<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ____________ to ____________
Commission File Number 1-10177
WINDMERE-DURABLE HOLDINGS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-1028301
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5980 MIAMI LAKES DRIVE, MIAMI LAKES, FLORIDA 33014
-------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(305) 362-2611
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to
such filing requirement for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
NUMBER OF SHARES OUTSTANDING
CLASS On August 12, 1999
----------------------------- ----------------------------
Common Stock, $.10 Par Value 22,479,716
<PAGE> 2
WINDMERE-DURABLE HOLDINGS, INC.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Statements of Operations for the
Three Months Ended June 30, 1999 and 1998 3
Consolidated Statements of Operations for the
Six Months Ended June 30, 1999 and 1998 4
Consolidated Balance Sheets as of
June 30, 1999, and December 31, 1998 5-6
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1999
and 1998 7
Notes to Consolidated Financial Statements 8-14
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15-21
ITEM 3. Quantitative and Qualitative Disclosures About Market
Risk 22
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 23
ITEM 4. Submission of Matters to a Vote of Security Holders 23
ITEM 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WINDMERE-DURABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------------------------------
1999 1998
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Sales and Other Revenues $149,168 100.0% $ 62,568 100.0%
Cost of Goods Sold 106,203 71.2 54,218 86.7
-------- ------- -------- -----
Gross Profit 42,965 28.8 8,350 13.3
Selling, General and
Administrative Expenses 40,284 27.0 12,826 20.5
Repositioning charge -- -- 9,914 15.8
-------- ------- -------- -----
Operating Profit (Loss) 2,681 1.8 (14,390) (23.0)
Other (Income) Expense
Interest Expense 6,531 4.4 1,426 2.3
Interest and Other Income (735) (.5) (1,517) (2.4)
-------- ------- --------- -----
5,796 3.9 (91) (.1)
Earnings (Loss) before Equity
in Net Earnings (Loss) of Joint
Ventures and Income Taxes (3,115) (2.1) (14,299) (22.9)
Equity in Net Earnings (Loss)
of Joint Ventures (12,374) (8.3) 751 1.2
--------- -------- -------- -----
Earnings (Loss) Before
Income Taxes (15,489) (10.4) (13,548) (21.7)
Provision (Benefit) for
Income Taxes (4,924) (3.3) (5,684) (9.1)
-------- ------- --------- ------
Net Earnings (Loss) $(10,565) (7.1)% $ (7,864) (12.6)%
========= ======= ========= ======
Earnings Per Share - basic $ (.47) $ (.42)
========= ========
Earnings Per Share - diluted $ (.47) $ (.42)
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
WINDMERE-DURABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------------
1999 1998
--------------------------- --------------------------
<S> <C> <C> <C> <C>
Sales and Other Revenues $268,021 100.0% $117,962 100.0%
Cost of Goods Sold 191,356 71.4 96,729 82.0
-------- ------- -------- -----
Gross Profit 76,665 28.6 21,233 18.0
Selling, General and
Administrative Expenses 76,154 28.4 24,532 20.8
Repositioning charge -- -- 9,914 8.4
-------- ------- -------- -----
Operating Profit (Loss) 511 .2 (13,213) (11.2)
Other (Income) Expense
Interest Expense 12,736 4.8 2,471 2.1
Interest and Other Income (1,024) (.4) (2,198) (1.9)
-------- ------- --------- -----
11,712 4.4 273 .2
Earnings (Loss) before Equity
in Net Earnings (Loss) of Joint
Ventures and Income Taxes (11,201) (4.2) (13,486) (11.4)
Equity in Net Earnings (Loss)
of Joint Ventures (12,894) (4.8) 1,196 1.0
-------- - -------- -------- -----
Earnings (Loss) Before
Income Taxes (24,095) (9.0) (12,290) (10.4)
Provision (Benefit) for
Income Taxes (7,000) (2.6) (5,563) (4.7)
-------- ------- --------- ------
Net Earnings (Loss) $(17,095) (6.4)% $ (6,727) (5.7)%
========= ======= ========= ======
Earnings (Loss) Per Share -
basic $ (.77) $ (.36)
========= ========
Earnings (Loss) Per Share -
dilutive $ (.77) $ (.36)
========= =========
Dividends Per Common Share $ (.00) $ (.00)
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
WINDMERE-DURABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
6/30/99 12/31/98
--------- --------
ASSETS
CURRENT ASSETS
Cash & Cash Equivalents $ 6,828 $ 20,415
Accounts and Other Receivables,
less allowances of $9,014 and
$7,367, respectively 153,892 165,837
Receivables from Affiliates (Note 2) 3,806 5,589
Inventories
Raw Materials 9,604 12,648
Work-in-process 22,578 28,727
Finished Goods 132,583 124,090
--------- ---------
Total Inventories 164,765 165,465
Prepaid Expenses 11,446 16,709
Refundable Income Taxes 6,294 6,555
Future Income Tax Benefits 24,170 18,277
--------- ---------
Total Current Assets 371,201 398,847
INVESTMENTS IN JOINT VENTURES
(NOTE 2) 2,688 15,708
PROPERTY, PLANT & EQUIPMENT -
AT COST, less accumulated
depreciation of $64,462 and
$59,524, respectively 78,202 76,077
Notes Receivable from Affiliate 7,891
OTHER ASSETS 255,302 244,214
--------- ---------
TOTAL ASSETS $ 707,393 $ 742,737
========= =========
5
<PAGE> 6
WINDMERE-DURABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
6/30/99 12/31/98
------- --------
LIABILITIES
CURRENT LIABILITIES
Note and acceptances payable $ 2,778 --
Current Maturities of Long-Term
Debt 7,955 $ 8,630
Accounts Payable and
Accrued Expenses 105,135 119,611
Income taxes payable -- 2,693
Deferred Income, current portion 689 479
--------- ---------
Total Current Liabilities 116,557 131,413
LONG-TERM DEBT 273,563 272,370
DEFERRED INCOME TAXES 9,049 12,132
DEFERRED INCOME, less current
Portion 1,080 2,804
SHAREHOLDERS' EQUITY (Note 3)
Special Preferred Stock -
Authorized 40,000,000 shares of
$.01 par value; none issued
Common Stock - authorized
40,000,000 shares of $.10 par
value; shares outstanding:
22,352 and 22,091,
respectively 2,235 2,209
Paid-in Capital 146,976 145,161
Retained Earnings 160,744 177,839
Accumulated Other Comprehensive Income (1,315) (1,191)
Note receivable from affiliate (1,496) --
--------- ---------
Total Shareholders' Equity 307,144 324,018
--------- ---------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 707,393 $ 742,737
========= =========
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
WINDMERE-DURABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1999 1998
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (Loss) $(17,095) $ (6,727)
Adjustments to reconcile net earnings (loss)
to net cash used in operating activities:
Depreciation of property, plant and equipment 8,510 3,863
Amortization of intangible assets 8,400 496
Amortization of deferred income -- (248)
Repositioning charge -- 17,600
Loss on disposal of fixed assets 2,147 609
Writedown of investment in joint venture 12,574 --
Net change in allowance for losses
on accounts receivable 1,647 146
Equity in net earnings (loss) of joint ventures 446 (1,705)
Changes in assets and liabilities
Decrease in accounts and other receivables 16,380 2,608
Decrease in inventories 10,306 4,236
Decrease (increase) in prepaid expenses 5,263 (5,613)
Decrease (increase) in other assets 6,010 (29,897)
Increase (decrease) in accounts payable
and accrued expenses (32,712) 5,022
Current and deferred income taxes (11,408) 1,394
Decrease in deferred income (1,513) --
Decrease in other accounts (124) (275)
--------- ---------
Net cash provided by (used in)
operating activities 8,831 (8,491)
Cash flows from investing activities:
Additions to property, plant and equipment - net (12,782) (7,499)
Purchase of net assets - Household Products Group -- (319,626)
Purchase of net assets from Newtech (15,059) --
Decrease (increase) in receivable accounts
and notes from affiliates 1,782 (6,092)
-------- --------
Net cash used in investing activities (26,059) (333,217)
Cash flows from financing activities:
Net borrowings under lines of credit $ 2,778 $ (28,235)
Long-term debt - net 518 373,593
Exercise of stock options and warrants 345 2,650
Payment of withholding tax on
Stock option exercises -- (2,346)
-------- --------
Net cash provided by
financing activities 3,641 345,662
-------- --------
Increase (decrease) in cash
and cash equivalents (13,587) 3,954
Cash and cash equivalents at
beginning of year 20,415 8,224
-------- --------
Cash and cash equivalents at end of quarter $ 6,828 $ 12,178
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 14,035 $ 2,997
Income taxes $ 4,231 $ 3
Non-cash investing and financing activities:
In April 1999, the Company sold 210,000 shares of common stock to its
Chief Executive Officer in exchange for a promissory note totaling
$1,496,250.
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
WINDMERE-DURABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
INTERIM REPORTING
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all normal recurring adjustments
necessary to present fairly the Company's financial position as of
June 30, 1999 and the results of its operations and changes in
financial position for the interim periods. Results for interim
periods should not be considered indicative of results for a full
year. Reference should be made to the financial statements contained
in the registrant's Annual Report on Form 10-K for the year ended
December 31, 1998.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified for comparability.
RECEIVABLES FROM AFFILIATES
Receivables from Affiliates include accounts receivable which arise in
the ordinary course of business and are settled as trade obligations,
as well as the current portion of notes receivable due from certain of
the Company's joint venture partners and other affiliates
("Affiliates"). Notes receivable from these Affiliates bear interest
at prevailing market interest rates.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses forward exchange contracts to reduce fluctuations in
foreign currency cash flows related to third party raw material and
other operating purchases. The terms of the currency instruments used
are generally consistent with the timing of the committed or
anticipated transactions being hedged. Outstanding at June 30, 1999
and 1998 are $38,000,000 and $25,000,000, respectively, in contracts
to purchase Hong Kong dollars, forward. Also outstanding are option
contracts to sell and buy $9,000,000 in Canadian dollars, forward.
There is no significant unrealized gain or loss on these contracts.
All contracts have terms of six months or less.
The Company uses interest rate swaps of one to four years in duration
to reduce the impact of changes in interest rates on its floating rate
debt. The notional amounts of the swap agreements are used to measure
interest to be paid or received and do not represent the amount of
exposure to credit loss. The differential paid or received on the
agreements is recognized as an adjustment of interest expense.
As of June 30, 1999, the Company had purchased swaps on $130,000,000
notional principal amount with a market value of approximately
($280,000). The market value represents the amount the Company would
have to pay to exit the contracts at June 30, 1999. The Company does
not intend to exit such contracts at this time.
2. INVESTMENTS IN JOINT VENTURES
Investments in Joint Ventures consist of the Company's interests in
joint ventures, accounted for under the equity method. Included are
the Company's 50-percent interests in Newtech Electronics Industries,
Inc. ("Newtech"), Breakroom of Tennessee, Inc. and Anasazi Partners,
L.P. ("Anasazi").
On July 28, 1998, the Company consummated the sale of its equity
interest in Salton Products, Inc. ("Salton"). Financial information
for Salton has, therefore, been excluded from the 1999 period results.
