<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 26, 1998
----------------
WINDMERE-DURABLE HOLDINGS, INC.
--------------------------------------------------
(Exact Name of Registrant as specified in charter)
Florida 1-10177 59-1028301
- ------------------------- ------------ -------------------
(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
5980 Miami Lakes Drive, Miami Lakes, Fl 33014
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 362-2611
--------------
N/A
- --------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE> 2
WINDMERE-DURABLE HOLDINGS, INC.
Current Report on Form 8-K
June 26, 1998
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 26, 1998, Windmere-Durable Holdings, Inc. (the "Company")
consummated the acquisition of the Cooking, Garment Care, Food Preparation, and
Beverage businesses of the Household Products Group of The Black & Decker
Corporation and certain related assets (the "Black & Decker Household Products
Group" or "HPG") for $315.0 million in cash and assumed certain related
liabilities (the "HPG Acquisition"). As part of the HPG Acquisition, the Company
licensed the Black & Decker(R) brand for use in marketing HPG products in North
America, Central America, South America (excluding Brazil), and the Caribbean
under a licensing arrangement with a minimum term of six and one-half years. For
the first five years, the license will be on a royalty-free basis. Renewals, if
mutually agreed upon, will be at specified minimum royalty payments. In
addition, the Company purchased subbrands from The Black & Decker Corporation,
including Toast 'R Oven(TM), ProFinish(R), Quick 'N Easy(R), Spacemaker(R), and
KT Kitchentools(TM).
The purchase price for the Black & Decker Household Products Group was
determined as a result of arm's-length negotiations between representatives of
both the Company and The Black & Decker Corporation. The HPG Acquisition has
been accounted for under the purchase method of accounting.
To facilitate the HPG Acquisition, the Company obtained (i) $345.0 million
in senior secured credit facilities (the "Senior Credit Facilities"), consisting
of a $160.0 million senior secured revolving credit facility (the "Senior
Secured Revolving Credit Facility"), a $90.0 million Tranche A Term Loan, a
$75.0 million Tranche B Term Loan and a $20.0 million Tranche C Term Loan
(collectively, the "Term Loans"), and (ii) $185.0 million in senior subordinated
loans (the "Senior Subordinated Loans") from commercial banks. The Company paid
the purchase price of the HPG Acquisition and certain related costs with
borrowings of $185.0 million under the Senior Subordinated Loans, $185.0 million
under the Term Loans and $7.0 million under the Senior Secured Revolving Credit
Facility.
2
<PAGE> 3
The Senior Secured Revolving Credit Facility includes (a) a $20 million
sublimit for the issuance of letters of credit and (b) a $10 million sublimit
for swing line loans (the "Swing Line Loans"). All amounts outstanding under
the Senior Secured Revolving Credit Facility shall be payable on June 26, 2003.
The Tranche A Term Loan will be payable in quarterly installments, ranging from
$2.5 million for the quarter ended March 31, 1999 to $6.25 million for the
quarter ended March 31, 2003, and all remaining amounts owing due the following
quarter. The Tranche B Term Loan will be payable in annual installments of
$750,000, with all remaining amounts owing thereunder due June 26, 2004. The
Tranche C Term Loan will be payable in annual installments of $200,000, with all
remaining amounts owing thereunder due June 26, 2004.
Interest will accrue on the loans made under the Senior Secured Revolving
Credit Facility (other than Swing Line Loans) at either LIBOR (adjusted for any
reserves) or the base rate, which is the higher of NationsBank, N.A.'s prime
rate and the federal funds rate plus 0.50% (the "Base Rate"), at the Company's
option. Interest will accrue on the Senior Secured Revolving Credit Facility and
the Tranche A Term Loan at either LIBOR (adjusted for any reserves) plus a
specified margin which will be determined by the leverage ratio of the Company
and its subsidiaries that initially will be set at 2.50%, or the Base Rate, plus
a specified margin of 1.50%, at the Company's option. Interest will accrue on
the Tranche B Term Loan and the Tranche C Term Loan at either LIBOR (adjusted
for any reserves) plus a specified margin which will be determined by the
leverage ratio of the Company and its subsidiaries that initially will be set at
3.00%, or the Base Rate plus a specified margin of 2.00%, at the Company's
option. Swing Line Loans will bear interest at the Base Rate. The post-default
rate on outstanding loans is 2.00% above the otherwise applicable rate of
interest.
The Senior Credit Facilities are secured by a security interest in
substantially all of the real and personal property, tangible and intangible, of
the Company and its domestic subsidiaries, as well as a pledge of all of the
stock of such domestic subsidiaries, a pledge of not less than 65% of the voting
stock of each direct foreign subsidiary of the Company and each direct foreign
subsidiary of each domestic subsidiary of the Company, and a pledge of all of
the capital stock of any subsidiary of a subsidiary of the Company that is a
borrower under the Senior Credit Facilities. The Senior Credit Facilities will
be guaranteed by all of the current and future domestic subsidiaries of the
Company.
The Senior Credit Facilities contain a number of significant covenants
that, among other things, will restrict the ability of the Company to dispose of
assets, incur additional indebtedness, prepay other indebtedness, pay dividends,
repurchase or redeem capital stock, enter into certain investments or create new
subsidiaries, enter into sale and lease-back transactions, make certain
acquisitions, engage in mergers or consolidations, create liens, or engage in
certain transactions with affiliates, and that will otherwise restrict corporate
and business activities. In addition, under the Senior Credit Facilities, the
Company is required to comply with specified financial ratios and tests,
including a minimum net worth test, a fixed charge coverage ratio, an interest
coverage ratio, a leverage ratio and a minimum EBITDA requirement.
The information set forth above is qualified in its entirety by reference
to (i) the Transaction Agreement, dated as of May 10, 1998 (the "Transaction
Agreement"), by and between the Company and The Black & Decker Corporation, a
copy of which is filed herewith as Exhibit 99.1, and (ii) Amendment No. 1, dated
as of June 26, 1998, to the Transaction Agreement, a copy of which is filed
herewith as Exhibit 99.2.
3
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The combined statement of financial position of the Black & Decker
Household Products Group as of December 31, 1997 and 1996, and the related
combined statements of operations, changes in owner's net investment and cash
flows for each of the three years in the period ended December 31, 1997, as
well as the combined statement of financial position as of March 29, 1998, and
the related combined statements of operations, changes in owner's net
investment and cash flows for each of the three months in the period ended
March 29, 1998, and the notes thereto are filed herewith.
(b) PRO FORMA FINANCIAL INFORMATION.
The unaudited pro forma combined balance sheet of the Company as of March
31, 1998, and the related unaudited statements of operations for the fiscal
year ended December 31, 1997 and the three months and twelve months ended March
31, 1998, and the notes thereto are filed herewith.
(c) EXHIBITS.
EXHIBIT NO. DESCRIPTION
99.1 Transaction Agreement, dated as of May, 1998, by and between
the Company and The Black & Decker Corporation.
99.2 Amendment No. 1, dated as of June 26, 1998, to the
Transaction Agreement, dated as of May 10, 1998, by and
between the Company and The Black & Decker Corporation.
4
<PAGE> 5
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Combined Statement of Financial Position as of December 31, 1997 and 1996 .....2
Combined Statement of Operations for the Years Ended December 31, 1997,
1996 and 1995 ................................................................3
Combined Statement of Cash Flows for the Years Ended December 31, 1997,
1996 and 1995 ................................................................4
Combined Statement of Changes in Owner's Net Investment for the
Years Ended December 31, 1997, 1996 and 1995 .................................5
Notes to Combined Financial Statements .....................................6-18
Report of Independent Auditors ...............................................19
1
<PAGE> 6
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Combined Statement of Financial Position
(Amounts in Thousands)
<TABLE>
<CAPTION>
December 31,
1997 1996
----------------------
<S> <C> <C>
Assets
Current assets
Accounts receivable, net of allowances of $3,800 $ 96,460 $ 55,084
in 1997 and $3,100 in 1996
Inventories 40,971 53,146
Prepaid expenses and other 5,808 8,986
----------------------
Total current assets 143,239 117,216
Property, equipment and capitalized software, net 74,457 74,781
Goodwill 23,451 27,134
Other assets 17,400 17,755
----------------------
Total assets 258,547 236,886
Liabilities
Current liabilities
Accounts payable 12,419 22,729
Accrued liabilities 51,109 51,340
----------------------
Total current liabilities 63,528 74,069
Other liabilities 35,547 38,130
----------------------
Total liabilities 99,075 112,199
----------------------
Owner's net investment $159,472 $124,687
======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 7
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Combined Statement of Operations
(Amounts in Thousands)
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
------------------------------
<S> <C> <C> <C>
Net sales $402,928 $412,446 $445,739
Cost of goods sold 289,423 295,187 315,296
------------------------------
Gross margin 113,505 117,259 130,443
Selling, general and administrative expenses 104,736 106,143 110,233
Restructuring -- 4,676 --
------------------------------
Operating income 8,769 6,440 20,210
Other expense 579 1,698 3,464
------------------------------
Earnings before income taxes 8,190 4,742 16,746
Income tax provision 3,936 3,319 6,995
------------------------------
Net earnings $ 4,254 $ 1,423 $ 9,751
==============================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 8
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Combined Statement of Cash Flows
(Amounts in Thousands)
<TABLE>
<CAPTION>
Years ended December 31,
1997 1996 1995
--------------------------------
<S> <C> <C> <C>
Operating activities:
Net earnings $ 4,254 $ 1,423 $ 9,751
Adjustments to reconcile net earnings
to cash flows from operating activities:
Depreciation and amortization 18,171 18,081 17,666
Restructuring charges -- 4,676 --
Changes in selected working capital items:
(Increase) decrease in accounts receivable (7,480) (1,181) 49,568
Decrease in inventories 11,908 16,589 1,718
(Decrease) increase in accounts payable (10,288) 4,221 (2,284)
Other assets and liabilities 3,561 408 4,716
Net decrease in accounts receivable sold (34,507) (8,450) (24,116)
--------------------------------
Net cash (used in) provided from operating activities (14,381) 35,767 57,019
Investing activities:
Capital expenditures (16,922) (22,306) (18,979)
Proceeds from disposal of assets 185 63 1,932
--------------------------------
Net cash used in investing activities (16,737) (22,243) (17,047)
Financing activities:
Net cash invested by (remitted to) owner 31,118 (13,524) (39,972)
--------------------------------
Cash at beginning and end of year $ -- $ -- $ --
================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 9
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Combined Statement of Changes in Owner's Net Investment
(Amounts in Thousands)
<TABLE>
<S> <C>
Balance at December 31, 1994 $ 166,529
Net income 9,751
Foreign currency translation adjustments 671
Net financing provided to B&D (39,972)
------------
Balance at December 31, 1995 136,979
Net income 1,423
Foreign currency translation adjustments (191)
Net financing provided to B&D (13,524)
------------
Balance at December 31, 1996 124,687
Net income 4,254
Foreign currency translation adjustments (587)
Net financing provided by B&D 31,118
------------
Balance at December 31, 1997 $ 159,472
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 10
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
1. Basis of Presentation
Household Products Group Excluding Cleaning and Lighting Product Lines ("HPG")
presented in these financial statements is a component of The Black & Decker
Corporation ("B&D") that markets and manufactures small household appliances
excluding cleaning and lighting product lines in the Western Hemisphere
exclusive of Brazil (collectively, the "Market Area"). HPG's operations consist
of three manufacturing facilities located in the United States, Mexico and
Malaysia and a dedicated United States marketing and sales organization. Sales
in the remainder of the Market Area are managed through sales and marketing
organizations shared with other product lines of B&D. Additionally, within the
United States, HPG products are sold through service centers and retail outlets
and utilize distribution facilities managed by other divisions of B&D. Certain
sourcing and purchasing operations are conducted through other B&D managed
entities.
The accompanying combined financial statements have been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in a Form 8-K to be filed by Windmere-Durable
Holdings, Inc. in connection with its acquisition of HPG.
Throughout the period covered by the combined financial statements, the HPG
business was not conducted discretely from other businesses of B&D and,
accordingly, separate financial statements for HPG were not prepared. These
combined financial statements have been prepared from the historical accounting
records of B&D. The combined financial statements include all revenues of HPG,
all items of expense directly incurred by it and expenses charged or allocated
to it by B&D in the normal course of business. In addition, certain expenses
were allocated by B&D to HPG for the sole purpose of preparing these combined
financial statements. As a result of the business structure discussed above, the
vast majority of selling, general and administrative expenses are allocated. For
additional information concerning expenses charged or allocated to HPG by B&D,
see Note 3. These combined financial statements were prepared without regard to
legal organization.
B&D principally utilizes a centralized cash management system. Under this
system, HPG's cash requirements were provided directly by B&D; similarly, cash
generated by HPG was remitted directly to B&D. All charges and allocations of
costs for functions and services provided by B&D are deemed paid by HPG, in
cash, in the period in which the cost is recorded in the combined financial
statements. Intercompany balances with B&D, net of cash, are included in owner's
net investment. No B&D indebtedness is directly attributable to the assets of
HPG. Accordingly, no debt of B&D or related interest expense has been allocated
to HPG.
HPG's results have been included in B&D's consolidated income tax returns in the
various taxing jurisdictions in the Market Area. The amount of taxes payable or
receivable due to/from B&D for 1997, 1996 and 1995 is included as a component of
owner's net investment. The provision for income taxes, the related assets and
liabilities, and the related footnote disclosures are presented as if HPG had
filed separate tax returns and are in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes".
The historical basis in inventories, property and equipment, capitalized
software and goodwill are clearly identifiable to the HPG business. Other
elements of working capital are not as clearly identifiable and accordingly
working capital other than inventory has been allocated to HPG in order to
estimate the total fixed and working capital investment related to reported
revenues.
6
<PAGE> 11
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
1. Basis of Presentation (continued)
All of the accounting judgments, estimations and allocations in the combined
financial statements are based on assumptions that B&D management believes are
reasonable under the circumstances. However, these allocations and estimates are
not necessarily indicative of the costs that would have resulted if HPG had been
operated as a separate entity.
2. Significant Accounting Policies
Use of estimates: The combined financial statements and related disclosures have
been prepared on the basis of presentation disclosed in Note 1. They reflect
management's estimates and assumptions. Actual results could differ from these
estimates, impacting reported results of operations and financial position.
Foreign currency translation: The financial statements of HPG businesses located
outside the United States, except those businesses operating in highly
inflationary economies and manufacturing operations producing primarily for the
United States market, generally are measured using the local currency as the
functional currency. Assets and liabilities of these businesses are translated
at the rates of exchange at the balance sheet date. The resultant translation
adjustments are included in owner's net investment. Income and expense items are
translated at average monthly rates of exchange. Gains and losses from foreign
currency transactions of these businesses are included in net earnings. For
businesses operating in highly inflationary economies and manufacturing
operations producing primarily for the United States market, gains and losses
from balance sheet translation adjustments are included in net earnings.
Revenue recognition: Revenues are recognized when products are shipped and
ownership risk and title pass to the customer.
Inventories: Inventories are stated at the lower of cost or market. The cost of
United States inventories is based primarily on the last-in, first-out (LIFO)
method; all other inventories are based on the first-in, first-out (FIFO)
method.
Property and equipment: Property and equipment is stated at historical cost,
net of accumulated depreciation. Property and equipment is depreciated over
their estimated useful lives, primarily on the straight-line basis. In general
the estimated useful lives are as follows:
<TABLE>
<CAPTION>
<S> <C>
Building 50 years
Computers and related equipment 2 - 4 years
Furniture and office equipment 15 years
Leasehold improvements Shorter of lease term or useful life
Machinery and other equipment 8 - 13 years
Tools and dies Shorter of estimated life of tool/die, product
life cycle or 3 years
</TABLE>
Capitalized software costs: HPG capitalizes the cost of purchased software.
Software costs are amortized over five years from the date placed in service.
7
<PAGE> 12
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
2. Significant Accounting Policies (continued)
Goodwill: Goodwill is amortized on the straight-line method over 20 years.
Advertising and promotional costs: Advertising and promotional costs are
expensed in the year they are first used. Advertising and promotional expense
for the years ended December 31, 1997, 1996 and 1995 approximated $22,600,
$24,700 and $27,700, respectively.
Research and development costs: Costs associated with the development of new
products and changes to existing products are expensed as incurred and
approximated $7,600, $7,600 and $5,800 for the years ended December 31, 1997,
1996 and 1995, respectively.
Stock-based compensation: B&D has elected to follow the accounting provisions of
Accounting Principles Board Opinion (APBO) No. 25 for stock-based compensation.
Derivative financial instruments: B&D utilizes derivative financial instruments
to manage certain foreign currency exposures including those of HPG. Gains and
losses on foreign currency transaction hedges are recognized in income and
offset the foreign exchange gains and losses on the underlying transactions.
Deferred gains on options that hedge forecasted cash flows, including
intercompany cash flows generally related to inventory purchases, are recognized
in cost of sales when the related inventory is sold or when a hedged purchase is
no longer expected to occur. Forward contracts that hedge forecasted
intercompany transactions are marked to market. Foreign currency contracts held
by B&D on behalf of HPG outstanding at December 31, 1997 were not material to
these combined financial statements.
3. Related Party Transactions
As previously discussed, in many regards the operations of HPG are commingled
with those of other B&D operations. Related party expenses included in these
combined financial statements include B&D corporate overhead allocated to HPG
("Corporate expense allocations"), costs incurred on behalf of HPG by B&D
largely to leverage B&D's combined purchasing power ("Corporate pass-through
charges"), costs shared by HPG and other B&D operations which are charged
primarily based on relative usage ("Shared direct services with B&D
affiliates"), and business unit overhead allocated to HPG ("Business unit
overheads"). The amounts charged for these services may not necessarily be
representative of the costs that would be incurred by HPG on a stand-alone
basis. In addition, business unit overheads in the HPG United States marketing
organization have been allocated to the cleaning and lighting product lines
which have been excluded from these combined financial statements. Products
manufactured in HPG production facilities for other B&D operations have been
transferred at cost and the related sales and expenses are excluded from these
combined financial statements.
Corporate expense allocations: B&D provides certain indirect management services
to HPG, including corporate and group management, treasury, tax, risk
management, certain legal services, internal audit and other indirect
administrative functions. The corporate expense allocations related to HPG
included in these combined financial statements was $4,600, $3,000 and $5,600
for the years ended December 31, 1997, 1996 and 1995, respectively.
8
<PAGE> 13
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
3. Related Party Transactions (continued)
Corporate pass-through charges: B&D provides certain common services for HPG and
other B&D affiliates, including group self-insurance programs and blanket
insurance coverage. Many of these services represent services provided by third
parties whereby B&D incurs the cost of the service on behalf of HPG. B&D charges
HPG for the estimated cost of these services. The charges for many of these
services from B&D represent estimates based upon certain allocations. The
amounts charged by B&D for these services may not necessarily be representative
of the costs that would be incurred by HPG on a stand-alone basis.
Corporate pass-through charges allocated to HPG in the United States and
reflected in the accompanying Combined Statement of Operations for each year are
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Product liability $ 4,720 $ 2,917 $ 3,397
Workers' compensation 234 209 203
General liability and loss insurance 361 268 342
Employee benefits:
Medical 3,672 3,843 4,217
Pension 788 716 538
Post-retirement medical 149 388 1,275
401(k) 432 497 417
Patent expenses 208 323 353
Employment taxes 2,223 2,345 2,224
----------------------------
$12,787 $11,506 $12,966
============================
</TABLE>
Shared direct services with B&D affiliates: HPG utilizes various direct services
provided by other B&D affiliates, including product distribution, purchasing and
information technology services. HPG is charged for these services from the
applicable affiliates as follows:
Product distribution: HPG's products are distributed in the United States
through two distribution centers which are operated by other B&D
affiliates. These distribution centers provide distribution services to
HPG and other B&D affiliates including shipping, receiving, warehousing
and invoicing. The charges from these distribution centers for these
services represent charges based upon certain allocation methodologies.
The amounts charged by B&D for these services may not necessarily be
representative of the costs that would be incurred by HPG on a stand-alone
basis. Costs charged to HPG for the use of these distribution services are
reflected within selling, general and administrative expenses in the
accompanying Combined Statement of Operations and totaled $12,700, $13,100
and $14,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
9
<PAGE> 14
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
3. Related Party Transactions (continued)
Purchasing: A B&D affiliate provides certain sourcing, purchasing and
inspection services with respect to finished goods and component parts
provided by vendors located in the Far East for many B&D business units,
including HPG. In exchange for these services, B&D charges HPG an
administrative fee of $1,100 per annum. The amount of the administrative
fee was determined by B&D based upon an allocation of the affiliate's
overhead costs to all business units which utilize the affiliate's
services. The amounts allocated by B&D may not necessarily be
representative of the costs that would be incurred by HPG on a stand-alone
basis.
Purchases made by B&D on behalf of HPG for the years ended December 31,
1997, 1996 and 1995, approximated $85,900, $89,200 and $82,300,
respectively.
Information technology and communication services: Certain information
technology and communication services are provided to HPG by B&D
affiliates. These services include mainframe computer processing, payroll
and benefits processing, information and communication systems support,
equipment lease administration, and the use of telephone and data
communication lines. The charges allocated to HPG for these services
represent both allocations of common costs and specifically identified
expenses that are incurred on behalf of HPG by other B&D affiliates. The
amounts charged to HPG for these services may not necessarily be
representative of the costs that would be incurred by HPG on a stand-alone
basis. Costs charged to HPG for the use of these information technology
and communication services are reflected within selling, general and
administrative expenses in the accompanying Combined Statement of
Operations and totaled $1,700, $1,500 and $1,600 for the years ended
December 31, 1997, 1996 and 1995, respectively.
Business unit overheads: As previously mentioned, HPG sells its products in the
Market Area outside of the United States through B&D affiliates. Selling,
general and administrative expenses include those costs, principally promotion,
marketing and research and development expenses, which are specifically
attributable to the HPG business. Those selling, general and administrative
expenses not directly attributable to HPG or other B&D product lines are
allocated to product lines, including HPG, on the basis of product line sales to
total sales. Allocated selling, general and administrative expenses included in
the HPG Combined Statement of Operations were $20,500, $19,700 and $19,200 for
the years ended December 31, 1997, 1996 and 1995, respectively.
Within the United States and Canada, B&D affiliates operate over 100 service
centers and 20 retail outlet stores. These service centers and outlet stores
primarily sell new and reconditioned B&D products, including HPG products. New
HPG products sold through these channels are primarily supplied by HPG, and
reconditioned products sold through these channels are supplied by a
reconditioning center operated by a B&D affiliate. Amounts reflected in the
accompanying Combined Statement of Operations represent HPG's share of the
operating results of the aforementioned service centers and retail outlets
including allocated overheads. Indirect costs included in these combined
financial statements which were allocated to revenues generated through these
service centers and outlets totaled $6,400, $6,700 and $6,600 for the years
ended December 31, 1997, 1996 and 1995, respectively.
10
<PAGE> 15
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
3. Related Party Transactions (continued)
Within the United States, selling, general and administrative expenses were
allocated between the HPG business and the cleaning and lighting product lines
first on the basis of specific identification. Those expenses that were not
specifically attributable to the HPG business or cleaning and lighting product
lines were allocated based on the revenue contribution of the respective
businesses or product lines. Costs allocated to cleaning and lighting, and
therefore excluded from these combined financial statements, were $37,300,
$55,700 and $59,800 for the years ended December 31, 1997, 1996 and 1995,
respectively. These costs include portions of the Corporate pass-through charges
and shared direct services with B&D affiliates noted above.
4. Accounts Receivable
HPG participated in B&D's sale of receivables program under which HPG's and
other B&D affiliate's receivables were sold without significant recourse on a
revolving basis. In December 1997, B&D terminated its sale of receivables
program. At December 31, 1996, B&D estimates that it had sold approximately
$34,500 of HPG's receivables under this program. The estimate is based on an
allocation percentage derived by dividing HPG's receivables eligible for sale
at that time by B&D's total receivable available for sale at that time,
multiplied by the actual receivables sold under the program. The discount on the
sale of receivables of $600, $1,700 and $2,200 for the years ended December 31,
1997, 1996 and 1995, respectively, is recorded in other expense.
HPG continuously evaluates the credit worthiness of its customers, and
generally does not require collateral.
5. Inventories
The classification of inventories at the end of each year consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
---------------------------
<S> <C> <C>
Raw materials and work-in process $ 8,670 $13,777
Finished goods 36,651 45,141
Provision for excess and obsolete inventories (4,350) (5,772)
---------------------------
$40,971 $53,146
===========================
</TABLE>
The cost of inventories determined under the last-in, first-out method (LIFO)
approximates the cost determined under the first-in, first-out (FIFO) method.
The cost of United States inventories stated under the LIFO method was
approximately 60% and 50% of total inventories at December 31, 1997 and 1996,
respectively. For the year ended December 31, 1996, gross margin increased by
$700 due to a LIFO liquidation.
11
<PAGE> 16
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
6. Property, Equipment and Capitalized Software
Major classes of property, equipment and capitalized software at the end of each
year are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
Land and land improvements $ 2,733 $ 2,568
Buildings and leasehold improvements 21,519 22,729
Computers and related equipment 4,276 6,947
Furniture and office equipment 2,606 3,088
Machinery and other equipment 92,929 107,060
Tools and dies 26,265 27,850
Construction in progress 2,724 3,797
Capitalized software 4,553 -
----------------------------
157,605 174,039
Less accumulated depreciation and amortization 83,148 99,258
----------------------------
$ 74,457 $ 74,781
============================
</TABLE>
Depreciation expense for the year ended December 31, 1997, 1996 and 1995 was
approximately $14,500, $14,400 and $14,000, respectively.
7. Goodwill
Goodwill at the end of each year was as follows:
<TABLE>
<CAPTION>
1997 1996
-----------------------------
<S> <C> <C>
Goodwill $ 85,825 $ 85,804
Accumulated amortization (62,374) (58,670)
-----------------------------
$ 23,451 $ 27,134
=============================
</TABLE>
8. Accrued Liabilities
Accrued liabilities at the end of each year consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---------------------------
<S> <C> <C>
Accrued advertising and promotion $ 8,717 $14,816
Accrued warranty 7,311 7,419
Accrued payroll and benefits 7,510 5,186
Other 27,571 23,919
---------------------------
$51,109 $51,340
===========================
</TABLE>
12
<PAGE> 17
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
9. Employee Benefit Plans
Throughout the period covered by the combined financial statements, HPG's United
States employees were covered by certain non-contributory defined benefit plans
of B&D. The benefits for these plans are based primarily on employees' years of
service and remuneration near retirement. The cost of these plans for HPG was
determined on an actuaria1 basis. Assets, which are not specifically
attributable to individual employees, were assumed to be equal to the projected
pension obligation for purposes of determining pension expense. The pension cost
is not necessarily indicative of the pension cost that would have been incurred
if HPG had been operated as a separate entity.
The components of pension cost for each year were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 1,114 $ 989 $ 846
Interest cost on projected benefit obligation 2,014 1,660 1,775
Actual return on assets (2,363) (2,184) (2,093)
Net amortization and deferral 23 251 10
- --------------------------------------------------------------------------------
Net pension cost $ 788 $ 716 $ 538
================================================================================
</TABLE>
The funded status of the domestic defined benefit plans at the end of each year
was as follows:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit $ 25,331 $ 19,714
- --------------------------------------------------------------------------------
Accumulated benefit $ 26,167 $ 20,318
- --------------------------------------------------------------------------------
Projected benefit $ 31,045 $ 23,554
Allocated plan assets at fair value (30,916) (23,490)
- --------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets 129 64
Unrecognized net gain 1,953 1,121
- --------------------------------------------------------------------------------
Net pension liability recognized in the Combined
Statement of Financial Position $ 2,082 $ 1,185
================================================================================
Discount rates 7.5% 8.0%
Salary scales 5.0% 5.0%
Expected return on plan assets 9.75% 10.5%
- --------------------------------------------------------------------------------
</TABLE>
Plan assets consist principally of investments in equity securities, debt
securities and cash equivalents.
HPG also participates in a B&D sponsored defined contribution plan. Under the
terms of the plan, HPG matches one ha1f of employee contributions based on a
percentage of the employee contribution or compensation. Expense for defined
contribution plans amounted to approximately $400, $500, and $400 for the years
ended December 31, 1997, 1996, and 1995, respectively.
Throughout the period covered by the combined financial statements, HPG's United
States and Canadian pensioners and survivors were provided health care and life
insurance benefits by an unfunded plan sponsored by B&D. The cost of these plans
for HPG was determined on an actuarial basis.
13
<PAGE> 18
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
9. Employee Benefit Plans (continued)
Net periodic postretirement benefit expense for each year included the following
components:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service expense $ 127 $ 112 $ 83
Interest expense 1,326 1,426 2,207
Net amortization (1,304) (1,150) (1,015)
- --------------------------------------------------------------------------------
Net periodic postretirement benefit expense $ 149 $ 388 $ 1,275
================================================================================
</TABLE>
The reconciliation of the accumulated postretirement benefit obligation to the
liability recognized in other liabilities in the Combined Statement of Financial
Position at the end of each year was as follows:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $15,018 $14,842
Fully eligible active participants 1,909 1,602
Other active participants 1,570 1,277
- --------------------------------------------------------------------------------
Total 18,497 17,721
- --------------------------------------------------------------------------------
Unrecognized prior service cost 5,790 7,039
Unrecognized net gain 3,031 4,860
- --------------------------------------------------------------------------------
Net postretirement benefit liability recognized in the
Combined Statement of Financial Position $27,318 $29,620
================================================================================
</TABLE>
The health care cost trend rate used to determine the postretirement benefit
obligation was 9.7% for 1997 and 7.2% for 1998, decreases gradually to an
ultimate rate of 5.25% in 2001, and remains at that level thereafter. The trend
rate is a significant factor in determining the amounts reported. The effect of
a 1% annual increase in these assumed health care cost trend rates would
increase the accumulated post-retirement benefit obligation at December 31,
1997, by approximately $1.2 million. The effect of a 1% increase on the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost is immaterial. An assumed discount rate of 7.5% was
used to measure the accumulated postretirement benefit obligation in 1997
compared to 8.0% used in 1996.
The benefit costs are not necessarily indicative of the costs that would have
been incurred if HPG had been operated as a separate entity.
10. Restructuring
Subsequent to December 31, 1997, HPG provided for severance costs of certain
selling, general and administrative employees and for the severance and asset
write-off costs associated with closing its Malaysian manufacturing facility
which totaled $15,500. The selling, general and administrative terminations were
effected during the quarter ended March 29, 1998, although payment of severance
will continue monthly through the term of the obligation. The Malaysian plant
shut-down is expected to be completed during 1998.
14
<PAGE> 19
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
10. Restructuring (continued)
In 1996, HPG recorded a restructuring provision to accrue severance costs and a
tooling write-off associated with the exit of its countertop beverage product
line and further integration of its Canadian business into its United States
business. Total severance costs associated with these actions approximated
$2,000.
