 17,364,400 17,826,700 17,415,200
___________ ___________ ___________
TOTAL ASSETS $192,698,300 $197,124,000 $196,793,600
WINDMERE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
LIABILITIES 6/30/95 12/31/94 6/30/94
CURRENT LIABILITIES
Notes and Acceptances Payable $2,206,600 $ 740,100 $2,882,300
Current Maturities of Long-Term
Debt 814,800 814,800 814,800
Accounts Payable 7,332,600 8,120,000 10,738,400
Accrued Expenses 7,481,900 8,981,700 9,247,700
Income Taxes 0 2,312,600 2,016,900
Deferred Income, current portion 598,100 598,100 598,100
Total Current Liabilities 18,434,000 21,567,300 26,298,200
LONG-TERM DEBT 3,259,300 3,666,700 4,095,600
DEFERRED INCOME, less current
portion 965,900 1,265,000 1,564,100
STOCKHOLDERS' EQUITY
Special Preferred Stock -
authorized 40,000,000 shares of
$.01 par value; none issued 0 0 0
Common Stock - authorized
40,000,000 shares of $.10 par
value; shares issued and out-
standing: 16,756,317 at 6/30/95;
16,734,172 at 12/31/94; and
16,949,315 at 6/30/94 1,675,600 1,673,400 1,694,900
Paid-in Capital 30,511,400 30,648,700 33,263,800
Retained Earnings 138,654,900 139,088,800 130,630,500
Unrealized Foreign Currency
Translation Adjustment (802,800 ) (785,900) (753,500)
Total Stockholders' Equity 170,039,100 170,625,000 164,835,700
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $192,698,300 $197,124,000 $196,793,600
The accompanying notes are an integral part of these statements.
WINDMERE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
6/30/95 6/30/94
Cash flows from operating activities
Net earnings $ 1,241,200 $10,388,200
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation of property, plant and
equipment 2,853,700 2,657,500
Amortization of intangible assets 287,900 193,600
Amortization of deferred income (299,100) (299,000)
Net change in allowance for losses
on accounts receivable 46,900 (50,100)
Equity in (earnings) loss of joint venture (130,600) (448,600)
Increase (decrease) in minority interest 0 (1,200)
Decrease (increase) in accounts and notes
receivable 7,398,200 (991,700)
Increase in inventories (13,200,700) (4,561,000)
Decrease (increase) in prepaid expenses 277,500 (1,087,400)
Increase (decrease) in accounts payable
and accrued expenses (2,287,200) 1,038,800
Increase (decrease) in notes and
acceptances payable 1,466,500 (113,500)
Increase (decrease) in current and
deferred income taxes (2,572,700) 1,332,100
Decrease in other assets 174,400 363,200
Decrease (increase) in other accounts (16,900) (42,800)
Net cash provided by (used in)
operating activities (4,760,900) 8,378,100
Cash flows from investing activities
Proceeds from fixed asset sales 182,400 1,606,900
Additions to property, plant and
equipment (4,075,200) (3,445,200)
Decrease in short-term investments 2,500,000 0
Decrease in receivables from
affiliates 2,286,600 875,600
Net cash provided by (used in)
investing activities $ 893,800 $ (962,700)
WINDMERE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Six Months Ended
6/30/95 6/30/94
Cash flows from financing activities
Payments of long-term debt $ (407,400) $ (407,600)
Exercise of stock options
and warrants 264,900 747,300
Cash dividends paid (1,675,100) (844,200)
Purchases of common stock (400,000) 0
Net cash used in
financing activities (2,217,600) (504,500)
Increase (decrease) in cash
and cash equivalents (6,084,700) 6,910,900
Cash and cash equivalents at
beginning of year 12,988,300 24,794,700
Cash and cash equivalents at end
of quarter $ 6,903,600 $31,705,600
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the six months for:
Interest $ 238,400 $ 273,000
Income taxes $ 2,070,500 $ 174,700
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Common stock issued for additional
investment in Durable Electrical
Metal Factory, Ltd. $ 0 $ 8,000,000
The accompanying notes are an integral part of these statements.
WINDMERE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to
present fairly the financial position as of June 30, 1995 and
1994, and the results of operations and changes in financial
position for the interim periods. Results for interim periods
should not be considered indicative of results for a full year.
Reference should be made to the financial statements contained
in the registrant's Annual Report on Form 10-K for the year
ended December 31, 1994.
Note 2. Investments include:
6/30/95 12/31/94 6/30/94
Joint Venture - at
cost plus equity in
undistributed earnings $ 0 $ 0 $ 0
The Company's joint venture investment at June 30, 1995,
December 31, 1994 and June 30, 1994 had negative values of $.2
million, $.4 million and $.1 million, respectively, which
deficits have been classified as a reduction in Receivables from
Affiliates.
The following table provides financial data for the Company's
joint venture investment accounted for on the equity method:
Six Six
Months Ended Year Ended Months Ended
6/30/95 12/31/94 6/30/94
Sales $ 20,060,500 $ 30,184,500 $ 20,881,400
Gross profit $ 1,948,300 $ 3,572,500 $ 2,794,000
Net Earnings $ 261,200 $ 185,000 $ 897,200
Note: Profits earned by the Company's manufacturing subsidiary
on sales to the joint venture are included in the consolidated
earnings results and are not part of the above table.
Note 3. The Company has reached an agreement-in-principle with the Hong
Kong Inland Revenue Department concerning the audit of the
Company's consolidated Hong Kong subsidiaries through 1991. The
proposed assessment, including interest charges and net of U.S.
foreign tax credits, approximates $1.4 million. The Company has
made a provision in its 1995 second quarter of $.4 million, or
$.02 per share, to increase its contingency reserve to the
proposed settlement amount. Security deposits of approximately
$3.0 million, which amounts are included in prepaid expenses,
will be refunded to the Company. Management believes that
adequate provision for taxes has been made for the years not yet
examined.
Note 4. Unusual or Non-Recurring Items: In April 1994, the Company's
manufacturing subsidiary, Durable Electrical Metal Factory, Ltd.
("Durable"), sold 60,000 square feet of office space in Hong
Kong, for $9,500,000. This transaction generated a non-
recurring profit of $7,810,500, or $.45 per share, in the
Company's 1994 second quarter results. No taxes were provided
as the gain was not taxable.
Note 5. Cash Dividends: The Board of Directors of the Company declared
a regular quarterly cash dividend of $.05 per share to
shareholders of record at the close of business on June 1, 1995,
which was paid on June 15, 1995.
The payment of dividends is at the discretion of the Board of
Directors of the Company and will depend upon, among other
things, future earnings, capital requirements, the Company's
financial condition and such other factors as the Board of
Directors may consider.
Note 6. In April 1994, Kabushiki Kaisha Izumi Seiki Seisakusho, a
Japanese corporation ("Izumi"), filed an action against the
Company, David M. Friedson, the President and Chief Executive
Officer of the Company, U.S. Philips Corporation, North American
Philips Corporation and N.V. Philips Gloellampenfabrieken
(together, "Philips"). This action concerns the 1992 settlement
(the "Philips Settlement") of certain claims, primarily a
Federal antitrust claim, made by the Company against Philips,
which resulted in an $89,644,257 judgment in favor of the
Company. Pursuant to the Philips Settlement, Philips paid the
Company $57,000,000 in May 1992. As part of the Philips
Settlement, the Company and Philips agreed that the Company's
money judgment against Philips in connection with such antitrust
litigation would be vacated. Izumi is claiming, among other
things, that the Philips Settlement, including the agreement
with Philips to cooperate to vacate the related judgment in
favor of the Company, constitutes a breach by the Company of a
customary indemnification agreement between Izumi (as seller of
goods) and the Company (as buyer of goods) dated February 20,
1984. This indemnification agreement covered certain claims
against the Company and was entered into more than eight months
prior to the commencement of the Philips litigation in
connection with the routine purchase by the Company of goods
from Izumi. Izumi advanced certain legal fees and costs to the
Company in connection with the Philips litigation. Izumi is
further claiming that it is entitled to recover from the Company
an unspecified portion of the Philips Settlement, punitive
damages and reimbursement of litigation and other related costs
and expenses. The Company disagrees with Izumi's position and
believes that it has meritorious defenses and counterclaims to
these claims by Izumi. The Company has filed a pre-answer
motion to dismiss Izumi's complaint in full, the final decision
on which is pending. The Company intends to defend this action
fully and vigorously.
In addition, on June 1, 1995, Izumi filed another lawsuit
against the Company and Philips. In this second lawsuit, Izumi
is seeking equitable relief in the form of reinstatement of the
1990 judgments in the Company's favor against Philips, which
were vacated. In its complaint, Izumi states that "the
$57,000,000 settlement between Windmere and Philips will stand
with or without reinstatement of the judgments." The time for
the Company to answer or otherwise respond to the complaint has
not yet passed. The Company believes that this second complaint
by Izumi has no merit, and it intends to defend it vigorously.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended June 30, 1995 Compared to
Three Months Ended June 30, 1994
Net sales were $42.1 million during the second quarter, a slight increase
from the $42.0 million recorded for the same period last year.
Manufacturing sales increased by $4.5 million due to increased shipments
of kitchen electric appliances. Distribution sales declined by $4.4
million due to the weak U.S. retailing environment. A kitchen electric
appliance distributor accounted for 13.3% of the Company's total sales
during this year's second quarter.
COMPARATIVE SALES RESULTS
Three Months Ended
June 30, 1995 June 30, 1994
DISTRIBUTION $ 32,094,400 76.2% $ 36,481,300 86.9%
MANUFACTURING 10,007,700 23.8 5,480,700 13.1
Total Sales $ 42,102,100 100.0% $ 41,962,000 100.0%
The Company's gross margin percentage declined in the current year's second
quarter to 24.7% of sales from the 29.2% level achieved during the same
period last year primarily due to higher raw materials costs and a greater
concentration of manufacturing sales, which carry lower margins. The
higher costs of raw materials have continued into the third quarter of
1995.
Selling, general and administrative expenses as a percentage of sales were
relatively unchanged in the second quarters of 1995 and 1994.