Arrangements between the Company and Salton pertaining to the Kmart
contract, pursuant to which Salton provides Kmart with products under
the White-Westinghouse brand name, are continuing with certain
modifications.
In June 1999, the Company entered into a definitive asset purchase
agreement to purchase substantially all of Newtech's assets, including
inventory, accounts receivable, certain trademarks and other
intangibles, as well as the assumption of certain liabilities relating
to the business. Net assets acquired totaled approximately
$15,000,000.
8
<PAGE> 9
Under the terms of the agreement, the Company acquired the exclusive
right and license to use the White-Westinghouse Trademark in North
America for the design, manufacture, and sale of certain consumer
electronic products and has been assigned Newtech's rights under the
long-term supply contracts with the Kmart Corporation in the United
States and Zellers in Canada. According to the terms of the contracts,
the Company will supply Kmart and Zellers consumer electronics under
the White-Westinghouse brand. The remaining term under the Kmart
contract can be extended up to 2011 upon mutual consent. The recently
signed Zellers contract expires in 2004. In conjunction with the
acquisition, the Company wrote down its remaining investment in
Newtech resulting in a one-time non-cash charge of $12,574,400
($8,300,000 after tax). The charge has been recorded as equity in net
loss of joint ventures in the Company's Statement of Operations.
Notes receivable from Affiliates at June 30, 1999 includes $15.0
million from the sale of the Company's equity interest in Salton. The
$15.0 million note has been recorded net of related deferred income
for anticipated future purchases by Salton from the Company.
All sales made by joint ventures in the three month periods ended June
30, 1999 and 1998 were to entities other than members of the
consolidated group. Sales made by the Company to Salton in the three
month periods ended June 30, 1999 and 1998 totaled $7.9 million and
$6.4 million, respectively. Fees earned under the White-Westinghouse,
Kmart and Zellers agreements totaled $2.4 million and $2.7 million,
respectively, in the quarter and six month periods ended June 30, 1999
as compared to $.9 million and $1.6 million, respectively, in the 1998
periods.
Note: Profits earned by the Company's manufacturing subsidiary on
sales to joint ventures are included in the consolidated earnings
results.
3. SHAREHOLDERS' EQUITY
EARNINGS PER SHARE
In 1997, the Company adopted Financial Accounting Standards No. 128
(SFAS 128), "Earnings Per Share." Basic shares for the three month
periods ended June 30, 1999 and 1998 were 22,302,018 and 18,765,412,
respectively.
All common stock equivalents have been excluded from the per share
calculation for the 1999 and 1998 periods, as the Company incurred a
net loss in both periods and their inclusion would have been
anti-dilutive.
4. COMMITMENTS AND CONTINGENCIES
In June 1999, a settlement was reached in the litigation between White
Consolidated Industries, Inc. and CBS Corporation pending in the
United States District Court for the Western District of Pennsylvania,
Civil Action No. 96-2294 relating to the use of the "White
Westinghouse" trademark for certain consumer products. The
consummation of the settlement, which is subject to the satisfaction
of certain conditions, is anticipated to be completed during the third
quarter of this year. No payment will be required by the Company in
connection with the settlement of the litigation. As part of the
settlement, which also involves other parties to the litigation and
other agreements between White Consolidated Industries and CBS
Corporation, and which confirms CBS' rights to the "Westinghouse"
trademark, all litigation against the Company will be dismissed and
the license agreements between the Company and White Consolidated
Industries will remain in force.
The Company is also a defendant in SHERLEIGH ASSOCIATES LLC AND
SHERLEIGH ASSOCIATES INC. PROFIT SHARING PLAN, ON THEIR OWN BEHALF AND
ON BEHALF OF ALL OTHERS SIMILARLY SITUATED V. WINDMERE-DURABLE
HOLDINGS, INC., DAVID M. FRIEDSON, HARRY D. SCHULMAN AND NATIONSBANC
MONTGOMERY SECURITIES LLC, 98-2273-CIV-LENARD which was filed in the
United States District Court, Southern District of Florida on October
8, 1998.
This matter is a class action complaint, which is the consolidation of
eight separate class action complaints with substantially similar
allegations. On June 30, 1999, a consolidated amended class action
complaint was filed. The consolidated amended class action complaint
was purportedly filed on behalf of those security holders of the
Company who purchased such securities during a certain period in the
second and third quarters of 1998, alleging violations of the federal
securities laws (including Rule 10b-5 promulgated pursuant to the
Securities Exchange Act of 1934, as amended) in connection with the
acquisition by the Company of certain product categories of the
9
<PAGE> 10
Household Products Group of the Black & Decker Corporation. Among
other things, the plaintiffs allege that the Company and certain of
its directors and officers, along with NationsBanc Montgomery
Securities LLC, provided false information in connection with a public
offering of debt and equity securities. The plaintiffs seek, among
other relief, to be declared a class, to be awarded compensatory
damages, rescission rights, unspecified damages and attorneys' fees
and costs. The Court has directed the Defendants to respond to the
consolidated amended complaint on or before August 16, 1999.
By Order dated March 9, 1999, in addition to consolidating the
above-referenced cases, the Court provisionally certified the class of
plaintiffs who purchased Windmere stock between May 12, 1998 and
September 22, 1998, and provisionally certified Sherleigh Associates
LLC and Sherleigh Associates, Inc. Profit Sharing Plan as lead
plaintiff. By Order dated June 3, 1999, the Court, among other things,
appointed lead counsel and directed the filing of a joint scheduling
order. On June 23, 1999, the parties submitted a Joint Scheduling
Report and a proposed scheduling order, which is still under
consideration by the Court.
The Company is currently advancing the legal expenses of the directors
and officers who were named as defendants. Such defendants have agreed
to repay the Company for all or any portion of such advances to which
they are ultimately found not to be entitled pursuant to applicable
law. Based on the information currently available to the Company,
management does not believe that the indemnification of the officers
and directors named as defendants in the above-listed matters will
have a material adverse effect on the financial condition, results of
operations or liquidity of the Company. However, the actual effects of
such indemnification on the Company cannot be finally determined until
the amount of such indemnification, if any, is fixed.
The Company is subject to other legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability, if any, in excess of
applicable insurance coverage, is not likely to have a material effect
on the financial position of the Company. However, as the outcome of
litigation or other claims is difficult to predict, significant
changes in the estimated exposures could occur.
5. BUSINESS SEGMENT INFORMATION
Summarized financial information concerning the Company's reportable
segments is shown in the following table. Corporate related items,
results of insignificant operations and, as it relates to segment
profit (loss), income and expense not allocated to reportable segments
are included in the reconciliations to consolidated results.
Segment information for the three month periods ended June 30, are as
follows: (In Thousands)
<TABLE>
<CAPTION>
Household
Windmere Products Durable
1999 Group Group Manufacturing Total
---- -------- --------- ------------- -------
<S> <C> <C> <C> <C>
Net Sales $47,534 $ 78,042 $ 34,814 $ 160,390
Intersegment net sales -- -- 17,262 17,262
Operating earnings (loss) (2,121) (2,600) 7,591 2,870
1998
Net Sales 46,469 -- 35,003 81,472
Intersegment net sales -- -- 19,768 19,768
Operating earnings (loss) (294) -- 6,395 6,101
</TABLE>
Reconciliation to consolidated amounts:
<TABLE>
<CAPTION>
1999 1998
-------- -------
Revenues
<S> <C> <C>
Total revenues for reportable segments $ 160,390 $ 81,472
Other revenues 6,040 864
Eliminations of intersegment revenues (17,262) (19,768)
-------- ---------
Total consolidated revenues $ 149,168 $ 62,568
========= =========
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
<S> <C> <C>
Operating earnings (loss)
Total earnings (loss) for reportable
segments $ 2,870 $ 6,101
Other earnings (loss) 2,777 (7,295)
Corporate headquarters expense (2,231) (1,765)
Interest expense (6,531) (1,426)
Equity in net earnings (loss) of joint ventures (12,374) 751
Repositioning charge
-- (9,914)
---------- --------
Consolidated earnings (loss) before income taxes $ (15,489) $(13,548)
========= ========
</TABLE>
Segment information for the six month periods ended June 30, are as
follows: (In Thousands)
<TABLE>
<CAPTION>
Household
Windmere Products Durable
1999 Group Group Manufacturing Total
---- -------- --------- ------------- -----
<S> <C> <C> <C> <C>
Net Sales $94,925 $143,192 $ 62,956 $ 301,073
Intersegment net sales -- -- 40,780 40,780
Operating earnings (loss) (4,895) (3,866) 10,319 1,558
1998
Net Sales 92,359 -- 59,727 152,086
Intersegment net sales -- -- 34,444 34,444
Operating earnings (loss) (2,369) -- 8,194 5,825
</TABLE>
Reconciliation to consolidated amounts:
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Revenues
Total revenues for reportable segments $ 301,073 $ 152,086
Other revenues 7,728 320
Eliminations of intersegment revenues (40,780) (34,444)
-------- ---------
Total consolidated revenues $ 268,021 $ 117,962
========= =========
Operating earnings (loss)
Total earnings (loss) for reportable segments $ 1,558 $ 5,825
Other earnings 4,420 (4,464)
Corporate headquarters expense (4,443) (2,462)
Interest expense (12,736) (2,471)
Equity in net earnings (loss) of joint ventures (12,894) 1,196
Repositioning charge -- (9,914)
-------- ---------
Consolidated earnings (loss) before income taxes $(24,095) (12,290)
======== =========
</TABLE>
6. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following condensed consolidating financial information presents
the results of operations, financial position and cash flows of the
Company (on a stand alone basis), the guarantor subsidiaries of the
Company's Senior Subordinated Notes ("Notes") (on a combined basis),
the non-guarantor subsidiaries (on a combined basis) and the
eliminations necessary to arrive at the consolidated results of the
Company. The results of operations and cash flows presented below
assume as if the guarantor subsidiaries were in place for all periods
presented. The Company and subsidiary guarantors have accounted for
investments in their respective subsidiaries on an unconsolidated
basis using the equity method of accounting. The Subsidiary Guarantors
are wholly-owned subsidiaries of the Company and have fully and
unconditionally guaranteed the Notes on a joint and several basis. The
guarantors include the following: Windmere Corporation, Windmere
11
<PAGE> 12
Holdings Corporation, Windmere Holdings Corporation II, Jerdon
Products, Inc., Fortune Products, Inc., Bay Books & Tapes, Inc.,
Consumer Products Americas, Inc., Windmere Innovative Pet Products,
Inc., EDI Masters, Inc., Windmere Fan Products, Inc., Household
Products, Inc., HP Delaware, Inc., HP Americas, Inc., HPG LLC, HP
Intellectual Corp., WD Delaware, Inc. and WD Delaware II, Inc. The
Notes contain certain covenants which, among other things, will
restrict the ability of the Subsidiary Guarantors to make distributions
to Windmere-Durable Holdings, Inc. The Company has not presented
separate financial statements and other disclosures concerning the
guarantors and non-guarantor subsidiaries because it has determined
they would not be material to investors.