11. Income Taxes
Earnings (loss) before income taxes for each year were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $(12,642) $2,688 $ 6,294
Other countries 20,832 2,054 10,452
- --------------------------------------------------------------------------------
$ 8,190 $4,742 $16,746
================================================================================
</TABLE>
Significant components of income taxes (benefits) for each year were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States $(3,600) $ 373 $(1,163)
Other countries 7,333 666 2,919
- --------------------------------------------------------------------------------
3,733 1,039 1,756
- --------------------------------------------------------------------------------
Deferred (primarily United States) 203 2,280 5,239
- --------------------------------------------------------------------------------
$ 3,936 $3,319 $ 6,995
================================================================================
</TABLE>
Deferred tax assets (liabilities) at the end of each year were composed of the
following:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Postretirement benefits $12,194 $12,322
Product liability 3,368 2,897
Warranty 2,486 2,459
Other 4,443 4,973
Inventories (3,417) (3,339)
Fixed assets (1,806) (1,841)
- --------------------------------------------------------------------------------
Net deferred tax assets $17,268 $17,471
================================================================================
</TABLE>
15
<PAGE> 20
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
11. Income Taxes (continued)
A reconciliation of income taxes at the federal statutory rate to HPG's income
taxes for each year is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at federal statutory rate $2,867 $1,660 $5,861
Higher (lower) effective taxes on
earnings in other countries 41 (53) (739)
State taxes (net of federal benefit) (362) 332 510
Amortization of goodwill 1,296 1,296 1,292
Other -- net 94 84 71
- --------------------------------------------------------------------------------
Income taxes $3,936 $3,319 $6,995
================================================================================
</TABLE>
Income taxes have not been provided on the undistributed earnings of foreign
businesses, as such earnings are designated to be reinvested locally to finance
expansion or to support local operating requirements. It is not practicable to
estimate the amount of additional tax that might be payable upon repatriation of
foreign earnings.
12. Disaggregated Financial Information
HPG operates in a single segment.
Geographic information
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
United States $266,685 $287,288 $312,704
Canada 53,982 55,193 66,052
Other 82,261 69,965 66,983
- --------------------------------------------------------------------------------
Combined total $402,928 $412,446 $445,739
================================================================================
</TABLE>
Net sales are attributed to countries based on the location of the customer.
16
<PAGE> 21
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
12. Disaggregated Financial information (continued)
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Long-lived assets:
United States $47,731 $ 48,762
Mexico 31,981 34,764
Malaysia 15,018 17,105
Other 3,178 1,284
- --------------------------------------------------------------------------------
Combined total $97,908 $101,915
================================================================================
</TABLE>
Significant customers: Sales to Wal-Mart represented 21% of net sales in 1997
(20% in 1996 and 19% in 1995). Sales to Kmart were 10% of net sales in 1997 (10%
in 1996 and 11% in 1995). At December 31, 1997, receivables from Wal-Mart
represented 19% of total receivables.
13. Commitments and Contingencies
Lease obligations: HPG is obligated under various non-cancelable leases for
office facilities and equipment. These leases generally provide for renewal
options and, in the case of facilities leases, for periodic rate increases based
upon various economic factors.
Future minimum payments under non-cancelable operating leases with initial terms
of one year or more as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998 $3,859
1999 3,224
2000 2,433
2001 42
------
Total $9,558
======
</TABLE>
Rental expense was $4,900, $4,000 and $4,100 for the years ended December 31,
1997, 1996 and 1995, respectively.
Legal proceedings: In October 1997, the Consumer Product Safety Commission filed
an administrative complaint against B&D seeking an order requiring B&D to give
public notice of a fire hazard associated with the T1000 Type 1 Horizontal
Toaster manufactured and sold by HPG and an order requiring to provide an
adequate remedy for the T1000 Type 1 Horizontal Toaster. Prior to the filing of
the administrative complaint, HPG had initiated a recall of the toaster. A
provision was made in HPG's results from operations in 1997 for the estimated
cost of the original recall.
17
<PAGE> 22
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Combined Financial Statements
(Amounts in Thousands)
13. Commitments and Contingencies (continued)
Subsequent to December 31, 1997, B&D agreed to modify the original recall plan
and entered into a settlement agreement with the Consumer Product Safety
Commission. The additional provision necessary to cover the incremental
estimated cost of the modified plan was also recorded in the Combined Statement
of Operations in 1997. B&D believes that amounts provided are adequate to
reflect the cost of the recall.
Various other suits, claims and actions are pending against HPG. Management of
B&D does not anticipate that the disposition of these suits, claims and actions,
either individually or in the aggregate, will have a material adverse effect on
HPG's financial position or its expected ongoing results of its operations.
14. Subsequent Events
On May 11, 1998, B&D announced that it had entered into an agreement to sell its
HPG business to Windmere-Durable Holdings, Inc. (the "buyer"). In connection
with the anticipated sale, B&D and the buyer have agreed to enter into certain
distribution services agreements, services agreements and lease or tenancy
agreements.
The distribution services agreements are to provide for the distribution by B&D
of HPG products in the United States though February 29, 2000. Separate
agreements will exist for other jurisdictions in the Market Area. These
agreements generally are cancelable by the buyer at certain early termination
dates upon specified advance written notice. Terms to be provided to HPG are to
be consistent with budgeted intercompany rates currently in effect.
The services agreements are to provide for the performance of certain
administrative services by B&D on behalf of HPG through periods ranging up to
September 30, 2000. Separate agreements will exist for the United States and
other jurisdictions in the Market Area and are cancelable by the buyer, in whole
or in part, upon specified advance written notice. Terms to be provided to HPG
are to be consistent with budgeted intercompany rates currently in effect.
The lease or tenancy agreements provide for the buyer to use the Malaysian
production facility for up to six months subsequent to closing and the United
States production facility through September 30, 1999, at nominal rates.
18
<PAGE> 23
Report of Independent Auditors
The Board of Directors
The Black & Decker Corporation
We have audited the accompanying combined statement of financial position of the
Household Products Group Excluding Cleaning and Lighting Product Lines (a
Component of The Black & Decker Corporation) as defined in Note 1 ("HPG") as of
December 31, 1997 and 1996, and the related combined statements of operations,
changes in owner's net investment and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of HPG's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of HPG, as defined in
Note 1, at December 31, 1997 and 1996, and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Stamford, Connecticut
June 5, 1998
19
<PAGE> 24
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Interim Combined Statement of Financial Position ........................... 2
Interim Combined Statement of Operations ................................... 3
Interim Combined Statement of Cash Flows ................................... 4
Interim Combined Statement of Changes in Owner's Net Investment ............ 5
Notes to Interim Combined Financial Statements ............................. 6
<PAGE> 25
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Interim Combined Statement of Financial Position
(Amounts in Thousands)
<TABLE>
<CAPTION>
March 29, December 31,
1998 1997
-------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Accounts receivable $ 65,492 $ 96,460
Inventories 61,037 40,971
Prepaid expenses and other 5,236 5,808
-------------------------
Total current assets 131,765 143,239
Property, equipment and capitalized software, net 63,738 74,457
Goodwill 22,525 23,451
Other assets 16,565 17,400
-------------------------
Total assets 234,593 258,547
Liabilities
Current liabilities
Accounts payable 19,896 12,419
Accrued liabilities 45,350 51,109
-------------------------
Total current liabilities 65,246 63,528
Other liabilities 33,713 35,547
-------------------------
Total liabilities 98,959 99,075
-------------------------
Owner's net investment $135,634 $159,472
=========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 26
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Interim Combined Statement of Operations (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 29, March 30,
1998 1997
-----------------------
<S> <C> <C>
Net sales $ 61,755 $ 65,357
Cost of goods sold 43,605 47,394
----------------------
Gross margin 18,150 17,963
Selling, general and administrative expenses 21,723 19,735
Restructuring 15,500 --
----------------------
Operating loss (19,073) (1,772)
Other income (expense) 121 (78)
----------------------
Loss before income taxes (18,952) (1,850)
Income tax benefit (3,428) (801)
----------------------
Net loss $(15,524) $ (1,049)
======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 27
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Interim Combined Statement of Cash Flows (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 29, March 30,
1998 1997
---------------------
<S> <C> <C>
Operating activities:
Net loss $(15,524) $ (1,049)
Adjustments to reconcile net earnings
to cash flows from operating activities:
Depreciation and amortization 4,027 4,611
Restructuring charges 15,500 --
Changes in selected working capital items:
Decrease in accounts receivable 30,890 28,143
Increase in inventories (20,106) (8,079)
Increase (decrease) in accounts payable 7,479 (982)
Other assets and liabilities (12,174) (12,696)
Net decrease in accounts receivable sold -- (17,298)
--------------------
Net cash provided from (used in) operating activities 10,092 (7,350)
Investing activities:
Capital expenditures (1,873) (1,125)
Proceeds from disposal of assets 19 --
--------------------
Net cash used in investing activities (1,854) (1,125)
Financing activities:
Net cash (remitted to) invested by owner (8,238) 8,475
--------------------
Cash at beginning and end of year $ -- $ --
====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 28
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Interim Combined Statement of Changes in Owner's Net Investment (Unaudited)
(Amounts in Thousands)
<TABLE>
<S> <C>
Balance at December 31, 1996 $ 124,687
Net loss (1,049)
Foreign currency translation adjustments (232)
Net Financing provided by B&D 8,475
---------
Balance at March 30, 1997 $ 131,881
=========
================================================================================
Balance at December 31, 1997 $ 159,472
Net loss (15,524)
Foreign currency translation adjustments (76)
Net financing provided to B&D (8,238)
---------
Balance at March 29, 1998 $ 135,634
=========
</TABLE>
The accompanying notes are an integral part of these financial statements,
5
<PAGE> 29
Household Products Group Excluding Cleaning and Lighting Product Lines
(a Component of The Black & Decker Corporation)
Notes to Interim Combined Financial Statements
(Amounts in Thousands)
1. Basis of Presentation
The accompanying unaudited combined financial statements include all
adjustments, consisting of recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for these
periods but do not include include all the information and notes required by
generally accepted accounting principles for complete financial statements.
Operating results for the period ended March 29, 1998, are not necessarily
indicative of the results that may be expected for the entire year.
2. Restructuring
In the quarter ended March 29, 1998, HPG provided for severance costs of certain
selling, general and administrative employees and for the severance and asset
write-off costs associated with closing its Malaysian manufacturing facility.
The selling, general and administrative terminations were effected by the end
of the quarter ended March 29, 1998, although payment of severance will continue
monthly through the term of the obligation. The Malaysian plant shut-down is
expected to be completed during 1998.
6
<PAGE> 30
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Financial Information gives
effect to the consummation of the HPG Acquisition (accounted for as a purchase
for financial accounting purposes), a proposed public offering of $100 million
of the Company's common stock and $125 million in aggregate principal amount of
the Company's senior subordinated notes, and the borrowings under the Senior
Credit Facilities (the "Transactions"), in each case as if it or they had been
consummated: (i) on March 31, 1998, in the case of the Unaudited Pro Forma
Combined Balance Sheet; and (ii) on January 1, 1997, the first day of
Windmere-Durable's 1997 fiscal year, in the case of the Unaudited Pro Forma
Combined Statements of Operations for the fiscal year ended December 31, 1997
and the three months and twelve months ended March 31, 1998.
The following Unaudited Pro Forma Combined Financial Information is
presented for illustrative purposes only and does not purport to be indicative
of the Company's actual financial position or results of operations as of the
date hereof, or as of or for any other future date, and is not necessarily
indicative of what the Company's actual financial position or results of
operations would have been had the Transactions been consummated on the
above-referenced dates, nor does it give effect to (i) any transactions other
than the Transactions and those described in the Notes to the Unaudited Pro
Forma Combined Financial Information or (ii) Windmere-Durable's or HPG's results
of operations since March 31, 1998. The pro forma financial information is based
on the HPG Acquisition including the closing of the acquisition of certain
Mexican assets (which is considered probable but still subject to MFCC
clearance). Until such closing takes place, the plant will supply product under
a Manufacturing Agreement which is expected to yield operating results for the
Company in respect of such assets and operations substantively equivalent to the
results reflected in the accompanying pro forma financial statements, which
assume completion of the acquisition of the Mexican assets. Although the
following Unaudited Pro Forma Combined Financial Information for the twelve
months ended March 31, 1998 gives effect to $6.9 million in payroll savings from
work force reductions and $12.7 million from annual cost reductions resulting
from the HPG Acquisition, it does not give effect to an additional $40.0 million
to $50.0 million of estimated annual cost savings expected by the Company's
management to be achieved over time following consummation of the HPG
Acquisition. The Company's ability to recognize any cost savings from the HPG
Acquisition and a related Repositioning Program will depend to a significant
extent on future events, certain of which are beyond the Company's control,
including market demand for its products, stable currency and political climates
in the People's Republic of China and Mexico and other factors.
In the preparation of the following Unaudited Pro Forma Combined Financial
Information, it has been generally assumed that the historical value of HPG's
assets and liabilities approximates the fair value thereof (except as described
in the accompanying Notes to Unaudited Pro Forma Combined Financial
Information), as an independent valuation has not been completed. The Company
will be required to determine the fair value of the assets and liabilities of
the Black & Decker Household Products Group (including intangible assets)
following the closing of the HPG Acquisition. Although such determination of
fair value is not presently expected to result in values that are materially
greater or less than the values assumed in the preparation of the following
Unaudited Pro Forma Combined Financial Information, there can be no assurance
with respect thereto.
The Unaudited Pro Forma Combined Balance Sheet at March 31, 1998 is based
upon Windmere-Durable's financial position at March 31, 1998 and upon the Black
& Decker Household Products Group's financial position at March 29, 1998. The
Unaudited Pro Forma Combined Statement of Operations for the fiscal year ended
December 31, 1997 is based upon Windmere-Durable's results of operations for its
fiscal year ended December 31, 1997 and upon the Black & Decker Household
Product Group's results of operations for its fiscal year ended December 31,
1997. The Unaudited Pro Forma Combined Statements of Operations for the three
months and twelve months ended March 31, 1998 are based upon Windmere-Durable's
and HPG's results of operations for the three months and twelve months ended
March 31, 1998.
The small household appliance industry is seasonal in nature, with a higher
proportion of sales and earnings usually being generated in the third and fourth
quarters of the fiscal year than in other periods. Because of this seasonality
and other factors, many of which are beyond the Company's control, results of
operations for interim periods are not necessarily indicative of results of
operations for an entire fiscal year.
7
<PAGE> 31
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
BALANCE SHEET
MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -------------------------
WINDMERE-DURABLE HPG ADJUSTMENTS COMBINED
---------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 2,491 $ -- $ $ 2,491
Accounts receivable, net............... 38,506 65,492 103,998
Receivables from affiliates............ 17,303 -- 17,303
Inventory.............................. 99,769 61,037 160,806
Prepaid expenses....................... 7,032 5,236 12,268
Future tax benefits.................... 3,950 -- 3,950
Refundable income taxes................ 1,274 -- 1,274
-------- -------- --------
Total current assets......... 170,325 131,765 302,090
Investment in affiliates............... 43,699 -- 43,699
Notes receivable from affiliate........ 7,872 -- 7,872
Property, plant and equipment.......... 38,009 63,738 (15,018)(1) 86,729
Other assets........................... 13,766 16,565 15,800(2) 30,131
(16,000)(1)
Intangible assets...................... -- 22,525 (22,525)(1)
219,991(1) 219,991
-------- -------- --------- --------
Total assets................. $273,671 $234,593 $ 182,248 $690,512
======== ======== ========= ========
Notes and acceptances payable.......... $ 45,451 $ -- $ (39,000)(2) $ 6,451
Current portion of long-term debt...... 3,365 -- (814)(2) 2,551
Accounts payable and accrued
expenses............................. 16,110 65,246 10,000(1) 91,684
328(1)
Deferred income, current portion....... 165 -- 165
-------- -------- --------- --------
Total current liabilities.... 65,091 65,246 (29,486) 100,851
Long-term debt......................... 15,866 -- 280,291(2) 296,157
Deferred income/other liabilities...... 1,031 33,713 (27,396)(1) 7,348
Net assets............................. 135,634 (135,634)(3) --
Common stock........................... 1,872 -- 304(2) 2,176
Paid-in capital........................ 40,668 -- 94,169(2) 134,837
Currency translation adjustment........ (1,080) -- (1,080)
Retained earnings...................... 150,223 -- 150,223
-------- -------- --------- --------
Total stockholders' equity... 191,683 135,634 (41,161) 286,156
-------- -------- --------- --------
Total liabilities and
stockholders' equity....... $273,671 $234,593 $ 182,248 $690,512
======== ======== ========= ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
8
<PAGE> 32
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -------------------------
WINDMERE-DURABLE HPG ADJUSTMENTS COMBINED
---------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Sales.................................. $261,885 $402,928 $ $664,813
Cost of goods sold..................... 197,507 289,423 (1,130)(4) 485,800
-------- -------- -------- --------
Gross profit........................... 64,378 113,505 1,130 179,013
Gross profit %......................... 24.6% 28.2% 26.9%
Selling, general, and administrative
expenses............................. 50,349 104,736 (6,168)(4) 146,372
(6,080)(5)
7,773(6)
2,431(7)
(1,250)(8)
(812)(9)
(2,250)(10)
223(11)
(2,580)(12)
-------- -------- -------- --------
Operating profit....................... 14,029 8,769 9,843 32,641
Interest expense....................... 3,351 -- 23,639(7) 26,990
Interest income........................ (2,727) -- (2,727)
Other expense.......................... -- 579 579
-------- -------- -------- --------
Earnings before equity in net earnings
of affiliates and income taxes....... 13,405 8,190 (13,796) 7,799
Equity in net earnings of affiliates... 7,353 -- -- 7,353
Income taxes (benefit)................. 923 3,936 (1,895)(13) 2,964
-------- -------- -------- --------
Net earnings........................... $ 19,835 $ 4,254 $(11,901) $ 12,188
======== ======== ======== ========
Earnings per share -- diluted.......... $ 1.00 $ 0.53
======== ========
Weighted average shares................ 19,776 3,041(14) 22,817
======== ======== ========
OTHER FINANCIAL DATA:
EBITDA............................... $ 21,727 $ 26,361 $ 68,135
Depreciation and amortization........ $ 7,698 $ 18,171 $ 36,073
Capital expenditures................. $ 11,296 $ 16,922 $ 28,218
Ratio of total debt to EBITDA........ -- -- 4.5x
Ratio of EBITDA to interest
expense........................... -- -- 2.5x
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
9
<PAGE> 33
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -------------------------
WINDMERE-DURABLE HPG ADJUSTMENTS COMBINED
---------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Sales.................................. $55,394 $ 61,755 $ $117,149
Cost of goods sold..................... 42,511 43,605 (67)(4) 86,049
------- -------- ------- --------
Gross profit........................... 12,883 18,150 67 31,100
Gross profit %......................... 23.3% 29.4% 26.5%
Selling, general, and administrative
expenses............................. 11,706 21,723 (1,317)(4) 32,038
(1,520)(5)
1,943(6)
608(7)
(313)(8)
(203)(9)
56(11)
(645)(12)
Restructuring charge................... -- 15,500 15,500
------- -------- ------- --------
Operating profit (loss)................ 1,177 (19,073) 1,458 (16,438)
Interest expense....................... 1,045 -- 5,910(7) 6,955
Interest income........................ (680) -- (680)
Other income (expense)................. -- 121 121
------- -------- ------- --------
Earnings (loss) before equity in net
earnings of affiliates and income
taxes................................ 812 (18,952) (4,452) (22,592)
Equity in net earnings of affiliates... 445 -- 445
Income taxes (benefit)................. 121 (3,428) (5,278)(13) (8,585)
------- -------- ------- --------
Net earnings (loss).................... $ 1,136 $(15,524) $ 826 $(13,562)
======= ======== ======= ========
Earnings (loss) per share -- diluted... $ 0.06 $ (0.58)
======= ========
Weighted average shares................ 20,194 3,041(14) 23,235
======= ======= ========
OTHER FINANCIAL DATA:
EBITDA............................... $ 3,251 $ 575 $ 7,835
Depreciation and amortization........ $ 2,074 $ 4,027 $ 8,652
Capital expenditures................. $ 2,671 $ 1,873 $ 4,154
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
10
<PAGE> 34
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -------------------------
WINDMERE-DURABLE HPG ADJUSTMENTS COMBINED
---------------- -------- ----------- --------
<S> <C> <C> <C> <C>
Sales.................................. $265,867 $399,326 $ $665,193
Cost of goods sold..................... 199,425 285,634 (862)(4) 484,197
-------- -------- -------- --------
Gross profit........................... 66,442 113,692 862 180,996
Gross profit %......................... 25.0% 28.5% 27.2%
Selling, general and administrative
expenses............................. 52,358 106,724 (6,037)(4) 150,500
(6,080)(5)
7,773(6)
2,431(7)
(1,250)(8)
(812)(9)
(2,250)(10)
223(11)
(2,580)(12)
Restructuring charge................... -- 15,500 15,500
-------- -------- -------- --------
Operating profit (loss)................ 14,084 (8,532) 9,444 14,996
Interest expense....................... 3,772 -- 23,639(7) 27,411
Interest income........................ (2,931) -- (2,931)
Other income (expense)................. -- (380) (380)
-------- -------- -------- --------
Earnings before equity in net earnings
of affiliates and income taxes....... 13,243 (8,912) (14,195) (9,864)
Equity in net earnings of affiliates... 8,288 -- 8,288
Income taxes (benefit)................. 880 1,309 (5,937)(13) (3,748)
-------- -------- -------- --------
Net earnings (loss).................... $ 20,651 $(10,221) $ (8,258) $ 2,172
======== ======== ======== ========
Earnings per share -- diluted.......... $ 1.04 $ 0.09
======== ========
Weighted average shares................ 19,881 3,041(14) 22,922
======== ======== ========
OTHER FINANCIAL DATA:
EBITDA............................... $ 21,970 $ 24,175 $ 65,793
Depreciation and amortization........ $ 7,886 $ 17,587 $ 35,677
Capital expenditures................. $ 11,966 $ 17,670 $ 23,636
Ratio of total debt to EBITDA........ -- -- 4.6x
Ratio of EBITDA to interest
expense........................... -- -- 2.4x
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Information.
11
<PAGE> 35
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(1) The following adjustments give effect to the HPG Acquisition. The aggregate
purchase price paid by Windmere-Durable in connection with the HPG
Acquisition is summarized below:
<TABLE>
<S> <C>
AGGREGATE PURCHASE PRICE: (in thousands)
Cash paid to The Black & Decker Corporation................. $315,000(a)
Transition/integration costs to be incurred in the HPG
Acquisition............................................... 10,000(b)
Financial and advisory, investment banking, legal,
accounting, and other professional fees................... 4,150
--------
$329,150
========
ALLOCATION OF PURCHASE PRICE:
Aggregate purchase price.................................... $329,150
Less net book value of assets acquired...................... 135,634
--------
Excess of cost over net book value of net assets acquired... 193,516
Adjustments to record assets and liabilities acquired at
fair market value:
Other assets.............................................. 16,000(c)
Accrued liabilities....................................... 328(d)
Other liabilities......................................... (27,396)(e)
Goodwill.................................................. 22,525(f)
Fixed assets.............................................. 15,018(g)
--------
26,475
--------
Excess of cost over fair market value of net assets
acquired.................................................. $219,991
========
</TABLE>
- ---------------
(a) Includes approximately $27.0 million paid into escrow for purchase of the
Queretaro property pending approval by MFCC.
(b) Reflects certain estimated transition and integration costs to be incurred
in connection with the HPG Acquisition in accordance with EITF 95-3
"Recognition of Liabilities in Connection with a Purchase Business
Combination."
(c) Reflects the eliminations of income tax assets of $16,000 which are not
being conveyed in the HPG Acquisition under the terms of the asset purchase
agreement between Windmere-Durable and The Black & Decker Corporation (the
"Purchase Agreement").
(d) Reflects the accrual of $2,500 for unfavorable office and computer leases
(idle property) under APB 16, and the elimination of $2,172 of product
recall liability accruals related to the recall of HPG's T1000 toaster
ovens by the Consumer Products Safety Commission as Windmere-Durable is
indemnified for such recall expense under the Purchase Agreement. There can
be no assurance, however, that Windmere-Durable will not incur product
recall expense in the future.
(e) Reflects the elimination of other postemployment benefit liabilities of
$27,396 not assumed by Windmere-Durable.
(f) Reflects the eliminations of HPG's existing goodwill of $22,525.
(g) Reflects the elimination of HPG's Kuantan, Malaysia fixed assets of $15,018
which are not being conveyed to the buyer under the purchase agreement.
12
<PAGE> 36
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
(2) Reflects the adjustment to record the following:
<TABLE>
<CAPTION>
SHORT-TERM LONG-TERM COMMON PAID-IN OTHER
CASH DEBT DEBT STOCK CAPITAL ASSETS
--------- ---------- --------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Borrowings under Senior
Subordinated Loans........... $ 185,000 $ $ 185,000 $ $ $
Borrowings under Term Loans.... 185,000 185,000
Borrowings under new Senior
Secured Revolving Credit
Facility..................... 12,882 12,882
Repayment of existing credit
facility..................... (39,000) (39,000)
Repayment of Salton loan....... (10,847) (10,847)
Repayment of industrial
development bonds............ (1,834) (814) (1,020)
Issuance of Common Stock, net
of costs..................... 94,473 304 94,169
Debt issuance costs............ (15,800) 15,800
HPG Acquisition cash purchase
price and expenses........... (319,150)
% Senior Subordinated
Notes due 2008............... 125,000 125,000
Repayment of Senior
Subordinated Loans........... (185,000) (185,000)
Repayment of Tranche C Term
Loan......................... (20,000) (20,000)
Repayment of Senior Secured
Revolving Credit Facility.... (10,724) (10,724)
--------- -------- --------- ---- ------- -------
$ -- $(39,814) $ 280,291 $304 $94,169 $15,800
========= ======== ========= ==== ======= =======
</TABLE>
(3) Reflects the elimination of HPG's equity which will be cancelled upon
acquisition.
(4) Reflects the HPG workforce reductions in 1997 and early 1998 at the plant
and corporate office levels resulting in the elimination of 127 positions
and savings of $7,298 for the year ended December 31, 1997, $1,384 for the
three months ended March 31, 1998, and $6,899 for the twelve months ended
March 31, 1998.
(5) Reflects the reduction of corporate expenses as calculated by comparing the
amount paid by HPG to The Black & Decker Corporation prior to the HPG
Acquisition to the amount estimated to be incurred on a stand-alone basis
which is a savings of $6,080 for the year ended December 31, 1997, $1,520
for the three months ended March 31, 1998, and $6,080 for the twelve months
ended March 31, 1998.
(6) Reflects incremental amortization expense as a result of the excess of cost
over fair market value of the net assets acquired (see Note 1) as follows:
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
ESTIMATED YEAR ENDED ENDED ENDED
USEFUL LIFE DECEMBER 31, 1997 MARCH 31, 1998 MARCH 31, 1998
--------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Amortization of identifiable
intangible assets............. 6.5 to 12 years $7,323 $1,831 $7,323
Amortization of excess of cost
over fair value of net assets
acquired...................... 40 years $ 450 $ 112 $ 450
</TABLE>
(7) Reflects an adjustment to record additional interest expense and
amortization of debt issuance costs of $26,070 for the year ended December
31, 1997, $6,518 for the three months ended March 31, 1998, and
13
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION -- (CONTINUED)
$26,070 for the twelve months ended March 31, 1998. An assumed rate of
10.0% per annum is used in connection with the interest expense on the
Notes. If the actual interest rate varies by 25 basis points from the
assumed rates, pro forma interest expense in connection with the Notes
would change by $313 for the year ended December 31, 1997, $78 for the
three months ended March 31, 1998 and $313 for the twelve months ended
March 31, 1998.
(8) Reflects the elimination of lease costs in excess of market rates in the
amount of $1,250 for the year ended December 31, 1997, $313 for the three
months ended March 31, 1998, and $1,250 for the twelve months ended March
31, 1998.
(9) Reflects the expected future reduction in purchasing costs for the Hong
Kong purchasing office under the interim services agreement entered into
between Windmere-Durable and The Black & Decker Corporation as part of the
HPG Acquisition from the amounts paid by HPG to The Black & Decker
Corporation prior to the HPG Acquisition of $812 for the year ended
December 31, 1997, $203 for the three months ended March 31, 1998, and $812
for the twelve months ended March 31, 1998.
(10) Reflects the elimination of product recall expense for which The Black &
Decker Corporation has indemnified Windmere-Durable under the terms of the
Purchase Agreement of $2,250 for the year ended December 31, 1997, $0 for
the three months ended March 31, 1998, and $2,250 for the twelve months
ended March 31, 1998. There can be no assurance, however, that the Company
will not incur product recall expense going forward.
(11) Reflects the agreed upon increase in executive salaries under the new
employment agreements which have been or are expected to be entered into of
$223 for the year ended December 31, 1997, $56 for the three months ended
March 31, 1998, and $223 for the twelve months ended March 31, 1998. See
"Management."
(12) Reflects the elimination of the Malaysian plant losses of $2,580
experienced by HPG for the year ended December 31, 1997, $645 for the three
months ended March 31, 1998, and $2,580 for the twelve months ended March
31, 1998. The Malaysia facility was not purchased by Windmere-Durable in
the HPG Acquisition.
(13) Reflects the income tax benefit related to the effects of the pro forma
adjustments based upon an assumed composite income tax rate of 38% or
$1,895 for the year ended December 31, 1997, $5,278 for the three months
ended March 31, 1998, and $5,937 for the twelve months ended March 31,
1998.
(14) Reflects the shares issued as a result of the Common Stock Offering at an
assumed offering price of $32.875 per share.
EBITDA is earnings (loss) before equity of net earnings of affiliates
income taxes plus depreciation expense, amortization expense, net interest
expense, and the restructuring charge. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service and/or
incur indebtedness, however, EBITDA should not be considered as an alternative
to net earnings as a measure of operating results or to cash flows as a measure
of liquidity in accordance with generally accepted accounting principles.
14
<PAGE> 38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: June 26, 1998. WINDMERE-DURABLE HOLDINGS, INC.
By: /s/ Harry D. Schulman
----------------------------
Harry D. Schulman
Chief Financial Officer
<PAGE> 39
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Transaction Agreement, dated as of May, 1998, by and between the
Company and The Black & Decker Corporation.
99.2 Amendment No. 1, dated as of June 26, 1998, to the Transaction
Agreement, dated as of May 10, 1998, by and between the Company
and The Black & Decker Corporation.
<PAGE> 1
Exhibit 99.1
Page 1
TRANSACTION AGREEMENT
Dated as of May 10, 1998
By and Between
THE BLACK & DECKER CORPORATION
and
WINDMERE-DURABLE HOLDINGS, INC.