In 1994's second quarter, the Company recorded an unusual and non-recurring
gain of $7.8 million on the sale of 60,000 square feet of office space in
Hong Kong. See Note 4 on page 10.
The Company's interest and other income was $.4 million higher in the 1995
second quarter compared to the similar period last year primarily due to
interest earned on the security deposits held by Hong Kong Inland Revenue
Department pending the resolution of the Hong Kong tax examination, and
sub-contracting income earned by Durable.
The Company's equity in net earnings of joint venture was $.2 million lower
in the 1995 second quarter compared to the similar period last year
primarily due to lower gross margins earned by the joint venture this year.
The Company's tax expense is based on the earnings of each of its foreign
and domestic operations and it includes such additional U.S. taxes as are
applicable to the repatriation of foreign earnings. Offshore earnings
generally are taxed at rates lower than in the United States. The Company
made a provision in its 1995 second quarter of $.4 million, or $.02 per
share, as a result of its anticipated settlement of a Hong Kong tax audit.
See Note 3 on page 9.
The average number of common shares and common equivalent shares used in
computing per share results was lower in 1995 primarily as a result of the
446,600 common shares purchased and retired since August 1994.
Six Months Ended June 30, 1995 Compared to
Six Months Ended June 30, 1994
Net sales were $80.0 million for the six months ended June 30, 1995, a 9.2%
increase from the $73.2 million recorded for the same period last year.
Durable's manufacturing sales were $7.5 million higher primarily due to
increased shipments of kitchen electric appliances. Wal-Mart Stores, Inc.
and a kitchen electric appliance distributor accounted for 12.3% and 11.5%,
respectively, of the Company's total sales in 1995.
COMPARATIVE SALES RESULTS
Six Months Ended
June 30, 1995 June 30, 1994
DISTRIBUTION $63,542,800 79.4% $64,138,600 87.7%
MANUFACTURING 16,489,400 20.6 9,015,000 12.3
Total Sales $80,032,200 100.0% $73,153,600 100.0%
The Company's gross margin percentage decreased for the six months ended
June 30, 1995 to 25.7% of sales from the 29.1% level in the prior year due
to higher raw materials costs and the greater concentration of lower-margin
manufacturing sales. The higher costs of raw materials have continued into
the third quarter of 1995.
Selling, general and administrative expenses increased by $1.3 million this
year, but declined by .7% as a percentage of sales. Manufacturing sales,
which were a greater part of total sales this year, incur lower selling,
general and administrative expenses than distribution sales.
The Company's interest and other income was $.5 million higher in the six
months ended June 30, 1995 compared to the similar period last year
primarily due to interest earned on the security deposits held by Hong Kong
Inland Revenue Department pending the resolution of the Hong Kong tax
examination, and sub-contracting income earned by Durable.
The Company's equity in net earnings of joint venture was $.1 million and
$.4 million in the first half of 1995 and 1994, respectively. Lower gross
margins in 1995 produced the decline in the joint venture's earnings.
The Company's tax expense is based on the earnings of each of its foreign
and domestic operations and it includes such additional U.S. taxes as are
applicable to the repatriation of foreign earnings. Offshore earnings
generally are taxed at rates lower than in the United States. The Company
made a provision in its 1995 second quarter of $.4 million, or $.02 per
share, as a result of its anticipated settlement of a Hong Kong tax audit.
See Note 3 on page 9.
The average number of common shares and common equivalent shares used in
computing per share results for the six months ended June 30 was 1.1%
higher in 1995 primarily as a result of the 1,000,000 shares issued on
April 1, 1994 to acquire the 20% minority interest in Durable, as these
shares were only in the 1994 weighted average shares calculation for three
months of the six month period. Reducing the impact of these additional
shares in the 1995 calculation is the Company's purchase and retirement of
446,600 common shares since August 1994, of which 49,200 were retired
during 1995.
Liquidity & Capital Resources
At June 30, 1995, the Company's current ratio and quick ratio were 7.9 to
1 and 3.2 to 1 and at June 30, 1994, they were 5.9 to 1 and 3.2 to 1,
respectively. Working capital at June 30, 1995 and 1994 was $127.4 million
and $128.9 million, respectively.
Cash and cash equivalents at June 30, 1995 are approximately $6.1 million
lower than the December 31, 1994 level. Cash of $9.7 million was generated
from lower affiliate and accounts receivable balances. The Company
utilized approximately $19.6 million of cash during the six month period
to build inventory, acquire fixed assets and to decrease accounts payable.
Cash dividends of $1.7 million were paid to shareholders in 1995.
The Company's foreign subsidiaries (the "subsidiaries") have a $3.9 million
trade finance line of credit, payable on demand, which is secured by the
subsidiaries' tangible and intangible property located in Hong Kong and in
the People's Republic of China, as well as a Company guarantee. At June
30, 1995, the subsidiaries were utilizing, including letters of credit,
approximately $2.7 million of this credit line. These subsidiaries also
have available an additional $5.0 million line of credit which is supported
by a domestic standby letter of credit, which credit line had not been used
as of June 30, 1995.
The Company has a $10.0 million ($20.0 million during the period July
through December 1995) line of credit from a domestic bank, which is
secured by domestic accounts receivable. At June 30, 1995, the Company was
borrowing $1.5 million under this credit line.
No provisions for U.S. taxes has been made on undistributed earnings of the
Company's foreign subsidiaries and joint ventures because management plans
to reinvest such earnings in their respective operations or in other
foreign operations. Repatriating those earnings or using them in some
other manner which would give rise to a U.S. tax liability would reduce
after tax earnings and available working capital.
The Company believes that its cash on hand and internally generated funds,
together with its credit lines, will provide sufficient funding to meet the
Company's capital requirements and its operating needs for the foreseeable
future.
Legal Proceedings
In April 1994, Kabushiki Kaisha Izumi Seiki Seisakusho, a Japanese
corporation ("Izumi"), filed an action against the Company, David M.
Friedson, the President and Chief Executive Officer of the Company, U.S.
Philips Corporation, North American Philips Corporation and N.V. Philips
Gloellampenfabrieken (together, "Philips"). This action concerns the 1992
settlement (the "Philips Settlement") of certain claims, primarily a
Federal antitrust claim, made by the Company against Philips, which
resulted in an $89,644,257 judgment in favor of the Company. Pursuant to
the Philips Settlement, Philips paid the Company $57,000,000 in May 1992.
As part of the Philips Settlement, the Company and Philips agreed that the
Company's money judgment against Philips in connection with such antitrust
litigation would be vacated. Izumi is claiming, among other things, that
the Philips Settlement, including the agreement with Philips to cooperate
to vacate the related judgment in favor of the Company, constitutes a
breach by the Company of a customary indemnification agreement between
Izumi (as seller of goods) and the Company (as buyer of goods) dated
February 20, 1984. This indemnification agreement covered certain claims
against the Company and was entered into more than eight months prior to
the commencement of the Philips litigation in connection with the routine
purchase by the Company of goods from Izumi. Izumi advanced certain legal
fees and costs to the Company in connection with the Philips litigation.
Izumi is further claiming that it is entitled to recover from the Company
an unspecified portion of the Philips Settlement, punitive damages and
reimbursement of litigation and other related costs and expenses. The
Company disagrees with Izumi's position and believes that it has
meritorious defenses and counterclaims to these claims by Izumi. The
Company has filed a pre-answer motion to dismiss Izumi's complaint in full,
the final decision on which is pending. The Company intends to defend this
action fully and vigorously.
In addition, on June 1, 1995, Izumi filed another lawsuit against the
Company and Philips. In this second lawsuit, Izumi is seeking equitable
relief in the form of reinstatement of the 1990 judgments in the Company's
favor against Philips, which were vacated. In its complaint, Izumi states
that "the $57,000,000 settlement between Windmere and Philips will stand
with or without reinstatement of the judgments." The time for the Company
to answer or otherwise respond to the complaint has not yet passed. The
Company believes that this second complaint by Izumi has no merit, and it
intends to defend it vigorously.
The Company is subject to other legal proceedings and claims which arise
in the ordinary course of its business. In the opinion of management, the
amount of ultimate liability, if any, with respect to these actions will
not materially affect the financial position of the Company.
Manufacturing Operations
The Company's products are primarily manufactured by Durable, its wholly-
owned Hong Kong subsidiary, in Bao An County, Guandong Province of the
People's Republic of China, which is approximately 60 miles northwest of
central Hong Kong. The Company has a significant amount of its assets in
the People's Republic, primarily consisting of inventory, equipment and
molds. Substantially all of the Company's products are manufactured by
Durable and unrelated factories in the People's Republic. Approximately
85% to 90% of the Company's products are manufactured by Durable. The
supply and cost of these products can be adversely affected, among other
reasons, by changes in foreign currency exchange rates, increased import
duties, imposition of tariffs, imposition of import quotas, interruptions
in sea or air transportation and political or economic changes. From time
to time, the Company explores opportunities to diversify its sourcing
and/or production of certain products to other low-cost locations or with
other third parties or joint venture partners in order to reduce its
dependence on production in the People's Republic and/or reduce Durable's
dependence on the Company's existing distribution base. However, at the
present time, the Company intends to continue its production in the
People's Republic.
In June 1989, the People's Republic experienced civil disturbances and,
although such disturbances have dissipated since that time, there continues
to be pressure for political reform. No assurance can be given, however,
that civil disturbances will not recur. If it becomes necessary to
relocate the Company's manufacturing facilities from the People's Republic
as a result of civil disturbances in that country or otherwise, the Company
believes the production currently conducted in the People's Republic could
be relocated to other Far East locations, including Hong Kong, or other
low-cost manufacturing locations, with only temporary disruption and delay
in such production and possible short-term operating and capital losses,
provided that the Company is able to move substantially all of its
manufacturing equipment and other assets currently in the People's Republic
to another location. If the Company is unable to remove such assets, due
to confiscation, expropriation, nationalization, embargoes or governmental
restrictions, it would incur substantial operating and capital losses,
including losses resulting from business disruption and delays in
production. In addition, as a result of a relocation of its manufacturing
equipment and certain other assets, the Company would likely incur
relatively higher manufacturing costs. A relocation could also adversely
affect the Company's revenues if the demand for the Company's products
currently manufactured in the People's Republic decreases due to a
disruption in the production and delivery of such products or due to higher
prices which might result from increased manufacturing costs. Furthermore,
earnings could be adversely affected due to reduced sales and/or the
Company's inability to maintain its current margins on the products
currently manufactured in the People's Republic.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See "Legal Proceedings" in Part I, Item 2 of this report.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 1. Amended and Restated Letter Agreement dated July 28,
1995, between NationsBank and the Company.