Six Months Ended June 30, 1999
<TABLE>
<CAPTION>
Windmere Durable Non
Holdings, Inc. Guarantors Guarantors Eliminations Consolidated
---------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Net Sales 0 204,471 104,330 (40,780) 268,021
Cost of goods sold 0 147,124 85,012 (40,780) 191,356
------ ------- ------- -------- -------
Gross Profit 0 57,347 19,318 0 76,665
Operating Expenses (347) 65,093 11,228 180 76,154
------ ------- ------- -------- -------
Operating Profit (Loss) 347 (7,746) 8,090 (180) 511
Other (income) expense, net 12,024 (847) (558) 1,093 11,712
------ ------- ------- -------- -------
Earnings (loss) before
income taxes and equity in
earnings (loss) of joint
ventures (11,677) (6,899) 8,648 (1,273) (11,201)
Provision (Benefit) for
income taxes 0 (2,803) 1,131 (5,328) (7,000)
Equity in net earnings (loss)
of joint ventures 593 (13,487) 0 0 (12,894)
------ -------- ------- -------- --------
Net earnings (loss) (11,084) (17,583) 7,517 4,055 (17,095)
======== ======== ======= ======== ========
Balance Sheet
Cash 9 (469) 7,288 0 6,828
Accounts and other receivables 0 105,411 48,481 0 153,892
Receivables from affiliates 9,437 (18,626) 12,993 2 3,806
Inventories 0 101,195 65,068 (1,498) 164,765
Other current assets 0 26,026 4,348 11,536 41,910
------ ------- ------- -------- ------
Total current assets 9,446 213,537 138,178 10,040 371,201
Investments in
joint ventures 426,376 9,254 70,542 (503,484) 2,688
Property, plant and
equipment, net 0 12,770 65,432 0 78,202
Other assets 1,521 583,213 11,928 (341,360) 255,302
------ ------- ------- -------- -------
Total assets 437,343 818,744 286,080 (834,804) 707,393
======= ======= ======= ======== =======
LIABILITIES:
Notes payable 0 11,350 2,778 (11,350) 2,778
Accounts payable and
accrued expenses 3 65,186 39,947 (1) 105,135
Current maturities
of long term debt 7,842 0 113 0 7,955
Deferred income, current
portion 0 689 0 0 689
Income taxes payable 0 (1,223) 948 275 0
------ -------- ------- --------- ------
Total current liabilities 7,845 76,002 43,786 (11,076) 116,557
Long term debt 269,373 332,906 4,190 (332,906) 273,563
Deferred income, less
current portion 0 297 0 783 1,080
Deferred income taxes 0 16,253 2,973 (10,177) 9,049
------ ------- ------- --------- -------
Total liabilities 277,218 425,458 50,949 (353,376) 400,249
Shareholders' equity 160,125 393,316 235,131 (481,428) 307,144
------- ------- -------- -------- -------
Total liabilities
and shareholders' equity 437,343 818,744 286,080 (834,804) 707,393
======= ======= ======= ======== =======
Cash Flow Information
Net cash provided by (used
In) operating activities (11,080) 56,201 (21,101) (15,064) 8,955
Net cash provided by (used
in) investing activities 995 15,825 (15,572) (27,307) (26,059)
Net cash provided by
(used in) financing
activities 10,095 (75,578) 26,753 42,371 3,641
Effect of exchange rate 0 0 (124) 0 (124)
Cash at beginning 0 3,083 17,332 0 20,415
Cash at end 9 (469) 7,288 0 6,828
</TABLE>
12
<PAGE> 13
Six Months Ended June 30, 1998
<TABLE>
<CAPTION>
Windmere Durable Non
Holdings, Inc. Guarantors Guarantors Eliminations Consolidated
---------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Net Sales 0 89,754 62,652 (34,444) 117,962
Cost of goods sold 0 78,716 52,757 (34,744) 96,729
---------- ------ ------ -------- ------
Gross profit 0 11,038 9,895 300 21,233
Operating expenses (313) 22,971 1,694 180 24,532
Repositioning charge 0 (9,914) 0 0 (9,914)
---------- ------ ------ -------- ------
Operating profit (Loss) 313 (21,846) 8,201 120 (13,213)
Other (income) expense, net 215 1,153 (1,813) 717 273
---------- ------ ------ -------- ------
Earnings (loss) before income
taxes and equity in earnings
(loss) of joint ventures 98 (23,000) 10,013 (597) (13,486)
Provision (Benefit) for
Income taxes 0 48 156 (5,766) (5,563)
Equity in net earnings (loss)
of joint ventures 151 1,045 0 0 1,196
---------- ------ ------ -------- ------
Net earnings (loss) 249 (22,003) 9,858 5,169 (6,727)
========== ======== ====== ======== =======
Balance Sheet
Cash 0 3,529 8,649 0 12,178
Accounts and other receivables 0 79,773 5,061 (622) 84,212
Receivables from affiliates 1,616 (16,821) 37,935 (1,652) 21,078
Inventories 0 132,056 42,593 993 175,642
Other current assets 0 13,836 4,208 (2,647) 15,397
Refundable income taxes 0 2,475 191 1,465 4,131
---------- ------ ------ -------- ------
Total current assets 1,616 214,848 98,636 (2,462) 312,638
Investment in joint
ventures 80,731 52,028 59,477 (147,440) 44,796
Property, plant and
equipment, net 0 51,852 30,760 0 82,612
Notes receivable from affiliate 0 0 19,455 (11,351) 8,104
Other assets 0 224,754 585 11,872 237,211
---------- ------- ------- -------- -------
Total assets 82,347 543,482 208,913 (149,381) 685,361
========== ======= ======= ======== =======
Notes and acceptances payable 0 16,350 9,747 (11,350) 14,747
Accounts payable and
accrued expenses 218 76,734 15,428 (622) 91,758
Current maturities of
long term debt 0 44,293 0 0 44,293
Income taxes payable and
other current liabilities 0 733 1 (469) 265
---------- ------ ------- -------- ------
Total current liabilities 218 138,110 25,176 (12,441) 151,063
Long term debt 10,848 338,337 0 0 349,185
Deferred income 0 125 0 865 990
Deferred income taxes 0 0 2,147 (2,147) 0
---------- ------- ------ -------- ------
Total liabilities 11,066 476,572 27,323 (13,723) 501,238
Shareholders' equity 71,281 66,910 181,590 (135,658) 184,123
---------- ------ ------- --------- -------
Total liabilities
and shareholders
equity 82,347 543,482 208,913 (149,381) 685,361
========== ======= ======= ======== =======
Net cash used in operating
activities 0 (24,352) 15,861 0 (8,491)
Net cash used in investing
activities 0 (328,952) (4,265) 0 (333,217)
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net cash provided by financing
activities 0 356,833 (9,794) 0 347,039
Effect of exchange rate 0 0 (1,377) 0 (1,377)
Cash at beginning 0 0 8,224 0 8,224
Cash at end 0 3,529 8,649 0 12,178
</TABLE>
7. Related Party Transactions
On April 14, 1999, the Company sold 210,000 shares of authorized
Common Stock at the fair market value of $7.125 per share to its Chief
Executive Officer in exchange for a promissory note. The note is on a
full recourse basis, with a maturity of three years from the date of
purchase and bears interest at LIBOR plus 2.75%.
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This document contains forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Such statements
are indicated by words or phrases such as "anticipate," "projects," "management
believes," "the Company believes," "intends," "expects," and similar words or
phrases. Such forward-looking statements are subject to certain risks,
uncertainties or assumptions and may be affected by certain other factors.
Should one or more of these risks, uncertainties or other factors materialize,
or should underlying assumptions prove incorrect, actual results, performance,
or achievements of the Company may vary materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements in this paragraph. The
Company disclaims any obligation to publicly announce the results of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
The Company, through its subsidiaries, is a leading diversified manufacturer
and distributor of a broad range of branded and private label small household
appliances, including electric housewares (kitchen and garment care), personal
care, and other products. The Company manufactures and markets products under
the Windmere(R) and other Company-owned brand names, under private-label brand
names, under licensed brand names, such as Black & Decker(R) and, pursuant to
licenses held by affiliates such as, the White-Westinghouse(R) brand name. The
Company's customers for such products include mass merchandisers, specialty
retailers and appliance distributors primarily in North America, Latin America
and the Caribbean. In addition, the Company manufactures products on an OEM
basis for other major consumer products companies. The Company also
manufactures and markets the LitterMaid(R) self-cleaning cat litter box.
Results of Operations
The operating results of the Company expressed as a percentage of sales and
other revenues are set forth below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------------
1999 1998
----- -----
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of goods sold 71.4 82.0
----- -----
Gross Profit 28.6 18.0
Selling, general and
administrative expenses 28.4 20.8
Other (income) expense - net 4.4 8.6
Equity in net earnings (loss) of joint ventures (4.8) 1.0
---- ---
Earnings (loss) before income taxes (9.0) (10.4)
Provision (benefit) for income taxes (2.6) (4.7)
----- -----
Net earnings (loss) (6.4)% (5.7)%
===== =====-
</TABLE>
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Sales and other revenues
Sales and other revenues ("Revenues") for the Company increased by $86.6
million to $149.2 million, an increase of 138% over Revenues for the second
quarter of 1998. The increase is primarily the result of the June 26, 1998
acquisition of the Black & Decker Household Products Group (HPG) which
contributed $78.0 million in distribution sales. Sales to Walmart accounted for
16% of total sales for the 1999 period. In the 1998 period, sales to Salton
accounted for 16.7% of total sales.
Fees earned by the Company under the White-Westinghouse, Kmart and Zellers
contracts totaled $2.4 million for the 1999 period as compared to $.9 million
for 1998 and are classified as Revenues.
15
<PAGE> 16
Gross Profit Margin
The Company's gross profit margin increased to 28.8% of Revenues from 25.6%,
excluding a $7.7 million one-time repositioning charge included in cost of
goods sold, in the 1998 period. The increase is attributable primarily to the
June 26, 1998 acquisition, as well as increased productivity at the Company's
China manufacturing plant.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the Company increased by $27.5
million to $40.3 million in the second quarter of 1999. As a percentage of
sales, costs increased to 27.0% from 20.5% in the 1998 period. The increase is
primarily due to the June 26, 1998 acquisition of HPG.
Equity in Net Earnings of Joint Ventures
The Company's equity in net earnings of joint ventures decreased to a loss of
$12.4 million in the 1999 second quarter as compared to income of $751,000 in
the 1998 period. The decrease is primarily the result of a one-time non cash
charge of $12.6 million ($8.3 million after tax) to write down the Company's
remaining investment in Newtech in conjunction with the June 1999 purchase of
Newtech's assets. Also contributing to the change is the July 1998 sale of the
Company's equity interest in Salton.
Interest Expense
Interest expense increased to $6.5 million in 1999 from $1.4 million in 1998.
The change is the result of amounts borrowed in conjunction with the
acquisition of HPG.
Taxes
The Company's tax expense is based on the earnings of each of its foreign and
domestic operations and it includes such additional U.S. taxes as are
applicable to any repatriation of foreign earnings. Foreign earnings, other
than in Canada, Mexico and certain other countries in Latin America, are
generally taxed at rates lower than in the United States.