<PAGE> 2
Page 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01 Definitions....................................... 1
ARTICLE II
TRANSACTIONS AND CLOSING
Section 2.01 Closing Transactions.............................. 1
Section 2.02 Exchange Consideration............................ 3
Section 2.03 Closing........................................... 4
Section 2.04 Adjustment of Exchange Consideration.............. 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.01 Representations and Warranties of Seller.......... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.01 Representations and Warranties of Buyer........... 6
ARTICLE V
COVENANTS AND AGREEMENTS OF SELLER
Section 5.01 Conduct of Business............................... 7
Section 5.02 Access to Information; Confidentiality............ 8
Section 5.03 Change of Lockbox Accounts........................ 9
Section 5.04 Access to Information; Cooperation After Closing.. 9
Section 5.05 Maintenance of Insurance Policies................. 9
Section 5.06 Noncompetition; Nonsolicitation; etc.............. 10
<PAGE> 3
Page 3
ARTICLE VI
COVENANTS AND AGREEMENTS OF BUYER
Section 6.01 Confidentiality................................... 12
Section 6.02 Provision and Preservation of and Access to
Certain Information; Cooperation................ 12
Section 6.03 Insurance; Financial Support Arrangements......... 13
Section 6.04 Use of Intellectual Property...................... 14
Section 6.05 Certain Environmental Investigations.............. 14
Section 6.06 Nonsolicitation of Employees, etc................. 15
ARTICLE VII
COVENANTS AND AGREEMENTS OF THE PARTIES
Section 7.01 Further Assurances................................ 16
Section 7.02 Certain Filings; Consents......................... 16
Section 7.03 Public Announcements.............................. 16
Section 7.04 Intellectual Property............................. 16
Section 7.05 HSR Act........................................... 17
Section 7.06 Certain Environmental Insurance Matters........... 17
Section 7.07 Legal Privileges.................................. 18
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
Section 8.01 Employees and Employee Benefit Matters............ 18
ARTICLE IX
CONDITIONS TO CLOSING
Section 9.01 Conditions to the Obligations of Each Party....... 18
Section 9.02 Conditions to Obligation of Buyer................. 19
Section 9.03 Conditions to Obligation of Seller................ 20
Section 9.04 Effect of Waiver.................................. 20
<PAGE> 4
Page 4
ARTICLE X
SURVIVAL; INDEMNIFICATION
Section 10.01 Survival......................................... 20
Section 10.02 Indemnification.................................. 22
Section 10.03 Procedures....................................... 23
Section 10.04 Limitations...................................... 25
ARTICLE XI
TERMINATION
Section 11.01 Termination...................................... 26
Section 11.02 Effect of Termination............................ 27
ARTICLE XII
MISCELLANEOUS
Section 12.01 Notices.......................................... 27
Section 12.02 Amendments; Waivers.............................. 28
Section 12.03 Expenses; Taxes.................................. 29
Section 12.04 Successors and Assigns........................... 29
Section 12.05 Disclosure....................................... 29
Section 12.06 Construction..................................... 29
Section 12.07 Entire Agreement................................. 30
Section 12.08 Governing Law.................................... 30
Section 12.09 Counterparts; Effectiveness...................... 30
Section 12.10 Jurisdiction..................................... 31
Section 12.11 Severability..................................... 31
Section 12.12 Captions......................................... 31
Section 12.13 Bulk Sales....................................... 31
<PAGE> 5
Page 5
EXHIBITS
EXHIBIT A Definitions
EXHIBIT B Representations and Warranties of Seller
EXHIBIT C Representations and Warranties of Buyer
EXHIBIT D Employees and Employee Benefit Matters
EXHIBIT E Additional Matters Relating to Product Liability Issues
<PAGE> 6
Page 6
ATTACHMENTS
Attachment I Opening Statement
Attachment II Form of Bill of Sale, Assignment and Assumption Agreement
Attachment III Form of Assignment of United States Trademarks, Trademark
Registrations and Applications for Registration
Attachment IV Form of Assignment of Foreign Trademarks, Trademark
Registrations and Applications for Registration
Attachment V Form of Assignment of United States Patents and Patent
Applications
Attachment VI Form of Assignment of Foreign Patents and Applications for
Patents
Attachment VII Form of Trademark License Agreement
Attachment VIII Form of Assignment of U.S. Copyrights
Attachment IX Form of Assignment of Mexican Trademarks, Trademark
Registrations and Applications for Registration
Attachment X Form of Cross License Agreement
Attachment XI Exchange Consideration Allocation Schedule
Attachment XII Certain Intellectual Property Assets
Attachment XIII Consents and Approvals Required Prior to Closing
Attachment XIV HPG Financial Statements
Attachment XV Certain Active Employees
Attachment XVI Form of Distribution Services Agreement (United States)
Attachment XVII Form of Distribution Services Agreement (Latin America)
Attachment XVIII Form of Services Agreement (United States and Canada)
Attachment XIX Form of Services Agreement (GPA)
Attachment XX Form of Services Agreement (Mexico)
Attachment XXI Form of Services Agreement (Latin American Group and CCA)
Attachment XXII Form of Services Agreement (Colombia)
<PAGE> 7
Page 7
Attachment XXIII Form of Services Agreement (Chile)
Attachment XXIV Form of Services Agreement (Peru)
Attachment XXV Form of Services Agreement (Argentina)
Attachment XXVI Form of Services Agreement (Puerto Rico)
Attachment XXVII Form of Services Agreement (Venezuela)
Attachment XXVIII Asheboro Facility
Attachment XXIX Opinion of Seller's Counsel
<PAGE> 8
Page 8
TRANSACTION AGREEMENT
This Transaction Agreement (together with the Exhibits, Schedules and
Attachments hereto, this "Agreement") is made as of the 10th day of May 1998, by
and among The Black & Decker Corporation, a Maryland corporation ("Seller"), and
Windmere-Durable Holdings, Inc., a Florida corporation ("Buyer"), on behalf of
itself and its wholly owned Subsidiaries ("Buyer Companies").
W I T N E S S E T H:
WHEREAS, Seller, through certain of its direct and indirect Subsidiaries,
is engaged in the HPG Business;
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, Seller desires to transfer or to cause the Affiliated Transferors to
transfer substantially all of the assets held, owned by or used to conduct the
HPG Business, and to assign certain liabilities associated with the HPG
Business, to Buyer or Buyer Companies designated by Buyer, and Buyer desires to
receive or to cause such designated Buyer Companies to receive such assets and
assume such liabilities; and
WHEREAS, in connection with the sale of the HPG Business to Buyer, Seller
and Buyer desire to enter into certain agreements and arrangements ancillary to
such sale;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Capitalized terms used in this Agreement shall
have the meanings specified in this Agreement or in Exhibit A.
ARTICLE II
TRANSACTIONS AND CLOSING
Section 2.01 Closing Transactions. Upon the terms and subject to the
conditions set forth in this Agreement, the parties agree that at the Closing,
among other things:
(i) Seller and the Affiliated Transferors will transfer or cause to
be transferred to Buyer or Buyer Companies designated by Buyer all
Transferred Assets and Buyer or Buyer Companies designated by Buyer will
assume all Assumed Liabilities in accordance with this Agreement;
(ii) to effect the transfer of certain assets and the assumption of
liabilities contemplated by the foregoing clause (i), Seller or the
Affiliated Transferors, as the case may be, and Buyer or Buyer Companies
shall execute and deliver the Assignment and Assumption Agreements;
<PAGE> 9
Page 9
(iii) to effect the transfer by Seller or the Affiliated Transferors
of certain rights in respect of Intellectual Property used or held for use
exclusively in connection with the HPG Business, Seller or the Affiliated
Transferors, as the case may be, shall execute and deliver the
Intellectual Property Assignment Agreements;
(iv) to effect the license of certain rights in respect of
Intellectual Property, Seller or the Affiliated Transferors, as the case
may be, and Buyer or Buyer Companies shall execute (a) the Trademark
License Agreement in the form contemplated by Attachment VII to this
Agreement, and (b) the Cross License Agreement;
(v) Seller or the Affiliated Transferors, as the case may be, and
Buyer or Buyer Companies, as the case may be, shall execute and deliver
the Services Agreements; provided, however that Buyer shall have the right
to decline to enter into any or all of such Services Agreements by notice
given to Seller at any time prior to Closing;
(vi) Seller or the Affiliated Transferors, as the case may be, and
Buyer or Buyer Companies, as the case may be, shall execute and deliver
the Distribution Services Agreement (United States) and the Distribution
Services Agreement (Latin America) in the forms contemplated by Attachment
XVI and Attachment XVII to this Agreement;
(vii) Seller or the Affiliated Transferors, as the case may be, and
Buyer or Buyer Companies, as the case may be, to the extent requested by
Buyer, shall execute and deliver sublease agreements for the sublease by
Buyer or Buyer Companies, as the case may be, relating to the facilities
located in Richmond Hill, Ontario, Canada, Miami, Florida, and Bosques de
Las Lomas, Mexico and shared by the HPG Business and Seller's power tools
business, on terms and conditions to be negotiated in good faith prior to
the Closing consistent with the terms and conditions of the applicable
lease for such shared facilities (including rent and expense reimbursement
on a pro rata basis taking into account the space used by the HPG Business
and the space used by Seller's power tools business) and on such other
terms and conditions as may be agreed to by Seller and Buyer. Such
subleases shall be on a month-to-month basis with 30 days advance written
notice being required to terminate the subleases, but in no event shall
expire later than the close of business on February 28, 1999;
(viii) Seller or the Affiliated Transferors, as the case may be, and
Buyer or Buyer Companies shall execute and deliver a supply agreement
relating to the continued supply, at Seller's option, for a period
commencing on the Closing Date and ending on the date on which the
Trademark License Agreement terminates in respect of the Black & Decker
trademark, of products and related parts, accessories or attachments
manufactured or sold by the HPG Business following the Closing for sale by
Seller Companies at the service centers and outlet stores of Seller
Companies, on terms and conditions to be negotiated in good faith prior to
the Closing, it being understood and agreed that the price of such
products to Seller Companies shall be equal to Buyer's standard cost of
production calculated on a basis consistent with current practices plus
15%;
(ix) Seller or the Affiliated Transferors, as the case may be, and
Buyer or Buyer Companies, as the case may be, shall execute and deliver a
lease agreement for the lease of the Kuantan Facility and any related
fixtures and equipment at the Kuantan Facility for a period of up to six
months following the Closing Date at a rental rate equal to the reasonable
out-of-pocket costs to Seller Companies of the continued operation of the
Kuantan Facility
<PAGE> 10
Page 10
during the lease term plus $1.00, and an agreement providing Buyer with a
right of first refusal on the sale by Seller Companies of any excess
manufacturing equipment at the Kuantan Facility that Seller Companies
decide not to use in their businesses;
(x) Seller or the Affiliated Transferors, as the case may be, and
Buyer or Buyer Companies, as the case may be, shall execute and deliver a
lease agreement for the lease of the Asheboro Property for a period
expiring on September 30, 1999, on terms and conditions consistent with
Attachment XXVIII to this Agreement;
(xi) Buyer Companies shall pay and deliver to Seller, for its own
account and as agent for the Affiliated Transferors, $315,000,000 in
immediately available funds by wire transfer to an account or accounts
designated by Seller (which account shall be designated by Seller by
written notice to Buyer at least two Business Days prior to the Closing
Date, or such shorter notice as Buyer shall agree to accept); and
(xii) At Closing, Seller shall deliver to Buyer: (A) in a form
agreed to by both Buyer and Seller, the instruments of conveyance in form
sufficient under Applicable Law to convey fee simple title to the
Queretaro Property, and (B) a No Lien Certificate issued by the Public
Registry of Property and Commerce in Queretaro, which confirms that fee
simple title to the Queretaro Property is vested in Seller, and that the
Queretaro Property is free and clear of all Liens, other than Permitted
Liens; provided, however, that if it is impractical because of the legal
formalities in Mexico to complete and record the instruments of conveyance
on the Closing Date, the parties hereto agree that the Closing shall be
consummated and such legal formalities will be completed as soon as
practicable after the Closing Date.
Section 2.02 Exchange Consideration.
(a) The consideration to be paid to Seller and the Affiliated Transferors
for the Transferred Assets (the "Exchange Consideration") shall consist of the
following:
(i) subject to adjustment in accordance with Section 2.04,
$315,000,000 in cash (as so adjusted, the "Adjusted Purchase Price"); and
(ii) the assumption by Buyer Companies of the Assumed Liabilities in
accordance with the Transaction Documents.
(b) The Exchange Consideration shall be allocated to and among the
respective Transferred Assets in the manner contemplated by Attachment XI to
this Agreement. Seller and Buyer agree that the allocation of the Exchange
Consideration contemplated by Attachment XI to this Agreement is consistent with
the value of the Transferred Assets and the principles of Section 1060 of the
Code and the regulations thereunder. Seller and Buyer agree that they shall use
the allocation of the Exchange Consideration determined in accordance with
Attachment XI to this Agreement in any Tax Returns or other reports that deal
with the Contemplated Transactions and are filed with any Tax Authority.
Section 2.03 Closing. The closing (the "Closing") of the Contemplated
Transactions shall take place at the offices of Miles & Stockbridge P.C., 10
Light Street, Baltimore, Maryland 21202, on the 15th day following the delivery
by Seller to Buyer of the audited financial statements contemplated by Section
9.02(g) (or the next Business Day if the 15th day is not a Business Day),
<PAGE> 11
Page 11
provided, however, that unless the Buyer agrees otherwise, the Closing shall not
occur prior to June 9, 1998, and, provided further, that if all of the
conditions to Closing set forth in Article IX have not been satisfied (or
waived) as of that date and if closing on that date therefore would be
impractical, the Closing shall take place on the fifth Business Day following
the satisfaction or waiver (by the party entitled to waive the condition) of all
conditions to the Closing set forth in Article IX, or at such other time and
place as the parties to this Agreement may agree. The Closing will occur at 9:00
a.m. on the Closing Date.
Section 2.04 Adjustment of Exchange Consideration.
(a) Promptly following the Closing Date, but in no event later than 60
days after the Closing Date, Seller shall, at its expense, with the assistance
of Buyer, prepare and submit to Buyer a statement of net tangible assets (and,
if applicable, net working capital) setting forth, in reasonable detail,
Seller's calculation of the Net Tangible Assets as of the close of business on
the day prior to the Closing Date (the "Proposed Final Net Tangible Asset
Amount") and in addition, if the Closing Date is any day after June 28, 1998,
Seller's calculation of the amount of the difference (the "Proposed Net Working
Capital Change Amount") between the Net Working Capital as of the close of
business on the day prior to the Closing Date (the "Closing Net Working Capital
Amount") and the Net Working Capital as of the close of business on June 28,
1998 (the "June 28 Net Working Capital Amount"). In the event Buyer disputes the
correctness of the Proposed Final Net Tangible Asset Amount or the Proposed Net
Working Capital Change Amount, Buyer shall notify Seller of its objections
within 45 days after receipt of Seller's calculation of the Proposed Final Net
Tangible Asset Amount and the Proposed Net Working Capital Change Amount and
shall set forth, in writing and reasonable detail, the reasons for Buyer's
objections. If Buyer fails to deliver such notice of objections within such
time, Buyer shall be deemed, for purposes of this Section 2.04, to have accepted
Seller's calculation. To the extent Buyer does not object, in writing and in
reasonable detail as required and within the time period contemplated by this
Section 2.04(a) to a matter in the statement of net tangible assets (including,
but not limited to, matters impacting Net Working Capital) prepared and
submitted by Seller, Buyer shall be deemed to have accepted Seller's calculation
and presentation in respect of the matter and the matter shall not be considered
to be in dispute. Seller and Buyer shall endeavor in good faith to resolve any
matters disputed under this Section 2.04 within 20 days after Seller's receipt
of Buyer's notice of objections. If they are unable to do so, Seller and Buyer
shall select a nationally known independent accounting firm (other than Ernst &
Young LLP or Grant Thornton LLP) to resolve the matters in dispute and only
those matters (in a manner consistent with Section 2.04(b) and with any matters
not in dispute), and the determination of such firm in respect of the
correctness of each matter remaining in dispute shall be conclusive and binding
on Seller and Buyer. With respect to each disputed matter, the determination of
such firm as to the appropriate amount shall not exceed the higher amount or be
less than the lower amount asserted by Buyer or Seller for such disputed matter
on or before the date of Seller's receipt of Buyer's notice of objections. The
Net Tangible Assets as of the close of business on the day prior to the Closing
Date, and, if applicable, the amount of the difference between the Closing Net
Working Capital Amount and the June 28 Net Working Capital Amount, as finally
determined pursuant to this Section 2.04(a) (whether by failure of Buyer to
deliver notice of objection, by agreement of Seller and Buyer or by
determination of the independent accountants selected as set forth above), are
referred to herein respectively as the "Final Net Tangible Asset Amount" and the
"Final Net Working Capital Change Amount."
(b) The Proposed Final Net Tangible Asset Amount, the Proposed Net Working
Capital Change Amount, the Final Net Tangible Asset Amount and the Final Net
Working Capital Change Amount shall be determined in accordance with the
accounting principles, policies, practices and
<PAGE> 12
Page 12
methods utilized in the preparation of the Opening Statement, as disclosed in
the notes to the Opening Statement and, to the extent applicable, the notes to
the special-purpose statement of net assets as of March 29, 1998, which is
included in the HPG Financial Statements, except as otherwise set forth in Note
E to the Opening Statement. Seller shall provide Buyer with notice of the time
and location at which all procedures relating to the determination of inventory
will be undertaken with respect to determination of the Proposed Final Net
Tangible Asset Amount and the Proposed Net Working Capital Change Amount and
shall permit Buyer and its representatives to be present to coordinate and
observe the counting procedure performed and to take such test counts as such
representatives of Buyer consider appropriate in the circumstances.
(c) If the Final Net Tangible Asset Amount is equal to or greater than
$107,500,000, there shall be no adjustment of the Exchange Consideration on
account of the Final Net Tangible Asset Amount. If the Final Net Tangible Asset
Amount is less than $107,500,000, the difference shall be paid to Buyer by
Seller with simple interest thereon from the Closing Date to the date of payment
at a floating rate per annum equal to the per annum interest rate announced from
time to time by Citibank, N.A. as its prime rate in effect. Such payment shall
be made in immediately available funds not later than five Business Days after
the determination of the Final Net Tangible Asset Amount by wire transfer to a
bank account designated in writing by Buyer.
(d) If the Closing Date is any day after June 28, 1998, the Exchange
Consideration shall be subject to adjustment on account of the Final Net Working
Capital Change Amount as provided in this Section 2.04(d). If the Final Net
Working Capital Change Amount is zero or constitutes a decrease of the Closing
Net Working Capital Amount from the June 28 Net Working Capital Amount, there
shall be no adjustment of the Exchange Consideration on account of the Final Net
Working Capital Change Amount. If the Final Net Working Capital Change Amount
constitutes an increase of the Closing Net Working Capital Amount over the June
28 Net Working Capital Amount, Buyer shall pay to Seller an amount equal to the
Net Working Capital Adjustment Amount (as hereinafter defined), together with
interest thereon as provided below in this Section 2.04(d). The "Net Working
Capital Adjustment Amount" shall equal the lesser of (i) the Final Net Working
Capital Change Amount or (ii) the amount of the excess of the Final Net Tangible
Asset Amount over $107,500,000. Interest shall accrue on the Net Working Capital
Adjustment Amount from the Closing Date to the date of payment at a floating
rate per annum equal to the per annum interest rate announced from time to time
by Citibank, N.A. as its prime rate in effect. Payment of the Net Working
Capital Adjustment Amount and accrued interest thereon shall be made in
immediately available funds not later than five Business Days after the
determination of the Final Net Working Capital Change Amount by wire transfer to
a bank account designated in writing by Seller.
(e) Seller shall make available and shall cause Ernst & Young LLP to make
available, in accordance with reasonable and customary practices and
professional standards and subject to such reasonable conditions as Ernst &
Young LLP shall impose, the books, records, documents and work papers underlying
the preparation and review of the Opening Statement and the calculation of the
Proposed Final Net Tangible Asset Amount and the Proposed Net Working Capital
Change Amount. Buyer shall make available and shall cause Grant Thornton LLP to
make available, in accordance with reasonable and customary practices and
professional standards and subject to such reasonable conditions as Grant
Thornton LLP shall impose, the books, records, documents and work papers created
or prepared by or for Buyer in connection with the review of the Proposed Final
Net Tangible Asset Amount, the Proposed Net Working Capital Change Amount and
the other matters contemplated by Section 2.04(a).
(f) The fees and expenses, if any, of the accounting firm selected to
resolve any
<PAGE> 13
Page 13
disputes between Seller and Buyer in accordance with Section 2.04(a) shall be
paid one-half by Seller and one-half by Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.01 Representations and Warranties of Seller. Seller represents
and warrants to Buyer as set forth in Exhibit B.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.01 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as set forth in Exhibit C.
ARTICLE V
COVENANTS AND AGREEMENTS OF SELLER
Section 5.01 Conduct of Business. Except with the written consent of Buyer
(which consent shall not be unreasonably withheld or delayed), as set forth in
Schedule 5.01, as permitted below or required by Applicable Law, or in
accordance with the terms and conditions of Contracts entered into in the
ordinary course of business and consistent with past practices and in existence
on the date of this Agreement, from the date of this Agreement until the Closing
Date, Seller Companies shall conduct the HPG Business in all material respects
in accordance with the historical and customary operating practices relating to
the conduct of the HPG Business and shall use reasonable commercial efforts to
preserve intact the HPG Business and the relationships of Seller Companies with
third parties in connection with the HPG Business, and Seller Companies shall
not:
(i) except for expenditures contemplated by the 1998 capital
expenditure plan for the HPG Business, make any capital expenditure, or
group of related capital expenditures, relating to the HPG Business in
excess of $500,000 in the aggregate;
(ii) sell or dispose of more than an aggregate of $500,000 of assets
that would constitute Transferred Assets if owned, held or used by any
Seller Companies on the Closing Date (other than the sale of Inventory in
the ordinary course of business consistent with past practices or obsolete
Inventory whether or not in the ordinary course of business, and the sale
of surplus equipment and materials arising out of or relating to the
closing of the Kuantan Facility);
(iii) sell, transfer, license or otherwise dispose of (other than in
the ordinary course of business consistent with past practices to
suppliers, vendors, or other Persons doing work for the HPG Business as
part of such work for the HPG Business) any Intellectual Property used
exclusively in the HPG Business;
(iv) terminate the coverage of any policies of title, liability,
fire, workers'
<PAGE> 14
Page 14
compensation, property and any other form of insurance covering the
operations of the HPG Business, except where such policies are replaced by
policies that are substantially similar in all material respects to the
terminated policies;
(v) settle any lawsuit or claim if such settlement imposes a
material continuing non-monetary obligation on the HPG Business or any of
the Transferred Assets;
(vi) grant any new or modified severance or termination arrangement
or increase or accelerate in any material respect any amount payable under
the severance or termination pay policies in effect on the date of this
Agreement with respect to any Transferred Employee; or
(vii) except as otherwise may be permitted or required by this
Agreement or Applicable Law, adopt or amend in any material respect any
Employee Plan or Benefit Arrangement in respect of any Transferred
Employee or, other than compensation increases in the ordinary course of
business, with respect to any Transferred Employee at a level of Vice
President or above, increase the compensation or fringe benefits of such
Transferred Employee or pay any benefit not required by any Employee Plan
or Benefit Arrangement with respect to such Transferred Employee.
Section 5.02 Access to Information; Confidentiality.
(a) Except as may be necessary to comply with any Applicable Laws, from
the date of this Agreement until the Closing Date, Seller Companies shall (i)
give Buyer and its Representatives reasonable access to the records of Seller
Companies relating to the HPG Business during normal business hours and upon
reasonable prior notice, (ii) give Buyer and its Representatives reasonable
access to any facilities the possession of which will be transferred to Buyer at
Closing during normal business hours and upon reasonable prior notice, (iii)
furnish to Buyer and its Representatives such financial and operating data and
other information relating to the HPG Business as Buyer may reasonably request
and (iv) instruct the employees and Representatives of Seller Companies to
provide reasonable cooperation to Buyer in its investigation of the HPG
Business. Without limiting the generality of the foregoing, subject to the
limitations set forth in the first sentence of this Section 5.02(a), from the
date of this Agreement to the Closing Date Seller shall (i) use reasonable
commercial efforts to enable Buyer and its Representatives to conduct, at
Buyer's expense, business and financial reviews, investigations and studies as
to the operation of the HPG Business, including any tax, operating or other
efficiencies that may be achieved and (ii) give Buyer and its Representatives
access upon reasonable request to information relating to the HPG Business.
(b) For a period commencing on the Closing Date and ending on the date on
which the Trademark License Agreement terminates in respect of the Black &
Decker trademark, Seller Companies will treat and hold as confidential, any
confidential information relating primarily to the operations or affairs of the
HPG Business. In the event any Seller Companies are requested or required (by
written request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process or by
Applicable Law) to disclose any such confidential information, then Seller shall
notify Buyer promptly of the request or requirement so that Buyer, at its
expense, may seek an appropriate protective order or waive compliance with this
Section 5.02(b). If, in the absence of a protective order or receipt of a waiver
hereunder, any Seller Companies are, on the advice of counsel, compelled to
disclose such confidential information, Seller Companies may so disclose the
confidential information, provided that Seller Companies shall use their
reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded to
<PAGE> 15
Page 15
such confidential information. The provisions of this Section 5.02(b) shall not
be deemed to prohibit the disclosure of confidential information relating to the
operations or affairs of the HPG Business by any Seller Companies to the extent
reasonably required (i) to prepare or complete any required Tax Returns or
financial statements, (ii) in connection with audits or other proceedings by or
on behalf of a Governmental Authority, (iii) in connection with any insurance
claims, (iv) to the extent necessary to comply with any Applicable Laws or (v)
to provide services to any Buyer Companies in accordance with the terms and
conditions of any of the Transaction Documents. Notwithstanding the foregoing,
the provisions of this Section 5.02(b) shall not apply to information that (i)
is or becomes publicly available other than as a result of a disclosure by any
Seller Company, (ii) is or becomes available to a Seller Company on a
non-confidential basis from a source that, to Seller's knowledge, is not
prohibited from disclosing such information by a legal, contractual or fiduciary
obligation or (iii) is or has been independently developed by a Seller Company
(other than solely for the HPG Business). This Section 5.02(b) shall not apply
to the disclosure of confidential information concerning the household products
businesses of Seller Companies headquartered in countries other than the
Designated Countries or to the use, license or sale of Intellectual Property not
constituting Transferred Assets.
Section 5.03 Change of Lockbox Accounts. Immediately after the Closing,
Seller shall take such steps as Buyer may reasonably request to cause Buyer to
be substituted as the sole party having control over any lockbox or similar bank
account maintained exclusively by the HPG Business to which customers of the HPG
Business directly make payments in respect of the HPG Business or to direct the
bank at which any such lockbox or similar account is maintained to transfer any
payments made thereto to an account established by Buyer.
Section 5.04 Access to Information; Cooperation After Closing.
(a) On and after the Closing Date, Seller shall, and shall cause each of
the other Seller Companies to, at their expense (i) afford Buyer and its
Representatives reasonable access upon reasonable prior notice during normal
business hours, to all employees, offices, properties, agreements, records,
books and affairs of Seller Companies to the extent relating to the conduct of
the HPG Business prior to the Closing and (ii) cooperate fully with Buyer with
respect to matters relating to the conduct of the HPG Business prior to the
Closing, including, without limitation, in the defense or pursuit of any
Transferred Asset or Assumed Liability or any claim or action that relates to
occurrences involving the HPG Business prior to the Closing Date. In addition,
Seller shall cause its independent accountants to make available their work
papers in respect of the HPG Financial Statements and the financial statements
contemplated by Section 9.02(g).
(b) Subject to and consistent with the obligations of senior management to
continue to manage and operate the HPG Business, Seller shall cause the members
of the senior management team of the HPG Business to make themselves available
to assist Buyer and their representatives in the review and preparation of
offering memoranda and related documents to be used by Buyer in the financing of
the Contemplated Transactions, and shall cause its independent accountants to
provide comfort letters in customary form at Buyer's expense in connection with
such financing and in connection therewith shall provide such representation
letters to its independent accountants as are reasonably required.
Section 5.05 Maintenance of Insurance Policies. Except as otherwise
provided in Exhibit D, on and after the date of this Agreement and until the
Closing Date, Seller shall not take or fail to take any action if such action or
inaction, as the case may be, would adversely affect the applicability of any
insurance (including reinsurance) in effect on the date of this Agreement that
<PAGE> 16
Page 16
covers all or any part of the assets that would constitute Transferred Assets if
owned, held or used by any Seller Companies on the Closing Date, the HPG
Business or the Transferred Employees. Except as otherwise provided in Exhibit D
or as may otherwise be agreed in writing by the parties, Seller shall not have
any obligation to maintain the effectiveness of any such insurance policy after
the Closing Date or to make any monetary payment in connection with any such
policy, unless such monetary payment relates to a period prior to Closing under
a policy in effect
prior to Closing.
Section 5.06 Noncompetition; Nonsolicitation; etc.
(a) Seller covenants and agrees, as an inducement to Buyer to enter into
this Agreement and to consummate the Contemplated Transactions, that: (i) with
respect to Additional Products (as defined in the Trademark License Agreement),
for a period commencing on the Closing Date and ending on the date on which the
Trademark License Agreement terminates in respect of the Black & Decker
trademark ("Period One"), and (ii) with respect to products that are Designated
Products as of the date of this Agreement, for a period commencing on the
Closing Date and ending on the date that is the fifth anniversary of the date on
which the Trademark License Agreement terminates in respect of the Black &
Decker trademark (the "Fifth Anniversary Date"), no Seller Company (for so long
but only for so long as it remains a Seller Company) will, directly or
indirectly, carry on or participate in the ownership, management or control of
any Competing Business (as hereinafter defined). "Competing Business" shall mean
(i) during Period One, any business enterprise that sells in any Designated
Countries any of the Additional Products or products that are Designated
Products as of the date of this Agreement, and (ii) during the period commencing
on the day after the date of termination of Period One and ending on the Fifth
Anniversary Date, any business enterprise that sells in any Designated Countries
any products that are Designated Products as of the date of this Agreement.
(b) Nothing contained in this Section 5.06 shall limit or restrict the
right of any Seller Company to hold and make investments in securities of any
Person that has securities listed on a national securities exchange or admitted
to trading privileges thereon or actively traded in a generally recognized
over-the-counter market, provided that the aggregate equity interest therein of
Seller Companies does not exceed five percent of the outstanding shares or
interests in such Person at the time of Seller Companies' investment therein
provided that such Seller Company does not take any active management role.
Notwithstanding any provisions of this Section 5.06 to the contrary, if Seller
or any other Seller Company acquires securities of any Person that is engaged in
a Competing Business, Seller Companies shall not be deemed to be in violation of
this Section 5.06, provided that (A) (i) at the time of acquisition the
Competing Business represents less than 10% of the gross revenues of the
acquired Person for the acquired Person's most recently completed fiscal year
and (ii) Seller Companies use reasonable commercial efforts to divest the
operations of such Competing Business subsequent to such acquisition, or (B) at
the time of acquisition the Competing Business represents less than five percent
of the gross revenues of the acquired Person for the acquired Person's most
recently completed fiscal year.
(c) Nothing contained in this Section 5.06 shall limit or restrict the
right of any Seller Company to engage in any business outside of the Designated
Countries or to sell any Designated Products to Persons outside of the
Designated Countries so long as the Seller Company in connection with the sale
of any such Designated Products to Persons outside of the Designated Countries
takes commercially reasonable steps to ensure that the Designated Products will
not be sold in the Designated Countries by such Persons. Nothing contained in
this Section 5.06 shall limit or restrict the right of any Seller Company to
sell new products purchased from Buyer or Buyer Companies on or after the
Closing Date, new products in inventory at or for the Seller Companies'
<PAGE> 17
Page 17
service centers, company stores and outlet stores or reconditioned products (or
any related parts, accessories or attachments) of the HPG Business through
Seller Companies' service center network (consisting of both owned and
authorized service centers) in a manner consistent with past practices or in
accordance with any agreements or arrangements between a Seller Company and the
HPG Business.
(d) Notwithstanding any provisions of this Section 5.06 to the contrary,
Seller Companies shall not be deemed to be in violation of this Section 5.06 to
the extent that, following the Closing, Seller Companies sell Designated
Products (i) that are in the Inventory of Seller Companies at or for the Seller
Companies' service centers, company stores and outlet stores as of the Closing
Date (or result from raw materials or work in process in the Inventory of Seller
Companies at or for the Seller Companies' service centers, company stores and
outlet stores as of the Closing Date) or (ii) to fulfill contracts, agreements,
commitments, sales or purchase orders or other similar instruments of any kind,
whether oral or written, at or for the Seller Companies' service centers,
company stores and outlet stores as in effect on the Closing Date.