Exhibit 2. Facility Letter dated June 3, 1995, from the Bank of
East Asia, Limited to Durable, Durable Electric Limited and PPC
Industries 1980 Limited.
(b) There were no reports on Form 8-K filed for the three months
ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINDMERE CORPORATION
(Registrant)
August 11, 1995 By: /s/
Harry D. Schulman
Executive Vice President - Finance
and Administration and Chief
Financial Officer
(Duly authorized to sign on
behalf of the Registrant)
August 11, 1995 By: /s/
Burton A. Honig
Vice President - Finance
(Duly authorized to sign on
behalf of the Registrant)
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 6,903,600
<SECURITIES> 0
<RECEIVABLES> 32,673,200
<ALLOWANCES> 1,385,000
<INVENTORY> 87,479,100
<CURRENT-ASSETS> 145,845,700
<PP&E> 67,174,400
<DEPRECIATION> 37,686,200
<TOTAL-ASSETS> 192,698,300
<CURRENT-LIABILITIES> 18,434,000
<BONDS> 3,259,300
<COMMON> 1,675,600
0
0
<OTHER-SE> 168,363,500
<TOTAL-LIABILITY-AND-EQUITY> 192,698,300
<SALES> 80,032,200
<TOTAL-REVENUES> 80,032,200
<CGS> 59,428,900
<TOTAL-COSTS> 59,428,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 236,500
<INTEREST-EXPENSE> 316,400
<INCOME-PRETAX> 1,473,600
<INCOME-TAX> 363,000
<INCOME-CONTINUING> 1,241,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 1,241,200
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</TABLE>
AMENDED AND RESTATED LETTER AGREEMENT
July 28, 1995
Windmere Corporation
5980 Miami Lakes Drive
Miami Lakes, Florida 33014-2467
Re: Loan and Letter of Credit Facility of up to $20,000,000 by
NationsBank of Florida, National Association to Windmere
Corporation
Gentlemen:
Windmere Corporation, a Florida corporation (the
"Borrower"), and NationsBank of Florida, National Association, a
national banking association (the "Bank"), previously have
entered into a Letter Agreement dated December 28, 1993 whereby
the Bank agreed to make a revolving loan upon certain terms and
conditions more specifically set forth below, in the principal
amount of $10,000,000 to the Borrower to be used to (i) provide
working capital and (ii) provide a letter of credit facility of
up to $2,000,000. The Borrower has requested that the Bank
increase the amount of the revolving loan to the principal amount
of $20,000,000 until December 31, 1995 and thereafter to continue
the revolving loan in the principal amount of $10,000,000, and
that the Bank increase the letter of credit facility to
$5,000,000 to the Borrower. The Bank is willing, and does hereby
agree, to make the increased revolving loan and letter of credit
facility to Borrower subject to and upon the terms and conditions
set forth in this amended and restated letter agreement (the
"Agreement"). Certain capitalized terms used herein shall have
the definition set forth in Exhibit A attached hereto.
1. The Loan. So long as no default or Event of Default
exists hereunder, the Bank agrees to loan to Borrower from time
to time a principal sum not in excess at any time of the
Committed Amount, such loan to be used for the purposes described
in the preceding paragraph (the "Loan"), provided that
immediately after giving effect to each Loan, the principal
amount of outstanding Loans and the Outstanding Letters of Credit
shall not exceed the Borrowing Base. The amount of Loans which
shall be available hereunder shall be reduced by the face amount
of outstanding Letters of Credit. The Loan, together with
interest thereon, shall be repayable in the manner and at the
rate of interest provided in the form of the Amended and Restated
Note attached as Exhibit B hereto and by reference made a part
hereof (the "Note"). The Loan shall be due and payable on the
Termination Date. However, if Borrower shall have furnished to
the Bank the financial statements described in Paragraph 9(a)
hereof, the Borrower may request in writing not earlier than 90
days prior to the Termination Date that such date be extended for
an additional period of 360 days. The Bank shall advise the
Borrower at least 60 days prior to the Termination Date of
whether it, in its sole discretion, is willing to extend the
Termination Date. No Loan or Letter of Credit issued pursuant to
this Agreement shall have an Interest Period (as defined in the
Note) or expiry date, respectively, that extends beyond the
Termination Date. The minimum amount of any Loan made pursuant
to this Agreement shall be $500,000 and multiples of $100,000 in
excess thereof.
2. Letters of Credit. (a) The Bank agrees, subject to the
terms and conditions of this Agreement, upon the request of the
Borrower to issue from time to time for the account of the
Borrower Letters of Credit; provided that (i) after giving effect
to the issuance of the requested Letter of Credit the face amount
of all Letters of Credit outstanding hereunder shall not exceed
the lesser of $5,000,000, (ii) after giving effect to the
issuance of the requested Letter of Credit the sum of the
Outstanding Letters of Credit and Loans outstanding hereunder
shall not exceed the Committed Amount or the Borrowing Base, and
(iii) any request for issuance of a Letter of Credit shall be
accompanied by an application for letter of credit in form and
content acceptable to the Bank.
(b) The Borrower hereby unconditionally agrees to pay to
the Bank on demand (i) all amounts required to pay all drafts
drawn or purporting to be drawn under the Letters of Credit and
(ii) the face amount of each draft accepted by the Bank on the
maturity date of such draft, or in the event of a Default or
Event of Default, and any and all expenses of every kind incurred
by the Bank in connection with the Letters of Credit and in any
event and without demand to place in possession of the Bank
(which shall include proceeds of Loans under Paragraph 1 hereof
to the extent available) sufficient funds to pay all debts and
liabilities arising under any Letter of Credit. The Borrower's
obligations to pay the Bank under this Paragraph 2(b) and the
Bank's right to receive the same, shall be absolute and
unconditional and shall not be affected by any circumstance
whatsoever. The Bank may charge any account the Borrower may
have with it for any and all amounts the Bank pays under a Letter
of Credit, plus commissions, charges and expenses as from time to
time agreed to in writing by the Bank and the Borrower; provided
that to the extent permitted by Paragraph 1, amounts shall be
paid pursuant to Loans. The Borrower agrees that the Bank may,
in its sole discretion, accept or pay, as complying with the
terms of any Letter of Credit, any drafts or other documents
otherwise in order which may be signed or issued by an
administrator, executor, trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, liquidator,
receiver, attorney in fact or other legal representative of a
party who is authorized under such Letter of Credit to draw or
issue any drafts or other documents. The Borrower agrees to pay
the Bank interest on any amounts not paid when due hereunder at
the Base Rate (as defined in the Note) plus two percent (2%), or
such lower rate as may be required by law.
(c) The issuance by the Bank of each Letter of Credit shall
be subject to the conditions that such Letter of Credit be in
such form, contain such terms and support such transactions or
obligations as shall be reasonably satisfactory to the Bank
consistent with the Bank's then current practices and procedures
with respect to similar letters of credit. All Letters of Credit
shall be issued pursuant to and subject to the Uniform Customs
and Practice for Documentary Credits, 1983 revision,
International Chamber of Commerce Publication No. 400 and all
subsequent amendments and revisions thereto. The Borrower shall
have executed and delivered such other instruments and agreements
relating to such Letter of Credit as the Bank shall have
reasonably requested consistent with such practices and
procedures.
(d) The Borrower hereby indemnifies and holds harmless the
Bank from and against any and all claims and damages, losses,
liabilities, costs or expenses which the Bank may incur (or which
may be claimed against the Bank) by any person by reason of or in
connection with the issuance or transfer of or payment or failure
to pay under any Letter of Credit; provided that the Borrower
shall not be required to indemnify the Bank for any claims,
damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, (i) caused by the willful misconduct or
gross negligence of the party to be indemnified, and (ii) caused
by the Bank's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms
and conditions of such Letter of Credit, unless such payment is
prohibited by any law, regulation, court order or decree.
(e) The Borrower shall pay to the Bank such administrative
fees in connection with Letters of Credit as the Borrower and
Bank shall agree. In addition, in connection with the issuance
of Letters of Credit (i) which provide credit support (a "Standby
Letter of Credit"), other than in connection with a commercial
transaction, the Borrower shall pay to the Bank an issuance fee
equal to one and one-half percent (1-1/2%) per annum or (ii)
which are issued to support a commercial transaction (a
"Documentary Letter of Credit"), the Borrower shall pay to the
Bank an issuance fee equal to one quarter of a percent (1/4%) for
each 120 day term or part thereof of such Documentary Letter of
Credit. The issuance fees shall be calculated on the basis of a
year of 360 days for actual days elapsed and shall be payable
quarterly in arrears on the last day of each December, March,
June and September.
3. Security. As security for repayment of the
indebtedness arising hereunder, the Borrower and its Domestic
Subsidiaries previously have executed and delivered to the Bank
one or more Security Agreements - Account dated as of December
28, 1993 pursuant to which the Borrower and its Domestic
Subsidiaries have granted the Bank a first priority lien on
Domestic Receivables (as defined therein) of Borrower and its
Domestic Subsidiaries, and to continue security for the repayment
of the increased indebtedness hereunder, the Borrower and its
Domestic Subsidiaries shall execute and deliver to the Bank a
Consolidated Amendment to Security Agreements - Account dated as
of even date herewith (such Security Agreements - Account, as so
amended by the Consolidated Amendment, are collectively referred
to as the "Security Agreement"). In addition, all Domestic
Subsidiaries of the Borrower have by an Affiliate Guaranty and
Suretyship Agreement dated as of December 28, 1993 each
guaranteed the obligations of Borrower to the Bank in the manner
set forth therein (the "Guaranty"), and all such Domestic
Subsidiaries shall consent, acknowledge and agree to the
increased indebtedness represented hereby by consenting to this
Agreement where noted hereon. This Agreement, the Security
Agreement, the Note and the Guaranty are herein collectively
called the "Loan Documents".