Earnings Per Share
In 1997, the Company adopted Financial Accounting Standards No. 128 (SFAS)
128), "Earnings Per Share." Basic shares for the three month periods ended June
30, 1999 and 1998 were 22,302,018 and 18,765,412, respectively.
All common stock equivalents have been excluded from the per share calculation
for the 1999 and 1998 periods, as the Company incurred a net loss in both
periods and their inclusion would have been anti-dilutive. The increase in the
number of basic shares is primarily due to the July 1998 public offering of
3,041,000 shares of the Company's common stock.
Windmere Group
Windmere Group sales increased by $1.0 million to $47.5 million in the second
quarter of 1999. The increase in Windmere Group sales is attributable to
weakness in personal care partially offset by growth in LitterMaid and seasonal
product sales. LitterMaid distribution sales increased by $2.1 million or 49.7%
over 1998 sales.
Selling, general and administrative expenses for the Windmere Group increased
by approximately $2.1 million to 25.1% of segment sales from 21.2% in the 1998
period. Group expenses for 1999 represented 8.0% of total Company sales as
compared to 15.7% in the 1998 period. Contributing significantly to the
increase were costs directly associated with the increase in sales volume such
as LitterMaid royalties and $1.0 million in advertising related expenditures.
Household Products Group
Selling, general and administrative expenses for the Household Products Group
totaled $24.9 million or 31.9% of segment sales and 16.7% of total Company
sales. Included in selling, general and administrative expenses was
approximately $1.8 million in costs under contracts where Black & Decker was
providing services to the Company during the transition period while the
Company was putting in place its own personnel and systems and $.8 million in
costs to run back office operations at the Company's Shelton, CT. location. All
16
<PAGE> 17
significant service contracts with Black & Decker have been exited as of May
31, 1999 and all back office operations have been relocated to the Company's
Miami headquarters as of June 30, 1999. Also included is approximately $3.3
million in amortization of intangibles recorded in conjunction with the
acquisition.
Durable Manufacturing
Sales at the Company's China based manufacturing subsidiary remained relatively
flat in the 1999 period as compared to 1998.
Operating earnings for Durable Manufacturing increased by $1.2 million to $7.6
million in the 1999 second quarter. Increased productivity contributed to the
improved results.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Sales and other revenues
Sales and other revenues ("Revenues") for the Company increased by $150.1
million to $268.0 million, an increase of 127% over Revenues for the first six
months of 1998. The increase is primarily the result of the June 26, 1998
acquisition of HPG which contributed $143.1 million in distribution sales.
Sales to Walmart accounted for 18% of total sales for the 1999 period.
Fees earned by the Company under the White-Westinghouse, Kmart and Zellers
contracts totaled $2.7 million for the 1999 period as compared to $1.6 million
for 1998 and are classified as Revenues.
Gross Profit Margin
The Company's gross profit margin increased to 28.6% of Revenues from 24.5%
excluding the $7.7 million portion of the repositioning charge recorded as cost
of goods sold in the 1998 period. The increase is attributable primarily to the
June 26, 1998 acquisition and increased productivity at Durable.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the Company increased by $51.6
million to $76.2 million in the first six months of 1999. As a percentage of
sales, costs increased to 28.4% from 20.8% in the 1998 period. The increase is
primarily due to the June 26, 1998 acquisition of HPG.
Equity in Net Earnings of Joint Ventures
The Company's equity in net earnings of joint ventures decreased to a loss of
$12.9 million in the 1999 period as compared to income of $1.2 million in the
1998 period. The decrease is primarily the result of a one-time non cash charge
of $12.6 million ($8.3 million after tax) to write down the Company's remaining
investment in Newtech in conjunction with the June 1999 purchase of Newtech's
assets. Also contributing to the change is the July 1998 sale of the Company's
equity interest in Salton.
Interest Expense
Interest expense increased to $12.7 million in 1999 from $2.5 million in 1998.
The change is the result of amounts borrowed in conjunction with the
acquisition of HPG.
Taxes
The Company's tax expense is based on the earnings of each of its foreign and
domestic operations and it includes such additional U.S. taxes as are
applicable to any repatriation of foreign earnings. Foreign earnings, other
than in Canada, Mexico and certain other countries in Latin America, are
generally taxed at rates lower than in the United States.
Earnings Per Share
In 1997, the Company adopted Financial Accounting Standards No. 128 (SFAS)
128), "Earnings Per Share." Basic shares for the six month periods ended June
30, 1999 and 1998 were 22,196,492 and 18,589,560, respectively.
17
<PAGE> 18
All common stock equivalents have been excluded from the per share calculation
for the 1999 and 1998 periods as the Company incurred a net loss in both
periods and their inclusion would have been anti-dilutive. The increase in the
number of basic shares is primarily due to the July 1998 public offering of
3,041,000 shares of the Company's common stock.
Windmere Group
Windmere Group sales increased by $2.6 million to $94.9 million in the first
six months of 1999. The increase in Windmere Group sales is attributable to
increases in LitterMaid, kitchen and seasonal product sales partially offset by
weakness in personal care sales. LitterMaid distribution sales increased by
$5.5 million or 82.9% over 1998 sales.
Selling, general and administrative expenses for the Windmere Group increased by
approximately $2.8 million to $22.5 million or 23.7% of segment sales from $19.8
million or 21.4% of sales in the 1998 period. Group expenses for 1999
represented 8.4% of total Company sales as compared to 16.8% in the 1998 period.
Contributing significantly to the increase were employee related costs for
increased personnel, costs directly associated with the increase in LitterMaid
sales volume such as royalties, a reserve for a customer who filed for
bankruptcy in the period and approximately $500,000 related to the write-off of
product design costs in conjunction with a change in accounting regulations.
Household Products Group
Selling, general and administrative expenses for the Household Products Group
totaled $46.9 million or 32.8% of segment sales and 17.5% of total Company
sales. Included in selling, general and administrative expenses was
approximately $3.2 million in costs under contracts where Black & Decker was
providing services to the Company during a transition period while the Company
was putting in place its own personnel and systems and $2.4 million in costs to
run back office operations at the Company's Shelton, CT location. All
significant service contracts with Black & Decker have been exited as of May
31, 1999 and all back office operations have been relocated to the Company's
Miami headquarters, as of June 30, 1999. Also included is approximately $6.8
million in amortization of intangibles recorded in conjunction with the
acquisition.
Durable Manufacturing
Sales at the Company's China based manufacturing subsidiary increased by $3.2
million or 5.4% to $63.0 million in the 1999 period.
Operating earnings for Durable Manufacturing increased by $2.1 million to $10.3
million in the 1999 second quarter. Increased productivity contributed to the
improved results.
Liquidity and Capital Resources
At June 30, 1999, the Company's working capital was $254.6 million, as compared
to $161.6 million at June 30, 1998. At June 30, 1999 and 1998, the Company's
current ratio was 3.2 to 1 and 2.1 to 1, respectively, and its quick ratio was
1.6 to 1 and .9 to 1, respectively. The improvement in ratios is primarily the
result of the acquisition.
Cash balances decreased by approximately $13.6 million for the six months ended
June 30, 1999. The net cash provided by operating activities is primarily the
result of the increased growth in sales resulting from the June 26, 1998
acquisition of HPG and the resultant cash collections in the period.
Cash used in investing activities totaled approximately $26.1 million for the
period and is primarily the result of $12.8 million in capital expenditures at
the Company's manufacturing facilities and approximately $15.0 million for the
purchase of the assets of Newtech.
Funds provided by financing activities totaled approximately $3.6 million in the
period reflecting increased borrowings of $3.3 million. Without the $15.0
million acquisition of the Newtech assets, the Company would not have borrowed
the additional funds.
No provision for U.S. taxes has been made on undistributed earnings of the
Company's foreign subsidiaries and joint ventures because management plans to
reinvest such earnings in their respective operations or in other foreign
operations. Repatriating those earnings or using them in some other manner
which would give rise to a U.S. tax liability would reduce after tax earnings
and available working capital.
18
<PAGE> 19
Certain of the Company's foreign subsidiaries have approximately $35.8 million
in trade finance lines of credit, payable on demand, which are secured by the
subsidiaries' tangible and intangible property, and in some cases, a Company
guarantee. Outstanding borrowings by the Company's Hong Kong subsidiaries are
primarily in U.S. dollars.
The Company's primary sources of liquidity are its cash flow from operations
and borrowings under the Senior Secured Credit Facilities. The Company is
currently borrowing $130.9 million under the term loan portion of its Senior
Secured Credit Facilities. The Senior Secured Revolving Credit Facility as
amended, provides for borrowings by the Company of up to $110.0 million through
December 31, 1999 and $160.0 million thereafter and through the remainder of
the term of the loan. As of August 9, 1999, the Company is borrowing $29.5
million under the Senior Secured Revolving Credit Facility and has
approximately $80.0 million available for future borrowings, under all its
credit facilities. Advances under the Senior Secured Revolving Credit Facility
are based upon percentages of outstanding eligible accounts receivable and
inventories.
The Company's aggregate capital expenditures for the six months ended June 30,
1999 were $12.8 million. The Company anticipates that the total capital
expenditures for 1999 will be approximately $20.0 million, which includes the
cost of new tooling. The Company plans to fund those capital expenditures from
cash flow from operations and, if necessary, borrowings under the Senior
Secured Revolving Credit Facility.
At June 30, 1999, debt as a percent of total capitalization was 48 percent.
The Company's ability to make scheduled payments of principal of, or to pay the
interest on, or to refinance, its indebtedness, or to fund planned capital
expenditures, product research and development expenses and marketing expenses
will depend on its future performance, which, to a certain extent, is subject
to general economic, financial, competitive, legislative, regulatory, and
international and United States domestic political factors and other factors
that are beyond the Company's control. Based upon the current level of
operations and anticipated cost savings and revenue growth, management believes
that cash flow from operations and available cash, together with available
borrowings under the Senior Credit and other facilities, will be adequate to
meet the Company's future liquidity needs for at least the next several years.
The Company may, however, need to refinance all or a portion of the principal
of the indebtedness on or prior to maturity. There can be no assurance that the
Company's business will generate sufficient cash flow from operations, that
anticipated revenue growth and operating improvements will be realized or that
future borrowings will be available under the Senior Secured Credit Facilities
in an amount sufficient to enable the Company to service its indebtedness,
including the Senior Subordinated Notes, or to fund its other liquidity needs.
In addition, there can be no assurance that the Company will be able to effect
any such refinancing on commercially reasonable terms or at all.
CURRENCY MATTERS
While the Company transacts business predominantly in U.S. dollars and most of
its revenues are collected in U.S. dollars, a portion of the Company's costs,
such as payroll, rent and indirect operations costs, are denominated in other
currencies, such as Chinese renminbi, Hong Kong dollars and Mexican pesos.
Changes in the relation of these and other currencies to the U.S. dollar will
affect the Company's cost of goods sold and operating margins and could result
in exchange losses. The impact of future exchange rate fluctuations on the
Company's results of operations cannot be accurately predicted.