Notwithstanding any provisions of this Section 5.06 to the contrary, Seller
Companies shall not be deemed to be in violation of this Section 5.06 to the
extent that, following the Closing, Seller Companies sell Cleaning and Lighting
Products.
(e) From and after the date of this Agreement until the first anniversary
of the Closing Date, Seller Companies shall not, without prior written approval
of Buyer employ any non-exempt (within the meaning of the Fair Labor Standards
Act) Transferred Employee. In addition, from and after the date of this
Agreement until the fifth anniversary of the Closing Date, no Seller Company
shall, without the prior written approval of Buyer, directly or indirectly
solicit any individual who was a non-exempt (within the meaning of the Fair
Labor Standards Act) Transferred Employee to terminate his or her employment
relationship with Buyer or Buyer Companies; provided, however, that the
foregoing shall not apply to individuals hired as a result of the use of an
independent employment agency (so long as the agency was not directed to solicit
a particular individual or a class of individuals that could only be satisfied
by employees of Buyer Companies) or as a result of the use of a general
solicitation (such as an advertisement) not specifically directed to employees
of Buyer Companies. From and after the date of this Agreement until the fifth
anniversary of the Closing Date, no Seller Company will induce or seek to induce
any contractor, supplier, client or customer of Buyer or Buyer Companies to
terminate their relationship with Buyer or Buyer Companies in respect of the HPG
Business.
(f) Seller recognizes and agrees that a breach by Seller Companies of any
of the covenants and agreements in this Section 5.06 could cause irreparable
harm to Buyer, that Buyer's remedies at law in the event of such breach would be
inadequate, and that, accordingly, in the event of such breach a restraining
order or injunction or both may be issued against Seller Companies, in addition
to any other rights and remedies that may be available to Buyer under Applicable
Law. If this Section 5.06 is more restrictive than permitted by the Applicable
Laws of the jurisdiction in which Buyer seeks enforcement hereof, this Section
5.06 shall be limited to the extent required to permit enforcement under such
Applicable Laws.
ARTICLE VI
COVENANTS AND AGREEMENTS OF BUYER
Section 6.01 Confidentiality. Buyer agrees that all information provided
or otherwise made
<PAGE> 18
Page 18
available in connection with the Contemplated Transactions, to Buyer or any of
its Representatives shall be treated as if provided under the Confidentiality
Agreement (whether or not the Confidentiality Agreement is in effect or has been
terminated). With the exception of the sixth paragraph of the Confidentiality
Agreement, which shall continue to apply in accordance with the terms of the
Confidentiality Agreement following the Closing, the other terms of the
Confidentiality Agreement shall no longer apply following the Closing. Nothing
in this Section 6.01, however, shall limit or otherwise restrict the
applicability of any other confidentiality or similar provisions included in the
Transaction Documents.
Section 6.02 Provision and Preservation of and Access to Certain
Information; Cooperation.
(a) Prior to the Closing Date, Buyer shall provide to Seller promptly upon
its receipt thereof copies of all environmental audit and similar reports with
respect to facilities the possession of which will be transferred to Buyer at
the Closing. Buyer shall provide to Seller a copy of all sampling results,
boring logs, analyses and other data and reports regarding any environmental
review conducted by Buyer immediately upon obtaining them.
(b) On and after the Closing Date, Buyer shall preserve all books and
records of the HPG Business for a period of six years commencing on the Closing
Date (or in the case of books and records relating to Tax, employment and
employee matters, until such time as Seller notifies Buyer in writing that all
statutes of limitations to which such records relate have expired), and
thereafter, not to destroy or dispose of such records without giving notice to
Seller of such pending disposal and offering Seller such records. In the event
Seller has not requested such materials within 90 days following the receipt of
notice from Buyer, Buyer may proceed to destroy or dispose of such materials
without any liability. Notwithstanding the foregoing, Buyer shall be entitled to
destroy or dispose of any books and records of the HPG Business on or after the
tenth anniversary of the Closing Date.
(c) From and after the Closing Date, Buyer shall at its expense (i) afford
Seller and its Representatives reasonable access upon reasonable prior notice
during normal business hours, to all employees, offices, properties, agreements,
records, books and affairs of Buyer relating to the HPG Business and provide
copies of such information concerning the HPG Business as Seller may reasonably
request in connection with the matters contemplated by Section 2.04, the
preparation of any Tax Returns, in connection with any judicial, quasi-judicial,
administrative, Tax, audit or arbitration proceeding, in connection with the
preparation of any financial statements or reports required in accordance with
Applicable Laws and in connection with the defense of any third party claims or
allegations that relate to or may relate to Excluded Liabilities and (ii)
cooperate fully with Seller for any proper purpose, including, without
limitation, the defense of or pursuit of any Excluded Liability, Excluded Asset
or Indemnified Claim, or any third party claim or action that relates to an
Excluded Liability, Excluded Asset or Indemnified Claim.
Section 6.03 Insurance; Financial Support Arrangements.
(a) Buyer acknowledges and agrees that as of the Closing Date, neither
Buyer, the HPG Business, any property owned or leased by any of the foregoing
nor any of the directors, officers, employees (including, without limitation,
the Transferred Employees) or agents of any of the foregoing will be insured
under any insurance policies maintained by Seller or any of its Affiliates,
except (i) in the case of certain claims made policies, to the extent that a
claim has been reported as of the Closing Date, (ii) in the case of a policy
that is an occurrence policy, to the extent the
<PAGE> 19
Page 19
accident, event or occurrence that results in an insurable loss occurs prior to
the Closing Date and has been, is or will be reported or noticed to the
respective carrier by Buyer or any Seller Company in accordance with the
requirements of such policies (which claims Seller shall, at Buyer's cost and
expense, pursue diligently on Buyer's behalf and the net proceeds of which
claims (except to the extent they relate to Excluded Liabilities) shall be
remitted promptly to Buyer upon receipt thereof), and (iii) as otherwise
provided in Exhibit D or agreed to in writing by the parties. Except as
otherwise provided in Exhibit D or as otherwise may be agreed to in writing by
the parties, from and after the Closing Date, Seller shall have no obligation of
any kind to maintain any form of insurance covering all or any part of the
Transferred Assets, the HPG Business or the Transferred Employees.
(b) From and after the Closing Date, Buyer agrees to reimburse Seller
within 30 days of receipt of an invoice for any self insurance, retention,
deductible, retrospective premium, cash payment for reserves calculated or
charged on an incurred loss basis and similar items, including but not limited
to associated administrative expenses and allocated loss adjustment or similar
expenses (collectively, "Insurance Liabilities") allocated to the HPG Business
by Seller on a basis consistent with past practices resulting from or arising
under any and all current or former insurance policies maintained by Seller or
any of its Affiliates to the extent that such Insurance Liabilities relate to or
arise out of Assumed Liabilities or any activities of Buyer. Buyer agrees that,
to the extent any of the insurers under the insurance policies, in accordance
with the terms of the insurance policies, requests or requires collateral,
deposits or other security to be provided with respect to claims made against
such insurance policies relating to or arising from Assumed Liabilities, Buyer
shall provide the collateral, deposits or other security or, upon request of
Seller, will replace any collateral, deposits or other security provided by
Seller or any of its Affiliates.
(c) Buyer agrees that, for a period of six years commencing on the Closing
Date, to the extent it maintains product liability or similar insurance
coverage, Buyer will use reasonable efforts (at Seller's cost to the extent of
any additional cost therefor, provided that, in the event there will be such a
cost, Buyer will give Seller a reasonable period of time to determine whether it
desires to incur such cost before Buyer commits to such coverage with respect to
Seller) to include Seller and its Affiliates as an additional insured/loss payee
on any such policies in respect of which Seller or its Affiliates has or may
have an insurable interest with respect to the HPG Business, the Transferred
Assets, any of the Assumed Liabilities or any facilities the possession of which
will be transferred to Buyer at the Closing. Seller agrees, for a period of six
years commencing on the Closing Date, to include Buyer Companies as additional
insured/loss payees on any product liability policies or similar insurance
coverage of Seller (at Buyer's cost to the extent of any additional cost
therefor, provided that, in the event there will be such a cost, Seller will
give Buyer a reasonable period of time to determine whether it desires to incur
such cost before Seller commits to such coverage with respect to Buyer) as to
all claims or occurrences that constitute Excluded Liabilities.
(d) Buyer agrees that, not later than December 31, 1998, and in a manner
reasonably satisfactory to Seller, Buyer shall in good faith seek to release
Seller and its Affiliates from all obligations under all Financial Support
Arrangements.
(e) If, at any time after the Closing Date, (i) any amounts are drawn on
or paid under any Financial Support Arrangement where Seller or any of its
Affiliates is obligated to reimburse the Person making such payment or (ii)
Seller or any of its Affiliates pays any amounts under, or any fees, costs or
expenses relating to, such Financial Support Arrangement, Buyer shall pay Seller
such amounts promptly after receipt from Seller of notice thereof accompanied by
written evidence of the underlying payment obligation and payment thereof.
(f) In the event that Buyer fails to ensure that Seller and its Affiliates
are unconditionally
<PAGE> 20
Page 20
released from all obligations under the Financial Support Arrangements not later
than December 31, 1998, Buyer shall either (i) promptly deposit with Seller cash
in an amount equal to the aggregate principal or stated amount, as may be
applicable, of the Financial Support Arrangements not so released or (ii)
provide back-up letters of credit issued by one or more commercial banks
reasonably satisfactory to Seller, payable to Seller in such aggregate principal
or stated amount and otherwise in form and substance reasonably satisfactory to
Seller with respect to such Financial Support Arrangements. Any cash deposited
with Seller in accordance with clause (i) shall be held by Seller in a
segregated interest-bearing account and shall be used by Seller solely to
satisfy its payment obligations in respect of such Financial Support
Arrangements, and the unused portion of any cash (including interest) so
deposited with Seller shall be returned to Buyer promptly following the release
of Seller Companies with respect to, or any other termination of, the Financial
Support Arrangement.
Section 6.04 Use of Intellectual Property. Buyer acknowledges and agrees
that except as otherwise specifically contemplated by the Transaction Documents,
no Buyer Company is obtaining any rights in or to use any Intellectual Property.
Buyer further acknowledges and agrees that notwithstanding any provision to the
contrary in the Transaction Documents, except as permitted by the Trademark
License Agreement or the Cross License Agreement, Buyer shall not use, and Buyer
shall cause its Affiliates not to use, any trademark, logo or tradename of
Seller or any Affiliate of Seller (other than those listed on Attachment XII as
Transferred Assets and transferred to Buyer under the terms of this Agreement)
or any trademarks, logos or trade names that are confusingly similar thereto or
that are a translation or transliteration thereof into any language or alphabet.
Section 6.05 Certain Environmental Investigations.
(a) Buyer agrees that, if Buyer decides to conduct prior to Closing an
environmental audit or similar review of the HPG Business that involves testing,
drilling or sampling at any facility, possession of which is contemplated to be
transferred to a Buyer Company at Closing, Buyer will so advise Seller and will
give Seller sufficient prior written notice to enable Seller's Representatives
to be present during any such testing, drilling or sampling, and to review and
comment on any work plans related to such audit or review. Buyer further agrees
to arrange for split samples to be taken in connection with any such audit or
review, with any additional costs therefor to be paid by Seller. Except with
respect to split samples, Buyer agrees that it will conduct such testing,
drilling, or sampling, including disposal of all materials associated with such
activities, such as drill cuttings, wastewater, and sampling equipment, at
Buyer's sole cost and expense and in accordance with all Applicable Laws,
including Environmental Laws. If the Closing contemplated by the Transaction
Documents is not consummated for any reason, Buyer agrees to restore each
facility at which any such testing, drilling or sampling was conducted to
reasonable working condition.
(b) Except to the extent Buyer is otherwise required to take action itself
in accordance with Applicable Law, all information obtained from Buyer's
environmental review shall be kept confidential and Buyer shall not provide it
to any Person other than its advisors and Seller, and in the event that Buyer's
environmental review discloses conditions at any of Seller's facilities that may
require notice to a Governmental Authority prior to Closing, Seller shall
determine what reporting, if any, is necessary and shall conduct any such
reporting.
Section 6.06 Nonsolicitation of Employees, etc. From and after the date of
this Agreement until the fifth anniversary of the Closing Date, neither Buyer
nor any Buyer Companies shall, without the prior written approval of Seller,
directly or indirectly solicit any individual who is a non-exempt (within the
meaning of the Fair Labor Standards Act) employee of a Seller Company to
terminate his or her employment relationship with Seller Companies; provided,
however, that the foregoing shall
<PAGE> 21
Page 21
not apply to individuals hired as a result of the use of an independent
employment agency (so long as the agency was not directed to solicit a
particular individual or a class of individuals that could only be satisfied by
employees of Seller Companies) or as a result of the use of a general
solicitation (such as an advertisement) not specifically directed to employees
of Seller Companies. Buyer recognizes and agrees that a breach by Buyer or Buyer
Companies of any of the covenants and agreements in this Section 6.06 could
cause irreparable harm to Seller, that Seller's remedies at law in the event of
such breach would be inadequate, and that, accordingly, in the event of such
breach a restraining order or injunction or both may be issued against Buyer or
Buyer Companies, in addition to any other rights and remedies that may be
available to Seller under Applicable Law. If this Section 6.06 is more
restrictive than permitted by Applicable Laws of the jurisdiction in which
Seller seeks enforcement hereof, this Section 6.06 shall be limited to the
extent required to permit enforcement under such Applicable Laws.
ARTICLE VII
COVENANTS AND AGREEMENTS OF THE PARTIES
Section 7.01 Further Assurances. Subject to the terms and conditions of
this Agreement, each party shall use reasonable commercial efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under Applicable Laws to consummate the Contemplated
Transactions. Seller and Buyer shall execute and deliver, and shall cause Seller
Companies and Buyer Companies, as appropriate or required and as the case may
be, to execute and deliver such other documents, certificates, agreements and
other writings and to take such other actions as may be necessary or desirable
to consummate or implement the Contemplated Transactions, specifically including
the reading and formalization of a public deed in Spanish, in front of a Notary
Public in Queretaro, Mexico, and the recordation of said public deed in the
applicable governmental office or registry. Except as otherwise expressly set
forth in the Transaction Documents, nothing in this Section 7.01 shall require
any Seller Companies or Buyer Companies to make any payments in order to obtain
any consents or approvals necessary or desirable in connection with the
consummation of the Contemplated Transactions.
Section 7.02 Certain Filings; Consents. Seller and Buyer shall cooperate
with one another (i) in determining whether any action by or in respect of, or
filing with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
Contracts, in connection with the consummation of the Contemplated Transactions
and (ii) subject to the terms and conditions of this Agreement, in taking such
actions or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
Section 7.03 Public Announcements. Prior to the Closing, Seller and Buyer
shall consult with each other before issuing any press release or making any
public statement with respect to this Agreement or the Contemplated Transactions
and, except as may be required by Applicable Law or any listing agreement with
any national or international securities exchange, shall not issue any such
press release or make any such public statement prior to such consultation.
Notwithstanding the foregoing, no provision of this Agreement shall relieve
Buyer from any of its obligations under the Confidentiality Agreement, or
terminate any of the restrictions imposed upon Buyer by Section 6.01.
Section 7.04 Intellectual Property.
<PAGE> 22
Page 22
(a) Buyer acknowledges and agrees that Buyer Companies shall hold all
Intellectual Property constituting part of the Transferred Assets subject to any
licenses thereof granted by Seller Companies prior to the Closing Date and,
other than in the ordinary course of business consistent with past practices to
suppliers, vendors, or other Persons doing work for the HPG Business as part of
such work for the HPG Business, Seller will not take any action to impair,
encumber, impede or invalidate such Intellectual Property prior to the Closing
Date.
(b) Buyer further acknowledges and agrees that the transfer of
Intellectual Property constituting Transferred Assets to Buyer Companies shall
not affect the right of Seller Companies to use, disclose or otherwise freely
deal with any know-how, trade secrets and other technical information not
constituting Transferred Assets, except to the extent otherwise limited in the
Cross License Agreement and subject to the provisions of Section 5.06.
Section 7.05 HSR Act. Seller and Buyer shall take all actions necessary or
appropriate to cause the prompt expiration or termination of any applicable
waiting periods under the HSR Act and the Mexican Federal Law of Economic
Competition in respect of the Contemplated Transactions, including, without
limitation, complying as promptly as practicable with any requests for
additional information.
Section 7.06 Certain Environmental Insurance Matters. The provisions of
this Section 7.06 shall not have any effect on any insurance policies of Buyer
or Buyer Companies. Notwithstanding any provision to the contrary in this
Agreement, this Section 7.06 shall constitute Seller's and Buyer's agreement
regarding the allocation of insurance proceeds with respect to matters that
arise under or relate to Environmental Laws that are comprised, in whole or in
part, of Environmental Liabilities that constitute Assumed Liabilities (the
"Environmental Insurance Claims"). Buyer acknowledges and agrees that,
notwithstanding any other provisions of the Transaction Documents, Seller shall
control the Environmental Insurance Claims and shall have the right to
compromise or settle any Environmental Insurance Claims; provided, however, that
without the prior written consent of Buyer, Seller shall not have the right to
enter into any compromise or settlement of any Environmental Insurance Claim
that (i) imposes any liability, obligation or responsibility on any Buyer
Company or (ii) imposes any condition, restriction or limitation on the
operation or conduct of the HPG Business. Seller agrees to act in good faith and
with reasonable prudence to maximize recovery (after costs and Taxes) with
respect to the Environmental Insurance Claims and shall allocate any recovery
received with respect to such Environmental Insurance Claims, first, to the
costs incurred to collect such recovery (whether incurred before or after
Closing) and, second, to all net Tax costs related to such recovery. With
respect to any recovery remaining (the "Remaining Recovery"):
(i) if the recovery applies to liabilities that are Assumed
Liabilities and to liabilities that are not Assumed Liabilities, and the
recovery was not designated as arising from specific liabilities (e.g., a
global settlement with an insurance carrier), Seller will pay Buyer an
amount equal to the Remaining Recovery multiplied by X multiplied by (one
minus Y); where X equals the total of the Environmental Insurance Claims
(estimated by Seller as of the date of recovery) under said insurance
policies divided by the total environmental and other claims by Seller
under said insurance policies; and Y equals Seller's past expenditures on
said liabilities divided by the sum of (A) Seller's past expenditures in
respect of said liabilities and (B) the total estimated expenditures to be
made by Seller or Buyer in respect of said liabilities (estimated by
Seller as of the date of recovery), or
<PAGE> 23
Page 23
(ii) if the recovery was designated as arising from a specific
liability that is an Assumed Liability, Seller will pay Buyer the
Remaining Recovery multiplied by (one minus Y).
Any obligations assumed in any such compromise or settlement of the
Environmental Insurance Claims shall be apportioned between Seller and Buyer in
the same proportion as a recovery would be allocated pursuant to this Section
7.06.
Section 7.07 Legal Privileges. Except as to attorney-client work product
and other legal privileges with respect to the negotiation of, and matters
relating to, the Contemplated Transactions, Seller and Buyer acknowledge and
agree that all attorney-client, work product and other legal privileges that may
exist with respect to the Transferred Assets, Excluded Assets, Assumed
Liabilities or Excluded Liabilities shall, from and after the Closing Date, be
deemed common privileges of Seller and Buyer to the extent that Seller and Buyer
have common interests in the matter. Both Seller and Buyer shall use all
commercially reasonable efforts after the Closing Date to preserve all such
privileges and neither Seller nor Buyer shall knowingly waive any such privilege
without the prior written consent of the other party (which consent shall not be
unreasonably withheld or delayed).
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
Section 8.01 Employees and Employee Benefit Matters. The parties agree as
to employee and employee benefit matters as set forth in Exhibit D.
ARTICLE IX
CONDITIONS TO CLOSING
Section 9.01 Conditions to the Obligations of Each Party. The obligations
of Seller and Buyer to consummate the Closing are subject to the satisfaction
(or waiver) of the following conditions:
(a) any applicable waiting period under the HSR Act relating to the
Contemplated Transactions shall have expired or been terminated without any
action being taken by a Governmental Authority that restrains, prevents or
results in a Material Adverse Effect on the HPG Business;
(b) no provision of any Applicable Law and no judgment, injunction, order
or decree shall restrain or prohibit the transactions contemplated hereby or
shall exist which would materially limit or adversely effect Buyer's ownership
or control of the Transferred Assets, and there shall not have been threatened,
nor shall there be pending, any action or proceeding by or before any court or
Governmental Authority challenging any of the Contemplated Transactions or
seeking monetary relief by reason of the consummation of the Contemplated
Transactions that reasonably could be expected to have a Material Adverse Effect
on the HPG Business; and
(c) all actions by or in respect of or filings with any Governmental
Authority required to
<PAGE> 24
Page 24
permit the Contemplated Transactions shall have been obtained.
Section 9.02 Conditions to Obligation of Buyer. The obligations of Buyer
to consummate the Closing are subject to the satisfaction (or waiver by Buyer)
of the following further conditions:
(a) (i) Seller shall have performed in all respects all of its obligations
under the Transaction Documents required to be performed by it on or prior to
the Closing Date, (ii) the representations and warranties of Seller contained in
the Transaction Documents shall be true and correct at and as of the date of
this Agreement and as of the Closing Date, as if made at and as of each such
date, except that those representations and warranties which are by their
express terms made as of a specific date shall be true and correct only as of
such date, in each case except for inaccuracies that could not reasonably be
expected to have a Material Adverse Effect on the HPG Business (except with
respect to the representations and warranties contained in Sections B.01 and
B.02, which shall be true and correct subject only to the exceptions set forth
therein), and (iii) Buyer shall have received a certificate signed by an
executive officer of Seller to the foregoing effect;
(b) since March 29, 1998, no event has occurred that has had a Material
Adverse Effect on the HPG Business;
(c) Seller or the applicable Affiliated Transferor shall have executed and
delivered, on or before the Closing Date, the Transaction Documents that are
required to be signed by a Seller Company;
(d) Seller or the applicable Affiliated Transferor, as the case may be,
shall have obtained the consents, approvals or permits contemplated by
Attachment XIII to this Agreement;
(e) Seller or the applicable Affiliated Transferor shall have prepared and
delivered on or before the Closing Date a patent docket and a trademark docket,
each of which shall set forth with particularity and accuracy with respect to
all Intellectual Property that constitute Transferred Assets all actions known
as of the date of preparation that are required to be taken to maintain such
Intellectual Property within the six months following the Closing Date;
(f) Buyer shall have received an opinion of Miles & Stockbridge P.C. in
the form attached hereto as Attachment XXIX to this Agreement; and
(g) Buyer shall have received audited financial statements of the HPG
Business consisting of the balance sheets as of December 31, 1997 and 1996 and
the related statements of operations, owners' equity and cash flows for each of
the three years in the period ended December 31, 1997, together with the opinion
of Ernst & Young LLP thereon, which opinion shall state that such financial
statements have been prepared in accordance with GAAP and shall be without
qualification, and unaudited financial statements of the HPG Business consisting
of the balance sheet as of March 28, 1998, and statements of operations and cash
flows for the quarter then ended.
Section 9.03 Conditions to Obligation of Seller. The obligation of Seller
to consummate the Closing is subject to the satisfaction (or waiver by Seller)
of the following further conditions:
(a) (i) Buyer shall have performed in all respects all of its obligations
under the Transaction Documents required to be performed by Buyer at or prior to
the Closing Date, (ii) the representations and warranties of Buyer contained in
the Transaction Documents shall be true and
<PAGE> 25
Page 25
correct at and as of the date of this Agreement and as of the Closing Date, as
if made at and as of each such date, except that those representations and
warranties which are by their express terms made as of a specific date shall be
true and correct only as of such date, in each case except for inaccuracies that
could not reasonably be expected to have a Material Adverse Effect on the HPG
Business (except with respect to the representations and warranties contained in
Sections C.01 and C.02, which shall be true and correct subject only to the
exceptions set forth therein), and (iii) Seller shall have received a
certificate signed by an executive officer of Buyer to the foregoing effect; and
(b) Buyer or the applicable Buyer Company shall have executed and
delivered, on or before the Closing Date, the Transaction Documents that are
required to be signed by a Buyer Company.
Section 9.04 Effect of Waiver. Any waiver by Buyer of the conditions
specified in clause (ii) of Section 9.02(a), and any waiver by Seller of the
conditions specified in clause (ii) of Section 9.03, if made knowingly, shall
also be deemed a waiver of any claim for Damages as the result of the matters
waived.
ARTICLE X
SURVIVAL; INDEMNIFICATION
Section 10.01 Survival.
(a) None of the representations, warranties, covenants or agreements of
the parties contained in any Transaction Document or in any certificate or other
writing delivered pursuant to any Transaction Document or in connection with any
Transaction Document shall survive the Closing, except for:
(i) the representations and warranties in Sections B.01 and B.02
shall survive indefinitely;
(ii) the representations and warranties in Section B.13 shall not
survive the Closing Date;
(iii) the representations and warranties in Section B.15 relating to
Intellectual Property (other than patents and copyrights) and the
representations and warranties in Sections B.07 and B.15 to the extent but
only to the extent they relate to title to Transferred Assets shall
survive for a period of six years and six months from the Closing Date;
(iv) the representations and warranties in Sections B.16 and B.18
shall survive until 30 days after the expiration of the applicable statute
of limitations (or extensions or waivers thereof);
(v) the representations and warranties in Exhibit B (other than (A)
those Sections of Exhibit B referenced in the preceding clauses (i), (ii)
and (iv), (B) those representations and warranties in Section B.15
relating to Intellectual Property (other than patents and copyrights) and
(C) those representations and warranties in Sections B.07 and B.15 to the
extent but only to the extent they relate to title to Transferred Assets)
shall survive for a period of one year from the Closing Date;
<PAGE> 26
Page 26
(vi) the representations and warranties in Sections C.01 and C.02
shall survive indefinitely;
(vii) the representations and warranties in Exhibit C (other than
those Sections of Exhibit C referenced in the preceding clause (v)) shall
survive for a period of one year from the Closing Date; and
(viii) those covenants and agreements set forth in the Transaction
Documents that, by their terms, are to have effect after the Closing Date
shall survive for the period contemplated by the covenants and agreements,
or if no period is expressly set forth, indefinitely.
The representations, warranties, covenants and agreements referenced in the
preceding clauses (i) and (iii) through (viii) are referred to herein as the
"Surviving Representations or Covenants." It is understood and agreed that, (i)
before the Closing the remedies expressly set forth in Article XI are the sole
and exclusive remedies for any breach of any representation, warranty, covenant
or agreement and (ii) following the Closing the sole and exclusive remedy with
respect to any breach of any representation, warranty, covenant or agreement
(other than (1) with respect to a breach of the terms of a covenant or
agreement, as to which Buyer or Seller, as the case may be, shall be entitled to
seek specific performance or other equitable relief and (2) with respect to
claims for fraud) shall be a claim for Damages (whether by contract, in tort or
otherwise, and whether in law, in equity or both) made pursuant to this Article
X.
(b) Except as otherwise provided in this Agreement, Buyer for itself, its
Affiliates and their respective Representatives and successors, effective as of
the Closing, releases and discharges Seller, its Affiliates and their respective
Representatives from any and all Damages (whether by contract, in tort or both,
and whether in law, in equity or both), rights of subrogation and contribution
and remedies of any nature whatsoever, known or unknown, relating to or arising
out of Environmental Liabilities or Environmental Laws, in either case, arising
in connection with or in any way relating to the HPG Business and constituting
an Assumed Liability.
Section 10.02 Indemnification.
(a) Effective as of the Closing and subject to the limitations set forth
in Section 10.04(a), Buyer hereby indemnifies Seller and its Affiliates and
their respective directors, officers, employees and agents against, and agrees
to hold them harmless from any and all Damages incurred or suffered by any of
them arising out of (i) any misrepresentation, breach or nonfulfillment of any
Surviving Representation or Covenant made or to be performed by Buyer Companies
pursuant to any of the Transaction Documents, (ii) except as otherwise
contemplated by Sections 10.02(b)(iv), 10.04(b)(ii) and D.18, any Assumed
Liabilities (including, without limitation, Buyer's (or any other Buyer
Company's) failure to perform or in due course pay or discharge any Assumed
Liability), (iii) any Financial Support Arrangement, (iv) any matters for which
indemnification is provided under Exhibit D (it being understood that the terms
of such indemnification shall be governed by and subject to the terms of Exhibit
D) or (v) any Environmental Laws to the extent such liabilities arise out of,
relate to, are based on or result from any action taken (or a failure to take
action) or any event occurring on or after the Closing Date. Other than costs
associated with split samples, Buyer hereby indemnifies Seller and its
Affiliates and their respective directors, officers, employees and agents
against, and agrees to hold them harmless from any and all Damages incurred or
suffered by any of them arising out of or related in any way to any actions
taken by Buyer Companies or any of
<PAGE> 27
Page 27
their Representatives in connection with any environmental audit or similar
review of the HPG Business that involves testing, drilling or sampling at any
facility possession of which is contemplated to be transferred to a Buyer
Company at Closing, including, without limitation, (A) personal injury, wrongful
death, economic loss or property damage claims, (B) claims for natural resource
damages, (C) violations of Applicable Law or (D) any Damages with respect
thereto.
(b) Effective as of the Closing and subject to the limitations set forth
in Section 10.04(b), Seller hereby indemnifies Buyer and its Affiliates and
their respective directors, officers, employees and agents against, and agrees
to hold them harmless from any and all Damages incurred or suffered by any of
them arising out of or related in any way to (i) any misrepresentation, breach
or nonfulfillment of any Surviving Representation or Covenant made or to be
performed by the Seller Companies pursuant to any Transaction Document, (ii) any
Excluded Liability or any other liability or obligation of the HPG Business,
other than Assumed Liabilities (provided that nothing herein shall diminish
Seller's obligations pursuant to Section 10.04(b)(ii)), to the extent arising
out of, relating to, based on or resulting from actions taken (or failures to
take action), events occurring or conditions existing prior to the Closing
(including, without limitation, Seller's (or any other Seller Company's) failure
to perform or in due course pay or discharge any Excluded Liability), (iii) any
matters for which indemnification is provided under Exhibit D (it being
understood that the terms of such indemnification shall be governed by and
subject to the terms of Exhibit D) or (iv) Asheboro Closing Costs in an amount
equal to 50% of the first $20,000,000 of Asheboro Closing Costs and 100% of all
Asheboro Closing Costs in excess of $20,000,000.
Section 10.03 Procedures.
(a) If Seller or any of its Affiliates or any of their directors,
officers, employees and agents, shall seek indemnification pursuant to Section
10.02(a), or if Buyer or any of its Affiliates or any of their directors,
officers, employees and agents, shall seek indemnification pursuant to Section
10.02(b), the Person seeking indemnification (the "Indemnified Party") shall
give written notice to the party from whom such indemnification is sought (the
"Indemnifying Party") promptly (and in any event within 30 days) after the
Indemnified Party (or, if the Indemnified Party is a corporation, any officer or
employee of the Indemnified Party) becomes aware of the facts giving rise to
such claim for indemnification (an "Indemnified Claim") specifying in reasonable
detail the factual basis of the Indemnified Claim, stating the amount of the
Damages, if known, the method of computation thereof, containing a reference to
the provision of the Transaction Documents in respect of which such Indemnified
Claim arises and demanding indemnification therefor. The failure of an
Indemnified Party to provide notice in accordance with this Section 10.03 shall
not constitute a waiver of that party's claims to indemnification pursuant to
Section 10.02, except to the extent that (i) any such failure or delay in giving
notice causes the amounts paid by the Indemnifying Party to be greater than they
otherwise would have been or otherwise results in prejudice to the Indemnifying
Party or (ii) such notice is not delivered to the Indemnifying Party prior to
the expiration of the applicable survival period set forth in Section 10.01. If
the Indemnified Claim arises from the assertion of any claim, or the
commencement of any suit, action, proceeding or Remedial Action brought by a
Person that is not a party hereto (a "Third Party Claim"), any such notice to
the Indemnifying Party shall be accompanied by a copy of any papers theretofore
served on or delivered to the Indemnified Party in connection with such Third
Party Claim. With respect to any Third Party Claim asserted or brought prior to
the Closing Date, notice of such Third Party Claim shall be deemed to have been
delivered on the Closing Date.