4. Yield Protection. If any law or guideline or
interpretation or application thereof by any governmental agency
charged with the interpretation or administration thereof or
compliance with any request or directive of any governmental
agency (whether or not having the force of law), now existing or
hereafter adopted:
(i) subjects the Bank to any new tax or changes the
basis of taxation with respect to this Agreement, the Note,
the Loans or payments by the Borrower of principal,
interest, fees or other amounts due hereunder or under the
Note (except for taxes on the overall net income of the Bank
imposed by the country, state, county, city or equivalent
jurisdiction in which the Bank's principal executive office
is located),
(ii) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against credits or
commitments to extent credit extended by, or assets (funded
or contingent) of, deposits with or for the account of or
other acquisitions of funds by, the Bank (other than
requirements expressly included herein or in the Note in the
determination of the Eurodollar-Rate),
(iii) imposes, modifies or deems applicable any capital
adequacy or similar requirement (A) against assets (funded
or contingent) of, or credits or commitments to extend
credit extended by, the Bank or (B) otherwise applicable to
the obligations of the Bank under this Agreement, or
(iv) imposes upon the Bank any other condition or
expense with respect to this Agreement, the Notes or the
making, maintenance or funding of any part of the Loans or
Letters of Credit,
and the result of any of the foregoing is to increase the cost
to, reduce the income received by, or impose any expense
(including loss of margin) upon the Bank with respect to this
Agreement, the Note or the making, maintenance or funding of any
part of the Loans or Letters of Credit (or, in the case of any
capital adequacy or similar requirement, to have the effect of
reducing the rate of return on the Bank's capital, taking into
consideration the Bank's policies with respect to capital
adequacy) by an amount which the Bank deems to be material, the
Bank shall from time to time notify the Borrower of the amount
determined in good faith (using any reasonable averaging and
attribution methods) by the Bank (which determination shall be
conclusive) to be necessary to compensate the Bank for such
increase, reduction or imposition. Such amount shall be due and
payable by the Company to the Bank the Business Day after such
notice is given. A certificate by the Bank as to the amount due
under this Paragraph 4 from time to time and describing in
reasonable detail the determination of such amount shall be
conclusive absent manifest error. The Bank agrees that it will
use good faith efforts to notify the Borrower of the occurrence
of any event that would give rise to a payment under this
Paragraph 4.
(b) In addition to the compensation required by this
Paragraph 4, the Borrower shall indemnify the Bank against any
loss or expense (including loss of margin) which the Bank
sustains or incurs as a consequence of any
(i) payment or prepayment by the Borrower of any of
such Eurodollar Loans on a day other than the last day
thereof (whether or not such payment or prepayment is
mandatory or automatic or is then due),
(ii) attempt by the Borrower to revoke (expressly, by
later inconsistent notices or otherwise) in whole or part
any notice stated herein to be irrevocable, or
(iii) default by the Borrower in the performance or
observance of any covenant or condition contained in this
Agreement or the Note, including without limitation any
failure of the Borrower to pay when due (by acceleration or
otherwise) any principal, interest, commitment fee or any
other amount due hereunder or under this Agreement or the
Note.
If the Bank sustains or incurs any such loss or expense it shall
from time to time notify the Borrower of the amount determined in
good faith by the Bank (which determination shall be conclusive
absent manifest error) to be necessary to indemnify the Bank for
such loss or expense. Such amount shall be due and payable by
the Borrower to the Bank ten Business Days after such notice is
given.
5. Mandatory Reduction. The Committed Amount shall
automatically and permanently be reduced by $10,000,000 on
December 31, 1995. This reduction shall be accompanied by a
prepayment of the Note (together with accrued interest thereon)
to the extent that the principal amount thereof then outstanding
exceeds the Committed Amount.
6. Unused Fee. For the period beginning on the date hereof
and ending on December 31, 1995 (or on the Termination Date, if
earlier), the Borrower will pay to the Bank an unused fee equal
to one quarter of a percent (1/4%) per annum multiplied by the
amount by which the Committed Amount exceeds the greater of (i)
$10,000,000 or (ii) the daily amount of (A) the aggregate undrawn
amount of Standby Letters of Credit and (B) Loans outstanding.
The unused fees shall be calculated on a basis of a year of 360
days for actual days elapsed and shall be payable quarterly in
arrears on the last day of each of September and December 1995.
7. Representations and Warranties. In order to induce the
Bank to make the Loan and to issue Letters of Credit, the
Borrower represents and warrants to the Bank (which
representations and warranties shall survive the delivery of the
documents mentioned herein and the making of the Loans
contemplated hereby) that:
(a) The Borrower is a duly organized corporation,
validly existing and in good standing under the laws of the State
of Florida, and has the power and authority to own its properties
and assets and to carry on its business as now being conducted,
and the Borrower has all necessary federal, state and other
licenses and permits to carry on and conduct such businesses in
each jurisdiction in which the transaction of its business makes
such licenses and permits necessary;
(b) The Borrower has full power and authority under
all applicable provisions of law to make and perform this
Agreement and to issue and deliver the Note and other Loan
Documents to which it is a party and all action on its part
required for the making and performing of this Agreement and the
borrowing under and the issuance and delivery of the Note and
other Loan Documents to which it is a party has been duly taken,
and this Agreement, the Note and other Loan Documents to which it
is a party upon the execution and delivery thereof, will be the
legal, valid, binding and enforceable obligation and instrument
of the Borrower in accordance with their terms. Neither the
execution of this Agreement and other Loan Documents nor the
issuance and delivery of the Note, nor the fulfillment of or
compliance with their provisions and terms, will conflict with,
or result in a breach of the terms, conditions or provisions of,
or constitute a violation of or default under any law,
regulation, writ or decree, the Articles of Incorporation or
Bylaws of Borrower, or any agreement or instrument to which
Borrower or any Subsidiary is now a party, or create any lien,
charge or encumbrance (other than those expressly provided for
herein) upon any of the property or assets of Borrower pursuant
to the terms of any agreement or instrument to which Borrower is
a party or by which it or either of them is bound;
(c) No written approval of any federal, state or local
governmental authority is necessary to carry out the terms of
this Agreement, or any of the other Loan Documents. Borrower has
obtained any and all consents required in order to execute and
deliver this Agreement, the Security Agreement, and the Note and
any other Loan Documents to which it is a party;
(d) The Borrower has provided the Bank with annual
audited financial statements dated as of December 31, 1993 and
1994 and interim financial statements for the three months ended
March 31, 1995. To the best of the Borrower's knowledge, the
financial statements are true and correct and fairly represent
the Borrower's financial position as of December 31, 1994 and
March 31, 1995. To the best of the Borrower's knowledge, there
has been no material adverse change in the condition, financial
or otherwise, of the Borrower since March 31, 1995;
(e) Except as set forth on Schedule 7(e) attached
hereto, there is no action, suit or proceeding at law or in
equity or before any governmental instrumentality or other agency
now pending or, to the knowledge of Borrower, threatened against
or affecting Borrower or any Subsidiaries which, if adversely
determined, would materially and adversely affect the financial
condition or operations of Borrower or any Subsidiaries;
(f) Borrower has good and marketable title to all of
its properties and assets reflected in the financial statements
and notes thereto described in subparagraph (d) of this
paragraph, except for such assets as have been disposed of since
the date of said financial statements as no longer used or useful
in the conduct of its business or as have been disposed of in the
ordinary course of business, and all such properties and assets
are free and clear of mortgages, pledges, liens, charges and
other encumbrances except as otherwise summarized in the
aforesaid financial statements;
(g) The Borrower and its Subsidiaries are in material
compliance with all of the provisions of the Employee Retirement
Income Securities Act of 1974 ("ERISA") and no plan maintained by
the Borrower or any Subsidiary, nor any trust created thereunder,
have incurred any "accumulated funding deficiency" as defined in
Section 302 of ERISA;
(h) To the best of Borrower's knowledge, the Borrower
and its Subsidiaries are not in violation of any applicable
Federal, state or local laws, statutes, rules, regulations or
ordinances relating to public health, safety or the environment.
The Borrower does not know of any liability or class of liability
of the Borrower or any Subsidiary under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended (42 U.S.C. Section 901, et seq.) or the Resource
Conservation and Recovery Act of 1976, as amended (42 U.S.C.
Section 6901, et seq.); and
(i) The Borrower and its Subsidiaries maintain in full
force and effect insurance coverage of types and amounts which
are customary for a business of its and their type and size.
8. Conditions of Closing. At the time of the closing the
following conditions precedent shall have been satisfied:
(a) Borrower shall deliver to the Bank the fully
executed Loan Documents, financing statements and such other
letters, instruments and documents as the Bank shall require.
(b) Borrower shall deliver all instruments and
documents incident to the issuance and delivery of the Note in
form and substance reasonably satisfactory to the Bank and
special counsel for the Bank, and the Bank shall have received an
opinion of counsel for the Borrower and each Subsidiary in form
and content acceptable to it.
(c) Borrower shall have paid to the Bank a closing fee
of $7,500.
(d) The continuing accuracy of all representations and
warranties of the Borrower contained herein.
(e) No event shall have occurred or be continuing that
would constitute a Default or Event of Default as set forth
below.