The Company uses forward exchange contracts to reduce fluctuations in foreign
currency cash flows related to third party raw material and other operating
purchases as well as trade receivables. The purpose of the Company's foreign
currency management activity is to reduce the risk that eventual cash flows
from foreign currency denominated transactions may be adversely affected by
changes in exchange rates.
Durable uses the Hong Kong dollar as its functional currency. The Hong Kong
dollar has historically been "pegged" to a fixed exchange rate vis-a-vis the
U.S. dollar. If the Hong Kong dollar were to be significantly devalued against
the U.S. dollar and the exchange rate allowed to fluctuate, the Company could
experience significant changes in its currency translation account which would
impact the Company's future comprehensive income. The Company has acquired the
Queretaro property and related assets from The Black & Decker Corporation.
Because the operations of such facilities are primarily peso-denominated and
the revenues derived from products manufactured at such facilities are
primarily dollar-denominated, the Company is now subject to fluctuations in the
value of the peso. The December 1994 devaluation of the peso had a number of
effects on the Mexican economy that adversely affected the financial condition
of businesses in Mexico. The devaluation caused the peso value of dollar
denominated indebtedness associated with businesses in Mexico to increase
significantly, and also greatly increased the rate of inflation, resulting in a
sharp rise in nominal interest rates on peso-denominated financing. There can
be no assurance that the peso to dollar foreign exchange rate will not be
volatile in the future and that financial markets will not have a material
adverse effect on the Company's business, financial condition and results of
operations.
19
<PAGE> 20
The Company uses interest rate swaps of one to four years in duration to reduce
the impact of changes in interest rates on its floating rate debt. The notional
amounts of the agreements are used to measure interest to be paid or received
and do not represent the amount of exposure to credit loss. The differential
paid or received on the agreements is recognized as an adjustment of interest
expense.
As of June 30, 1999, the Company had purchased interest rate swaps on $130
million notional principal amount with a market value of approximately
($280,000). The market value represents the amount the Company would have to
pay to exit the contracts at June 30, 1999. The Company does not intend to exit
such contracts at this time.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards (FAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities." FAS
No. 133 establishes standards for accounting and reporting for derivative
instruments, and conforms the requirements for treatment of different types of
hedging activities. This statement is effective for all fixed quarters of years
beginning after June 15, 2000. The Company has not completed its evaluations of
FAS No. 133.
SEASONALITY
The Company's business is highly seasonal, with operating results varying from
quarter to quarter. The Company has historically experienced higher revenues in
the third and fourth quarters of each fiscal year primarily due to increased
demand by customers for products in the late summer for "back-to-school" sales
and in the fall for holiday sales. The Company's major sales occur during
August through November. Sales are generally made on 45 to 90 day terms.
Heaviest collections on its open accounts receivable are received from November
through March, at which time the Company is in its most liquid state.
YEAR 2000 ISSUES
The Company uses a significant number of computer software programs and
operating systems across its entire organization, including applications used
in financial business systems, manufacturing and administrative functions. A
complete evaluation has been performed to identify whether any of the Company's
software applications contain source code that is unable to interpret the
upcoming year 2000 and beyond. The appropriate modifications have been made and
the Company now believes that its critical systems are Year 2000 compliant. The
Company has received communications from its major suppliers and trading
partners, some of who have filed reports with the Securities and Exchange
Commission, and believes that they are also Year 2000 Compliant. The cost of
implementing required system changes is not material to the Company's
consolidated financial statements. No assurance can be given, however, that all
of the Company's systems, the systems of acquired businesses and those of
significant customers and suppliers will not experience Year 2000 compliance
difficulties. Difficulties that arise may result in unfavorable business
consequences including disruption in product shipments, delays in receipt of
materials, delay in customer receipts and payments to suppliers.
LEGAL PROCEEDINGS
In June 1999, a settlement was reached in the litigation between White
Consolidated Industries, Inc. and CBS Corporation pending in the United States
District Court for the Western District of Pennsylvania, Civil Action No.
96-2294 relating to the use of the "White Westinghouse" trademark for certain
consumer products. The consummation of the settlement, which is subject to the
satisfaction of certain conditions, is anticipated to be completed during the
third quarter of this year. No payment will be required by the Company in
connection with the settlement of the litigation. As part of the settlement,
which also involves other parties to the litigation and other agreements
between White Consolidated Industries and CBS Corporation, and which confirms
CBS' rights to the "Westinghouse" trademark, all litigation against the Company
will be dismissed and the license agreements between the Company and White
Consolidated Industries will remain in force.
The Company is a defendant in SHERLEIGH ASSOCIATES LLC AND SHERLEIGH ASSOCIATES
INC. PROFIT SHARING PLAN, ON THEIR OWN BEHALF AND ON BEHALF OF ALL OTHERS
SIMILARLY SITUATED V. WINDMERE-DURABLE HOLDINGS, INC., DAVID M. FRIEDSON, HARRY
D. SCHULMAN AND NATIONSBANC MONTGOMERY SECURITIES LLC, 98-2273-CIV-LENARD which
was filed in the United States District Court, Southern District of Florida on
October 8, 1998.
20
<PAGE> 21
This matter is a class action complaint, which is the consolidation of eight
separate class action complaints with substantially similar allegations. On
June 30, 1999, a consolidated amended class action complaint was filed. The
consolidated amended class action complaint was purportedly filed on behalf of
those security holders of the Company who purchased such securities during a
certain period in the second and third quarters of 1998, alleging violations of
the federal securities laws (including Rule 10b-5 promulgated pursuant to the
Securities Exchange Act of 1934, as amended) in connection with the acquisition
by the Company of certain product categories of the Household Products Group of
the Black & Decker Corporation. Among other things, the plaintiffs allege that
the Company and certain of its directors and officers, along with NationsBanc
Montgomery Securities LLC, provided false information in connection with a
public offering of debt and equity securities. The plaintiffs seek, among other
relief, to be declared a class, to be awarded compensatory damages, rescission
rights, unspecified damages and attorneys' fees and costs. The Court has
directed the Defendants to respond to the consolidated amended complaint on or
before August 16, 1999.
By Order dated March 9, 1999, in addition to consolidating the above-referenced
cases, the Court provisionally certified the class of plaintiffs who purchased
Windmere stock between May 12, 1998 and September 22, 1998, and provisionally
certified Sherleigh Associates LLC and Sherleigh Associates, Inc. Profit
Sharing Plan as lead plaintiff. By Order dated June 3, 1999, the Court, among
other things, appointed lead counsel and directed the filing of a joint
scheduling order. On June 23, 1999, the parties submitted a Joint Scheduling
Report and a proposed scheduling order, which is still under consideration by
the Court.
The Company is currently advancing the legal expenses of the directors and
officers who were named as defendants. Such defendants have agreed to repay the
Company for all or any portion of such advances to which they are ultimately
found not to be entitled pursuant to applicable law. Based on the information
currently available to the Company, management does not believe that the
indemnification of the officers and directors named as defendants in the
above-listed matters will have a material adverse effect on the financial
condition, results of operations or liquidity of the Company. However, the
actual effects of such indemnification on the Company cannot be finally
determined until the amount of such indemnification, if any, is fixed.
The Company is subject to other legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability, if any, in excess of applicable insurance coverage, is not
likely to have a material effect on the financial position of the Company.
However, as the outcome of litigation or other claims is difficult to predict,
significant changes in the estimated exposures could occur.
MANUFACTURING OPERATIONS
The Company's products are manufactured primarily at the Company's facilities
in the PRC and Mexico. The Company has ceased manufacturing at the Asheboro
facility as of March 31, 1999 and completely exited the facility as of June 30,
1999. Prior to the HPG acquisition, the majority of the Company's products were
manufactured by Durable, its wholly-owned Hong Kong subsidiary operating in Bao
An County, Guangdong Province of the People's Republic of China, which is
approximately 60 miles northwest of Central, Hong Kong. The Company has a
significant amount of its assets in the People's Republic, primarily consisting
of inventory, equipment and molds. The supply and cost of products, as well as
finished products, can be adversely affected, among other reasons, by changes
in foreign currency exchange rates, increased import duties, imposition of
tariffs, imposition of import quotas, interruptions in sea or air
transportation and political or economic changes. From time to time, the
Company explores opportunities to diversify its sourcing and/or production of
certain products to other low-cost locations or with other third parties or
joint venture partners in order to reduce its dependence on production in the
People's Republic and/or reduce Durable's dependence on the Company's existing
distribution base. However, at the present time, the Company intends to
continue its production in the People's Republic and Mexico.
The Mexican government exercises significant influence over many aspects of the
Mexican economy. Accordingly, the actions of the Mexican government concerning
the economy could have a significant effect on private sector entities in
general and the Company in particular. In addition, during the 1980s and 1990s,
Mexico experienced periods of slow or negative growth, high inflation,
significant devaluations of the peso and limited availability of foreign
exchange. As a result of the Company's reliance upon manufacturing facilities
in Mexico, economic conditions in Mexico could adversely affect the Company's
business, financial condition and results of operations.
21
<PAGE> 22
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's major market risk exposure is to changing interest rates, debt
obligations issued at a fixed rate and fluctuations in the currency exchange
rates. The Company's policy is to manage interest rate risk through the use of
a combination of fixed and floating rate instruments, with respect to both its
liquid assets and its debt instruments.
The Senior Credit Facilities accrue interest at variable rates; however, the
company has purchased interest rate protection for such loans in the form of
interest rate swaps. Based on the current amount of variable rate, as well as
underlying swaps, the exposure to interest rate risk is not material.
Fixed-rate debt obligations issued by the Company are not callable until July
31, 2003.
The Company is subject to foreign currency exchange rate risk relating to
receipts from customers and payments to suppliers in foreign currencies. As a
general policy, the Company hedges foreign currency commitments of future
payments and receipts by purchasing foreign currency-forward and option
contracts. As of June 30, 1999, the notional value of such derivatives was
approximately $56 million, with no significant unrealized gain or loss. The
majority of the Company's receipts and expenditures are contracted in U.S.
dollars, and the Company does not consider the market risk exposure relating to
currency exchange to be material at this time.
22
<PAGE> 23
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See "Legal Proceedings" in Part I, Item 2 of this report.
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on May
11, 1999, the shareholders of the Company voted to elect
Frederick E. Fair, David M. Friedson Desmond Lai, Jerald I.
Rosen, Harry D. Schulman and J. Maurice Hopkins, as Directors
of the Company for three year terms. Continuing members of
the Board of Directors of the Company, include: Barbara
Friedson Garrett, Susan J. Ganz, Thomas J. Kane, Felix S.
Sabates, Leonard Glazer, Lai Kin, Raymond So, Harold Strauss
and Arnold Thaler.
The number of votes cast for or withheld, and the number of
broker non-votes, with respect to each of the nominees were
as follows:
Nominee For Against
------- --- -------
Frederick E. Fair 20,895,782 313,498
David M. Friedson 20,896,006 313,274
Desmond Lai 20,896,082 313,198
Jerald I. Rosen 20,896,116 313,164
Harry D. Schulman 20,896,116 313,164
J. Maurice Hopkins 20,895,816 313,464
The shareholders of the Company voted to approve the
Company's 1998 Stock Option Plan. The shareholders cast
9,634,402 votes in favor of the Plan, 1,942,863 against and
77,591 withheld authority.