(b) (i) Upon receipt of notice of a Third Party Claim from an Indemnified
Party pursuant to Section 10.03(a), the Indemnifying Party will be
entitled to assume the defense
<PAGE> 28
Page 28
and control of such Third Party Claim subject to the provisions of this
Section 10.03, provided that in the case of matters involving actions or
claims that, if not first paid, discharged or otherwise complied with
would result in a material interruption or cessation of the conduct of the
HPG Business, the Indemnifying Party shall act promptly to avoid, to the
extent practicable, any such effects on the HPG Business. After written
notice by the Indemnifying Party to the Indemnified Party of its election
to assume the defense and control of a Third Party Claim, the Indemnifying
Party shall not be liable to such Indemnified Party for any legal fees or
expenses subsequently incurred by such Indemnified Party in connection
therewith. Notwithstanding anything in this Section 10.3 to the contrary,
if the Indemnifying Party does not assume defense and control of a Third
Party Claim as provided in this Section 10.3, the Indemnified Party shall
have the right to defend such Third Party Claim, subject to the
limitations set forth in this Section 10.03, in such manner as it may deem
appropriate. Whether the Indemnifying Party or the Indemnified Party is
defending and controlling any such Third Party Claim, it shall select
counsel, contractors, experts and consultants of recognized standing and
competence, shall take all steps necessary in the investigation, defense
or settlement thereof, and shall at all times diligently and promptly
pursue the resolution thereof. The party conducting the defense thereof
shall at all times act as if all Damages relating to the Third Party Claim
were for its own account and shall act in good faith and with reasonable
prudence to minimize Damages therefrom. The Indemnified Party shall, and
shall cause each of its Affiliates, directors, officers, employees, and
agents to, cooperate fully with the Indemnifying Party in connection with
any Third Party Claim.
(ii) Subject to the provisions of Section 10.03(b)(iii) and Section
10.03(b)(iv), the Indemnifying Party shall be authorized to consent to a
settlement of, or the entry of any judgment arising from, any Third Party
Claims, and the Indemnified Party shall consent to a settlement of, or the
entry of any judgment arising from, such Third Party Claims; provided,
that the Indemnifying Party shall (1) pay or cause to be paid all amounts
arising out of such settlement or judgment concurrently with the
effectiveness thereof; (2) shall not encumber any of the assets of any
Indemnified Party or agree to any restriction or condition that would
apply to such Indemnified Party or to the conduct of that party's
business; and (3) shall obtain, as a condition of any settlement or other
resolution, a complete release of each Indemnified Party against any and
all damages resulting from, arising out of or incurred with respect to
such settlement or other resolution. Except for the foregoing, no
settlement or entry of judgment in respect of any Third Party Claim shall
be consented to by any Indemnifying Party or Indemnified Party without the
express written consent of the other party.
(iii) Notwithstanding the provisions of Section 10.03(b)(i), Buyer
shall manage all Remedial Actions conducted with respect to facilities
which constitute Transferred Assets, provided that Seller and its
Representatives shall have the right, consistent with Buyer's right to
manage such Remedial Actions as aforesaid, to participate fully in all
decisions regarding any Remedial Action, including reasonable access to
sites where any Remedial Action is being conducted, reasonable access to
all documents, correspondence, data, reports or information regarding the
Remedial Action, reasonable access to employees and consultants of Buyer
with knowledge of relevant facts about the Remedial Action and the right
to attend all meetings and participate in any telephone or other
conferences with any Government Authority or other third party regarding
the Remedial Action.
(iv) In the case of the indemnification contemplated by Section
10.02(b)(iii), in the event that the Indemnifying Party desires to settle
the matters referenced therein or
<PAGE> 29
Page 29
consent to the entry of any judgment arising thereunder and the
Indemnified Party does not wish to consent to such settlement or entry of
judgment, the Indemnified Party shall have no obligation to consent to the
settlement or entry of judgment provided that it agrees in writing to pay
and be responsible for 100% of any Damages; provided that the Indemnified
Party shall not be required to consent to any settlement or agree to be
responsible for the payment of Damages thereafter incurred with respect to
any matter the settlement or entry of judgment of which would require the
consent of such Indemnified Party pursuant to Section 10.03(b)(ii). The
obligation of an Indemnified Party that rejects any proposed settlement
offer or entry of any such judgment to pay and be responsible for 100% of
any Damages in accordance with this Section 10.03(b)(iv) shall be
conditioned upon and subject to the payment by the Indemnifying Party,
within five Business Days of the date such Indemnified Party provides the
written agreement contemplated by the preceding sentence, of an amount, in
immediately available funds, equal to the portion of the total settlement
that would have been payable by the Indemnifying Party according to the
percentage sharing arrangement contemplated by Section 10.04(b)(ii).
Thereafter, the Indemnified Party shall be solely responsible for any
Damages and for the defense of the matter that is the subject of the
proposed settlement or entry of judgment. Notwithstanding the foregoing,
an Indemnifying Party may, at its option and expense, participate in the
defense of any Indemnified Claim.
(v) In furtherance of and not in limitation of the provisions of
this Section 10.03, with respect to product liability matters and other
matters contemplated by Exhibit E, Seller and Buyer covenant and agree as
set forth in Exhibit E.
(c) If the Indemnifying Party and the Indemnified Party are unable to
agree with respect to a procedural matter arising under Section 10.03(b)(iii),
the Indemnifying Party and the Indemnified Party shall, within 10 days after
notice of disagreement given by either party, agree upon a third-party referee
("Referee"), who shall be an attorney and who shall have the authority to review
and resolve the disputed matter. The parties shall present their differences in
writing (each party simultaneously providing to the other a copy of all
documents submitted) to the Referee and shall cause the Referee promptly to
review any facts, law or arguments either the Indemnifying Party or the
Indemnified Party may present. The Referee shall be retained to resolve specific
differences between the parties within the range of such differences. Either
party may request that all discussions with the Referee by either party be in
each other's presence. The decision of the Referee shall be final and binding
unless both the Indemnifying Party and the Indemnified Party agree. The parties
shall share equally all costs and fees of the Referee.
(d) If an Indemnifying Party makes any payment on an Indemnified Claim,
the Indemnifying Party shall be subrogated, to the extent of such payment, to
all rights and remedies of the Indemnified Party to any insurance benefits or
other claims of the Indemnified Party with respect to such claim.
Section 10.04 Limitations. Notwithstanding anything to the contrary in
this Agreement or in any of the Transaction Documents:
(a) Buyer shall only have liability to Seller or any other Person
hereunder with respect to the representations and warranties described in clause
(i) of Section 10.02(a) if such matters were the subject of a written notice
given by the Indemnified Party pursuant to Section 10.03(a) within the period
following the Closing Date specified for each respective matter in Section
10.01.
<PAGE> 30
Page 30
(b) Seller shall only have liability to Buyer or any other Person
hereunder:
(i) with respect to the representations and warranties described in
clause (i) of Section 10.02(b), (y) to the extent that the aggregate
Damages of all Indemnified Parties as the result thereof exceed $3,500,000
but are not greater than an amount equal to $3,500,000 plus 25% of the
Adjusted Purchase Price (it being understood that Seller's maximum
liability under Section 10.02(b)(i) with respect to representations and
warranties and this Section 10.04(b)(i) shall be an amount equal to 25% of
the Adjusted Purchase Price), and (z) if such matters were the subject of
a written notice given by the Indemnified Party pursuant to Section
10.03(a) within the period following the Closing Date specified for each
respective matter in Section 10.01; provided, however, that such
$3,500,000 threshold shall not apply to any such breach of representation
or warranty in respect of the Black & Decker Trademarks (as defined in the
Trademark License Agreement).
(ii) with respect to Environmental Liabilities constituting Assumed
Liabilities, to the extent of 75% of the first $5,000,000 in aggregate
Damages, and 100% of the aggregate Damages in excess of $5,000,000, in
each case only to the extent incurred and paid within five years following
the Closing Date by all Indemnified Parties as the result thereof based on
the use of the facilities constituting Transferred Assets as of the
Closing Date; and
(iii) with respect to the matters described in clause (ii) of
Section 10.02(b), there shall be no limitation on Seller's liability.
ARTICLE XI
TERMINATION
Section 11.01 Termination. The Transaction Documents may be terminated at
any time prior to the Closing:
(i) by mutual written agreement of Seller and Buyer;
(ii) by Seller or Buyer if the Closing shall not have been
consummated by July 31, 1998; provided, however, that neither Seller nor
Buyer may terminate the Transaction Documents pursuant to this clause (ii)
if the Closing shall not have been consummated by July 31, 1998, by reason
of the failure of such party or any of its Affiliates to perform in all
material respects any of its or their respective covenants or agreements
contained in the Transaction Documents;
(iii) by either Seller or Buyer if there shall be any Applicable Law
or regulation that makes consummation of the Contemplated Transactions
illegal or otherwise prohibited or if consummation of the Contemplated
Transactions would violate any nonappealable final order, decree or
judgment of any Governmental Authority having competent jurisdiction;
(iv) by Buyer if the representations and warranties of Seller shall
not be true and correct as at any date prior to Closing or if Seller shall
have failed to perform all of the covenants and comply with all of the
provisions required by any Transaction Document to be performed or
complied with by it on or before the Closing, unless such matters would
not rise to the level of a failure of the Closing condition contemplated
by Section 9.02(a) if Seller
<PAGE> 31
Page 31
fails to so perform, comply or otherwise cure such matter within 15 days
of receipt of notice from Buyer of such matter; and
(v) by Seller if the representations and warranties of Buyer shall
not be true and correct as at any date prior to Closing or if Buyer shall
have failed to perform all of the covenants and comply with all of the
provisions required by any Transaction Document to be performed or
complied with by it on or before the Closing, but only unless such matters
would not rise to the level of a failure of the Closing condition
contemplated by Section 9.03(a) if Buyer fails to so perform, comply or
otherwise cure such matter within 15 days of receipt of notice from Seller
of such matter.
Any party desiring to terminate this Agreement pursuant to this Section 11.01
shall give written notice of such termination to the other parties to this
Agreement.
Section 11.02 Effect of Termination. If this Agreement is terminated as
permitted by Section 11.01, such termination shall be without liability of any
party (or any Affiliate, stockholder, director, officer, employee, agent,
consultant or Representative of such party) to any other party to this
Agreement; provided, however, that if the Contemplated Transactions fail to
close as a result of a breach of the provisions of any Transaction Document by
Seller or Buyer, such party shall be fully liable for any and all Damages
incurred or suffered by the other party as a result of all such breaches if the
other party is ready, willing and able to otherwise satisfy its obligations
under the Transaction Documents. Notwithstanding the foregoing, the provisions
of Sections 6.01 and 12.03, the second sentence of Section 10.02(a), and this
Section 11.02 shall survive any termination hereof pursuant to Section 11.01.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopy or similar writing)
and shall be given,
if to Seller:
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Senior Vice President and
Chief Financial Officer
Telecopy: (410) 716-3318
with a copy to:
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
Attention: Senior Vice President and
General Counsel
Telecopy: (410) 716-2660
<PAGE> 32
Page 32
and
Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202
Attention: Glenn C. Campbell
Telecopy: (410) 385-3700
if to Buyer:
Windmere-Durable Holdings, Inc.
5980 Miami Lakes Drive
Miami Lakes, Florida 33014-2467
Attention: Harry D. Schulman
Telecopy: (305) 364-0635
with a copy to:
Greenberg Traurig
1221 Brickell Avenue
Miami, Florida 33131
Attention: Paul Berkowitz
Telecopy: (305) 579-0717
or to such other address or telecopy number and with such other copies, as such
party may hereafter specify for the purpose by notice to the other parties. Each
such notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section 12.01 and evidence of receipt is received or (ii) if given by any
other means, upon delivery or refusal of delivery at the address specified in
this Section 12.01.
Section 12.02 Amendments; Waivers.
(a) Any provision of the Transaction Documents may be amended or waived
prior to the Closing Date if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by Seller and Buyer, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege under any Transaction Document shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 12.03 Expenses; Taxes. Except as otherwise provided in the
Transaction Documents, all costs and expenses incurred in connection with the
Transaction Documents shall be paid by the party incurring such cost or expense.
Notwithstanding the foregoing, (i) all real estate transfer and similar taxes or
governmental charges resulting from or relating to the transfer of the
Transferred Assets to Buyer Companies by Seller or any of the Affiliated
Transferors, shall be borne one-half by Seller and one-half by Buyer, (ii) all
sales, use and similar taxes or governmental
<PAGE> 33
Page 33
charges (other than value added or similar taxes for which Buyer or Buyer
Companies can obtain a credit or refund) resulting from or relating to the
transfer of the Transferred Assets to Buyer Companies by Seller or any of the
Affiliated Transferors, shall be borne one-half by Seller and one-half by Buyer,
and (iii) all value added or similar taxes for which Buyer or Buyer Companies
can obtain a credit or refund shall be borne solely by Buyer and Buyer
Companies. Each of Buyer and Seller shall reimburse the other for one-half of
such fees and taxes and charges paid by the other promptly upon presentation of
a demand therefor consistent with this Section 12.03. Any property taxes that
are assessed on an annual basis and have been paid by Seller Companies prior to
Closing shall be prorated at Closing and Buyer shall reimburse Seller Companies
for amounts attributable to any period or portion thereof on or after the
Closing Date.
Section 12.04 Successors and Assigns. The provisions of the Transaction
Documents shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party, except that Buyer may assign
its rights and delegate its obligations hereunder to any Buyer Company, provided
that Buyer shall remain responsible for the fulfillment of all such obligations
and shall remain fully liable hereunder for its own actions or omissions and the
actions or omissions of any such assignee as if such rights and obligations had
not been assigned or delegated, and the Buyer may assign its rights hereunder to
NationsBank, N.A., as collateral agent for Buyer's lenders.
Section 12.05 Disclosure. Certain information set forth in the Disclosure
Schedules has been included and disclosed solely for informational purposes and
may not be required to be disclosed pursuant to the terms and conditions of the
Transaction Documents. The disclosure of any such information shall not be
deemed to constitute an acknowledgement or agreement that the information is
required to be disclosed in connection with the representations and warranties
made in the Transaction Documents or that the information is material, nor shall
any information so included and disclosed be deemed to establish a standard of
materiality or otherwise used to determine whether any other information is
material.
Section 12.06 Construction. As used in the Transaction Documents, any
reference to the masculine, feminine or neuter gender shall include all genders,
the plural shall include the singular, and the singular shall include the
plural. With regard to each and every term and condition of the Transaction
Documents, the parties understand and agree that the same have or has been
mutually negotiated, prepared and drafted, and that if at any time the parties
desire or are required to interpret or construe any such term or condition or
any agreement or instrument subject hereto, no consideration shall be given to
the issue of which party actually prepared, drafted or requested any term or
condition of the Transaction Documents.
Section 12.07 Entire Agreement.
(a) The Transaction Documents and any other agreements contemplated
thereby (including, to the extent contemplated herein, the Confidentiality
Agreement) constitute the entire agreement among the parties with respect to the
subject matter of such documents and supersede all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter thereof.
(b) The parties hereto acknowledge and agree that no representation,
warranty, promise, inducement, understanding, covenant or agreement has been
made or relied upon by any party hereto other than those expressly set forth in
the Transaction Documents. Without limiting the
<PAGE> 34
Page 34
generality of the disclaimer set forth in the preceding sentence, (i) neither
Seller nor any of its Affiliates has made or shall be deemed to have made any
representations or warranties, in any presentation or written information
relating to the HPG Business given or to be given in connection with the
Contemplated Transactions, in any filing made or to be made by or on behalf of
Seller or any of its Affiliates with any Governmental Authority, and no
statement, made in any such presentation or written materials, made in any such
filing or contained in any such other information shall be deemed a
representation or warranty hereunder or otherwise, and (ii) Seller, on its own
behalf and on behalf of the other Seller Companies, expressly disclaims any
implied warranties, including but not limited to warranties of fitness for a
particular purpose and warranties of merchantability. Buyer acknowledges that
Seller has informed them that no Person has been authorized by Seller or any of
its Affiliates to make any representation or warranty in respect of the HPG
Business or in connection with the Contemplated Transactions, unless in writing
and contained in this Agreement or in any of the Transaction Documents to which
they are a party.
(c) Except as expressly provided herein or in any other Transaction
Document, no Transaction Document or any provision thereof is intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
Section 12.08 Governing Law. Except as otherwise provided in any of the
Transaction Documents, this Agreement and the other Transaction Documents shall
be construed in accordance with and governed by the law of the State of New York
(without regard to the choice of law provisions thereof).
Section 12.09 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other party hereto.
Section 12.10 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, any of the Transaction Documents or the Contemplated Transactions shall be
brought in the United States District Court for the Southern District of New
York (or, if subject matter jurisdiction is unavailable, in the state courts of
the State of New York), and each of the parties hereby consents to the exclusive
jurisdiction of such court (and of the appropriate appellate court) in any such
suit, action or proceeding and waives any objection to venue laid therein.
Process in any such suit, action or proceeding may be served on any party
anywhere in the world. Without limiting the foregoing, Seller and Buyer agree
that service of process upon such party at the address referred to in Section
12.01, together with written notice of such service to such party, shall be
deemed effective service of process upon such party.
Section 12.11 Severability. Any provision of the Transaction Documents
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of the
Transaction Documents or affecting the validity or enforceability of such
provision in any other jurisdiction. To the extent any provision of the
Transaction Documents is determined to be prohibited or unenforceable in any
jurisdiction Seller and Buyer agree to use reasonable commercial efforts, and
agree to cause the other Seller Companies or Buyer Companies, as the case may
be, to use reasonable commercial efforts, to substitute one or more valid, legal
and enforceable provisions that, insofar as practicable implement the purposes
and intent of the prohibited or unenforceable provision.
<PAGE> 35
Page 35
Section 12.12 Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
Section 12.13 Bulk Sales. Buyer hereby waives compliance by Seller and
each Affiliated Transferor, in connection with the Contemplated Transactions,
with the provisions of Article 6 of the Uniform Commercial Code as adopted in
the States of Connecticut, Maryland and North Carolina, and as adopted in any
other states or jurisdictions where any of the Transferred Assets are located,
and any other applicable bulk sales laws with respect to or requiring notice to
Seller's (or any Affiliated Transferor's) creditors, as the same may be in
effect on the Closing Date. Seller shall indemnify and hold harmless Buyer
against any and all liabilities (other than liabilities in respect of Assumed
Liabilities) which may be asserted by third parties against Buyer as a result of
noncompliance with any such bulk sales law.
<PAGE> 36
Page 36
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be duly
executed by their respective authorized officers on the day and year first above
written.
THE BLACK & DECKER CORPORATION
By: /s/
-------------------------------------
Name:
Title:
WINDMERE-DURABLE HOLDINGS, INC.
By: /s/
-------------------------------------
Name:
Title:
<PAGE> 37
Page 37
EXHIBIT A
DEFINITIONS
(a) The following terms have the following meanings:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person. For purposes of determining whether a Person is an Affiliate, the term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of securities, contract or otherwise.
"Affiliated Transferors" means any Seller Company that owns any of the
assets that would constitute Transferred Assets if owned, held or used by Seller
or any of its Affiliates on the Closing Date or is liable for any of the Assumed
Liabilities.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, decree or other requirement
of any Governmental Authority (including any Environmental Law) applicable to
such Person or any of their respective properties, assets, officers, directors,
employees, consultants or agents (in connection with such officer's, director's,
employee's, consultant's or agent's activities on behalf of such Person).
"Asheboro Closing Costs" means the following cash closing costs in respect
of the Asheboro Property: (a) employee severance benefits in respect of
employees working at the Asheboro property, (b) dismantle, freight and
installation costs, (c) travel and living expenses in connection with relocation
to the Queretaro Property, (d) contract engineering and recruitment expenses,
(e) any special bonus arrangements for employees working at the Asheboro
Property as of the Closing Date that are agreed to in writing by Seller and
Buyer, and (f) cleanup and maintenance costs after relocation.
"Asheboro Property" means the property located at 1758 South Fayetteville
Street, Asheboro, North Carolina 27203.
"Assignment and Assumption Agreements" means the Bill of Sale, Assignment
and Assumption Agreements to be entered into by Seller and an Affiliated
Transferor and Buyer and a Buyer Company in respect of each of the countries
where Transferred Assets are located as of the Closing Date, in the form
contemplated by Attachment II (with such changes as may be required to satisfy
any requirements of Applicable Law in any country or jurisdiction where such
Transferred Assets are located) and any other similar agreements or further
assurances documents contemplated by this Agreement executed and delivered by
Seller and an Affiliated Transferor and Buyer and a Buyer Company in connection
with the sale, assignment and transfer by Seller or an Affiliated Transferor of
Transferred Assets and the assumption by a Buyer Company of Assumed Liabilities,
as the same may be amended from time to time.
"Assumed Liabilities" means all liabilities and obligations of Seller
Companies, to the extent relating to or arising out of the operation, affairs
and conduct of the HPG Business, the Transferred Assets or the HPG Leases, of
any kind, character or description, whether liquidated or unliquidated,
<PAGE> 38
Page 38
known or unknown, fixed or contingent, accrued or unaccrued, absolute,
determined, determinable or indeterminable or otherwise, whether or not
reflected or reserved against in the Opening Statement or in the calculation of
the Final Net Tangible Asset Amount and whether presently in existence or
arising hereafter, except for Excluded Liabilities, including but not limited to
the following:
(i) all liabilities and obligations relating to the HPG Business or
the Transferred Assets (and, to the extent provided in clauses (a) or (d) below,
in connection with the Cleaning and Lighting Products), whether accrued,
liquidated, contingent, matured or unmatured, at or prior to the Closing, that
(a) are set forth on, reflected or referred to in the Opening Statement
(including those liabilities relating to the Cleaning and Lighting Products),
(b) are disclosed in any of the Disclosure Schedules delivered hereunder, (c)
would be subject to disclosure in any of the Disclosure Schedules delivered in
connection with any of Seller's representations and warranties but for the
materiality standards contained in such representation and warranty (provided
that any such liabilities or obligations covered by this clause (c) shall not,
in the aggregate, exceed an amount that reasonably could be expected to have a
Material Adverse Effect on the HPG Business), (d) are reflected in the Final Net
Tangible Asset Amount as determined in accordance with Section 2.04 herein
(including without limitation accounts payable and reserves reflected as
contra-asset accounts) or (e) are otherwise a liability or obligation that Buyer
is expressly assuming pursuant to this Agreement;
(ii) all liabilities and obligations arising under Contracts entered
into in the ordinary course of business consistent with past practices, whether
or not the Contracts have been completed or terminated prior to the Closing
Date, including, without limitation, any such liabilities and obligations
arising from or relating to the performance or non-performance of such Contracts
by the HPG Business, a Buyer Company or any other Person, whether arising prior
to, on or after the Closing Date, except to the extent they constitute Excluded
Liabilities;
(iii) all liabilities and obligations in respect of Transferred
Employees, and beneficiaries of employees and former employees of the HPG
Business, including, without limitation, liabilities and obligations under or
relating to WARN or any similar state or local law to the extent relating to or
arising out of any actions taken by Buyer Companies on or after the Closing
Date, except to the extent otherwise provided in Exhibit D to be retained by
Seller;
(iv) all liabilities and obligations in respect of Transferred
Employees and dependents and beneficiaries of Transferred Employees under
Employee Plans and Benefit Arrangements, except to the extent otherwise provided
in Exhibit D to be retained by Seller;
(v) all liabilities and obligations relating to claims of
manufacturing or design defects with respect to any product manufactured or sold
or service provided by the HPG Business on or after the Closing Date (other than
any product in the finished goods inventory of Seller Companies as of the close
of business on the day preceding the Closing Date), including liabilities and
obligations in respect of investigations regarding product safety, product
recall and related matters, except to the extent they constitute Excluded
Liabilities;
(vi) all liabilities and obligations relating to warranty
obligations or services with respect to any product sold or service provided by
the HPG Business prior to, on or after the Closing Date;
(vii) all Environmental Liabilities, whether arising prior to, on or
after the Closing
<PAGE> 39
Page 39
Date, to the extent relating to or arising out of conditions at the Queretaro
Property;
(viii) all liabilities and obligations relating to the HPG Leases,
whether arising prior to, on or after the Closing Date;
(ix) all liabilities and obligations (except to the extent they
constitute Environmental Liabilities, which shall be governed by the foregoing
clause (vii)) relating to the Occupational Safety and Health Act of 1970, as
amended, and any regulations, decisions or orders promulgated thereunder,
together with any state or local law, regulation or ordinance pertaining to
worker, employee or occupational safety or health in effect as the same may be
amended, supplemented or superseded, whether arising prior to, on or after the
Closing Date, as the same relates to the HPG Business;
(x) all liabilities and obligations arising from or relating to
governmental, judicial or adversarial proceedings (public or private),
litigation, suits, arbitration, disputes, claims, causes of action or
investigations (collectively, "Proceedings") to the extent arising from or
relating to the HPG Business or any Transferred Assets, whether or not accrued,
liquidated, contingent, matured, unmatured, or known or unknown to Seller or
Buyer at or prior to the Closing, except for liabilities and obligations of a
type contemplated by the foregoing clause (v), which shall be governed by such
clause;
(xi) all liabilities and obligations relating to the ownership by
Buyer Companies or any of their successors of the Transferred Assets, directly
or indirectly relating to or arising under the Employee Plans and Benefit
Arrangements or relating to the Transferred Employees, the lease of properties
under the HPG Leases or otherwise, or the conduct of the HPG Business or any
other business, in each case, from and after the Closing Date, including,
without limitation, any and all Proceedings in respect thereof; and
(xii) a pro rata portion of all ad valorem real property taxes for
the portion of the taxable year ending on the Closing Date.
"Benefit Arrangements" means all life and health insurance,
hospitalization, retirement, savings, bonus, deferred compensation, incentive
compensation, severance pay, disability and fringe benefit plans, holiday or
vacation pay, profit sharing, seniority, and other policies, practices,
agreements or statements of terms and conditions providing employee or executive
compensation or benefits to Transferred Employees or any of their dependents,
maintained by Seller Companies, other than an Employee Plan.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Cleaning and Lighting Products" means hand held vacuums, upright floor
vacuums, battery powered bathroom and outdoor cleaners sold under the
Scumbuster(R) name, flexible flashlights, flexible lanterns, leashlights and
rechargeable lights, together in each case with any related accessories or
attachments.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE> 40
Page 40
"Confidentiality Agreement" means the letter agreement dated February 3,
1998, by and between Seller and Buyer, as the same has been or may be amended
from time to time.
"Contemplated Transactions" means the transactions contemplated by the
Transaction Documents.
"Contracts" means all contracts, agreements, leases (including leases of
real property), licenses, commitments, sales and purchase orders, and other
undertakings of any kind, whether written or oral, relating exclusively to the
HPG Business, except to the extent that any of the foregoing constitute any of
the Employee Plans, Benefit Arrangements or funding vehicles associated with any
of the Employee Plans or Benefit Arrangements.
"Cross License Agreement" means the Intellectual Property Cross License
Agreement in the form contemplated by Attachment X.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement, including,
without limitation, reasonable costs, fees and expenses of attorneys, experts,
accountants, appraisers, consultants, witnesses, investigators and any other
agents or representatives of such Person (with such amounts to be determined net
of any resulting Tax benefit actually received or realized and net of any refund
or reimbursement of any portion of such amounts actually received or realized,
including, without limitation, reimbursement by way of insurance or third party
indemnification), but specifically excluding (i) any costs incurred by or
allocated to an Indemnified Party with respect to time spent by employees of the
Indemnified Party or any of its Affiliates, (ii) any lost profits or opportunity
costs (except to the extent assessed in connection with a third-party claim with
respect to which the Person against which such damages are assessed is entitled
to indemnification hereunder), and (iii) the decrease in the value of any
Transferred Asset to the extent that such valuation is based on any use of the
Transferred Asset other than its use as of the Closing Date.
"Designated Countries" means the countries located in the Caribbean and
North, Central and South America, but excluding Brazil, Paraguay and Uruguay.
"Designated Products" means coffeemakers, espresso makers, cappuccino
makers, toasters, toaster ovens, steamers, choppers, can openers, mixers, food
processors, irons, breadmakers, skillets, electric knives, blenders, juicers,
grills, kettles and wafflebakers, together in each case with any related
accessories or attachments, and all products in the foregoing categories under
development in the HPG Business as of the Closing Date or that have been under
development in the HPG Business at any time during the year prior to the Closing
Date, but excluding step stools, Cleaning and Lighting Products, shop,
construction and similar vacuums, and VersaPak(R) rechargeable battery packs and
chargers, together in each case with related accessories or attachments.
"Disclosure Schedules" means the Disclosure Schedules dated the date of
this Agreement relating to this Agreement. Matters disclosed in one Schedule of
the Disclosure Schedules shall be applicable to such Schedule only.
"Employee Plans" means each "employee benefit plan" as defined in Section
3(3) of ERISA, maintained or contributed to by Seller or any of its Affiliates
which provides benefits to employees of the HPG Business or their dependents.
<PAGE> 41
Page 41
"Environmental Claim" means any written or oral notice, claim, demand,
action, suit, complaint, proceeding or other communication by any third Person
alleging liability or potential liability (including without limitation
liability or potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage, personal
injury, fines or penalties) arising out of, relating to, based on or resulting
from (i) the presence, discharge, emission, release or threatened release of any
Hazardous Substances at any location, (ii) circumstances forming the basis of
any violation or alleged violation of any Environmental Laws, or (iii) otherwise
relating to obligations or liabilities under any Environmental Laws.
"Environmental Laws" means any and all past, present or future federal,
state, local and foreign statutes, laws, regulations, ordinances, judgments,
orders, permits, codes, or injunctions, which (i) imposes liability for or
standards of conduct concerning the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or handling
of Hazardous Substances including, The Resource Conservation and Recovery Act of
1976, as amended, The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, The Superfund Amendment and Reauthorization
Act of 1984, as amended, The Toxic Substances Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, to the extent it relates
to the handling of and exposure to hazardous or toxic materials or similar
substances, and any other so-called "Superfund" or "Superlien" law or (ii)
otherwise relates to the protection of human health or the environment.
"Environmental Liabilities" means all liabilities to the extent arising in
connection with or in any way relating to the HPG Business or Seller's or any of
its Affiliates' use or ownership thereof, whether vested or unvested, contingent
or fixed, actual or potential, which arise under or relate to Environmental Laws
including, without limitation, (i) Remedial Actions, (ii) personal injury,
wrongful death, economic loss or property damage claims, (iii) claims for
natural resource damages, (iv) violations of Applicable Law or (v) any Damages
with respect thereto. Notwithstanding the foregoing, Environmental Liabilities
shall not include any increased liabilities resulting from or arising out of a
use of a facility constituting a Transferred Asset after the Closing other than
the use of the facility as of the Closing Date.