9. Affirmative Covenants. The Borrower covenants and
agrees that, until all of the indebtedness of the Borrower
incurred hereunder is paid in full and all obligations to make
Loans hereunder have terminated and all Letters of Credit have
expired it will, unless specifically agreed otherwise and
confirmed by the Bank in writing:
(a) as soon as practical and in any event (i) within
90 days of the end of its fiscal year deliver or cause to be
delivered to the Bank financial statements on a consolidated and
consolidating basis in form and content acceptable to the Bank,
setting forth comparative financial statements for the preceding
fiscal year, all prepared in accordance with Generally Accepted
Accounting Principles and in the case of the consolidated
statements containing an unqualified opinion of independent
certified public accountants acceptable to the Bank, together
with a certificate of the chief financial officer of the Borrower
demonstrating compliance with Sections 9(b) and 9(c) hereof
(which certificate shall be in the form of Exhibit C attached
hereto); (ii) within 45 days of the end of each fiscal quarter,
other than the last, of each fiscal year deliver to the Bank
financial statements on a consolidated and consolidating basis in
form and content acceptable to the Bank for the period from the
beginning of the fiscal year through the end of such reporting
period, all prepared in accordance with Generally Accepted
Accounting Principles subject to normal year end adjustments and
certified by the chief financial officer of Borrower to be
accurate and correct, together with a certificate of the chief
financial officer of Borrower containing computations for such
quarter comparable to that required pursuant to subparagraph
(a)(i) herein; (iii) within 15 days following the last day of
each calendar month deliver to the Bank (A) a summary and aging
of Eligible Receivables and (B) a Borrowing Base Certificate to
the Bank in the form of Exhibit D attached hereto; (iv) within
five days of receipt thereof a copy of any management letter
furnished to Borrower by its public accountants; and (v) within
five days of mailing or filing any report filed with the
Securities and Exchange Commission or any stock exchange;
(b) Maintain at all times Consolidated Tangible Net
Worth equal to the sum of (i) $140,000,000 plus (ii) 50% of
Consolidated Net Income for each quarterly period subsequent to
March 31, 1995 plus (iii) the aggregate net proceeds of any
equity offering (including net proceeds under any stock option or
executive compensation plan) received by Borrower after the date
hereof;
(c) Maintain at all times a Consolidated Interest
Coverage Ratio of not less than 2.00 to 1.00;
(d) Maintain its property in good order and repair and
from time to time, make all needful and proper repairs, renewals,
replacements, additions and improvements thereto;
(e) Furnish to the Bank with reasonable promptness
such additional financial or other information relating to the
financial condition or operations of the Borrower as the Bank may
from time to time reasonably request and permit officers of the
Bank, on reasonable notice, to inspect the properties, books and
records of the Borrower;
(f) Promptly pay, or cause to be paid, all taxes,
assessments and other governmental charges which may lawfully be
levied or assessed upon the income or profits of the Borrower or
upon any property, real, personal or mixed, belonging to the
Borrower, or upon any part thereof, and also any lawful claims
for labor, material and supplies which, if unpaid, might become a
lien or charge against any such property; provided, however,
Borrower shall not be required to pay any such tax, assessment,
charge, levy or claim so long as the validity thereof shall be
actively contested in good faith by proper proceedings; but
provided further that any such tax, assessment, charge, levy or
claim shall be paid forthwith upon the commencement of
proceedings to foreclose any lien securing the same;
(g) Permit the Bank, at the Borrower's expense, at
least quarterly to cause the Bank's employees or agents to enter
the premises of the Borrower and audit the Borrower's Domestic
Receivables; and
(h) Do or cause to be done all things necessary to
preserve and to keep in full force and effect its existence,
rights and franchises granted by law or otherwise.
10. Negative Covenants. Borrower covenants and agrees
that, until all of the indebtedness of the Borrower hereunder is
paid in full and all obligations to make Loans hereunder has
terminated and all Letters of Credit have expired, the Borrower
will not, unless specifically agreed to by the Bank and confirmed
in writing:
(a) Sell, lease, transfer or dispose of all or any
part of its assets except in the ordinary course of business;
(b) Incur, create, assume or permit to exist aggregate
Indebtedness in excess of $1,000,000, however evidenced, or
guarantee, assume or endorse or otherwise become or remain liable
in connection with any Contingent Obligation, other than (i) the
Indebtedness evidenced by the Note and Indebtedness approved by
the Bank and (ii) Indebtedness listed on Exhibit E attached
hereto; and
(c) Permit at any time total outstanding Indebtedness
of the Borrower to the Bank to exceed 75% of Eligible
Receivables.
(d) Purchase, redeem or otherwise retire shares of the
Borrower's stock in an aggregate amount greater than $10,000,000.
11. Default. Upon the occurrence of any of the following
events ("Events of Default"):
(a) Nonpayment of principal or interest when and as
the same shall become due hereunder;
(b) Failure to observe or perform any of the other
terms, covenants or conditions of this Agreement and the failure
to remedy any such default within 30 days after notice thereof
shall have been given to the Borrower by the Bank;
(c) Failure to observe or perform any of the terms,
covenants or conditions contained in the other Loan Documents, or
any other Agreement securing the indebtedness arising under this
agreement and the Note, and the failure to remedy any such
default within the period of grace, if any, provided therein;
(d) The failure by any Domestic Subsidiary to observe
or perform any of the terms, covenants or conditions contained in
the Guaranty;
(e) Merger or dissolution of the Borrower, except that
a Subsidiary may be merged into another Subsidiary or into the
Borrower;
(f) Commencement of voluntary or involuntary
Bankruptcy, reorganization, insolvency, arrangement, receivership
or similar proceedings by or against the Borrower or any Domestic
Subsidiary and, as to any of such involuntary proceedings, the
continuation thereof for sixty (60) days undismissed;
(g) Final judgment or judgments for the payment of
money aggregating in excess of $1,000,000 is or are outstanding
against the Borrower or any Subsidiary or against any property or
assets of any of them and any one such judgments has remained
unpaid, unvacated, unbonded or unstayed by appeal or otherwise
for a period of 30 days from the date of its entry;
(h) Failure by the Borrower or any Subsidiary to
comply in all material respects with the requirements of ERISA
for a period of 30 days after becoming aware of such failure;
(i) Default shall occur in the payment of any
principal, interest or premium with respect to any Indebtedness
of the Borrower or any Subsidiary in an aggregate principal
amount greater than $50,000 or in the performance, observance or
fulfillment of any term or covenant contained in any agreement or
instrument under or pursuant to which any such Indebtedness may
have been issued, created, assumed, guaranteed or secured by the
Borrower or any Subsidiary, and such default shall continue for
more than the period of grace, if any, therein specified, and
such default shall permit the holder of such Indebtedness to
accelerate the maturity thereof;
then, and at any time thereafter, the Bank, by written notice to
the Borrower, may declare any indebtedness hereunder or otherwise
of the Borrower to the Bank to be immediately due and payable and
declare any commitments to make Loans or issue Letters of Credit
to be terminated. At that time, all such indebtedness shall
become immediately due and payable without any further action;
provided, however, that upon the occurrence of an event described
in (f) above, all indebtedness shall become immediately due
without necessity of demand. In addition, Borrower shall
immediately pay over to the Bank an amount of cash equal to the
undrawn amount of all Letters of Credit. Neither the failure nor
any delay on the part of the Bank to exercise any right, power,
or privilege hereunder shall operate as a waiver thereof and no
single or partial exercise by the Bank of any right, power or
privilege hereunder shall preclude any other or further exercise
thereof.
12. Miscellaneous.
(a) The Borrower further agrees to reimburse the Bank
for all costs and out-of-pocket expenses, including but not
limited to fees of the Bank's counsel incurred in connection with
the preparation, execution and delivery of this Agreement and the
other Loan Documents, and the other related documentation, in an
amount not to exceed $2,500, and also all reasonable expenses
incurred by the Bank (including attorneys' fees) in the
collection of any indebtedness incurred hereunder in the event of
default by Borrower.
(b) Borrower agrees to pay any and all documentary,
intangible stamp or excise taxes now or hereafter payable in
respect of this Agreement or any other related documentation, or
any modifications thereof, and hold the Bank harmless with
respect thereto.
(c) This Agreement sets forth the entire understanding
and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and
agreements among the parties relative to such subject matter. No
promise, condition, representation or warranty, express or
implied, not herein set forth shall bind any party thereto, and
none of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto
acknowledges that, except as in this Agreement otherwise
expressly stated, no representations, warranties or commitments,
express or implied, have been made by any party to the other.
None of the terms or conditions of this Agreement may be changed,
modified, waived or canceled orally or otherwise, except by
writing, signed by all the parties hereto, specifying such
change, modification, waiver or cancellation of such terms or
conditions, or of any preceding or succeeding breach thereof.
(d) This Agreement and the other Loan Documents shall
be governed in all respects by the laws of Florida, without
regard to any otherwise applicable principles of conflict of
laws.
(e) Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable as to one
or more of the parties, all other provisions nevertheless shall
remain effective and binding on the parties hereto.
(f) All notices and other communications provided for
hereunder shall be in writing (including telecopy communication)
and shall be sent by registered or certified mail, return receipt
requested, or first class express mail or overnight courier, or
by telecopy, in all cases with charges prepaid, and shall be
effective when delivered against a receipt therefor or when
telecopy transmission is confirmed, as the case may be. All
notices shall be sent to the applicable party at the address
stated on the signature page hereto or in accordance with the
last unrevoked written direction from such party to the other
party.
(g) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of
which shall together constitute one instrument.
(h) At any time, the Borrower may terminate the credit
facilities described in this Agreement, without penalty, by
giving prior written notice to the Bank of termination and
repaying all principal, interest and any other amounts
outstanding under any of the Loan Documents. Promptly following
such termination and repayment, the Bank agrees that it will take appropriate
action to release the security interests granted to it under the Loan
Documents.
Sincerely,
NATIONSBANK OF FLORIDA, NATIONAL
ASSOCIATION
WITNESS By:_________________________
Bennie H. Duck, Jr.
_____________________ Title: Vice President
_____________________
<PAGE>
Agreed to and accepted, as of this 28th day of July, 1995.
WINDMERE CORPORATION
WITNESS:
By:____________________________
____________________________ Name: John Heinlein
Title: Treasurer
____________________________
Address:
5980 Miami Lakes Drive
Miami Lakes, Florida 33014-2467
<PAGE>
The undersigned hereby acknowledge, agree to and consent to
the terms and provisions hereof, as of this 28th day of July,
1995.
WINDMERE HOLDINGS CORPORATION
WITNESS:
By:____________________________
____________________________ Name: John Heinlein
Title: Secretary
____________________________
WINDMERE FAN PRODUCTS, INC.