In addition, the shareholders of the Company voted to
reappoint Grant Thornton LLP, independent certified public
accountants, as the Company's auditors for the fiscal year
ending December 31, 1999. The shareholders cast 21,116,669
votes in favor of the reappointment of Grant Thornton LLP,
56,473 votes against and 36,138 shareholders withheld
authority.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.43 - Employment agreement dated June 18, 1999 between
Windmere-Durable Holdings, Inc. and David M. Friedson.
Filed herewith.
(b) Reports on Form 8-K:
Form 8K dated June 3, 1999 reporting under "Item 5. Other
Information," the execution by the Company of a definitive
agreement to purchase the assets of Newtech Electronics
Industries, Inc.
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WINDMERE-DURABLE HOLDINGS, INC.
(Registrant)
August 13, 1999 By: /s/ Harry D. Schulman
------------------------------------
Harry D. Schulman
Chief Financial Officer (Duly
authorized to sign on behalf of
the Registrant)
August 13, 1999 By: /s/ Terry L. Polistina
------------------------------------
Terry L. Polistina
Senior Vice President - Finance
(Duly authorized to sign on
behalf of the Registrant)
24
<PAGE> 1
Exhibit 10.43
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is executed this 18th day
of June, 1999, by and between Windmere-Durable Holdings, Inc., a Florida
corporation with its principal place of business at 5980 Miami Lakes Drive,
Miami Lakes, Florida (the "Company"), and David M. Friedson, an individual
residing in the State of New York (the "Executive").
RECITALS:
A. The Executive is currently employed as the Chief Executive Officer
and President of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company and its subsidiaries, their policies, methods and
personnel.
C. The Board of Directors of the Company (the "Board") recognizes that
the Executive has contributed to the growth and success of the Company and its
subsidiaries, and desires to assure the Company and its subsidiaries of the
Executive's continued employment and to compensate him therefor.
D. The Board has determined that this Agreement will reinforce and
encourage the Executive's continued attention an dedication to the Company and
its subsidiaries.
E. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
Therefore, in consideration of the premises, mutual covenants and
agreements of the parties contained herein, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
Company and the Executive hereby agree as follows:
1. Employment. Commencing on the Closing Date, the Company shall
employ the Executive and the Executive shall accept employment by the Company,
upon the terms and conditions set forth in this Agreement.
2. Term. The term of employment (the "Term") of this Agreement shall
begin on the date hereof and shall terminate as provided herein. Except as
otherwise provided in Sections 7, 8, 9, 10, 11 and 12 below, the Term shall be
for a continuous five-year period commencing on this date and running for a
period such that on each "Anniversary Date" (as defined below) an additional
year automatically shall be added. On any Anniversary Date, either party may
provide written notice to the other party of that party's intention not to
extend the Term of this Agreement beyond the number of years then remaining in
the Term, which shall always be five. Such written notice shall be deemed the
notice to terminate this Agreement at the end of the five-year term then in
effect. The "Anniversary Date," as used herein, shall be the first day of the
second year of the Term and the first day of each subsequent year, including
<PAGE> 2
each year beyond the first five years of the Term. It is the intention of the
parties that the Term as of each Anniversary Date automatically shall be five
years, that five years' written notice shall be required to terminate this
Agreement, except as otherwise provided in Sections 7, 8, 9, 10, 11 and 12
below, and that said written notice to terminate may only be given on an
Anniversary Date.
3. Duties. The Executive will have such duties as are assigned or
delegated to the Executive by the Board and will initially serve as the Chief
Executive Officer of the Company. The Executive will have the primary
responsibility as the Chief Executive Officer of the Company to manage and
direct the day-to-day business of the Company, including the generation of
income and management of expenses. The Executive will devote his entire
business time, attention, skill, and energy exclusively to the business of the
Company and its subsidiaries, will use his best efforts to promote the success
of the Company and its subsidiaries, and will cooperate fully with the Board in
the advancement of the best interests of the Company and its subsidiaries.
4. Compensation. During the Term, the Company shall compensate
Executive as follows:
(a) Salary. The Company shall pay Executive an annual salary
of $1,000,000 (the "Annual Base Salary"), to be distributed in equal periodic
installments according to the Company's customary payroll practices. The Annual
Base Salary will increase progressively for each of the ensuing twelve month
periods ("Fiscal Year") during the Term by an amount at least equal to the
percentage increase in the United States Consumer Price Index for all urban
consumers (CPI-U), U.S. City Average - All Items, published by the Bureau of
Labor Statistics, United States Department of Labor (the "Index") for the
previous calendar year. If at any time required for the determination of the
Annual Base Salary adjustment as above described, the Index is no longer
published or issued, the parties shall use such other index as is then
generally recognized or accepted for similar determinations of purchasing
power. If the parties are unable to agree on the selection of an index which
would most accurately carry out the intent hereof, or if there is a dispute
with respect to any computations as called for herein, then the issue with
respect thereto shall be determined by arbitration according to the then
existing rules of the American Arbitration Association. Nothing contained
herein shall be construed to prevent the Company from increasing Executive's
Annual Base Salary more often than annually or by a higher amount than required
by the Index.
(b) Annual Bonus. The Executive shall be entitled to receive
incentive compensation (the "Incentive Compensation") for each year during the
Term as set forth below:
(i) Performance Bonus. At the beginning of each
calendar year during the Term, the Board (or the Compensation
Committee thereof) shall establish target goals for (A) earnings
before interest, taxes, depreciation and amortization ("EBITDA") of
the Company on a consolidated basis and (B) the Executive's personal
performance (collectively, the "Performance Goals"). The Executive
shall be entitled to an annual bonus (the "Performance Bonus") based
50% on the achievement of the Performance Goal set forth in (A) above
2
<PAGE> 3
and 50% on the achievement of the Performance Goal set forth in (B)
above, it being understood that a pro rata Performance Bonus may be
earned by the Executive as set forth below in any year in which either
Performance Goal is met. Such Performance Bonus shall be equal to a
percentage of his Annual Base Salary to be determined as follows:
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF BONUS AS PERCENTAGE
PERFORMANCE GOALS ACHIEVED OF ANNUAL BASE SALARY
----------------------------------------- ---------------------
<S> <C>
75% - 79% (Threshold Performance) 85%
80% - 84% 88%
85% - 89% 91%
90% - 94% 94%
95% - 99% 97%
100% - 104% (Target Performance) 100%
105% - 109% 103%
110% - 114% 106%
115% - 119% 109%
120% - 124% 112%
125% and above (Maximum Performance) 115%
</TABLE>
(ii) Synergy Bonus. At the beginning of each of the
calendar years 1999, 2000, 2001 and 2002, the Board (or the
Compensation Committee thereof) shall establish target goals for the
synergies to be attained as a result of the integration of the
business Household Products, Inc., a subsidiary of the Company (the
"HPG Group"), into the Company (the "Synergy Goals"). Not later than
90 days after the end of each such year in which the portion of the
Synergy Goals achieved are at least equal to 75%, the Executive shall
be paid a cash bonus (the "Synergy Bonus") equal to a percentage of
his Annual Base Salary to be determined as follows:
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF BONUS AS PERCENTAGE
PERFORMANCE GOALS ACHIEVED OF ANNUAL BASE SALARY
----------------------------------------- ---------------------
<S> <C>
75% - 79% (Threshold Performance) 20%
80% - 84% 22%
85% - 89% 24%
90% - 94% 26%
95% - 99% 28%
100% - 104% (Target Performance) 30%
105% - 109% 32%
110% - 114% 34%
115% - 119% 36%
120% - 124% 38%
125% and above (Maximum Performance) 40%
</TABLE>
3
<PAGE> 4
(iii) Special Bonus. From time to time during the
Term, as determined by the Compensation Committee, the Executive shall
be entitled to additional bonuses to be paid in cash, stock or
otherwise.
5. Expense Reimbursement and Other Benefits.
(a) Reimbursement of Expenses. During the term of Executive's
employment hereunder, the Company, upon the submission of proper
substantiation, including copies of all relevant invoices, receipts or other
evidence reasonably requested by the Company, by the Executive, shall reimburse
the Executive for all reasonable expenses actually paid or incurred by the
Executive in the course of and pursuant to the business of the Company,
including first class or business class air travel.
(b) Executive Benefits. Executive shall participate in the
Company's Group Health and Hospitalization Plan, Group Life Insurance Plan,
Group Disability Insurance Plan and all other insurances, or insurance plans
(collectively, the "Welfare Benefits"), and Executive benefits and bonuses
covering the Company senior executive officers as are now or may in the future
be in effect, subject to applicable eligibility requirements. Additionally, the
Company shall provide the Executive with life insurance in an amount equal to
five times his Annual Base Salary. During the Term, the Company shall pay for
(i) the Executive's annual dues in a country club and (ii) tax preparation and
financial planning for the Executive on an annual basis up to a maximum of
$20,000. Notwithstanding anything to the contrary contained in this Agreement,
the Executive shall be entitled to all benefits, including bonuses, paid or
given by the Company to executive officers of the Company during the Term, and
nothing contained in this Agreement shall in any way be deemed to limit the
Executive's receipt of or participation in such benefits, bonuses or benefit
plans or to preclude the Company from making additional payments, in the form
of bonuses or otherwise, or conferring additional benefits upon the Executive.
Additionally, if in the future the Company adopts a supplemental executive
retirement plan, a deferred compensation plan or similar arrangement, the
Executive shall be entitled to participate in such plan or arrangement on the
terms and conditions consistent with those applicable to senior executive
officers as determined by the Compensation Committee or the Board of Directors.
(c) Stock Options. During the Term of this Agreement, the
Executive shall be eligible to be granted options to acquire shares of the
Company Common Stock under (and therefore subject to all terms and conditions
of ) the Company stock option plans as then in effect, and all rules and
regulations of the Securities and Exchange Commission applicable to stock
option plans. Such options will contain such restrictions as required by the
Board or the applicable committee of the Board charged with administration of
the stock option plan. The number of shares of Common Stock subject to the
stock options shall be adjusted for any subsequent stock splits, stock
dividends or similar recapitalizations of the Company's Common Stock which
4
<PAGE> 5
results in an increase or decrease of the number of shares of outstanding
Common Stock of the Company. The number of options and terms and conditions of
options shall be determined in the sole discretion of the Board, or applicable
committee thereof, and shall be based on several factors, including the
performance of the Company on a consolidated basis.
(d) Automobile. During the Term, the Company shall provide
Executive with an automobile allowance of $2,000 monthly.
(e) Vacation. During the Term, the Executive will be entitled
to four weeks' paid vacation for each year. The Executive will also be entitled
to the paid holidays and other paid leave set forth in the Company's policies.
Vacation days and holidays during any fiscal year that are not used by the
Executive during such fiscal year may not be carried over and used in any
subsequent fiscal year.
(f) Tax Reimbursement. The Company shall reimburse the
Executive, on an after tax basis, for the net increase in the Executive's total
federal, state, and local income tax liability that results from the
compensation received pursuant to this Agreement being subject to any New York
state or local income taxes. The reimbursement amount shall be determined by
the Board or the Compensation Committee, upon the submission of proper
substantiation by the Executive or his accountants, and shall be paid as soon
as practicable after such determination is made.