"ERISA" means the Employee Retirement Income Security act of 1974, as
amended.
"Excluded Assets" means:
(i) all cash and cash equivalents of Seller Companies, including,
without limitation, cash and cash equivalents used as collateral for letters of
credit, deposits with utilities, insurance companies and other Persons, except
to the extent taken into account in the determination of the Final Net Tangible
Asset Amount;
(ii) all original books and records that Seller Companies shall be
required to retain pursuant to any Applicable Law (in which case copies of such
books and records to the extent relating to the HPG Business shall be provided
to Buyer), or that portion of such records that contain information relating to
any business or activity of Seller Companies not forming a part of the HPG
Business, or any employee of a Seller Company that is not a Transferred
Employee;
(iii) all Tax assets of any Seller Companies, other than Tax assets
relating to sales and use taxes, gross receipts taxes, property taxes, licenses,
employee and employer withholding and unemployment taxes and other non-income
related taxes;
<PAGE> 42
Page 42
(iv) all assets of Seller Companies not held or owned by or used
exclusively in connection with the HPG Business;
(v) all rights and claims of Seller Companies under any of the
Transaction Documents and the agreements and instruments delivered to Seller
Companies by Buyer Companies pursuant to any of the Transaction Documents;
(vi) all accounts receivable, notes receivable or similar claims or
rights (whether or not billed or accrued) of the HPG Business from any Seller
Companies;
(vii) all trade accounts receivable, trade notes receivable or
similar trade claims or rights (whether or not billed or accrued) of the HPG
Business relating to the sale of products by an Affiliated Transferor to a
Person other than a Seller Company for sale outside of the United States
(excluding Puerto Rico) or Canada;
(viii) all capital stock or any other securities of any Seller
Companies or any other Person;
(ix) all GE Intellectual Property and all Intellectual Property not
used or held for use exclusively in the HPG Business, it being understood and
agreed that the only Intellectual Property deemed used or held for use
exclusively in the HPG Business that is registered or as to which an application
for registration is pending is listed as "Transferred Assets" on Attachment XII;
(x) all assets related to Excluded Liabilities;
(xi) all rights and claims of Seller Companies against SAI/Earle
Palmer Brown Promotions, or any of its predecessors, successors or affiliates,
in connection with the design, manufacture, purchase or sale of "Sharpei
puppets" sold and/or packaged with irons sold by the HPG Business prior to the
Closing Date;
(xii) all ownership and leasehold interests of Seller Companies in
respect of the facility, real property, fixtures and equipment located at or
constituting the Kuantan Facility, except to the extent specifically
contemplated within the definition of Transferred Assets;
(xiii) all accounts receivable, notes receivable or similar claims
or rights of Seller Companies arising out of or relating to any judgments
entered by a court or arbitrator prior to the Closing Date in favor of Seller
Companies in respect of Designated Products;
(xiv) all rights, claims, credits and assets of Seller Companies
arising out of or relating to media barter contracts, agreements or arrangements
of Seller Companies;
(xv) all Inventory (and any related parts, accessories or
attachments) that is owned by Seller Companies and held for sale, use or
consumption by Seller's national disposition center (i.e., Nashville facility),
service centers, outlet stores and company stores in the United States or
Canada, and all returned goods that are being held for reconditioning or are
being considered for reconditioning by Seller's national disposition center
(i.e., Nashville facility), service centers, outlet stores and company stores in
the United States or Canada;
(xvi) all assets related to Cleaning and Lighting Products, except
for accounts
<PAGE> 43
Page 43
receivable and prepaid expenses;
(xvii) the 28 mold presses identified as relating to the Cleaning
and Lighting Products located at the Asheboro Property and listed on Schedule A;
and
(xviii) all assets (other than Inventory) relating to operations in
the Designated Countries other than the United States (excluding Puerto Rico)
and Canada, and other than the manufacturing operations located at the Queretaro
Property.
"Excluded Liabilities" means the following liabilities and obligations:
(i) all liabilities and obligations of Seller Companies not arising
out of the conduct of the HPG Business, except as otherwise specifically
provided in the Transaction Documents;
(ii) except as otherwise specifically provided in the Transaction
Documents, all liabilities or obligations for any Tax arising from or with
respect to the Transferred Assets or the operations of the HPG Business prior to
the Closing, other than Tax liabilities or obligations relating to sales and use
taxes, gross receipts taxes, property taxes, licenses, employee and employer
withholding and unemployment taxes and other non-income related taxes;
(iii) all liabilities or obligations, whether presently in existence
or arising after the date of this Agreement, in respect of accounts payable,
notes payable (including intercompany promissory notes and similar financing
arrangements) or similar obligations (whether or not billed or accrued) to
Seller Companies, except for amounts accrued by the HPG Business and not billed
by Seller Companies to the HPG Business as of the Closing Date in respect of
accounts payable, notes payable or similar obligations relating to specific
services provided to and specific expenses paid on behalf of the HPG Business by
Seller Companies;
(iv) all liabilities or obligations, whether presently in existence
or arising after the date of the Agreement, relating to fees, commissions or
expenses owed to any broker, finder, investment banker, accountant, attorney or
other intermediary or advisor employed by Seller Companies in connection with
the Contemplated Transactions;
(v) all liabilities or obligations retained by Seller pursuant to
Exhibit D;
(vi) all liabilities or obligations related to Excluded Assets and
not otherwise included in the Assumed Liabilities by express provision of this
Agreement;
(vii) all liabilities or obligations related to claims of
manufacturer or design defects with respect to any products sold or service
provided by the HPG Business prior to, on or after the Closing Date, including
liabilities and obligations in respect of investigations regarding product
safety, product recall and related matters, to the extent but only to the extent
relating to products manufactured or sold prior to the Closing Date or any
product in the finished goods inventory of Seller Companies as of the close of
business on the day preceding the Closing Date;
(viii) all Environmental Liabilities, whether arising prior to, on
or after the Closing Date, to the extent arising out of actions taken prior to
the Closing Date, (1) relating to the disposal by Seller Companies or any of
their predecessors or respective agents prior to Closing of Hazardous Substances
at any location that at the time of such disposal were not owned or leased
<PAGE> 44
Page 44
by a Seller Company or any of its predecessors, it being understood and agreed
that the migration of Hazardous Substances in soil or groundwater from a
facility included in the Transferred Assets to surrounding properties shall not
be considered a disposal of Hazardous Substances, or (2) relating to or arising
out of conditions at, or the current or former operations at, any facilities
other than the Queretaro Property;
(ix) all Environmental Liabilities, whether arising prior to, on or
after the Closing Date, relating to the operations at the Asheboro Property or
Kuantan Facility prior to the Closing Date;
(x) all liabilities or obligations, whether presently existing or
arising after the date of this Agreement, relating directly or indirectly to (i)
the home security alarm systems and related products (including, but not limited
to, digital dialers) business previously conducted by Seller Companies, and (ii)
the Agreement of Sale dated August 1, 1991, by and between Black & Decker
Monitoring Services, Inc., Black & Decker (U.S.) Inc. and Monital Signal
Corporation; and
(xi) all liabilities or obligations relating directly or indirectly
to the litigation titled Emerson Electric Co. v. Black & Decker Inc. pending in
the United States District Court for the Southern District of New York.
"Financial Support Arrangements" means the agreements listed in Schedule
B.10 as "Financial Support Arrangements."
"GAAP" means Generally Accepted Accounting Principles as in effect on the
date of the Agreement, consistently applied.
"GE Intellectual Property" means the Intellectual Property identified as
such on Table 2 in Attachment XII.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Hazardous Substances" means (i) substances defined as "hazardous
substances," "hazardous materials" or "hazardous waste" pursuant to The
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or The Resource Conservation and Recovery Act of 1976, as amended, (ii)
substances defined as "hazardous wastes" in the regulations adopted and
publications promulgated pursuant to any of said laws, (iii) substances defined
as "toxic substances" in The Toxic Substances Control Act, as amended, and (iv)
petroleum, its derivatives and petroleum products, and asbestos and asbestos
containing materials.
"HPG Business" means (i) the household products business as presently
conducted by Seller Companies involving the manufacturing, marketing or sale in
the Designated Countries of the Designated Products, (ii) the manufacturing or
sale of Designated Products (or components thereof) at the Kuantan Facility and
(iii) the purchase or sourcing of Designated Products (or components thereof)
for import and sale by Seller Companies into the Designated Countries.
"HPG Financial Statements" means the special-purpose financial statements
attached in
<PAGE> 45
Page 45
Attachment I and Attachment XIV to this Agreement.
"HPG Leases" means the real property leases listed on Schedule B.07(d)
relating to the facilities used exclusively by the HPG Business, and any other
real property leases entered into after the date of this Agreement and on or
prior to the Closing Date with the consent of Buyer, exclusively for the benefit
of the HPG Business, as the same may be amended and supplemented from time to
time, including the interests of Seller Companies in any related fixtures,
improvements and personal property located therein.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Intellectual Property" means all patents, copyrights, technology,
know-how, processes, trade secrets, inventions, proprietary data, formulae,
research and development data and computer software programs; all trademarks,
trade names, service marks and service names; all registrations, applications,
recordings, licenses and common-law rights relating thereto, all rights to sue
at law or in equity for any infringement or other impairment thereto, including
the right to receive all proceeds and damages therefrom, and all rights to
obtain renewals, continuations, divisions or other extensions of legal
protections pertaining thereto; and all other United States, state and foreign
intellectual property owned by Seller Companies on the Closing Date.
"Intellectual Property Assignment Agreements" means the Assignment of
United States Trademarks, Trademark Registrations and Applications for
Registration, the Assignment of Foreign Trademarks, Trademark Registrations and
Applications for Registration, the Assignment of United States Patents and
Patent Applications, the Assignment of Foreign Patents and Application for
Patents, the Assignment of U.S. Copyrights, and the Assignment of Mexican
Trademarks, Trademark Registrations and Applications for Registration, in the
forms contemplated by Attachments III, IV, V, VI, VIII and IX to this Agreement,
and such other assignment agreements as Buyer may reasonably request in order to
effect the change of title to the Intellectual Property contemplated by such
Attachments.
"Inventory" means all items of inventory notwithstanding how classified in
the financial records of Seller Companies, including all raw materials,
work-in-process, finished goods, reconditioned products and to be reconditioned
products.
"Kuantan Facility" means the manufacturing facility located at Lot 109A,
KWS. Perinbustrain Gebeng, P.O. Box 6, Kuantan, Pahang 26080, Malaysia.
"Licensed Software" shall mean any software used by and material to the
operation of the HPG Business that constitutes Transferred Assets, which
software constitutes "off-the-shelf" software or is licensed by Seller Companies
pursuant to a Contract.
"Lien" means, with respect to any asset, any mortgage, lien, claim,
pledge, charge, security interest or other encumbrance of any kind in respect of
such asset.
"Material Adverse Effect" means (i) with respect to the HPG Business, a
material adverse effect on the assets, properties, business, financial condition
or results of operations of the HPG Business taken as a whole, or (ii) with
respect to any other Person, a material adverse effect on the assets,
properties, business, financial condition or results of operations of such
Person and its Subsidiaries taken as a whole.
<PAGE> 46
Page 46
"Net Tangible Assets" means (i) all Transferred Assets, minus (ii) all
Assumed Liabilities, calculated in accordance with the practices and policies
that were employed in the preparation of the Opening Statement, determined, in
each case, consistent with the Opening Statement and the notes thereto, except
as provided in Note E thereto.
"Net Working Capital" means (i) Net Tangible Assets, minus (ii) real
property, equipment and capitalized software, other fixed assets and all other
non-current assets, plus (iii) all non- current liabilities of the HPG Business,
calculated in accordance with the practices and policies that were employed in
the preparation of the Opening Statement, determined, in each case, consistent
with the Opening Statement and the notes thereto, except as provided in Note E
thereto.
"Non US Benefit Arrangements" means Benefit Arrangements in respect of Non
US Transferred Employees.
"Non US Transferred Employees" means Transferred Employees who are not US
Transferred Employees.
"Opening Statement" means the "Base Business" column of the
special-purpose combining statement of net assets of the HPG Business at March
29, 1998, together with the notes thereto, as included in the Other Financial
Information section of Attachment I to this Agreement.
"Owned Software" shall mean software used by and material to the operation
of the HPG Business that constitutes Transferred Assets that has been designed
and developed by Seller Companies separate from any Licensed Software as set
forth and described on Schedule B.19.
"Permitted Liens" means any of the following:
(i) Liens for Taxes that (x) are not yet due or delinquent or (y)
are being contested in good faith by appropriate proceedings;
(ii) statutory Liens or landlords', carriers', warehousemen's,
mechanic's, suppliers', materialmen's or other like Liens arising in the
ordinary course of business with respect to amounts not yet overdue for a period
of 60 days or amounts being contested in good faith by appropriate proceedings;
(iii) easements, rights of way, restrictions and other similar
charges or encumbrances on real property interests, that, individually or in the
aggregate, do not materially interfere with the ordinary course of operation of
the HPG Business or the use of any such real property for its current uses;
(iv) with respect to real property, title defects or irregularities
that do not in the aggregate materially impair the value of or the use of such
real property for its current use;
(v) rights and licenses granted to others in Intellectual Property
that have been disclosed to Buyer prior to Buyer's execution of this Agreement,
that are not material to the HPG Business taken as a whole or that have no
effect upon the Transferred Assets;
(vi) with respect to any of the HPG Leases where any Seller Company
is a lessee, any Lien affecting the interest of the landlord thereunder;
<PAGE> 47
Page 47
(vii) with respect to the Queretaro Property, the encroachment of a
structure from the neighboring facility across a shared property line,
approximately eight meters into the Queretaro Property;
(viii) a lease of approximately 750 square feet of space at the
Queretaro Property to BanaMex, which operates an automated teller machine and
office for the use of the employees at the Queretaro Property; and
(ix) Encumbrances disclosed in the Disclosure Schedule or taken into
account in the Opening Statement.
"Person" means an individual, a corporation, a general partnership, a
limited partnership, a limited liability company, limited liability partnership,
an association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Queretaro Property" means the property located at Accesco III SIN,
Fracc., Industrial Benito Juarez, Queretaro, QRO. 76130, Mexico.
"Remedial Action(s)" means the investigation, clean-up or remediation of
environmental contamination or damage caused by, related to or arising from the
generation, use, handling, treatment, storage, transportation, disposal,
discharge, release, or emission of Hazardous Substances, including, without
limitation, investigations, response, removal and remedial actions under The
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, corrective action under The Resource Conservation and Recovery Act of
1976, as amended, and clean-up requirements under similar state Environmental
Laws.
"Representatives" means (i) with respect to Buyer, any of the
"Representatives" as defined in the Confidentiality Agreement and (ii) with
respect to Seller, each of its respective directors, officers, advisors,
attorneys, accountants, employees or agents.
"Seller Companies" means Seller and its Subsidiaries.
"Services Agreements" means the Services Agreement (United States and
Canada), Services Agreement (GPA), Services Agreement (Mexico), Services
Agreement (Latin American Group and CCA), Services Agreement (Colombia),
Services Agreement (Chile), Services Agreement (Peru), Services Agreement
(Argentina), Services Agreement (Puerto Rico) and Services Agreement
(Venezuela), in the forms contemplated by Attachments XVIII, XIX, XX, XXI, XXII,
XXIII, XXIV, XXV, XXVI and XXVII to this Agreement, as the same may be amended
from time to time.
"Subsidiary" as it relates to any Person, shall mean with respect to any
Person, any corporation, partnership, joint venture or other legal entity of
which such Person, either directly or through or together with any other
Subsidiary of such Person, owns more than 50% of the voting power in the
election of directors or their equivalents, other than as affected by events of
default.
"Tax Authority" shall mean a foreign or United States federal, state or
local Governmental Authority having jurisdiction over the assessment,
determination, collection or imposition of any Tax, as the context requires.
"Tax Returns" means all returns (including information returns),
declarations, reports,
<PAGE> 48
Page 48
estimates and statements regarding Taxes, required to be filed with any Tax
Authority.
"Taxes" means all taxes, charges, fees, levies or other assessments,
including without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, estimated, severance, stamp, occupation, property
or other taxes, customs, duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any Tax Authority.
"Transaction Documents" means this Agreement, the Assignment and
Assumption Agreements, the Services Agreements, the Intellectual Property
Assignment Agreements, the Cross License Agreement, the Trademark License
Agreement, the Distribution Services Agreement (United States), and the
Distribution Services Agreement (Latin America), and any exhibits or attachments
to any of the foregoing, as the same may be amended from time to time.
"Transferred Assets" means, other than Excluded Assets, all of the assets,
properties, rights, licenses, permits, Contracts, causes of action and business
of every kind and description as the same now exist (except to the extent
transferred in the ordinary course consistent with past practices prior to the
Closing Date) or exists on the Closing Date, wherever located, real, personal or
mixed, tangible or intangible, owned by, leased by or in the possession of
Seller or any Affiliated Transferor, whether or not reflected in the books and
records thereof, and held or used exclusively in the conduct of the HPG Business
as the same now exist (except to the extent transferred in the ordinary course
consistent with past practices prior to the Closing Date) or exists on the
Closing Date, and all assets of the HPG Business acquired by any Seller Company,
on or prior to the Closing Date and not disposed of prior to the Closing Date in
accordance with this Agreement, and including, without limitation, except as
otherwise specified herein, all direct or indirect right, title and interest of
Seller or any Affiliated Transferor in, to and under:
(i) the Queretaro Property, together with all buildings, fixtures,
easements, rights of way, and improvements thereon and appurtenances thereto to
the extent relating to the HPG Business;
(ii) the rights and interests of Seller Companies under the HPG
Leases;
(iii) all personal property and interests therein (other than
Intellectual Property and other than that located at the Kuantan Facility),
including machinery, equipment, furniture, office equipment, communications
equipment, vehicles, storage tanks, spare and replacement parts, fuel and other
tangible property (and interests in any of the foregoing) owned by any Seller
Company that are used exclusively in connection with the HPG Business;
(iv) all Inventory that is owned by Seller Companies and held for
sale, use or consumption exclusively in the HPG Business;
(v) all Contracts; provided, however that the license of the
Spacemaker(R) trademark shall be limited to the Designated Countries;
(vi) all accounts, accounts receivable and notes receivable whether
or not billed, accrued or otherwise recognized in the Opening Statement or taken
into account in the determination of the Final Net Tangible Asset Amount,
together with any unpaid interest or fees accrued thereon or other amounts due
with respect thereto of Seller Companies that relate
<PAGE> 49
Page 49
exclusively to the HPG Business, and any security or collateral for any of the
foregoing;
(vii) all expenses that have been prepaid by Seller Companies
relating exclusively to the operation of the HPG Business, including but not
limited to ad valorem Taxes, lease and rental payments;
(viii) all of Seller's or any of Seller Companies' rights, claims,
credits, causes of action or rights of set-off against Persons other than Seller
Companies relating exclusively to the HPG Business or the Transferred Assets,
including, without limitation, unliquidated rights under manufacturers' and
vendors' warranties;
(ix) all Intellectual Property (other than Intellectual Property
constituting an Excluded Asset) used or held for use exclusively in the HPG
Business, including the goodwill of the HPG Business symbolized thereby, it
being understood and agreed that the only Intellectual Property deemed used or
held for use exclusively in the HPG Business that is registered or as to which
an application for registration is pending is listed as "Transferred Assets" on
Attachment XII;
(x) all transferable franchises, licenses, permits or other
governmental authorizations owned by, or granted to, or held or used by, Seller
Companies and exclusively related to the HPG Business;
(xi) except to the extent a Seller Company is required to retain the
originals pursuant to any Applicable Law (in which case copies will be provided
to Buyer), all business books, records, files and papers, whether in hard copy
or computer format, of a Seller Company used exclusively in the HPG Business,
including, without limitation, books of account, invoices, engineering
information, sales and promotional literature, trademark and service mark legal
files, other legal files, archival materials comprising historical advertising
and sales information relating to Transferred Assets and Designated Products,
manuals and data, sales and purchase correspondence, lists of present and former
suppliers, lists of present and former customers, personnel and employment
records of present or former employees, documentation developed or used for
accounting, marketing, engineering, manufacturing, or any other purpose relating
to the conduct of the HPG Business at any time prior to the Closing, except to
the extent relating to Excluded Liabilities;
(xii) the right to represent to third parties that Buyer is the
successor to the HPG Business;
(xiii) all insurance proceeds (except to the extent relating to
Excluded Assets or Excluded Liabilities or to the extent relating to or arising
out of Environmental Insurance Claims), net of any retrospective premiums,
deductibles, retention or similar amounts, arising out of or related to damage,
destruction or loss of any property or asset of or used exclusively in
connection with the HPG Business to the extent of any damage or destruction that
remains unrepaired, or to the extent any property or asset remains unreplaced at
the Closing Date;
(xiv) the equipment in the Kuantan Facility listed on Schedule A,
which assets shall be included in the calculation of the Final Net Tangible
Asset Amount; and
(xv) accounts receivable and prepaid expenses relating to Cleaning
and Lighting Products in the United States (except for the operations located in
Miami, Florida) and Canada.
<PAGE> 50
Page 50
"US Benefit Arrangements" means Benefit Arrangements in respect of US
Transferred Employees.
"US Transferred Employees" means Transferred Employees employed by the HPG
Business in the United States.
"WARN" means the Worker Adjustment Retraining and Notification Act, as
amended.
(b) "To the knowledge," "known by" or "known" (and any similar phrase)
means (i) with respect to Seller, to the knowledge of any of the Chief Financial
Officer, the General Counsel, the Treasurer or the Controller of Seller, or the
President of the HPG Business, and shall be deemed to include a representation
that a reasonable investigation or inquiry of the subject matter thereof has
been made of such individuals, (ii) with respect to Buyer, to the knowledge of
the President, Chief Financial Officer, the General Counsel, the Treasurer or
the Controller of Buyer, and shall be deemed to include a representation that a
reasonable investigation or inquiry of the subject matter thereof has been made
of such individuals.
(c) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Active Employee.....................................................D.01
Adjusted Purchase Price.............................................2.02
Agreement.......................................................Preamble
Buyer...........................................................Preamble
Buyer Companies.................................................Preamble
Buyer's Mexico Plan.................................................D.13
Buyer's Pension Plan................................................D.07
Closing.............................................................2.03
Closing Net Working Capital Amount..................................2.04
Competing Business..................................................5.06
CSA.................................................................E.05
Encumbrances........................................................ A
Environmental Insurance Claims......................................7.06
Exchange Consideration..............................................2.02
Fifth Anniversary Date..............................................5.06
Final Net Tangible Asset Amount.....................................2.04
Final Net Working Capital Change Amount.............................2.04
Indemnified Claim..................................................10.03
Indemnified Party..................................................10.03
Indemnifying Party.................................................10.03
Insurance Liabilities...............................................6.03
June 28 Net Working Capital Amount..................................2.04
Leased Real Property................................................B.07
Net Working Capital Adjustment Amount...............................2.04
Owned Real Property.................................................B.07
PBGC................................................................B.18
Period One..........................................................5.06
Proceedings........................................................ A
Proposed Final Net Tangible Asset Amount............................2.04
<PAGE> 51
Page 51
Proposed Net Working Capital Change Amount..........................2.04
Referee............................................................10.03
Remaining Recovery..................................................7.06
Seller..........................................................Preamble
Seller's Canada Plan................................................D.15
Seller's Mexico Plan................................................D.13
Seller's Pension Plan...............................................D.07
Seller's Puerto Rico Plan...........................................D.14
Seller's Savings Plan...............................................D.08
Successor Canada Plan...............................................D.15
Successor Puerto Rico Plan..........................................D.14
Successor Savings Plan..............................................D.08
Surviving Representations or Covenants.............................10.01
Third Party Claim..................................................10.03
Transferred Employees...............................................D.01
UL..................................................................E.05
Year 2000 Compliant.................................................B.19
<PAGE> 52
Page 52
EXHIBIT B
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants prior to Buyer, that:
B.01 Corporate Existence and Power. Each of Seller and each Affiliated
Transferor is a corporation duly incorporated, validly existing and in good
standing under the laws of the state or jurisdiction of its incorporation and
has all corporate powers, and has all governmental licenses, authorizations,
consents and approvals required to carry on the HPG Business as now conducted,
except where the failure to have such licenses, authorizations, consents and
approvals has not had, and could not reasonably be expected to have, a Material
Adverse Effect on the HPG Business. Each of Seller and each Affiliated
Transferor, as the case may be, is duly qualified to do business as a foreign
corporation in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities make such qualification necessary
to carry on the HPG Business as now conducted, except where the failure to be so
qualified has not had, and could not reasonably be expected to have, a Material
Adverse Effect on the HPG Business.
B.02 Corporate Authorization. The execution, delivery and performance by
Seller of each of the Transaction Documents to which it is a party and the
consummation by Seller of the Contemplated Transactions are within its corporate
powers and have been duly authorized by all necessary corporate action on its
part. The execution, delivery and performance by Seller Companies other than
Seller of the Transaction Documents to which a Seller Company other than Seller
is a party and the consummation by such Seller Company of the Contemplated
Transactions are within such Seller Company's corporate powers and as of Closing
will have been duly authorized by all necessary corporate action on its part.
Each of the Transaction Documents to which it is a party constitutes or will
constitute at Closing a legal, valid and binding agreement of the applicable
Seller Company, enforceable against it in accordance with its terms (i) except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally, including the effect of
statutory and other laws regarding fraudulent conveyances and preferential
transfers and (ii) subject to the limitations imposed by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
B.03 Governmental Authorization. The execution, delivery and performance
by each Seller Company of the Transaction Documents to which it is a party
require no action by or in respect of, or consent or approval of, or filing
with, any Governmental Authority other than:
(i) compliance with any applicable requirements of the HSR
Act;
(ii) actions, consents, approvals or filings set forth in
Schedule B.03 or otherwise expressly referred to in this Agreement; and
(iii) such other consents, approvals, authorizations, permits
and filings the failure to obtain or make would not have, in the
aggregate, a Material Adverse Effect on the HPG Business.
B.04 Non-Contravention. Except as set forth in Schedule B.04, the
execution, delivery
<PAGE> 53
Page 53
and performance by Seller or any Affiliated Transferor of the Transaction
Documents do not and will not (i)(A) contravene or conflict with the charter or
bylaws of Seller or any Affiliated Transferor, (B) assuming compliance with the
matters referred to in Section B.03, contravene or conflict with or constitute a
violation of any provisions of any Applicable Law binding upon Seller or any
Affiliated Transferor that is applicable to the HPG Business; (C) assuming
compliance with the matters referred to in Section B.03, constitute a default
under or give rise to any right of termination, cancellation or acceleration of,
or to a loss of any benefit relating exclusively to the HPG Business to which
Seller or any Affiliated Transferor is entitled under, any Contract binding upon
Seller or any Affiliated Transferor and relating exclusively to the HPG Business
or by which any of the Transferred Assets is or may be bound or any license,
franchise, permit or similar authorization held by Seller or any Affiliated
Transferor relating exclusively to the HPG Business except, in the case of
clauses (B) and (C), for any such contravention, conflict, violation, default,
termination, cancellation, acceleration or loss that could not reasonably be
expected to have a Material Adverse Effect on the HPG Business or (ii) result in
the creation or imposition of any Lien on any transferred Asset, other than
Permitted Liens.
B.05 Financial Statements.
(a) The Opening Statement is presented fairly, in all material
respects, and in conformity with GAAP (except as set forth in the notes thereto)
applied on a basis consistent in all material respects with the manner in which
the HPG Business reported as of December 31, 1997 its financial position for
inclusion in the audited consolidated financial statements of Seller.
(b) The HPG Financial Statements present fairly, in all material
respects, the financial position and results of operations at the dates and for
the periods set forth therein, in conformity with GAAP (except as set forth in
the notes thereto).
B.06 Absence of Certain Changes. Except for matters that would be
permitted in accordance with Section 5.01 if they occurred after the date of
this Agreement or as set forth in Schedule B.06, from March 30, 1998 to the date
of this Agreement, there has not been any material adverse change in the
business, financial condition or results of operations of the HPG Business and
there has not been:
(a) any event or occurrence that has had a Material Adverse Effect
on the HPG Business;
(b) any damage, destruction or other casualty loss affecting the HPG
Business or any assets that would constitute Transferred Assets if owned, held
or used by Seller or any of the Affiliated Transferors on the Closing Date that
has had a Material Adverse Effect on the HPG Business;
(c) any transaction or commitment made, or any Contract entered
into, by Seller or any Affiliated Transferor relating primarily to the HPG
Business or any assets that would constitute Transferred Assets if owned, held
or used by Seller or any of the Affiliated Transferors on the Closing Date
(including the acquisition or disposition of any assets) or any termination or
amendment by Seller or any Affiliated Transferor of any Contract or other right
relating primarily to the HPG Business, in either case, material to the HPG
Business taken as a whole, other than transactions and commitments in the
ordinary course of business consistent with past practices and those
contemplated by this Agreement;
<PAGE> 54
Page 54
(d) any sale or other disposition of more than an aggregate of
$500,000 of assets (other than the sale of Inventory in the ordinary course of
business consistent with past practices, the sale of obsolete Inventory whether
or not in the ordinary course of business, any sale made in the ordinary course
of business and the sale of surplus equipment and materials arising out of or
relating to the closing of the Kuantan Facility) that would constitute
Transferred Assets if owned, held or used by any Seller Companies on the Closing
Date;
(e) any increase in the compensation of any current employee of the
HPG Business at a level of vice president or above, other than nondiscretionary
increases pursuant to Employee Plans or Benefit Arrangements disclosed in
Schedule B.18 or referenced in Exhibit D; and
(f) any cancellation, compromise, waiver or release by Seller or any
Affiliated Transferor of any claim or right (or a series of related rights and
claims) related to the HPG Business, other than cancellations, compromises,
waivers or releases in the ordinary course of business consistent with past
practices.
B.07 Sufficiency of and Title to the Transferred Assets.
(a) Except as set forth in Schedule B.07, the Transferred Assets,
together with the services to be provided to Buyer Companies pursuant to the
Services Agreements, the Distribution Services Agreement (United States) and the
Distribution Services Agreement (Latin America), and the Intellectual Property
to be licensed to Buyer pursuant to the Trademark License Agreement, and the
Cross License Agreement, and the subleases contemplated by Section 2.01,
constitute, and on the Closing Date will constitute, all of the assets and
services that are necessary or appropriate to permit the operation of the HPG
Business in substantially the same manner as such operations have heretofore
been conducted.
(b) Except as set forth in Schedule B.07, subject to the receipt of
any consents or approvals of any other Person, upon consummation of the
Contemplated Transactions, Buyer will have acquired good and marketable title in
and to, or a valid leasehold interest in, each of the Transferred Assets (except
for the Intellectual Property as to which no representation is made in this
Section B.07), free and clear of all Liens, except for Permitted Liens. Except
as set forth in Schedule B.07, subject to the receipt of any consents or
approvals of any other Person set forth in Schedules B.03 and B.04 or referenced
in Section B.03, upon consummation of the Contemplated Transactions, Buyer will
be in a position to operate the HPG Business in substantially the same manner as
operations have heretofore been conducted.
(c) Schedule B.07 includes a true and complete list of all real
property owned by Seller Companies (or real property which Seller Companies have
a right to acquire in connection with the operation of the HPG Business) which
is included in the Transferred Assets (collectively, the "Owned Real Property").
Schedule B.07 sets forth (i) the address of each parcel of Owned Real Property
and (ii) the owner of such Owned Real Property.