WITNESS:
By:___________________________
____________________________ Name: John Heinlein
Title: Treasurer
____________________________
JERDON PRODUCTS, INC.
WITNESS:
By:___________________________
____________________________ Name: John Heinlein
Title: Secretary
____________________________
CONSUMER PRODUCTS AMERICAS, INC.
WITNESS:
By:___________________________
____________________________ Name: John Heinlein
Title: Secretary
____________________________
FORTUNE PRODUCTS, INC.
WITNESS:
By:___________________________
____________________________ Name: John Heinlein
Title: Treasurer
____________________________
<PAGE>
EDI MASTERS, INC.
WITNESS:
By:___________________________
____________________________ Name: John Heinlein
Title: Vice President
____________________________
<PAGE>
EXHIBIT A
The following terms as used in the Letter Agreement shall
have the respective meanings set forth below:
"Borrowing Base" means, as of the date of determination
thereof, Eligible Receivables multiplied by 75%.
"Capital Leases" means all leases which have been or should
be capitalized in accordance with Generally Accepted Accounting
Principles as in effect from time to time including Statement No.
13 of the Financial Accounting Standards Board and any successor
thereto;
"Committed Amount" means the principal sum of $20,000,000
from the date hereof to and including December 31, 1995 and
$10,000,000 thereafter to the Termination Date.
"Consolidated Interest Coverage Ratio" means, for the period
of four consecutive fiscal quarters ending as at the date of
determination, the ratio of (i) Consolidated Net Income plus
Consolidated Interest Expense and income taxes to (ii)
Consolidated Interest Expense;
"Consolidated Interest Expense" means, with respect to any
period of computation thereof, the gross interest expense of the
Borrower and its Subsidiaries, including without limitation (i)
the amortization of debt discounts, (ii) the amortization of all
fees payable in connection with the incurrence of Indebtedness to
the extent included in interest expense and (iii) the portion of
any liabilities incurred in connection with Capital Leases
allocable to interest expense, all determined on a consolidated
basis in accordance with Generally Accepted Accounting Principles
applied on a consistent basis;
"Consolidated Net Income" means the gross revenues of
the Borrower and its Subsidiaries less all operating and non-
operating expenses of the Borrower and its Subsidiaries including
taxes on income, all determined in accordance with Generally
Accepted Accounting Principles applied on a consistent basis; but
excluding as income: (i) gains and losses on the sale, conversion
or other disposition of capital assets, (ii) gains and losses on
the acquisition, retirement, sale or other disposition of capital
stock and other securities of the Borrower or any Subsidiary,
(iii) gains and losses on the collection of proceeds of life
insurance policies, (iv) any write-up of any asset, and (v) any
other gain or credit or loss of an extraordinary nature as
determined in accordance with Generally Accepted Accounting
Principles applied on a consistent basis;
"Consolidated Tangible Net Worth" means the total of
Borrower's shareholder equity as determined in accordance with
Generally Accepted Accounting Principles minus the sum of the
following, (i) the book value of all assets as could be treated
as intangible assets under Generally Accepted Accounting
Principles and (ii) any prepaid advertising credits;
"Contingent Obligation" of any person means all contingent
liabilities required (or which, upon the creation or incurring
thereof, would be required) to be included in the consolidated
financial statements (including footnotes) of such person in
accordance with Generally Accepted Accounting Principles applied
on a consistent basis, including Statement No. 5 of the Financial
Accounting Standards Board, and any obligation of such person
guaranteeing or in effect guaranteeing any Indebtedness, dividend
or other obligation of any other person (the "primary obligor")
in any manner, whether directly or indirectly, including
obligations of such person however incurred:
(1) to purchase such Indebtedness or other obligation
or any property or assets of the primary obligor
constituting security therefor;
(2) to advance or supply funds in any manner (i) for
the purchase or payment of such Indebtedness or other
obligation of the primary obligor, or (ii) to maintain a
minimum working capital, net worth or other balance sheet
condition or any income statement condition of the primary
obligor;
(3) to grant or convey any lien, security interest,
pledge, charge or other encumbrance on any property or
assets of such person to secure payment of such Indebtedness
or other obligation of the primary obligor;
(4) to lease property or to purchase securities or
other property or services primarily for the purpose of
assuring the owner or holder of such Indebtedness or
obligation of the ability of the primary obligor to make
payment of such Indebtedness or other obligation; or
(5) otherwise to assure through any legal
understanding the owner of such Indebtedness or such
obligation of the primary obligor against loss in respect
thereof.
Contingent Obligations shall be computed at the amount which, in
light of all the facts and circumstances existing at the time,
represent the amount which can reasonably be expected to become
an actual or matured liability of such person, provided that a
determination of such amount by the Borrower's independent
certified public accountants after consultation with the Agent
made in good faith in accordance with its usual procedures shall
be conclusive;
"Domestic Subsidiary" means any Subsidiary which is
incorporated under the laws of any state of the United States of
America;
"Eligible Receivables" means those accounts receivable of
the Borrower and its Domestic Subsidiaries which are determined
by the Bank in the reasonable exercise of its discretion to be an
Eligible Receivable; provided, however, that any of the following
shall not be Eligible Receivables:
(i) intercompany receivables;
(ii) receivables owed by the United States government
or any of its states, departments, agencies or
instrumentalities of any thereof;
(iii) receivables owed by any person not a United States
citizen or corporation, partnership or other entity
organized under the laws of the United States whose
principal office is located within the United States;
(iv) receivables of any customer more than 50% of which
receivables due Borrower or any Domestic Subsidiary are more
than 90 days past due;
(v) receivables that are due or unpaid for more than
ninety (90) days from the original due date thereof; and
(vi) any receivable which is subject to any offset,
deduction, defense, dispute or counterclaim.
"Generally Accepted Accounting Principles" means those
principles of accounting set forth in pronouncements of the
Financial Accounting Standards Board, the American Institute of
Certified Public Accountants or which have other substantial
authoritative support and are applicable in the circumstances as
of the date of a report, as such principles are from time to time
supplemented and amended;
"Indebtedness" means with respect to any person without
duplication, all Indebtedness for Money Borrowed of such person,
all indebtedness of such person for the acquisition of property
other than purchases of property, products, merchandise and
services in the ordinary course of business (so long as such
amounts are payable in less than twelve (12) months),
indebtedness secured by any Lien on the property of such person
whether or not such indebtedness is assumed (except unperfected
Liens incurred in the ordinary course of business and not in
connection with the borrowing of money), all liability of such
person by way of endorsements (other than for collection or
deposit in the ordinary course of business); all Contingent
Obligations; all Capital Leases; provided that in no event shall
the term Indebtedness include capital stock, surplus and retained
earnings, minority interests in the common stock of Subsidiaries,
lease obligations (other than pursuant to Capital Leases),
reserves for deferred income taxes and investment credits, other
deferred credits and reserves, FASB 106 Charges, and deferred
compensation obligations;
"Letter of Credit" means either a letter of credit issued by
the Bank for the account of the Borrower in favor of a person
advancing credit, providing insurance or goods to or securing
obligation of the Borrower;
"Outstanding Letters of Credit" means all undrawn amounts of
Letters of Credit plus Reimbursement Obligations;
"Reimbursement Obligation" means at any time, the obligation
of the Borrower with respect to any Letter of Credit to reimburse
the Bank for amounts theretofore paid by the Bank pursuant to a
drawing under such Letter of Credit;
"Subsidiary" means, except for the Borrower's joint venture
in Paragon Industries, any corporation in which more than 50% of
its outstanding voting stock is owned directly or indirectly by
the Borrower and/or by one or more of the Borrower's
Subsidiaries, or in the case of a person other than a
corporation, the Borrower, directly or indirectly, is entitled to
more than 50% of the profits of such person; and
"Termination Date" means the earlier of (i) July 28, 1996,
(ii) the occurrence of a Default, or (iii) such later date as the
Bank in its sole discretion shall agree pursuant to Paragraph 1
of the Agreement.
<PAGE>
EXHIBIT B
AMENDED AND RESTATED NOTE
Location: Charlotte, North Carolina Date: July 28, 1995
Borrower: Windmere Corporation, a Florida corporation
Maximum Amount: $20,000,000 from the date hereof through and
including December 31, 1995 and $10,000,000
thereafter to the Termination Date
Interest Rate Options: Base Rate or Eurodollar Rate + 1.50%
This Note evidences Loans made by Lender to Borrower
pursuant to a line of credit in the Maximum Amount pursuant to
that certain Amended and Restated Letter Agreement dated the date
hereof between the Borrower and the Lender (the "Letter
Agreement"). From the date hereof to the Termination Date (as
defined in the Letter Agreement), the Borrower may borrow, repay
and reborrow up to the Maximum Amount subject to the terms and
conditions of this Note, provided that no Event of Default is
then existing and provided, further, that at no time shall the
aggregate principal amount of outstanding Loans and Outstanding
Letters of Credit (as defined in the Letter Agreement) exceed the
Maximum Amount or the Borrowing Base (as defined in the Letter
Agreement).
Borrower, for the value received, promises to pay to the
order of NationsBank of Florida, National Association ("Lender"),
at its offices in Miami, Florida, or at any other place
designated to Borrower in writing by Lender, in lawful money of
the United States of America and in immediately available funds
prior to 11:00 a.m. Miami, Florida time on the date due, the
principal amount of each Loan, on the earlier of (i) declaration
by Lender pursuant to Section 1.6 hereof, (ii) the last day of
the Interest Period of such Loan, or (iii) the Termination Date,
together with interest on the unpaid principal balance of such
Loan at the applicable rates herein set forth.
This Note is issued upon the following terms and conditions:
<PAGE>
ARTICLE I
THE LOANS
1.1 Definitions. Defined terms used herein shall have the
meanings given to them above and in Article III hereof.