6. Restrictions.
(a) Non-Competition. During the Term and for a one year
period after the termination of the Term for any reason, the Executive shall
not, directly or indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any other person or
entity (whether as an Executive, officer, director, partner, agent, security
holder, creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the Company (for
this purpose, any business that engages in the manufacture or distribution of
products similar to those products manufactured or distributed by the Company
at the time of termination of the Agreement shall be deemed to be in
competition with the Company); provided that such provision shall not apply to
the Executive's ownership of Common Stock of the Company or the acquisition by
the Executive, solely as an investment, of securities of any issuer that is
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934,
as amended, and that are listed or admitted for trading on any United States
national securities exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar system or
automated dissemination of quotations of securities prices in common use, so
long as the Executive does not control, acquire a controlling interest in or
become a member of a group which exercises direct or indirect control or, more
than five percent of any class of capital stock of such corporation.
(b) Nondisclosure. During the Term and for a one year period
after the termination of the Term for any reason, the Executive shall not at
any time divulge, communicate, use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of the Company.
Any Confidential Information or data now or hereafter acquired by the Executive
with respect to the business of the Company (which shall include, but not be
5
<PAGE> 6
limited to, information concerning the Company's financial condition,
prospects, technology, customers, suppliers, sources of leads and methods of
doing business) shall be deemed a valuable, special and unique asset of the
Company that is received by the Executive in confidence and as a fiduciary, and
Executive shall remain a fiduciary to the Company with respect to all of such
information. For purposes of this Agreement, "Confidential Information" means
information disclosed to the Executive or known by the Executive as a
consequence of or through his employment by the Company (including information
conceived, originated, discovered or developed by the Executive) prior to or
after the date hereof, and not generally known, about the Company or its
business. Notwithstanding the foregoing, nothing herein shall be deemed to
restrict the Executive from disclosing Confidential Information to the extent
required by law. None of the foregoing obligations and restrictions apply to
any Confidential Information that the Executive demonstrates was or became
generally available to the public other than as a result of disclosure by the
Executive.
(c) Nonsolicitation of Executives and Clients. During the
Term and for a one year period after the termination of the Term for any
reason, the Executive shall not, directly or indirectly, for himself or for any
other person, firm, corporation, partnership, association or other entity,
other than in connection with the performance of Executive's duties under this
Agreement, (a) employ or attempt to employ or enter into any contractual
arrangement with any Executive or former Executive of the Company, unless such
Executive or former Executive has not been employed by the Company for a period
in excess of six months, (b) call on or solicit any of the actual or targeted
prospective clients of the Company on behalf of any person or entity in
connection with any business competitive with the business of the Company,
and/or (c) make known the names and addresses of such clients or any
information relating in any manner to the Company's trade or business
relationships with such customers (unless the Executive can demonstrate that
such information was or became generally available to the public other than as
a result of a disclosure by the Executive).
(d) Ownership of Developments. All copyrights, patents, trade
secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed
or created by Executive during the course of performing work for the Company or
its customers (collectively, the "Work Product") shall belong exclusively to
the Company and shall, to the extent possible, be considered a work made by the
Executive for hire for the Company within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for the Company, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of the Company, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.
(e) Books and Records. All books, records, and accounts
relating in any manner to the customers of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of the Executive's employment hereunder or on the
Company's request at any time.
6
<PAGE> 7
(f) Definition of Company. For purposes of this Section 6,
the term "Company" also shall include, along with all current direct and
indirect subsidiaries, any existing or future subsidiaries of the Company that
are operating during the time periods described herein and any other entities
that directly or indirectly, through one or more intermediaries, control, are
controlled by or are under common control with the Company during the periods
described herein.
(g) Acknowledgment by Executive. The Executive acknowledges
and confirms that (a) the restrictive covenants contained in this Section 6 are
reasonably necessary to protect the legitimate business interests of the
Company, and (b) the restrictions contained in this Section 6 (including
without limitation the length of the term of the provisions of this Section 6)
are not overbroad, overlong, or unfair and are not the result of overreaching,
duress or coercion of any kind. The Executive further acknowledges and confirms
that his full, uninhibited and faithful observance of each of the covenants
contained in this Section 6 will not cause him any undue hardship, financial or
otherwise, and that enforcement of each of the covenants contained herein will
not impair his ability to obtain employment commensurate with his abilities and
on terms fully acceptable to him or otherwise to obtain income required for the
comfortable support of him and his family and the satisfaction of the needs of
his creditors. The Executive acknowledges and confirms that his special
knowledge of the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge to the
benefit of a competitor or were to compete with the Company in violation of the
terms of this Section 6. The Executive further acknowledges that the
restrictions contained in this Section 6 are intended to be, and shall be, for
the benefit of and shall be enforceable by, the Company's successors and
assigns.
(h) Reformation by Court. In the event that a court of
competent jurisdiction shall determine that any provision of this Section 6 is
invalid or more restrictive than permitted under the governing law of such
jurisdiction, then only as to enforcement of this Section 6 within the
jurisdiction of such court, such provision shall be interpreted and enforced as
if it provided for the maximum restriction permitted under such governing law.
(i) Extension of Time. If the Executive shall be in violation
of any provision of this Section 6, then each time limitation set forth in this
Section 6 shall be extended for a period of time equal to the period of time
during which such violation or violations occur. If the Company seeks
injunctive relief from such violation in any court, then the covenants set
forth in this Section 6 shall be extended for a period of time equal to the
pendency of such proceeding including all appeals by the Executive.
(j) Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7
<PAGE> 8
7. Death. The Term shall terminate upon the death of Executive and be
of no further force or effect. Upon such termination, the Company will pay the
Executive's estate a lump sum equal to the sum of (A) the Annual Base Salary at
the date of termination multiplied by the number of years remaining in the
Term, and (B) the product of the sum of the Performance Bonus for the prior
year multiplied by the number of years remaining in the Term.
8. Disability. If during the Term Executive is unable to perform his
services, by reason of illness or incapacity, for a period of 180 consecutive
days or more, the Company may, at its option, upon written notice to Executive,
terminate the Term and his employment hereunder. If the Term is terminated as a
result of the Executive's disability, the Company will pay the Executive (A)
his Annual Base Salary at the date of termination for the period remaining in
the Term to be distributed in periodic installments according to the Company's
customary payroll practices, and (B) a lump sum equal to the product of the sum
of the Performance Bonus for the prior year multiplied by the number of years
remaining in the Term, to be paid at the time of such termination. The Company
shall also continue to pay the premiums for the same or substantially similar
Welfare Benefits for the remainder of the Term. Such termination shall not
affect any rights of Executive to insurance payments due to Executive as a
result of the insurance coverage provided for in Section 5(b) above.
Notwithstanding the foregoing, if the Executive shall find other employment
during the period he is receiving payments pursuant to this Section 8, then the
Executive shall promptly notify the Company in writing of the date and terms of
such employment and the Company shall be entitled to reduce the amount payable
to the Executive pursuant to this Section 8 during the period from the
commencement of such other employment by the cash compensation received and to
be received by the Executive for services rendered in connection with such
other employment.
9. Termination for Cause.
(a) The Company shall have the right to terminate the Term
and the Executive's employment hereunder for Cause (as defined below). Upon any
termination pursuant to this Section 9, the Company shall pay to the Executive
any unpaid Annual Base Salary through the effective date of termination
specified in such notice. The Company shall have no further liability hereunder
(other than for reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of Section
5(a)).
(b) For purposes hereof, the term "Cause" shall mean: (A) the
willful and continued failure by the Executive to substantially perform his
duties with the Company, other than any such failure resulting from his
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance by the Executive of a notice of termination for Good
Reason (as defined in section 11 hereof), after a written demand for
substantial performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, or (B) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For purposes of
this section, no act or failure to act on the part of the Executive shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that his action or omission was in the
best interest of the Company. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for Cause unless and until there
8
<PAGE> 9
shall have been delivered to the Executive a copy of the resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel, to be heard before the Board), finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth above in clauses (A) or (B) above.
10. Termination Without Cause. At any time the Company shall have the
right to terminate the Term and the Executive's employment hereunder by written
notice to the Executive. Upon any termination pursuant to this Section 10 (that
is not a termination under any of Sections 7, 8, 11 or 12), the Company shall
pay to the Executive a lump sum equal to the sum of (A) the Annual Base Salary
at the date of termination multiplied by the number of years remaining in the
Term, and (B) the product of the sum of the Performance Bonus for the prior
year multiplied by the number of years remaining in the Term. The Company shall
also continue to pay the premiums for the same or substantially similar Welfare
Benefits and the Executive shall be entitled to the other benefits set forth in
Section 5(b), (d) and (e) for the remainder of the Term. Further, any Company
stock option granted to Executive shall be exercisable immediately and the
Company stock acquired pursuant to such exercise may be sold by Executive
subject to no restrictions by the Company whatsoever (other than those imposed
by federal and state securities laws). The Company shall have no further
liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of termination, subject, however, to the
provisions of Section 5(a)). The Executive shall be entitled to receive all
severance payments and benefits hereunder regardless of any future employment
undertaken by the Executive as long as he is in full compliance with the terms
of this Agreement.
11. Termination by Executive.
(a) The Executive shall at all times have the right, upon 60
days written notice to the Company, to terminate the Term and his employment
hereunder.
(b) Upon any termination pursuant to this Section 11 by the
Executive without Good Reason (as defined below), the Company shall pay to the
Executive any unpaid Annual Base Salary through the effective date of
termination specified in such notice. The Company shall have no further
liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of termination, subject, however, to the
provisions of Section 5(a)). The Executive shall be entitled to receive all
severance payments and benefits hereunder regardless of any future employment
undertaken by the Executive as long as he is in full compliance with the terms
of this Agreement.
(c) Upon any termination pursuant to this Section 11 by the
Executive for Good Reason, the Company shall pay to the Executive the same
amounts that would have been payable by the Company to the Executive under
Section 10 of this Agreement if the Executive's employment had been terminated
9
<PAGE> 10
by the Company without Cause. The Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however, to the provisions
of Section 5(a)).
(d) For purposes of this Agreement, "Good Reason" shall mean
(i) the assignment to the Executive of any duties inconsistent in any material
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 3 of this Agreement, or any other action by the Company which
results in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive; (ii) the
relocation of the Executive to another location more than 50 miles from his
current location without his consent, or (iii) any failure by the Company to
comply with any of the material provisions of Section 4 of this Agreement,
other than an isolated, insubstantial and inadvertent failure not occurring in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive.