(d) Schedule B.07 includes a true and complete list of all
agreements (together with any amendments thereof) pursuant to which Seller
Companies lease, sublease or otherwise occupy (whether as landlord, tenant,
subtenant or other occupancy arrangement) any real property used in the HPG
Business (collectively, the "Leased Real Property"). Schedule B.07 sets forth
(i) the address of each parcel of Leased Real Property and (ii) the owner of the
leasehold, subleasehold or occupancy interest for each Leased Real Property.
<PAGE> 55
Page 55
B.08 No Undisclosed Liabilities. There are no liabilities of Seller or any
Affiliated Transferor relating to the HPG Business that constitute Assumed
Liabilities of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than:
(a) liabilities disclosed in or provided for in the Opening
Statement and liabilities for matters taken into account in the determination of
the Final Net Tangible Asset Amount;
(b) liabilities (i) disclosed in Schedule B.08, (ii) related to any
contract, agreement, lease, license, commitment, sales or purchase order or
other undertaking or matter disclosed in the Disclosure Schedules or (iii)
related to any Employee Plan or Benefit Arrangements identified in Exhibit D or
disclosed in Schedule B.18; and
(c) liabilities incurred in the ordinary course of business
consistent with past practices since March 29, 1998.
B.09 Litigation. Except as set forth in Schedule B.09, there is no action,
suit, investigation or proceeding pending against, or to the knowledge of
Seller, threatened against or affecting, the HPG Business or any Transferred
Asset before any Governmental Authority that could reasonably be expected to
have a Material Adverse Effect on the HPG Business.
B.10 Material Contracts.
(a) Except as set forth in Schedule B.10 and except for Contracts
that do not constitute Assumed Liabilities, Seller Companies, with respect to
the HPG Business, are not parties to or otherwise bound by or subject to:
(i) any written employment, severance, consulting or sales
representative Contract which contains an obligation (excluding
commissions) to pay more than $100,000 per year and constitutes an Assumed
Liability;
(ii) any Contract containing any covenant limiting the freedom
of Seller Companies, with respect of the HPG Business or the operations of
the HPG Business, to engage in any line of business or compete with any
Person in any geographic area in any material respect if such Contract
will be binding on Buyer Companies after the Closing;
(iii) any Contract in effect on the date of this Agreement
relating to the disposition or acquisition of the assets of, or any
interest in, any business enterprise which relates to the HPG Business
other than in the ordinary course of business consistent with past
practices;
(iv) any Financial Support Arrangements;
(v) any indebtedness for borrowed money of the HPG Business
that would constitute an Assumed Liability if in existence on the Closing
Date, with a principal amount in excess of $500,000; or
(vi) any offset agreement entered into in connection with an
international sales transaction and relating to any Contract that imposes
on the HPG Business an obligation to perform that will continue in effect
on or after the Closing Date.
<PAGE> 56
Page 56
(b) Except as disclosed in Schedule B.10, each Contract disclosed in
Schedule B.10 is a legal, valid and binding obligation of Seller (or the
applicable Affiliated Transferor) enforceable against Seller (or the applicable
Affiliated Transferor) in accordance with its terms (except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally, including the effect of statutory and other laws regarding fraudulent
conveyances and preferential transfers, and subject to the limitations imposed
by general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity), and Seller (or the applicable
Affiliated Transferor) is not in default and has not failed to perform any
obligation thereunder, and, to the knowledge of Seller, there does not exist any
event, condition or omission which would constitute a breach or default (whether
by lapse of time or notice or both) by any other Person. As of the date of this
Agreement, Seller has not received any notification from any other Person party
to any of the Contracts disclosed in Schedule B.10 of a claim of default by
Seller.
B.11 Licenses and Permits. To the knowledge of Seller, except as set forth
in Schedule B.11, Seller (or the appropriate Affiliated Transferor) has all
licenses, franchises, permits and other similar authorizations affecting, or
relating in any way to, the HPG Business required by law to be obtained by
Seller (or the appropriate Affiliated Transferor) to permit Seller to conduct
the HPG Business in substantially the same manner as the HPG Business has
heretofore been conducted.
B.12 Finders' Fees. Except for Goldman, Sachs & Co., whose fees will be
paid by Seller, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Seller who might be entitled to any fee or commission from Seller or Buyer or
any of their Affiliates upon consummation of the Contemplated Transactions.
B.13 Environmental Compliance. Except as disclosed in Schedule B.13 and
except as reserved against or referred to in the Opening Statement, to the
knowledge of Seller the HPG Business is and has been in substantial compliance
with all applicable Environmental Laws, and has obtained all permits, licenses
and other authorizations that are required under applicable Environmental Laws,
except where the failure to be in compliance or to have obtained all material
permits, licenses and other authorizations has not had, and cannot reasonably be
expected to have, a Material Adverse Effect on the HPG Business. Except as set
forth in Schedule B.13 and except as reserved against or referred to in the
Opening Statement, to the knowledge of Seller (i) the HPG Business is and has
been in material compliance with the terms and conditions under which the
permits, licenses and other authorizations referenced in the preceding sentence
were issued or granted, (ii) Seller Companies hold all permits required by
Environmental Laws that are necessary and appropriate to conduct the HPG
Business as presently conducted in all material respects and to operate the
Transferred Assets and the Asheboro Property in all material respects as they
are presently operated; (iii) no suspension, cancellation or termination of any
permit referred to in clause (ii) is pending or threatened; (iv) Seller has not
received written notice of any material Environmental Claim relating to or
affecting the HPG Business or the Transferred Assets, and there is no such
threatened Environmental Claim; (v) Seller, in connection with the HPG Business
or the Transferred Assets, has not entered into, agreed in writing to, or is
subject to any judgment, decree, order or other similar requirement of any
Governmental Authority under any Environmental Laws; and (vi) no event has
occurred and no circumstance exists that is reasonably likely to give rise to or
serve as a basis for any Environmental Liability; except in the case of clauses
(i) through (vi) where such failure, event or other circumstance has not had,
and cannot reasonably be expected to have, a Material Adverse Effect on the HPG
Business.
<PAGE> 57
Page 57
B.14 Compliance with Laws. Except as set forth in Schedule B.14, for
violations or infringements of Environmental Laws, and for violations or
infringements that have not had, and may not reasonably be expected to have, a
Material Adverse Effect on the HPG Business, to the knowledge of Seller the
operation of the HPG Business and condition of the Transferred Assets have not
violated or infringed, and do not violate or infringe, in any respect any
Applicable Law or any order, writ, injunction or decree of any Governmental
Authority.
B.15 Intellectual Property. With respect to Intellectual Property that
constitute Transferred Assets, except as set forth in Schedule B.15:
(a) Seller (or an Affiliated Transferor) owns, free and clear of all
Liens other than Permitted Liens, and subject to any licenses disclosed in
Schedule B.15 or that in the aggregate are not material to the HPG Business as a
whole granted by Seller Companies prior to the Closing Date, all right, title
and interest in such Intellectual Property;
(b) the use of such Intellectual Property in connection with the
operation of the HPG Business as conducted during the past three years does not
conflict with, infringe upon or violate the intellectual property rights of any
other Persons;
(c) Seller (or an Affiliated Transferor) has the right to use all
such Intellectual Property used by the HPG Business and necessary for the
continued operation of the HPG Business in the same manner as its operations
have been conducted during the past three years and the list of such
Intellectual Property comprising patents, patent applications, trademark and/or
service mark registrations and applications that is included in Table 1 of
Attachment XII sets forth a complete and accurate list of all such Intellectual
Property that constitutes Transferred Assets;
(d) Seller (or an Affiliated Transferor) is the owner of record of
the pending patent applications and issued patents and of the applications or
issued registrations for trademarks and service marks comprising Intellectual
Property included in Table 1 of Attachment XII in each country or state of
application or registration, and each trademark or service mark and each issued
patent constituting such Intellectual Property is subsisting and in full force
and effect;
(e) Upon the consummation of the Closing hereunder, (i) Buyer will
be vested with all of Seller's (or the Affiliated Transferors') rights, title
and interest in, and Seller's (or the Affiliated Transferors') rights and
authority to use in connection with the HPG Business, all of the Intellectual
Property that constitute Transferred Assets and (ii) such Intellectual Property,
together with the Intellectual Property licensed to Buyer in accordance with the
Cross License Agreement and Trademark License Agreement and any other interests
in Intellectual Property transferred hereunder will collectively constitute such
rights and interests in Intellectual Property which are necessary for the
continued operation of the HPG Business as a whole in the same manner as its
operations have heretofore been conducted during the past three years; and
(f) Notwithstanding the provisions of this Section B.15, Seller
makes no representation or warranty, and no such representation or warranty
shall be implied, that any of such Intellectual Property included in Table 1 of
Attachment XII not constituting a trademark or service mark is valid or
enforceable.
B.16 Taxes.
<PAGE> 58
Page 58
(a) Except as set forth in Schedule B.16, Seller and each Affiliated
Transferor has exercised reasonable care in the preparation of, and has duly and
timely filed, all applicable Tax Returns with respect to all Taxes required to
be filed to the date hereof and, as of the Closing Date will have exercised
reasonable care in the preparation of, and will have timely filed, all
applicable Tax Returns with respect to Taxes required to have been filed to the
Closing Date, except for Taxes relating to periods that close on or before the
Closing Date that under Applicable Law are not obligations of Buyer Companies.
Except as set forth in Schedule B.16, all Taxes shown on the Tax Returns or
pursuant to any declarations or assessments received by Seller and each
Affiliated Transferor (including estimated Taxes) have been duly and timely
paid, except for Taxes relating to periods that close on or before the Closing
Date that under Applicable Law are not obligations of Buyer Companies, and no
such Taxes have created a Lien (other than a Permitted Lien) against or impair
the ability to transfer the Transferred Assets to Buyer Companies free and clear
of any Lien (other than a Permitted Lien) in accordance with the terms of this
Agreement. Except as set forth in Schedule B.16, all such Tax Returns are true,
correct and complete, except for Taxes relating to periods that close on or
before the Closing Date that under Applicable Law are not obligations of Buyer
Companies. Except as set forth in Schedule B.16, there exists no Tax deficiency
or unpaid Tax assessed or proposed by any Governmental Authority against Seller
or any Affiliated Transferor, except for Taxes relating to periods that close on
or before the Closing Date that under Applicable Law are not obligations of
Buyer Companies.
(b) As of the date of this Agreement, Schedule B.16 contains a list
of all states and other jurisdictions where Seller Companies have filed Tax
Returns during the past three years with respect to Transferred Assets.
(c) None of the Assumed Liabilities is or may be an obligation to
make (i) a payment that will not be deductible by Buyer Companies under Code
section 280G; or (ii) a payment under any tax allocation or tax sharing
agreement or in respect of any liability for the Taxes of any Person under
Treasury regulation section 1.1502-6 (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract, or otherwise.
(d) None of the Transferred Assets consists of stock in any
corporation (whether or not it currently holds any assets) that is or has been a
member of any consolidated, combined, unitary or other similar group in respect
of any Taxes.
B.17 Insurance. Schedule B.17 contains a correct and complete list of all
material policies of insurance held by any Seller Companies that are in effect
on the date of this Agreement or in calendar years 1997 or 1996 and that insure
the HPG Business. Schedule B.17 contains an accurate and complete description of
any provision contained in said policies which provides for retrospective or
retroactive premium adjustment. None of the insurance carriers listed in
Schedule B.17 are related to or affiliated with Seller, other than Shenandoah
Insurance, Inc. Seller has not received notice or any other indication from any
insurer or agent (other than Shenandoah Insurance, Inc.) of any intent to cancel
or not to renew any of the insurance policies listed in Schedule B.17, except
for cancellations or failures to renew that will occur as a result of the
Closing. No Seller Company has been refused any insurance, nor has any Seller
Company's coverage been limited by any insurance carrier to which it has applied
for insurance or with which it has carried insurance during the last five years,
except as limited by insurance carrier's internal policy regarding maximum
coverage and limits.
B.18 Employee Benefit Matters.
<PAGE> 59
Page 59
(a) Schedule B.18 lists each Employee Plan or material Benefit
Arrangement (other than Benefit Arrangements as to which Buyer has no
obligations hereunder) which covers Transferred Employees and each collective
bargaining agreement covering Transferred Employees.
(b) Except as set forth in Schedule B.18, with respect to the HPG
Business:
(i) neither Seller nor any member of its "Controlled Group"
(defined as any organization which is a member of a controlled group of
organizations within the meaning of Code Sections 414(b), (c), (m) or (o))
has ever contributed to or had any liability to a multi-employer plan, as
defined in Section 3(37) of ERISA, which could reasonably be expected to
have a Material Adverse Effect on the HPG Business;
(ii) no fiduciary of any funded Employee Plan has engaged in a
nonexempt "prohibited transaction" (as that term is defined in Section
4975 of the Code and Section 406 of ERISA) which could subject Buyer to a
penalty tax imposed by Section 4975 of the Code or Section 502(i) of
ERISA;
(iii) no Employee Plan that is subject to Section 412 of the
Code has incurred an "accumulated funding deficiency" within the meaning
of Section 412 of the Code, whether or not waived;
(iv) each Employee Plan and Benefit Arrangement has been
established and administered in all material respects in accordance with
its terms and in compliance with Applicable Law;
(v) no Employee Plan subject to Title IV of ERISA has incurred
any material liability under such title other than for the payment of
premiums to the Pension Benefit Guaranty Corporation ("PBGC"), all of
which to the knowledge of Seller have been paid when due;
(vi) no defined benefit Employee Plan has been terminated; nor
have there been any "reportable events" (as that term is defined in
Section 4043 of ERISA and the regulations thereunder), other than
reportable events arising directly from the Contemplated Transactions,
which would present a risk that an Employee Plan would be terminated by
the PBGC in a distress termination;
(vii) each Employee Plan intended to qualify under Section 401
of the Code has received a determination letter that it is so qualified
and no event has occurred with respect to any such Employee Plan which
could cause the loss of such qualification or exemption;
(viii) with respect to each Employee Plan listed in Schedule
B.18, Seller has made available to Buyer the most recent copy (where
applicable) of (1) the plan document; (2) the most recent determination
letter; (3) any summary plan description; and (4) Form 5500;
(ix) with respect to the Transferred Employees, there are no
post-retirement medical or health plans, dental plans, hospitalizations,
life insurance or other plans or arrangements in effect;
<PAGE> 60
Page 60
(x) there are no actions, claims or investigations pending or,
to the knowledge of Seller threatened, against any Employee Plan, Benefit
Arrangement, or any administrator, fiduciary or sponsor thereof with
respect to the HPG Business, other than benefit claims arising in the
normal course of operation of such Employee Plan or Benefit Arrangement;
and
(xi) except as otherwise expressly provided in Exhibit D, the
consummation of the Contemplated Transactions in and of themselves will
not entitle any individual to severance pay that is payable by Buyer
Companies, and will not accelerate the time of payment or vesting, or
increase the amount of any compensation or benefits due any Transferred
Employee to the extent such compensation or benefits are the
responsibility of any Buyer Companies.
B.19 Software Applications.
(a) Software Applications: Year 2000. All of the Owned and Licensed
Software has been considered in Year 2000 remediation plans developed by the HPG
Business. Except as otherwise set forth on Schedule B.19, Seller represents that
to its knowledge the Owned Software will operate without interruption and/or
malfunction due to the recognition and processing of dates on and beyond January
1, 2000, except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect on the HPG Business ("Year 2000
Compliant").
(b) Licensed Software. Seller's interest in Licensed Software
reflected by a Contract listed on Schedule B.19, subject to consents
contemplated by Schedule B.04 or Schedule B.19, is transferrable to Buyer.
(c) No Errors; Non-Conformity. The Owned Software is free from
defects in workmanship and materials, except for defects that could not
reasonably be expected to have a Material Adverse Effect on the HPG Business.
(d) No Bugs or Viruses. Seller has not knowingly altered its data to
create a bug or virus which would cause either the Owned or Licensed Software to
be fully dysfunctional, and there are no such bugs or viruses, except in either
case to the extent that such bugs or viruses could not reasonably be expected to
have a Material Adverse Effect on the HPG Business.
(e) Passthrough Warranties. Seller shall, to the extent permitted by
Applicable Law and the applicable manufacturer and supplier and provided that it
is at no cost to Seller, transfer to Buyer all manufacturers' and suppliers'
warranties for the Licensed Software, and the Seller shall, upon the Buyer's
reasonable request, execute such documentation reasonably acceptable to Seller
that is necessary to effectuate the transfer.
(f) Documentation. Seller has furnished Buyer, or will furnish upon
Buyer's request, copies of all documentation (End-User or otherwise) in its
possession relating to the use, maintenance and operation of the Owned Software.
B.20 Real Property. Except as otherwise set forth in Schedule B.20:
(a) Subject only to the permitted Liens, there are no leases,
tenancies or other occupancy agreements, either oral or written, which affect
the Queretaro Property, and Seller has exclusive possession of the Queretaro
Property;
<PAGE> 61
Page 61
(b) Seller has no notice or knowledge of: (i) any pending
improvement liens to be made by any Governmental Authority with respect to the
Queretaro Property; (ii) any violations of building codes and/or zoning
ordinances or other governmental regulations with respect to the Queretaro
Property; or (iii) any pending or threatened condemnation proceedings with
respect to the Queretaro Property;
(c) To Seller's knowledge, no fact or condition exists which would
result in the termination or impairment of access to the Queretaro Property or
the discontinuation of necessary sewer, water, electric, gas, telephone or other
utilities or services to the Queretaro Property;
(d) All of the structural elements, mechanical systems, utility
systems and roofs of the Queretaro Property are in good working order, ordinary
wear and tear and routine maintenance excepted;
(e) To Seller's knowledge, without independent investigation, all
improvements on the Queretaro Property were permitted, conforming structures
under applicable zoning and building laws and ordinances in effect when the
improvements were constructed and the present uses thereof are permitted,
conforming uses under applicable zoning and building laws and ordinances;
(f) All water, sewer, gas, electric, telephone, drainage and other
utility equipment and facilities necessary for the operation of the Queretaro
Property are installed and connected pursuant to valid permits, are adequate to
service the Queretaro Property and are in good operating condition;
(g) To Seller's knowledge, all requirements applicable to the
Queretaro Property imposed under zoning and building laws and ordinances adopted
subsequent to the construction of the improvements have been complied with to
the extent required by Applicable Law; and
(h) Seller is vested with good and marketable fee simple title to
the Queretaro Property subject only to the Permitted Liens. Without limiting the
generality of the foregoing, there are no so-called "ejido" rights encumbering
or otherwise affecting the Queretaro Property.
<PAGE> 62
Page 62
EXHIBIT C
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
C.01 Organization and Existence. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Florida and
has all corporate powers, and has all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except where the failure to have such licenses, authorizations, consents and
approvals has not had and may not reasonably be expected to have, a Material
Adverse Effect on Buyer. As of the Closing Date, Buyer will be duly qualified to
do business as a foreign corporation in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities (after giving
effect to the Contemplated Transactions) make such qualification necessary to
carry on its business as now conducted, except for those jurisdictions where
failure to be so qualified has not had, and may not reasonably be expected to
have, a Material Adverse Effect on Buyer.
C.02 Corporate Authorization. The execution, delivery and performance by
Buyer of the Transaction Documents and the consummation by Buyer of the
Contemplated Transactions are within the corporate powers of Buyer and have been
(or, prior to the Closing, will have been) duly authorized by all necessary
corporate action on the part of Buyer. Each of the Transaction Documents
constitutes a legal, valid and binding agreement of Buyer, enforceable against
Buyer in accordance with its terms (i) except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally, including the effect of statutory and other laws regarding
fraudulent conveyances and preferential transfers and (ii) subject to the
limitations imposed by general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity).
C.03 Governmental Authorization. Except as set forth on Schedule C.03, the
execution, delivery and performance by Buyer of the Transaction Documents
require no action by or in respect of, consents or approvals of, or filing with,
any governmental body, agency, official or authority other than compliance with
any applicable requirements of the HSR Act.
C.04 Non-Contravention. The execution, delivery and performance by Buyer
of the Transaction Documents do not and will not (i) contravene or conflict with
the charter or bylaws of Buyer, (ii) assuming compliance with the matters
referred to in Section C.03, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to Buyer, or (iii) constitute a default
under or give rise to any right of termination, cancellation or acceleration of
any right or obligation of Buyer or to a loss of any benefit to which Buyer is
entitled under any provision of any agreement, contract or other instrument
binding upon Buyer or any license, franchise, permit or other similar
authorization held by Buyer, except, in the case of clauses (ii) and (iii), for
any such contravention, conflict, violation, default, termination, cancellation,
acceleration or loss that could not reasonably be expected to have a Material
Adverse Effect on Buyer Companies taken as a whole.
C.05 Finders' Fees. Except for NationsBanc Montgomery Securities LLC,
whose fees will
<PAGE> 63
Page 63
be paid by Buyer, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Buyer who might be entitled to any fee or commission from Seller or Buyer (or
any of their Affiliates) upon consummation of the Contemplated Transactions.
C.06 Litigation. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Buyer, threatened against or affecting,
Buyer before any court or arbitrator or any Governmental Authority that in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
Contemplated Transactions.
C.07 Inspections. Buyer acknowledges that Seller has made no
representation or warranty as to the prospects, financial or otherwise, of the
HPG Business except as expressly set forth in the Transaction Documents. Buyer
agrees that it shall accept the Transferred Assets and the Assumed Liabilities
as they exist on the Closing Date based on Buyer's inspection, examination,
determination with respect thereto as to all matters, and without reliance upon
any express or implied representations or warranties of any nature, whether in
writing, orally or otherwise, made by or on behalf of or imputed to Seller,
except as expressly set forth in the Transaction Documents.
C.08 Financing. Buyer has available to it cash, marketable securities or
other investments, or presently available sources of credit, to enable it to
consummate the Contemplated Transactions.
<PAGE> 64
Page 64
EXHIBIT D
EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
I. Employees and Employment.
D.01 General. On the Closing Date, the employment of all Active Employees
of the HPG Business including employees based in the HPG Business' headquarters
in Shelton, Connecticut, employees based in the Asheboro Property, the Queretaro
Property and the Kuantan Facility, and the employees listed on Attachment XV,
shall be transferred to the Buyer Companies such that the employment of such
persons shall be considered continuous employment under Applicable Law. "Active
Employee" shall mean any individual who is actively employed by any Seller
Company in connection with the HPG Business or is on authorized leave of
absence, military service (without restriction) or lay-off with recall rights
(without restriction) with respect to the HPG Business and where applicable
shall include independent contractors. The Active Employees of the HPG Business
who are employed at any time on or after the Closing Date with any of the Buyer
Companies are herein collectively referred to as "Transferred Employees."
Subject to the terms and conditions of this Exhibit D, such employment shall be
at the same workplace and on substantially the same terms and conditions as
those under which such employees are currently employed by Seller Companies and
the employment of each Transferred Employee shall be continued by the Buyer
Companies for the maximum applicable termination notice period to which the
Seller Companies may be subject under Applicable Law as a result of the
Contemplated Transactions. From and after the Closing Date, except as otherwise
provided herein or in the Agreement, each Buyer Company employing a Transferred
Employee shall assume all obligations under any agreements, contracts or
Applicable Law relating to the terms and conditions of employment of such
Transferred Employees, and such Buyer Company shall be responsible for any
liability or obligations arising out of or pertaining to the termination of
employment of, hiring of or failure or refusal to hire any Transferred Employee.
D.02 Labor Agreements. The Buyer Companies agree to recognize the
applicable labor unions, collective bargaining representative, trade unions or
work councils representing any employees of the HPG Business as the exclusive
collective bargaining representatives of such employees with respect to wages,
hours, fringe and other terms and conditions of employment to the extent so
recognized by Seller Companies for all such employees who are within the
appropriate bargaining unit as determined by Applicable Law. The Buyer Companies
shall become successor employers under any labor or collective bargaining
agreements and agree to honor the terms of and to assume all obligations of the
Seller Companies under applicable existing collective bargaining agreements in
respect of such unionized Transferred Employees from and after the Closing Date
and all legal obligations arising from such recognition or assumption.
D.03 Recalled or Rehired Employees. Buyer Companies confirm that any
employees of the HPG Business that are laid off or on leave as of the Closing
Date and who are recalled or rehired by a Buyer Company or return from leave on
or after the Closing Date will be recalled or rehired or returned to employment
in compliance with any applicable agreements, contracts or Applicable Law and
will be accorded the benefits otherwise provided to Transferred Employees by the
Buyer Companies.
D.04 Negotiations with Employees or Employee Representatives. If and to
the extent that
<PAGE> 65
Page 65
any provisions of this Agreement are or may be subject to negotiation with
employees (including Transferred Employees), or applicable labor unions, trade
unions or work councils, by policy, contract, collective agreement or Applicable
Law, the Seller Companies and Buyer Companies shall cooperate fully in such
negotiations.
D.05 Termination and Plant Closing Notices; WARN. Seller shall provide any
notices to the Transferred Employees that may be required under any Applicable
Law, including but not limited to WARN or any similar state or local law, with
respect to events that occur prior to the Closing Date. Buyer shall provide any
such notices to Active Employees of the HPG Business with respect to events that
occur as a result of the Closing, and to Transferred Employees with respect to
events that occur on and after the Closing Date. Buyer shall not take any action
after the Closing that would cause any termination of employees by the Seller
Companies that occur on or before the Closing Date to constitute a "plant
closing" or "mass layoff" under WARN or any similar state or local law, or
create any liability to the Seller Companies for employment termination under
Applicable Law.
D.06 Immigration Matters. The Buyer Companies acknowledge that the
Contemplated Transactions may trigger certain obligations under the immigration
laws of the countries where the HPG Business operates. Buyer shall use
reasonable efforts to comply with all requirements of such immigration laws and
agrees to make any reasonable and necessary filings with the appropriate
Governmental Authority to attempt to ensure the continued employment eligibility
of the Transferred Employees, including Bruce Duncan, Rafael Diaz, David
O'Connor, Kaj Koft and Larry Baab.
II. United States Employee Benefit Matters.
D.07 Pension Plans.
(a) Seller and its Affiliates shall retain all liabilities and
obligations in respect of benefits accrued by employees of the HPG Business
(including Transferred Employees) as of the Closing Date under The Black &
Decker Pension Plan ("Seller's Pension Plan"). Accrued benefits of US
Transferred Employees under Seller's Pension Plan shall be fully vested as of
the Closing Date. Benefit accruals in respect of US Transferred Employees under
Seller's Pension Plan shall cease as of the Closing Date. US Transferred
Employees participating in Seller's Pension Plan shall not be entitled to
receive any such vested accrued benefits under Seller's Pension Plan unless and
until their employment with Buyer Companies terminates. No assets of Seller's
Pension Plan shall be transferred to Buyer Companies or to any employee benefit
plan of Buyer or any of its Affiliates.
(b) Except as otherwise provided in Section D.07(c), prior to or as
soon as practicable after the Closing Date, Buyer shall designate or establish a
defined benefit pension plan for the benefit of US Transferred Employees who
were participants in Seller's Pension Plan ("Buyer's Pension Plan"). Buyer's
Pension Plan shall cover all US Transferred Employees, each of whom shall be
eligible to participate therein for a period of at least one year following the
Closing Date on substantially the same terms and conditions as provided to the
US Transferred Employees under Seller's Pension Plan immediately prior to the
Closing Date; provided, however, that with respect to benefit accrual, Buyer may
offset the benefit under the Buyer's Pension Plan for the benefit accrual of US
Transferred Employees under the Seller's Pension Plan as of the Closing Date.
(c) Buyer covenants and agrees that service with Seller or any of
its Affiliates (and, to the extent applicable, with General Electric Company or
any of its Affiliates) prior to the
<PAGE> 66
Page 66
Closing Date that is recognized for any purpose by Seller's Pension Plan will be
recognized by Buyer's Pension Plan for such purpose.
(d) In lieu of adopting Buyer's Pension Plan, Buyer may make a
contribution to an individual account plan maintained by the Buyer, and/or make
a cash payment, to or for the benefit of each US Transferred Employee in an
amount not less than the value of the benefit that the US Transferred Employee
would have accrued under the Buyer's Pension Plan, after the offset for benefits
under Seller's Pension Plan, for the one-year period beginning on the Closing
Date. The Buyer shall make any such contribution, or cash payment net of any
withholding taxes, within 120 days after the first anniversary of the Closing
Date.
(e) Seller shall provide Buyer with any information relating to the
accrued benefits of the US Transferred Employees under Seller's Pension Plan as
shall be reasonably requested by Buyer to enable it to calculate the benefits to
be provided under the Buyer's Pension Plan pursuant to paragraph (b) of this
Section D.07 or the contributions or payments otherwise required to be made by
the Buyer pursuant to this paragraph (d) of this Section D.07.
D.08 Savings Plans.
(a) Seller shall cause the trustee of The Black & Decker Retirement
Savings Plan ("Seller's Savings Plan") to transfer as of the transfer date
specified below, the full account balances of the US Transferred Employees under
Seller's Savings Plan, to the Successor Savings Plan (as hereinafter defined).
Such assets shall be transferred to the Successor Savings Plan in cash, provided
that assets consisting of notes or other instruments evidencing loans made to
participating US Transferred Employees shall be transferred in such form to the
Successor Savings Plan. Seller and Buyer shall make any and all filings and
submissions to the appropriate Governmental Authorities, and shall make any
necessary plan amendments arising in connection with the transfer of assets from
Seller's Savings Plan to the Successor Savings Plan.
(b) As soon as practicable after the Closing Date, Buyer shall
establish or designate an individual account plan for the benefit of US
Transferred Employees (the "Successor Savings Plan"), shall take all necessary
action, if any, to qualify the Successor Savings Plan under the applicable
provisions of the Code and shall make any and all filings and submissions to the
appropriate Governmental Authorities required to be made by it in connection
with the transfer of assets contemplated hereby. The Successor Savings Plan
shall provide that those US Transferred Employees and their beneficiaries
covered by Seller's Savings Plan shall receive credit for all service and
compensation with Seller or any of its Affiliates (and, to the extent
applicable, with General Electric Company or any of its Affiliates) prior to the
Closing Date for all purposes, to the same extent such service and compensation
are recognized under Seller's Savings Plan immediately prior to the Closing
Date. Buyer shall take all action required or appropriate to vest fully all such
US Transferred Employees in their entire account balances transferred to the
Successor Savings Plan and, to the extent required under Section 411(d)(6) of
the Code, to protect and preserve all benefits, rights and features relating to
those account balances transferred from Seller's Savings Plan. As soon as
practicable following the earlier of the delivery to Seller of a favorable
determination letter from the Internal Revenue Service regarding the qualified
status of the Successor Savings Plan or the issuance of indemnities satisfactory
to Seller in its sole discretion, Seller shall cause the trustee of Seller's
Savings Plan, subject to any election by a US Transferred Employee to withdraw
his or her account balance prior to the transfer date in respect of Seller's
Savings Plan, to transfer the full account balances of US Transferred Employees
under Seller's Savings Plan as of the transfer date to the appropriate trustee
designated by the Buyer under the
<PAGE> 67
Page 67
trust agreement forming a part of the Successor Savings Plan; provided, that
assets consisting of notes or other instruments evidencing loans made to
participating US Transferred Employees shall be transferred in such form to the
Successor Savings Plan.