1.2 Making the Loans. Each Loan shall be in a minimum
amount of $500,000 and in multiples of $100,000 in excess
thereof. Each Loan shall be made by notice to Lender (stating
the Type Loan, the amount of the Loan, the date of the Loan and
the Interest Period for the Loan) not later than 10:30 a.m.,
Miami, Florida time, given by Borrower to Lender (i) as to any
Eurodollar Rate Loan, at least three (3) Business Days prior to
the date of such Type Loan, and (ii) as to any Base Rate Loan, on
the day of such Type Loan. Lender shall on the date of each Loan
not later than 1:00 p.m., Miami, Florida time, in immediately
available funds, deposit the proceeds of such Loan in a deposit
account designated by the Borrower.
1.3 Repayment. Borrower shall repay the principal amount
of each Loan on the earlier of (i) declaration by Lender pursuant
to Section 1.6 hereof, (ii) the last day of the Interest Period
for such Loan, or (iii) the Termination Date.
1.4 Prepayments. Except as may be required by Paragraph 5
of the Letter Agreement, no prepayment of any Loan shall be
permitted without the prior written consent of Lender.
Notwithstanding such prohibition, if there is a prepayment of any
Loan, whether pursuant to Paragraph 5 of the Letter Agreement, by
consent of Lender or because of acceleration or otherwise,
Borrower shall, within fifteen (15) days of any request by
Lender, pay to Lender any loss or expense which Lender may incur
or sustain as a result of any such prepayment.
A statement as to the amount of such loss or expense,
prepared in good faith and in reasonable detail by Lender and
submitted by Lender to Borrower shall be conclusive and binding
for all purposes absent manifest error in computation.
Calculation of all amounts payable to Lender under this Section
1.4 shall be made as though Lender shall have actually funded or
committed to fund the relevant Loan through the purchase of an
underlying deposit in an amount equal to the amount of such Loan
and having a maturity comparable to the related Interest Period;
provided, however, that Lender may fund any Loan in any manner it
sees fit and the foregoing assumption shall be utilized only for
the purpose of calculation of amounts payable under this Section
1.4.
1.5 Interest.
(a) Eurodollar Rate Loans. The unpaid principal
balance of each Loan outstanding from time to time as a
Eurodollar Rate Loan shall bear interest during each Interest
Period at the Eurodollar Rate for such Eurodollar Rate Loan plus
the percentage, if any, set forth in the "Interest Rate Options"
section of this Note. Interest on each Eurodollar Rate Loan for
each Interest Period shall be payable on the last day thereof.
(b) Base Rate Loans. The unpaid principal balance
of each Loan outstanding from time to time as a Base Rate Loan
shall bear interest during each Interest Period at the Base Rate
for such Base Rate Loan. Interest on each Base Rate Loan for
each Interest Period shall be payable on the last day thereof.
(c) Computations. Subject to the provisions of
Section 2.4 of this Note, interest on each Loan and any
commitment fee shall be calculated on the basis of actual days
elapsed, but computed as if each year consisted of 360 days. The
books and records of Lender shall be prima facie evidence of all
sums due Lender.
(d) Past Due Principal and Interest. All past due
principal of and, to the extent permitted by Applicable Law, all
past due interest on any Loan and any other past due amount owing
on this Note, shall bear interest from the date due until paid at
the Default Rate.
1.6 Events of Default. It shall be an event of default
("Event of Default") under this Note and each of any other
documents executed in connection herewith if any one of the
following shall occur: (i) Borrower shall fail to make any
payment of principal, interest or other amounts under this Note
when due; or (ii) any default under the Letter Agreement or Event
of Default (as such term is defined in the Letter Agreement).
If one or more of the foregoing Events of Default shall
occur, all or any part of the outstanding principal of this Note
plus accrued unpaid interest on this Note and any other accrued
unpaid amount owing under this Note shall at the option of Lender
become due and payable immediately without notice to Borrower,
which is hereby waived by Borrower, and Lender shall have no
further obligation (if any) to make Loans under this Note, and
Lender may exercise any and all available rights and remedies
under any document or instrument executed in connection with this
Note or under Applicable Law.
ARTICLE II
MISCELLANEOUS
2.1 Waivers and Consents. Borrower and all endorsers,
sureties and guarantors of this Note hereby severally waive
demand and notice of demand, presentment for payment, protest,
notice of protest, notice of acceleration of the maturity of this
Note, notice of intention to accelerate the maturity of this
Note, diligence in collecting, the bringing of any suit against
any Person, and any notice of or defense on account of any
extensions, renewals, partial payments or changes in this Note or
in any of its terms, provisions and covenants, or any releases or
substitutions of any security for this Note, or any delay,
indulgence or other act of any holder hereof, whether before or
after maturity.
2.2 Fees. Borrower agrees to pay to Lender, on the date
hereof, a facility fee in the amount of Seven Thousand Five
Hundred Dollars ($7,500), as provided in the Letter Agreement.
2.3 Expenses. If this Note is placed in the hands of an
attorney for collection after the occurrence of an Event of
Default, or if all or any part of the indebtedness evidenced
hereby is proved, established or collected in any court or in any
bankruptcy, receivership, debtor relief, probate or other court
proceedings, Borrower and all endorsers, sureties and guarantors
of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in
addition to the principal and interest and other amounts payable
hereunder. In addition, Borrower agrees to pay Lender all
reasonable costs and expenses, including reasonable attorneys'
fees, incurred by Lender in connection with the preparation of
this Note and any documents or instruments executed in connection
herewith, making the Loans hereunder, all amendments, consents
and waivers related to the Loans and requests therefor by
Borrower.
2.4 Controlling Agreement. Interest paid or agreed to be
paid in this Note or in any other documents executed in
connection herewith shall not exceed the Highest Lawful Rate,
and, in any contingency whatsoever, if Lender shall receive
anything of value deemed interest under Applicable Law which
would exceed the Highest Lawful Rate, the excessive interest
shall be applied to the reduction of unpaid principal or refunded
to Borrower, if in exceeds unpaid principal. It is further
agreed that, without limitation of the foregoing, all
calculations of the rate of interest contracted for, charged, or
received by Lender or any holder of this Note that are made for
the purpose of determining whether such rate exceeds the Highest
Lawful Rate shall be made, to the extent permitted by usury laws
applicable to Lender (now or hereafter enacted), by amortizing,
prorating and spreading during the period of the full stated term
of the Loans evidenced by this Note all interest at any time
contracted for, charged, or received by Lender in connection
therewith.
2.5 Binding Effect. This Note shall be binding upon and
inure to the benefit of Borrower and Lender and their respective
successors and assigns, except that Borrower shall not have the
right to assign its rights or obligations hereunder or any
interest herein without the prior written consent of Lender.
Lender may assign to one or more banks, all or any part of, or
may grant participation to one or more banks in or to all or part
of, any Loan or Loans and this Note, and to the extent of any
such assignment or participation (except where otherwise stated)
the assignee or participant of such assignment or participation
shall have the rights and benefits with respect to each Loan or
Loans and this Note as it would have if it were the Lender
hereunder.
2.6 Titles. The titles to paragraphs in this Note are
inserted for convenience only and do not constitute a part of the
test hereof.
2.7 Notices. Notices hereunder must be given in writing to
be effective and shall be effective upon receipt by Borrower or
Lender at the address set forth below its signature below or at
such other address as Borrower or Lender may notify the other.
ARTICLE III
DEFINITIONS
As used in and for all purposes of this Note, the terms
defined in this Article III shall have the following meanings,
and the singular shall include the plural, and vice versa, unless
otherwise specifically required by the context:
"Applicable Law" shall mean the Laws of the United States of
America applicable to contracts made or performed or to be
performed in the State of Florida, including, without limitation,
U.S.C. 85 and 86(a), as heretofore or hereafter amended, and
any other statute of the United States of America now or at any
time hereafter prescribing maximum rates of interest on loans,
advances and extensions of credit, and the Laws of the State of
North Carolina.
"Base Rate" shall mean the greater of (i) the Federal Funds
Effective Rate plus .50% or (ii) the Prime Rate.
"Base Rate Loan" shall mean each Loan which bears interest
at the Base Rate.
"Business Day" shall mean a day of the year on which banks
are not required or authorized to close in Miami, Florida, and,
if the applicable Business Day relates to any Eurodollar Rate
Loans, a day of the year on which dealings are carried on in the
London interbank market.
"Default Rate" shall mean (i) from the date that any payment
is due until ten (10) days thereafter, an interest rate per annum
equal to the lesser of (y) two (2) percent above the interest
rate otherwise applicable to such payment or, if there is no
otherwise applicable interest rate, two (2) percent above the
Prime Rate or (z) the Highest Lawful Rate and thereafter (ii) the
Highest Lawful Rate.
"Dollars" and the sign "$" shall mean lawful money of the
United States of America.
"Eurodollar Rate" shall mean an interest rate per annum
equal to a rate determined pursuant to the following formula:
London Interbank Rate
_____________________________________________
100% - Eurodollar Reserve Percentage
"Eurodollar Rate Loan" shall mean each Loan which bears
interest based on the Eurodollar Rate.
"Eurodollar Reserve Percentage" shall mean the maximum
reserve requirement (including, without limitation, any basic,
supplemental, marginal and emergency reserves) (expressed as a
percentage) applicable to member banks of the Federal Reserve
System in respect of "Eurocurrency Liabilities" under Regulation
D of the Board of Governors of the Federal Reserve System, or
such additional, substituted or amended reserve requirements as
may be hereafter applicable to member banks of the Federal
Reserve System.
"Federal Funds Effective Rate" for any day, as used herein,
means the rate per annum (rounded upward to the nearest 1/100 of
1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates
on overnight Federal funds transactions arranged by Federal funds
brokers on the previous trading day, as computed and announced by
such Federal Reserve Bank (or any successor) in substantially the
same manner as such Federal Reserve Bank computes and announces
the weighted average it refers to as the "Federal Funds Effective
Rate" as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on
any day, the "Federal Funds Effective Rate" for such day shall be
the Federal Funds Effective Rate for the last day on which such
rate was announced.
"hereof," "hereto," "hereunder" and similar terms shall
refer to this Note and not to any particular section or provision
of this Note.
"Highest Lawful Rate" shall mean at the particular time in
question the maximum rate of interest per annum which, under
Applicable Law, Lender is then permitted to charge Borrower on
the Obligation. If the Highest Lawful Rate shall change after
the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as
of the effective time of each change in the Highest Lawful Rate
without notice to Borrower; provided, however, the Highest Lawful
Rate shall decrease with respect to the Note only if required by
Applicable Law.