12. Change in Control.
(a) In the event that (i) a Change in Control (as defined in
paragraph (b) of this Section 12) in the Company shall occur during the Term,
and (ii) prior to the earlier of the expiration of the Term and one year after
the date of the Change in Control, the Term and Executive's employment with the
Company is terminated by the Company without Cause, as defined in Section 9(b)
(and other than pursuant to Section 7 by reason of the Executive's death or
Section 8 by reason of the Executive's disability) or the Executive terminates
the Term and his employment for Good Reason, as defined in Section 11(d), the
Company shall (1) pay to the Executive any unpaid Annual Base Salary through
the effective date of termination, (2) pay to the Executive the Incentive
Compensation, if any, not yet paid to the Executive for any year prior to such
termination, at such time as the Incentive Compensation otherwise would have
been payable to the Executive, (3) at the time of such termination, pay to the
Executive a lump sum equal to the sum of (A) the Annual Base Salary at the date
of termination multiplied by the number of years remaining in the Term, and (B)
the product of the sum of the Performance Bonus for the prior year multiplied
by the number of years remaining in the Term. The Company shall also continue
to pay the premiums for the same or substantially similar Welfare Benefits for
the number of years remaining in the Term. Further, any Company stock option
granted to Executive shall be exercisable immediately and the Company stock
acquired pursuant to such exercise may be sold by Executive subject to no
restrictions by the Company whatsoever (other than those imposed by federal and
state securities laws). The Company shall have no further liability hereunder
(other than for reimbursement for reasonable business expenses incurred prior
to the date of termination, subject, however, to the provisions of Section
5(a)).
(b) For purposes of this Agreement, the term "Change in
Control" shall mean:
(i) Approval by the shareholders of the Company of
(x) a reorganization, merger, consolidation or other form of corporate
transaction or series of transactions, in each case, with respect to
which persons who were the shareholders of the Company immediately
prior to such reorganization, merger or consolidation or other
10
<PAGE> 11
transaction do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then
outstanding voting securities, or (y) a liquidation or dissolution of
the Company or (z) the sale of all or substantially all of the assets
of the Company (unless such reorganization, merger, consolidation or
other corporate transaction, liquidation, dissolution or sale is
subsequently abandoned); or
(ii) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election
or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest relating
to the election of the Directors of the Company, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Securities
Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) The acquisition (other than from the Company)
by any person, entity or "group", within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act (excluding, for
this purpose, the Company or its subsidiaries, or any Executive
benefit plan of the Company or its subsidiaries) which acquires
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act), of 20% or more of either the then
outstanding shares of the Company's Common Stock or the combined
voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors.
(c) The payments made pursuant to paragraph (a) above shall
be in lieu of any and all compensation due to Executive for the years that
would otherwise be remaining in the Term. Upon receipt of said lump sum
payment, this Agreement and all rights and duties of the parties shall be
terminated, except as follows. In consideration for such lump sum payment and
for the right to terminate under the conditions set forth above, Executive
agrees to consult with the Company (or its successors), and its officers if
requested to do so for a period of at least two years from the date of such
termination. However, Executive shall be required to devote only such part of
his time to such services as Executive believes reasonable in Executive's sole
discretion, and the time and date such services are offered shall be determined
by Executive so long as that time and date is within a reasonable period of
time after the request. It is expressly agreed that the Company's rights to
avail itself of the advice and consultation services of Executive shall at all
times be exercised in a reasonable manner, that adequate notice shall be given
to Executive in such events, and that non-compliance with any such request by
Executive for good reason, including, but not limited to, ill health or prior
commitments, shall not constitute a breach or violation of this Agreement.
11
<PAGE> 12
Executive agrees that, except for reimbursement of all reasonable expenses
incurred by him with respect to such consultation and advisory services,
payable as such consultation and advisory services are rendered, he shall not
be entitled to any further compensation. It is understood that in furnishing
any advisory and consulting services provided herein, Executive shall not be an
Executive of the Company but shall act in the capacity of independent
contractor.
13. Waivers. It is understood that either party may waive the strict
performance of any covenant or agreement made herein; however, any waiver made
by a party hereto must be duly made in writing in order to be considered a
waiver, and the waiver of one covenant or agreement shall not be considered a
waiver of any other covenant or agreement unless specifically in writing as
aforementioned.
14. Savings Provisions. The invalidity, in whole or in part, of any
covenant or restriction, or any section, subsection, sentence, clause, phrase
or word, or other provisions of this Agreement, as the same may be amended from
time to time shall not affect the validity of the remaining portions thereof.
15. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Florida without giving effect to
its choice of law provision.
16. Notices. If either party desires to give notice to the other in
connection with any of the terms and provisions of this Agreement, said notice
must be in writing and shall be deemed given when (a) delivered by hand (with
written confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by registered mail,
return receipt requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), in each
case addressed to the party for whom it is intended as follows (or such other
addresses as either party may designated by notice to the other party):
If to the Company: Windmere-Durable Holdings, Inc.
5980 Miami Lakes Drive
Miami, Lakes, Florida 33014
Attn: Chairman, Compensation Committee
If to Executive: At the most recent home address of
Executive on the official records
of the Company
17. Default. In the event either party defaults in the performance of
its obligations under this Agreement, the non-defaulting party may, after
giving 30 days notice to the defaulting party to provide a reasonable
opportunity to cure such default, proceed to protect its rights by suit in
equity, action at law, or, where specifically provided for herein, by
arbitration, to enforce performance under this Agreement or to recover damages
for breach thereof, including all costs and attorneys' fees, whether settled
out of court, arbitrated, or tried (at both trial and appellate levels).
12
<PAGE> 13
18. Section 162(m) Limits.
Notwithstanding any other provision of this Agreement, if and to the
extent that any remuneration payable by the Company to the Executive for any
year would exceed the maximum amount of such remuneration that the Company may
deduct for that year by reason of Section 162(m) of the Code, payment of the
portion of the remuneration for that year that would not be so deductible under
Section 162(m) shall, in the sole discretion of the Board, be deferred so that
it shall become payable at such time or times as the Board reasonably
determines that it would be deductible by the Company under Section 162(m),
with interest at the "short-term applicable federal rate" as such term is
defined in Section 1274(d) of the Code.
19. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or other action by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, determined with regard to any
additional payments required under this Section 19) (a "Payment") would be
subject to an excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), or any interest or penalties are incurred by
the Executive with respect to any such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), the Company shall make a payment to the Executive (a
"Gross-Up Payment") in an amount equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of paragraph (c) of this
Section 19, all determinations required to be made under this Section 19,
including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by Grant Thornton LLP, or such other independent
public accounting firm regularly engaged by the Company from time to time (the
"Accounting Firm"), which shall provide detailed supporting calculations both
to the Company and the Executive within 20 business days of the receipt of
notice from the Executive that there has been a Payment, or such earlier time
as is requested by the Company. In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, the Company shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 19, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive with a written opinion
that failure to report the Excise Tax on the Executive's applicable federal and
state income tax return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
13
<PAGE> 14
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 19 and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 19(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
14
<PAGE> 15
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 19(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 19(c))
promptly, after receipt by Executive of such refund, pay to the Company the
amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 19(c), a determination is
made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
20. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
21. Waiver of Jury Trial. ALL PARTIES KNOWINGLY WAIVE THEIR RIGHTS TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION IN ANY COURT OF LAW, TRIBUNAL OR
LEGAL PROCEEDING INVOLVING THE PARTIES HERETO OR ANY DISPUTES ARISING OUT OF OR
RELATED TO THIS AGREEMENT.
22. Advisory Period.
(a) Duration. Upon the expiration of the Term (other than as
a result of a Change in Control), the Executive shall be retained by the
Company as an advisor and consultant to the Company (the "Advisory Period").
The Advisory Period shall commence on the first day following the last day of
the Term (the "Advisory Term") and shall continue for a minimum of five
consecutive years thereafter. Unless either party provides written notice to
the other party on each Anniversary Date of its intention not to extend the
Advisory Term beyond the number of years then remaining in the Advisory Period,
which number shall always be four, then the Advisory Term shall automatically
be extended by one additional year. The "Anniversary Date," as used herein,
shall be the first day of the second year of the Advisory Period, and the first
15
<PAGE> 16
day of each subsequent year, including each year beyond the first five years of
the Advisory Period. It is the intention of the parties that, unless written
notice to terminate is given, the term of the Advisory Period as of each
Anniversary Date shall be five years, that four year's written notice shall be
required to terminate the Advisory Period, and that said written notice to
terminate may only be given on an Anniversary Date.
(b) Duties. During the Advisory Period, the Executive will
attend all regular and annual meetings of the Board of Directors and all
Special Meetings to which he is invited, all with adequate notice. The
Executive further agrees to consult with the Company and its officers and to
act in an advisory capacity at such reasonable time or times as required to do
so. However, the Executive shall not be required to devote a major or
substantial part of his time to such services. It is expressly agreed that the
Company's rights to avail itself of the advice and consultation services of the
Executive shall at all times be exercised in a reasonable manner; that adequate
notice shall be given to the Executive in such events; and that non-compliance
with any such request by the Executive for good cause, including, but not
limited to, ill health or absence from Miami-Dade County, Florida, shall not
constitute a breach or violation of this Agreement. The Executive agrees that
except for reimbursement of all reasonable expenses incurred by him with
respect to such consultation and advisory services, he shall not be entitled to
any further compensation except as provided to be paid to him in subsection (c)
below. It is understood that in furnishing any advisory and consulting services
provided herein, the Executive shall not be an employee of the Company, but
shall act in the capacity of an independent contractor.
(c) Compensation. During the Advisory Period, the Company
shall pay the Executive annual compensation equal to 60% of the average of the
Executive's Annual Base Salary and Incentive Compensation (as set forth in
Section 4(b) hereof) for the three years ending prior to the Advisory Term, to
be distributed in equal periodic installments according to the Company's
customary payroll practices. Additionally, the Executive shall continue his
participation in the Company's Welfare Benefits, as provided in Section 5(b)
above (or the Company shall provide comparable coverage, if available), and the
Executive shall continue to receive the tax reimbursement payment, as provided
in Section 5(f) above. The Company shall reimburse the Executive for all
reasonable expenses incurred by him in the performance of his duties hereunder
(collectively, the "Advisory Compensation"). If the Executive's physical or
mental condition shall prevent him from performing his duties hereunder, the
Advisory Compensation shall nevertheless be paid to the Executive during the
entire Advisory Period.
(d) Change in Control. The Notwithstanding anything to the
contrary contained herein, if at any time during the Advisory Period there
shall be a Change in Control (as defined in Section 12 hereof) and if such
change in control did not occur due to the Executive's bulk sale of common
shares of the Company owned by him, then the Executive shall have the option,
at any time, of terminating the Advisory Period upon five days' notice, and, in
such event, the Company shall pay to the Executive, upon such termination, a
lump sum equal to the sum of the Advisory Compensation to be paid to the
Executive during the remainder of the Advisory Period, discounted by a factor
of 10% for each year by which such payments are accelerated, so that the
16
<PAGE> 17
amounts payable during the then current calendar year of the Advisory Period
shall be valued at 100%; those due during the immediately following calendar
year shall be valued at 90%; and so forth, decreasing by 10% for each remaining
calendar year of the Advisory Period.
IN WITNESS WHEREOF, the Company, by its appropriate officer, signed
this Agreement and Executive have signed this Agreement, as of the day and year
first above written.
WINDMERE-DURABLE HOLDINGS, INC.
/s/ Harry D. Schulman
----------------------------------
Harry D. Schulman
Chief Operating Officer
EXECUTIVE
/s/ David M. Friedson
----------------------------------
David M. Friedson
17
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0
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