(c) Buyer, effective as of the date of the transfer of assets
contemplated by this Section D.08, assumes all of the liabilities and
obligations of Seller or any of its Affiliates in respect of the account
balances accumulated by US Transferred Employees under Seller's Savings Plan,
and the Successor Savings Plan assumes all liabilities and obligations of
Seller's Savings Plan with respect to all account balances under Seller's
Savings Plan of such US Transferred Employees. Neither Buyer nor any of its
Affiliates shall assume any other obligations or liabilities arising under or
attributable to Seller's Savings Plan and neither Seller nor any of its
Affiliates shall assume any liabilities or obligations under or attributable to
the Successor Savings Plan. Prior to the transfer of assets contemplated by this
Section D.08, Buyer Companies, if consented to by the applicable US Transferred
Employee, shall withhold from such US Transferred Employee's pay, loan
repayments relating to any outstanding loan to such US Transferred Employee
under Seller's Savings Plan and shall promptly forward those withholdings to
Seller's Savings Plan.
D.09 Health and Welfare Plans; Benefit Arrangements.
(a) For a period of one year following the Closing Date, Buyer
Companies shall ensure that the US Transferred Employees are provided benefits
that are comparable in the aggregate to the health, medical, dental, life,
disability and severance benefits in effect for the US Transferred Employees
immediately prior to the Closing Date.
(b) In furtherance and not in limitation of the provisions of this
Section D.09, as of the Closing Date, Buyer (i) shall, subject to the provisions
of Section 10.02(b)(iv), establish severance plans, agreements and arrangements
with substantially the same terms and conditions as those provided under the
applicable severance agreements, plans or arrangements listed on Schedule B.18,
(ii) agrees to maintain such severance agreements, plans and arrangements for a
period of at least one year following the Closing Date, and (iii) agrees to pay
any benefits to any US Transferred Employees that they may be entitled to
receive under such severance agreements, plans or arrangements. In furtherance
and not in limitation of the provisions of this Section D.09, as of the Closing
Date, Buyer or the applicable Buyer Company shall assume the obligations of
Seller Companies under the individual employee severance agreements listed on
Schedule B.18.
(c) With respect to any US Transferred Employee (including any
beneficiary or dependent thereof), except as expressly set forth herein, Seller
Companies shall retain (i) all liabilities and obligations arising under any
group life, accident, medical, dental or disability plan or similar arrangement
(whether or not insured) to the extent that such liability or obligation relates
to claims incurred (whether or not reported) on or prior to the Closing Date,
and (ii) all liabilities and obligations arising under any worker's compensation
laws to the extent such liability or obligation relates to the period prior to
the Closing Date.
(d) Any group health plan, disability plan or other plans
established or designated by the Buyer Companies for the benefit of US
Transferred Employees shall not contain any exclusion or limitation with respect
to any preexisting condition.
(e) Except as otherwise expressly provided in this Exhibit D,
effective as of the Closing, Buyer shall assume the liabilities and obligations
of Seller Companies in respect of all US Transferred Employees (and their
beneficiaries and dependents) under the Benefit Arrangements
<PAGE> 68
Page 68
sponsored or maintained by Seller Companies at any time prior to the Closing
Date, if and only to the extent that such liabilities and obligations are
reflected on the Opening Statement.
D.10 Post-Retirement Medical and Life Insurance.
(a) Seller Companies shall retain responsibility for providing
health, medical, dental, hospitalization, life insurance or similar benefits
(including, without limitation, reimbursement for Medicare premiums) to any
employee or former employee of the HPG Business (other than US Transferred
Employees) who retires or has retired on or before the Closing Date. Buyer
Companies shall be responsible for providing any post-retirement medical, life
or similar benefits to US Transferred Employees if and only to the extent that
Buyer, in its sole discretion, agrees to provide such post-retirement benefits.
(b) Notwithstanding the provisions of this Exhibit D, including but
not limited to the provisions of this Section D.10, Seller Companies may amend,
modify or terminate any plans or arrangements providing post-retirement health,
medical, dental, hospitalization, life insurance or similar benefits (including,
without limitation, reimbursement for Medicare premiums) to any employee or
former employee of the HPG Business, subject in each case to the provisions of
Applicable Law.
(c) Buyer shall not be obligated by this Agreement to provide
post-retirement, health, medical, dental, hospitalization, life insurance or
similar benefits (including, without limitation, reimbursement for Medicare
premiums), or any particular level of such benefits, to US Transferred
Employees.
III. Other Country Employee Benefit Matters.
D.11 General. For a period of one year following the Closing Date, Buyer
shall ensure that the Non-US Transferred Employees are provided benefits that
are comparable in the aggregate to those provided under the Non-U.S. Benefit
Arrangements as in effect for those Non-US Transferred Employees immediately
prior to the Closing Date, it being understood that each Non-US Transferred
Employee shall receive credit for all service and compensation with Seller
Companies and any of their predecessors or Affiliates prior to the Closing Date
for all purposes to the same extent that service and compensation are recognized
immediately prior to the Closing.
D.12 Severance/Termination Indemnities. In furtherance and not in
limitation of the provisions of Section D.11, for a period of at least one year,
Buyer shall provide severance programs and termination indemnities with
substantially the same terms and conditions as those provided by the Seller
Companies to the Non-US Transferred Employees immediately prior to the Closing
and agrees to pay any benefit to Non-US Transferred Employees to which they may
be entitled under such severance programs and/or termination indemnities with
respect to events that occur as a result of the Closing and on or after the
Closing Date.
D.13 Mexico Plan. In furtherance and not in limitation of the provisions
of Section D.11:
(a) Except as otherwise provided in paragraph (d) of this Section
D.13, prior to or as soon as practicable after the Closing Date, Buyer shall
designate or establish a defined benefit pension plan ("Buyer's Mexico Plan")
for the benefit of Non-US Transferred Employees who were participants in the
Black & Decker, S.A. de C.V. Pension and Seniority Premium Plans ("Seller's
Mexico Plan"). Buyer's Mexico Plan shall cover all Non-US Transferred Employees
who were
<PAGE> 69
Page 69
participants in the Seller's Mexico Plan, each of whom shall be eligible to
participate therein for a period of at least one year following the Closing Date
on the same terms and conditions as provided to participants under the Seller's
Mexico Plan immediately prior to the Closing Date.
(b) Buyer covenants and agrees that service with the Seller or any
of its predecessors or Affiliates prior to the Closing Date that is recognized
for any purpose under the Seller's Mexico Plan will be recognized by Buyer's
Mexico Plan for such purpose.
(c) As of the Closing Date, Seller shall cause the Seller's Mexico
Plan to be amended to fully vest all Non-US Transferred Employees participating
in that plan in their entire accrued benefit determined as of the Closing Date.
The Seller shall cause assets of the Seller's Mexico Plan to be transferred to
the Buyer's Mexico Plan in an amount equal to the accrued benefit of the Non-US
Transferred Employees participating in the Seller's Mexico Plan, calculated on a
discontinuance basis as of the Closing Date (increased or decreased by the rate
of actual investment return realized with respect to such assets under the
Seller's Mexico Plan for the period between the Closing Date and the date those
assets are transferred to the Buyer's Mexico Plan). The amount of the
transferred assets shall be calculated in accordance with the actuarial
assumptions, used by the Seller's Mexico Plan actuary.
(d) In lieu of adopting Buyer's Mexico Plan, subject to the
provisions of Applicable Law, Buyer may make a contribution to an individual
account plan maintained by Buyer, and/or make a cash payment, to or for the
benefit of each Non-US Transferred Employee who was a participant in the
Seller's Mexico Plan in an amount not less than the value of the benefit that
the Non-US Transferred Employee would have accrued under the Buyer's Mexico
Plan, after the offset for benefits under the Buyer's Mexico Plan, for the
one-year period beginning on the Closing Date. The Buyer shall make any such
contribution, or cash payment net of any withholding taxes, within 120 days
after the first anniversary of the Closing Date.
(e) Seller shall provide Buyer with any information relating to the
accrued benefits of the Non-US Transferred Employees under the Buyer's Mexico
Plan as shall be reasonably requested by Buyer to enable it to calculate the
benefits to be provided under the Buyer's Mexico Plan pursuant to paragraph (a)
of this Section D.13.
D.14 Puerto Rico Plan. In furtherance and not in limitation of the
provisions of Section D.11:
(a) Seller shall cause the trustee of the Black & Decker (Puerto
Rico) Inc. 401(k)/165(e) Benefit Pension Plan ("Seller's Puerto Rico Plan") to
transfer, in cash, as of the transfer date specified below, the full account
balances of the Non-US Transferred Employees under the Seller's Puerto Rico Plan
to the Successor Puerto Rico Plan (as hereinafter defined). Seller and Buyer
shall make any and all filings and submissions to the appropriate Governmental
Authorities, and shall make any necessary plan amendments arising in connection
with the transfer of assets from Seller's Puerto Rico Plan to the Successor
Puerto Rico Plan.
(b) As soon as practicable after the Closing Date, Buyer shall
establish or designate an individual account plan for the benefit of Non-US
Transferred Employees who were participants in the Seller's Puerto Rico Plan
(the "Successor Puerto Plan"), shall take all necessary action, if any, to
qualify the Successor Puerto Rico Plan under Applicable Law and shall make any
and all filings and submissions to the appropriate Governmental Authorities
required to be made by it in connection with the transfer of assets contemplated
hereby. The Successor Puerto Rico Plan
<PAGE> 70
Page 70
shall provide that those Non-US Transferred Employees and their beneficiaries
covered by Seller's Puerto Rico Plan shall receive credit for all service and
compensation with Seller or any of its predecessors and Affiliates prior to the
Closing Date for all purposes, to the same extent such service and compensation
is recognized under Seller's Puerto Rico Plan immediately prior to the Closing
Date. Buyer shall take all action required or appropriate to vest fully all such
Non-US Transferred Employees in their entire account balances transferred to the
Successor Puerto Rico Plan and shall protect and preserve all benefits, rights
and features relating to those account balances transferred from Seller's Puerto
Rico Plan. As soon as practicable following the earlier of the delivery to
Seller of appropriate notification of the qualified status of the Successor
Puerto Rico Plan or the issuance of indemnities satisfactory to the Seller in
its sole discretion, Seller shall cause the trustee of Seller's Puerto Rico
Plan, subject to any election by a Non-US Transferred Employee to withdraw his
or her account balance prior to the transfer date in respect of Seller's Puerto
Rico Plan, to transfer the full account balances of Non-US Transferred Employees
under Seller's Puerto Rico Plan as of the transfer date to the appropriate
trustee designated by the Buyer under the trust deed forming part of the
Successor Puerto Rico Plan.
(c) Buyer, effective as of the date of the transfer of assets
contemplated by this Section D.14, assumes all of the liabilities and
obligations of Seller or any of its predecessors or Affiliates in respect of the
account balances accumulated by Non-US Transferred Employees under Seller's
Puerto Rico Plan and the Successor Puerto Rico Plan assumes all liabilities and
obligations of Seller's Puerto Rico Plan with respect to all account balances
under Seller's Puerto Rico Plan of such Non-US Transferred Employees. Neither
Buyer nor any of its Affiliates shall assume any other obligations or
liabilities arising under or attributable to Seller's Puerto Rico Plan and
neither Seller nor any of its predecessors or Affiliates shall assume any
liabilities or obligations under or attributable to the Successor Puerto Rico
Plan.
D.15 Canada Plan. In furtherance and not in limitation of the provisions
in Section D.11:
(a) Seller shall cause the trustee of the Black & Decker Retirement
Plan ("Seller's Canada Plan") to transfer, in cash, as of the transfer date
specified below, the full account balances of the Non-US Transferred Employees
under the Seller's Canada Plan to the Successor Canada Plan (as hereinafter
defined). Seller and Buyer shall make any and all filings and submissions to
appropriate Governmental Authorities, and shall make any necessary plan
amendments arising in connection with the transfer of assets from Seller's
Canada Plan to the Successor Canada Plan.
(b) As soon as practicable after the Closing Date, Buyer shall
establish or designate an individual account plan for the benefit of Non-US
Transferred Employees who were participants in the Seller's Canada Plan (the
"Successor Canada Plan"), shall take all necessary action, if any, to qualify
the Successor Canada Plan under Applicable Law and shall make any and all
filings and submissions to the appropriate Governmental Authorities required to
be made by it in connection with the transfer of assets contemplated hereby. The
Successor Canada Plan shall provide that those Non-US Transferred Employees and
their beneficiaries covered by Seller's Canada Plan shall receive credit for all
service and compensation with Seller or any of its predecessors and Affiliates
prior to the Closing Date for all purposes to the same extent such service and
compensation is recognized under Seller's Canada Plan immediately prior to the
Closing Date.
<PAGE> 1
EXHIBIT 99.2
AMENDMENT NO. 1
DATED AS OF JUNE 26, 1998
TO
TRANSACTION AGREEMENT
DATED AS OF MAY 10, 1998
BY AND BETWEEN
THE BLACK & DECKER CORPORATION
AND
WINDMERE-DURABLE HOLDINGS, INC.
<PAGE> 2
AMENDMENT NO. 1 TO TRANSACTION AGREEMENT
This Amendment No. 1 to Transaction Agreement (this "Amendment") is
made as of the 26th day of June 1998, by and between The Black & Decker
Corporation, a Maryland corporation ("Seller"), and Windmere-Durable Holdings,
Inc., a Florida corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Seller through certain of its direct and indirect Subsidiaries
is engaged in the HPG Business;
WHEREAS, Seller and Buyer have entered into a Transaction Agreement
dated as of May 10, 1998 (the "Agreement"), pursuant to which Seller has agreed
to transfer or to cause the Affiliated Transferors to transfer substantially all
of the assets held, owned by or used to conduct the HPG Business, and to assign
certain liabilities associated with the HPG Business, to Buyer or Buyer
Companies designated by Buyer, and Buyer has agreed to receive or to cause such
designated Buyer Companies to receive such assets and assume such liabilities
upon the terms and subject to the conditions set forth in the Agreement; and
WHEREAS, Seller and Buyer desire to amend the Agreement in accordance
with the terms of this Amendment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties contained herein, the parties agree as follows:
Section 1. Capitalized terms used but not defined herein have the
meanings given to them in the Agreement.
Section 2. The list of Attachments included on pages v and vi of the
Agreement is amended by deleting "Attachment IX Form of Assignment of Mexican
Trademarks, Trademark Registrations and Applications for Registration" and
inserting in its place and stead "Attachment IX [Intentionally Omitted]", and by
adding the following:
"Attachment XXX Form of Kuantan Transition Agreement
Attachment XXXI Form of Escrow Agreement
Attachment XXXII Form of Manufacturing Agreement"
Section 3. Section 2.01(ix) of the Agreement is deleted in its entirety
and the following is inserted in its place and stead:
"(ix) Seller and Buyer shall execute and deliver a
transition agreement for the Kuantan Facility in the form
contemplated by Attachment XXX to this Agreement, and an
agreement providing Buyer with a right of
1
<PAGE> 3
first refusal in the sale by Seller Companies of any excess
manufacturing equipment at the Kuantan Facility that Seller
Companies decide not to use in their businesses;"
Section 4. Section 2.01(xi) of the Agreement is deleted in its entirety
and the following is inserted in its place and stead:
"(xi) Buyer Companies shall (A) pay and deliver to
Seller, for its own account and as agent for the Affiliated
Transferors, $288,000,000 in immediately available funds by
wire transfer to an account or accounts designated by Seller
(which account or accounts shall be designated by Seller by
written notice to Buyer at least two Business Days prior to
the Closing Date, or such shorter notice as Buyer shall agree
to accept) and (B) pay and deliver to the Escrow Agent under
the Escrow Agreement $27,000,000 in immediately available
funds by wire transfer to the account contemplated by the
Escrow Agreement; and"
Section 5. Section 2.01(xii) of the Agreement is deleted in its
entirety and the following is inserted in its place and stead:
"(xii) At Closing, Seller shall cause its wholly
owned subsidiary, Black & Decker S.A. de C.V., and Buyer shall
cause its wholly owned subsidiary, Household Products Limited
de Mexico, S. de R.L. de C.V., to execute and deliver a
manufacturing agreement for the Queretaro Property in the form
contemplated by Attachment XXXII."
Section 6.The following provision is added as Section 2.04(g)
of the Agreement:
"(g) Notwithstanding any other provisions of this
Agreement and notwithstanding the fact that title to assets
used at the Kuantan Facility and the Queretaro Property and
Inventory located in Colombia, Argentina, Chile or Peru will
not be transferred to Buyer or Buyer Companies on the Closing
Date, in calculating the Proposed Final Net Tangible Asset
Amount, the Proposed Net Working Capital Change Amount, the
Final Net Tangible Asset Amount and the Final Net Working
Capital Change Amount, Seller and Buyer agree to take into
account those assets located at the Kuantan Facility and the
Queretaro Property and the Inventory located in Colombia,
Argentina, Chile or Peru that otherwise would have been
Transferred Assets as of the Closing Date had title
transferred at the Closing."
Section 7. The second sentence of Section 5.06(d) of the Agreement is
deleted in its entirety and the following sentence is inserted in its place and
stead:
2
<PAGE> 4
"Notwithstanding any provisions of this Section 5.06 to the
contrary, Seller Companies shall not be deemed to be in
violation of this Section 5.06 to the extent that, following
the Closing, Seller Companies sell (i) Cleaning and Lighting
Products in any of the Designated Countries, (ii) corded or
cordless vacuums (and any related accessories or attachments)
in any of the Designated Countries (other than Chile), (iii)
corded Dustbuster and Floorbuster vacuums in Chile, or (iv)
any Excess Products that Buyer Companies do not purchase
pursuant to the right of first refusal contemplated by the
Manufacturing Agreement."
Section 8. Section 10.02(a)(ii) is amended by deleting the phrase
"Sections 10.02(b)(iv), 10.04(b)(ii) and D.18" and inserting in its place and
stead "Sections 10.02(b)(iv) and 10.04(b)(ii)".
Section 9. The definition of "Asheboro Closing Costs" set forth in
Exhibit A of the Agreement is amended by inserting the phrase "Property (other
than employees dedicated to the manufacturing of Cleaning and Lighting
Products)" in lieu of the word "property" in clause (a), and by inserting the
phrase "(other than costs associated with Cleaning and Lighting Products)" after
the word "costs" in clause (b).
Section 10. The definition of "Cleaning and Lighting Products" set
forth in Exhibit A of the Agreement is deleted in its entirety and the following
is inserted in its place and stead:
""Cleaning and Lighting Products" means hand held
vacuums, upright floor vacuums, battery powered bathroom and
outdoor cleaners sold under the Scumbuster(R) name, flexible
flashlights, flexible lanterns, leashlights and rechargeable
lights, together in each case with any related accessories or
attachments, but excluding corded canister and corded upright
floor vacuums sold in Chile and any related accessories or
attachments."
Section 11. The definition of "Designated Countries" set forth in
Exhibit A of the Agreement is revised by deleting the phrase ", Paraguay and
Uruguay" following the word "Brazil".
Section 12. The definition of "Designated Products" set forth in
Exhibit A of the Agreement is deleted in its entirety and the following is
inserted in its place and stead:
""Designated Products" means coffeemakers, espresso
makers, cappuccino makers, coffee mills, toasters, toaster
ovens (including those with convection features), steamers,
rice cookers, choppers, can openers, mixers, food processors,
irons, breadmakers, skillets, electric WOKs, electric
griddles, slow cookers, electric knives, blenders, juicers,
grills, kettles, wafflebakers and corded canister and corded
upright floor vacuums sold in Mexico, Central America, South
America (other than Brazil) and the Caribbean together in each
case with any related accessories or attachments, and all
products in the foregoing categories under development in the
HPG Business as of the Closing Date or that have been under
development in the HPG
3
<PAGE> 5
Business at any time during the year prior to the Closing
Date, but excluding step stools, Cleaning and Lighting
Products, shop, construction and similar vacuums, and
VersaPak(R) rechargeable battery packs and chargers, together
in each case with related accessories or attachments. It is
expressly understood and agreed that corded canister and
corded upright floor vacuums (and any related accessories or
attachments) shall only be "Designated Products" to the extent
and only to the extent sold in Mexico, Central America, South
America (other than Brazil) and the Caribbean."
Section 13. The definition of "Excluded Assets" set forth in Exhibit A
of the Agreement is amended by inserting the phrase "(other than Inventory
representing administrative returns located at the national disposition center
(i.e., Nashville facility))" after the first reference to "Canada".
Section 14. The definition of "Intellectual Property Assignment
Agreements" set forth in Exhibit A of the Agreement is amended by inserting the
word "and" before the phrase "the Assignment of US Copyrights," and by deleting
the phrase "and the Assignment of Mexican Trademarks, Trademark Registrations
and Applications for Registration," and by deleting the roman numeral "IX".
Section 15. Exhibit A of the Agreement is amended by adding the
following definitions:
"Escrow Agent" means the escrow agent acting as such
from time to time pursuant to the terms of the Escrow
Agreement.
"Escrow Agreement" means the Escrow Agreement in the
form contemplated by Attachment XXXI.
"Escrow Funds" means any funds held from time to time
by the Escrow Agent under the Escrow Agreement.
"Manufacturing Agreement" means the Manufacturing
Agreement in the form contemplated by Attachment XXXII.
"Mexico Closing Date" means the Mexico Closing Date
as defined in the Manufacturing Agreement.
Section 16. The definition of "Transaction Documents" set forth in
Exhibit A of the Agreement is deleted in its entirety and the following is
inserted in its place and stead:
""Transaction Documents" means this Agreement, the
Assignment and Assumption Agreements, the Services Agreements,
the Intellectual Property Assignment Agreements, the Cross
License Agreement, the Trademark License Agreement, the
Kuantan Transition Agreement, the
4
<PAGE> 6
Manufacturing Agreement, the Escrow Agreement, the Supply
Agreement contemplated by Section 2.01(viii), the Distribution
Services Agreement (United States), and the Distribution
Services Agreement (Latin America), and any exhibits or
attachments to any of the foregoing, as the same may be
amended from time to time."
Section 17. The definition of "Transferred Assets" set forth in Exhibit
A of the Agreement is amended by inserting "or the Mexico Closing Date, as the
case may be," following the phrase "Closing Date" throughout the lead-in
language in such definition, by deleting the word "and" following the semi-colon
in clause (xiv), by deleting the "." at the end of clause (xv) and inserting in
its place and stead ";" and by adding the following proviso at the end of the
definition of "Transferred Assets":
"provided, however, that assets, properties, rights, licenses,
permits, Contracts, or causes of actions located at or
relating to the Queretaro Property shall only be "Transferred
Assets" on and as of the Mexico Closing Date."
Section 18. The first sentence of Section D.01 of Exhibit D of the
Agreement is deleted in its entirety and the following is inserted in its place
and stead:
"On the Closing Date, the employment of all Active Employees
of the HPG Business, including employees based in the HPG
Business' headquarters in Shelton, Connecticut, employees
based in the Asheboro Property, and the employees listed on
Attachment XV, but excluding the employees based at the
Kuantan Facility and the Queretaro Property, shall be
transferred to Buyer Companies. On the Mexico Closing Date,
the employment of all Active Employees of the HPG Business
based in the Queretaro Property shall be transferred to Buyer
Companies. Buyer and Buyer Companies shall ensure that the
transfer of employment of all such persons shall be considered
continuous employment under Applicable Law."
Section 19. The third sentence of the original draft of Section D.01 of
Exhibit D of the Agreement is amended by inserting "(or with regard to Active
Employees of the HPG Business at the Queretaro Property, on or after the Mexico
Closing Date)" after the phrase "Closing Date".
Section 20. The last sentence of Section D.02 of Exhibit D of the
Agreement is amended by inserting "(or with regard to Active Employees of the
HPG Business at the Queretaro Property, on or after the Mexico Closing Date)"
after the phrase "Closing Date".
Section 21. The first sentence of Section D.03 of Exhibit D of the
Agreement is amended by inserting the word "applicable" before each of the
references to "Closing Date".
Section 22. The first sentence of Section D.05 of Exhibit D of the
Agreement is amended by inserting "(or with regard to Active Employees of the
HPG Business at the Queretaro Property, on or after the Mexico Closing Date)"
after the phrase "Closing Date".
5
<PAGE> 7
Section 23. The second sentence of Section D.05 of Exhibit D of the
Agreement is amended by inserting "or the closing of the transactions
contemplated by Section 7 of the Manufacturing Agreement" after the word
"Closing" and before the "," and by inserting "(or with regard to Active
Employees of the HPG Business at the Queretaro Property, on or after the Mexico
Closing Date)" after the phrase "Closing Date".
Section 24. The third sentence of Section D.05 of Exhibit D of the
Agreement is amended by inserting "(or with regard to Active Employees of the
HPG Business at the Queretaro Property, on or after the Mexico Closing Date)"
after the phrase "Closing Date".
Section 25. The second sentence of Section D.06 of Exhibit D of the
Agreement is revised by deleting the phrase ", David O'Connor, Kaj Koft"
following the name Rafael Diaz.
Section 26. Section D.11 of Exhibit D of the Agreement is deleted in
its entirety and the following is inserted in its place and stead:
"D.11 General. For a period of one year following the
Closing Date (or with regard to Active Employees of the HPG
Business at the Queretaro Property, the Mexico Closing Date),
Buyer shall ensure that the Non-US Transferred Employees are
provided benefits that are comparable in the aggregate to
those provided under the Non-US Benefit Arrangements as in
effect for those Non-US Transferred Employees immediately
prior to the Closing Date (or the Mexico Closing Date, as the
case may be), it being understood that each Non-US Transferred
Employee shall receive credit for all service and compensation
with Seller Companies and any of their predecessors or
Affiliates prior to the Closing Date (or the Mexico Closing
Date, as the case may be) for all purposes to the same extent
that service and compensation are recognized immediately prior
to such date."
Section 27. Section D.12 of Exhibit D of the Agreement is deleted in
its entirety and the following is inserted in its place and stead:
"D.12 Severance/Termination Indemnities. In
furtherance and not in limitation of the provisions of Section
D.11, for a period of at least one year from the Closing Date
(or with regard to Active Employees of the HPG Business at the
Queretaro Property, the Mexico Closing Date), Buyer shall
provide severance programs and termination indemnities with
substantially the same terms and conditions as those provided
by Seller Companies to the Non-US Transferred Employees
immediately prior to the Closing Date (or with regard to
Active Employees of the HPG Business at the Queretaro
Property, the Mexico Closing Date) and agrees to pay any
benefit to Non-US Transferred Employees to which they may be
entitled under such severance programs and/or termination
indemnities with respect to events that occur as
6
<PAGE> 8
a result of the Closing or the closing of the transactions
contemplated by Section 7 of the Manufacturing Agreement, and
on or after such date."
Section 28. Section D.13 of Exhibit D of the Agreement is deleted in
its entirety and the following is inserted in its place and stead:
"D.13 Mexico Plan. In furtherance and not in
limitation of the provisions of Section D.11:
(a) Prior to or as soon as practicable after
the Mexico Closing Date, Buyer shall designate or establish a
plan ("Buyer's Mexico Plan"), providing pension and seniority
premiums to Non-US Transferred Employees who were participants
in the Black & Decker S.A. de C.V. Pension and Seniority
Premium Plan ("Seller's Mexico Plan"). Buyer's Mexico Plan
shall cover all Non-US Transferred Employees who were
participants in the Seller's Mexico Plan, each of whom shall
be eligible to participate therein on substantially the same
terms and conditions as provided to the Non-US Transferred
Employees under Seller's Mexico Plan immediately prior to the
Mexico Closing Date. Buyer covenants and agrees that service
with the Seller or any of its predecessors or Affiliates prior
to the Mexico Closing Date that is recognized for any purpose
under the Seller's Mexico Plan will be recognized by Buyer's
Mexico Plan for such purpose.
(b) As soon as practicable after the Mexico
Closing Date, the Seller shall cause assets of the Seller's
Mexico Plan to be transferred to the Buyer's Mexico Plan in an
amount that is equal to the sum of (i) the accrued current
liability ("ABO") as reported on the funding valuation report
of Watson Wyatt Worldwide for Seller's Mexico Plan as of
January 1, 1998 plus (ii) 50% of the difference between the
actuarial accrued liability ("PBO") as reported on such
funding valuation report under Seller's Mexico Plan and ABO as
reported on such funding valuation report. For purposes of
making this determination, the assets and liabilities of each
component of Seller's Mexico Plan shall be aggregated and the
calculations of ABO and PBO shall relate solely to the Non-US
Transferred Employees and will be updated through the Mexico
Closing Date.
(c) Upon the transfer of assets from
Seller's Mexico Plan to Buyer's Mexico Plan as contemplated
herein, Buyer and its Affiliates shall assume all of the
liabilities and obligations of Black & Decker or any of its
Affiliates in respect of the benefit obligations of all Non-US
Transferred Employees and their beneficiaries under Seller's
Mexico Plan.
7
<PAGE> 9
Section 29. Section D.17 of Exhibit D of the Agreement is amended by
inserting "(or in the case of Active Employees of the HPG Business in Mexico, on
or after the Mexico Closing Date)" after the word "Closing" in clauses (i) and
(ii).
Section 30. Section D.18 of Exhibit D of the Agreement is deleted in
its entirety.
Section 31. Section D.19 of Exhibit D of the Agreement is renumbered
Section D.18.
Section 32. Section D.19 of Exhibit D of the Agreement (which is being
renumbered pursuant to Section 30 above as Section D.18) is amended by inserting
"(or in the case of Active Employees of the HPG Business in Mexico, on or after
the Mexico Closing Date)" after the phrase "Closing Date".
Section 33. Attachment IV is deleted in its entirety and the Assignment
of Foreign Trademarks, Trademark Registrations and Applications for Registration
attached to this Amendment as Exhibit A is inserted in its place and stead.
Section 34. Attachment VII is deleted in its entirety and the Trademark
License Agreement attached to this Amendment as Exhibit B is inserted in its
place and stead.
Section 35. Attachment X is deleted in its entirety and the Cross
License Agreement attached to this Amendment as Exhibit C is inserted in its
place and stead.
Section 36. Table 1 and Table 2 of Attachment XII are deleted in their
entirety and Table 1 and Table 2 attached to this Amendment as Exhibit D are
inserted in their place and stead.
Section 37. Item I.D. of Schedule B.18 to the Agreement titled "United
States Severance Programs" is amended by inserting "(covers all salaried exempt
employees)" following the reference in number 2 to "The Black & Decker Exempt
Employees Severance Pay Plan," inserting "(covers all salaried and hourly
nonexempt employees)" following the reference in number 3 to "The Black & Decker
Nonexempt Employees Severance Pay Plan," and adding a new number 5 in Item I.D.
as follows: "For all employees at the Asheboro Property employed prior to April
27, 1984, severance benefits consisting of two weeks pay for each of the
employee's full years of continuous service, plus one-half week's pay for each
additional three months of continuous service at the time of termination, and
related Education & Retraining Assistance of up to $1,800 in accordance with the
Asheboro Property Employee Handbook."
Section 38. The list of Licensed Software in Schedule B.19 to the
Agreement is amended by adding the following:
Licensor Description
-------- -----------
Intemec Bar coding for plant and
D.C. operations
8
<PAGE> 10
Section 39. For purposes of the Agreement, Seller and Buyer agree that
sales by the HPG Business to agencies of the United States Armed Forces for sale
in Armed Forces owned outlets and stores on Armed Forces bases, whether or not
such outlets or stores are located in Designated Countries, shall be considered
sales in the United States.
Section 40. Attachment A-2 to Schedule A to the Agreement is deleted in
its entirety and Attachment A-2 attached to this Amendment as Exhibit E is
inserted in its place and stead.
9
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto caused this Amendment to be duly
executed by their respective authorized officers on the day and year first above
written.
THE BLACK & DECKER CORPORATION
By: /s/
-------------------------------
WINDMERE-DURABLE HOLDINGS, INC.
By /s/
--------------------------------
10