"Interest Period" means, for each Loan, the period
commencing on the date of such Loan and ending on the last day of
such period as selected by Borrower pursuant to the provisions
hereof. The duration of each such Interest Period for (i) each
Eurodollar Rate Loan shall be 1, 2, 3 or 6 months, (ii) each Base
Rate Loan shall be up to 30 days as agreed to by Borrower and
Lender and confirmed in writing by Borrower, subject to the other
provisions hereof, as Borrower may select; provided however,
that:
(i) Whenever the last day of any Interest Period would fall
on a day which is not a Business Day, such Interest
Period shall expire on the next succeeding Business
Day, provided, in the case of any Interest Period for a
Eurodollar Rate Loan, that if such extension would
cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such
Interest Period shall occurred on the next preceding
Business Day; and
(ii) No Interest Period with respect to any Loan may extend
beyond the Termination Date.
"Laws" shall mean all constitutions, treaties, statutes,
laws, ordinances, regulations, orders, writs, injunctions, or
decrees of the United States, any state or commonwealth, any
municipality, any foreign country, any territory or possession or
any Tribunal.
"Loan" shall mean any Base Rate Loan or Eurodollar Rate
Loan, as the context requires.
"London Interbank Rate" shall mean, for the applicable
Interest Period, the rate of interest per annum (rounded upward,
if necessary, to the next higher 1/16 of 1%) determined by
Lender, in accordance with its customary general practice from
time to time, to be the rate at which deposits in immediately
available funds in Dollars are or would be offered or quoted by
Lender to major banks in the London interbank market, as of
approximately 11:00 a.m. London time, or as soon thereafter as
practicable, on the second Business Day immediately preceding the
first day of such Interest Period, for a term comparable to such
Interest Period in an amount approximately equal to the principal
amount of the Loan to which the Interest Period applies. If no
such offers or quotes are generally available for such amount,
then Lender shall be entitled to determine the London Interbank
Rate by estimating in its reasonable judgment the per annum rate
(as described above) that would be applicable if such quotes or
offers were generally available.
"Obligation" shall mean (without duplication) the aggregate
principal amount of and any interest, fees, and other charges
payable by Borrower in respect of the Loans.
"Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department,
agency or political subdivision thereof.
"Prime Rate" shall mean the prime interest rate charged by
Lender as announce or published by Lender from time to time. It
is understood that the Prime Rate is set by Lender as a general
reference rate of interest and is not necessarily the lowest or
best rate actually charged to any customer or a favored rate.
"Tribunal" shall mean any state, commonwealth, federal,
foreign, territorial, or other court or governmental department,
commission, board, bureau, district, agency or instrumentality.
"Type Loan" shall mean with respect to the Loan, a Base Rate
Loan, or a Eurodollar Rate Loan.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE AND
ANY OTHER DOCUMENTS EXECUTES IN CONNECTION HEREWITH REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
BORROWER:
Windmere Corporation
By:_______________________________
Name:_____________________________
Witness:
____________________________
____________________________
<PAGE>
EXHIBIT C
Form of Compliance Certificate
As of ________, 19__
NationsBank of Florida, National Association
150 S.E. Third Avenue
Miami, Florida 33131
Telefacsimile:
Attention: Corporate Banking Department
Reference is hereby made to the Amended and Restated Letter
Agreement dated as of July 28, 1995 (the "Letter Agreement")
between Windmere Corporation (the "Borrower") and NationsBank of
Florida, National Association (the "Bank"). Capitalized terms
used but not defined herein shall have the respective meanings
therefor set forth in the Letter Agreement. The undersigned, the
duly authorized and acting Chief Financial Officer of the
Borrower, hereby certifies to you as of the date set forth above
as follows:
1. Calculations:
A. Compliance with Section 9(b) of the Letter
Agreement: Consolidated Tangible Net Worth
Consolidated Tangible Net Worth $_______________
Required: $140,000,000 plus 50% of cumulative Consolidated
Net Income since March 31, 1995 through the last day of the
Fiscal Quarter for which financial statements have been
delivered to the Lenders plus the aggregate net proceeds of
any equity offering (including net proceeds under any stock
option or executive compensation plan)
Base $________________
Cumulative Consolidated
Net Income $________________
50% of Cumulative
Consolidated Net Income $________________
Aggregate Net Proceeds from
Equity Offering $________________
Required: $________________
B. Compliance with Section 9(c) of the
Letter Agreement: Consolidated Interest
Coverage Ratio
1. Consolidated Net Income $________________
2. Consolidated Interest Expense $________________
3. Income Tax Expense $________________
4. Sum of Items 1, 2 and 3 $________________
5. Ratio of Item 4 to Item 2 _____ to 1.00
Required: At any time during any period of four consecutive
fiscal quarters the Consolidated Interest Coverage Ratio shall
not be less than 2.00 to 1.00.
2. No Default
A. To the best knowledge of the undersigned, during the
fiscal quarter ended as of the date set forth above,
(a) no Default or Event of Default specified in the
Letter Agreement has occurred or (b) the following
Default or Event of Default has occurred:
___________________________________________________
___________________________________________________
___________________________________________________
B. The Borrower proposes to take the following action with
respect to any such Default or Event of Default
described above:__________________________
__________________________________________________
__________________________________________________
__________________________________________________
(Note, if no Default or Event of Default has
occurred, insert "Not Applicable").
The undersigned Chief Financial Officer hereby certifies
that the information set forth above is true, correct and
complete as of the date hereof.
IN WITNESS WHEREOF, I have executed this Certificate this
___ day of _________, 19____.
WINDMERE CORPORATION
By:______________________________
Chief Financial Officer
EXHIBIT D
Form of Borrowing Base Certificate
The undersigned officer of Windmere Corporation hereby
certifies as follows:
Eligible Receivables as of this date:
Total $__________________ x 75% = $_______________
EXECUTED THIS ____ DAY OF __________________, 199__.
WINDMERE CORPORATION
By:______________________________
Title:___________________________
EXHIBIT E
Indebtedness
(a) Dade County Industrial Development Authority Variable Rate
Demand Industrial Development Revenue Bonds (Windmere
Corporation Project) Series 1985 ($7,500,000), and related
documents thereto, including, but not limited to, (i)
Guaranty Agreement, dated as of May 1, 1985, between
Windmere Corporation and Bankers Trust Company, and (ii)
Letter of Credit Agreement, dated as of July 31, 1992,
between Windmere Corporation and NationsBank of Florida,
N.A.
(b) Banking Facility or Facilities in an aggregate principal
amount not to exceed $8,000,000 granted by the Bank of East
Asia, Limited or other financial institution to Durable
Electrical Metal Factory, Ltd. and/or other Subsidiaries.
(c) Guarantee by Windmere Corporation of the Indebtedness
described in (b) above.
(d) Equipment leases existing at July 28, 1995.
(e) $5,000,000 Standby Letter of Credit from Bank of Tokyo
Limited-Hong Kong (through Miami office) to provide working
capital.
June 3, 1995
PRIVATE & CONFIDENTIAL
Durable Electrical Metal Factory Ltd.
1/F, Efficiency House
35 Tai Yau Street
San Po Kong, Kowloon
Hong Kong
Attn: Mr. Raymond So
Re: Banking Facilities granted to
Durable Electrical Metal Factory Ltd.
Durable Electric Ltd.
PPC Industries 1980 Ltd.
Dear Sirs:
We are pleased to inform you that the banking facilities available
to all of your companies have been revised, subject to the
following terms/conditions and to be reviewed in April 1996.
a) L/C + T/R + Shipping Guarantee (S/G) HK$25,000,000
+ Foreign Currency Loan (F/L) Limit
(Within which T/R not to exceed
HK $17,000,000, S/G not to exceed
HK $600,000 - and F/L not to exceed
HK $5,000,000
- for opening of your sight or usance
Letter of Credit.
- for refinancing of your import bills
Tenor: 120 days
interest rate: at prime
- for countersigning of your shipping
guarantee not under our Letter of Credit
- for foreign currency loan subject to
availability of funds
Tenor: up to 60 days
Interest Rate: SIBOR + 0.5%
b) Discrepancies Guarantee 5,000,000
- for negotiating of your export Letter
of Credit with discrepancies
Total banking facilities: HK$30,000,000
Securities:
a) All monies legal charge on the following properties:
i) 1/F and 3/F, Efficiency House, 35 Tai Yau Street,
San Po Kong, Kowloon.
ii) G/F, Wah Mow Factory Building, 202 - 4 Choi Hung
Road, San Po Kong, Kowloon
b) Corporate Guarantee signed by Windmere Corporation,
U.S.A. for US$3,850,000 - in covering credit facilities
extended to Durable Electrical Metal Factory Ltd.,
Durable Electric Ltd. and PPC Industries 1980 Ltd.
c) Debenture by way of floating charge covering all
undertakings, properties and assets in Hong Kong and
People's Republic of China both present and future
including uncalled capital for the time being on Durable
Electrical Metal Factory Ltd., Durable Electric Ltd. and
PPC Industries 1980 Ltd.
d) Corporate Guarantee signed by Durable Electrical Metal
Factory Ltd. for HK$30,000,000 - in covering credit
facilities extended to Durable Electric Ltd. and PPC
Industries 1980 Ltd.
e) Corporate Guarantee signed by Durable Electric Ltd. for
HK$30,000,000 - in covering credit facilities extended to
Durable Electrical Metal Factory Ltd. and PPC Industries
1980 Ltd.
f) Corporate Guarantee signed by PPC Industries 1980 Ltd.
for HK$30,000,000 - in covering credit facilities
extended to Durable Electric Ltd. and Durable Electrical
Metal Factory Ltd.
We hope that you will include us in your main banker and make
active use of these facilities. We assure you of our best service
at all times.
Yours faithfully for and
on behalf of
THE BANK OF EAST ASIA, LTD.
CHEUNG Ding-fong WONG Kin-man
Assistant Manager Sub-Manager
Credit Department
